Capital spending accounts for bulk of Rs 10.68 billion federal arrears
KATHMANDU, Nov 5: The federal government's arrears exceeded Rs 10 billion in the last fiscal year, with the largest share of irregularities recorded under capital expenditure.
According to the annual internal audit reports published by the Financial Comptroller General Office (FCGO), unsettled financial transactions of the federal government increased by Rs 1.44 billion to Rs 10.68 billion in FY 2025/26, up 15.6 percent from Rs 9.24 billion recorded in the previous fiscal year.
The FCGO stated that the auditing of government transactions and internal control systems has become more rigorous and effective compared to previous years. However, the rise in arrears has been attributed partly to the expansion of budget allocations, which increased the scope of government spending and oversight.
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The office also noted that the 'Gen-Z' movement during the fiscal year contributed to the increase in arrears, citing damage to public vehicles, government documents and physical infrastructure. In addition, routine errors, procedural lapses and negligence by government employees were identified as factors behind the growth in irregularities.
According to the FCGO, the financial assessment covered transactions related to budget appropriations, revenue, deposits and operational funds. Of the total arrears, Rs 3.42 billion was categorized as recoverable, Rs 1.98 billion required regularization, and overdue advances amounted to Rs 5.27 billion.
By expenditure category, capital spending accounted for the largest share of irregularities. Of the Rs 409 billion allocated for capital expenditure, only Rs 191.89 billion was spent, while arrears totaling Rs 5.78 billion were recorded under the category.
Similarly, of the Rs 1.168 trillion allocated for recurrent expenditure, the government spent Rs 1.015 trillion. Arrears amounting to Rs 969.3 million were recorded under recurrent spending.
The FCGO noted that the low level of capital expenditure also raised concerns about the quality and effectiveness of spending. With less than half of the allocated capital budget utilized and a significant portion of expenditures classified as irregular, questions have been raised over the implementation of development projects and the financial accountability of the agencies involved.
Among government ministries, those involved in infrastructure development accounted for the highest arrears. The Ministry of Physical Infrastructure and Transport recorded arrears of Rs 4.19 billion, representing nearly 39 percent of the total.
The Ministry of Energy, Water Resources and Irrigation reported arrears of Rs 3.23 billion. Other ministries with significant arrears included the Ministry of Land Management, Cooperatives and Poverty Alleviation (Rs 1.32 billion), the Ministry of Urban Development (Rs 780.3 million), and the Ministry of Defence (Rs 319.6 million).
During FY 2025/26, the FCGO conducted internal audits of 3,985 government offices. The audits covered federal offices, programs implemented through intergovernmental fiscal transfers, and financial transactions of offices operating across all seven provinces and 753 local governments.
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