Financial Accountability and Transparency in Community Schools: A Case of Lalitpur Metropolitan City

Abstract

Poor accountability and transparency in school is one of the critical challenges of Nepali education system. This dissertation critically examines the implications of appointing local government’s executive authority holder, mainly ward chairpersons as the executive chairpersons of School Management Committees (SMCs) on financial accountability and transparency in community schools within Lalitpur Metropolitan City (LMC), Nepal. The research is situated within the context of Nepal’s federal transition, which decentralized education governance at the local level. Utilizing a qualitative case study methodology across three representatives LMC community schools, the research gathered data from head teachers, municipal officials, ward chairpersons, and parent representatives followed by an analysis of key policy documents, including the Local Government Operation Act 2074 (2017) and LMC- Education procedure, 2076 (2019). The findings reveal a dual effect of this governance model. On the one hand, the political authority of the ward chairperson has demonstrably strengthened formal financial management and upward accountability. Schools exhibit greater procedural compliance with LMC financial regulations, leading to improved financial reporting and budgetary conformity. This outcome is primarily driven by the ward chairperson’s direct link to resource allocation and regulatory enforcement at the municipal level. On the other hand, this study challenges the assumption that decentralization generally enhances downward accountability. The findings suggest that appointing political agents (ward chairs) as SMC chairs effectively re-centralizes power, shifting authority from administrative bureaucracies to local political networks rather than empowering the community. Additionally, the study highlights a critical gap between procedural compliance and genuine empowerment, demonstrating that transparency mechanisms (like social audits) do not equate to democratic governance unless accompanied by actual decision-making power. Ultimately, while the Constitution mandates local management of education, delegating this authority to ward chairs undermines the spirit of federalism. Instead of fostering community ownership, this practice effectively re-centralizes power, shifting control from parent’s representatives to the political party’s extended networks. The result is a system that excels at financial reporting but ignores the interest of parents and students. On the other hand, the study reveals significant weaknesses in downward accountability and substantive transparency. The concentration of power creates a structural conflict of interest, where the primary resource allocator also acts as the school's chief executive authority, weakening the effectiveness of the accountability loop (Principal–Agent theory). Further, while there is an increase in formal disclosure (procedural transparency) through mechanisms like the annual social audit, the information often remains incomprehensible to the community, resulting in a participatory deficit. The system prioritizes financial compliance with the municipal government over performance accountability to parents and students regarding academic quality. It recommends urgent policy interventions, including the separation of the ward chairperson's roles in school management to resolve the conflict of interest and the institutionalization of capacity building to enhance community financial literacy, thus transforming transparency from a mere ritualistic disclosure into a tool for genuine community empowerment.