The Constitution of Nepal grants a series of exclusive and concurrent rights to local governments. A majority of the financing they need to carry out their functions according to their rights and responsibilities comes as transfers from the federal and state governments. This sharing of finance keeps local governments accountable to the federal and provincial governments.
With a view to assist local governments in the reporting mechanism for their accountability purposes, the Financial Comptroller General Office has mandated local governments to use the Sub-National Treasury Regulatory Application (SuTRA) so that better control over planning, budgeting and accounting can be achieved. However, the implementation of SuTRA has not been able to achieve the desired result as local governments are yet to completely use the software as a reporting system.
The Mid-Term Budget Review Report produced by the Ministry of Finance discloses that out of the 753 local governments, only 666 used SuTRA. Even among those that used it, transactions are only partially recorded. Moreover, as per the website of SuTRA, the information fed into and produced by it has been limited to the Ministry of Finance, Financial Comptroller General Office and National Natural Resource and Fiscal Commission. Local governments are required to report to different federal and provincial agencies in addition to the aforementioned ones.
The Ministry of Federal Affairs and General Administration, one of the state agencies lacking access to SuTRA, is planning to make chief administrative officers sign an 18-point commitment to reduce the inefficiency of local governments. This move from the federal ministry can be viewed as a therapeutic or short-term solution to the persisting problem of accountability and transparency. Forcing chief administrative officers to sign a commitment will not bring efficiency when the entire system lacks it. If the Ministry of Federal Affairs truly wishes to achieve efficiency, it has to implement a sustainable solution which is fiscal devolution and institutionalisation of accountability. And this can be done only by instilling the importance of an efficient reporting mechanism throughout all levels of government.
SuTRA is an automated information system. The data fed into it can generate the desired information and reports for the concerned agencies. The limited implementation of SuTRA and its inability to incorporate agencies which receive the reports produced by local governments have brought forward two challenges—redundancy and inefficiency. The inability of other state agencies to access SuTRA compels local governments to prepare separate reports manually for which they have to set aside a substantial amount of time that could have been spent on public service delivery.
Preparing reports with similar sub-components only results in duplication of work for local governments. From a taxpayer’s perspective, the absence of efficient service delivery is an absence of accountability. When taxpayer rupees are going towards funding an inefficient system and local governments are unable to deliver service in a timely manner, it shows a case of low accountability.
In order to address the challenges faced by local governments, a single Integrated Financial Management Information System (IFMIS) needs to be implemented. The International Monetary Fund defines IFMIS as a system to support the management of public sector budgetary, financial and accounting operations and promote better public financial management with a centralised registry of public sector revenues and expenditures.
IFMIS integrates budgetary, accounting, treasury and public debt management processes besides generating corresponding reporting documents, mainly the financial statements necessary for all the agencies that use the system. IFMIS is thus a centralised system where different other systems are linked together to record and produce financial information by involving all government agencies and constitutional bodies along with the general public. Its successful implementation will not only produce timely, relevant and reliable financial data to promote fiscal discipline, but also assist resource allocation and improve operational efficiency and fiscal transparency.
In the context of Nepal, SuTRA can be modified into IFMIS because of its wide applicability and also because it is designed to incorporate provincial governments too. The different systems developed to facilitate government operations can be linked with SuTRA to frame a holistic design that provides public financial information to the concerned agencies and the general public. Doing so will also save budgetary costs for the government as a single one-time cost will incur for its implementation and training when compared with implementing multiple systems. Most importantly, bickering between local and provincial governments and the federal government will finally end, and the sub-national governments will finally be able to function as autonomous agencies.
This article was originally published in The Kathmandu Post by Prakash Maharjan on December 12, 2020.
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