Financial indiscipline in local bodies

The local bodies – mainly the District Development Committees (DDCs) and Municipalities and Village Development Committees (VDCs) – have failed to return unspent money worth about 15 billion rupees meant for development activities. The officials say this money has become due for over last five years. DDCs, VDCs and Municipalities get grant from the central government to carry out various development activities annually. According to the Financial and Local Development Act, local bodies must return unspent budgets to the central accounts at the end of the fiscal year to ensure transparency in activities conducted throughout the fiscal year. This revelation only shows growing financial indiscipline and potential irregularities at the local level that needs immediate redress.



This, however, also shows that the problem does not lie just at the local level. Since the local bodies are obliged, under prevailing laws, to report and return the unspent money to the central account, they should have been reprimanded and punished when many of them have failed to do so for the last five years. But the fact that the local bodies have not been held into account for violation of the law means Office of the Auditor General and Office of the Financial Comptroller, who are the responsible bodies to keep a tab on government’s expenses, also have not done their job. The local development ministry, which is the line-ministry to deal with local bodies, should also have played its role to make sure that the unspent money was returned to the government’s central account. Since the local bodies do not have elected representatives for the last eight years and are run primarily by bureaucrats, the ministry should have been even more vigilant about taxpayers’ money that had gone to the local bodies.



This revelation about the unspent resources at the local level raises another important issue: How local bodies have become largely dysfunctional in absence of elected representatives and development activities have become victim of lack of democracy. It’s definitely not that the local bodies are awash with cash and therefore the central grant remained unutilized. Nor is it true that there was no need of money to be spent in development activities. We all are aware of how Nepal’s countryside chronically lacks infrastructure – many of the villages even don’t have critical infrastructure such as roads, schools, and drinking water. Since multiparty system was restored in the country in 1990, local bodies had functioned effectively and were a great success story. People’s participation was unprecedented and citizens were holding their local leaders into account until Sher Bahadur Deuba’s government dismissed the local bodies in 2002. It’s sad that the parties, despite several rounds of dialogues after the reinstatement of the parliament in 2006, failed to reach an agreement to reactivate the local bodies. That the government has now even become indifferent to the potential irregularities at the local body is really sad.

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