𝐅𝐢𝐧𝐚𝐧𝐜𝐢𝐚𝐥 𝐈𝐫𝐫𝐞𝐠𝐮𝐥𝐚𝐫𝐢𝐭𝐢𝐞𝐬 𝐉𝐮𝐦𝐩 𝟏𝟓𝟐 % 𝐓𝐨 𝐍𝐞𝐚𝐫𝐥𝐲 𝐓𝐞𝐧 𝐁𝐢𝐥𝐥𝐢𝐨𝐧 𝐍𝐠𝐮𝐥𝐭𝐫𝐮𝐦

…𝒂𝒏𝒏𝒖𝒂𝒍 𝒂𝒖𝒅𝒊𝒕 𝒇𝒐𝒓 𝑭𝒊𝒏𝒂𝒏𝒄𝒊𝒂𝒍 𝒀𝒆𝒂𝒓 2024-25 𝒔𝒉𝒐𝒘𝒔 𝑷𝑯𝑷𝑨-𝑰𝑰 𝒂𝒏𝒅 𝒉𝒚𝒅𝒓𝒐𝒑𝒐𝒘𝒆𝒓 𝒑𝒓𝒐𝒋𝒆𝒄𝒕𝒔 𝒓𝒆𝒔𝒑𝒐𝒏𝒔𝒊𝒃𝒍𝒆 𝒇𝒐𝒓 𝒎𝒂𝒋𝒐𝒓𝒊𝒕𝒚 𝒐𝒇 𝒆𝒓𝒓𝒐𝒓𝒔 𝒉𝒊𝒈𝒉𝒍𝒊𝒈𝒉𝒕𝒊𝒏𝒈 𝒈𝒂𝒑𝒔 𝒊𝒏 𝒂𝒄𝒄𝒐𝒖𝒏𝒕𝒂𝒃𝒊𝒍𝒊𝒕𝒚

By Yeshi Dolma

In one of the most comprehensive assessments of Bhutan’s public financial governance in recent years, the Royal Audit Authority (RAA) has reported a sharp increase in financial irregularities, raising serious questions about systemic weaknesses in public financial management. The findings are detailed in the Annual Audit Report for the Financial Year 2024-25, which was officially tabled before Parliament in September 2025.

According to the report, financial irregularities totaling Nu. 9,987.242 million were recorded during the year, marking a staggering 152 percent increase from Nu. 3,961.136 million reported in the previous financial year. This rapid escalation indicates not only that certain agencies continue to struggle with compliance but also highlights the need for stronger oversight mechanisms across the government.

The audit covered 533 reports issued between 1 July 2024 and 30 June 2025. Of these, 214 reports documented financial irregularities, while 319 returned nil findings. This means roughly 40 percent of audited reports revealed some form of irregularity, while 60 percent of agencies maintained compliant operations, illustrating a mix of adherence and gaps in financial governance.

A large majority of irregularities, 94.84 percent, were recorded in non-budgetary agencies, while budgetary agencies contributed only 5.16 percent. This indicates that most deviations occur in agencies that operate outside the standard budgetary framework, such as certain projects, autonomous bodies, or externally funded programmes, and not within ministries funded directly by the national budget.

“This report represents the most comprehensive assessment of our nation’s financial governance,” said Auditor General Jamtsho.

“While the persistent trend of aggregated irregularities appears to be alarming, it is significantly skewed in that a significant portion, constituting 78 percent, pertains to PHPA-II alone. However, the fact that the existence of significant irregularities in a particular agency points to potential systemic deficiencies that need to be addressed.”

The report also places these audit findings within the broader fiscal context. To meet operational and capital expenditure requirements, the Royal Government of Bhutan relied on both internal and external financing. Net internal borrowings amounted to Nu. 3,548.860 million, while external borrowings totalled Nu. 7,438.131 million, reflecting the need to supplement domestic revenue to meet spending needs. In addition, the government received Nu. 17,272.570 million in grants, of which Nu. 16,761.819 million was in cash and Nu. 510.751 million in kind.

