Mukti Rijal

The performance of local government institutions is under public scrutiny these days. It is because of the fact that these local democratic institutions are nearing completion of their five-year term and scheduled to brace for polls during the upcoming months. Many of the promises and pledges that the elected officials had committed to their voters during the last local elections are being scrutinised and assessed to what extent these have been fulfilled or achieved. The widely read and followed national dailies have allotted spaces to spotlight the performance of the local government institutions -- rural municipalities and municipalities -- and see where these have failed to fulfil the promises made to the people.

A national weekly has made public the state of governance and public finance management in local governments across all the districts in the country. The media quoting watchdog agencies like the Commission for the Investigation of Abuse of Authority (CIIAA) and the Office of Auditor General (OAG) lists the local governments that are doing relatively better compared against those who have utterly failed to deliver. Even the names of some of the elected local government officials from wards to the municipal levels who are facing the charge of corruption and irregularities have been made public.

Poor fiscal management
If the substance contained in these news items are to be believed, local governments spend a huge amount of fiscal resources without taking due cognizance of financial diligence, rules and regulations. However, it is not for the first time that the local government's poor financial management has been subjected to tougher scrutiny and splashed on media spotlight.
A study conducted by the CIAA almost four years ago mentions that municipalities and rural municipalities are one of the allegedly corrupt agencies in the country. Though the findings can be well contested and dismissed as exaggerated and unreal, the CIAA survey report had indicated that municipalities and rural municipalities are plagued with corruption followed by the land revenue offices in the country.

After the local elections held in 2017 after a gap of around 20 years, it was largely expected that the elected representatives would be accountable to the people and governance would improve in a meaningful way. But the spate of the cases of irregularities seems not declining and poor governance at the local level has not improved. It is alleged that elected representatives at the local levels have been so dominant and errant that there is a tendency to breach laws and rules with impunity, of course, in complicity with the government officials and other actors concerned.

Some local governments have been reported to be spending money in projects which have not been discussed and endorsed by the Local Assembly. Not only the equalisation grants and conditional grants provided by the federal government have also been reportedly misused at many local governments. Local governments have been caught allocating budget in areas where the law does not allow them to do so. As reported, a tendency prevails among a number of local governments to make cost estimate of projects in such a way that contract could be awarded at a lower amount in return for kickback from contractors. However, these allegations levelled against the local governments are brushed aside by the local government authorities and their association contending that local people are generally satisfied with the services delivered by local governments.

The issue of irregularities has been hugely overgeneralised to show all local governments have not performed better under elected representatives. But what all stakeholders and actors must concede is that there exists recurring several public finance management related challenges and risks, including fiscal indiscipline at the local level. Though financial laws and regulations are enacted to enforce fiscal discipline, they are not fully complied and followed. The annual reports of the OAG in the last few fiscal years have reported widespread financial irregularities and indiscipline, such as high variances up to 21 times and spending of capital expenditure up to seventy per cent at the end of the fiscal year. This increases the risk of poor financial mismanagement, and poor quality infrastructure.

An analysis of the budget data shows poor prioritisation of projects and programmes leading to spending in non-prioritised areas and sectors. Also, several projects are listed under priority projects and are considered more on political grounds than on strategic importance. Moreover, poor internal control and weak enforcement of corrective measures against irregularities constitute other challenges that have increased fiduciary and corruption risks at the local level.

Given the substantial number of public finance management related challenges and risks at the local level, an evaluation needs to be conducted with regard to institutional arrangements especially at local government levels. This will provide relevant information on the implementation of the reform measures towards mitigation of public finance management related risks. There is also need to establish project bank including sector categorisation and prioritisation of the projects based on objectively defined criteria followed by and linking multi-year budgeting with the project bank.

Internal audit
Moreover, internal control and internal audit should be strengthened in line with the provisions of the law concerned. Likewise, there is a need for digitisation of the public finance management system, including the information and asset management systems to reduce the risks of irregularities and wasteful expenditure of resources. Moreover, this should be accompanied by robust plans and strategies for institutionalisation of capacity development plan to address the local needs. In addition to it, local citizens should also have a meaningful space to engage with local government to set local development agenda and seek accountability from the local authorities.

Finally, as the second local elections of the federal democratic Nepal is closing in on the heels, there is a need to weed out and reject the incompetent and non-delivering representatives costing delay on local governance and service delivery. The voters should be alert enough to vote in and elect the honest, committed and credible persons to head the local governments that stand as the pyramid structures of the federal governance system in the country.

(The author is presently associated with Policy Research Institute (PRI) as a senior research fellow. rijalmukti@gmail.com)