I. Credibility of the Budget
Scores by Dimension
Overall Indicator Score
1. Aggregate expenditure out-turn compared to original approved budget
B
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)
B
Notes:
In no more than out of one of the last three years has the actual expenditure deviated by an amount equivalent to more than 10% of budgeted expenditure. The ratio of actual expenditure to approved budget is as follows: FY 2003/04 = 94.12%; FY 2004/05 = 99.81%; FY 2005/06 = 94.44%. (p. 5-6)
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 overall deviation in primary expenditure by 10 percentage points in no more than one of the last three years. Total variance in expenditure composition compared to overall deviation in primary expenditure is as follows: FY2003/04 = 6%, FY2004/05 = 13.5% and 2005/06 = 9.5% (p. 6-7)
2.2 The average amount of expenditure actually charged to the contingency vote over the last three years
NU
Notes:
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:
Actual domestic collection was below 97% of budgeted domestic revenue estimates in no more than one of the last three years. The ratio of actual revenue to budget is as follows: FY2003/04 = 107% (66.60/62.22), FY2004/05 = 102.3% (71.92/70.32) and FY2005/06 = 88.4% (72.28/81.81). (p. 7-8)
4. Stock and monitoring of expenditure payment arrears
D+
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
C
Notes:
Stock of arrears constitutes 2-10% of total expenditure; and there is no evidence of it being reduced significantly in the last two years. (p. 9)
4.2 Availability of data for monitoring the stock of expenditure payment arrears
D
Notes:
There is no reliable data on the stock of arrears. The system of recording arrears is weak. Much of this weakness stems from (a) weak enforcement (not everyone fills in Form Number 18 at the end of fiscal year); (b) weak coverage (many committees, boards and public enterprises do report arrears but not annually); (c) not included in reporting, special decisions of Government (related to emergencies, natural calamities and others); and, (d) weak accounting system for consolidating arrears that are reported. (p. 9)
II. Comprehensiveness and Transparency
Scores by Dimension
Overall Indicator Score
5. Classification of the budget
C
Notes:
5.1 The classification system used for formulation, execution and reporting of the central government's budget
C
Notes:
The budget formulation and execution is based on administrative and economic classification using GFS Standards or a standard that can produce consistent documentation according to those standards. The current classification and chart of accounts follows GFS coding formats and standards on the flow side but not the stock. Stock information, if so desired, as per GFS standards, can be tabulated accordingly. (p. 10)
6. Comprehensiveness of information included in budget documentation
B
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)
B
Notes:
"Recent budget documentation fulfils 5-6 of the 9 information benchmarks. Benchmarks with complete information: - Macro-economic assumptions, including at least estimates of aggregate growth, inflation and exchange rate. This information is provided in the budget speech. - Fiscal deficit, defined according to GFS or other internationally recognized standard. This information is provided in the budget speech. - Prior year’s budget, presented in the same format as the budget proposal. Presented in the budget book—Red Book Annex. - Current year’s budget (either the revised budget or the estimated), presented in the same format as the budget proposal. Presented in the budget book—Red Book Annex. - Summarized budget data for the both revenue and expenditure according to the main heads of the classification used (ref. PI-5), including data for the current and previous year. Budget Speech Annex has the information. - Explanation of budget implications of new policy initiatives, with estimates of the budgetary impact of all major revenue policy changes and/or some major changes to the expenditure programs. The Budget Speech has the information. Benchmarks with incomplete information: - Deficit financing, describing anticipated composition. - Debt stock, including details at least for the beginning of the current year. - Financial Assets, including details at least for the beginning of the current year. (p. 11-12)"
7. Extent of unreported government operations
C
Notes:
7.1 The level of extra-budgetary expenditure (other than donor funded projects) which is unreported i.e. not included in fiscal reports.
