I. Credibility of the Budget
Scores by Dimension
Overall Indicator Score
1. Aggregate expenditure out-turn compared to original approved budget
A
Notes:
1.1 The difference between actual primary expenditure and the originally budgeted primary expenditure (i.e. excluding debt service charges, but also excluding externally financed project expenditure)
A
Notes:
2. Composition of expenditure out-turn compared to original approved budget
C+
Notes:
2.1 Extent of the variance in expenditure composition during the last three years, excluding contingency items (the methodolodgy to rate this dimension is set out in the footnote of the PFM PMF booklet)
C
Notes:
Variance in expenditure composition exceeded 15 percent in no more than one of the last three years. Variance in FY11 was 11.8%, in FY12was16.7%, and in FY13 was 5.3%.
2.2 The average amount of expenditure actually charged to the contingency vote over the last three years
A
Notes:
Actual expenditure charged to the contingency vote was on average less than 3 percent of the original budget. Actual expenditure to the contingency budget was 0.25% on an average for three years.
3. Aggregate revenue out-turn compared to original approved budget
A
Notes:
3.1 Actual domestic revenue collection compared to domestic revenue in the originally approved budget
A
Notes:
4. Stock and monitoring of expenditure payment arrears
B+
Notes:
4.1 Stock of expenditure payment arrears (as a percentage of actual total expenditure for the corresponding fiscal year) and any recent change in the stock
A
Notes:
Financial statement of FCGO of FY11/12 and12/13. The expenditure payment arrears to actual expenditure were respectively0.31%(FY11/12) and 0.15%(FY12/13). Records maintained by DTCOs in TSA/ DECS based on statements submitted by spending units and verification of observations by internal audit and external audit by OA G.
4.2 Availability of data for monitoring the stock of expenditure payment arrears
B
Notes:
Annual report of the FCGO DECS/TSA system (enforced since 2009) has forced the offices to record such arrears in FM IS and prepare district-wise annual report.
II. Comprehensiveness and Transparency
Scores by Dimension
Overall Indicator Score
5. Classification of the budget
A
Notes:
5.1 The classification system used for formulation, execution and reporting of the central government's budget
A
Notes:
6. Comprehensiveness of information included in budget documentation
A
Notes:
6.1 Share of the listed information under PI-6 in the PFM PMF booklet in the budget documentation most recently issued by the central government (in order to count in the assessment, the full specification of the information benchmark must be met)
A
Notes:
7. Extent of unreported government operations
D+
Notes:
7.1 The level of extra-budgetary expenditure (other than donor funded projects) which is unreported i.e. not included in fiscal reports.
D
Notes:
i): There are 1,062 parastatals (including autonomous government agencies, trust funds, and state corporations) in which government has a majority stake. Estimated unreported expenditure is considerably more than 10% of total expenditure; comprehensive details on expenditure and on-tax revenues are not included in fiscal reports, not even as consolidations with other central government expenditure.
7.2 Income/expenditure information on donor-funded projects which is included in fiscal reports.
C
Notes:
Development Cooperation Report 2013 cites the status of aid reporting as 29% on budget and on Treasury, of which all loan aid is reported and the balance (US$681.48 million) is grant and TA aid.
8. Transparency of inter-governmental fiscal relations
C+
Notes:
8.1 Transparent and rules based systems in the horizontal allocation among SN governments of unconditional and conditional transfers from central government (both budgeted and actual allocations);
C
Notes:
Since 1998/99, grants have increased annually incrementally on a criteria and formula base, but it does not exceed 50 percent of total budget fund transfer to local bodies.
8.2 Timeliness of reliable information to SN governments on their allocations from central government for the coming year;
C
Notes:
Grant information (ceiling for next FY, i.e. July to December 2013) was issued to SNG levels, but it was too late for significant budget changes to be made.
8.3 Extent to which consolidated fiscal data (at least on revenue and expenditure) is collected and reported for general government according to sectoral categories.
B
Notes:
SNG reports are collected and Local Fiscal Commission prepares consolidated financial statement within 8 months after completion of the fiscal year.
