NATIONAL 4 - (Spotlight Weekly)

‘Accountability Must Begin From Top Politicians And Bureaucrats'

— BISHNU BAHADUR K.C.

BISHNU BAHADUR K.C. has had a long innings in the Auditor-General's Office, having joined the body as a career auditor. After a series of promotions, the King appointed him head of the constitutional body. Auditor-General K.C. has introduced new techniques and modalities for intensive auditing. He spoke to KESHAB POUDEL on key challenges of auditing in Nepal and lapses in the government expenditure. Excerpts:

As a career bureaucrat promoted to the highest position of the Auditor-General's Office, how do you see your performance over the last five years?

Although one can see slight improvements in the process of annual auditing and positive tendencies in the annual budget expenditure, I have not been able to achieve major things to satisfy myself. I will be happy when the volume of the annual unsettled account is reduced and collections of government dues increase. Unless one can feel drastic changes and progress in budgetary spending, there is no reason to celebrate. My objective is to encourage officials to abide by the law. If I succeed in doing so, it will be one of the greatest achievements of my life.

Are there any flaws in the Financial Administration Act and Regulations?

After the amendment to the Financial Administration Act and Regulations three years ago, some ways have been opened in spending annual budget, but there are still many lapses. According to the Constitution of the Kingdom of Nepal, the government has to spend money sanctioned by parliament through the Financial Act. If the government wants some changes in the budget, parliamentary sanction is required. It is very unfortunate that no one seems to abide by their constitutional obligations. Annual budget allocations are changed randomly by officials. The budget allocated to one heading is transferred to another area. Unless the role and duties of the concerned officials are clearly defined, I don't think budget allocations and expenditure can be used properly.

What is required to compel officials, then?

First of all, there is a need for commitment among senior bureaucrats and politicians to abide by the rule of law. Secondly, the government needs to take action against those who do not fulfil the roles, duties and responsibilities spelled in the act. The government changed the Financial Act and Regulation in 1998, but it is still incomplete and confusing. The act is still not in consonance with the spirit of the constitution. I have often raised the issue in the Public Accounts Committee of parliament and with concerned officials. The committee has also directed the government to take necessary steps to fulfill the constitutional obligations. Along with modification in this system, we also need to bring changes in the accounting system.

What are the highlights of this year's report?

We have tried to audit more and more institutions and increase the volume of money. Overall, there has been an increase of 21 percent in unit and 25 percent in amount in unaudited money compared to the last fiscal year. We have seen progress in preparing budget allocation report for audit and promptness among officials to reply to our queries. This year the amount of unsettled accounts of auditing has been reduced by a marginal percentage. Last year, the unsettled account increased by Rs 3.24 billion, but this year it has increased by just Rs 710 million. The total amount of unsettled money is Rs 26.41 billion and auditing due is Rs 2.85 billion. Another serious issue of concern is the increasing amount of revenue due, which is Rs 26.62 billion now. The total amount of revenue due and unsettled account is Rs 55.88 billion.

How do you see the response of officials to your report?

The officials are gradually supporting us by implementing our suggestions and recommendations. This year, the settled amount increased by Rs 3.90 billion and unsettled account of Rs 7.43 billion has been cleared. The account was settled through regular and special provisions. Overall, the amount of settled account has increased, but ministries are trying to reduce the level. In terms of unsettled account and settled account, the progress is very positive. In case of advance payment, the amount has declined compared to previous years. If we see the cases of revenue collections, there are billions of rupees that are overdue. The total revenue overdue was Rs 13.53 billion in the last fiscal year and today it is Rs 17.36 billion. The money includes royalty of electricity, auction of timbers and other revenue and taxes. This is a more serious issue than the amount of unsettled account. The revenue overdue is so high that the progress made in the areas of unsettled account has no effect.

What is the trend of overdue revenue?

If you see the trends of the last five years, the amount of revenue overdue has increased by 374 percent. In fiscal 1996\1997, the revenue due increased from Rs 3.67 billion, but now it is Rs 17.37 billion. This is a result of negligence in the implementation of financial rules and regulations. In business transactions, we have not seen seriousness among the officials. We don't have any monitoring system for follow up and to take action.

