Government Financial Transactions in Nepal: A Comprehensive Guide
Introduction
Government financial transactions encompass all activities related to revenue, expenditure, fiscal transfers, grants/loans management, operation of consolidated and other government funds, accounting, reporting, and auditing, as mandated by prevailing laws. According to the Financial Procedures and Fiscal Accountability Act, 2076 BS (2019), financial transactions include:
- Managing movable and immovable assets, cash, and in-kind resources for authorized purposes.
- Collecting and depositing revenue.
- Receiving, spending, and managing grants and loans.
- Handling deposits, operational funds, and related financial activities.
These transactions involve responsibilities such as revenue collection, expenditure, accounting, and auditing, ensuring compliance with legal frameworks.
Features and Importance
Government financial transactions in Nepal are designed to ensure transparency, accountability, and efficiency in public finance management. Their key features include:
- Based on double-entry accounting principles.
- Use of standardized forms approved by the Auditor General.
- Recording transactions by budget heads and subheads.
- Internal control systems for oversight.
- Cash-based accounting system.
- Control of transactions through budget heads.
- Division into central and operational levels.
- Records for appropriations, revenue, deposits, and in-kind assets.
- Mandatory auditing for compliance.
- Evaluation for regularity, economy, efficiency, effectiveness, and propriety.
- Service-oriented, not profit-driven.
- Aligned with national economic and fiscal policies (budget).
- Based on public funds with fiscal accountability.
- Managed by authorized officials and structures.
- Planned, systematic, and capable of addressing emergencies.
- Prerequisite for effective service delivery and development management.
These features ensure that public resources are used efficiently to meet national development goals while maintaining public trust.
Transaction Analysis
Transaction analysis involves assessing the dual impact of financial transactions on assets, liabilities, capital, revenue, expenditure, profit, or loss. It identifies the debit and credit effects of each transaction based on supporting documents like invoices, receipts, and vouchers.
In government financial transactions, analysis covers:
- Assets, liabilities, consolidated funds, revenue, foreign aid, loans, investments, public expenditure, deposits, revenue sharing, and intergovernmental fiscal transfers.
- Details such as amount, timing, source, and method of transactions.
- Evaluation of regularity, economy, efficiency, effectiveness, and propriety.
Since Nepal’s accounting system is cash-based, no balance sheet is prepared. Analysis focuses on the impact on bank accounts and relevant revenue or expenditure heads, as shown below:
| Transaction Type | Increases | Decreases |
|---|---|---|
| Expenditure | Expenditure Account | Bank Account |
| Revenue | Revenue Head, Bank Account | - |
| Expenditure Refund | Bank Account | Related Expenditure Head |
| Advance Payment | Related Head | Bank Account |
| Advance Settlement | Expenditure Head | Advance Head |
| Deposit Receipt | Deposit Head, Bank Account | - |
| Deposit Forfeiture | Revenue Head | Deposit Head |
| In-Kind Purchase | Asset Head | Bank Account |
| Liability Payment | - | Liability Head, Bank Account |
| Loan Receipt | Loan Head, Bank Account | - |
| Loan Repayment | - | Loan Head, Bank Account |
| Investment | Investment Account | Bank Account |
| Investment Refund | Bank Account | Investment Account |
Transaction analysis ensures accurate accounting, transparency, and accountability by identifying the nature and impact of transactions.
Preliminary Accounting
Preliminary accounting involves recording transactions on the date they occur, capturing brief details to identify the transaction. The primary tool for this is the Journal Voucher (Goshwara Voucher), which is mandatory for initiating any government financial transaction.
The Journal Voucher provides details such as:
- Date and purpose of the transaction.
- Accounts affected (debit and credit).
- Amount involved (revenue or expenditure).
Objectives of Preliminary Accounting:
- Maintain chronological records of transactions.
- Compile supporting documents and evidence.
- Facilitate ledger posting.
- Serve as proof of transactions.
- Provide information to stakeholders.
- Ensure accountability through signatures.
- Support preparation of various reports.
Need for Preliminary Accounting:
- Records transaction dates.
- Provides a basis for ledger posting.
- Ensures accountability of transacting parties.
- Maintains authenticity of transactions.
- Facilitates classification, analysis, and comparative studies.
- Enables report preparation.
- Documents the context and rationale of transactions.
Tools for Preliminary Accounting:
- Cash Receipt (M.L.P.F. No. 101): Issued to taxpayers for taxes, fees, or charges, serving as proof and record.
- Daybook: Records daily revenue and expenditure (e.g., M.L.P.F. No. 102, 106, 107).
- Journal Voucher: The primary record for all transactions, divided into:
- Identification Section: Office code, date, voucher number, electronic transaction number.
- Details Section: Subhead number, transaction description, debit, and credit.
