dsf quarterly report march 2010

March 2010

DSF Quarterly Report

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DSF QUARTERLY REPORT MARCH 2010

March 2010


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Table of Contents

Introduction ..................................................................................................................................... 1

Governance and Development Context .......................................................................................... 1

Decentralization in general ......................................................................................................... 1

Legislative councils .................................................................................................................... 2

Competency-based training ........................................................................................................ 2

Planning ...................................................................................................................................... 2

Border areas ................................................................................................................................ 2

Inter-regional cooperation ........................................................................................................... 3

Newly-autonomous regions ........................................................................................................ 3

Minimum service standards ........................................................................................................ 3

Ministry of Home Affairs strategic objectives and performance indicators ............................... 4

Work Programming ........................................................................................................................ 4

Background ................................................................................................................................. 4

Two rounds of programming ...................................................................................................... 4

Progress of second round of programming ................................................................................. 4

The Provincial Government Support Program ........................................................................... 5

Progress of first round of programming ...................................................................................... 6

Work Plan Implementation ........................................................................................................... 10

Legislative councils. ................................................................................................................. 10

Competency-based standards for improved public service delivery ........................................ 11

Data provision to the regional financial information system .................................................... 11

Sub-national government borrowing (municipal bonds). ......................................................... 12

Spatial planning ........................................................................................................................ 12

Border areas .............................................................................................................................. 12

Sub-national business climate ................................................................................................... 13

Donor mapping database........................................................................................................... 13

New local governments............................................................................................................. 14

Delays and Remedies .................................................................................................................... 14

Recipient-execution .................................................................................................................. 14

Commitment to recipient-execution - implications. ................................................................. 15

Implementation of recipient-executed activities. ...................................................................... 15

Capacity building ...................................................................................................................... 15

World Bank and DSF Executive processes .............................................................................. 16

The Future of the DSF .................................................................................................................. 16

DSF Engagement with Local Government ................................................................................... 17

Monitoring Framework ................................................................................................................. 17

Financial Report ............................................................................................................................ 17

DSF Governance ........................................................................................................................... 18

Transfer of co-chair responsibility ............................................................................................ 18

Government membership of SC................................................................................................ 18

Management and conduct of DSF business .............................................................................. 18

Extension of memorandum of understanding ........................................................................... 18


March 2010

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DSF Executive .............................................................................................................................. 18

Engagement with government. ................................................................................................. 18

Engagement with donors........................................................................................................... 19

Staffing – professional staff appointments. .............................................................................. 19

Risk Management ......................................................................................................................... 19

Annex A: Monitoring Framework ................................................................................................. 21

Annex B: Financial Report ........................................................................................................... 35

Annex C: List of Acronyms ........................................................................................................... 42


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March 2010

Decentralization Support Facility

Quarterly Report (For the quarter ending 31 March 2010)

Introduction

1. In accordance with the DSF Operations Manual, this report is submitted within 30

days following the end of the first quarter of 2010.

2. Based on an up-dated version of the monitoring framework developed for the DSF

Annual Report 2009, the report discusses the progress in the first quarter of 2010 of DSF-

financed activities approved in January and February 2007 and in 2009 and outlines

progress made with the design, execution, and implementation of activities under the

DSF Work Plan 2009-2011 (see relevant sections in the body of the report, Tables 1 and

2, and Annex A).

3. It also discusses delays in programming and implementation; up-dates (very

briefly) certain aspects of the governance and development context and features of the

management and functioning of the DSF Executive; and notes developments concerning

local government engagement and the future of the DSF.

4. A financial report is set out in Annex B and a snapshot of available funds and

formally approved allocations and commitments appears in Table 3.

Governance and Development Context

5. During the first quarter of 2010, the general governance and development context

remained much as outlined in the December 2009 quarterly report, although the economic

outlook from March 2010 is a little better than was expected in that quarter.

6. Otherwise, the general trends that emerged in late 2009 have continued into early

2010. Domestic demand remains relatively strong, although the pace of growth has

moderated somewhat. In the first three months of the year, the trade surplus increased on

the back of higher commodity prices and the strengthening economies of the country’s

major trading partners. The Government’s budget deficit was slightly less than expected.

The 2010 budget predicts a growth in deficit to 2.1% of GDP, mainly due to rising energy

prices and subsidies. The continuing relative robustness of the economy is likely to see

imports grow more rapidly than exports.1

7. In the rest of this section of the report we discuss governance developments that

have a more direct and immediate bearing on different aspects of the DSF work program

(principally changes in relevant legislation; institutions; key positions and associated

authorities; and practices and processes).2

8. Decentralization in general. Two laws that form the basis of decentralization and

local government are under review, namely Law 32/2004 on Local Governance and Law

1 World Bank (2010). Indonesia Economic Quarterly: March 2010. Jakarta, Indonesia. 2 This does not pretend to be a complete account of such matters.

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March 2010


33/2004 on Fiscal Decentralization. Discussions concerning revisions to Law 32/2004,

which are coordinated by MoHA, have been held over the last three years and have

involved consultations with the general public as well as a number of local governments

throughout the country, including Jakarta. The business of revising this law is stipulated

in the National Legislative Program 2010-2014.

9. Legislative councils (DPRD): In preparation for the 2009 legislative elections, a

revision to Law No.22/2003 - on the Procedures and Structure of DPR, DPD, and DPRD

- was passed in the form of a replacement to law No.27/2009. In discussions leading up to

the revision, the position of the DPRD - as an elected body accountable to local

authorities as opposed to an extension of the central government - was debated but not

decided, and is therefore not addressed in the revision. However, the debate on this issue

continues - in discussions surrounding the proposed revisions to Law No.32/2004 on

local governance. Several studies have indicated that a careful review of the system of

checks and balances is needed, including issues such as the approval of local regulations

(whether by judicial review or MoHA) and the relationship between the DPRD and local

government heads. In addition, discussions surrounding Law No.32/2004 are examining

the role of the governor and whether the position will be an appointment or directly

elected. Resulting decisions will have a significant bearing on a number of aspects of

governance, such as public accountability and political legitimacy.

10. Competency-based training (CBT): The President announced that his number

one priority in the 2010-2014 mid-term development plan is bureaucratic reform,

covering the revision of the system of recruitment, education, appointment, promotion,

and rotation of civil servants. The Government Training and Education Centre (Diklat)

will make an important contribution to this reform program. Diklat’s mission is

formalized in Minister of Home Affairs Decree No.378/2009 on the ‘Formation of a

Reform Team for the Government Education and Training Centres in the Ministry of

Home Affairs and Regional Governments’. Diklat must map competencies, review

systems and procedures, and develop a competency-based training program to transform

the training apparatus into a performance-based system. Diklat continues to be involved

with PAN, BKN, and LAN on issues of consolidation and capacity building related to

bureaucratic reform.

11. Planning: The Medium-term Development Plan for 2010-2014 (RPJM) became

law in January 2010 (Presidential Regulation No. 5, 2010). The RPJM is presented as

three books: Book 1 on National Priorities; Book 2 on Strengthening the Synergies

between Sectors; and Book 3 on Development with a Regional Dimension. This will

clearly be a crucial reference point for all of the support provided in this area, as well as

for many other DSF-supported activities. Investment climate is an important part of the

RPJM and two ministries – the Ministry of Home Affairs (MoHA) and the National

Development Planning Agency (BAPPENAS) – are designated as being responsible for

improving investment climate. The DSF-financed activity will help MoHA to achieve

2010 national targets that have been agreed between the Minister and the President.

12. Border areas. Presidential Regulation 12/2010 on the establishment of a National

Board of Border Areas Management (Badan Nasional Pengelola Perbatasan - BNPP)

defines the positions, roles and responsibilities, and membership of the organization.

BNPP will determine policies for the development of border areas, determine program


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March 2010

budget allocations, coordinate implementation and monitoring, and evaluate the

management of border areas. The head of BNPP is the Minister of Home Affairs. A

permanent secretariat will be established with three deputies responsible for: state

boundary management; resource potential management; and border area infrastructure

management.

13. Inter-regional cooperation. Several recent pieces of legislation are relevant to

DSF work in this field, namely:

a. Minister of Home Affairs Regulation number 19/2009 that provides guidelines

for capacity building of organisations responsible for the implementation of

inter-regional cooperation – it provides a syllabus for training; and directions

concerning the identification and selection of participants and facilitators,

organization, finance, and so on.

b. Minister of Home Affairs Regulation number 22/2009 provides: guidance for

the establishment of ‘coordinating teams for inter-regional cooperation’ at

both the provincial and local government levels; detailed procedures for

implementing inter-regional cooperation; and a list of options for managing

such cooperation.

c. Minister of Home Affairs Regulation number 23/2009 sets out procedures for

the facilitation and supervision of inter-regional cooperation; and specifies

roles, tasks and responsibilities of the joint secretariat for inter-regional

cooperation in central government (MoHA) and the coordinating team for

inter-regional cooperation, at both provincial and local government levels.

14. Newly-autonomous regions. In relation to the evaluation of newly-autonomous

regions, two ministerial regulations are noteworthy:

a. Minister of Home Affairs Regulation 21/2010 provides guidance on the

evaluation of autonomous regions that were created following the

implementation of Law 22 of 1999 on regional government.

b. Minister of Home Affairs Regulation 23/2010 sets out methods and

procedures for the evaluation of newly-autonomous regions.

15. Minimum service standards. The proper costing and implementation of

minimum service standards is clearly crucial at all levels of government. Law 25/2009

(on public services) sets minimum service standards in health, social services,

environment, home affairs, and women’s empowerment. To date, seven ministries have

formalized MSS legally (health, social services, environment, public housing, home

affairs, and women’s empowerment). Only the Ministry of Health has issued formal

technical guidelines for MSS costing (Minister of Health Regulation 317/2009). The

Ministry of Health has also set up a team to accelerate the implementation of MSS in

health (through Minister of Health Decree 341/2010). In 2010, the aim is to formulate

and implement minimum service standards in health, environment, social affairs, and

home affairs in districts and municipalities in 33 provinces and to have these service

standards reflected in local government budgets.

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March 2010


16. Ministry of Home Affairs strategic objectives and performance indicators. On

February 12, 2010, Minister of Home Affairs Decree 061-41: 2010 was issued. The

decree sets out 15 strategic objectives and 33 key performance indicators for MoHA as a

whole and does likewise for each directorate general within MoHA.

17. Strategic objectives of particular relevance to the DSF programs include:

a. The enhancement of the development of border areas

b. The enhancement of the quality of the democratization process

c. The enhancement of the implementation of minimum standard services

d. The regularization of the implementation of evaluation processes surrounding

the designation of newly- autonomous region and the development of a

‘grand’ strategy for regional arrangements

e. The enhancement of partnerships between government and the private sector

f. The widening and acceleration of public services reform

g. The harmonization of local regulations with MoHA legislation

h. The establishment of accountable and transparent local financial management

systems

Work Programming

18. Background. In May 2009, a no-cost extension for the DSF to September 2011

was formally approved.3 Pending such approval (that is, up to late May 2009), in

accordance with the wishes of the principal financial donor and so as not to raise

expectations that might not be met, design and development of activities under the DSF

Work Plan 2009-2011 had been put on hold. Commencing immediately upon the granting

of the no-cost extension, in the seven months from May to December 2009, a total of 23

activities, each involving in one way or another one or more of 20 government

directorates in three different government agencies, were designed, subjected to a

thorough process of internal and external review, and formally approved by the DSF

Management Committee (MC). Considering the large number and variety of interested

parties involved, the complexity of the issues addressed, and the relatively short time

within which the work was done, this was a noteworthy achievement.

19. Two rounds of programming. The 23 activities were separated into two rounds of

programming. The first round, involving 14 full-blown activities (described in 14

separate Activity Concept Notes – ACNs), was largely approved in the third quarter of

2009 (12 out of 14 activities). The second round, involving 9 activities that were designed

and conceived as extensions or developments of those that constituted the first round, was

approved by the MC (by circulation) during November/December 2009.

