For nine years since the tenure of elected representatives expired in 2001, Butwal Municipality has poured millions of rupees in building roads, parks, public spaces, rest houses and covered halls. Yet municipal denizens often identify these projects with certain politicians and political parties rather than with the local needs and demands.


As in all other municipalities, a political mechanism, consisting of nominated representatives of major political parties, is responsible to pass the annual municipal budget with powers equivalent to an elected municipal council. But these nominees are accountable to their political parties, not to the people. Local municipal employees, appointed under the recommendation of political parties, maneuver these members.


One of the most influential individuals in the municipal affairs is former mayor Bhoj Prasad Shrestha. His word is work in the municipality as a large number of employees were appointed by him before his tenure ended a long time back. He still runs the municipal show as a proxy.


This is the reason Butwal Municipality has been allocating a major portion of its budget to carry out development projects favoring Shrestha’s or, for that matter, his party CPN-UML’s constituencies.


Budget
The population of Butwal Municipality increased in the last one decade. So did the percentage of its capital investment under development expenditure. According to GTZ supported Urban Development through Local Efforts (UDLE), Butwal Municipality spent Rs. 79,605,928 in 2003/04. Out of this, the municipality spent Rs. 46,791,083 in development expenditure and Rs. 30,804,852 for town level development and 159,966,231 in other development activities.  Similarly, the budget of 2007/08 was Rs. 148,087,987. Out of this, Rs. 87,546,862 went under the capital investment head, Rs. 366, 68,106 for town development activities and Rs. 81, 51,759 for other development activities.


The budget of 2009/10 was slightly higher with more than 150 million rupees, or sixty percent of the budget, going to capital development. One of the interesting things is that the volume of money spent to other development activities also increased.


Hill Park Budget
Butwal Municipality allocated 8.1 million rupees this year for the development of Hill Park Bus Stand. This is the highest amount of money allocated by any municipality for the construction of any single project. This year it is proposing additional money to the Hill Park Development Project in the eastern part of Butwal.


The municipality has already allocated Rs. 20 million to the project over the last five years. The budget is earmarked for infrastructure like drinking water, road, public building and picnic spot. Municipal officials said they needed more money to complete the project in the future.


Now a question arises: why has the municipality showed a soft corner to the project which is under the supervision of Hill Park Protection Council, an NGO?


Shrestha is the patron of the Council and local employees he recruited in the municipality are returning him a favor.


“Former mayor Shrestha is a guardian, so we cannot deny budget for the project. But then, we know that it is going to be a white elephant for the municipality,” said a senior municipal official. “Since a majority of employees are supporters of mayor Shrestha, they manage the budget for it anyway.”


Although Butwal Municipality is still without basic needs like drinking water, roads, schools and health posts to many of its denizens, its budget heads are far from directly benefitting the common people.


“It is a good initiative to protect the forest and environment but giving so much priority to the Hill Park Project is not justifiable. This shows how the municipality and the political mechanism work,” said Khelraj Pandey, president of Butwal Municipality unit of Nepali Congress. “This indicates that Butwal Municipality is under the influence of one person and one political party.”


Although the budget allocated for Hill Park development directly goes to the account of Hill Park Protection Council, the money is distributed under several sub-titles under other development activities. In 8 and 9 wards of the municipality, 2.4 million rupees is allocated for the construction of a ticket counter at the western gate of the park.


“This is a way to hide the budget,” said a senior official at the municipality on condition of anonymity. “This is a very well planned idea to cover up the huge budget spent in the project. If the money is allocated clearly, many will raise questions.”


Series of Other Projects
Nuwakot is another place where the municipality invested a huge amount of resources. Although it lies in Palpa district, Nuwakot is 10 kilometers east of the main city at the top of a hill. This is being developed as a residential area where many influential persons bought plots of land hoping that it will turn into a main tourist destination in the future.


“It is purely a rugged forested hill with virtually non-existent population. However, the municipality is allocating the money under the influence of Butwal’s new land owners,” said Communist Party of Nepal Maoist leader Krishna Pokharel. “We don’t know how much budget is allocated to it as the municipal executive board also is authorized to allocate grants to small projects.”


In another case, a covered hall has been a priority municipal project since its inception four years ago. The municipality has spent 800,000 rupees on the project to build an international standard hall. This year, another 800,000 rupees has been set aside.


However, Lumbini Sports Club, which has been given the responsibility to build the covered hall, is not mentioned anywhere. “The name is deleted in the budget title because of the involvement of one of the senior employees of the municipality who is the chairman of the club,” said a junior official of the municipality.


