Local governments: Epicenter of corruption

The 61st Annual Report of the Auditor General on local government financial management and accountability has revealed serious issues. The report highlights that many local bodies are misusing funds and engaging in corruption and mismanagement. 

Common problems include excessive and unauthorized spending on travel, fuel, mobile phones, vehicles, and hospitality; hiring staff and advisors beyond approved positions; direct procurement without competitive bidding; paying higher wages and allowances than authorized; misuse of disaster relief and social security funds; and lack of proper accounting and documentation for expenses. According to the Auditor General’s report, local officials arbitrarily spent over Rs 185.32m on travel and monitoring, fuel, mobile phones, transportation vehicles, and hospitality.

Many local officials have made arbitrary expenditures on personal secretaries and advisors. The report indicates that 171 local units spent Rs 91.5m on the remuneration and facilities of personal secretaries in the fiscal year 2022/23. Additionally, 424 local units spent Rs 6.92bn on staff appointed on contract. Although local units are allowed to appoint only municipal police, drivers, office assistants, plumbers, electricians, security guards, gardeners, etc., on contract, 229 local bodies hired staff on contract beyond sanctioned positions and paid Rs 1.53bn in salaries and allowances. Furthermore, 625 local units spent Rs 7.22bn without competitive bidding, as required by law. According to Section 8 of the Public Procurement Act, 2006, procurement should be done without limiting competition. Rule 84 of the Regulations stipulates that procurements worth more than Rs 1m should be done through sealed quotations, and those above Rs 2m through sealed tenders.

Rs 1.06bn spent on consultancy services

During 2022/23, 312 local units spent Rs 1.06bn on feasibility studies, detailed project reports, master plan preparation, and other consultancy services. The Public Procurement Act mandates that consultancy services should only be used if the work cannot be performed by available human resources in public bodies. The report states that these local bodies did not maintain records of detailed project reports received from consultants, and most of these study reports were not implemented. The report also reveals that 193 local units spent Rs 186m to procure various computer software and applications without obtaining approval from the Department of Information Technology, as required by law. Twenty-nine of these local units did not utilize the procured software and applications.

During the year, 75 local units spent Rs 3.66bn to procure four-wheelers, and 130 local units spent Rs 207.2m to purchase two-wheelers. Similarly, 264 local units spent Rs 736.7m on vehicle repairs, while 327 local bodies spent Rs 1.56bn on fuel.

Irregularities via consumer committees

Rule 97 of the Public Procurement Regulations, 2007, states that consumer committees should be responsible only for labor-intensive work that does not require machines, tools, or equipment. However, 302 local bodies spent Rs 2.99bn through consumer committees for 3,314 construction works that involved the use of machines and equipment. According to the report, Rule 97(10) of the Public Procurement Regulations, 2007, prohibits consumer committees from using construction companies in projects they manage. Despite this, 122 local units approved cost estimates for 1,173 projects to be implemented through consumer committees and made payments of Rs 700.9m to construction committees.

Series of irregularities in education sector

The report states that 129 local units spent an additional Rs 33.98m on textbook procurement beyond what is recorded in the Education Management Information System (EMIS). Likewise, 101 local units disbursed Rs 24.76m more for scholarships than the amounts recorded in the EMIS. Additionally, 131 local units released Rs 39.76m more for teacher salaries and related facilities than documented in the system. Furthermore, 162 local units spent a total of Rs 1.31bn on teacher salaries and facilities, previously covered by schools through their internal funds. This included payments for teaching positions that were not officially approved.

Poor service delivery

Local units are responsible for providing easy and quality services by ensuring public participation, accountability, and transparency to implement the provisions related to local-level authority. According to the Auditor General’s report, service delivery has been ineffective due to a lack of staff recruitment as per approved positions, inadequate office buildings and other infrastructure, and geographical challenges. The report highlights numerous discrepancies, such as the approval of a large number of small fragmented projects by village/municipal assemblies, the non-implementation of approved projects, and the transfer of project funds to other headings. There is also excessive expenditure on unproductive and distributive programs, non-compliance with procurement laws, and a lack of sustainable planning.

Local bodies not conducting audits

As per Section 20 of the Audit Act, 2018, the accounts of local units should be audited by the Office of the Auditor General. However, the Auditor General’s report has found that many local bodies have not conducted audits. Mechinagar Municipality of Jhapa, Bishnupur Rural Municipality of Saptari, Bariyarpatti Rural Municipality of Siraha, Kabilasi Municipality of Sarlahi, Simraungadh Municipality of Bara, and Chankheli and Adanchuli Rural Municipalities of Humla have not conducted audits for 2022/23. Similarly, Kamala Municipality of Dhanusha, Chinnamasta Rural Municipality of Saptari, and Dhanauji Rural Municipality of Dhanusha have not audited their accounts for 2021/22.