A latest study by United Nations Capital Development Fund (UNCDF), reported in Nagarik Daily, states that budget leakage in Mountain and Terai regions is as high as 80 percent. The figure for Hilly region is 25 percent. On average, the leakage of allocated budget by ministries and income of local authorities is close to 50 percent. Consumers committee in local authorities are misusing the money (by showing investment in local roads that are redone multiple times).
This raises doubt over the hypothesis that efficiency is enhanced if power is given to consumer committees to come up with priority projects and also allow discretionary power to them to spend budget allocated to local authorities. It raises question over the effectiveness of decentralization in the face of rampant corruption, vested interests of leaders, and illiterate committee members. The study states that without local elections and elected local representatives, real decentralization is unimaginable.
Here is an editorial on the same issue published in Republica:
The study has found that every year, over Rs 20 billion is being embezzled from state funds going into local development. According to the study, the money funneled down to the local level is misappropriated, right from the planning to the implementation stage of local projects. The problem is most acute in the Hill and Tarai regions with up to 80 percent of the allocated sums going missing.
[…]The latest revelations have also questioned a hallow principle among development experts in Nepal. Of late, a consensus has been building that local people are the best equipped to bring meaningful changes in the society. Thus, the local consumer groups have been given more and more say on how the money going into local bodies is spent. But the ground realities hint that things are not so straightforward. It was quite a stretch of imagination to assume that consumer groups that do not need license to operate, that do not pay taxes and most surprisingly, cannot be held accountable for their actions, would maintain self-discipline without any oversight. It is bizarre because no human being is immune to the base motives induced by a potentially endless source of money.