Governmental Fund Flow Mechanism at Central and District Level, Reporting and Audit

Bhava Nath Dahal, FCA

Local Level Fund Flow and Reporting

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Agenda for Discussion
• • • • Fund Flow of Public Fund- Central and Local Accounting System for public fund Internal control and auditing Overall scenario on accounting, reporting and monitoring • Comparison of accounting system with Bhutan (Group Discussion) • Computerization status for public accounting.
Local Level Fund Flow and Reporting 2

grant – Participatory Fund.Fund Flow in Central Level • Funds through Consolidated Fund – Budgetary Fund~ Revenue and Expenditure – Special accounts~ ADB.grant in form of goods/ turn-key • Funds beyond Consolidated Fund – Non budgetary Fund~ Project Funding esp.Proportionate revenue from different accounts – Operational Accounts Local Level Fund Flow and Reporting 3 . IDA etc. – Cash Grants and reimbursements – Direct Payment.

accounting. Local Level Fund Flow and Reporting 4 . – Revenue is based on annual Finance Act with procedure under line item special acts. • Local Level Fund Flow: – Decentralization / independence has allowed in local funds including central budgetary grants . reporting based on Nepal Accounting Standards. – Corporations are independent for their business.Organization for public fund • Central Fund Flow: – Expenditure is based on annual Appropriation Act.

Central Fund: Consolidated Fund • Receipts – Revenue (Tax and non-tax) – Loan (internal or external) – Grants • Expense ~ Red Book Mechanism (BUDGET) – Release through District Treasury Comptroller’s Office (DTCO). authorised through Ministry – Unreleased fund to be freezed at year-end. • Accounting ~ Cash Basis (with accrual information) – – – – Manual system in unit level Manual system consolidation in Ministry level Central networking for DTCO records (Batch Processing) Central networking for VAT/PAN records (Batch Processing) Local Level Fund Flow and Reporting 5 .

– Many project funding falls under this category Local Level Fund Flow and Reporting 6 .Direct Payment – Special Accounts or Imprest accounts.Central Fund.Expenditure • Through governmental banking – Planning. Authority to expense and Current Fund account – Monthly reimbursement for expense made – Return at year-end (minor freeze accounts) • Project Fund. if allowed – Local payments to be reimbursed to Consolidated Fund – Foreign payments allowed or some cases direct payment through IDA/ADB or other development partner accounts.

Expenditure • To Local Authority (Districts. • Project Fund. – Many project funding falls under this category Local Level Fund Flow and Reporting 7 . if allowed – Local payments to be reimbursed to Consolidated Fund – Foreign payments allowed or some cases direct payment through IDA/ADB or other development partner accounts. Town and Village) – Bulk fund based on approved planning to Ministry of Local Development – Disburse to Districts (central account based) – Expense itself (local accounts based) or disburse to town or village.Central Fund.Direct Payment – Special Accounts or Imprest accounts.

Central Fund • Project Fund. – Capital grant – Goods • Recorded as per documentary evidences and reported • Durable assets are to be recorded into OAG Form 47 Local Level Fund Flow and Reporting 8 . first release and expend • Then Project Office request for reimbursement • Reimbursement of the expend is deposited into consolidated fund.with or without counterpart through Governmental budgetary system – Cash Grant (central government Ka 7 series) – Reimbursable Grant • Govt.

Central Fund • Operational Fund– Normally created by law of parliament or under decision of government – Income and expense are as per law governing the fund – Accounts are audited by OAG – Reporting to the ministry and National Planning Commission – Non of development partner contributes in these accounts. normally. Local Level Fund Flow and Reporting 9 .

forest.District Fund • District itself can earn revenue and expend it – Different revenues • • • • Royalties ~Electricity. mine. or natural resources Land Revenue or registration fees Local Development Duty Tourism etc. – The amounts are distributed as per various laws – Accounts are to be audited normally similar as other accounts of DDC Local Level Fund Flow and Reporting 10 .