9. Oversight of aggregate fiscal risk from other public sector entities.
C
Notes:
9.1 Extent of central government monitoring of AGAs and PEs.
C
Notes:
Major public enterprise and autonomous government agencies submit financial accounts to the Accountant General's Department and MoF on an annual basis. A consolidated overall fiscal risk report has not been issued
9.2 Extent of central government monitoring of SN government's fiscal position
C
Notes:
Fiscal information on SNG is monitored annually on the basis of MCPM . Financial status analysis of SNG is also prepared annually. But it is not used to produce an overall fiscal risk report.
10. Public access to key fiscal information
A
Notes:
10.1 Number of the above listed elements of public access to information that is fulfilled (in order to count in the assessment, the full specification of the information benchmark must be met)
A
Notes:
III. Policy-Based Budgeting
Scores by Dimension
Overall Indicator Score
11. Orderliness and participation in the annual budget process
A
Notes:
11.1 Existence of and adherence to a fixed budget calendar;
A
Notes:
There exists a clear annual budget calendar. For this purpose, MoF publishes Budget Formulation Guidelines by consulting with all stakeholders that are involved in the budget formulation process, including NPC. Generally, the Guidelines need to be updated every two years. The latest version was published in 2012. The budget calendar has clearly mentioned the dates, roles, responsibilities, and activities during the budget preparation process and responsibilities of the concerned institutions. It allows MDAs reasonable time (about 2 months from the receipt of the budget circular) to send their budget and program proposals to the NPC and MoF for budgetary discussions.
11.2 Clarity/comprehensiveness of and political involvement in the guidance on the preparation of budget submissions (budget circular or equivalent);
A
Notes:
A Resource Committee has been set up in NPC for the preparation of mediumterm macroeconomic framework. This Committee meeting is chaired by the vice-chairperson of the NPC and is participated by all the members of the NPC, its Member- Secretary, Finance Secretary, Central Bank Governor and the Financial Comptroller General. Moreover, a clear and comprehensive budget guidelines (macro and sectorial) and budget ceiling is circulated to all the MDAs keeping the total budget size within the limit set by the Resource Committee.
11.3 Timely budget approval by the legislature or similarly mandated body (within the last three years);
NA
Notes:
In the last three years there were two instances when the budget was approved through an executive ordinance because there was no Parliament.
12. Multi-year perspective in fiscal planning, expenditure policy and budgeting
B
Notes:
12.1 Preparation of multi -year fiscal forecasts and functional allocations
B
Notes:
Nepal has been preparing the MTEF since the FY02/03. This MTEF is prepared for a three-year period. It has a macroeconomic framework for a three-year period based on the main categories of economic and functional/sector classifications prepared on a rolling annual basis. The first year of the MTEF is the budget, and the forward forecast sets the ceiling for the coming years. Links between multi-year estimates and subsequent setting of annual budget ceilings are clear and differences are explained in the MTEF document. Therefore, there exists a clear link between MTEF and the annual budget. The previous periodic plans (i.e., the 11thand the 12thplans) were fiscally anchored by the MTEF s. Disaggregate sectorial and sub-sectorial ceilings were also enunciated in the MTEF . However, there is the provision for crossing the ceiling allocated for the ministries if they could mobilize additional external resources. So there is some flexibility allowed to the ministries
12.2 Scope and frequency of debt sustainability analysis
A
Notes:
The FCGO debt-servicing unit maintains records of external debt. External debt information is received from development partners and is recorded by the FCGO debt-servicing unit. The Central Bank used to publish the total outstanding debt, both domestic and foreign, in its quarterly bulletin. It is not usual practice for the government to do debt sustainability analysis. However, agencies like IMF and World Bank used to regularly publish the DSA reports that could be used by the government for its analysis.
