The Office of the Auditor General of Nepal has repeatedly emphasized the need for auditing 43 government-owned organizations. However, the 62nd report of the Auditor General reveals that 31 of these organizations remain unaudited. Highlighting this issue, the Auditor General has called for policy reforms in corporate governance.
According to the report, during the 45th fiscal year, accounts of 43 companies, worth a combined Rs 447.5bn, were audited. In the 2023/24 fiscal year, audits were completed for an additional 42 organizations valued at Rs 477.49bn. Despite repeated directives, 31 organizations have not completed audits for 80 fiscal years, and 21 fully government-owned organizations still have 38 fiscal years pending audit. These unaudited entities include Udayapur Cement Industry, Nepal Tourism Board, Guthi Sansthan, Gorkhapatra Sansthan, Food Management and Trade Company Limited, Hetauda Cement Industry Limited, Dairy Development Corporation, Janak Education Materials Center Limited, Nepal Drinking Water Corporation, and Nepal Television.
Similarly, 10 corporate bodies majority-owned by the government have not submitted accounts for the 42nd fiscal year. These include the National Insurance Company, National Life Insurance Company Limited, Bishal Bazar Company, Upper Tamakoshi Hydropower Company Limited, Kathmandu Upatyaka Khanepani Limited, Sajha Prakasan, and Nepal Orient Magnesite Private Limited.
The report notes inconsistencies in how boards of directors determine staffing and benefits in public corporations, often based on varying acts that lack uniformity. It recommends policy reforms to ensure that worker appointments and benefits are regulated through a standardized government policy implemented via the boards of directors. Additionally, there is no clear criteria for establishing subsidiaries or assessing the impact of issuing shares to the public on the organizations’ investments and liabilities. Since some organizations have share ownership spread across multiple ministries while the government acts as a single entity, the Auditor General suggests reviewing and amending laws and regulations accordingly.
The report also flags increasing operational expenses—such as financial management, salaries, allowances, and office costs—outpacing income, exacerbated by overstaffing and underutilized capacity. Several organizations have operated at a loss for extended periods, with low returns on government investments and no substantial efforts to strengthen these entities. The government reportedly has not evaluated the public services offered or their economic contributions, nor reviewed investments. The report further notes delays in auditing, failure to meet goals, unreconciled accounts, and non-payment of principal, interest, and dividends.
A significant concern raised involves loans extended by the Employees Provident Fund and the Citizens Investment Fund for Nepal Airlines Corporation’s purchase of aircraft. On 18 June 2013, the Provident Fund and Nepal Airlines provided a loan of Rs 9.98bn, guaranteed by the government, for two A320 narrow-body Airbuses. On 18 May 2017, an additional Rs 11.9bn loan, also government-guaranteed, was provided for one A330 wide-body Airbus. Due to non-payment of interest, the Provident Fund Board has capitalized the principal to Rs 28.5bn. The loans appear only in the retirement fund’s financial statements, with decisions made solely by the fund’s board at a time when no trustee was formed. The loan repayments have not followed the agreement, including the provision requiring 30 percent of ticket sales to be deposited into a special account.
The report stresses that when the government provides guarantees for large, long-term projects, detailed risk assessments and business plan evaluations should precede loan disbursement to ensure proper coverage.
Regarding the Nepal Electricity Authority (NEA), the Auditor General states that the reported profit is not entirely realistic. While total profit increased in the 2023/24 fiscal year compared to the previous year, net profit declined due to higher depreciation expenses. Ratios related to net income, long-term debt, equity, employee expenses, and imported electricity remained stable. The Authority’s accumulated profit reached Rs 46.47bn, but significant depreciation on trade receivables (Rs 11.51bn previously, Rs 5.16bn this year) has affected earnings.
The NEA had also recognized outstanding fines for dedicated and trunk lines as income, based on government commission recommendations for tariff exemptions. Electricity tariff arrears rose by 8.88 percent this year to Rs 48.26bn, with Rs 23.44bn owed by 59 customers on trunk and dedicated lines—debts disputed for over a decade. Another Rs 6.89bn remains unpaid for street lighting. Although power loss (leakage rate) decreased slightly from 13.46 percent to 12.85 percent, it remains above the global average, prompting calls for identifying causes and implementing effective control systems in high-loss areas.
With rising electricity production, the NEA has been urged to implement an effective export strategy while considering growing domestic consumption and demand during the rainy season. The NEA owes Rs 3bn to the government and Rs 5bn to other entities. According to Article 1 of the Mahakali Treaty between Nepal and India, Nepal receives 70m units of electricity free annually, with any additional requirements to be purchased.
The government provides free power to NEA at Rs 4.75 per unit. Of this, NEA owes the government Rs 2.42bn last year and Rs 330m this year. Furthermore, the NEA’s financial statements include Rs 5.6bn in discounts offered during the Covid-19 period, resulting in a net receivable of Rs 2.31bn from the government, which requires verification and settlement.
