Chapter 15 Solutions: Agencies Involved in Government Accounting System of Nepal

Answers to the Chapter 15 exercises. Each answer is as long as its marks call for: a sentence or two for 1 mark, five marks’ worth of explained points, tables or working for 5 marks, and an introduction, explained points and a conclusion for 8 marks.

Group A: Very Short Answer Questions (1 Mark Each)

1. Which is the apex (supreme) auditing body in Nepal?

The Office of the Auditor General (OAG) is the apex constitutional auditing body of Nepal, governed by Part 22 (Articles 240 and 241) of the Constitution of Nepal.

2. When was the Office of the Auditor General established in Nepal?

The Office of the Auditor General was established on 2016 Ashadh 15 B.S. (1959 June 29 A.D.), under the Constitution of the Kingdom of Nepal, 2015.

3. Who appoints the Auditor General in Nepal and what is their tenure?

The President of Nepal appoints the Auditor General on the recommendation of the Constitutional Council for a single term of 6 (six) years from the date of appointment.

4. Define Province Treasury Comptroller Office (PTCO).

The Province Treasury Comptroller Office (PTCO) is the provincial-level treasury agency, set up in each of the 7 Provinces under the Provincial Ministry of Economic Affairs and Planning, that manages the Provincial Consolidated Fund, operates the provincial TSA, releases budget to provincial offices and conducts their internal audit.

Group B & C: Short and Long Answer Questions (5 & 8 Marks)

1. Write any five major functions of the Ministry of Finance. (5 Marks)

The Ministry of Finance (MoF), established in 2008 B.S. (1951 A.D.), is the apex central executive ministry of the Government of Nepal, responsible for public finance, the national budget, fiscal policy, revenue administration, foreign aid and the overall economic stability of the country. Its five major functions are:

1. Formulating and presenting the annual national budget: The MoF prepares the annual estimate of revenue and expenditure of the Government of Nepal and presents it through the Budget Speech on Jestha 15 every year, as required by Article 119 of the Constitution. After the budget is passed, it monitors how the ministries and offices implement it.
2. Formulating fiscal, tax and revenue policies: The MoF frames the policies on direct tax (income tax) and indirect taxes (VAT, customs and excise). It carries out these policies through the Inland Revenue Department and the Department of Customs.
3. Mobilizing foreign aid, grants and public debt: The MoF negotiates bilateral and multilateral grants and loans with development partners such as the World Bank, ADB and IMF. It also manages the government’s internal and external public debt.
4. Supervising the FCGO and public enterprises: The MoF oversees the government’s treasury management through the Financial Comptroller General Office (FCGO) and coordinates with Nepal Rastra Bank on monetary policy. It also monitors the state-owned enterprises.
5. Managing inter-governmental fiscal transfers: The MoF manages fiscal equalization, conditional, complementary and special grants to the Provincial and Local Governments. It does this in coordination with the National Natural Resources and Fiscal Commission (NNRFC).

2. Introduce the Financial Comptroller General Office (FCGO) and explain its major functions. (5 Marks)

Introduction: The Financial Comptroller General Office (FCGO) is the main department-level central agency under the Ministry of Finance, responsible for operating and administering the Government Accounting System and Treasury Management of Nepal. It was first established as the Accountant General Office on 2008 Ashwin 6 B.S., and was upgraded and renamed the FCGO from 2032 Shrawan 1 B.S. (1975 A.D.). It is headed by the Financial Comptroller General, a Special Class (Secretary-level) officer of the Government of Nepal, and works in the districts through the 77 District Treasury Comptroller Offices (DTCOs).

