Local Governments Face Weak Financial Governance, Audit Report Reveals

Biratnagar. The financial governance of some local levels among the 753 local levels of the country is found to be weak and risky. According to the 63rd annual summary report published by the Office of the Auditor General, local governments have not complied with the prevailing laws and regulations and have not been able to maintain proper accounts. 

The Local Government Operation Act, 2074 has directed local levels to spend only after clearly stating the plan and title while allocating the budget. However, according to the audit report, 219 local levels of the country have approved budgets by keeping 7 billion 56 crore 74 lakh 81 thousand rupees in reserve, flouting the prevailing laws. Keeping the budget in reserve means keeping a lump sum amount without specifying the title and plan, which can be spent arbitrarily based on the decision of the executive committee later. Misusing this provision, local government representatives have been investing in unproductive sectors and spreading the budget on ad-hoc plans, according to the conclusion of the audit office. Billions of rupees have been spent through this backdoor, which the law clearly prohibits. 

The report also points out problems in the financial transparency of local levels. Local levels have been found to be manipulating bank reconciliations. According to point number 90 of the report, 90 local levels have not reconciled the accounts between their ledgers and the balance in the bank. The amount in the bank is found to be 54 crore 49 lakh 35 thousand rupees less than the accounts in the office of those local levels. The absence of more than 54 crore rupees in the bank, which should be in the government treasury, indicates financial irregularities. 

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Local levels added 19 billion in arrears in a single year, 268 municipalities did not conduct internal audits

Local levels are legally required to deposit the revenue collected under various headings into the designated account immediately. However, according to the report, 177 local levels have kept 13 crore 30 lakh rupees of collected revenue with themselves without depositing it in the government account. Some local levels have not even reconciled the collected revenue with the vouchers deposited in the bank. 

Internal audit is an important mechanism to control and balance the expenditure of local levels. However, the representatives and employees of local levels have rendered this mechanism inactive. According to point number 89 of the report, 268 local levels have not conducted internal audits. 

There is no inventory of government vehicles, machinery, and other assets owned by local levels. According to the report, 221 local levels have not conducted physical inspections. Despite the Auditor General's directive to compulsorily implement the Government Asset Management System (PAMS), 293 local levels have not used this system. According to the report, 148 local levels have spent 11 crore 53 lakh rupees only on software purchase, maintenance, and renewal. No standards have been followed while purchasing software. The Auditor General's office has stated that 15 local levels have not even used the software purchased for 77 lakh 9 thousand rupees. 

The tendency of local levels to reduce their responsibilities is also found to be increasing. According to the report, 83 local levels have shown their initial balance for this year as 88 crore 10 lakh 29 thousand rupees less than their balance from last year. 

In the audit of the fiscal year 2081-82 alone, arrears of 19 billion 4 crore 77 lakh rupees have been established in the local levels. The portion of arrears to be recovered in local levels is still large. Including the remaining from the previous year and the addition of this year, the total updated arrears of local levels have reached 2 kharba 20 arba 47 crore 26 lakh rupees.