20. Progress of second round of programming. As indicated in Table 1 below, five

of the nine addenda have now been completed or are covered in an existing ACN or in

other documents referred to in that table. A sixth addendum has been drafted and will be

endorsed formally by government in early April.

3 In December 2009, a further no-cost extension – to 31 March 2012 – was formally approved and the Contribution

Agreement between the Bank and DfID was amended accordingly.


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March 2010

21. However, progress in relation to proposals 3 (MoHA), 5 (MoF), and 9 (MoHA) has

been slow. There are a number of reasons for this, most of which are discussed in a

separate section below and in the DSF quarterly report for December 2009. There are

also a number of project specific reasons for delay. In relation to proposal 9, the Grand

Design on Implementation of Regional Autonomy, this is clearly a highly complex matter

of considerable moment and political sensitivity for government and involves all three

DSF counterpart agencies. Discussions surrounding the addendum have therefore been

protracted and senior officers from all three agencies have wanted to participate in them,

making organization more difficult. Nevertheless, the aim is to have a final draft of this

addendum completed by the end of April.

22. In relation to proposals 3 and 5, the slow rate of progress is partly due to the

lengthy (and largely unavoidable) delay in appointing a replacement senior economist to

the DSF Executive and the increased load this put on the fiscal decentralisation specialist.

23. The Provincial Government Support Program (PGSP). Following thorough

discussion within the World Bank and, subsequently, between the World Bank and the

UNDP, the Fiscal Agency Agreement (FAA) between the two parties now has the green

light to proceed. Resolution of the issues involved, which was outside of the sphere of

influence of both the DSF MC and the DSF Executive, consumed much of the first

quarter of 2010. A letter designed to enhance communication and cooperation between

the parties in relation to DSF reporting requirements was drawn up during the reporting

period and will be signed on the date that the FAA is signed, which is expected to be

early in the second quarter of 2010.

Table 1: Second Round of Programming under DSF Work Plan 2009-2011

Proposal

(notional budget) Link to ACN Counterpart Addendum status

1 DPRD Orientation

($500,000)

ACN 1/2009 MoHA (Diklat) Addendum completed.

2 Regional Development

Policy

($700,000)

ACN 2/2009 Bappenas

(Pengembangan

Wilayah)

Covered in existing ACN

– no addendum required.

3 Local Government

Evaluation

($300,000)

ACN on EPPD MoHA (PDOK) Activity design, budget,

and mode of execution are

being finalised with

MoHA. Expected

completion date: end of

April 2010.

4 Inter-Regional

Cooperation

($1,000,000)

ACN 2/2009

ACN 4/2009

Bappenas (Otda)

MoHA (PUM)

Agreement on content

reached with Bappenas &

PUM (MoHA) in February.

Draft written in March.

Agreement on final draft to

be reached in first week of

April with Ditjen. Bangda

(MoHA) and the Ministry of

Disadvantaged Areas (key

national stakeholders in

inter-regional cooperation).

5 Regional Finance

($850,000)

ACN 12/2009

ACN 13/2009

MoF (DJPK) 1. PEA-Otsus (600K):

ACN under preparation

with MoF. Expected

completion date: end of

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March 2010


Proposal

(notional budget) Link to ACN Counterpart Addendum status

April 2010.

2. Regional fiscal

incentives (250K):

discontinued at MoF

request (as similar support

being provided by ADB).

6 Provincial Government

Support Program

(PGSP)

(≤$2,000,000)

ACN 2/2009

ACN 4/2009

ACN 5/2009

ACN 14/2009

Bappenas (KKDT),

MoHA (UPD, PUM)

Province of Gorontalo

and Bangka Belitung

Design completed.

Agreement obtained to

proceed with fiscal

agency agreement (FAA).

Separate letter of

understanding on

performance drafted.

7 Regional & Local

Economic Development

Facility

($600,000)

ACN 10/2009 Bappenas (Perkotdes) Addendum completed.

Awaiting final

confirmation by

government.

8 Sub-national Business

Climate Reform

($1,000,000)

DSF Work Plan

2007-2008

continuation

MoHA (Bangda &

Diklat)

Bappenas (Biro

Hukam)

Addendum discussed with

MoHA and Bappenas and

approved. Method of

Bank execution

(competitive tender or

grant agreement) will be

decided early in the next

quarter.

9 Grand Design on

Implementation of

Regional Autonomy

($700,000)

ACN 13/2009 MoHA (Otda) Draft addendum under

discussion with MoHA,

MoF, & Bappenas. It will

be completed by early

May. Preparations for

recipient-execution

commenced in parallel.

24. Progress of first round of programming. As indicated above, to 31 December

2009, fourteen full-blown activities had been through a thorough process of development,

review, and approval. These activities are now in various stages of execution and

implementation. A summary of progress during the first quarter of 2010 is provided in

Table 2 below.

Table 2: First Round of Programming under DSF Work Plan 2009-2011

ACN # Name

Budget

Estimate

(USD)

Trust Fund

Status Implementation Status

1/2009 Capacity Strengthening

Program for DPRD (Local

Government Legislatures)

500,000 Active Grant Agreement signed by WB

and counter-signed by GOI. Grant

Effectiveness requested by GOI and

declaration issued by WB. GOI

currently registering the grant and

processing DIPA funds.

Implementation schedule on target.


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March 2010

ACN # Name

Budget

Estimate

(USD)

Trust Fund


2/2009 Capacity Building for

Regional Development

Policy Formulation

Part 1:

142,500

Part 2:

700,000

Active

Funds being

transferred

Policy analysis and data

collection in a number of

sectors underway.

ToR drafted. Procurement to

begin in April; services to

commence by third quarter of

2010.

3/2009 Socialization and Pilot

Implementation of Joint

Circular Letter (SEB) on

Monitoring of Technical

Implementation and

Evaluation of Use of Special

Allocation Funds (DAK)

550,000 Active Formal launch with Bappenas &

finalization of project

implementation strategy;

FGD/socialization on SEB-DAK to

Bappeda Kota Bogor (January

2010).

Modules for field facilitators and

data collecting activities completed

by TKP2E-DAK Secretariat,

Bappenas (February 2010).

SEB data forms tested & assistance

given to Dinas staff that received

DAK in Kabupaten Karawang,

West Java. The event was opened

by Dadang Muchtar, Bupati of

Karawang (March 2010).

4/2009 Management Strengthening

and Institution Building for

Local Public Service

Providers (MSIB-LPSP)

500,000 GFR has

been

submitted

and is

awaiting

grant

agreement

signature for

activation

Awaiting GA signature

5/2009 Institution Building for the

Integration of National-

Regional Development and

Spatial Planning

483,400 Active Data collection and analysis

commenced (Dec 1, 2009 –

June 30, 2010). Contract

negotiation with implementing

agency from 29 March, 2010.

6/2009 Building Capacity for the

Development of Sub-

National Government

Capital Markets for

Municipal Bonds

900,000 Active First round of discussions on

revision of Government Regulation

(GR) 54/2005 on Local Borrowing

between MoF and Ministry of Law

and Human Rights completed

(February 2010).

DKI municipal bond: draft Perda

(local regulation) on municipal

bonds to DKI legislature (DPRD) is

being revised to accommodate

MoF’s inputs/concerns. Preparation

of technical documents—pre-

feasibility studies of projects and

related sections on economic,

financial and environmental

matters, in accordance to MoF

regulations (PMK 147/06)—is

underway.

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March 2010


ACN # Name

Budget

Estimate

(USD)

Trust Fund


International workshop on

municipal bonds is postponed until

GR 54/2005 has been signed by the

President.

7/2009 Government Training and

Education Centre

Development: Introducing

Competency Based

Standards for Improved

Public Service Delivery

797,0004 Active Grant Agreement signed by WB

and counter-signed by GOI.

Grant Effectiveness requested

by GOI and declaration issued

by WB. GOI currently

registering the Grant and

processing DIPA funds.

Implementation schedule on

target.

8/2009 Institution Building for the

Accelerated Development of

Border Areas

500,000

500,000

Active

GFR

submitted,

awaiting GA

signature for

activation

Evaluation report on technical

proposals submitted for

procurement approval 26

March, 2010.

Awaiting GA signature

9/2009 Capacity Building through

Decentralization Education

and Training (DET) for

Public Service

Delivery

1,593,520 GFR

prepared

Financial management and

procurement assessments

completed and draft grant

agreement finalized for review by

MoF & MoHA.

Advertisement for scholarships

program posted in Kompas in

February. 42 applications received

by deadline of March 17. Selection

Committee meeting held on March

29 to shortlist the candidates for

master degree programs.

NB: owing to exigencies of time,

on 31 March a decision was made

by AKLN to ask the Bank to

assume responsibility for execution.

10/2009 Strengthening Local

Government Natural

Resource Management

Capability

749,500 Active Evaluation of technical

proposals (bids) completed 31

March 2010.

11/2009 Formulation of Norms,

Standards, Procedures and

Criteria (NSPK) for Local

Government

Service Delivery

1,000,000 GFR

submitted,

awaiting GA

signature for

activation

Awaiting GA signature.

For Bank-executed components,

procurement of implementing

agent(s) is underway.

4 In order to finance fully the competency-based training work planned under ACN 7/2009, the Foreign Cooperation

Bureau of MoHA (AKLN) has approved from funds earmarked for governance reform in the DSF Work Plan 2009-

2011 an additional allocation for Diklat, up to a ceiling of $800,000. AKLN sent this recommendation to the MC co-

chair for documentation purposes. The DSF Executive has reviewed the revised budget, currently at $797,000, and

found that it meets the requirements for eligible expenditures.


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March 2010

ACN # Name

Budget

Estimate

(USD)

Trust Fund


12/2009 Strengthening Data

Provision to the Regional

Financial Information

System by Sub-National

Governments with Stand-

Alone Electronic Data Bases

250,000 Active Preliminary version of software

to translate electronic data from

the regions to MoF’s SIKD was

presented at MoF (March 2010).

Financial data from 3 local

governments in North Sulawesi

province - collected post

scoping mission in December

2009 - were used for trial run of

the software.

Plans for data entry and

capacity building activities were

also discussed with MoF.

13/2009 Grand Design of Fiscal

Decentralization

900,000 Active Two public consultation

workshops to solicit input for

revision of main ideas (the

body) of GDFD conducted in

Pontianak, West Kalimantan

(February 2010) and Makassar,

South Sulawesi (March 2010).

High attendance from local

governments and academicians

within West Kalimantan and

South Sulawesi provinces.

Initial discussions/

brainstorming on input to the

revision of Law 32/2004

(especially to regional finance

chapter) and Law 33/2004 took

place during March 2010.

14/2009 Capacity Building for

Costing and Pilot

Implementation of

Minimum Service Standards

1,200,000 GFR

prepared

Mode of execution decided on

January 13, 2010. TOR and

budget completed. In March,

the Director for CB and Local

Government Performance

Evaluation requested

reallocation of the budget and

tasks between recipient and

Bank execution. Calculation is

being finalized. Procurement

and financial management

assessment scheduled for April.

Preparations for grant

agreement underway.

25. As for the December quarter of 2009, it can be seen in Table 2 that during the

reporting period progress in relation to the finalisation of execution arrangements and

implementation for the majority of the fourteen activities has been satisfactory in the

circumstances. Nevertheless, from a disbursement standpoint, progress is far from ideal.

Trust funds for ten of the activities are now active and are being implemented (up from

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March 2010


five in the December quarter of 2009); one (ACN 11) is at an advanced stage of finalising

the conditions for execution; and ACNs 4, 8 (MoHA component), 9, and 14 are making

slow but steady progress.

26. Examples of work plan implementation and results achieved are discussed below.

Further discussion of reasons for delay in execution and implementation, and associated

remedies, appears immediately thereafter.

Work Plan Implementation

27. The following are some examples of the results achieved during the past quarter;

work in progress; and work under preparation for implementation – for activities

approved in 2007, and in 2009 under the DSF Work Plan 2009-2011. In this quarterly

report, we present some cases in a way that illustrates the range of processes that must be

completed in order for an activity to be executed and implemented. A full account of

activity progress against milestones is set out in Annex A.

