The bane of underutilisation is blamed on local governments, which in turn point the finger at bureaucratic red tape

Notice: What could be the reason for many government agencies to return a substantial amount of unused budgets to the finance ministry at the end of every fiscal year?

According to the finance ministry, the issue of underutilisation [of budget] is a serious concern and the heads of agencies concerned will be held accountable.

“Persistent underutilisation of budgets may also affect subsequent years’ budget allocation,” says the budget call notice for 2015-16.

According to the annual audit report 2013, the government was able to utilise only Nu 2,286M out of a total budget of Nu 20,717M.  And that was an improvement in the utilisation of capital budget, compared with the usage in the previous years.

Underutilisation of funds mobilised through loans would have implications on effective and optimal use of borrowed funds, and also on debt service burden on the government.

More than 30 to 40 percent of the overall expenditure budgets come as grants.  About 3 to 7 percent are financed through loans.

Choida Jamtsho, the chair of the public accounts committee (PAC) of Parliament, said that underutilisation of budget is a problem for the country.  Often budgets are not released on time causing delay in the execution of works.

PAC in 2011 recommended that parliamentarians be involved in the budget preparation process for better implementation. However, only members of budget committee  which is being formed, will evaluate the finance ministry’s annual budget reports.

“Once this committee is formed, the annual budgets will be evaluated before being taken up to Parliament,” said Choida Jamtsho.  Parliament has already passed a resolution to this effect.

The audit report has blamed local governments, saying that cases of budget underutilisation come mostly from grassroots.

Lhawang Dorji, chair of Dagana dzongkhag tshogdu blamed bureaucratic red tape as the biggest constraint in timely execution of developmental works at all levels.

“Even as we have budget, obtaining clearances from agencies, such as national environment commission and the department of forests, takes a lot of time,” said Lhawang Dorji.

A team from finance ministry made a presentation on the underutilisation of budgets during the recent visit of the finance minister, Namgay Dorji, to Dagana.

“The government says there’s lack of implementation at the local level. It’s easy to lay blame on local governments (LGs) without understanding the ground reality. Actually, we have no problem executing works,” said Lhawang Dorji. “There are complicated and unnecessary processes after releasing the budget.” And local governments face a serious shortage of engineers.

“Though the government says that decentralisation has made things easier, things haven’t changed much. Beyond awarding community contracts, local governments don’t have any power. This is one of the biggest constraints,” said Lhawang Dorji.

According to the audit report, Thimphu thromde’s education sector did not utilise the capital budget of Nu 27.620M in 2012.  Underutilisation of funds for capital activities ranged from 23 percent to 94 percent, indicating that “the management had either not planned the capital activities properly or failed to execute the planned activities”.

PAC, in the past, had said that, in order to avoid such underutilisation of budget, regular progress reports of all planned activities should be submitted to relevant offices, and if there is a delay in the implementation of certain activities, the delay must be explained.  The committee pointed out that budget underutilisation could have happened because of flaws in budgeting system, overambitious budget planning, and low capacity of the implementing agencies or ad hoc planning.

The government has earlier said donor funds were unpredictable, and that the private sector was not in a position to undertake government contracts, and that money not utilised in a year would automatically spill over to the next.

According to the finance ministry, while submitting the budget proposals to the ministry, agencies should align the budgets with annual performance agreement targets signed by the local governments.

To maximise utilisation of budgets, agencies have been advised to consider the implementation capacity and other constraints during preparation of budget.

By MB Subba