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Indonesia - Local Government and Decentralization Project : restructuring : Disclosable Restructuring Paper - Local Government and Decentralization Project - P111577 (English)

The objective of the Local Government and Decentralization Project is to improve the accountability and reporting of the central government’s Specific Purpose Grants (DAK) for the infrastructure sub-sectors within pilot local governments (LGs). This will be done through improved financial and technical reporting, and verification of outputs delivered by LGs with the DAK grants. Beginning in 2001, the Government of Indonesia (GOI) shifted responsibility for delivering nearly all public services to sub-national level, as local governments (LG) were expected to be better able to respond to local service delivery needs. However, LGs spent more DAK on administration than on productive activities. To overcome this problem, greater transparency, accountability and incentives were needed to improve monitoring and verification of use of DAK funds. The project introduced three key features: output verification and institutionalization in the government systems; capacity building to improve monitoring and evaluation; and a web-based reporting system to move from manual to automated recording and reporting. Because of the project, accountability and reporting on the use of Specific Purpose Grants (DAK) for basic infrastructure has largely improved although the performance slipped somewhat in the last year of the project. In 2011, only 10 percent of LGs were submitting their reports through web-based reporting, but by 2016 that reached 100 percent, exceeding the end of project target of 80 percent. For 2016, physical outputs are being reported, verified and were meeting eligibility criteria for repayment through DAK 77 percent of the time, compared to the end target of 88 percent. Performance on this indicator declined late in the project because GOI reduced spending on technical assistance and socialization of the project to newly participating LGs. Challenges with late-arriving LGs are also evident from the indicator on ‘contracts with quality of outputs delivered by December 31’, where the June 2017 actual is only 25 percent compared to the end target of 45 percent. Overall the project outcome is considered moderately satisfactory. Following the full disbursement of the Loan in July 2017, GOI has requested a 12 months advance closing date from December 31, 2018 to December 31, 2017, through a letter dated December 19, 2017.

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Citation

Yuwono,Thalyta Ernandya

Indonesia - Local Government and Decentralization Project : restructuring : Disclosable Restructuring Paper - Local Government and Decentralization Project - P111577 (English). Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/231941513979913283/Disclosable-Restructuring-Paper-Local-Government-and-Decentralization-Project-P111577