28. Legislative councils (approved in 2009). The DPRD strengthening program was

proposed by the Local Government Affairs directorate of the Directorate General for

Regional Autonomy in the Ministry of Home Affairs. This activity seeks to assess the

needs of selected DPRD at the provincial and district/municipality level, develop relevant

materials and modules, and provide capacity strengthening workshops for newly-elected

DPRD members. Following the workshops, action learning/technical assistance will be

provided to assist DPRD members in achieving performance targets.

29. This activity is a GOI-executed activity made possible through a grant agreement

between the World Bank and GOI supported with DSF funds. MoHA prepared the

necessary documents, including: a detailed budget that met both GOI standards and WB

trust fund eligible expenditures; a project operations manual with detailed project

activities; financial management and procurement procedures; anti-corruption measures;

and performance indicators. MoHA also completed detailed financial management and

procurement assessments, and attended World Bank financial management and

procurement training.

30. Once the grant agreement had been signed MoHA submitted the documentation

required for grant effectiveness and researched the process for registering the grant with

MoF and activating DIPA. This was a complicated process, which entailed: preparation

of an annual work plan, procurement plan, and disbursement plan according to MoF

specifications; the issuing of a Perdirjen (Directorate General Regulation) for the project;

opening a special account; and registering for DIPA funds. In a short period of time

MoHA was able to accomplish most of these steps.

31. In the next quarter, the Local Government Affairs directorate plans to proceed with

a road show and signing of MOUs with selected DPRDs. In addition, Local Government

Affairs plans to hire an implementing agency to complete a needs assessment and

develop capacity strengthening modules, and it will hire a monitoring and evaluation firm

for the project. The schedule is currently on target to meet performance indicators and

milestones.


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March 2010

32. In addition, during the reporting period the ‘DPRD Orientation’ addendum was

developed by the Government Training and Education Centre (Diklat) in the Ministry of

Home Affairs. During the past quarter, Diklat revised the 2004 and 2009 preliminary

DPRD orientation modules in preparation for DPRD orientation roll-out and held a

training of trainers (TOT) course for government instructors (for the revised modules).

This was conducted with assistance from the Democratic Reform Support Program

(DRSP) funded by USAID. The revised Diklat modules and format for TOT will be used

in the roll-out of the Diklat DPRD orientation in four post-conflict provinces, namely,

Papua, West Papua, Maluku, and Aceh (under the DSF work program). With DSF

funding through a grant agreement, Diklat will hold an additional TOT for the remaining

government instructors and will then roll out the orientation in all of the districts and

municipalities of the four aforementioned provinces, thereby reaching a total of

approximately 960 DPRD members.

33. An amendment to the Diklat grant agreement on competency-based standards will

be completed to accommodate this activity. The government budget and World Bank

trust fund eligible expenditures for this amendment have been approved. Financial

management and procurement assessments for the unit within Diklat that is executing this

activity are scheduled for the next quarter.

34. Competency-based standards for improved public service delivery (approved

in 2009). This activity seeks to build the capacity of MoHA to develop competency-based

training for civil servants in key areas of public service delivery as part of the agenda on

bureaucratic reform. This activity will provide training for the assessment and

formulation of competency-based standard training and it will support its implementation

in a number of pilot regions.

35. This activity is GOI-executed. Diklat has made significant progress in preparing

documentation and completing the extensive requirements for the grant agreement, which

was signed this quarter. Diklat has developed the project operations manual and fulfilled

the requirements for registering the grant with MoF; taken the steps necessary to open a

special account; and is processing DIPA funds. The DSF Executive and Diklat have

worked together closely to expedite formal requests, clearances, and approvals of various

documents.

36. DIPA funds are expected to be available in the next quarter. Diklat will proceed

with the refinement of the strategy on competency-based training (CBT) and with setting

up workshops on CBT assessment and formulation. Diklat will also hire consultants in

human resource management, competency-based standards, population administration,

administration, and financial support to assist with implementation of the project through

GOI procurement processes.

37. Data provision to the regional financial information system (by sub-national

governments with stand-alone electronic data bases) (approved 2009). Preliminary

systems for data transfer and new data entry modules are nearing completion (expected

by the end of April). Socialization of the new (electronic transfer) SIKD system will

begin soon thereafter, starting with North Sulawesi province (as the data for developing

the systems came from 3 local governments in North Sulawesi). During the life of the

12

March 2010


activity, MoF expects to have around 25 local governments transmitting their financial

data electronically - for easy transfer to its national SIKD system.

38. The system will be made compatible with those being developed with support from

the ADB – in 171 local governments.

39. Sub-national government borrowing (municipal bonds). The formal title of this

activity is ‘Building Capacity for the Development of Sub-National Government Capital

Markets for Municipal Bonds’ (approved 2007). With DSF support, MoF has prepared a

revised draft of Government Regulation (GR) 54/2005 on Regional Government

Borrowing. This piece of legislation is important to the accelerated provision of

infrastructure, regional economic development, and public service delivery – arising from

the availability of alternative sources of financing (municipal bonds). The draft has been

approved by the Ministry of Finance (December 2009) and has been discussed with the

Ministry of Law and Human Rights (February 2010). Further discussions with Ministry

of Law and Human Rights are ongoing – and any issues arising therefrom must be

resolved before approval by the President.

40. There has also been significant progress made in relation to the preparation of DKI

municipal bonds. A draft local regulation on municipal bonds – for submission to DKI

legislature (DPRD) - was completed in January 2010 for review by MoF. The draft is

currently undergoing revisions to accommodate inputs from MoF. In addition,

preparation of technical documents - pre-feasibility studies of projects and related

sections on economic, financial and environmental matters, in accordance with MoF

regulations (PMK 147/06) - is underway. By end of May or early June it is expected that

the draft local regulation and related technical documents will be delivered to the DPRD

for approval.

41. Spatial planning (approved in 2009). This activity seeks to build central and local

government institutional capacity for the better integration of development and spatial

planning. The DSF is helping Bappenas (through the Directorate of Spatial Planning and

Land Affairs) to map the institutional structure of planning; identify integration problems

of development planning and spatial planning at the national level; and make

recommendations as to how better integration can be achieved. During the reporting

period, an analysis of the regulations pertaining to the integration of regional spatial

planning and regional government planning documents was presented to Bappenas.

42. The spatial planning activity will focus on three provinces: West Sumatra, East

Java and Gorontalo. Assistance will be provided through the DSF during the next quarter

to complete the provincial spatial plans and ensure and that they are sufficiently

integrated with the national spatial plan and regional development plans. Similar support

will also be provided to district and city governments in these provinces.

43. Border areas (approved in 2009). The development of border areas is a key

national government policy area, as expressed in the government’s latest Medium-term

Development Plan 2010-2014 (RPJM). This activity brings together Bappenas and

MoHA in a collaborative effort to provide more comprehensive national government

assistance for the development of border areas, both in terms of economic development

and improved service delivery.


13

March 2010

44. The establishment of BNPP is articulated in Law 43, 2008 on State Territory. This

law mandates the establishment of a cross-ministerial agency to coordinate national

government’s support for the development of border areas. BNPP’s functions and

membership are detailed in Presidential Regulation 12, 2010.

45. The DSF contracted a consultant to assist Bappenas (through the Directorate of

Special Areas and Less Developed Region) with questions of organisational design and

inter-institutional arrangements for this agency. The consultant undertook a mission to

Jayapura (Papua) and Pontianak (West Kalimantan) to assess local versions of border

area management agencies and to seek input from local stakeholders. A paper on

recommendations for institutional arrangements was presented to a cross-ministerial

group comprising representatives from Bappenas, MoHA, the Ministry of Disadvantaged

Areas and the Ministry of Finance.

46. The above builds on work carried out in the last quarter of 2009, which contributed

to the RPJM section on border area development (Book 2, Chapter 9 on Policy Direction

and Development Strategy). This required agreement between relevant ministries on the

identification of border areas and on how to proceed in relation to the preparation of

indicators to evaluate progress towards the attainment of development goals. This will

help to improve consistency between ministries’ border area programs, the quality of

such programs, and to promote more effective coordination.

47. In the next quarter, the DSF will contract an implementing agency to help BNPP,

through Bappenas, to draft a master plan for the development of border areas. Among

other things, this will set out government policy on border areas. The master plan will be

used by MoHA to develop national and regional action plans to improve public service

delivery in border areas.

48. Sub-national business climate (approved in 2009). This activity builds on the

achievements of a previous project of this name (approved in 2007). It responds to

important sections of the government’s medium term development plan (RPJM 2010-

2014). The aim of the activity is to institutionalize capacity within local governments to

implement effective, efficient and accountable regulations and processes for business

licensing. The program will: (i) support the Ministry of Home Affairs (MoHA) in

monitoring the performance of one stop shops (OSS) for business licensing across the

country; (ii) help three selected provincial governments (PGs) with facilitating the

establishment of district-level OSS and improving the performance of existing ones; and

(iii) through support to the National Development Planning Agency (BAPPENAS) and

three selected PGs, assist with the diffusion of regulatory impact assessments (RIA).

49. Procurement will be done either through competitive bidding or a grant agreement.

50. Donor mapping database (third phase – from 2009). In 2006, the Ministry of

Home Affairs commissioned the DSF to create a donor mapping database - for the benefit

of government and the development community. The database development proceeded in

phases. In phase 1, a prototype was created. In phase 2, the design was upgraded to a

web-enabled dynamic HTML database. For all concerned, it was clearly desirable to

maintain an up-to-date map of donor-supported activities, one that provided comparable

data on key dimensions: matters addressed; geographic location; tools and approaches

14

March 2010


used; nature of assistance - whether loan/grant/TA; monitoring frameworks; expected

results; and so on.

51. The third phase of the activity is designed to institutionalise the database and its

management in government. A consultant is therefore in the process of being been hired

in order to (in close collaboration with government):

a. Keep the database program information up-to-date (while institutionalization

is being designed and implemented)

b. Suggest further improvements to the system

c. Work towards complete government management of the system and its

sustainability

52. New local governments (‘newly-created regions’ and ‘local government

evaluation’). On 24 February 2010, a DSF-supported meeting was held in Jakarta

involving more than 700 representatives drawn from over 200 newly-created local

governments and more than 40 ‘parent’ local governments. The purpose of the meeting

was to disseminate and ‘socialize’ the Ministry of Home Affairs decree on the

‘Evaluation of Newly-Created Regions’. In collaboration with MoHA, the DSF is in the

process of designing an activity that will help to embed understanding and

implementation of the new decree at the local level.

Delays and Remedies

53. In the December 2009 quarterly report, we discussed a number of factors that were

contributing to delays in programming and implementation. Below, we extend this

discussion to other considerations, primarily as a means for recording our experience of

implementing the processes involved, so that we – and others – can learn from it.

54. Recipient-execution. In order for GOI-execution to work – that is, in order that

government may commence procurement for the implementation of activities – three

conditions must be satisfied:

a. A grant agreement between government and the World Bank must be signed.

This requires that budgets, together with financial management and

procurement systems, have been developed by government to standards

considered to be satisfactory by the Bank (on the basis of assessments the

Bank carries out).

b. Conditions for ‘grant effectiveness’ must be established. Such conditions

depend primarily on the production of an acceptable project operations

manual, and the conduct of financial management and procurement training.

The satisfactoriness of such conditions is assessed by the Bank.

c. Grant activation must be instigated by government. As the term implies, this

requires that government take the steps necessary to allow for procurement to

commence. These steps comprise internal GOI processes that include grant

registration; the establishment of a special account; and DIPA processing.

55. Directorates in government naturally vary in their capacities (and eagerness) to

satisfy these conditions, which in turn affects the pace of progress. For example, some


15

March 2010

parts of MoHA have shown considerable energy and commitment in relation to the

above; have sought advice and other forms of assistance when they were needed; and

have been prepared to follow through on clearances and approvals in order to keep

projects moving ahead. The Local Government Affairs directorate of the Directorate

General for Regional Autonomy and the Government Education and Training Centre

(Diklat), both in the Ministry of Home Affairs, have exhibited these qualities and are well

advanced in relation to the above (see Table 2 and Annex A).

