Unsavoury soup of cooked booksThe disgraceful picture portrayed by the auditor general's report reflects lack of accountability.
The Office of the Auditor General presented the 58th Annual Report 2021 to President Bidya Devi Bhandari on August 21. The report of the country's supreme auditing institution has covered 5,462 public institutions and offices. Out of the audited amount of Rs5.33 trillion, Rs644.4 billion or 12.69 percent remains as a "yet to be updated, or unsettled" amount. With a fresh addition of Rs104.38 billion in the last fiscal year ended mid-July, a total of Rs418.85 billion stands as beruju or irregular account. According to Section 2(r) of the Financial Procedures Act 1999, irregular amount (beruju) means "such a transaction indicated or found on audit as a transaction carried on without fulfilling such requirements as to be fulfilled in accordance with the prevailing law or a transaction of which such accounting as to be maintained has not been maintained or a transaction which has been carried on in an irregular or unreasonable manner".
Of the audited books, such impropriety or irregularity amounts to 2.86 percent, 2.74 percent and 5 percent of the federal, provincial and local government expenses respectively. The irregular amount in state-owned enterprises, institutions and committees stands at 7.74 percent. The report reveals that some state-owned enterprises have not even audited their accounts for the last eight to 10 years. These facts and figures directly correlates with the policy question surrounding the rationale behind maintaining loss-making public entities at the expense of taxpayer money, and more importantly, the economic efficiency and quality of fiscal governance at sub-national federal units.
Tip of the iceberg
The disgraceful picture portrayed by the auditor general's report, like other annual reports which are constitutionally required to be produced by all constitutional bodies including the judiciary, Commission for the Investigation of Abuse of Authority (CIAA), National Human Rights Commission and National Natural Resource and Fiscal Commission, among others, manifests the gravity of the absence of accountability in public administration, in every aspect of appropriation to expending of public funds. Although they may only be the tip of the iceberg given the widespread practice of doctoring and cooking of the books of accounts to siphon away the public funds, when these reports are out, they make a sort of annual feat, raise some eyebrows, serve as peg for news stories for a week or so and end up as a storm in a teacup. But, in effect, the irregularities, defalcation of public funds and spending impropriety continue to pile up year-after-year only to make every successive report more voluminous.
Not that these bodies do not recommend "measures" to correct these anomalies, but the erring parties do not even pay passing attention to them. The verdicts of the Supreme Court, too, go unenforced. CIAA orders to take action against public officials is often shelved by the bureaucracy. The concerned government agencies hardly care about admonitions from the Human Rights Commission. Federal ministries and related agencies are more inclined to flaunt than uphold guidelines from the Resource and Fiscal Commission on operationalising fiscal federalism. These burgeoning improprieties and irregularities are, in fact, the cumulative outcome of the comprehensive failure of the nation's accountability framework.
These recommendations are only "recommendatory" and not mandatory or legally binding on policymakers and account managers. The absence of any credible system of reward and punishment has only served as an abetment to public servants with the decision-making authority and discretion. There are a number of structural issues that the state, in its utter leniency, has left unattended for years.
At the crux of all forms and manifestations of financial irregularities is the pervasively flawed public procurement practices. The federal restructuring of the Nepal, at least in theory, has devolved powers of fiscal governance up to the municipal (local) level. But, a deep-rooted centralist mindset is still impeding the decentralisation of public procurement practices in the true federal spirit. Therefore, despite being amended 10 times, the Public Procurement Act 2007 has essentially failed to enhance transparency and accountability in all small and large public biddings and final procurements across the country.
The pretension of singly managing and monitoring all public procurements of the nation including those by the local governments by one Kathmandu-based Public Procurement Management Office is an outright farce. This overstretching has provided incentives to local executives to go around "distant" laws, and also prevented sub-national legislatures from enacting locally suitable laws for the purpose, which ideally would have augmented a sense of policy ownership and public awareness about transparency in the process.
The extent of impropriety or irregularity at the local level (Rs40.83 billion or 5 percent of the audited amount), double that at the federal or provincial government level, is certainly a serious cause for concern. But to assume that all unsettled amounts have accrued due to mala fide intentions or corruption would be preposterous. A large chunk of the irregularities has also surfaced due to lack of skills in both fiscal planning and account management among the elected executives and civil servants posted in the majority of local units. Or, government officers were hardly posted to many local units, those who got posted barely reported, they were quickly transferred, and above all, those who assumed their posts were scarcely trained in budget making, project planning and public accountability mechanisms.
Bribery in many forms
Capacity building trainings for local government employees, mainly in public procurement and technology-based accounting applications like Sutra developed by the Financial Comptroller General's Office, are sparse and fragmented. There are also chronic concerns over the efficacy, integrity and consistency of the auditors assigned by the Office of the Auditor General. The practice of bribery in many forms—from greasing the palm to drinking parties to please the visiting auditors by the hosting offices—is rampant and an open secret. There is no set audit calendar for the offices.
It is still not clear why this impoverished nation would like to keep a large number of (18 of them now) public enterprises that have been running in the red for several decades. Twelve of them have failed to carry out their financial audits on a regular basis. Therefore, such incessant misuse of the nation's treasury should not be a mere fleeting concern but needs a systematic approach to correct the course. Putting in place a national accountability framework that conforms to the federal division of state authority could be the most advisable first step.