C
Notes:
The level of unreported extra-budgetary expenditure (other than donor-funded projects) constitutes 5-10% of total expenditure. The levels of some extra-budgetary expenditure are also recorded in the “Weekly Treasury Report”. They added up to 2.31% of total expenditure in FY 2005/06. However, there are expenditures incurred from sources such as Army Welfare Fund, Police Welfare Fund and other development funds/boards, which escape total reporting in the budget and is estimated to range from 5% to 10% of total expenditure. (p. 12-13)
7.2 Income/expenditure information on donor-funded projects which is included in fiscal reports.
C
Notes:
Complete income/expenditure information for all loan-financed projects is included in fiscal reports. All loans are reported, recorded and audited but some grant-funded projects are not reflected in the budget. (p. 12-13)
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:
The horizontal allocation of only a small part of transfers from central Government (10- 50%) is determined by transparent and rules based systems. The Local Self Governance Act (LSGA) empowers the local government to implement development activities in accordance with local priorities and is funded through block grants—conditional and unconditional, own resources, loans and foreign aid. (p. 14)
8.2 Timeliness of reliable information to SN governments on their allocations from central government for the coming year;
C
Notes:
Reliable information to sub-national governments is issued before the start of the sub- national fiscal year but too late for significant budget changes to be made. (p. 14)
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.
C
Notes:
Fiscal information (at least ex-post) that is consistent with central government fiscal reporting is collected for at the least 60% (by value) of sub-national government expenditure and consolidated into annual reports within 24 months of the end of the fiscal year. (p. 14)
9. Oversight of aggregate fiscal risk from other public sector entities.
D+
Notes:
9.1 Extent of central government monitoring of AGAs and PEs.
C
Notes:
Most autonomous government agencies (AGAs)/Public enterprises (PEs) submit fiscal reports to central governments, at least annually, but a consolidated overview is missing or significantly incomplete. (p. 15)
9.2 Extent of central government monitoring of SN government's fiscal position
D
Notes:
No annual monitoring of the fiscal position of sub-national government takes place or it is significantly incomplete. (p. 15)
10. Public access to key fiscal information
B
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)
B
Notes:
"The government makes available to the public 3-4 of the 6 listed types of information. Complete information: - Annual budget documentation: A complete set of documents can be obtained by public through appropriate means when it is submitted to the legislature. - In–year budget execution reports: Reports are routinely made available to the public through appropriate means within a month of completion. - Resources available to primary service units: Information is publicized through appropriate means at least annually or made available upon request for primary service units with national coverage in at least two sectors (such as elementary schools or primary health clinics). Incomplete information: - Year-end financial statements. - External audit reports. - Contract awards. (p. 17)"
III. Policy-Based Budgeting
Scores by Dimension
Overall Indicator Score
11. Orderliness and participation in the annual budget process
C+
Notes:
11.1 Existence of and adherence to a fixed budget calendar;
B
Notes:
A clear annual budget calendar exists but some delays are often experienced in its implementation. The calendar allows MDAs reasonable time (at least four weeks from receipt of the budget circular) so that most of them are able to meaningfully complete their detailed estimates on time. (p. 18)
11.2 Clarity/comprehensiveness of and political involvement in the guidance on the preparation of budget submissions (budget circular or equivalent);
B
Notes:
A comprehensive and clear budget circular is issued to MDAs, which reflects ceilings approved by Cabinet (or equivalent). This approval takes place after the circular distribution to MDAs but before MDAs have completed their submission. (p. 18)
11.3 Timely budget approval by the legislature or similarly mandated body (within the last three years);
D
Notes:
The budget has been approved with more than two months delay in two of the last three years. Generally, the legislature approves the budget within 2 to 3 months of the start of the fiscal year. (p. 18-19)
12. Multi-year perspective in fiscal planning, expenditure policy and budgeting
C+
Notes:
12.1 Preparation of multi -year fiscal forecasts and functional allocations
B
Notes:
Forecasts of fiscal aggregates (on the basis of main categories of economic and functional/sector classifications) are prepared for at least two years on a rolling annual basis. Links between multi-year estimates and subsequent setting of annual budget ceilings are clear and differences are explained. (p. 19)
12.2 Scope and frequency of debt sustainability analysis
C
Notes:
A DSA for at least for external debt undertaken once during last three years. (p. 19)
12.3 Existence of sector strategies with multi-year costing of recurrent and investment expenditure;
C
Notes:
Statements of sector strategies exist for several major sectors but are only substantially costed for sectors representing up to 25% of primary expenditure or costed strategies cover more sectors but are inconsistent with aggregate fiscal forecasts. Only two sectors, education and health, have approved sector strategies with cost estimates and investments linked to forward estimates. The spending of the two sectors constitutes 22% of total expenditure or 68% of social sector spending. In view of the coverage and activities of these two sectors being primary by nature, this third dimension is rated as “C”. (p. 19-20)
