1.6 Management Audit

Management Audit in Nepal's Public Administration

Overview of Management Audit

A management audit is the process of evaluating and assessing the organizational structure, financial and human aspects, outcomes, client satisfaction, efficiency, and effectiveness of public entities to improve and promote service delivery and managerial capacity. It identifies strengths and weaknesses, aiding in organizational improvement and development.

Under the Management Audit Guidelines, 2079 BS (Section 72A of the Civil Service Act, 2049 BS), excluding matters under the Public Service Commission’s jurisdiction, a management audit involves:

• Compliance with prevailing policies, laws, administrative rules, and procedures.
• Adherence to annual plans, budgets, and programs.
• Compliance with performance contracts.
• Inspection, supervision, monitoring, evaluation, and review of employee management, office management, financial administration, inventory, and record management, as well as overall public service delivery.

Process of Conducting Management Audit

• The Ministry of Federal Affairs and General Administration conducts management audits of federal entities and their subordinate bodies.
• All entities must conduct or facilitate regular management audits.
• Entities must perform self-assessments and inform the Ministry.
• The Ministry may conduct regular or surprise audits.
• The Ministry must prepare an annual program for audits.
• Auditors must develop a plan before conducting audits.
• Assigning entities must orient auditors before deployment.
• Concerned entities must provide necessary support to auditors.
• Audit reports must be submitted to the assigning entity within one month of completion.
• Federal entities must submit annual audit reports to the Ministry by the end of Bhadra (mid-September).
• The Ministry must submit a consolidated report to the Government of Nepal by the end of Kartik (mid-November).
• A Management Audit Guidance and Implementation Committee, chaired by the Ministry’s Secretary, oversees the process.
• The Ministry provides suggestions/directives to address irregularities or issues.
• Concerned entities must address irregularities per regulations.
• Monitoring of resolutions and rewarding compliant entities.

Subjects Covered in Management Audit

The mnemonic "निकका अजिवा आसे सुगु क्षआआ" represents the following areas of focus:

1. Policy and Legal Provisions: Compliance with laws and policies.
2. Employee Administration and Management: Workforce management practices.
3. Office Management: Operational efficiency of offices.
4. Record Management: Maintenance and organization of records.
5. Inventory Management: Management of physical assets.
6. Annual Programs: Adherence to planned activities.
7. Financial Administration: Financial discipline and transparency.
8. Service Delivery: Quality and efficiency of public services.
9. Information Flow and ICT: Use of information technology and communication.
10. Grievance Management: Handling public complaints.
11. Capacity Development: Training and skill enhancement.
12. Conduct and Discipline: Employee ethics and adherence to rules.
13. Other Relevant Areas: Additional subjects as needed.

Who Conducts Management Audits

• The Ministry of Federal Affairs and General Administration audits federal entities and their subordinate bodies.
• Federal entities audit their subordinate bodies.
• Audits are conducted by a team led by at least an Under-Secretary.

Methods of Management Audit

• Observation: On-site inspections.
• Discussion: Engaging with stakeholders.
• Interviews: Gathering insights from personnel.
• Questionnaires: Structured data collection.
• Reference Material Study: Reviewing documents and records.
• Other Methods: As deemed necessary.

Challenges in Management Audits

1. Weak compliance with management audit provisions and lack of prioritization.
2. Insufficient financial and human resources for the audit process.
3. Incomplete coverage of all entities in audits.
4. Limited capacity of the Ministry of Federal Affairs and General Administration to conduct audits.
5. Lack of implementation of audit report recommendations and improvements.
6. No action taken on identified irregularities or issues.
7. Lack of skills and knowledge continuity due to frequent staff changes in the Ministry.
8. Unclear mechanisms for auditing provincial and local government entities.

Suggestions for Improvement

1. Establish clear legal provisions for management audits with defined responsibilities and accountability.
2. Ensure sufficient resources and focus on capacity building and sustainability of audit personnel.
3. Make heads of public entities accountable for audit processes.
4. Ensure periodic management audits for all entities.
5. Develop a system for mandatory implementation of audit recommendations and feedback.
6. Link outcomes to rewards for well-performing entities and penalties for underperformers.
7. Create and enforce laws and procedures for management audits at provincial and local levels.