12.3 Existence of sector strategies with multi-year costing of recurrent and investment expenditure;
C
Notes:
A few years ago, the Government prepared the business plans for seven sectors. But it was not continued. Sector strategies were prepared in the periodic plan documents. SWAPs are in place in education, health and rural road sectors. Some initiative was also taken to prepare a SWAp in the trade sector. The budget allocation for these three sectors covers about 27% of the total.
12.4 Linkages between investment budgets and forward expenditure estimates.
C
Notes:
Although sector strategies are spelled out in the plan document, the links to them and their investment and recurrent cost implications is weak. Sector strategies with cost estimates exist only in education, health, and rural roads. Therefore the link between sector strategies, the investment, and forward expenditure estimates is weak in most of the sectors.
IV. Predictability and Control in Budget Execution
Scores by Dimension
Overall Indicator Score
13. Transparency of taxpayer obligations and liabilities
A
Notes:
13.1 Clarity and comprehensiveness of tax liabilities
A
Notes:
Value Added Tax Act 2052 (1995)and Value Added Tax Rules 2053 ( 1996); Income Tax Act 2058 (2001) and Income Tax Rules 2059 (2002); and Customs Act 2064 (2007) and Customs Rules 2064 (2007); Excise Act 2058 (2001) and Excise Rules 2059 (2002); Income Tax Directives 2066 (2009), Value Added Tax Directives 2069 (2012), Excise Tax Directives 2068 (2011), Customs Tax Directives 2065 (2008) and Rent Tax Directives 2068 (2011); as well as Annual Reports of Inland Revenue Department and Custom Department all clearly exhibit the comprehensiveness and clarity of legislations and procedures. The discretionary power of government officers too is totally controlled by the law.
13.2 Taxpayer access to information on tax liabilities and administrative procedures.
A
Notes:
Tax laws and rules, directives, procedures, tax calculators, brochures, circulars, FA Qs are available on departmental websites. Citizen’s Charters are displayed at all revenue offices. Taxpayer education programs – workshops, seminars, interactions, etc. are being organized regularly. Facilitators and Taxpayer Service Offices have been established. The information flow is broad and comprehensive.
13.3 Existence and functioning of a tax appeals mechanism.
B
Notes:
Revenue Tribunal, Administrative Review Committee and Tax Evaluation Review Committee have been established.
14. Effectiveness of measures for taxpayer registration and tax assessment
A
Notes:
14.1 Controls in the taxpayer registration system.
B
Notes:
The record of taxpayers with PAN remains intact in IRD central database system. Every taxpayer is registered with a nine- digit PAN . The work to establish linkages with other government agencies is just beginning.
14.3 Planning and monitoring of tax audit and fraud investigation programs.
A
Notes:
The work plan of selecting taxpayers on the basis of potential risk of noncompliance and tax audit existed in accordance with the provisions of the laws, annual reports of departments, and the information provided by IRD.
14.2 Effectiveness of penalties for non-compliance with registration and declaration obligations
A
Notes:
Legal action is taken against taxpayers not included in the tax system according to the provisions of penalties in the Value Added Tax Act 2052 (1995), Income Tax Act 2058 (2001), Excise Act 2058 (2001) and Custom Act 2064 (2007), and on the basis of the report of tax audit, fraud investigation and market monitoring.
15. Effectiveness in collection of tax payments
D+
Notes:
15.1 Collection ratio for gross tax arrears, being the percentage of tax arrears at the beginning of a fiscal year, which was collected during that fiscal year (average of the last two fiscal years).
D
Notes:
FY2013 OA G report.
15.2 Effectiveness of transfer of tax collections to the Treasury by the revenue administration.
B
Notes:
Financial Procedures Act sets a 2-day time limit for revenue to be deposited to the Treasury account. While this provision is adhered to, a few administrative units deposit the revenue collection only within a week.
15.3 Frequency of complete accounts reconciliation between tax assessments, collections, arrears records and receipts by the Treasury.
D
Notes:
Financial Procedures Act 1998 and Financial Administration Rules 1999 require that the account reconciliation of revenue should be done. But the account reconciliation between data recorded in Central Database System and the revenue collected in Treasury is not completed within 3 months from the end of the fiscal year.