- Approval Section: Names and designations of preparer, submitter, and approver.
Importance of Journal Voucher:
- Serves as the foundation for all record-keeping.
- Facilitates ledger posting with debit-credit rules.
- Acts as the primary authentic record.
- Ensures accountability through signatures.
- Supports preparation of budget sheets, bank cash books, and reports.
- Provides evidence through attached documents (bills, receipts, bank vouchers).
Ledger Posting
Ledger posting involves transferring transaction details from the Journal Voucher to relevant accounts based on transaction analysis. The debit amount is recorded in the debit column, and the credit amount in the credit column of the ledger.
Key Aspects:
- Journal Voucher is the primary record; the ledger is the secondary record.
- Vouchers are prepared chronologically, while ledgers are organized by subject or budget head.
- Ledgers are closed at the end of each accounting period to determine balances.
- Facilitates reporting, budgeting, revenue forecasting, and expenditure control.
Types of Ledgers in Government Transactions:
- Advance Ledger (M.L.P.F. No. 207): Records advances for purchases, construction, or programs, including recipient details, purpose, and budget head. Closed upon settlement.
- Budget Sheet (M.L.P.F. No. 208): Tracks appropriations, releases, and expenditures monthly, ensuring control and transparency.
- Bank Cash Book (M.L.P.F. No. 209): Records cash, bank balances, advances, and settlements, correcting arithmetic errors. Includes five account types: cash, bank, budget, advances, and miscellaneous.
- Deposit Ledger: Tracks deposits for risk coverage, with details of depositor, purpose, and date. Types include:
- Personal Deposit Ledger (M.L.P.F. No. 601): Individual or entity-specific records.
- Consolidated Deposit Ledger (M.L.P.F. No. 602): Office-wide deposit records.
Reporting
Reporting involves informing relevant authorities about financial transactions after a specific period. As per the Financial Procedures and Fiscal Accountability Act, 2076 BS and its regulations, public entities must submit monthly and annual reports, and additional reports as requested by supervisory bodies.
Reporting Deadlines:
- Monthly reports: Within 7 days of month-end.
- Annual reports: Within 35 days of fiscal year-end.
Key Reports:
| Category | Report Type | Form Number | Frequency |
|---|---|---|---|
| Appropriation | Expenditure Breakdown | M.L.P.F. No. 210 | Monthly |
| Appropriation | Pending Advances | M.L.P.F. No. 211 | Monthly/Annual |
| Appropriation | Bank Reconciliation | M.L.P.F. No. 212 | Monthly |
| Revenue | Bank Revenue Statement | M.L.P.F. No. 109 | Monthly |
| Revenue | Revenue Collection Report | M.L.P.F. No. 113 | Monthly |
| Deposit | Deposit Financial Statement | M.L.P.F. No. 607 | Monthly/Annual |
| Appropriation | Annual Financial Statement | M.L.P.F. No. 17 | Annual |
| Revenue | Revenue Financial Breakdown | M.L.P.F. No. 110 | Annual |
| Appropriation | Pending Payments | M.L.P.F. No. 221 | Annual |
Reporting Authorities:
- Federal Offices: Supervisory ministry, department, Treasury and Comptroller Office, Auditor General’s Office.
- Provincial Offices: Provincial ministries, Provincial Treasury Comptroller Office.
- Local Levels: Submit quarterly progress reports within 15 days to the executive, and financial statements to the federal Ministry of Finance, provincial ministry, and National Natural Resources and Fiscal Commission.
Legal Provisions:
- Local levels submit consolidated financial statements covering grants, revenue sharing, internal revenue, loans, and expenditure to provincial and federal authorities.
- Monthly reports (expenditure, advances, revenue, deposits, irregularities) are submitted within 7 days to the Treasury and Comptroller Office.
- Annual reports (appropriations, revenue, deposits, advances, liabilities, foreign aid) are submitted within 21 days of fiscal year-end, verified by the Treasury and Comptroller Office within 7 days, and forwarded to supervisory bodies.
- Central agencies maintain comprehensive records of transactions, assets, and liabilities.
- Quarterly progress reports by local levels are submitted within 15 days to the executive.
- Non-compliance with reporting requirements results in accountability measures for responsible officers.
Conclusion
Nepal’s government financial transactions are a cornerstone of public finance management, ensuring transparency, accountability, and efficient resource use. By adhering to cash-based, double-entry accounting principles and standardized reporting, the system supports effective service delivery and development. Digital tools like integrated financial management systems could further enhance accuracy and timeliness.
References
- Financial Procedures and Fiscal Accountability Act, 2076 BS (2019).
- Local Government Operation Act, 2074 BS (2017).
- Nepal Government Accounting Guidelines, 2073 BS (2016).
- Auditor General’s Office, Standardized Forms.