Prithvi Man Shrestha, The Kathmandu Post, 18 February 2018
As the Auditor General’s Office (OAG) starts auditing financial transactions of local governments for the first time, most of the federal units are found not to be complying with standard accounting practices in their dealings.
Audits being conducted by the OAG across the country have found discrepancies in the book keeping of local governments such as failure to ensure proper billing of income and expenditures, differences between banking transactions and accounts kept by the local governments.
After the new constitution authorised the office to audit the finances of local governments--municipalities and rural municipalities, the constitutional body initiated auditing of the financial transactions by 753 local units for the fiscal year 2016-17.
The office, which expects to complete field auditing next week, aims to compile details within the fourth week of March. “Based on our observation, most of the local units have not maintained proper accounts of their income and expenditure. The accounting process does not follow the standard practices,” said Maheshwor Kafle, the assistant auditor general who oversees the task. “Some of them have not kept actual details of their assets,” he said.
Some of the local governments have not frozen the budget, as required to be done at the end of the fiscal year. Resources that were transferred to the local governments’ accounts to implement the central government’s programmes need to be frozen at the fiscal end. “Many local units were found to have not frozen unspent funds while adding them to the local consolidated fund,” said Kafle.
But the budget that the central government provides in the form of grant is not frozen: it is transferable from one fiscal year to another. “One of the reasons behind poor account keeping is the lack of accounting staff in many local units as several of them were deputed there after a new local structure was formed in March last year,” said Kafle.
The OAG started auditing the financial transactions of local governments in August 2017. After the local units were created as per the new constitution, the OAG had moved to audit their financial transactions.
Article 241 of the constitution mandates the OAG to conduct auditing at the local level, alongside offices under the federal and provincial governments, courts, parliaments, President’s Office, Vice President’s Office and the constitutional bodies. Under previous constitutions, the OAG audited transactions of various state organs, constitutional bodies and offices under the central government. But the local bodies used to have audits as provisioned by the Local Self-Governance Act-1999.
As per the Act, a village development committee required auditing by an auditor approved by the District Development Committee (DDC) on the recommendation of the accounts committee formed by the Village Council. Auditing at a municipality used to be done by a registered auditor appointed by the Municipal Council, with the OAG looking into the DDCs.
Experts say conducting audits through the OAG contributes to accountability of the local governments. “It will end the conflict of interest that the DDC could face while approving auditor in the past,” said Bhanu Acharya, a former auditor general.