Favoritism is found even in the distribution of resources on the title of publicity. Although the municipality has allocated Rs.300, 000 for publicity, the beneficiary of this amount is Lumbini Television Channel. There are several television channels, newspapers and FM radios. The reason Lumbini Television got the job is: some municipal officials are its investors.


Political Interventions
Two years ago, when the Municipal Board was underway, CA member Radha Gyawali phoned the board members, demanding budget to black top the road link to her house. Then executive officer avoided the pressure saying that the municipality did not have the money. He proposed that the municipality could allocate the budget in case her neighbors agreed to contribute certain portions. Finally, the municipality surrendered under continuous pressure of CA member Gyawali. The road was blacktopped by using the budget proposed for other development works.


Other local communities in Butwal contributed 50 percent of the money in construction of the city roads but the neighbors of CA member Gyawali did not have to pay any. “This event exposed the nature of the Private-Public Participation.”


Another example of political pressure is culvert construction. The municipality allocated Rs.300, 000 for a culvert under pressure from the personal secretary of then minister Bishnu Poudel.


“Municipal officials do not present such projects in the all party mechanism fearing that they will face criticism. Municipality allocates money under the title of other development projects to be used later to complete works under political pressure,” said Krishna Pokharel.


Town Planning
Despite their knowledge of several cases involving misuse of resources, municipal officials claim that development works were in keeping with the need of town planning and the people.


“It is natural to allocate the budget for the projects formulated during the period of CPN-UML leadership. CPN-UML is the first party which introduced town planning for Butwal,” said CPN-UML leader Khem Prasad Luitel. “It is useless exercise to look at how much budget is allocated where because an all party mechanism passed it.”


Former mayor of Butwal Bhoj Prasad Shrestha claimed that there is no question of allocating budget in the interest of a particular political party. “Hill Park is an income generating integrated project and it is in the interest of the local population. After the completion of the project, they will have a place to go for recreation. If somebody sees this is done for my personal interests, I don’t have anything to say. I am proud to say that the construction is going on under my leadership,” said former mayor Shrestha.


All Party Mechanism
The party members involved in the all-party mechanism are more concerned about their personal and party interests, leaving aside the interests of the common people. Unlike elected Municipal Council, which is the body of all elected representatives of the municipality, nominated members cannot enjoy the legal rights and legitimacy.


According to clause 90 of Local Self Governance Act 1999, the council needs to meet twice a year and this is where elected representatives can discuss and debate on the development projects and budgetary allocations. The tenure of the members is fixed for five years.


However, political parties nominate their members to the all-party mechanism on the rotation basis. They have little knowledge about previous development projects and priorities. “Although the municipal budget was prepared with the participation from ward level representatives of political parties, the budget allocation depends upon the level of participation at the ward level,” said President of Butwal Municipal Unit Pandey. “We understand now that it is a complex process in the budget presentation. Many of us were unable to understand the process in early days,” said Pandey. “I now realize that there are many hidden titles in the budget.”

Flaws in Act
As Local Self-Governance Act 1999 envisions the functioning of local bodies under elected representatives, the political mechanism does not fit its spirit. From taking decisions on local matters to collecting taxes, the municipality is given a sweeping power under the elected representatives.


“With no elected representatives, there are many flaws in our decision making process now. The political parties are responsible for the present state of municipality,” said senior officer of Butwal Municipality Bhuba Prasad Luitel. “Party representatives involved in the budget making process attend the meeting without having any visions and programs. Since they represent nobody, people’s genuine concerns are often ignored and it is the political interest, vote banks, party sympathizers that matter the most.”

Impact of Monitoring
As long as there was the Municipal Council, it evaluated the administrative functions, development and construction works and gave the necessary direction. However, the nominated members of the municipality do not enjoy such privileges.


There is no monitoring system in the municipality to evaluate the construction quality of the projects.


“Had there been any employees to question the integrity of the institutions and individuals involved in the projects, irregularities have been minimized,” said an employee on condition of anonymity.


Another official said it is not a question of intention of the particular individual but what one does and has to complete the task is important. However, the municipality is clearing the bill.

 

 

Accounting System
Despite the progress in the municipal finance system, it is yet to be transparent as per standard accounting systems. Nepal’s Auditor General’s Report 2010 expressed its concern over the growing rampant misuse of resources at the Municipal Level.


According to UDLE, most Nepalese municipalities use a cash based double-entry accounting system, developed and endorsed by the Office of the Controller General. The system is basically designed to support the central base expenditure system of the government offices. In other words, it deals only with the preparation of revenue and expenditure statements of a particular financial year. As such, it does not have further scope to deal with the balance sheet. It is, however, appropriate for central public financial transactions, which are understood as revenues collected by different government offices, deposited into central deposit accounts and redistributed by the Ministry of Finance through the District Treasury Office to different government offices for expenditure purposes.


