KATHMANDU, Aug. 14: Despite a decline in the amount of new arrears in recent years, Koshi Province’s accumulated arrears have continued to mount, crossing Rs 5.86 billion by the end of fiscal year 2024/25.
According to the Office of the Auditor General’s Eighth Annual Report 2083 BS, the total outstanding arrears of the Koshi provincial government reached Rs 5.8668 billion by the end of fiscal year 2024/25, up sharply from Rs 22.342 million in fiscal year 2017/18.
The report shows that although the province has managed to reduce the annual amount of arrears over the past two years, clearing the accumulated backlog remains a major challenge as new arrears continue to be added each year.
Koshi recorded its highest annual arrears in fiscal year 2018/19, at Rs 1.673926 billion. The amount stood at Rs 1.317610 billion in fiscal year 2022/23 before falling to Rs 868.189 million in 2023/24.
The annual figure declined further to Rs 586.683 million in fiscal year 2024/25 following efforts to control arrears. Of this amount, Rs 151.704 million was recoverable, Rs 403.842 million required regularization, and Rs 31.137 million remained as advances.
However, the decline in annual arrears has done little to bring down the overall outstanding amount, as arrears accumulated in previous years have not been cleared significantly. The figures indicate that weaknesses in government spending and financial management remain a persistent problem.
In fiscal year 2024/25, the Auditor General audited 208 entities—182 government offices and committees and 26 other institutions—with transactions totaling Rs 52.384979 billion.
The report also states that transactions worth Rs 2.880905 billion could not be audited after some offices submitted letters saying they were unable to produce records and undergo audits due to the Gen-Z protests of September 8 and 9.
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In fiscal year 2023/24, audits of 201 entities covering transactions worth Rs 51.416915 billion had identified Rs 868.189 million in arrears. Of this, Rs 110.364 million was recoverable, Rs 654.176 million required regularization, and Rs 103.649 million remained as advances.
In fiscal year 2024/25, audits covering Rs 46.541423 billion were conducted at the province’s nine ministries, the Province Public Service Commission, Province Planning Commission, Office of the Chief Attorney and local governments receiving financial transfers. These entities recorded Rs 146.519 million in recoverable arrears, Rs 347.824 million requiring regularization and Rs 30.337 million in advances.
Infrastructure sector accounts for bulk of arrears
At the ministry level, arrears are heavily concentrated in three ministries, with the Ministry of Physical Infrastructure Development accounting for more than 56 percent of the total.
The ministry recorded arrears of around Rs 294.4 million. The Ministry of Water Supply, Irrigation and Energy accounted for 24.18 percent, or around Rs 126.9 million, while the Ministry of Tourism, Forests and Environment recorded arrears of around Rs 47.3 million. Other ministries and agencies accounted for around Rs 56.2 million.
The high volume of arrears in the infrastructure sector is partly attributed to the large share of the provincial development budget spent on roads, bridges, buildings and other physical infrastructure projects. The Ministry of Physical Infrastructure Development and its subordinate offices had also recorded substantial arrears in the previous year.
Up to fiscal year 2023/24, recoverable arrears at 12 offices under the ministry and its subordinate agencies alone amounted to Rs 365.17494 million.
Previous Auditor General’s reports have also highlighted arrears in the water supply, irrigation and energy sector. In fiscal year 2023/24, the ministry had an arrears rate of 3.92 percent.
The Ministry of Tourism, Forests and Environment ranked third, while arrears in other ministries and agencies remained below 4 percent. The Office of the Chief Minister and Council of Ministers, meanwhile, recorded zero arrears, according to the report.
Clearance campaigns fail to gain momentum
A monitoring report on arrears clearance conducted by the Koshi provincial government itself suggests that the problem extends beyond the amounts identified by the Auditor General.
The report points to discrepancies between records maintained by provincial ministries and subordinate offices and those of the Auditor General. It also notes that some offices do not conduct internal audits regularly and that monitoring of arrears clearance remains weak.
The provincial government has been conducting campaigns for years to clear outstanding arrears. Bhupendra Rai, the then minister for physical infrastructure development, had launched a special campaign at the Infrastructure Ministry and instructed the chiefs of subordinate offices to reduce arrears.
The ministry and its subordinate offices managed to reduce arrears during his tenure. However, frequent changes in provincial governments and ministers have made it difficult to sustain such initiatives, with new administrations often failing to continue the efforts of their predecessors.
The continued accumulation of outstanding arrears also suggests that such campaigns have yet to produce the desired results.
The Auditor General has recommended giving priority to contract management, construction-related payments, supporting documentation, irregular expenditures and advance management, particularly in the infrastructure, water supply-irrigation-energy, and tourism-forest-environment sectors.
It has also called for holding officials responsible for financial transactions accountable, strengthening internal controls and internal audits, and conducting regular monitoring of arrears clearance.
Ministry vows to prevent new arrears
Milan Acharya, secretary at the Ministry of Physical Infrastructure Development, said the ministry was working to minimize arrears as much as possible.
He said that although the ministry is not currently running a campaign specifically focused on arrears clearance as it did in the past, it is working on a two-pronged approach: preventing new arrears while gradually clearing those accumulated over previous years.
“We are working in the province to implement the recommendations made by the Auditor General and gradually reduce old arrears as well,” Acharya said.
He also pledged to address the weaknesses identified by the Auditor General. According to Acharya, the ministry remains particularly focused on preventing arrears because it handles a large development budget, although some arrears continue to occur in the course of project implementation.