12.4 Linkages between investment budgets and forward expenditure estimates.
C
Notes:
Many investment decisions have weak links to sector strategies and their recurrent cost implications are included in forward budget estimates only in a few (but major) cases. In the absence of coherent approved sector strategies, the periodic plan has loose cost estimates although some activities have estimates to the unit level. Except for education and health sector strategies, Nepal lacks sector strategies with cost estimates. Therefore, linkages between sector strategies, investment budget and forward expenditure estimates are, at best, weak and questionable. (p. 20)
IV. Predictability and Control in Budget Execution
Scores by Dimension
Overall Indicator Score
13. Transparency of taxpayer obligations and liabilities
C+
Notes:
13.1 Clarity and comprehensiveness of tax liabilities
C
Notes:
Legislation and procedures for some major taxes are comprehensive and clear but the fairness of the system is questioned due to substantial discretionary power of government entities involved. Legal provisions for major taxes are comprehensive and clear but the fairness of the system is questionable because of perceived discretionary power of government entities, especially on decisions related to liquor and excise. For all major tax streams—customs, Value-added Tax (VAT), Excise and Income Tax—there are rules and regulations for the individual taxes. But when it comes to arbitration, the tax officer’s judgmental decision is final for collection though there is space for legal redress at a later date. (p. 21)
13.2 Taxpayer access to information on tax liabilities and administrative procedures.
C
Notes:
Taxpayers have access to some information on tax liabilities and administrative procedures but the usefulness of the information is limited due to coverage of selected taxes only, lack of comprehensiveness and/or not being up-to-date. Legal terms, understood mostly by lawyers only, remain as the main hurdles and therefore all tax liability procedures are not user-friendly from the taxpayers' perspective. (p. 21)
13.3 Existence and functioning of a tax appeals mechanism.
B
Notes:
A tax appeals system of transparent administrative procedures is completely set up and functional. But it is either too early to assess its effectiveness or some issues relating to access, efficiency, fairness or effective follow-up on its decisions, need to be addressed. There is a system for tax appeal but transparency, fairness and effectiveness are questionable when tax arbitration is slow and can take more than a year for resolution, resulting in substantial financial costs. The provision for administrative review exists for all major taxes: Excise, Income Tax, VAT and Customs (Valuation). Nepal also has a Judicial Tribunal. But questions have been raised on delays in decision making and implementation, resulting in low compliance. The tax appeal system needs strengthening. (p. 21-22)
14. Effectiveness of measures for taxpayer registration and tax assessment
C
Notes:
14.1 Controls in the taxpayer registration system.
C
Notes:
"Taxpayers are registered in database systems for individual taxes, which may not be fully and consistently linked. Linkages to other registration/licensing functions may be weak but are then supplemented by occasional surveys of potential taxpayers. Nepal launched the taxpayer identification (Permanent Account Number or PAN) scheme with the implementation of new income tax law in 2001. Compulsory VAT registration for all importers, exporters and retailers above the threshold, has been implemented. Necessary permissions are granted for transactions in liquor and excise- dutiable products upon request. As PAN was introduced for income tax, it has limited linkages with other taxes (excise, VAT and customs). Except for customs, efforts are underway to link all databases of Inland Revenue (excise, VAT and Income Tax) but full integration will take some time. (p. 23)"
14.3 Planning and monitoring of tax audit and fraud investigation programs.
C
Notes:
"There is a continuous program of tax audits and fraud investigations but audit programs are not based on clear risk assessment criteria. Tax audits are conducted—2% of total tax filed—and fraud is investigated on an ad hoc basis. This, however, applies only for income tax and VAT. (p. 23)"
14.2 Effectiveness of penalties for non-compliance with registration and declaration obligations
C
Notes:
"Penalties for non-compliance generally exist but substantial changes to their structure; levels or administration are needed to give them a real impact on compliance. Penalties for non-compliance exist for most relevant taxes but are not always effective due to inconsistent administration. Heavy penalties are prescribed in the laws for income tax, excise, VAT and customs violations but compliance is low resulting in heavy leakages and non-collection. Non filers of income tax are penalized up to NRs.1,000 annually with 15% interest for defaulted payment. Similarly non-VAT filers are charged NRs.1,000 per month with 15% interest on defaulted payment. (p. 23)"
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:
The debt collection ratio in the most recent year was below 60% and the total amount of tax arrears is significant (i.e. more than 2% of total annual collection). (p. 24)
15.2 Effectiveness of transfer of tax collections to the Treasury by the revenue administration.
B
Notes:
Revenue collections are transferred to the Treasury daily. A weekly consolidated Treasury report is also prepared. (p. 24-25)
15.3 Frequency of complete accounts reconciliation between tax assessments, collections, arrears records and receipts by the Treasury.