Major functions of the FCGO:

1. Implementing and reforming government accounting forms: The FCGO puts into use, in every government office, the AGF accounting forms approved by the Office of the Auditor General. It also gives technical training to accounting personnel so that the forms are used correctly.
2. Managing the Consolidated Fund and Treasury Single Account: The FCGO operates and maintains the central accounts of the Federal Consolidated Fund, the Contingent Fund and the Divisible Funds. It prepares the Annual Consolidated Financial Statement of the Government of Nepal.
3. Supervising DTCOs and internal audit: The FCGO directs and supervises all 77 DTCOs to ensure that budget is released and payments are processed on time. Through them, it gets the Internal Audit of all federal offices carried out.
4. Operating Public Financial Management (PFM) IT systems: The FCGO develops and runs the national financial software systems, including TSA, CGAS, SuTRA, RMIS, PAMS and EFT, which make government accounting computerized, fast and transparent.
5. Managing pension, gratuity and public debt records: Through the Pension Management Office (Nivrittibharan Vyavasthapan Karyalaya), the FCGO administers civil, police and teacher pensions. It also keeps track of government investments and loans.

3. Explain the functions, duties, and powers of the Office of the Auditor General (OAG) under the Constitution of Nepal. (8 Marks)

The Office of the Auditor General (OAG) is the supreme constitutional auditing body of Nepal. It was first established on 2016 Ashadh 15 B.S. (1959 June 29 A.D.) under the Constitution of the Kingdom of Nepal, 2015, and is now governed by Part 22, Articles 240 and 241 of the Constitution of Nepal (2072) and the Audit Act, 2075. The Auditor General is appointed by the President of Nepal on the recommendation of the Constitutional Council for a single term of 6 (six) years. The functions, duties and powers of the OAG under Article 241 of the Constitution are explained below:

1. Final audit of all public accounts: The OAG conducts the final constitutional audit of the accounts of the Office of the President and Vice-President, the Supreme Court, the Federal Parliament, the Provincial Assemblies, the Provincial Governments, the 753 Local Levels, the Constitutional Bodies, Nepal Army, Nepal Police, the Armed Police Force and all Federal and Provincial government offices. Its audit therefore covers practically every body that spends public money.
2. Audit on the five bases of public audit: Every audit is done with due consideration to Regularity, whether transactions follow the laws and rules; Economy, whether resources were obtained at a reasonable cost; Efficiency, whether the best output was obtained from the resources used; Effectiveness, whether the intended objectives were achieved; and Propriety, whether the spending was fair and reasonable in the public interest.
3. Audit of and consultation on corporate bodies: The OAG audits corporate bodies in which the government owns more than 50% of the shares or assets. It is also consulted when auditors are appointed for corporate bodies in which the government holds shares.
4. Approving government accounting forms (AGF): The OAG prescribes and approves all the accounting forms, ledgers and reporting formats used at the Federal, Provincial and Local levels. The FCGO then implements these forms in every office, which keeps government accounts uniform across the country.
5. Power to access all books, documents and explanations: The OAG has the constitutional power to inspect any accounting book, voucher or store record at any time. It can also demand an explanation from any chief or official, who must provide it.
6. Identifying and classifying Beruju: During the Final Audit, the OAG points out audit irregularities and classifies them as Recoverable Beruju, Beruju to be Regularized, and Unsettled Advance Beruju. The concerned offices must respond to its preliminary audit report and take action within 35 days.
7. Audit of the consolidated accounts of the government: The FCGO prepares the Annual Consolidated Financial Statement of the Government of Nepal, and the OAG audits it. This gives Parliament and the public independent assurance about the government’s overall accounts.
8. Submission of the Annual Report: The Auditor General submits an Annual Report on the audits to the President of Nepal, who causes it to be laid before the Federal Parliament. There it is discussed by the Public Accounts Committee, which holds the executive answerable for irregularities.

Conclusion: As an independent constitutional body free from executive interference, the OAG is the final guardian of public money in Nepal. By auditing every public office for regularity, economy, efficiency, effectiveness and propriety, prescribing uniform accounting forms and reporting its findings to Parliament through the President, it keeps the government accountable for how public funds are raised and spent.