16. Predictability in the availability of funds for commitment of expenditures
C+
Notes:
16.2 Reliability and horizon of periodic in-year information to MDAs on ceilings for expenditure commitments
B
Notes:
There are provisions of authorization guidance letters from MoF and FCGO to MDAs along with the ceiling of budgeted amount (Red Book) after promulgation of Appropriation Act; increasing trend on revenue collection and more predictability and transparency in foreign aid mobilization have increased the reliability and horizon of information on ceiling for committing expenditure.
16.3 Frequency and transparency of adjustments to budget allocations, which are decided above the level of management of MDAs.
C
Notes:
Signification-year virement.
16.1 Extent to which cash flows are forecast and monitored
C
Notes:
Line ministries prepare pro-forma cash flows at start of each fiscal year and also prepare monthly pro-forma cash flows, however these are updated only when there is a significant deviation from anticipated expenditure.
17. Recording and management of cash balances, debt and guarantees
C+
Notes:
17.1 Quality of debt data recording and reporting
C
Notes:
Domestic and foreign debt records maintained by dedicated unit at FCGO are complete, updated, and reconciled annually. Data quality is fair. Some gaps and reconciliation problems are observed. Reports on debt stock and servicing are published annually.
17.2 Extent of consolidation of the government’s cash balances
B
Notes:
Cash balances are calculated and consolidated at least weekly. Extra-budgetary funds remain outside the arrangement.
17.3 Systems for contracting loans and issuance of guarantees.
C
Notes:
Government contracting loans and issuance of guarantees are always approved by single responsible entity but are not decided on the basis of clear guideline, criteria, or overall ceilings
18. Effectiveness of payroll controls
C+
Notes:
18.1 Degree of integration and reconciliation between personnel records and payroll data.
C
Notes:
Each employee gets a personal ID with the first appointment and changes in personal profile are updated regularly. Payroll of each month is verified with the salary report, transfer order, and other changes. However, reconciliation problems do exist for lack of integration of the personnel database and payroll every month.
18.2 Timeliness of changes to personnel records and the payroll
B
Notes:
Personnel records are updated after receiving authorized letter of changes in personnel profile from the government offices. Letters in transit may create reconciliation problem.
18.3 Internal controls of changes to personnel records and the payroll.
C
Notes:
Personnel records are maintained, according to civil service law, jointly by record keeping agencies, ministries, and the office concerned. However, there is a different system and basis for keeping personnel records. Authority and basis for changes to personnel records and the payroll are clear and are checked in the management audit.
18.4 Existence of payroll audits to identify control weaknesses and/or ghost workers.
C
Notes:
Personnel records are verified.
19. Transparency, competition and complaints mechanisms in procurement
B
Notes:
19.1 Transparency, comprehensiveness and competition in the legal and regulatory framework
B
Notes:
Transparency, comprehensiveness and competition in the legal and regulatory framework.
19.2 Use of competitive procurement methods
D
Notes:
Use of competitive procurement methods.
19.3 Public access to complete, reliable and timely procurement information
C
Notes:
Public access to complete, reliable, and timely procurement information.
19.4 Existence of an independent administrative procurement complaints system
A
Notes:
Existence of an independent administrative procurement complaints system.
20. Effectiveness of internal controls for non-salary expenditure
C
Notes:
20.1 Effectiveness of expenditure commitment controls.
C
Notes:
Commitments for all expenditure categories are registered in the accounting system: this incorporates comprehensive controls that limit expenditure commitments according to cash availability (conformity with budget allocations and availability).
20.2 Comprehensiveness, relevance and understanding of other internal control rules/ procedures
C
Notes:
Internal controls are implemented through rules/regulations and FM IS, including all execution stages. There are many formal procedures/ manual to disseminate and communicate internal control rules, and the DTCOs (IAA) are considering checking its effectiveness.
20.3 Degree of compliance with rules for processing and recording transactions
C
Notes:
The existing control mechanisms are understood and followed in most transactions. However, occasionally simplified procedures are used without further justification.
