Nepal has suffered from the lack of proper management of public expenditures, stagnant real revenues, large and inefficient parastatals and a weak financial sector. Fiduciary risk remains high. His Majesty's Government of Nepal has accorded high priority to the assurance of good accountability and transparency in public sector financial management. This diagnostic study assesses the strengths and weaknesses of the budgeting, accounting, financial reporting and auditing systems, and the standards and practices in the public, private and non-government organization sectors of the economy. Such financial accountability is important for efforts to improve the investment climate, monitor public expenditure, improve governance and promote decentralization.