Unclaimed Public Funds Nearly Equal to One Year’s Budget, Auditor General Reports

May 15, Kathmandu – Funds spent from the state treasury in violation of existing laws and regulations are now approaching an amount equivalent to nearly one fiscal year’s budget.

According to the 63rd annual report submitted to the President by the Office of the Auditor General on Friday, the total amount of unclaimed public funds to date has reached NPR 1.543 trillion.

In the last fiscal year alone, unclaimed funds increased by nearly NPR 300 billion, compared to NPR 1.284 trillion the previous year.

The current fiscal year’s budget is NPR 1.964 trillion, meaning unclaimed funds now represent roughly 80 percent of the annual budget. This marks a 50 percent increase compared to five years ago.

Auditor General Toyam Raya presented the audit report for the fiscal year 2081/82 (2024/25) to the President. The report analyzes expenditure from the state treasury and the effectiveness of public entities under eight major areas and provides recommendations.

“This year, some local governments have reduced unclaimed funds, which is a result of institutional reforms,” Auditor General Raya said at a press conference.

Audit scope includes verifying whether ministries have legally utilized their allocated budgets and examining the justification and proper use of expenditures. The Auditor General also audits revenue administration to determine whether taxes have been properly collected.

Unclaimed amounts are declared when expenditures are unlawful, unjustified, or when required documentation is missing. The auditor also tracks if revenue collection has occurred as required.

How much was added to unclaimed funds in the last year?

According to Auditor General Raya, NPR 8.809 billion was added to unclaimed funds last year. Funds pending action amount to NPR 236 billion. Together, these irregularities total approximately NPR 324 billion.

However, the audit office has begun to distinguish between unclaimed funds and arrears. Based on decreasing arrears year-over-year, irregular amounts are estimated at around NPR 325 billion.

The Auditor General’s Office treats remaining balances, revenue arrears, foreign grants and loans, and accrued interest on overdue loans as arrears in annual audits.

Toyam Raya named ministry secretaries, local government chief administrative officers, and department heads as accountable officers for financial management.

“We have clearly stated who is responsible in the annual report. What more can we do beyond that?” he said.

Unclaimed funds nearly equal to national budget

Last year, unclaimed funds stood at about NPR 1.2 trillion, increasing by nearly NPR 300 billion this year. The auditor’s office found that NPR 237 billion in revenue arrears were added this year, indicating unpaid tax liabilities.

Outstanding tax and revenue arrears across the country have reached NPR 709 billion. Taxpayers’ reluctance and cases pending in court contribute significantly to the arrears burden.

Last year, tax arrears were NPR 472 billion, which has increased by about 50 percent this year. Additionally, accrued interest on overdue tax liabilities has reached NPR 52 billion.

During the JNU movement last September, numerous government offices were damaged or set on fire, resulting in the destruction of records from 179 offices, preventing audits from being conducted.

The Auditor General’s Office reported that audits amounting to nearly NPR 1.4 billion are pending. Raya considers this a notable achievement given the circumstances.

Specifically, NPR 147.89 billion remains un-audited, but Raya clarified these amounts were excluded from unclaimed funds or amounts pending closure due to exceptional situations.

Types and distribution of unclaimed funds

Out of the NPR 8.809 billion unclaimed last year, NPR 5.348 billion is with the federal government, representing over half of the total. Local governments hold NPR 1.9 billion, while provincial governments have the least, at NPR 522 million.

The Auditor General classifies unclaimed funds into three categories: collectible, regularizable, and advances. Collectible unclaimed funds amount to NPR 3.264 billion this year.

Regularizable funds exceed NPR 5 billion; these can be cleared upon completing necessary procedures and submitting documents.

Due to missing paperwork, NPR 3.6 billion remains unclaimed, while advances given before work commencement have contributed to NPR 517 million.

The ratio of unclaimed funds to total expenditure from the treasury has remained stable over the past three years, with 1.69 percent three years ago, 1.21 percent two years back, and 1.84 percent last year.

The report excludes unclaimed funds related to organized institutions where boards resolve discrepancies internally.

Raya noted it is impossible to review all documents simultaneously; audits focus on sectors identified as high-risk and vulnerable.

According to the report, the Ministry of Finance holds the largest share of unclaimed funds — about 70 percent of total — followed by ministries of Physical Infrastructure, Land Management, Forest and Environment, and Communications and Information Technology.

Madhesh Province reportedly has the highest unclaimed funds among provinces, while Koshi Province has the least. The Ministry of Finance’s unclaimed amount stands at NPR 3.763 billion whereas the Ministry of Physical Infrastructure’s is about NPR 750 million. Inclusion of revenue arrears further increases the Ministry of Finance’s unclaimed figures.

Approximately 5,500 government offices have undergone audits. However, audits of some offices could not be completed due to record damage caused by the JNU movement.

The Office of the Auditor General has fully implemented an online auditing system and adopted a policy of conducting audits through both field visits and online methods focusing on high-risk sectors.

Key issues identified

The auditor’s report highlights that nearly NPR 200 billion in tax disputes are currently pending in administrative reviews, tax adjudication bodies, and the Supreme Court. These unresolved disputes affect about 10 percent of the annual budget and hinder tax revenue collection.

Last year, approximately NPR 4.72 billion was reappropriated in the budget, with influential ministers adjusting the budget near the fiscal year-end to favor certain programs. Only NPR 80 million was reappropriated by mid-July.

Over the past 15 years, 27 projects have been declared as national pride projects.

Among them, Upper Tamakoshi, Pokhara, and Bhairahawa airports have been completed, while the Melamchi drinking water project is in its first phase. Other projects remain incomplete or not yet initiated. The progress of 17 transformative projects is similarly limited.

Auditor General Raya stated that identified problems have been categorized into eight sectors: governance, economy, public administration, public asset management, public finance, development management, information technology, and good governance, where corrective suggestions have been provided.

He added, “We have recommended necessary reforms within these sectors.”