21. Effectiveness of internal audit
D+
Notes:
21.1 Coverage and quality of the internal audit function.
D
Notes:
Coverage of auditing is 100%, which cover all financial transaction and its process, achievement of targets; utilization of financial resources in efficient, economic, and effective way; checking the internal control system within organization; and presenting actual report of financial transaction. As per provision, current auditing practice is not enough to cover the all systematic issues. It is mainly successful in checking numeric and arithmetic errors, verifying the accuracy of transaction, and preparing treasury position. OA G reports have stated that other systematic issues (especially in achieving result, checking effectiveness of internal control system, and efficient use of financial resources) are not addressed properly. There is no separate internal audit standard but the regulation and guidelines have mentioned subject areas to be covered in detail with checklists, reporting format, and checking standards of different financial activities for internal audit purpose.
21.2 Frequency and distribution of reports
C
Notes:
Internal audit reports are issued to audited entity and their concerned ministry and department. It is also sent to OA G and FCGO. The reports are not sent to MoF. The compiled internal audit report is published by FCGO. It has started to share suggestions with concerned line ministries and central agencies. The report should have been produced each trimester, which is not the case. It is done annually in most cases.
21.3 Extent of management response to internal audit findings.
D
Notes:
DTCO reports to respective expenditure units and the manager is required to address the suggestions. The manager needs to take action on suggestions of the internal audit, and supervising agencies are required to monitor and take actions as needed. The OA G report states tracking of implementation is weak. There is no information on actions taken by managers.
V. Accounting, Recording and Reporting
Scores by Dimension
Overall Indicator Score
22. Timeliness and regularity of accounts reconciliation
C+
Notes:
22.1 Regularity of bank reconciliations
C
Notes:
There are issues in reconciliation of revenue accounts while reconciliation of expenditure accounts are done as per schedule. Data generated by FCGO system, monthly, quarterly and year-end reports are verified.
22.2 Regularity of reconciliation and clearance of suspense accounts and advances.
B
Notes:
Suspense accounts are not maintained in government accounting. FPR 2007 has clear provision for taking and clearing the outstanding advances. Clearance of advances takes place regularly on the basis of prescribed period.
23. Availability of information on resources received by service delivery units
A
Notes:
23.1 Collection and processing of information to demonstrate the resources that were actually received (in cash and kind) by the most common front-line service delivery units (focus on primary schools and primary health clinics) in relation to the overall
A
Notes:
24. Quality and timeliness of in-year budget reports
C+
Notes:
24.1 Scope of reports in terms of coverage and compatibility with budget estimates
C
Notes:
The current system is short in coverage of commitment. The system is weak in reporting outstanding commitments and/or uncommitted balance reported/shown on monthly reports. To address this, a pilot program is underway; and if proven effective, this program will be mainstreamed in the next fiscal year.
24.2 Timeliness of the issue of reports
A
Notes:
Reports are produced every month within 7 days of the close of the month. After TSA rollout, daily reporting system with timely information is available in the FM IS.
24.3 Quality of information
B
Notes:
Government reports are now generated from FM IS. Reconciliation of check issued and cashed can be done on a daily basis.
25. Quality and timeliness of annual financial statements
C+
Notes:
25.1 Completeness of the financial statements
C
Notes:
The Government uses cash basis of accounting for preparing annual financial statements covering expenditure and revenue of the budget under single financial statements. The recording of asset information is not yet mainstreamed.
25.2 Timeliness of submission of the financial statements
A
Notes:
Consolidated financial statement and the public accounts were submitted within the statutory 6 months after FY-end.
25.3 Accounting standards used
C
Notes:
NPSAS was developed in 2009. It is in the process of implementation – piloted in two ministries.