56. Commitment to recipient-execution - implications. In the MoHA there has been

laudable commitment to the idea of recipient-execution, premised on a desire to acquire

necessary skills and knowledge as a basis for creating lasting institutional capability. For

the reasons we have given, this can threaten to take longer than the current lifespan of

activity implementation under the DSF (September 2011) or other implementation

deadlines will comfortably accommodate (e.g., for scholarships, university admission

deadlines and degree program lengths). This has meant that in at least one case (DET), a

final decision as to whether to proceed with recipient or Bank execution has been left to

the very last minute (the last week of March), with a decision being taken to make the

activity Bank-executed.

57. Of course, recipient-execution also slows down disbursement (for financial donors

and for the Bank disbursement is regarded as an important performance measure).

Balancing these competing claims is not easy, partly because judgements about what to

do and when are subject to individual and institutional idiosyncrasies that are not

amenable to any formal control that can be exercised either by the DSF’s governance

structure5 or by the DSF Executive.

6

58. Implementation of recipient-executed activities. Government-executed projects

can also take longer to implement, partly because of the DIPA processing schedule and

partly because of the need to follow government procurement procedures. However, the

DPRD and CBT projects have anticipated these possible delays and taken a number of

steps to minimise them. Both of these activities are therefore on-track to meeting project

objectives.

59. Nevertheless, delays in DIPA disbursement and/or procurement processes are

likely to arise in government-executed activities and could create delays in project

implementation and the attainment of project objectives.

60. Capacity building. In all cases, however, it is clear that government capability for

doing this type of work needs to be, and is being, improved. The importance of such

capacity building is recognised by DSF’s counterparts in government. To date such

capacity building has comprised:

a. A training and orientation workshop for government staff; and

5 It has some formal authority in relation to such matters, but it is not clear how far this extends, particularly when it

comes to institutional boundaries. The MC and the government technical team have done their best to influence these

matters, primarily through exhortation. But this can only go so far. 6 The DSF Executive has no formal authority in relation to such matters and must rely exclusively on rational argument

and exhortation, with all of the attendant limitations for getting things done efficiently and effectively.

16

March 2010


b. Day-to-day interactions between professional staff of the DSF Executive and

government counterparts; coaching; and what amounts to action learning in

relation to different aspects of execution and procurement.

Further workshops for government are planned that address different points in the critical

paths for recipient-executed activities. For example, in April, a workshop will be held

with staff of MoHA that attempts to produce in one sitting drafts of all or most of the

documents (including letters) needed for recipient-execution.

61. World Bank and DSF Executive processes. The DSF Executive has taken a

number of steps to help ensure that Bank and DSF Executive processes – for both

recipient and Bank-executed activities - work as expeditiously as possible. These steps

include:

a. The reconfirmation of internal service standards between units in the Bank for

the turnaround of approvals and the conduct of financial and procurement

assessments, and so on;

b. The clarification of lines of authority and communication between the DSF

Executive and relevant sections of the Bank;

c. Meetings between the DSF Program Manager and Deputy Program Manager

and relevant heads of units in the Bank (accounting and procurement) to

explain underlying rationales for modes of execution and the number of

transactions and to discuss ways of clearing bottlenecks on the Bank side and

building capacity and maintaining momentum on the government side;

d. Within the DSF Executive, at least bi-weekly portfolio review meetings

between the Program Manager and Deputy Program Manager and portfolio

managers to examine progress and devise means for addressing obstacles to it;

and

e. Among staff of the DSF Executive continuous review of work processes,

including working lunches on critical paths related to Bank and recipient-

execution.

62. Even so, there have been some avoidable (as well as some unavoidable) delays on

the Bank side.

The Future of the DSF

63. At a breakfast meeting held in March 2010, government representatives of the MC

requested that the DSF Executive produce for their consideration a discussion paper on

the future of the DSF. Work on this has begun and will be completed in the second

quarter of 2010.

64. At the same time, the World Bank is examining its own strategic positioning in

relation to decentralisation and how best to organise and manage relevant Bank units and

activities to contribute to whatever strategic direction it adopts. Significant progress in

relation to these matters should be made in the second quarter of 2010. The DSF is likely

to be integral to these developments.


17

March 2010

65. The discussion paper to be produced for (initial) consideration by government

members of the MC will take any such developments into account.

DSF Engagement with Local Government

66. In late October 2009, a paper outlining a number of possibilities for DSF

engagement with local government was put to the MC for its consideration. The MC

agreed that the idea of a ‘local government consultative group reporting to the DSF MC

be endorsed and recommended to the DSF Steering Committee for its consideration.’ The

relevant minute of the meeting also states that: ‘subject to Steering Committee approval

of the recommendation, a MC task force be established comprising members drawn from

the government technical team and the DSF Executive, whose job it would be to make

detailed recommendations concerning terms of reference for the consultative group;

membership; and forms of logistical and other support to be provided.’

67. Work on a discussion paper on these matters – initially for consideration by

government members of the MC - commenced in the reporting period and will be

completed in the second quarter of 2010.

Monitoring Framework

68. Annex A provides a summary of progress made to date according to the agreed

monitoring framework. Activities are organised according to: (1) Public service delivery;

(2) Fiscal decentralisation; (3) Accountability; and (4) Planning and performance

measurement.

Financial Report

69. A detailed financial report is provided separately as Annex B and a summary of the

Facility’s cash position and of projected cash flow to 2011 is set out in Table 4 of Annex

B.

70. Table 3 below provides a snapshot of available funds and formally approved

allocations7 and commitments

8 that takes into account a reduction in available funds of 2

million pounds sterling in the current financial year. The difference between total

allocations and commitments and total funds available leaves the DSF with a small

negative balance, in the amount of - $127,766. This comes about as a result of exchange

rate fluctuations. It is expected that there will be sufficient savings from under-spending

on some approved activities to cover this shortfall.

Table 3: Snapshot of Financial Status (USD)

Budget (USD)

Total pledges 44,243,625

Other receipts 24,836

Investment income 1,383,065

Disbursements 16,285,241

Fund balance (a) 29,366,285

7 The word ‘allocations’ is used to denote financial amounts (budgets) formally approved by the DSF governance

structure for a DSF activity or operation. It does not entail any legal obligation. 8 A ‘commitment’ signifies that a legally-binding obligation exists to pay the amounts for the purposes described.

18

March 2010


Budget (USD)

Less GBP 2 million 3,060,000

Fund balance (b) 26,306,285

Total allocations & commitments

Balance of allocations approved January 2007 5,105,026

First round project allocations - approved 2009 10,890,520

Second round project allocations - approved 2009 7,650,000

DSF Executive (to March 2012) 2,788,505

Total allocations & commitments 26,434,051

Uncommitted and unallocated funds: fund balance (b) less total allocations

& commitments -127,7669

Total cash held (funds received – disbursements & commitments) 13,297,536

DSF Governance

71. Transfer of co-chair responsibility. The government-held positions of co-chair of

the MC and the SC are in the process of being transferred formally to the Ministry of

Home Affairs.

72. Government membership of SC. There has been discussion in government

concerning government representation on the SC. Adjustments to such membership are

likely to be mooted formally during the second quarter of 2010.

73. Management and conduct of DSF business. During this transition period, the

business of the DSF has continued uninterrupted under the guidance of informal breakfast

meetings held from time to time between the DSF Executive and government members of

the DSF MC (principally, the first government co-chair of the MC, from Bappenas; the

outgoing co-chair, from the Ministry of Finance; and the incoming co-chair, from the

Ministry of Home Affairs).

74. Extension of memorandum of understanding. The end date for the

memorandum of understanding between the Government of Indonesia and the World

Bank (on behalf of donors) has been extended to December 2011.

DSF Executive

75. Engagement with government. Such engagement continues to strengthen and, as

in the past, to rest on:

a. Meetings - called by government – with government members of the DSF

MC.

b. Breakfast meetings – as described above.

c. Day-to-day interactions with government counterparts responsible for

particular activities.

9 To reiterate, the reduction in uncommitted and unallocated funds from the figure reported in the December 2009

Quarterly Report is due to exchange rate fluctuations. It is expected that there will be sufficient savings from under-

spending on some approved activities to cover this shortfall.


19

March 2010

d. Day-to-day interactions with the government technical team assigned to

support government’s management of DSF-related work.

e. Workshops with the government (DSF) technical team.

76. Engagement with donors. Work will commence in the second quarter of 2010 on

establishing ways for institutionalizing reporting by donors of their the interaction with

the DSF MC and a short note containing recommendations concerning this is likely to be

produced for consideration by the MC by the end of the June 2010 quarter.

77. Also during the second quarter of 2010 donors associated with the DSF will

discuss with government work they are doing on the standardization of systems of

monitoring and evaluation for projects that they support outside of the DSF.

78. Staffing – professional staff appointments. For (a) and (b) below, the

appointments made are to existing positions. The national position is newly-created and is

designed to further the DSF Executive’s policy of nationalization.

a. Senior Economist (international). The appointee – Mr. Soren Nelleman –

took up his position formally on 1 March 2010.

b. Senior Governance Adviser (international). The appointee - Mr. Henrik

Lindroth – will take up his position formally on 5 April 2010.

c. Decentralisation Adviser (national). The appointee - Mr. Widjono Ngoedijo

– took up his position formally on 9 February 2010.

Risk Management

79. The main risks remain as set out in the DSF Annual Report 2009.

80. The most significant operational risk continues to be speed of execution,

implementation and disbursement - particularly certain (not all) activities that are

recipient-executed. As in the past, risk management on the part of the DSF Executive will

continue to concentrate on the striking of a reasonable balance between government need

and priority, quality of design and implementation, and speed of disbursement; and will

rely on continuous process and management improvement on the part of the DSF

Executive and the World Bank; on further capacity building in government; and on the

maintenance of open and continuous dialogue with government and with the principal

financial donor on the basis of the best available information.

20

March 2010



March 2010

21

Annex A: Monitoring Framework

Project Name Decentralization Support Facility (DSF) Phase 2 Goals Indicators Progress Rating Comment

Improved socio-economic

development and reduced

poverty

Indonesia's Human

Development Index (HDI)

Purpose Indicators Progress Rating Comment

Equitable, accountable and

high quality public services

provided by national and local

governments

Local government

expenditure and local

government performance in

basic public service delivery

Further contributions to the development and dissemination and

implementation of legislation and procedures governing functional

assignments; minimum service standards including costing; institution

and capacity building of service providers; and identification and

diffusion of good practices.

3*

* First milestone/ target 1 – Fully achieved

2 – Largely achieved

3 – Partially achieved

4 – Achieved to a very limited extent

March 2010


22

Output 1: Public Service Delivery

Objectives Indicators Progress Rating Comment

1.1. Guidelines (norms,

standards, procedures and

criteria-NSPK) for

service delivery in

selected sectors

formulated

Number of new guidelines

(norms, standards,

procedures and criteria) for

service delivery

completed/issued

Consultations held with regions in July 2009 for formulation of 26

norms, standards, procedures and criteria (NSPK) in health. This

resulted in confirmation that up to 10 out of 26 NSPKs can now be

further processed and formalized by the Minister of Health.

Assessment of 26 NSPK in health and preliminary assessment of

NSPK in agriculture, trade, mining and land administration sector

completed further clarifying the role and authority of each level of

government (refer to Government Regulation 38/2007) and providing

technical guidance for implementing service functions..

ACN 11/2009 on Formulation of Norms, Standards, Procedure and

Criteria (NSPK) was approved in October 2009. Financial

management and procurement assessments done and reports

completed. For recipient-executed components, the grant agreement

has been cleared within the WB and will be signed upon receipt from

MoHA of a letter confirming internal and external audit requirements.

For Bank-executed components an assessment of NSPK status is out

to tender; requests for expressions of interest made; short list drawn

up; and preparation of technical and financial proposal requests is

underway.

