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@%- Jg Tyf E The Auditor General's Fifty-Seventh Annual Report 2020 Summary Report Office of the Auditor General Kathmandu, Nepal. 1 Unofficial Translation The Auditor General Fifty-Seventh Annual Report 2020 Summary Report Office of the Auditor General Kathmandu, Nepal. We strive to be a credible institution in promoting accountability, transparency and integrity for the benefit of the people Provide independent and quality audit service to assure our stakeholders that the public funds are efficiently used Integrity Independence Professionalism Transparency Accountability Preface The Constitution of Nepal and Audit Act 2075 (2018) mandate the Auditor General to conduct the statutory audit of all government offices of federation, provinces & local levels and wholly government- owned corporate bodies considering regularity, economy, efficiency, effectiveness and propriety thereof. This 57th Annual Report has been prepared by carrying out the audits of financial transactions of 5 thousand 619 entities inclusive of the regular fiscal year and audit backlogs of prior fiscal years, and by including major audit findings, conclusions and recommendations. In the course of the audits, previous experience & international practices and the auditing standards adopted by International Organization of Supreme Audit Institution (INTOSAI) have been followed. This Summary Report has been prepared by covering the significant issues of the Annual Report with an objective to acknowledge the stakeholders pursuant to the results of an independent and impartial evaluation on the works performed by the public entities. This year, total amount of NRs. 5 trillion 171.64 billion has been audited comprising of the transactions of government entities of the federation, provinces and local levels, corporate bodies, boards & other institutions and District Coordination Committees. Out of the amount, total amount of NRs. 1 trillion 756.04 billion of 3 thousand 110 federal government entities and 77 District Coordination Offices have been audited, resulting total irregularity of NRs. 71.06 billion i.e 4.05 percent. Likewise, pursuant to provinces, total amount of NRs. 189.25 billion of 998 entities has been audited, resulting the total irregularity of NRs. 8.20 billion i.e 4.33 percent, and total amount of NRs. 740.65 billion of 747 local levels has been audited, resulting total irregularity of NRs. 38.13 billion i.e 5.15 percent. Similarly, pursuant to public enterprises and other institutions, total amount of NRs. 2 trillion 498.87 billion has been audited. In addition, with respect to the 32 corporate bodies, the consultations for which are provided for auditing in this year, total amount of NRs. 747.80 billion has been audited. Thus, altogether, the total amount of NRs. 6 trillion 122.49 billion has been audited in this year. In comparison to total outstanding irregularity NRs. 377.48 billion that remained up to previous year, the total outstanding irregularity has reached to NRs. 418.32 billion in this year after deducting the settlement and adding this year's irregularity amount of NRs. 40.84 billion. Total of NRs. 7.48 billion has been recovered in course of audits and follow- up audits. As against the total amount of action to be taken, which stood NRs. 683.66 billion up to previous year, the total amount has appeared NRs. 664.44 billion in this year showing a slight decrease in figure caused by reasons such as- the activeness shown in settlement of previous years' irregularities, adjustment & recovery of revenue arrears, improvement made in reimbursements etc. In course of audits, recommendations have been provided for the improvement of the lacuna & weaknesses witnessed with respect to subject matters - the budget formulation & implementation, revenue administration, project & procurement management, expenditure curtailment, monitoring & regulating of grants, service delivery, application of information technology, public enterprises operations, accounting & reporting system, internal controls system, internal and external audits, safeguard & usage of public properties, implementation of federalism, financial management of provinces & local levels etc. It is believed that implementation of the recommendations will contribute in enhancement of the financial accountability in public administration through making the financial management system more responsive, transparent, result-oriented and accountable. Though this office's Annual Audit Plan of this year has a time schedule to submit annual report within 12th April 2020 (end of Chaitra 2076) by preparing the risk-based audit plans of specified entities and carrying out audits starting from 17th July 2019 (2076 Srawan) to 13th. March 2020 (2076 Falgun), but there