|Project Rationale and Linkage to Country/Regional Strategy
Municipalities are characterized by inadequate drinking water supply, sanitation, drainage, solid waste management, and transport infrastructure and facilities. Serious environmental issues, including an increased level of vehicular pollution, haphazard disposal of solid waste, wastewater, and illegal dumping of industrial waste into rivers and streams, are emerging because of uncontrolled and haphazard urban development. Insufficient financial resources and qualified human resources, and a low level of institutional capacity mean that urban authorities are unable to cope with the growing demand for services with commensurate infrastructural facilities. Issues and challenges that will be addressed in the TA are detailed in the subsequent paragraphs.
Financial Management including Revenue Enhancement. Mobilization of financial resources by municipalities is hampered by lack of a sound financial management system and innovative approaches to develop institutional capacity to manage their financial affairs. With grants and loans from the central Government accounting for a significant portion of the total revenue of municipalities, municipalities are largely dependent on the Central Government. There is an urgent need to increase the internal revenue by assessing potential sources, such as broadening the tax base, updating property tax valuation and increasing collection efficiency. Based on a revenue potential study, a realistic annual revenue estimate will need to be prepared.
Although accrual-based accounting systems have not been established and are not in use in most municipalities, each municipality is required by Local Bodies Financial Administration Regulation (LBFAR) to adopt accrual based accounting effective from FY 2011/12. Most internal audit units are not in place, and internal audits are essentially irregular and not effective. Backlog of audits is quite common in municipalities. Accumulated misappropriations (expenditure and advances) are high and generally not settled. The practice of periodic reconciliations varies from municipality to municipality with reconciliations done monthly, quarterly, semiannually or annually. Efforts need to be made to improve the accounting system and reduce misappropriations found in the audit report as well as the time taken for reconciliations.
Urban Planning. The municipalities and emerging towns of Nepal have developed haphazardly in the absence of stringent policy on regulating and managing the growth. The unplanned growth has created a number of problems such as deficiencies in basic urban services, lack of sanitation and solid waste management system, environmental degradation, and encroachment of settlements in public lands, forests and rivers. Additionally, the unprecedented rise of urban land price has encouraged land speculation and led to the indiscriminate subdivision of agricultural land and urban sprawl. Support is needed to enable municipalities to implement municipal building by-laws and national building codes through legislative support, institutional strengthening, and community empowerment.
Geographic information system-based urban mapping. Many municipalities still lack proper base maps. Although the participating municipalities have or are developing basic digital base maps, there is no software to run the geographic-information system (GIS) and only very limited information and data are available in the GIS. The existing maps do not serve the purpose of increasing functions that municipalities need to perform. Together with a rapid urbanization trend, there is a strong need to develop and/or update large-scale GIS-based urban maps with adequate socio-economic database. These maps will bring multiple benefits that can be used for better urban planning, project planning, tax information base, and public works engineering purposes.
Sustainability. The participating municipalities under this TA are the same municipalities selected under PPTA-7727 NEP Preparing the Integrated Urban Development Project. Capacity development for the four municipalities is essential to ensure effective and efficient implementation of the proposed Integrated Urban Development Project as well as to ensure sustainability of the infrastructure improvement to be carried out under the project. To the extent possible, good practices, manuals and specifications emerging from this TA may be used as standards for municipalities as the national level.