Despite its success stories, a performance audit observed several shortcomings and oversights that may be detrimental to the effective and efficient implementation and monitoring of the Revolving Funds (RF) for the now closed Business Opportunity and Information Centre (BOiC).
Until the audit period of May 31 last year, only a total sum of Nu 316.53M, which is 16 percent of RF Fund, has been disbursed, for the 1,214 projects.
“Further, with the closure of BOiC and establishment of the new SOE, the targets of disbursing funds will be further affected,” the report stated. The audit team found that some of the challenges, which led to delay in disbursement, would remain and without appropriate policy intervention and support to Cottage and Small Industries (CSI) and coordination at all levels, the delay will remain a ground reality.
Of the Nu 1.9B (Nu 1.5B of RF I and Nu 400M of RF II), it was found that BOiC has set a target of 167 CSIs and 444 non-formal rural activities in the first year.
On verification, RAA found that the total amount disbursed for RF I and RF II, in 2014 was Nu 7.31M (4 disbursed out of 55 approved) and Nu 3.71 million (38 disbursed out of 543 approved.)
Audit also noted substantial delay in disbursement of funds by BDBL against release orders issued by the BOiC. BDBL had only one focal person assigned to carry out disbursement works.
The focal person assigned by BDBL for BOiC services was multitasked with both BOiC services and daily routine work of the BDBL.
The management reported that due to the overwhelming number of applicants, especially RF II funds, the delays were inevitable.
RAA found that 11 officials were paid post-retirement benefits on their separation from BOiC without adherence to formalities as required by public servants. Besides, audit also reported that BOiC employees were paid higher than employees of other state enterprises. “Fact remains that BOiC, being a government agency did not incorporate best practices in the service rule which lead to nonadherence to required formalities,” the report stated.
On monitoring, the Audit authority found that despite signing 30 Memorandum of Understanding or contracts with 20 dzongkhags and 10 agencies, these arrangements were not properly disseminated to all level of administration involved in the whole cycle of implementation and monitoring of the projects.
For instance, some applicants had the notion that government was giving “free money” while gewog officials were unaware of which applicants, referred by BOiC availed the funding.
“No monitoring was carried out with regard to RF II funded projects nor was follow-ups made by the BOiC,” the audit report stated indicating that awareness campaign have not spiralled down as intended.
According to the BOiC annual report 2015, the approved projects for both RF I and RF II have a total of 2,317 jobs created, with 63 percent self-employed and 37 percent employed.
The physical verification revealed that the employment data mentioned in the BOiC annual report was the planned/target employment generation and not the actual employment generated.
Of the 2,156 approved projects, 1,214 projects were disbursed funds as of May 31, 2016. Many proposed projects were unable to complete the cycle since the projects failed during the documentation phase.
The audit report stated that some clients could not provide the technical clearances, which delayed the disbursement of funds and most RF II livestock projects were cancelled due to insufficient technical clearances.
The RAA observed that the Centre took about 31 to 90 days to approve and within 31 to 90 days to prepare fund disbursement orders. Similarly, incidences were noted where some of the projects took 181 days to approve or disburse and some were completed within 30 days.
There were also cases of funds not transferred into the accounts of the applicant even after all necessary documents for disbursement of funds were completed, submitted to BOiC and approved. The convenience sampling conducted during course of the audit revealed 15 such cases.
Monitoring responsibilities for RF II projects were shared between officials authorised as per the MOU developed between BOiC and dzongkhag Administration, ministries and government agencies. However, after interaction with many local administrations officials, the RAA found no proper monitoring exercises were performed at the dzongkhag levels on RF II projects.
“It was also evident that follow up efforts from project management at BOiC were not efficient in case of the RF II projects,” the report stated.
Field visits and audit scrutiny revealed that given the scattered location of the RF II projects in huge numbers, it might be unfeasible as well to initiate any system of monitoring for these projects solely by BOiC. MoUs signed between BOiC and Dzongkhags officials to monitor the progress of the project did not materialise.
Local administration did not have the list of projects that were approved for fund disbursement by the BOiC, and instead only had the list of applicants who had applied for the fund.
The management team reported to audit that monitoring of the projects were out sourced to BDBL at a fee of two percent of the total fund outstanding.
The performance compact of BOiC signed with the Prime Minister (APA) has a target NPL of less than or equal to 20 percent for RF I and 30 percent for RF II and that the service contract terms with BDBL specifies different rebate rates of NPL above 10 percent and 20 percent for RF I and RF II respectively. This should ensure adequate project monitoring by both BOIC and BDBL. However, no follow up was made on the progress of RF II projects. “It may be noted that BDBL is the service provider recruited by the BOiC and it is the BOiC’s responsibility to ensure BDBL carries out their terms of contract.”
The Audit authority also pointed out that some of the lapses are still being practiced by the REDCL.
However, the revolving funds of Nu 1.9B injected into the economy through the economic stimulus package via a special purpose vehicle, Business Opportunity and Information Centre (BOiC), did result in a good number of cottage and small industries (CSI) and non-formal rural activities.
With BOiC closing shop last year, a new state enterprise, Rural Enterprise Development Corporation Limited (REDCL) was formed under an executive order to cater to the RF II (non-formal rural activities). The RF I directed for cottage and small industries was handed over to the Bhutan Development Bank in the interim.
The Audit authority’s performance audit report on BOiC also stated that the implementation efforts accorded towards the RF projects, as of the audit period, indicate fairly good progress towards achieving its objectives despite the controversy and issues that resulted in the Centre’s closure.
“It may still be early to ascertain the actual impact on the economy, given that only a small fraction of the total funds have been disbursed and the implementation period of the fund is set at 10 years,” the report stated. Further most projects have a gestation period between 3-4 months and 12-18 months. The RAA however, noted good potential in projects that are already implemented.
An official from REDCL said that some of the projects have finished repaying their loans and that their products are doing well in the market.