District Fund • District Council pass the budget to expend – Central budget and own source revenue can be expend under decision of council and DDC make expend – DDC release the fund to VDCs and to Municipalities as per Budget approved by council – Programs are implemented as per project documents and reported accordingly • District Accounts are to be audited by OAG – All incomes. practically Local Level Fund Flow and Reporting 11 . expenses and assets of DDC are audited by OAG and reporting to Parliament – OAG shall issue Audit Reports for the specific donors as required by the project agreement – OAG’s audit for release of fund to VDCs and Municipalities to be limited to release vouchers.

District Fund • Proportionate sharing of Fund – DDC shares the revenue received itself • Some local taxes are levied by DDC and it share to concern VDCs/Municipalities – Whole amounts to be recorded by DDC as revenue or only own portion is as revenue – Share out portion is release as RELEASE or not – They keep their records on cash basis accounting • Some local taxes are levied by VDCs/Municipalities and they share these with DDCs – Receiver records all receipts and deposit DDC’s share to DDC accounts. – Records for these are normally kept under cash basis accounting Local Level Fund Flow and Reporting 12 .

DDC level Summery • DDC Fund Received from: – Central Government – Sharing from Central – Own income – Loan – Donation from Individual/Development Partners – Shared income with VDC/M collected by DDC – Share income with VDC/M collected by VDC/M – DDC are tax exempted except in rent and interest Local Level Fund Flow and Reporting 13 .

DDC level Summery • DDC Fund expend to: – Administrative purpose – Development Program as passed by council – Release to VDCs/M – Refund of loan • DDC Accounts reported as: – Internal audit by own staff – Final audit by OAG – Project audits as per project agreement Local Level Fund Flow and Reporting 14 .

Material in Central Accounting • Central Funds: – Financial Procedural Act. 2056 – Procedural Manual for Central Accounts – Agreement of Nepal Government with Nepal Rastra Bank – Budget Manual • District Level: – Local Self-governance Act. 2055 – Financial Administrative Regulation. 2056 Local Level Fund Flow and Reporting 15 . 2055 – Local Self-governance Regulation.

Comparison of Local Fund Flow For both: between Nepal and Bhutan in terms of – Release and recordings – Accounting – Reporting – Auditing Public Fund Flow and Reporting 16 .Group Discussion • Group AComparison of Central Fund Flow • Group B.

reports) • DTCO consolidates budget release in networking and centrally consolidates by way of batch processing system (output is reliable. even not used officially till.Systems used in Public Fund • Most cases. accounting and recording are in manual form (vouchers. OAG Forms.now redirected to taxpayer level web based input too. Local Level Fund Flow and Reporting 17 . Income tax returns are kept in system. source tax records are in computarised system. FCGO reproduce its reports based on these) • Value Added Tax.

Systems used in Public Fund … • Large sized Governmental undertakings in most cases use computarised accounting and reporting. Local Level Fund Flow and Reporting 18 .but not for accounting (ms-office especially for ms-word) • Local school and VDC level accounting is poor. • Almost all offices use computers. Most manual accountings are format based. central level accounting is fair in current year cash basis.

• Various legal and control mechanism has established against unwanted activities. • Auditor General is final auditor for all central fund and some local funds too. • Department and line ministry is monitor for program progress. Local Level Fund Flow and Reporting 19 .Monitoring and control • Accounting records are audited by DTCO as internal auditor (for fund released from or revenue received to consolidated fund).

Cash basis standard -similar as cash basis IPSAS is near to complete).Development in accounting • From July 16. Local Level Fund Flow and Reporting 20 . By 2011 NAS shall converse as same as IFRS. • Public sector entity. 2008 all public sector business entity require to comply all mandatory Nepal Accounting Standards. other then business entity require to comply Nepal Public Sector Accounting Standards (going process to develop.

Thank You Local Level Fund Flow and Reporting 21 .