Finance Ministry setting bad precedent: FCGO

KATHMANDU, MAR 15 -

The Financial Comptroller General Office (FCGO) has cautioned the Finance Ministry that its move to authorise other ministries to release budget

for programmes and projects failing to get timely reimbursement from donors would establish a bad precedent.

The FCGO, which is responsible for releasing the budget, has stated in a letter sent to the ministry that releasing the budget as per the ministry’s lone direction for projects failing to fulfil the direction issued by ministry itself on budget implementation and provision of working procedure on reimbursement would make it hard to ensure compliance of the provisions by other projects too.

Stating that the budget for projects under the pool fund under the Health Ministry was released as per the Finance Ministry’s request despite the projects’ failure to comply with almost all provisions, the FCGO told the ministry that such a trend would lead to piling up of reimbursement dues.

As of 2011-12, outstanding reimbursements stood at Rs 22.15 billion, slightly down from Rs 24.60 billion as of 2010-11. In fiscal 2009-10, the figure was at Rs 32 billion.

Neither the projects under the pool fund submitted the project account of the last fiscal year to the donors, nor did they receive reimbursement from the donors when the budget was released.

They also failed to reconcile their expenditure record with that maintained at the FCGO.

Various multilateral and bilateral donors have provided budgetary support to the government in the pooled form to implement health-related programmes.

Other programmes and projects that got the budget released in the second trimester despite their failure to fulfil the set criteria include School Sector Reform Programme, Infant Care Programme and Food for Education Programme under the Ministry of Education; Rural Access Improvement and Decentralisation Programme under Local Development Ministry; and Secondary Towns Integrated Urban Environmental Improvement Project under the Urban Development Ministry.

“A majority of the programmes got the budget released despite their failure to submit project audit report and get reimbursement as of the last fiscal year,” said Narayan Niraula, deputy   financial comptroller general.

He said releasing the budget to such projects as per the Finance Ministry “letter” would encourage the tendency of seeking intervention from the ministry instead of correcting their shortcomings. “That’s why we told the Finance Ministry that we obligated your directive, but you should also tell other ministries to improve their performance.”

The Finance Ministry, in its budget authorisation letters to other ministries, has clearly stated that the release of the budget for the projects failing to get reimbursement would be completely stopped. It has said the release of the budget has been tied with whether the foreign-aided projects have details of expenditure and audit reports have been presented to the donors.

Finance Secretary Shanta Raj Subedi said his ministry has been encouraging other ministries to submit the project account and get reimbursement in time. “We have told other ministries that a failure to do so would be problematic for the Finance Ministry to arrange the matching fund in donor-aided projects,” he said, adding a meeting of the secretaries chaired by the chief secretary on Wednesday also directed the ministries to get timely reimbursement.

The delay getting reimbursement had been one of the major reasons behind the heavy deficit in the balance of payments in fiscal year 2010-11. A failure to get reimbursed funds from the donors leads to a budget deficit, forcing the government either to take overdraft from the Nepal Rastra Bank or recover the deficit through internal borrowing. On both the occasions, the government has to pay interest on the borrowings. But a reimbursement ensures interest-free resources.

It is a common practice in development projects to spend the budget allocated under the donors’ head and claim reimbursement from them after submitting the paperwork of expenditure. Delay in claiming reimbursement has also been a common practice, resulting in delayed repayment.

Source: The Kathmandu Post