The Government of Nepal (GoN) is committed to achieve the goals of EFA by 2015 and it has focused on the universal participation of its children, youths and adults in the education sector, especially in basic education. Although the Interim Constitution of Nepal 2007 does not make any direct reference to education financing, it includes basic education as a fundamental right of all citizens and also emphasizes that every citizen shall have the right to free education from the State up to secondary level. The School Sector Reform Plan (SSRP) expands basic education to Grades 1 to 8. The Plan also defines some requirements for education funding, including: The need for 85% of total education expenditure to be applied to comprehensive school education (0 -12). The suggestion that 4% of GDP and 20% of national expenditures be allocated to education. The need for 76% of total education expenditure be applied to basic education. The need of 37% of the cost of the SSRP to be met by donors. Current expenditure levels on education are 17% of total government budget and about 3.8% of GDP. 27% of total education budget and 35% of the total primary education budget is provided from external sources. Government funding through grants to schools is not delivered in a timely fashion. Net enrollment rate is increasing but systems are not becoming as efficient to retain them and ensure their universal completion. Funding to schools does not respond to schools’ needs as expressed in their plans. Funding by local bodies is inconsistent across the country. There is inadequate monitoring of how schools expend funds. Schools are inflating student numbers to acquire funding for students above the prescribed student teacher ratios. Although the community-managed schools have achieved some success, funding models do not provide grants of funds directly to the community. Some of international experiences reflects the need of countries to address issues of vertical imbalance of resources and responsibilities (i.e. imbalance between tiers of government) and horizontal imbalance (i.e. imbalance between the provincial governments).
Countries deal with these issues through a range of flexible strategies – adjustments to mechanisms, adjustments to amounts and shifting responsibilities among the tiers of government. Federal constitution needs to make clear and specific statements relating to the funding of education. The funding of school and vocational education should be the responsibility of the provincial governments, and the funding of higher education needs to be the responsibility of the federal government. For school construction, the central government should develop standards and the provincial government should provide funds to achieve those standards. Teachers should be recruited by local authorities but paid by provincial governments. Funding needs to be disbursed directly to school bank accounts. The federal government should fund textbooks, provide assistance to poor families, programs targeting increased participation and research and development. Formula funding should be based on student enrollments supplemented by incentives (e.g. for increased retention rates). With regard to revenue, provincial governments should determine education taxes. Regulation of private schools should be the responsibility of provincial governments. Donor coordination should be the responsibility of the federal government but should respond to the needs of provinces as expressed in project plans. There is a need to distribute the funds directly to school account. The general idea for the distribution of funds might be suggested as follows: the larger unit of government distributes funds to the smaller unit in accordance with the needs of students in the smaller unit and with regard to the fiscal capacity of the smaller unit of government.
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