Author(s): Devilal Sharma, Surendra Kumar
Analysis of the financial status of local governments will assist in shortening the financial problems. Similar studies are found mostly in autonomous local government entities in American and European context. This research seeks to measure the financial status of municipalities in the Gandaki province of Nepal. After promulgation of the new constitution of Nepal in 2015, it makes provision of autonomous three tiers government in order to provide efficient service to the people with balanced development. Using financial data from audited statements from the office of the auditor general, the government of Nepal of 27 sample municipalities this research tries to assess and compare the financial status of municipalities in Gandaki province of Nepal. A comprehensive index of six dimensions viz. short-term solvency, budgetary solvency, service-level solvency, financial flexibility, and financial independence were developed using the empirical literature available in the field on local government’s financial status as well as taken into consideration of data availability. The index found is applied to explain the financial status of urban and rural municipalities for the fiscal year 2019/20 and 2020/21. Results from the analysis revealed that there are differences in overall financial status as well as their measuring dimensions. The measured index also entails about operational efficiency of municipalities with areas of improvement in their performance for further sustainability. This paper will contribute to make municipals effective through devising policies by focusing effective service to the citizen and federal and provincial governments will get insight to formulate their policies for equitable distribution of financial resources among the municipalities.