The municipalities are authorized to collect different taxes and fees. In return, they are responsible for providing basic urban services like road construction and maintenance, drainage and assuring the water supply as well as an efficient and effective social service delivery. These tasks explain why the municipality should keep updated information about bills payable and bills receivable through the preparation of a balance sheet. As this system is not in place, municipalities are not able to share this essential information to taxpayers. To provide this vital information to taxpayers when and wherever required, the Accrual Accounting System (AAS) has been introduced in many organizations, which deal with public money.


“The municipal finance system in Nepal is still in its infancy. In 1999, the Local Self Governance Act (LSGA) provided the legal framework for increased autonomy of Nepalese local bodies—including municipalities. The implementation of these transferred rights and duties towards local bodies, however, is faulty. Many municipalities are not able to fulfill their intended role as a service provider for the population,” UDLE’s report writes.


Asian Development Bank’s Consultant Report on Sector Level Risk Assessment and Risk Management Plan to Assess Public Financial Management, Procurement, and Corruption Risks in the Urban Development Sector 2009 also highlighted some flaws in the financial system of Municipalities. ADB’s report pointed out governance issues as a major factor undermining the effectiveness of municipality spending.

                 

Accounting System
Despite the progress in the municipal finance system, it is yet to be transparent as per standard accounting systems. Nepal’s Auditor General’s Report 2010 expressed its concern over the growing rampant misuse of resources at the Municipal Level.


According to UDLE, most Nepalese municipalities use a cash based double-entry accounting system, developed and endorsed by the Office of the Controller General. The system is basically designed to support the central base expenditure system of the government offices. In other words, it deals only with the preparation of revenue and expenditure statements of a particular financial year. As such, it does not have further scope to deal with the balance sheet. It is, however, appropriate for central public financial transactions, which are understood as revenues collected by different government offices, deposited into central deposit accounts and redistributed by the Ministry of Finance through the District Treasury Office to different government offices for expenditure purposes.


The municipalities are authorized to collect different taxes and fees. In return, they are responsible for providing basic urban services like road construction and maintenance, drainage and assuring the water supply as well as an efficient and effective social service delivery. These tasks explain why the municipality should keep updated information about bills payable and bills receivable through the preparation of a balance sheet. As this system is not in place, municipalities are not able to share this essential information to taxpayers. To provide this vital information to taxpayers when and wherever required, the Accrual Accounting System (AAS) has been introduced in many organizations, which deal with public money.


“The municipal finance system in Nepal is still in its infancy. In 1999, the Local Self Governance Act (LSGA) provided the legal framework for increased autonomy of Nepalese local bodies—including municipalities. The implementation of these transferred rights and duties towards local bodies, however, is faulty. Many municipalities are not able to fulfill their intended role as a service provider for the population,” UDLE’s report writes.


Asian Development Bank’s Consultant Report on Sector Level Risk Assessment and Risk Management Plan to Assess Public Financial Management, Procurement, and Corruption Risks in the Urban Development Sector 2009 also highlighted some flaws in the financial system of Municipalities. ADB’s report pointed out governance issues as a major factor undermining the effectiveness of municipality spending.

                 

ADB emphasizes and attaches great importance on accountability for public officials, and transparency and predictability in government operations and critical principles in the fight against corruption.


“Municipalities are vulnerable to corruption in various forms and levels. Petty corruption in urban development sector was widely reported by all the CDOs in the districts visited. The award of contracts and implementation of projects through user groups (UGs) is allegedly fraught with corruption in the form of political interference, nepotism and conflict of interest in procurement and tender-related corruption, lack of ethical values and standards within the local bodies, and construction related irregularities associated with the use of sub-standard materials. Corruption risks also arise from ineffective monitoring and control mechanism, inadequate technical human resources in municipalities, poor communication systems and poorly articulated and enforced standards and regulations. In general, ADB's projects also encounter similar corruption risks prevalent in the overall urban development sector,” writes the report.


Similarly, the Commission for Investigation of the Abuse of Authority also raises various questions over the misuse of resources in various municipalities including Butwal.


Although there is increasing concern over the misuse of resources at the municipal level, it seems there is a long way to go before allaying it. Without the election of local bodies, these problems will not be solved.
This is the fifth of nine investigative stories on politics of local bodies supported by The Asia Foundation. The views expressed by the Author do not necessarily reflect those of The Foundation or founder