Could withhold fiscal grants to provinces, local units not making financial reporting on time

KATHMANDU, June 11: The government is formally introducing a measure to tighten the transfer of grants to provinces and local units that fail to submit financial details on time. 

According to the new measure introduced in ‘Appropriation Bill, 2076’ tabled in the parliament, the central government can withhold the transfer of equalization and conditional grants of next installment for the subnational governments that do not comply with the requirement to submit details of their expenditures made from the previous installment.

The bill is formulated to authorize the federal government to allocate and spend budget for services and works for the upcoming fiscal year 2019/20.

In the budget for FY2019/20, the central government has allocated a total of Rs 55.3 billion to provinces and Rs 89.95 billion. Similarly, provincial governments and local governments are set to get Rs 44.55 billion and Rs 123.87 billion, respectively, as conditional grants in the upcoming fiscal year.

The central government deposits the equalization grants to provincial and local governments in their consolidated funds in four installments (August 10, October 19, January 16 and April 13). All subnational governments must submit financial details of the expenditures to the Financial Comptroller General Office (FCGO) by August 10, October 19 and April 14 of the respective fiscal year and annual financial detail by August 9 of the next fiscal year.

The bill also states that the fiscal equalization grants will not be deposited in the consolidated funds if the financial accounts are submitted to the FCGO on time.

Similarly, the central government has also proposed to withhold the conditional grants to subnational governments until they present their financial reports of expenditures of the previous installment to the FCGO on time.

The measure is being introduced at a time when many local units are not providing financial statements of expenditures of the fiscal transfers. Though the FCGO at present can do nothing than to request subnational governments to present financial reports, the new measure will tie up the transfer of the next installment with the financial reporting.

“The fiscal equalization grant is something that has been constitutionally envisioned and the center government cannot stop it. So, we could do nothing but request local governments to send the financial reports to bring them on track,” said Jagannath Devkota, the spokesperson for the FCGO. 
“The bill is trying to have a binding clause for local level governments to do reporting regularly,” he added.

 
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