has been some delay in reporting due to lock-down arose from the worldwide pandemic of Corona Virus. I would like to express my sincere gratitude to Rt. Honorable the President, Honorable Speaker of House of Representative of Federal Legislature for providing their valuable guidance and express my gratitude towards to all concerned inclusive of the Federal Legislature, Provincial Assemblies, Constitutional Bodies, all level of Governments, public entities, Audit Advisory Committee, Technical Committee, development partners, civil society, media persons, general public for providing the valuable suggestions in the preparation and implementation of audit plan. In addition, I would like to extend special thanks to all office staffs for their contributions in preparation of this report by timely completing audit works engaging throughout the day & night even in difficult situation. (Tanka Mani Sharma, Dangal) Auditor General Table of Content Chapter Headings Page 1. Background 1 2. Audit, Irregularity and Follow-up of audit 6 3. Glimpses of Some audit Observations 11 • Economic Indicators and Income Expenditure 12 • Accuracy of Government Accounts 18 • Revenue Exemption and Arrears 21 • Foreign Assistance 26 • Budget Formulation and Execution 28 • Loans & Liabilities 32 • Public Enterprises Operations 34 • Revenue scope 39 • Tax Compliance 43 • Revenue Recovery 62 • Acquisition, Safeguard and Usage of Means & Resources 70 • Loss Damage and Embezzlement 74 • Excess Payment & burden 78 • Economy 81 • Efficiency and Effectiveness 83 • Accountability and Transparency 93 • Scope of Work 96 • Services Delivery 97 • National Pride Projects 100 • Public Procurement Management 107 • Contract Management 111 • Project Management 117 • Grant Distribution 120 • Treasury Mobilization and Consolidated Fund Deposit 122 • Monitoring and Regulating 125 • Reconstruction and Rehabilitation 128 • Sustainable Development 131 • Province Government Offices 135 • Local Levels 141 4. Reforms To Be Undertaken In Future 157 1. Background 1. Legal Provision – Article 241 of the Constitution of Nepal mandates the Auditor General (AG) to carry out the audits of all government offices of the federation and provinces, local levels and other institutions as specified by laws in accordance with the methods as prescribed in law with due regard to, inter alia, the regularity, economy, efficiency, effectiveness and the propriety thereof; and Article 294 of the Constitution requires all Constitutional Bodies to submit their annual reports to the President. The Audit Act, 2019 stipulates about the methodology, scope of audits and the matters to be audited by the Auditor General, and the audit matters pertaining to the corporate bodies wholly-owned by Government of Nepal, Province Government, and Local Bodies. Audits have been carried out by approving audit plan in accordance with the legal mandate as conferred by the Constitution and the Audit Act. 2. Objectives – The objective of our audits has been to provide appropriate conclusions & recommendations on assurance of the following matters by examining with due consideration to regularity, economy, efficiency, effectiveness and propriety thereof pursuant to acquisition and utilization of public resources, and to give reasonable assurances in the presentation of financial statements: Financial Audit • whether the financial statements are prepared in accordance with prescribed formats and present true and fair state of financial transactions, • whether the financial transaction and reporting system are in accordance with the approved formats, • whether adequate arrangements have been made for recording, utilization and safeguard of cash, inventories and other government properties in order to check the loss & damages and misuse, and the arrangement so made have been followed, • whether the accounts of revenues, other overall incomes and deposits are properly maintained, • whether the internal controls system are effective, Compliance Audit • whether the expenditure are incurred for specified purposes remaining within the approved ceilings in accordance with Appropriation Act, • whether accountability and responsibilities are accomplished, • whether the applicable laws are complied and evidences are sufficiently maintained while conducting financial transactions, Auditor General's Fifty-Seventh Annual Report, 2020 -Summary 1 • whether the revenues, other incomes and deposits have been ascertained, realized and deposited in accounts complying the prevalent laws, • whether the monitoring are conducted as per the arrangements of prevalent laws, Performance Audit • whether the economical procedures are followed in incurring expenditure, • whether the progress has been achieved within scheduled
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