For the public, these figures highlight that a substantial portion of government programmes and projects relies on external funding and borrowings, making it critical that such funds are accurately accounted for and properly utilised to ensure that taxpayers’ money and international aid achieve intended outcomes.

During the financial year, the approved national budget was revised upward from Nu. 89,051.17 million to Nu. 97,063.73 million. The revised budget was financed through several sources: domestic revenue contributed Nu. 62,208.380 million (63.41 percent of total revenue), grants accounted for Nu. 17,270.570 million (20.04 percent), net borrowings provided Nu. 13,893.397 million (14.31 percent), and other receipts comprised 2.24 percent. This diversification shows the government’s reliance not just on domestic income but also on grants and borrowings to fund its development agenda.

Despite these increased allocations, total expenditure during the year amounted to Nu. 89,466.86 million, leaving an underutilisation of 7.83 percent of the revised budget. This underutilisation was more pronounced in the capital budget, which fell short by 12.24 percent, while the current budget was 3.37 percent below projections. For the public, these figures indicate that some planned projects and programmes were not implemented as expected, which could affect service delivery, infrastructure development, and timely execution of development initiatives.

The RAA also revised its observation categorisation, separating irregularities into Fraud and Errors. Fraud cases, which indicate prima facie evidence of wilful mismanagement, amounted to Nu. 8.375 million, just 0.08 percent of total irregularities. The overwhelming majority, 99.92 percent or Nu. 9,978.867 million, were categorised as errors arising from non-wilful reasons.

Although these errors do not imply criminal activity, they still compromise financial reporting accuracy, adherence to regulations, and overall efficiency. This distinction is crucial for public understanding because it clarifies that most irregularities result from procedural or administrative mistakes rather than deliberate misconduct.
Within the fraud category, Autonomous Agencies recorded Nu. 8.129 million (97.07 percent), followed by Dzongkhags with Nu. 0.195 million (2.33 percent). Smaller amounts were found in Armed Forces, Hydropower Projects, Ministries, and Corporations and Financial Institutions.

Under the Errors category, Hydropower Projects accounted for the largest share at Nu. 8,206.250 million, highlighting a sector that historically has faced complex financial management challenges. This was followed by Corporations and Financial Institutions at Nu. 938.685 million, Dzongkhags at Nu. 334.610 million, Civil Society Organisations and Non-Governmental Organisations at Nu. 205.064 million, Ministries at Nu. 157.119 million, Autonomous Agencies at Nu. 108.445 million, and Armed Forces at Nu. 28.695 million.

These figures indicate to the public that while some sectors are efficiently managed, others- particularly hydropower projects-require stronger internal controls and monitoring to prevent financial inefficiency.

“The three-pronged strategies of reinforcing accountability pursued by RAA in restitutions, sanctions and corrective measures have demonstrated improvements in most agencies,” said the Auditor General during the press conference.
“However, it brings some degree of comfort that while the trend is distorted due to the concentration in PHPA-II, the rest of the agencies have shown progress. This improvement is basically due to the sustained focus on accountability that we have pursued over the past years.”

The report includes ten strategic recommendations designed to strengthen compliance and improve financial governance. These include regulating external funding to Civil Society Organisations and Non-Governmental Organisations, ensuring Ministry of Finance oversight on termination and recovery clauses, and considering clauses on applicable interest for delayed recoveries in hydropower projects.

Further recommendations call for the full operationalisation of the Government Inventory Management System, stronger controls for salary and benefit payments, review of the Closed Work Account practice, and robust monitoring of Deposit Works.

“The RAA believes that a reinforced and scaled-up accountability mechanism would further boost transparency, public trust, and confidence in the operations of the country’s public sector,” said the Auditor General.
“The RAA seeks cooperation, collaboration and value-added partnerships with all stakeholders in building a society that upholds principles of good governance and meets the societal aspirations of Gross National Happiness.”