3

1.2. Minimum Service

Standards (MSS), in

targeted sectors budgeted

and implemented in

selected district

governments

Implementation of MSS in

selected sectors in selected

districts and municipalities

The Manual for MSS Costing (Minister of Health Decree 317/2009)

has been printed and is ready for distribution by Ministry of Health &

MoHA to all districts and municipalities.

The first draft of the electronic system for costing health MSS has

been produced. The system is being pilot tested in Kota Yogya and is

expected to be ready in April 2010.

ACN 14/2009 on Capacity Development for Minimum Service

Standards Costing and Implementation was approved in November

2009. In January, 2010 MoHA (finally) decided that the activity

should be part recipient-executed (US$ 1,050,000) and part WB

Executed (US$ 150,000). Further prevarication then ensued in MoHA

over budget allocation between Bank and recipient execution. A final

decision is expected in April.

3

1.3. Alternative service

delivery schemes

established in selected

sectors and districts and

municipalities with better

Number of selected district

governments developed

pilot alternative schemes in

service delivery and number

of women reached by these

Phase 1: Assessment of Legal and Regulatory Framework report

completed October 2009.

National Workshop on Alternative Mechanisms for Service Delivery

(AMSD) was held in November 2009. Representatives from three

1


March 2010

23



access for women (Phase

1)

Management

Strengthening and

institution building for

local public service

providers ( Phase 2)

pilot schemes

regions in Province Banten presented preparations for the pilot

implementation of: Management Strengthening and Institution

Building for Local Public Service Providers.

The ‘Alternative Mechanisms for Service Delivery’ (AMSD) activity

was successfully completed in December 2009. Final report submitted.

Phase 2: The follow-on activity commissioned by GOI was

formalized in ACN 4/2009 on Management Strengthening and

Institution Building of Local Public Service Providers. This is a

recipient-executed activity. TOR and budget have been finalized.

Financial management and procurement assessments completed and

report produced. Draft grant agreement under preparation.

For WB executed component, three TORs prepared: (1) development

of baseline information on women’s access to selected public services;

(2) preparation for the pilot implementation of AMSD in West Java

Province; and (3) project management support. Recruitment of

consultants is underway.

4

1.4. Improved public service

delivery by selected local

governments in border

areas

Action plans for improved

public service delivery

completed by selected local

governments in border areas

The ToR have been finalized for this government-executed (MoHA)

activity. A procurement and financial management assessment has

been scheduled for early in the second quarter of 2010.

This links to activity 4.3 on border area development. This is a Bank-

executed activity on behalf of Bappenas. ACN 2/2009 covers activities

1.4 and 4.3 and represents the DSF’s integrated support for the

development of border areas..

4 MoHA and Bappenas are seeking to

strengthen cross-ministerial support

for border area development. Activity

4.3 provides support to Bappenas for

the production of a master plan for

border area development. This will

constitute the basis for activity 1.4,

which is concerned with the

development of national and regional

action plans.

1.5. Improved local

government systems for

dissemination and

replication of good

practices in service

delivery

National policy on good

practices issued

Comparative analysis of good practice programs in Indonesia

completed in April 2009.

MoHA has held several rounds of consultations on a draft

permendagri (ministerial regulation) on best practices.

The project implementation consultants presented a mid-term report to

MoHA in August 2009. In spite of DSF efforts to rectify the situation,

it was noted that progress was disappointing. The consultants had not

submitted an inception report in Bahasa Indonesia, nor completed the

pilots and database work as stipulated in the ToR.

4 Project implementation was

handicapped by key members of the

selected consultancy team not being

available as proposed and poor

compliance to TORs.

MoHA (Directorate for Capacity

Building and Local Government

Performance Evaluation) expressed

dissatisfaction with activity

March 2010


24



In order to enable the consultants to meet with GOI and rectify the

deficiencies, a one month no-cost extension was allowed beyond the

project closing date of 30 September 2009. As the consultants failed to

comply, the project was closed on 31 October 2009.

performance. As a consequence, the

project was closed on 31 October

2009.

1.6. Local governments adopt

effective, efficient and

accountable regulations

and processes for

business licensing

Local government

performance in

implementing OSS for

business licensing

Phase 1: The project has successfully delivered all outputs stipulated

by the contract, with regard to both one stop shops (OSS) for business

licensing and use of regulatory impact assessments (RIA).

A presentation of project achievements to all key stakeholders,

including the DSF Management Committee, was held in January,

2010. This meeting reflected on lessons learnt and discussed national

strategies to scale up the pace and performance of sub national

business licensing reforms in order to improve the overall business

and investment climate in the regions.

The Sub-National Business climate Reform activity was successfully

completed in January 2010. Final report submitted.

Phase 2: To ensure the momentum of this work, in late 2009 a follow-

on project was approved by the DSF Management Committee. An

activity addendum was designed in consultations with MoHA and

Bappenas to: (i) support MoHA in monitoring the performance of the

OSS for business licensing across the country; (ii) support three

selected provincial governments (PGs) to facilitate establishment of

district-level OSS and improve the performance of the existing ones;

and (iii) support the National Development Planning Agency

(BAPPENAS) and three selected PGs in disseminating and utilizing

the RIA method.

1

4

For Phase 2, the DSF has started the

procurement process, which will be

either through competitive bidding or

a grant agreement.

1.7. Improved understanding

of international best

practices, social political

dimensions, costs and

benefits and alternatives

for territorial reform

Evidenced based research

on territorial reform adopted

by three key ministries:

MoF, Bappenas and MoHA

for policy input

Six analyses completed for Bappenas, MoF, MoHA, DPD, DPR, and

local government, with information on lessons learned from

international, national, and local experience of territorial reform:

Experiences in Territorial Reform: Implications for Indonesia

Territorial Restructuring: Country Case Studies

Process and Implications of the Social-Political Dimensions of

Territorial Reform: Case Studies from Sambas and Buton.

Costs and Benefits of Proliferation of Regions (Pemekaran)

analysis completed for MoF with key findings for fiscal transfer

formulas related to pemekaran, November 2007

Evaluation of the Proliferation of Administrative Regions in

Indonesia 2001-2007

Territorial Reform and People’s Welfare: Finding Alternatives

1 A Fiscal Agency Agreement (FAA)

with UNDP for coverage of work

under territorial reform, disaster

management, and sub national data

was operational until June 30, 2009.

UNDP submitted the final report

covering the entire body of work

under the FAA in December 2009.

However, the work that formed the

basis of the report was carried out by

RTI International, UNDP, and a

freelance consultant. The trust fund

for the FAA has been closed.


March 2010

25



Consultations and dissemination workshops with national and local

multi-stakeholder forums were held during preparation, finalization,

and outreach for the analyses. Parts of the reports have been used in

presentations and seminars by senior GOI central and local

government officials. The research also informed policies related to

fiscal, administrative, and social-political aspects of territorial reform.

Output 2: Fiscal Decentralization and Capacity Development

Objectives Indicators Progress Rate Comment

2.1. The Ministry of Finance

Regional Financial

Information System

recording local

government budgets is

upgraded

Number and process of

data entry of local

government budgets

recorded in the Ministry of

Finance Regional Financial

Information System

Phase 1: DSF supported data entry of MoF’s Regional Financial

Information System (SIKD) for Fiscal Year 2007 Support duration:

May-August 2009.

Data entered and verified in Phase 1:

Budget data (APBD, 2009): 481 districts and municipalities (94

percent of total)

Realization data (LRA, 2007): 351 districts and municipalities (75

percent of total).

Two user manuals were prepared: data entry procedure intended for

data entry operators; and a guide for users to access the data.

Phase 2: ACN 12/2009 on Strengthening Data Provision to the

Regional Financial Information System by Sub-National Governments

with Stand-Alone Electronic Data Bases, approved by DSF MC in

October 2009.

Scoping mission to 3 local governments in North Sulawesi to review

regional financial information systems carried out in December 2009.

Preliminary version of software used to transfer electronic data from

the regions to MoF’s SIKD was presented to MoF. The software uses

data from the above districts and municipalities (March 2010). In

addition to the data transfer module, at the request of MoF, the

software will also include (new and expanded) modules for data entry.

1

3

Results from this exercise will form

the basis for determining how best to

transfer electronic data from local

governments to central government.

2.2. Improved fiscal

decentralization policy

Implementation of ‘Grand

Design of Fiscal

Decentralisation’ across

government ministries and

local governments

Feasibility assessments of possible incentives for the grants system

including revenue-sharing intercepts as sanctions for poor

performance completed September 2008.

ACN 13/2009 ACN on Improving the Policy Framework for Fiscal

Decentralisation (‘Grand Design of Fiscal Decentralization’ - GDFD)

approved by DSF MC in November 2009.

Project implementation plan for the whole support completed (January

4 In addition to clarifying and

specifying in more detail the policy

framework for fiscal decentralisation,

the support will also provide

analytical inputs for the revision of

Law 33/2004 on fiscal balance

between central government and local

governments.

March 2010


26



2010).

Two public consultation workshops to solicit input for revision of

main ideas (the body) of GDFD took place in Pontianak, West

Kalimantan (February 2010) and Makassar, South Sulawesi (March

2010). The event was well attended by local governments and

academicians from both provinces.

Initial discussions on input to the revision of Law 32/2004 (especially

to regional finance chapter) and Law 33/2004 took place during March

2010.

Final public consultation workshop is

scheduled for April 2010 in Surabaya,

East Java.

2.3. National policy on local

government borrowing,

including issuance of

municipal bonds, adopted

Municipal bond issuance,

including credit worthiness

assessments

Phase 1: Review of Indonesian Civil Code on issues relating to

debtor, creditor, and bankruptcy/insolvency completed May 2009.

Review of Regulatory Framework and Best Practices Study on Local

Government Financial Emergency Procedures completed in December

2009.

Support for revision of Government Regulations GR 54/2005: Local

Government Borrowing and GR 57/2005: Local Government Granting

is complete. Draft revisions have been signed by the Ministry of

Finance and are currently being discussed with the Ministry of Law

and Human Rights.

Phase 2: Analysis and preparatory work for issuance of Jakarta and

Bandung bonds:

Technical assistance to the governments of Provinces DKI

Jakarta and Kota Bandung is underway

Team for preparation of DKI Jakarta municipal bonds (Tim

Persiapan Obligasi Daerah - TPOD) established in July 2009.

The team is discussing selection of project(s) to be financed by

the bonds.

Draft local regulation on municipal bonds for submission to DKI

legislature (DPRD) is being revised to accommodate MoF’s

concerns.

Preparation of technical documents - pre-feasibility studies of

projects and related sections on economic, financial and

environmental matters, in accordance with MoF regulations

(PMK 147/06) - is underway.

First round of discussions on revision of Government Regulation (GR)

54/2005 on Local Borrowing between MoF and Ministry of Law and

Human Rights completed (February 2010).

2

3

Rating refers to Phase 1 activities.

Future reports will be rated according

to achievement of milestones/target

phase 2.

Directorate of Regional Financing

and Capacity-MoF has submitted

request to expand the scope of

activities to the Province of

Kepulauan Riau and Kota Surabaya.

Consultations among members of

DSF MC are underway to

accommodate the request.

Scoping mission to Kota Surabaya is

scheduled for April 2010. The

purpose of the mission is to review

local government readiness for

preparation of municipal bond

issuance.

International workshop on municipal

bonds is postponed until GR 54/2005

has been signed by the President.


March 2010

27



2.4. Improved public financial

management of special

allocation funds (SAF) by

local governments

Public financial analysis of

SAF completed by selected

local governments as a basis

for local government

planning and budgeting

Empirical analysis of regional government surpluses based on data

from 27 provinces and 220 districts and municipalities resulting in

report with recommendations completed June 2008. Empirical analysis on regional government investment in public

infrastructure based on audited financial data for 2004-2007

completed June 2009.

1

Rating pertains to Phase 1.

Phase 2 is currently on hold pending

further discussions with GOI.

