Since 1995, Nepal’s village-level local government bodies (village development
committees — VDCs) have received annual block grants from the central Government for spending on improving local infrastructure and services. In fiscal year 2008/09 these grants were increased to a minimum of 1.5 million rupees and a maximum of 3 million rupees. A major rationale behind the greatly increased amounts of Government and donor money going to local government is to reinvigorate the local bodies and local government processes after the ten years of armed conflict and to enable the local bodies to become the main channel for fostering and implementing local development.

A serious policy constraint to VDCs’ more effective use of their block grant money and other sources of funding has been the lack of knowledge about how this money has been used and what the impact has been. Thus, in 2008, the Ministry of Local Development and the United Nations Development Programme (UNDP) commissioned Inlogos to assess VDC governance and the use of VDC block Grants.