August 2021 Analysis: Federal Affairs

Posted by : Phiroj Chaudhary


Date : 2021-09-20

Widespread Arrears and Irregularities in Nepal

Auditor General of the Office of the Audit General (OAG), Tankamani Sharma on August 20th presented the 58th Annual Report to President Bidhya Devi Bhandari. In the said report, huge arrears including irregularities in the Fiscal Year (FY) 2019/20 were found to be made by the three tiers of government – federal, provincial, local as well as ministries and its bodies. After the federal election, the OAG continuously presented three annual reports; 56th, 57th, and 58th respectively. In all Fiscal Years, average irregularities in the financial amount have been increasing year wise.

Reportedly, the arrears and irregularities of the government reached NPR 676.44 billion in the FY 2019/20 – an increase from the last FY’s amount of NPR 664.44. Similarly, the outstanding amount has reached to NPR 418.85 billion in the 58th report, which has been settled by the government. All levels of government spent a huge amount behind the law – such as purchases were made without proof and no billing system was maintained, which contributed to the irregularities, report showed.

Irregularities happened not only from the local representatives and political sphere but also due to the bureaucracy. As federalism is new, irregularities from the local representative could be a new challenge for the government. However, the bureaucrats have also been involved in the irregularities, while they have had a long experience of the government system. The ministries’ irregularities appear huge as well.

Arrears Increasing Every Year

According to the Report, arrears amount has increased by a large number than last year. Arrears and irregularities are surging every year at all local levels, ministries, and its bodies as showed in the report. For example, the local levels’ irregularities reached NPR 24 billion in the FY 2017/18, compared to NPR 38 billion in FY 2018/19, and now to NPR 41 billion according to the 58th OAG report in the FY 2019/20. Similarly, provincial levels’ irregularities reached NPR 190 million in FY 2018/19, while in the FY 2019/20, it reached NPR 820 million. Comparatively, the irregularities of the provincial level increased four times in FY 2019/20 compared to 2018/19. Likewise, in the federal government, arrear amount reached NPR 44.39 billion and in provincial and local government, it reached NPR 12.66 billion and NPR 40.83 respectively.

Where are The Arrears

In the 58th OAG report, out of 753 local governments, 147 local governments have expended NPR 76.8 million for the meeting allowance. However, as per the provision, only the members of the judicial, legislative, accounts, and Good Governance Committee are allowed to receive allowance. Similarly provincial government spent a huge budget on the vehicle purchase. Twenty-seven local governments received money from the federal government last year to build industrial villages, but in vain. Another example of arrears is 28 local governments illegally spending NPR 14.38 million for vehicle purchase. Similarly, 47 local bodies have spent NPR 19.07 million in purchase of clothes and attire. Similarly, the OAG report stated that 84 local bodies spent NPR 36.35 million for communication, monitoring, house rent, transportation and fuel expenses, indicating that these transactions made were either personal or way above the market price. Similarly, 131 local levels have illegally hired personal secretaries and advisers to pay them monthly NPR 92.91 million collectively.

Failed Submission of Audit

The number of local governments not submitting audit reports has been increasing every year. According to the OAG, several local governments have not been able to submit and audit report. Reportedly, during the last three years, 6 local levels have not conducted an audit report to the OAG in the FY 2017/18. Similarly, 10 local levels failed in the FY 2018/19, however, 59 local levels failed in the FY 2019/20, the 58th audit report showed. Justifying their delay, several local governments blamed the COVID-19 crisis for not being able to submit to the OAG, their financial report. However, the government was not submitted an audit report in the previous year as well.

Two Aspects

There is two aspects of the arrears and irregularities over the country. According to OAG, three tiers of government repeatedly ignored the rule provided by the OAG to submit their report, which led to the huge number of irregularities to appear. While another aspect is from the three tiers government, who claim that all the governments are in charge to expend their budget as per their rules. Normally in federal practice, all three tiers of government can spend by making their own rules. Thus, the contradictory laws of the Nepal government is the root cause of misunderstanding regarding arrears and audit report submission.


The 58th annual audit report presents that all levels of governments, ministries, and its bodies and committees have spent huge amount by crossing the limitation of rules. The arrears in the OAG pointed out that the public service provided by all the bodies is at serious concern. The provincial governments – the newest form of government – had the opportunity to set a new standard by maintaining good governance and transparency. However, the provincial level also drowned in the irregulars as the center and local government.