fundamental reform in the government system is implementing decentralization and regional autonomy. Giving village funds is a form of fulfilling the village's rights to implement their own autonomy to grow and develop their own community. It also increases the role of the village to provide services and improve the welfare of the community on their own. Therefore, this study aims to reveal the impact of the village funding policies on improving the welfare of the community and reducing unemployment. The study is conducted in three different villages in Klaten, Central Java. They are desa Ponggok, desa Tegalrejo and desa Kalangan. The first village, Desa Ponggok, is chosen because it is a pilot village that has successfully managed village funds to improve the welfare of its residences. Ponggok uses its village funds to create various programs such as, building infrastructure to support the sustainability of Ponggok’s tourism, conducting training programs, and building toilets for each house. In Ponggok, the entire community participates in the programs. As a result, the programs can significantly reduce number of unemployment. On the other two villages, the story of the village fund is different. The village funds do not significantly improve the economy and reduce unemployment. In these two villages, the village funds is mainly spent to improve infrastructure and provide training for its residence’s capacity building. However, due to lack of community participation, the village funds have not been able to improve the economy and reduce unemployment in Tegalrejo and Kalangan.