VI. External Scrutiny and Audit
Scores by Dimension
Overall Indicator Score
26. Scope, nature and follow-up of external audit
C+
Notes:
26.1 Scope/nature of audit performed (incl. adherence to auditing standards).
B
Notes:
In 2012/13 OA G performed financial audit of 4,670 entities covering all MDAs, autonomous government agencies, district development committees, and other organizations. The same year, 27 performance audits, 4 IT audits, and 1 environment audit were conducted. The audit covers more than 95% of total expenditures of government offices and more than 90% autonomous government agencies. The audit is conducted in accordance with INTO SAI Fundamental Principles. OA G has developed, published, and implemented auditing standards, guides, and directives that are in line with INTO SAI standards.
26.2 Timeliness of submission of audit reports to legislature.
C
Notes:
OA G submitted audit report to Parliament within 9 months after FY-end.
26.3 Evidence of follow up on audit recommendations
C
Notes:
OA G has maintained records of preliminary audit report for the purpose of follow-up. In 2012/13 OA G approved the clearance of irregularities made by entities of NPR 20.588 billion out of NPR 89.164 billion.
27. Legislative scrutiny of the annual budget law
D
Notes:
27.1 Scope of the legislature’s scrutiny.
D
Notes:
Overall PI-27. Annual budget is prepared under joint leadership of MoF and NPC with the line ministries. Finance Committee examines the budget allocated for various programs on basis of priorities and submits its report with recommendations to Parliament. However, there is inadequate meaningful pre-budget discussion between the legislature and the executive body. Upon approval by the Cabinet, the budget is presented in Parliament for approval. The budget is approved after a discussion in Parliament
27.2 Extent to which the legislature’s procedures are well-established and respected.
NA
Notes:
As there was no Parliament during the assessed period, the budget was announced through a presidential ordinance.
27.3 Adequacy of time for the legislature to provide a response to budget proposals both the detailed estimates and, where applicable, for proposals on macro-fiscal aggregates earlier in the budget preparation cycyle (time allowed in practice for all stag
NA
Notes:
Budget for FY13/14 was implemented through an ordinance and was approved by the newly elected Parliament without debate.
27.4 Rules for in-year amendments to the budget without ex-ante approval by the legislature.
NA
Notes:
With respect to rules for in-year budget amendments without exante approval by the legislature, the Finance Procedure Act has clearly defined conditions under which the executive can amend the budget; it also specifies the limits on extent and nature of the amendments.
28. Legislative scrutiny of external audit reports
D
Notes:
28.1 Timeliness of examination of audit reports by the legislature (for reports received within the last three years).
D
Notes:
No audit reports scrutinized in the last three years
28.2 Extent of hearings on key findings undertaken by the legislature.
NA
Notes:
28.3 Issuance of recommended actions by the legislature and implementation by the executive.
NA
Notes:
Donor Practices
Scores by Dimension
Overall Indicator Score
D-1 Predictability of Direct Budget Support
D+
Notes:
D-1.1 Annual deviation of actual budget support from the forecast provided by the donor agencies at least six weeks prior to the government submitting its budget proposals to the legislature (or equivalent approving body).
D
Notes:
Disbursement against forecast in 2010-11, 2011- 12, and 2012-13 was found to be 58.9%, 76.7% and 107.5%, with deviation of 41.1%, 23.3%, and -7.5% , respectively.
D-1.2 In-year timeliness of donor disbursements (compliance with aggregate quarterly estimates)
A
Notes:
FCGO record system of direct budget support shows that the amount once agreed to by donors is deposited in the Government Treasury. This shows level of Government control over budgetary support.
D-2 Financial information provided by donors for budgeting and reporting on project and program aid
C+
Notes:
D-2.1 Completeness and timeliness of budget estimates by donors for project support.
B
Notes:
Donors reporting planned disbursement to AMP were more than half in terms of number of donors (15 out of 21) and amount (77.43%).
D-2.2 Frequency and coverage of reporting by donors on actual donor flows for project support.
C
Notes:
Actual disbursement reported to FM IS was 62.70% of budget estimate FY12-13.
D-3 Proportion of aid that is managed by use of national procedures
C
Notes:
D-3.1 Overall proportation of aid funds to central government that are managed through national procedures
C
Notes:
