Promoting good governance has always been high on agenda of all the political parties and successive governments in Nepal. But things seem to have mostly gone other way around. The increase in public arrears at an alarming rate has been one of the factors behind the country’s failure to ensure good governance and rule of law.
Although the Office of the Auditor General (OAG) has alerted the relevant public offices against a haphazard spending of taxpayers’ money every year, the amount of arrears has been on the rise because of the misuse of public funds. Less revenue collection, idle deposits at the treasury, higher payments and expenditures beyond legal parameters are considered arrears. It also refers to payments that are overdue.
The OAG’s 58th annual report that was unveiled recently portrays a worsening situation of public spending. According to the report, public offices in the country have around Rs. 104 billion by the end of the fiscal year 2020/21. The recovery rate of arrears has not remained so encouraging. The offices had to recover as much as Rs. 26.4 billion arrears during the last fiscal year, but they were able to recover only Rs 6.1 billion. After the OAG’s reports indicated the arrears, the authorities concerned had recovered Rs. 9.7 billion in 2017/18, Rs. 7.4 billion in 2018/19 and Rs. 6.1 billion in 2019/20.
As per the report, arrears of the federal and provincial government offices have witnessed a gradual fall over the past three years. The amount of arrears in federal government offices has fallen to 2.86 per cent in 2021 from 5.29 per cent in 2019. This is certainly a positive sign. Similarly, the arrears of the provincial offices have also dropped to 2.74 per cent from 7.25 per cent. However, what is worrying is that the actual amount of arrears has increased to Rs. 6.5 billion in 2021 from Rs. 19 million in 2019.
But the local governments and other organisations and agencies have increased arrears considerably. The size of arrears of the local levels stood at 4.22 per cent (Rs. 24.1 billion) while it has gone up to Rs. 5 per cent (Rs. 40.8 billion) in 2021. It is notable that the organisations and committees set up by the federal and provincial governments have remained the worst performers when it comes to fiscal transparency and accountability. Such organisations have as much as Rs. 12.6 billion arrears in the last fiscal year.
Many organisations and offices that were responsible for making unwanted expenditures are often found to be failing to clear their arrears in time. There has also been a propensity of numerous public offices to spend extravagantly on unwanted goods and services. This has led to a significant increase in the total amount of outstanding payments.
The process of development is sure to hit a snag with the continuous increase in the amount of public arrears. The OAG has pinpointed poor public accountability of many offices in terms of budget and project implementation, revenue administration, public property management, fiscal federalism execution and public service delivery. Its recommendation must be followed by the relevant offices and bodies to utilise the public funds in a more effective manner. They should also reduce unproductive, distributary and administrative costs. This will alone help reform and strengthen governance.