The Auditor General's Fifty-Fifth Annual Report 2018
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Unofficial Translation The Auditor General's Fifty-fifth Annual Report 2018 Summary Report Office of the Auditor General Kathmandu, Nepal. The Auditor General's Fifty- Fifth Annual Report, 2018 Summary Report Office of the Auditor General Kathmandu, Nepal. Serving the Nation and the People Vision We strive to be a credible institution in promoting accountability, transparency and integrity for the benefit of the people Mission Provide independent and quality audit service to assure our stakeholders that the public funds are efficiently used Core Values Integrity Independence Professionalism Transparency Accountability Preface The Constitution of Nepal mandates the Auditor General to conduct the statutory audit of all government offices of federation, states & local levels, and wholly-owned corporate bodies by federal or state government in consideration with regularity, economy, efficiency, effectiveness and propriety thereof. This Fifty-fifth Annual Report has been prepared, within almost 11 months of my tenure after assuming office as an Auditor General, incorporating the findings and recommendations witnessed on the this year's (2016/17) audits of financial transactions of 6 thousand 616 entities and the audit backlogs of prior to this fiscal year. In the course of the audits and in the preparation of audit reports, the practices adopted by this office in the past, international practices, and standards adopted by International Organization of Supreme Audit Institution (INTOSAI) and Asian Organization of Supreme Audit Institution (ASOSAI) have been followed. In order to acknowledge the people on the works performed by the public entities by an independent an impartial analysis, this Summary Report has been prepared by consisting significant issues of the Annual Report . This year, the total amount of NRs. 4 trillion 687 billion 910 million has been audited comprising of the transactions of government entities, corporate bodies, local Bodies/levels and District Development/Coordination Committees, and total irregularity of NRs. 94 billion 820 million or 5.41 percent has been noticed from the audits of NRs. 1 trillion 752 billion 930 million of 4 thousand 812 government entities. Pursuant to 744 local levels including then 3,374 local bodies, the total amount of NRs. 180 billion 310 million of 738 local levels has been audited, and irregularities of NRs. 14 billion 250 million or 7.90 percent have been witnessed. During this year, the total of NRs. 2 trillion 754 billion 670 million has also been audited pursuant to public enterprises, District Development Committees and other institutions. In addition, the consultations for audits have been provided to 21 public enterprises. Out of outstanding irregularities up to previous years' NRs. 222 billion 530 million, NRs. 169 billion 620 million has remained as outstanding after settlement of NRs. 52 billion 910 million during this year, and the total outstanding irregularity of NRs. 290 billion 530 million has been stood at with the addition of this year's irregularity NRs. 120 billion 910 million. This year, the recovery of NRs. 14.9 billion has been made during audits and follow-up audits. Total amount of irregularities that require to be recovered and to be settled through required action has totalled NRs. 500 billion 80 million at the end of this year that was remained at NRs. 396 billion 260 million up to last year,. In course of auditing, weaknesses & lacunae have been witnessed pertaining to compliance with laws, internal control arrangements, safeguards of government properties, receipts & application of resources & means, budget management & certainty of funding, mobilization of foreign aid, revenue receipts, public procurement management, project management, approval & implementation of programs, grant disbursement and its monitoring, reconstruction and rehabilitation, conservation of natural resources & cultural heritages, service delivery, among other. Pertinent suggestions/ recommendations have been provided in this report to make improvements in the areas of public administration, financial administration, promotion of accountability & transparency and service delivery in addition to the above mentioned weaknesses & lacunae observed in course of audits. We do believe that implementation of these recommendations would help in maintaining fiscal discipline in public administration. As per the Constitution of Nepal, following the transformation of the country in federal structure, people-elected governments have been formed in federation, states and local levels. Huge resource gaps are expected pursuant to budgetary management as development works, service delivery and administrative expenses are required to be undertaken by these threetiers government. Such gaps could be bridged only if available government resources are economically & efficiently mobilized for the essential activities to be performed by the governments, and external sources along with private sector are mobilized for the rest of services & works to be performed. Finally, in course of accomplishment of constitutional responsibility, I would like to express my gratitude towards all concerned inclusive of Legislature-Parliament, Constitutional Bodies, all entities of Government of Nepal, public enterprises, Audit Advisory Committee, development partners, civil society, media persons, general public among other; for their supports by providing suggestions in preparation of this Audit Report. In addition, I would like to extend a very special thanks to all staff of my office for their valuable contributions in preparation of this report by timely completion of audit works through their round the clock engagement into it. (Tankamani Sharma, Dangal) Auditor General Auditor General Babar Mahal, Kathmandu Nepal Of Nepal Summary Report In accordance with Article 241 of the Constitution of Nepal, the Fifty-fifth Annual Report has been submitted today to the Rt. Honourable President of Nepal. The Report has been made public through the official website- on www.oagnep.gov.np of this office. This report has been published as a Summary extracted from the Fifty- fifth Annual Report with a view to enhance financial accountability & transparency by acknowledging general public about the results of the country's public fiscal affairs noted through the way of audits. 12 April, 2018 (Tankamani Sharma, Dangal) Auditor General Table of Content 1. Background 1 2. Audit, Irregularity and Follow-up of audit 5 3. Glimpses of major audit findings 8 Economic Indicators and Income Expenditure 9 Accuracy of Public Accounts 12 Foreign Assistance Mobilization 14 Budgetary Discipline 15 Loan & Liability 19 Revenue Projection and Extension of Tax Net Tax Compliance 21 Revenue Exemption and leakage Control 25 Receipt, Safeguard and Usage of Means & Resources 32 Loss Damage and Embezzlement 37 Misuse of Public Resources 37 Economy 40 Efficiency and Effectiveness 42 Accountability and Transparency 43 Delivery of Services 45 Policy Program, Approval and Implementation 48 National Pride Projects 49 Norms and Cost Estimate 54 Public Procurement Management 56 Construction Works and Quality of Goods 64 Project Implementation 66 Grant Disbursement and Monitoring 67 Tax Deduction and Deposit 68 Deposit in Consolidated Fund 69 Return on Investment 71 Monitoring and Regulation 73 Reconstruction and Rehabilitation 76 Environment Protection an Sustainable Development 78 Conservation of Natural and Cultural Heritage 79 Local Level 80 4. Reform Areas 86 5. Office Activities 90 Auditor General's Annual Report, 2018 Summary Report 1. Background 1. Legal Provision – Under the Article 241 of the Constitution of Nepal, the Auditor General (AG) has been mandated to carry out the audits of all government offices of the federation and states, local levels and other institutions in accordance with the methods as prescribed by law with due regard to, inter alia, the regularity, economy, efficiency, effectiveness and the propriety thereof; and all Constitutional Bodies are required to submit their annual reports to the President in accordance with the Article 294 of the Constitution. The Audit Act, 1991 (First Amendment) stipulates the methodology, scope and the matters to be audited by the Auditor General, and the audit matters pertaining to the wholly and substantially owned corporate bodies by the Government of Nepal. Audits have been carried out in conformity with the legal mandate as conferred by the Constitution and the Audit Act. 2. Objectives– The objective of audit was to provide appropriate conclusions & recommendations with assurance on 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 give reasonable assurances on the financial statements: . Financial statement has been prepared in the prescribed formats and transactions are presented in true and fair manner, . Expenditure has been incurred only for the very purpose and specified task within the limit approved for as set by Appropriation Act, . All receipts including revenue are properly collected and deposited, . Adequate arrangements have been made for maintaining records of government property, its usage and safeguarding, . Arrangements for internal control and internal audit are effective, . Financial transactions are conducted complying with laws and supporting