2.5. Government pro-poor

special allocation fund

(DAK) monitored and

evaluated

Monitoring and evaluation

reports completed on

expenditures of pro-poor

government fund in selected

local governments

ACN 3/2009 on Socialization and Pilot Implementation of Joint

Circular Letter (SEB) on Monitoring of Technical Implementation and

Evaluation of Use of Special Allocation Funds (DAK) approved by

DSF MC in July 09.

Project implementation plan for the whole support completed (January

2010).

In order to obtain initial feedback on SEB-DAK, focus group

discussions and socialization on SEB-DAK conducted for Bappeda

Kota Bogor (January 2010).

Modules for field facilitators and data collecting activities completed

by TKP2E-DAK Secretariat, Bappenas (February 2010).

SEB data forms tested & assistance given to Dinas staff that received

DAK in Kabupaten Karawang, West Java. The event was opened by

Dadang Muchtar, Bupati of Karawang (March 2010).

3 Socialization workshop on the project

is scheduled for May 2010.

Output 3: Increasing Accountability


3.1. Effective legislative

processes, resource

allocation and oversight

functions demonstrated in

selected local legislatures

Number of provincial and

district MPs, including

women MPs, trained in

legislative processes,

budgeting and oversight

DSF II Capacity Strengthening for DPRD (Local Government

Legislatures) TF 095584 Grant Agreement was signed by the World

Bank on January 25, 2010 and countersigned by the Government of

Indonesia (represented by the Ministry of Finance) on February 3,

2010. MoHA submitted a request for grant effectiveness with

supporting evidence on March 10, 2010 and the Grant Effectiveness

Declaration letter was signed by the World Bank on March 23, 2010.

After the Grant Agreement was signed in January, MoHA took the

steps necessary to register the Grant Agreement with MoF; to open a

special account which required preparation and approval of an annual

work plan and issuance of a Perdirjen for the project; and to complete

4 The Local Government Affairs

(UPD) directorate of the MoHA was

proactive in completing the steps for

grant activation according to internal

GOI processes. The documents

prepared by UPD will be used by

other directorates as examples for

upcoming grant agreements. UPD-

MoHA demonstrated the ability to

access knowledge of internal GOI

processes, work across ministries

(MoHA and MoF), and diligently

March 2010


28



DIPA registration.

DIPA funds are expected to be available in May 2010. MoHA will

begin the road show and MOU signing with local DPRDs at that time.

In the meantime, MoHA will proceed with a request for expressions of

interest for the implementing agency and monitoring and evaluation

firm, in line with Perpres 8/2006.

The addendum for the DPRD orientation activity approved by the

Management Committee as an addition to ACN 1/2009 on DPRD

Strengthening has been completed. The RAB (government budget) for

this activity has been approved and the financial management and

procurement assessments are scheduled for April 2010. The Grant

Agreement amendment (to TF 095995) is anticipated in May 2010 and

the first activities are planned for June 2010. The DPRD orientation

activity will use the same special account set up for the competency

based standard Diklat activity (ACN 7/2009) and will require an

amendment to the Diklat operations manual to accommodate

requirements for the DPRD orientation program.

prepare and revise documents. UPD-

MoHA should be commended for its

excellent work. In addition, MoF

(Debt Management, Treasury, and

Fiscal Balance) and the MC support

team should be recognized for their

advice and cooperation.

The DPRD orientation activity

executed by Diklat will cover

provincial and district/municipality

DPRD in four provinces (Aceh,

Papua, West Papua, and Maluku).

This is an orientation for DPRD

members based on a government

curriculum. This will complement the

DPRD strengthening program

executed by Local Government

Affairs/Regional Autonomy- MoHA,

which provides tailor made capacity

strengthening workshops to selected

DPRDs and follow up action

learning/TA to achieve DRPD

performance targets.

3.2. Effective and accountable

public service delivery by

local government

officials and effective

monitoring by CSO

leaders demonstrated in

selected local

governments

Number of national and

local government officials

and CSO leaders

professionally trained in

effective and accountable

public service delivery

ACN No. 9/2009 on Capacity Building through Decentralized

Education and Training (DET) approved for a total budget of USD

1.593,520. The activity has 3 components that aim to enhance the

professional capacity of local and national officials to provide - and

CSOs to monitor - improved public service delivery:

Short courses in country and the region

Study tours

Scholarships for Master degree programs in decentralization-

related studies in the UK.

MoHA, MoF and Bappenas held a meeting on February 9, 2010, to

agree on: the schedule of the scholarships program implementation;

the criteria for the selection of candidates for Master degree programs;

and the composition of the selection committee.

An advertisement for the scholarships program was posted in the

national newspaper Kompas; on DSF, AKLN and Diklat websites; on

the BaKTI online portal; and was sent to local government

4 ACN 9/2009 has been divided into 2

grants: 1) scholarships and 2) short

courses and study tours.

In view of the tight timeline for the

execution of the scholarships project,

on 31 March 2010 AKLN/MoHA

asked that the WB assume

responsibility for the execution of the

scholarship component of the project.

Short courses and study tours will

still be GOI-executed.


March 2010

29



associations. By the deadline of March 17 forty-two applications had

been received by MoHA/Diklat.

On March 29, 2010, a meeting of the selection committee was held to

shortlist candidates. The committee rejected two applications received.

40 will be invited to interview. April 8 and 9, 2010 are scheduled

interview days.

3.3. Local training and

education centres

demonstrated

improvement in

conducting training

programmes for local

government officials

Competency-based training

programmes on

decentralized public service

delivery developed by local

government training centres

DSF II Government Training and Education Centre Development:

Introducing Competency-Based Standards for Improved Public

Service Delivery TF 095995 Grant Agreement was signed by the

World Bank on January 25, 2010 and countersigned by the

Government of Indonesia (represented by the Ministry of Finance) on

February 3, 2010. Diklat submitted a request for grant effectiveness

with supporting evidence on March 17, 2010 and the Grant

Effectiveness Declaration letter was signed by the World Bank on

March 30, 2010.

After the Grant Agreement was signed in January, MoHA took the

appropriate steps to register the Grant Agreement with MoF; open a

special account which required preparation and approval of an annual

work plan and issuance of a Perdirjen for the project; and completed

DIPA registration.

DIPA funds are expected to be available in May 2010. Diklat will

begin with the first training and workshops at that time. Diklat will

proceed with a call for curriculum vitae for consultants in the area of

HRM/competency based standards, population administration, and

administration and financial support - in line with Perpres 8/2006

(contracting based on availability of funds).

4

Diklat has been proactive in fulfilling

the requirements for grant activation

and is one of the lead directorates

within MoHA in terms of project

preparation and implementation.

Diklat is bringing on another project

(DPRD Orientation as part of

Objective 3.1) and has taken the

necessary steps for a grant agreement

amendment to accommodate this

activity.

3.4. Improved public

accountability of local

governments delivered by

CSOs

Public accountability

mechanisms developed and

implemented by CSOs

Task force established and commenced operation. Discussion paper

will be produced by May.

N/A Activity pending

In order to meet the objectives stated

in 3.4. it is recommended that an

activity addressing public

accountability mechanisms is added

to the DSF Work Plan 2009-2011

3.5. Improved knowledge

sharing on support to

local governments

Publicly accessible data

base on support to local

government developed and

A donor mapping database created and made available online in

English and Bahasa Indonesia at

http://www.dsfindonesia.org/apps/dsf-dm/cgi-bin/dw.cgi. Presented to

1 This project is complete and has met

its objectives. The database is well

received and commended as a useful

http://www.dsfindonesia.org/apps/dsf-dm/cgi-bin/dw.cgi

March 2010


30



number of development

forums and harmonization

activities facilitated

(i) Director PK-EKD in MoHA in August 2008 (ii) the donor

community in the Donor Working Group in March, 2009 (iii) AKLN

in MoHA in May, 2009, and (iv) Bappenas team from Aid for

Development Effectiveness Secretariat (A4DES) in September 2009.

The Bureau of Foreign Cooperation (AKLN) in MoHA was identified

as the host institution to administer and maintain the data base. In

March 2010, AKLN and DSF selected a consultant to update the

database content and transfer management to GOI. This will work will

commence in April 2010.

tool for coordination and monitoring

of donor support to decentralization.

GOI is keen to incorporate the tool in

a government system for monitoring

and reporting on development

assistance in decentralization.

DSF will continue to work with

AKLN to update and upgrade the

system.

Output 4: Planning and Performance Measurement


4.1. Provincial and

district/municipal spatial

plans produced which are

in line with national

spatial plan and

integrated with provincial

and district/municipal

development plans

Provincial and

district/municipal spatial

plans completed and

approved by respective

parliaments

ACN 5/2009 on Institution Building for the Integration of National-

Regional Development and Spatial Planning. Part 1 commenced

December 2009 and completed March 2010. Paper produced on

‘Identifying the connections between regional spatial plans with

regional development plans’. During Part 1 an event to introduce the

activity and seek input was held for representatives from each of the

three pilot provinces (including heads of Bappeda).

Part 2 to be implemented by a firm. Evaluations completed and

contract negotiations scheduled for first week of April 2010.

ACN 2/2009 on Capacity Building for Regional Development Policy

Formulation is also linked to Objective 4.1. Part 1 commenced

September 2009, implemented by a team of five consultants.

Completion by end April 2010. A number of interim reports have been

4

3

Activities under ACN 5/2009 are

designed to improve the consistency

between regional government planning

documents (spatial plans and

development plans) and also the

consistency between spatial plans at

different levels of government. A key

component of the activity is to develop

the capacities of three provincial

governments (West Java, Gorontalo

and West Sumatra) and three

district/city governments to produce

spatial plans that are aligned with the

national spatial plan and integrated

with regional development plans.

Part 1 provided input to the Directorate

of Spatial Planning and Land Affairs

(Bappenas) on the legal aspects of

regional planning documents and

provided recommendations on how to

improve alignment.

This is an additional activity not listed

in the Log Frame.

The first part of the activity will

produce, by end April 2010, a


March 2010

31



submitted, including policy papers for each major island region, a

literature review on Indonesian development policy and an input paper

for the RPJMN 2010-2014 (for Book 3 on Development with a

Regional Dimension).

Part 2 to be implemented by a firm. Draft terms of reference provided

by Bappenas in February 2010. ToR developed through March 2010,

with finalisation expected in April 2010.

An addendum to ACN 2/2009 is under preparation that is designed to

strengthen inter regional cooperation, and addresses matters that are

the responsibility either of Bappenas (Directorate of Special Regions

and Less Developed Areas) or MoHA (Directorate for

Deconcentration and Cooperation, PUM). In February 2010, the two

directors discussed how best to combine the activities into a single

addendum, with follow-up discussions within each directorate. An

inter-departmental meeting, involving Bangda (MoHA) and the

Ministry for the Development of Less Developed Regions (which also

run projects on inter-regional cooperation), is scheduled for the first

week of April, whereupon the addendum will be finalised.

substantial review paper on regional

development policy that will draw on

lessons learned from past experiences

and build upon the RPJMN for 2010-

2014 to provide key input into

government’s approach to regional

development policy. The Directorate of

Regional Development (Bappenas) is

the client and has led the consultant

team proactively through regular team

meetings. The second part will build

upon this work by formulating

development strategies for the major

island groups, with a focus on eastern

Indonesia. One of the components will

address questions surrounding the

stimulation of inter-island trade, a key

policy area for the government. The

Directorate of Regional Development

has provided important input for the

ToR and an inter-directorate meeting

(within the Deputy for Regional

Autonomy and regional Development)

is planned for April to finalise the

ToR.

This activity highlights the importance

of cross-ministerial cooperation in

activity development and

implementation, which is likely to

yield positive results in terms of

greater coordination between related

government programs.

4.2. Natural resource planning

and management policies

developed by targeted

local governments

Local governments

adopting policies and

systems for natural

resource planning and

management policy

ACN 10/2009 on Strengthening Local Government Natural Resource

Management Capability. All activities to be completed through a

single contract by a firm or association of firms. Technical proposals

reviewed jointly by DSF/Bappenas on 31 March 2010.