D
Notes:
Complete reconciliation of tax assessments, collections, arrears and transfers to Treasury takes place annually but it takes three months after the end of the year for reconciliation to be completed. (p. 25)
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:
MDAs are provided reliable information on commitment ceilings at least quarterly in advance. (p. 26)
16.3 Frequency and transparency of adjustments to budget allocations, which are decided above the level of management of MDAs.
C
Notes:
Significant in-year budget adjustments are frequent but undertaken with some transparency. There are transparent rules of adjustment and virement from one budget heading to another and one source of financing to the other. (p. 26)
16.1 Extent to which cash flows are forecast and monitored
C
Notes:
A cash flow forecast is prepared for the fiscal year but is not (or only partially and infrequently) updated. (p. 26)
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 are complete, updated and reconciled at least annually. Data quality is considered fair, but some gaps and reconciliation problems are recognized. Reports on debt stocks and service are produced only occasionally or with limited content. A dedicated unit at the Financial Comptroller General Office regularly updates both domestic and foreign debt. Although, it has software (CSDRMS) to help facilitate debt management, operational problems have resulted in recording debt manually. Debt, stock and flow are reported annually in the Economic Survey report. (p. 27)
17.2 Extent of consolidation of the government’s cash balances
B
Notes:
Most cash balances are calculated and consolidated at least weekly, but some extra- budgetary funds remain outside the arrangement. Major cash balances are calculated weekly and are reflected in the Weekly Treasury Report. Local government revenues are recorded but expenditures (not more than 8% of the total spending) are outside the recording systems. (p. 27)
17.3 Systems for contracting loans and issuance of guarantees.
C
Notes:
Central government's contracting of loans and issuance of guarantees are always approved by a single responsible entity, but are not decided on the basis of clear guidelines, criteria or overall ceilings. (p. 27)
18. Effectiveness of payroll controls
C+
Notes:
18.1 Degree of integration and reconciliation between personnel records and payroll data.
C
Notes:
A personnel database may not be fully maintained but reconciliation of the payroll with personnel records takes place at least every six months. Electronic Personnel Information System of Government is complete—teachers (90% complete) and police (80% complete). Personnel records assist in linking the database and the payroll. This, at best, covers two thirds of total payroll subjected to budget appropriation. Although it is mandatory to pass the “salary report” by each office for budget appropriation for the fiscal year, discrepancies in linking posts to payroll exist mainly because of the aforesaid reasons. Personnel records and payroll data are reconciled at least once every six months, generally at the beginning of the fiscal year and at the time of audit. (p. 28)
18.2 Timeliness of changes to personnel records and the payroll
B
Notes:
Up to three months delay occurs in updating of changes to the personnel records and payroll but affects only a minority of changes. Retroactive adjustments are made occasionally. (p. 28)
18.3 Internal controls of changes to personnel records and the payroll.
C
Notes:
Controls exist but are not adequate to ensure full integrity of data. (p. 28)
18.4 Existence of payroll audits to identify control weaknesses and/or ghost workers.
B
Notes:
A payroll audit covering all central Government entities has been conducted at least once in the last three years (whether in stages or as one single exercise). Internal payroll audits are conducted on a monthly basis by the District Treasury Controller Office (DTCO); they are audited on an annual basis by an external auditor—the Office of the Auditor General. (p. 28-29)
19. Transparency, competition and complaints mechanisms in procurement
C
Notes:
19.1 Transparency, comprehensiveness and competition in the legal and regulatory framework
C
Notes:
"Available data shows that less than 50% of contracts above the threshold are awarded on an open competitive basis, but the data may not be accurate. Although, generally, open competition is mandatory for procurement, there is no system to maintain data. Data are generally available at the project or entity level for donor-financed projects, showing that more than 75% of contracts above the threshold are awarded on the basis of open competition. But this information is not tracked systematically. Volume of procurement undertaken through the Government’s own funds is proportionately large and hence, on aggregate, it is estimated that less than 50% of contracts above the threshold are awarded on an open competitive basis. However, there is no basis to confirm or ignore this estimate. (p. 29-30)"
19.2 Use of competitive procurement methods
C
Notes:
Justification for use of less competitive methods is weak or missing. The Public Procurement Act (Clause 9) requires the open competitive bidding to be the preferred and expected method. (p. 29-30)
19.3 Public access to complete, reliable and timely procurement information
C
Notes:
The Public Procurement Act has a formal complaints or appeals mechanism (Clauses 48 through 51). The law spells out the procedure for reviewing complaints with timeframe for appeals by the bidders and decision making by the Review Committee. Since the Act was approved only in January 2007, it has not yet been implemented effectively. How the formal complaint system will function thus remains to be seen. (p. 29-30)
19.4 Existence of an independent administrative procurement complaints system
NU
Notes:
20. Effectiveness of internal controls for non-salary expenditure
C
Notes:
20.1 Effectiveness of expenditure commitment controls.
C
Notes:
Expenditure commitment control procedures exist but are partially effective, but they may not comprehensively cover all expenditures, or they may be occasionally violated. Although there is a good procedure for expenditure commitment control, enforcement, especially, during the last trimester of the fiscal year is violated often in the name of crisis and emergency. (p. 31)
20.2 Comprehensiveness, relevance and understanding of other internal control rules/ procedures
C
Notes:
Other internal control rules and procedures consist of a basic set of rules for processing and recording transactions, which are understood by those directly involved in their application. Some rules and procedures may be excessive, while controls may be deficient in areas of minor importance. In practice, internal control comprises check and balance from concerned authorities, inspection by senior authority and internal audits. Budget allocation, authorization and control, sanction from authorized officials, record keeping and reconciliation and financial reporting are the elements of the internal control system. (p. 31-32)
20.3 Degree of compliance with rules for processing and recording transactions
C
Notes:
Rules are complied with in a significant majority of transactions but use of simplified/emergency procedures in unjustified situations is an important concern. (p. 31)
21. Effectiveness of internal audit
D+
Notes:
21.1 Coverage and quality of the internal audit function.
D
Notes:
There is little or no internal audit focused on systems monitoring. (p. 33)
21.2 Frequency and distribution of reports
C
Notes:
Reports are issued regularly for most government entities but may not be submitted to MOF and the SAI. (p. 33)
21.3 Extent of management response to internal audit findings.
D
Notes:
Internal audit recommendations are usually ignored (with few exceptions). (p. 33)
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
B
Notes:
Bank reconciliation of all Treasury-managed bank accounts of the expenditure budget and deposits are timely and are prepared each month, within a week from the end of the month as stipulated in the Financial Administration Regulations. (p. 35)
22.2 Regularity of reconciliation and clearance of suspense accounts and advances.
C
Notes:
Reconciliation and clearance of suspense accounts and advances take place annually in general—within two months of end of year, but a significant number of accounts have uncleared balances brought forward. (p. 35)
23. Availability of information on resources received by service delivery units
C
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
C
Notes:
Special surveys undertaken within the last three years have demonstrated the level of resources received in cash and in kind by either primary schools or primary health clinics covering a significant part of the country or by primary service delivery units at local community level in several other sectors. (p. 37)
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:
Comparison to budget is possible only for main administrative headings. Expenditure is captured either at commitment or at payment stage (not both). (p. 38)
24.2 Timeliness of the issue of reports
A
Notes:
Reports are prepared quarterly or more frequently and issued within four weeks of end of period. (p. 38)
24.3 Quality of information
C
Notes:
There are some concerns about the accuracy of information, which may not always be highlighted in the reports but this does not fundamentally undermine their basic usefulness. (p. 38)
25. Quality and timeliness of annual financial statements
C+
Notes:
25.1 Completeness of the financial statements
C
Notes:
A consolidated Government statement is prepared annually. Information on revenue, expenditure and bank account balances may not always be complete but the omissions are not significant. (p. 39)
25.2 Timeliness of submission of the financial statements
A
Notes:
The statement is submitted for external audit within six months of the end of the fiscal year. (p. 39)
25.3 Accounting standards used
C
Notes:
Statements are presented in consistent format over time with some disclosure of accounting standards. (p. 39)
VI. External Scrutiny and Audit
Scores by Dimension
Overall Indicator Score
26. Scope, nature and follow-up of external audit
D+
Notes:
