The Bhutanese Leading the way.
The Auditor General’s Advisory Series on the “Review of Local Government Development Grant” for three financial years 2021-2024 found that various inefficiencies and misallocation of resources.
The report says while the introduction of the Annual Grant in 2019 aimed to enhance the financial autonomy of Local Governments (LGs), the current framework has not fully realized its transformative potential.
There are instances of underfunding in certain Local Government Key Result Areas (LGKRAs), while some activities receive excessive funding indicating that fund spendings are unbalanced or disproportionate to LGKRAs.
As per the Annual Grants Guidelines for Local Governments, ‘In view of competing priorities, those projects/activities with economic/social returns must be accorded the highest priority’.
Further, it also states that the LGs must ‘Ensure that any infrastructure development caters to the majority of the beneficiaries at the LGs and that proper cost-benefit analysis is carried out’.
However, it was found Gewog authorities, in particular, may prioritize visible infrastructure projects to gain political leverage, potentially overlooking initiatives with intangible but long-term benefits, such as food security.
A visible problem across all Gewogs is that all Gewogs are very determined and adamant about farm road and Lhakhang development preferably one Lhakhang in each Chiwog. The other equally important key areas like health, education, agriculture, and livestock remain underfunded.
The imbalanced allocation of resources may undermine the broader developmental objectives of the Annual Grant, including improved well-being, enhanced productivity and strengthened community resilience. Without addressing these inefficiencies, the Annual Grant may fall short of its potential as a transformative tool for local development.’
The Annual Grant Guideline requires to accord highest priority to those projects/activities with economic/social returns. It also mandates to spend no more than 10% of the annual grant for activities related to the preservation and promotion of cultural and religious heritages. Further, a comprehensive cost-benefit analysis is required to support infrastructure development. These requirements were not met as evident from the review of expenditure and other documented records.
The highest expenditure was recorded for farm road development, totaling Nu. 2,880.149 million. This was followed by Lhakhang development activities with an expenditure of Nu. 834.03 million. Agriculture support ranked third, with expenses amounting to Nu. 634.895 million. Health initiatives incurred a cost of Nu. 589.329 million, followed by education at Nu. 482.924 million. The lowest expenditure was on livestock support, amounting to Nu. 220.367 million. The primary focus of Gewogs of almost all 20 Dzongkhags is Farm Road Development.
With farm roads and Lhakhang eating up the chunk of the budget only 34.17% of the capital grantwas left for other critical LGKRAs, including agriculture (food security), health, education, livestock, and other developmental activities.
The expenditure on farm road development is maximum in all Dzongkhag except Haa and Gasa Dzongkhags. Farm road development for Haa Dzongkhag is second highest after Lhakhang Development and fourth highest priority for Gasa Dzongkhag. Livestock development is of least priority across all Dzongkhag.
Many approach roads such as roads to Lhakhangs, Lam’s Zimchungs etc. were also found booked under the farm roads thereby totally deviating from the farm road definition. For instance, the construction of the farm road from Pangringku to Thrichu Goenpa in Trashiyangtse was completed on May 2024 to connect to Therichu Goenpa instead of connecting to human settlements or agricultural land violating the requirement of the Farm Road Development Guidelines.
The expenditure pattern for livestock development showed a consistent decrease across all 20 Dzongkhags. For instance, during the financial year 2021-2022, a total of Nu. 101.77 million was allocated to livestock development, which declined to Nu. 87.35 million in 2022-2023 and further dropped to Nu. 30.03 million in 2023-2024.
The Gewog authorities frequently cite insufficient budgets as the reason for inadequate progress in education, health, livestock, and agriculture. For instance, students at Shali Primary School in Shumar Gewog, Pemagatshel, continue to use desks and chairs from the 1980s and 1990s, with many items no longer functioning properly. Over the past three financial years (2021–2024), the Gewog has allocated only Nu. 2.4 million to education, which accounts for just 4% of the total budget, reflecting its status as a lowest priority.
Furthermore, the trend in expenditure shows a decline in funding for education. Throughout all 11 Gewogs in Pemagatshel, education has consistently been the lowest priority in funding allocations.
Similarly, the RAA noted a case where the BHU in Merak Gewog, Trashigang, was left without maintenance or repairs, a situation that was reported on BBS on June 11, 2022. In the financial year 2022–2023, the budget allocated for health development was only Nu. 0.199 million. This clearly reflects that the insufficient funding in critical sectors like healthcare is largely due to improper prioritization and the substantial allocation of available funds to areas such as farm roads and Lhakhang development.
Over the last three financial years, the three least prioritized sectors in terms of expenditure were Health, Education, and Livestock. Specifically, Livestock accounted for 3% of the total expenditure, Education for 7%, and Health for 8% of the overall spending during the financial years 2021-2024.
The highest expenditure on Lhakhang development was made by Monger Dzongkhag amounting to Nu. 111.46 million, followed by Samtse Dzongkhag, Chukha, Dagana and Trashigang Dzonkghag. Local Governments have heavily prioritized Lhakhang development, despite it being classified under a single Local Government Key Result Area – Culture and Traditions.
This has led to a disproportionate allocation of funds, limiting investments in other key areas. The 14.78% expenditure on Lhakhang development alone exceeds the 10% limit set for Culture and Traditions by the Annual Grant Guidelines, indicating non-compliance with expenditure limits.
Each year, the Gewogs invest on agriculture and livestock activities. However, the outcomes of such implemented activities are not gauged and its impact on agricultural and livestock productivity is unknown to the Gewog authorities. The absence of a clear diversification and sustainability plan has resulted in activities being implemented without well-defined objectives and outcomes.
This lack of assessment of outcome and impact limits the ability to evaluate plans and programs and track progress or contribution of implemented programs to the Gewogs.
The RAA report recommends Strengthening the Gewog Planning Cycle, Aligning the resource allocation with LGKRAs, Enhancing Equity and Impact in Resource Allocation and to Strengthen Monitoring of developmental activities.