Implementation to commence in the second quarter of 2010.

An addendum to ACN 10/2009 has been written that is designed to

4 This activity seeks to improve the way

natural resources are managed by local

governments, thereby contributing to

local economic development. The

capacity to do this type of work will

start to be developed in local

governments in two target provinces

March 2010


32



develop a local economic development facility. The client is the

Directorate of Urban and Rural Affairs (Bappenas). The addendum

has been submitted for approval.

(Papua and South East Sulawesi), and

should help local governments to

identify the potential for resource

development; and manage the

resources in a sustainable manner with

the involvement of entrepreneurs and

communities. Lessons will be derived

from these pilots and made available

on a wider scale to local governments

with similar resources and challenges.

Key resources within the scope of this

activity include land for plantations,

marine resources for fisheries, and

resources with tourism development

potential.

This activity has been designed in

collaboration with the Directorate of

Urban and Rural Affairs and with

GTZ’s RED program (which will also

be supporting the development of the

local economic development facility).

4.3. Local governments in

border regions have

improved capacity in

economic development

planning

Action plans for improved

economic development

planning completed by

selected local governments

in border areas

ACN 8/2009 on Institution Building for the Accelerated Development

of Border Areas. This ACN covers activities related to border area

development, prioritized by both Bappenas and MoHA. Bappenas

activities are WB-executed and MoHA activities are GOI-executed.

This objective is linked to activity 1.4 on service delivery in border

regions. The activities are clearly closely inter-related and both

involve Bappenas, MoHA and the Ministry of Disadvantaged Regions.

Bappenas activities are divided into two parts. Part 1 was implemented

by a consultant contracted from November 2009 to March 2010. Input

was provided for the RPJMN 2010-2014 (for Book 2 on Strengthening

the Synergies between Development Sectors; Chapter IX on Regions

and Spatial Aspects). A paper on suitable institutional arrangements

for the national border area agency (BNPP) was presented at an inter-

ministerial meeting hosted by the Directorate of Special Areas and

Disadvantaged Regions (Bappenas) in March 2010. Part 2 will be

contracted to a firm or association of firms. An evaluation report on

the technical proposals was submitted to WB for approval on 25

March 2010. Implementation is expected to commence by May 2010.

4 Through this activity, the MoHA and

Bappenas seek: first, to strengthen

cross-ministerial institutions,

particularly

the National Agency for the

Management of Border Regions,

which manages and develops border

regions; and second, to improve policy

for the development of border regions.


March 2010

33



4.4. Improved quality and

availability of sub-

national statistics for

local decision making

Study of sectoral data

systems at central and

regional level with policy

recommendations adopted

by BPS (Central Statistics

Agency)and participating

local governments

‘Improving the Quality and Availability of Sub-National Statistics for

Local Decision Making & Streamlining the Flow of Statistics between

Regions and the Centre’ study completed in support of BPS and local

governments, January 2009.

National and local level sectoral data system analysed for 19

governments (6 provinces, 4 kota, 9 kabupaten), January 2009.

Assessment of health data for 11 districts/municipalities and

assessment of education data for 12 districts/municipalities completed

in January 2009.

Final report with 21 policy recommendations grouped in the categories

of:

System design, setup and maintenance;

Promotion of data quality; application of information and

communication technology;

Human, physical and financial resources; strengthening of data

sharing, analysis, and utilization; and

Legislation and regulation, May 2009.

BPS is using the results of this activity in negotiations with the WB

concerning a national statistics capacity building program

(STATCAP) loan.

1 This project is complete and has met

its objectives.

The findings from this project are

relevant to many other DSF projects,

since these rely on the availability of

good quality sub-national sectoral data.

A follow-on to this project could

include extension of the web-based

system for transmitting data from

technical agencies at the sub-national

level to relevant ministries in Jakarta.

Capacity building recommended for

local governments in relation to use of

information technology.

March 2010


34


September 2009


March 2010

35 35

Annex B: Financial Report

Summary

Donor Contributions: Three donors have pledged a total of USD 44.24 million

(exchange rate March 31, 2010).

Commitments: USD 42.33 million or 96% of total pledges has been allocated to 58

projects, the approved DSF Work Plan 2009 – 2011, and DSF operations.

Disbursements: USD 16.28 million or 36.80% of total contributions pledged or

38.46% of allocations.

Remaining Funds: Shortfall of USD -127,766 owing to exchange rate fluctuations

and after taking into account probable postponement or withholding of GBP 2

million from DfID pledged funds.

I. Donor Contributions

DSF has 9 donor partners, 3 of whom are financial contributors: DFID, AusAID, and

CIDA. Total pledges amount to USD 44.24 million (31 March 2010 exchange rate).

About 96.6% of the total amount (USD 42.74 million) has been pledged by DFID. As of

31 March 2010, DSF had received USD 29 million or 65.55% of total pledges (see Table

1): USD 27.50 million from DFID, USD 1 million from AusAID, and USD 500K from

CIDA.

Table 1: Pledges Received on the Basis of Signed Contribution Agreements

Contributors Contribution

Currency

Contribution

Amount USD equivalent

Cash Received

in USD million

DFID GBP 24.36 42.74 27.50

AusAID USD 1.00 1.00 1.00

CIDA CAD 0.50 0.50 0.50

Total

44.24 29.00

II. Fund Allocations and Commitments

The projects and allocations set out in Table 2 were approved by the MC at its meetings

of 24 January 2007, 16 February 2007, 12 February 2009, and 28 October 2009 and by

circulation in November 2009.

Table 2: Fund Allocations and Commitments to 31 March 2010

Budget (USD)

Total Pledges 44,243,625

Investment income (as of March 31, 2010) 1,383,065

Projected Administration fee (1% of total pledges) (442,436)

Other Income (as of March 31, 2010) 24,836

Total Available Funds 45,209,090


September 2009 March 2010


36 36

Budget (USD)

Fund Allocations approved in January 2007 21,298,513

Focal Area 1 2,968,714

Tax Assignment and Own-source Revenue -

Transfer 350,000

Borrowing 600,000

Surplus and Reserves 275,000

Data for Monitoring and Evaluation 480,000

Assessing and Revising the System for Setting Territorial Boundaries 227,500

Fiscal Agency Intergovernmental Framework Fund 476,214

Exploring Future Reform Options in Functional Assignment 55,000

Supporting the Establishment of Financially Feasible Minimum Service Standards 305,000

Alternative Mechanism of Service Delivery 200,000


Local Government Performance Measurement 187,174

Identification and Replication of Good Practice 478,000

Appraisal : Sub national Investment Climate Reform 600,000

Knowledge Management for Effective Local Government Support Programs 375,500

Mapping and Analysis of Local Planning and Budgeting Processes 49,703

Improved Evidence Base of Good and Bad Local Perda 117,682


National Program for Community Empowerment 1,072,961

CDD Summit 421,705

Policy Development for PNPM 58,666

Cost Accounting Review for CDD Programs 16,512

Technical Assessment for CDD Programs 53,685

Information, Education and Communication for PNPM 484,739

User Fee Assessment for CDD Programs 419,000

MIS Improvement for PNPM 106,000

Short Term Monitoring and Evaluation 710,385

Medium / Long Term Monitoring and Evaluation 399,926

CCT Baseline Survey 1,669,665

Support Office for Eastern Indonesia (SOfEI) 3,310,588

Quick starts 97,908

Project Operations thru March 31, 2010 7,700,000

Staff costs 4,200,000

Operations costs 3,500,000


September 2009


March 2010

37 37

Budget (USD)

Approved Work Plan 2009 - 2011 (1st round) 10,890,520

ACN 1/2009: Capacity Strengthening Program for DPRD (Local Government Legislatures) 500,000

ACN 2/2009: Capacity Building for Regional Development Policy Formulation 150,000

ACN 3/2009: Improving and Piloting the Implementation of Monitoring and Evaluation

System of Special Allocation Funds Utilization

550,000

ACN 4/2009: Management Strengthening and Institution Building for Local Public Service

Providers (MSIB-LPSP)

500,000

ACN 5/2009: Institutional Building for the Integration of National Regional Development and

Spatial Planning

500,000

ACN 6/2009: Building Capacity for the Development of Sub-National Government Capital

Markets for Municipal Bonds

900,000

ACN 7/2009: Government Training and Education Centre Development: Introducing

Competency Based Standards for Improved Public Service Delivery

797,000

ACN 8/2009: Institution Building for the Accelerated Development of Border Areas 500,000

ACN 9/2009: Capacity Building through Decentralization Education and Training (DET) for

Public Service Delivery

1,593,520

ACN 10/2009: Strengthening Local Government Natural Resource Management Capability 750,000

ACN 11/2009: Formulation of Norms, Standards, Procedures and Criteria (NSPK) for Local

Government Service Delivery

1,000,000

ACN 12/2009: Strengthening Data Provision to the Regional Financial Information System by

Sub-National Governments with Stand-Alone Electronic Data Bases

250,000

ACN 13/2009: Improving the Policy Framework for Fiscal Decentralization 900,000

ACN 14/2009: Costing and Pilot Implementation of Minimum Service Standards 1,200,000

Service Delivery in Border Regions 500,000

Support for EPPD 300,000

Approved DSF Work Plan 2009 - 2011 (2nd round) 7,650,000

DPRD Orientation 500,000

Regional Development Policy 700,000

Local Government Evaluation 300,000

Inter-Regional Cooperation 1,000,000

Regional Finance 850,000

Provincial Government Support Program 2,000,000

Regional & Local Economic Development 600,000

Sub-National Business Climate Reform 1,000,000

Grand Design on Implementation of Regional Autonomy 700,000

Approved additional DSF Executive Operations Work Plan 2009 - 2011 2,788,505

Knowledge Management for Aid Effectiveness 700,000

DSF Executive Operations 1,502,043

Additional donor contribution for DSF Operations 586,462

Total allocations to programming & DSF Executive staffing & operations 42,627,538

Total Unallocated and Uncommitted Funds1 2,581,552

1 Fund balance for unallocated and uncommitted funds fluctuates according to the prevailing exchange rate and return

on investment.




38 38

III. Disbursement Status

To date, DSF has received USD 30.40 million, consisting of USD 29 million of donor

contributions and USD 1.38 million of investment income. As of March 31, 2010, USD

16.28 million had been disbursed to work streams and operations. In addition, a total of

USD 290,001 has been charged as WB administration fee (see Table 3).

Focal Area 1 (Strengthening Inter-Governmental Framework) has disbursed USD

2.15 million or 72% of the total approved budget of USD 2.97 million.

Focal Area 2 (Support to Sub-National Entities) has disbursed USD 1.26 million or

57% of the total approved budget of USD 2.21 million.

Focal Area 3 (Strengthening Accountability, Participation and Civic Engagement) has disbursed USD 5.37 million or 99.26% of the total approved budget of USD 5.41

million.

