Nepal : Strengthening Municipalities for Urban Service Delivery

Water and other urban infrastructure and services / Urban policy, institutional and capacity development

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.

Tax net extended for property tax

Internal audit carried out regularly and as per standard

Staff skills enhanced in accounting, budgeting, and internal auditing

Amended building bylaws approved

GIS-based urban maps used for taxation and urban service delivery

Staff skills enhanced for GIS-based urban mapping

At the central level, a steering committee (SC) will be established to monitor the TA implementation. The SC will be co-chaired by Secretaries of MPPW and MLD and consist of high-level representatives from the National Planning Commission (NPC), the Ministry of Finance (MOF), MLD, Local Body Fiscal Commission (LBFC), DUDBC, the Municipal Association of Nepal (MuAN), and executive officers of participating municipalities. The project director in the project coordination office of DUDBC will work as member and the convener of the SC. The MLD and the DUDBC will each assign a TA coordinator and the former will take the lead in output 1, while the latter will do so for output 2. The SC will meet at least quarterly to discuss the overall progress and provide policy guidance to the TA. At each participating municipality, a focal point for the TA is appointed, and a working committee (WC) will be established to closely work with the TA consultants. The WC will comprise representatives from Town Development Committees (TDC), revenue, planning, accounting, audit, GIS units and other relevant service delivery sections from the municipalities. The consultants will produce quarterly progress reports, which will be reviewed by MPPW, MLD, DUDBC and ADB, and discussed at the SC and the WC. Workshops are planned towards the completion of the TA, by inviting other municipalities in Nepal, to disseminate good practices and lessons learned from the TA. ADB will undertake the TA review in collaboration with the EA, at least twice a year during the implementation.

The TA final workshop was held in February 2014.