What are the problems then?

The problems are the violation of the act and regulations while spending the money allocated in the annual budget. As long as top officials do not abide by the rule of law, I do not see any possibility of bringing the desired change.

After presenting the fourth report in parliament, what improvements have you found in the area of auditing?

There are still many problems and challenges. I am very tired of seeing the repetition of the same types of mistakes each year. Negligence and irresponsible behavior continue to exist and senior officials use public money as they wish. There is still a tendency to spend the budget through decree, not under rules and regulations. Modern accounting is based on certain rules and planning, but our ministers and officials want to use public funds under their discretion. The tendencies and practices among top official to bypass the law and regulations continue. Had senior officials followed the rule and regulations, the problem of unsettled account would not grown to such a large proportion.

What are the major challenges in auditing?

There still are many issues that need to be addressed in order to meet the enormous challenges we face. As you know, the government is yet to agree to put the Rs18 billion-Rs 20 billion in foreign aid in the annual budget. In the budget of fiscal year 2000\01 the government had disclosed only Rs 8 billion in the title of foreign aid. More than 50 percent of foreign assistance is yet to come under the budget. Each year, the government takes overdraft from the central bank, instead of collecting its own revenues and resources. In the last fiscal year, the government took Rs 300 million in overdraft. This year the figure is going to be higher. The government is taking overdraft from the bank but it has not made any effort to collect revenues due from taxpayers.

As you say, a large sum of money that comes through foreign assistance is yet to be recorded in the annual budget. What impact will this have in the budget?

There are two components of foreign assistance. The first is foreign loan and other is foreign assistance. As far as foreign loan is concerned, it is included in the annual budget and the Auditor-General audits it. There is transparency on the part of the loan. Foreign grants, however, are yet to be brought under the purview of the annual budget. We have been requesting the government to disclose the entire amount available through grants. If it is not included in the budget, there is going to be a lack of transparency. As a citizen of the country, one is entitled to know how much money is coming to Nepal and whether the money is being properly used. In many cases, there is no accountability in spending such grants. As the government has already agreed to bring a foreign aid policy, the issue will be settled in the future.

Why are you so much concerned about grants?

Look, a large sum of grant money is being spent without the notice of the government. If the grant is given to Nepalese people, it must be channeled properly. There must be valid auditing from the Auditor-General. If grant money is allowed to be spent without following certain financial norms, it will create problems in the future. It is up to the government to decide where it wants to spend the money. So, you need to have parliamentary approval. If the money is included in the annual budget, it will promote good governance and transparency. The money is now being spent is not in our interest but in the interest of others.

How do you see the level of professionalism among employees in the financial administration and how up-to-date are they on the Financial Act and Regulations?

It is not as if nothing has changed. We can see much improvement in the financial administration. Five or six years ago, employees were left virtually scot-free even after increasing unsettled account. But now senior officers have started to take action against those who do not follow the financial rules and regulations in government expenditure. This in itself is a major shift in policy, but it is still inadequate. Despite the sensitivity and complications involved, the financial administration is yet to receive due attention from the concerned officials and large number of defaulters are yet to be brought before the law. There is much room for improvement, but the pace is not enough to bring desired results. If this situation continues, there will be more defaulters and uncollected revenues.

How do you see the quality of manpower in the financial administration?

Of course, the quality of manpower is an essential component in maintaining a healthy accounting system. As long as senior officials, including ministers and secretaries, are unprepared to follow rules and regulations, skilled officers cannot do anything to improve the situation. The change must begin from top of the bureaucracy. The government must take earnest steps to improve the quality and skill of employees. Fundamentally, senior officials who are given the authority to run the account must be sincere.

What is the level of violation of financial regulations in local bodies like District Development Committees (DDCs), Village Development Committees (VDCs) and municipalities?

In the DDC level, the situation is not as alarming as in government offices. Since the implementation of the Local Governance Act 1998, we don't have to audit the expenditure of the municipalities. Although the municipalities are more resourceful than the DDCs and VDCs, the act gives authority to the municipalities to audit on their own. I don't understand why municipalities are excluded from the central auditing system.