Table 3: Disbursement Status of the DSF as of March 31, 2010

Budget

(USD)

Actual

(USD)

Commitments

(USD)

Receipts

Paid in Contributions 44,243,625 29,000,052

Investment Income 1,383,065

Other Income 24,836

Total Receipts 44,243,625 30,407,953

Disbursements

Focal Area 1 2,968,714 2,152,400 59,547

Tax Assignment and Own-source Revenue * - - -

Transfer 350,000 90,754 -

Borrowing 600,000 554,616 42,615

Surplus and Reserves 275,000 179,505 3,600

Data for Monitoring and Evaluation 480,000 322,413 -

Assessing and Revising the System for Setting Territorial

Boundaries

227,500 227,500 -

Fiscal Agency Intergovernmental Framework Fund 476,214 476,214 -

Exploring Future Reform Options in Functional Assignment 55,000 47,467 4,301

Supporting the Establishment of Financially Feasible Minimum

Service Standards

305,000 54,176 9,031

Alternative Mechanism of Service Delivery 200,000 199,755 -

Focal Area 2 1,808,059 1,265,098 227,117

Local Government Performance Measurement 187,174 187,174 -

Identification and Replication of Good Practice 478,000 382,392 95,598

Appraisal : Sub national Investment Climate Reform 600,000 469,325 129,791

Knowledge Management for Effective Local Government Support

Programs

375,500 58,823 1,728

Mapping and Analysis of Local Planning and Budgeting Processes 49,703 49,703 -

Improved Evidence Base of Good and Bad Local Perda 117,682 117,682 -

Focal Area 3 5,413,244 5,372,315 11,985

National Program for Community Empowerment 1,072,961 1,072,961 -

CDD Summit 421,705 421,705 -


September 2009


March 2010

39 39

Budget

(USD)

Actual

(USD)

Commitments

(USD)

Policy Development for PNPM 58,666 58,666 -

Cost Accounting Review for CDD Programs 16,512 16,512 -

Technical Assessment for CDD Programs 53,685 53,685 -

Information, Education and Communication for PNPM 484,739 484,739 -

User Fee Assessment for CDD Programs 419,000 390,395 -

MIS Improvement for PNPM 106,000 93,676 11,985

Short Term Monitoring and Evaluation 710,385 710,385 -

Medium / Long Term Monitoring and Evaluation 399,926 399,926 -

CCT Baseline Survey 1,669,665 1,669,665 -

Decentralization Support for Eastern Indonesia (SofEI) 3,310,588 2,972,544 46,472

Quick starts 97,908 97,908 -

Project Operations 7,700,000 4,333,221 99,747

Staff costs 4,200,000 2,654,384 26,400

Operation costs 3,500,000 1,678,837 73,347

Approved Work Plan 2009 - 2011 (1st round)

New projects approved and registered in FY09 (1st round) 6,163,576 91,755 90,307

Support to Public Service Delivery 366,000 - -

Strengthening Data Provision to the Regional Financial Information

System by Sub-National Governments with Stand-Alone Electronic

Data Bases

250,000 680 8,318

Improving and Piloting the Implementation of Monitoring and

Evaluation System of Special Allocation Funds Utilization

550,000 7,886 10

Improving the Policy Framework for Fiscal Decentralization 900,000 22,655 -

Building Capacity for the Development of Sub-National

Government Capital Markets for Municipal Bonds

900,000 9,274 7,586

Decentralization Support Facility II Capacity Strengthening

Program for Local Government Legislatures

500,000 - -

Government Training and Education Center Development:

Introducing Competency Based Standards for Improved Public

Service Delivery

797,576 - -

Institutional Building for the Integration of National Regional

Development and Spatial Planning

500,000 10,106 3,568

Capacity Building for Regional Development Policy Formulation 150,000 32,547 70,825

Institution Building for the Accelerated Development of Border

Areas

500,000 8,607 -

Strengthening Local Government Natural Resource Management

Capability

750,000 - -

Approved Work Plan 2009-2011 in process of registration

(1st round)

4,726,944

Approved DSF Work Plan 2009 - 2011 (2nd round) 7,650,000 Approved additional DSF Executive Operations Work Plan

2009 - 2011

2,788,505

Total Project Disbursements 42,627,538 16,285,241

Administration fee 442,436 290,001

Total Disbursements 43,069,974 16,575,242

Outstanding commitments 535,175 535,175

Total Cash Available (= receipts - disbursements -

commitments)

13,297,536




40 40

Support Office for Eastern Indonesia (SOfEI) has disbursed USD 2.97 million or 90%

of the total USD 3.31 million approved budget. Signed commitments amounting to USD

46K for activities completed before December 31, 2009 will be paid in the next quarter.

For DSF operations, USD 4.33 million has been disbursed. This includes office and

project operations as well as staff costs.

Outstanding commitments: as indicated in footnote 8 above this refers predominantly to

formal contractually-based financial commitments. Such commitments amount to USD

6.4 million in DSF operations, including staff contracts over the life of the DSF plus the

existing programmatic contracts of USD 535,175.

Total cash available as of March 31, 2010 is USD 13.29 million. These funds are fully

committed, that is, either in the process of being allocated to child TF or earmarked for

such allocation – for programming and for DSF Executive staffing and operations.

Outlook

Table 4 shows expected cash receipts and disbursements for the current and projected

portfolio of projects. The Fund expects to disburse USD 21.35 million to project accounts

through to the end of fiscal year 2010.

Table 4 is based on total project funds committed, as set out in the current Contribution

Agreement and Administrative Agreement. The current DSF TF closing date is March

31, 2012.

Table 4: Projection of Cash Receipts and Disbursements 2007 – 2011

Actual per

March 31,

2010

Year ended

June 30, 2010

(USD

million)

Year ended

June 30, 2011

(USD

Million)

Projections as

of Apr. 30,

2012 (USD

million)

Expected Receipts

Projected Cash Remaining from prior period 0 13.3 14.46 12.57

Paid in Contributions

DFID 27.5 6 9.24 0

AusAID 1 0 0 0

CIDA 0.5 0 0 0

Cash Receipt during current period 29 6 9.24 0

Investment Income 1.38 0.29 0.44 0

Other Income 0.03 0 0 0

Expected Cash Available to DSF TF 30.41 19.59 24.14 12.57

Disbursements

Focal Area 1 2.15 0.82 0 0

Focal Area 2 1.27 0.94 0 0

Focal Area 3 5.37 0.04 0 0

Eastern Indonesia projects (SoFEI) 2.97 0.34 0 0

Quick starts 0.1 0 0 0

Project Operations 4.33 0.3 3.3 3.04


September 2009


March 2010

41 41

Actual per

March 31,

2010

Year ended

June 30, 2010

(USD

million)

Year ended

June 30, 2011

(USD

Million)

Projections as

of Apr. 30,

2012 (USD

million)

Priority Area per FY09

Public Services 0 0.25 2.95 1.5

Fiscal Decentralization 0.04 0.55 2.01 0.85

Planning and Performance Measurement 0.05 1.625 0.525 3.6

Governance Reform 0 0.2 2.69 1

Total Project Disbursements (Projections) 16.28 5.065 11.475 9.99

Administration fee 0.29 0.06 0.09 0

Total Disbursements (Projections) 16.57 5.125 11.57 9.99

Outstanding commitments 0.54 0 0 0

Total Cash Available for subsequent

year(s)

13.3 14.46 12.57 2.58




42 42

Annex C: List of Acronyms

A4DES: Aid for Development Effectiveness Secretariat

ACNs: Activity Concept Notes

ADB: Asian Development Bank

AKLN: Administrasi Kerjasama Luar Negeri (Bureau of Foreign Cooperation)

AMSD: Altenative Mechanisms of Service Delivery

APBD: Anggaran Pendapatan dan Belanja Daerah (Regional Government Budget)

BAPPEDA: Badan Perencanaan Pembangunan Daerah (Regional Planning & Development Agency)

BAPPENAS: Badan Perencanaan dan Pembangunan Nasional (National Planning & Development

Agency)

BKN: Badan Kepegawaian Negara (National Civil Service Agency)

BNPP: Badan Nasional Pengelola Perbatasan (National Border Management Agency)

BPS: Badan Pusat Statistik (Central Statistics Agency)

CB: Capacity Building

CBT: Competency-Based Training

CSO: Civil Society Organization

DAK: Dana Alokasi Khusus (Special Allocation Fund)

DET: Decentralization Education and Training

Diklat: Pendidikan dan Pelatihan (Education and Training)

DIPA: Daftar Isian Pelaksanaan Anggaran (Budget Implementation Entry List)

Ditjen Bangda: Direktorat Jenderal Pembangunan Daerah (Directorate General of Regional

Development)

DJPK: Direktorat Jenderal Perimbangan Keuangan (Directorate General of Fiscal Balance)

DKI: Daerah Khusus Ibukota (use in DKI Jakarta, Special Region of the Capital of Jakarta)

DPD: Dewan Perwakilan Daerah (House of Regional Representatives)

DPR: Dewan Perwakilan Rakyat (House of Representatives)

DPRD: Dewan Perwakilan Rakyat Daerah (Provincial Legislative Council)

DRSP: Democratic Reform Support Program

DSF: Decentralization Support Facility

EPPD: Evaluasi Penyelenggaraan Pemerintahan Daerah (Guidelines for Regional Government

Evaluation)

FAA: Fiscal Agency Agreement

FGD: Focus Group Discussion

GA: Grant Agreement

GDFD: Grand Design of Fiscal Decentralization

GDP: Gross Domestic Product

GFR: Grant Funding Request

GOI Government of Indonesia

GR: Government Regulation

GTZ: Gesellschaft für Technische Zusammenarbeit

HDI: Human Development Index

HRM: Human Resources Management

HTML: Hyper Text Markup Language

KKDT: Kawasan Khusus dan Daerah Tertinggal (Directorate of Special Regions and Less

Developed Areas)

LAN: Lembaga Administrasi Negara (State Administration Agency)

LRA: Laporan Realisasi Anggaran (Budget Realization Report)

MC: Management Committee

MoF: Ministry of Finance

MoHA: Ministry of Home Affairs

MOUs: Memorandum of Understanding

MP: Member of Parliament

MSIB-LPSP: Management Strengthening and Institution Building for Local Public Service Providers

MSS: Minimum Service Standard


September 2009


March 2010

43 43

NSPK: Norma, Standar, Prosedur, dan Kriteria (Norms, Standards, Procedures and Criteria)

OSS: One Stop Shop

Otda: Otonomi Daerah (BAPPENAS: Directorate of Regional Autonomy; MoHA: Directorate

General of Regional Autonomy)

Otsus: Otonomi Khusus (Special Autonomy)

PAN: Pendayagunaan Aparatur Negara (State Ministry of Administrative Reform)

PDOK: Penataan Daerah dan Otonomi Khusus (Directorate of Regions Management and Special

Autonomy)

PEA: Public Expenditure Analysis

Perda: Peraturan Daerah (Local Regulation)

Perdirjen: Peraturan Direktur Jenderal (Director General Regulation)

Permendagri: Peraturan Menteri Dalam Negeri (Ministry of Home Affairs Regulation)

Perpres: Peraturan Presiden (Presidential Regulation)

PGs: Provincial Governments

PGSP: Provincial Government Support Program

PK-EKD: Pengembangan Kapasitas dan Evaluasi Kinerja Daerah (Directorate of Capacity Building

and Regions Performance Evaluation)

PMK: Peraturan Menteri Keuangan (Ministry of Finance Regulation)

PUM: Pemerintahan Umum (Directorate General of Public Administration)

RAB: Rencana Anggaran Biaya (Government Budget Estimation)

RED: Regional Economic Development

RIA: Regulatory Impact Assessments

RPJM: Rencana Pembangunan Jangka Menengah (Mid-Term Development Plans)

RPJMN: Rencana Pembangunan Jangka Menengah Nasional (Mid-Term National Development

Plans)

SAF: Special Allocation Fund

SC: Steering Committee

SEB: Surat Edaran Bersama (Joint Circular Letter)

SEB-DAK: Surat Edaran Bersama Dana Alokasi Khusus (Special Allocation Fund Joint Circular

Letter)

SIKD: Sistem Informasi Keuangan Daerah (Regional Financial Information System)

SSS: Single Source Selection

STATCAP: Statitical Capacity Building

TA: Technical Assistance

TAF: The Asia Foundation

TF: Trust Fund

TKP2E-DAK: Tim Koordinasi Penyusunan Kebijakan Perencanaan Pemantauan dan Evaluasi Dana

Alokasi Khusus (Coordination, Planning, Monitoring and Evaluation Team for Special

Allocation Fund)

ToR: Terms of Reference

TOT: Training of Trainers

TPOD: Tim Persiapan Obligasi Daerah (Municipal Bonds Preparation Team)

UNDP: United Nations Development Programme

UPD: Urusan Pemerintahan Daerah (Directorate of Local Government Affairs)

USAID: United States Agency for International Development

WB: World Bank




44 44

dsf quarterly report march 2010

Documents

dsf quarterly report

round of programming

work programming

rounds of programming

competencybased standards

legislative councils

border areas

minimum service standards