RAA finds MoF used General Reserve Funds for Finance Minister’s Constituency and Dzongkhag

The 2020-21 Annual Audit Report has found that the Ministry of Finance (MoF) transferred Nu 19 mn from the ‘Local Government Election’ budget under the General Reserve to fund capital works activities in various Gewogs under Paro Dzongkhag during the Financial Year (FY) 2020-21.

Of the five Gewogs that got these funds three which are Dogar (4.50 mn), Naja (7 mn) and Shabha (2 mn) are part of the Finance Minister’s Constituency of Dogar-Shabha. 

The other two Gewogs are Dopshari (3 mn) and Doteng (2.50 mn) which are in Paro Dzongkhag and under the Lamgong-Wangchang constituency of another DNT MP.

As per the National Budget Report 2020-21 the General Reserve is an amount set aside to meet unforeseen, unavoidable and unexpected future expenditure or financial obligations that may arise during the financial year.

In Dogar the activity was blacktopping of a farm road from Sali to Sili Gonepa of 4 km.

In Naja there were four activities of construction of farm road at Jelikha, construction of GSB and earthen drain at Kubjab to Tshebji farm road, construction of Tsedrona-Tseramna Wajugang-Singkha Nabana-Sago Nagu farm road and maintenance of farm road at Tshomji Haa Chhu.

In Shabha it was for the laying of GSB at Phubana to Hoshatsen farm road of 2 km.

In Dopshari the activity was the maintenance of the Thongyur irrigation channel from the sawmill to Ambakha and the construction of the Lam’s residence at Samtentsemo Lhakhang.

In Doteng the money was for the construction of the Chindukha farm road.

The RAA report says that the above activities were neither unforeseen nor unavoidable. It said such activities should have been covered in the annual work plan of the Gewog Administration through normal budgetary process.

Apart from diverting the fund provisioned for the local government election, it was observed that the Nu 4.50 mn spent in the blacktopping of a farm road from Sali to Sili Gonepa of 4 km was in deviation of the Road Design Standard of Road Classification System in Bhutan 2017 issued by the Department of Roads. It says the approved design for such farm roads only provides a single layer base course.

The RAA says such instances indicated a lack of clear policy guideline in place for managing the fund under general reserves.

On enquiry, the RAA learnt that a draft guideline has been developed for operating the General Reserves, however, the draft guidelines does not clearly specify the delegation of financial powers for sanctioning from the General Reserve.

The RAA report says the draft guidelines also does not specify the process and admissibility of funding activities other than those provisioned for.

The RAA says in the absence of a clear policy guideline regulating the use of funds from the General Reserve, the RAA could not ascertain the legitimacy and admissibility of transfer of funds from the General Reserve fund.

Further it was also observed that there were several instances of wrong recording and reporting of fund transferred from each head of activity. For example, the fund amounting to Nu 5.959 mn for general repair works at the Professional Development Center, Tsirang, RAA was transferred from and reported under ‘New Appointments/Establishments’ fund in the General Reserve. Therefore, wrong recording and reporting of transfers from General Reserves did not provide a clear fund position under each head of activity.

The General Reserve had a total of Nu 3.336 bn allocated for FY 2020-21 and of which 3.146 bn was used. Around 46% of the fund was used for COVID-19 containment measures.

The MoF in its response said as part of its annual budget the MoF makes provision under the General Reserve for unforeseen or unavoidable expenditure and for implementing important ad-hoc activities during the financial year.

It said the general basis for determining the budget provisions for each category are requirements based on past trend of new appointment, new establishment, retirements benefits, hospitality and entertainment, helicopter services, disaster etc.

It also includes expected national events like the main National Day celebration which cannot be captured in the agencies’ budget, provisions for elections based on estimates and dates submitted by ECB and ad-hoc special priority projects.

The MoF said the transfers from the General Reserve are made based on checklist of criteria adopted within the delegation of financial authority and based on the existing government policies and norms.

The MoF said it has been facilitating the transfers from the General Reserve based on established criteria and norms, but recognizing the importance to have a proper guideline to ensure uniformity and parity in the distribution of general provision, the Department of National Budget is in the process of further strengthening the process.

To, this effect. A guideline has been drafted and finalized for implementation. The details of the conditions to be met for transfer of funds from the General Reserve have been captured in the guidelines.

The RAA while noting the response said the MoF should clearly spell out in its guideline the delegation of authority at various levels for sanctioning of funds from the General Reserve.

It said the MoF should have clear criteria on the admissibility of funds from the General Reserve including the accountability process in the event of diversion of fund to other than intended activities and programs.

The RAA said this would ensure uniformity and parity in the distribution and implementation of the General Reserve, thereby minimizing the risk of misallocation of fund from the General Reserve.

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