26.1 Scope/nature of audit performed (incl. adherence to auditing standards).
B
Notes:
Central Government entities representing at least 75% of total expenditures are audited annually, at least covering revenue and expenditure. A wide range of financial audits are performed and generally adhere to auditing standards, focusing on significant and systemic issues. Scope of audit includes extra-budgetary funds and autonomous agencies owned by Government. The Office of the Auditor General follows auditing standards that are based on the International Organization of Supreme Audit Institutions standards. (p. 41)
26.2 Timeliness of submission of audit reports to legislature.
D
Notes:
Audit reports are submitted to the legislature more than 12 months from the end of the period covered (for audit of financial statements from their receipt by the auditors). Neither the Interim Constitution nor the audit law specifies the period within which the audit report is to be submitted to the legislature. The track record suggests that audit reports are generally submitted to the legislature after 12 months of the end of the period covered (it was submitted within 12 months only once). (p. 41-42)
26.3 Evidence of follow up on audit recommendations
C
Notes:
A formal response is made, though delayed or not very thorough, but there is little evidence of any follow-up. Follow-up on audit recommendations was generally weak owing partly to the political instability of the recent past. There is no established mechanism or system to follow-up on audit recommendations. (p. 41-42)
27. Legislative scrutiny of the annual budget law
D+
Notes:
27.1 Scope of the legislature’s scrutiny.
C
Notes:
The legislature’s review covers details of expenditure and revenue but only at a stage where detailed proposals have been finalized. (p. 43)
27.2 Extent to which the legislature’s procedures are well-established and respected.
D
Notes:
Procedures for the legislature's review are non-existent or not respected. Nepal’s parliament remained dissolved since May 2002 owing to the political instability. It was a setback in the development of a good system for discussing budget proposals. (p. 43)
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
D
Notes:
The time allowed for the legislature's review is clearly insufficient for a meaningful debate (significantly less than one month). (p. 43)
27.4 Rules for in-year amendments to the budget without ex-ante approval by the legislature.
B
Notes:
Clear rules exist for in-year budget amendments by the executive and are usually respected, but they allow extensive administrative reallocations. With respect to rules for in-year budget amendments without ex-ante approval by the legislature, the Finance Procedure Act has clearly defined the conditions under which the executive can amend the budget; it also specifies the limits on extent and nature of the amendments. (p. 43-44)
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:
Examination of audit reports by the legislature does not take place or usually takes more than 12 months to complete. After the dissolution of parliament there was no arrangement for public scrutiny of the Auditor General’s reports. (p. 44-45)
28.2 Extent of hearings on key findings undertaken by the legislature.
C
Notes:
In-depth hearings on key findings take place occasionally, cover only a few audited entities or may include with MOF officials only. (p. 44)
28.3 Issuance of recommended actions by the legislature and implementation by the executive.
C
Notes:
Actions are recommended but are rarely acted upon by the executive. (p. 44)
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:
In at least two of the last three years did direct budget support outturn fell short of the forecast by more than 15% or no comprehensive and timely forecast for the year(s) was provided by the donor agencies. (p. 46)
D-1.2 In-year timeliness of donor disbursements (compliance with aggregate quarterly estimates)
D
Notes:
The requirements for Score C (or higher) are not met. In-year timeliness of donor disbursements (compliance with aggregate quarterly estimates) is very low and does not meet the criteria mentioned in rating. (p. 46-47)
D-2 Financial information provided by donors for budgeting and reporting on project and program aid
D
Notes:
D-2.1 Completeness and timeliness of budget estimates by donors for project support.
D
Notes:
Not all major donors provide budget estimates for disbursement of project aid at least for the government's coming fiscal year and at least three months prior its start. (p. 47)
D-2.2 Frequency and coverage of reporting by donors on actual donor flows for project support.
D
Notes:
With regard to reporting, except for a few loan-financing donors, most do not provide quarterly reports within two months of the end-of-quarter on the disbursements made for at least 50% of the externally-financed project estimates in the budget. (p. 48)
D-3 Proportion of aid that is managed by use of national procedures
D
Notes:
D-3.1 Overall proportation of aid funds to central government that are managed through national procedures
D
Notes:
Less than 50% of aid funds to central Government are managed through national procedures. The requirement that national authorities use different procedures for managing aid funds diverts capacity away from the national systems. This is compounded when different donors have different requirements. Since a large proportion of grant aid funds are provided directly by donors, the aid has to be managed in accordance with different donor procedures. (p. 48-49)