The government released Rs 11.97 million last fiscal year alone for the integration of Maoist combatants into the national army. Started in 2007, the integration process, a major component of the peace process, completed last year.

According to the annual report of the Office of the Auditor General made public on Friday, the state invested Rs 19.8 billion in allowances, salary and voluntary retirement of the combatants while Rs 26.7 billion went to reconstruction and other tasks.

The cantonment spending came under scrutiny after top Maoist leaders and commanders were accused of embezzling the funds by producing fake combatants. Complaints lodged at the Commission for Investigation of Abuse of Authority state Maoist leaders misused at least Rs 4 billion allocated for the combatants by producing fake combatants.

The anti-graft body is investigating into the matter. A knowledgeable source at the CIAA said preliminary investigation has concluded that the Maoist leadership embezzled around Rs 20 billion of the funds released for integration, rehabilitation and construction of cantonment sites.

Auditor General Bhanu Prasad Acharya said the objective of the information was to make the public aware of the money spent on the peace process.

The Maoist party had also formed a probe committee after protests from cadres and former combatants. The committee, however, never made the report public.

Citing ongoing probe, then-CIAA Secretary Bhagawati Kumar Kafle, who also acted as the CIAA chief, had refused to initiate inquiry into the allegations. The watchdog took up the case after Lokman Singh Karki was appointed its chief last year.

According to the report submitted to the President, the accrued arrears of government agencies this year stood at Rs 36.6 billion.