The Ministry of Finance (MoF) is considering a proposal to exclude contingency funds—set aside for unforeseen expenses—from the budgets of provincial and local governments.
A recent meeting of the Inter-Governmental Finance Council and a thematic committee under the MoF reached a preliminary agreement to eliminate this budget category at sub-national levels. The move follows a study by the Office of the Auditor General (OAG), which found that contingency allocations at provincial and local levels have been steadily increasing and are often misused.
Contingency funds are typically allocated without being tied to specific programs or projects, intended to address unexpected needs. While such provisions will remain mandatory for the federal government—especially to respond to emergencies like natural disasters or epidemics—the council is also discussing reducing the size of the federal contingency budget.
The OAG report noted that growing contingency allocations have reduced development spending at the local level. It also raised concerns about a lack of transparency and accountability in how these funds are used.
Despite the recommendation, provincial and local governments retain constitutional authority over their budgets. Municipal and rural councils can decide whether to include contingency funds, while provincial decisions rest with their respective Councils of Ministers.
Previously, the Finance Committee of the Koshi Provincial Assembly had also advised removing contingency funds from the province’s fiscal year 2025/26 budget.
According to a senior MoF official, eliminating contingency budgets could improve accountability by ensuring clearer allocation of funds and better tracking of how public money is spent.
