On July 15, the Office of the Auditor General (OAG) submitted its 57th annual report to President Bidya Devi Bhandari, highlighting the growing trend of running arrears in government agencies. The report said that it audited 5,619 institutions this year, which included federal, provincial and local government agencies. The total amount the OAG audited for this fiscal year amounted to Rs5,171,649,800,000. The federal government accounted for 4.05 percent of the arrears, provincial governments 4.33 percent and local governments 5.25 percent. The federal Finance, Defence, and Physical Infrastructure and Transport Management ministries had the largest amounts outstanding.

The OAG identifies arrears based on the Economic Guidelines and Financial Responsibility Act as any financial transaction carried out without providing the required documents and fulfilling the processes. The high level of arrears, amounting to half of the country's annual budget, ridicules the government's slogan of ‘Prosperous Nepal, Happy Nepali' through good governance.

Major shortcomings

Flaws in the procurement process of government agencies, ineffective budget and expenditure management, misuse of grants at the local level, weak monitoring, reporting and verification, ineffective revenue administration and weak implementation of financial management policies, and the attitudes and mindsets of the relevant authorities are the major shortcomings for the recurrence of arrears in all three tiers of government.

The OAG ritualistically highlighted that non-implementation of the laws was the biggest challenge to minimise arrears in all three tiers of government. After the audit report is released, the Public Accounts Committee of Parliament discusses it as usual and passes directives to the concerned ministries to eliminate, or at least reduce, the arrears in the next fiscal year. But the three tiers of government, the ministries and their departments hardly follow the directives of the Public Accounts Committee which results in the same or even higher levels of arrears to be noted in the next year's report.

Growing arrears means growing chances of more corruption at all three levels of government. These practices have greatly undermined the key pillars of good governance such as accountability, transparency, effectiveness, participation, legitimacy, and the rule of law. The increasing rate of arrears in the use of taxpayer money is an immense disrespect to the people.

Many studies such as A Survey of the Nepali People, a multi-year study conducted to understand the overall governance of the country, also demonstrate that strong financial discipline is not maintained in the use of public funds. They show that corruption is rapidly increasing in the country—be it petty (cash corruption) or grand (policy corruption). The report of the OAG clearly corroborates such findings, suggesting that the arrears are not only financial, technical and legal issues, but a legitimacy issue of the government.

From the legitimacy perspective, people keep questioning how the whole development process takes place in the country. More than four-fifths of Nepalis state that they do not know what development activities are occurring in their localities, and when public hearings and public audits take place in their neighbourhoods. This shows that the right to information—a fundamental right of the people— transparency in planning to expenditure, and public accountability of the officials are weakened and threatened, becoming a strong indicator showing that chances of corruption are high even if there are no arrears because of the existence of ‘settings’—a new term for organised corruption.

Now the question is how these arrears can be eliminated and the actual practice of zero tolerance against corruption established. There are at least six integrated approaches to achieve this goal. The first and most important approach is to ensure fiscal discipline by modernising the existing accounting system with the use of the electronic transaction system in all government agencies. The second approach is to provide legal, technical and financial skill development training to all relevant staff and elected officials to handle the electronic transaction system by meeting all the requirements while handling finances and maintaining financial discipline. The third approach is to strengthen the monitoring, evaluation and verification system, and not allowing the same officials to perform different roles to avoid conflict of interest.

Moral science

The fourth approach is building a strong collaborative and consensus-driven partnership for national development between bureaucrats, elected officials and the public. And if embezzlements should occur, all public office bearers should be made liable to punishment. The fifth approach is converting the attitude, behaviour, conscience and mindset of public officials through ethical and moral upliftment training to make them understand that development without arrears and embezzlement can help the country develop in a short span of time for the benefit of all Nepalis including themselves. They should be made to understand that increasing arrears and embezzlement for their personal interest and development will keep the nation always poor, although a few people may become filthy rich, and that this can be achieved by practising the essence of accountability, transparency, effectiveness and public legitimacy.

Six, the government of the day should not only keep proclaiming that there is zero-tolerance against arrears and corruption. It should act and demonstrate this in action by punishing those who have been found guilty of such crimes. Carrying out these actions can direct the country from bad governance to good governance, and the slogan of ‘Prosperous Nepal, Happy Nepali’ can be achieved.

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