DSF Quarterly Report March 2010

DSF Quarterly Report March 2010

DSF QUARTERLY REPORT MARCH 2010

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DSF Quarterly Report March 2010

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

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DSF Quarterly Report March 2010

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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DSF Quarterly Report 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 DSFfinanced 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 2

World Bank (2010). Indonesia Economic Quarterly: March 2010. Jakarta, Indonesia.

This does not pretend to be a complete account of such matters.

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DSF Quarterly Report 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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DSF Quarterly Report 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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DSF Quarterly Report 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. b. c. d.

e. f. g. h.

The enhancement of the development of border areas The enhancement of the quality of the democratization process The enhancement of the implementation of minimum standard services 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 The enhancement of partnerships between government and the private sector The widening and acceleration of public services reform The harmonization of local regulations with MoHA legislation 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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DSF Quarterly Report 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 1 2

3

Proposal (notional budget) DPRD Orientation ($500,000) Regional Development Policy ($700,000) Local Government Evaluation ($300,000)

Link to ACN

Counterpart

Addendum status

ACN 1/2009

MoHA (Diklat)

Addendum completed.

ACN 2/2009

Covered in existing ACN – no addendum required.

ACN on EPPD

Bappenas (Pengembangan Wilayah) 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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DSF Quarterly Report March 2010

Proposal (notional budget)

Link to ACN

Counterpart

Addendum status

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

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Regional & Local Economic Development Facility ($600,000) Sub-national Business Climate Reform ($1,000,000)

ACN 10/2009

Bappenas (Perkotdes)

DSF Work Plan 2007-2008 continuation

MoHA (Bangda & Diklat) Bappenas (Biro Hukam)

Grand Design on Implementation of Regional Autonomy ($700,000)

ACN 13/2009

MoHA (Otda)

8

9

April 2010.

2. Regional fiscal incentives (250K): discontinued at MoF request (as similar support being provided by ADB).

Design completed.

Agreement obtained to proceed with fiscal agency agreement (FAA).

Separate letter of understanding on performance drafted.

Addendum completed.

Awaiting final confirmation by government.

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.

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 # 1/2009

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Name Capacity Strengthening Program for DPRD (Local Government Legislatures)

Budget Estimate (USD) 500,000

Trust Fund Status Active

Implementation Status 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.

DSF Quarterly Report March 2010

ACN # 2/2009

Name Capacity Building for Regional Development Policy Formulation

Budget Estimate (USD) Part 1: 142,500

Trust Fund Status Active

Part 2: 700,000

Funds being transferred

Implementation Status 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

Awaiting GA signature

5/2009

Institution Building for the Integration of NationalRegional Development and Spatial Planning

483,400

GFR has been submitted and is awaiting grant agreement signature for activation Active

6/2009

Building Capacity for the Development of SubNational 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—prefeasibility studies of projects and related sections on economic, financial and environmental matters, in accordance to MoF regulations (PMK 147/06)—is underway.

Data collection and analysis commenced (Dec 1, 2009 – June 30, 2010). Contract negotiation with implementing agency from 29 March, 2010.

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DSF Quarterly Report March 2010

ACN #

Name

Budget Estimate (USD)

Trust Fund Status

Implementation Status 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

8/2009

Institution Building for the Accelerated Development of Border Areas

500,000

Active

500,000

GFR submitted, awaiting GA signature for activation GFR prepared

Awaiting GA signature

Active

Evaluation of technical proposals (bids) completed 31 March 2010.

GFR submitted, awaiting GA signature for activation

Awaiting GA signature.

9/2009

Capacity Building through Decentralization Education and Training (DET) for Public Service Delivery

1,593,520

10/2009

Strengthening Local Government Natural Resource Management Capability Formulation of Norms, Standards, Procedures and Criteria (NSPK) for Local Government Service Delivery

749,500

11/2009

4

1,000,000

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.

Evaluation report on technical proposals submitted for procurement approval 26 March, 2010.

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.

For Bank-executed components, procurement of implementing agent(s) is underway.

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 20092011 an additional allocation for Diklat, up to a ceiling of $800,000. AKLN sent this recommendation to the MC cochair 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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DSF Quarterly Report March 2010

ACN #

Name

12/2009

Strengthening Data Provision to the Regional Financial Information System by Sub-National Governments with StandAlone Electronic Data Bases

13/2009

Grand Design of Fiscal Decentralization

14/2009

Capacity Building for Costing and Pilot Implementation of Minimum Service Standards

Budget Estimate (USD) 250,000

Active

900,000

Active

1,200,000

Trust Fund Status

GFR prepared

Implementation Status 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. 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.

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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DSF Quarterly Report 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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DSF Quarterly Report 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

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DSF Quarterly Report 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.

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DSF Quarterly Report 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 20102014). 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

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DSF Quarterly Report 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

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DSF Quarterly Report 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.

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DSF Quarterly Report 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 recipientexecution.

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.

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DSF Quarterly Report 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 commitments8 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) Total pledges Other receipts Investment income Disbursements Fund balance (a)

Budget (USD) 44,243,625 24,836 1,383,065 16,285,241 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.

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DSF Quarterly Report March 2010

Less GBP 2 million Fund balance (b)

Budget (USD) 3,060,000 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 Uncommitted and unallocated funds: fund balance (b) less total allocations & commitments Total cash held (funds received – disbursements & commitments)

26,434,051 -127,7669 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 underspending on some approved activities to cover this shortfall.

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DSF Quarterly Report 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.

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DSF Quarterly Report March 2010

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DSF Quarterly Report March 2010

Annex A: Monitoring Framework Project Name

Decentralization Support Facility (DSF) Phase 2

Goals

Indicators

Improved socio-economic development and reduced poverty

Indonesia's Human Development Index (HDI)

Purpose Equitable, accountable and high quality public services provided by national and local governments

* First milestone/ target

Progress

Rating

Comment

Indicators

Progress

Rating

Comment

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*

1 – Fully achieved 2 – Largely achieved 3 – Partially achieved 4 – Achieved to a very limited extent

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DSF Quarterly Report March 2010

Output 1: Public Service Delivery Objectives

Indicators

Progress

Rating

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

Comment

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DSF Quarterly Report March 2010

Output 1: Public Service Delivery Objectives access for women (Phase 1)

Indicators

Progress

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.

Rating

Comment

4 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.

Management Strengthening and institution building for local public service providers ( Phase 2)

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.

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 Bankexecuted 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

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DSF Quarterly Report March 2010

Output 1: Public Service Delivery Objectives

Indicators

Progress

Rating

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.

1.6. Local governments adopt effective, efficient and accountable regulations and processes for business licensing

1.7. Improved understanding of international best practices, social political dimensions, costs and benefits and alternatives for territorial reform

Local government performance in implementing OSS for business licensing

Evidenced based research on territorial reform adopted by three key ministries: MoF, Bappenas and MoHA for policy input

Comment performance. As a consequence, the project was closed on 31 October 2009.

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 followon 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.

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.

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DSF Quarterly Report March 2010

Output 1: Public Service Delivery Objectives

Indicators

Progress

Rating

Comment

Progress 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.

Rate 1

Comment

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

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 2.1. The Ministry of Finance Regional Financial Information System recording local government budgets is upgraded

2.2. Improved fiscal decentralization policy

Indicators Number and process of data entry of local government budgets recorded in the Ministry of Finance Regional Financial Information System

Implementation of ‘Grand Design of Fiscal Decentralisation’ across government ministries and local governments

3

Results from this exercise will form the basis for determining how best to transfer electronic data from local governments to central government.

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.

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DSF Quarterly Report March 2010

Output 2: Fiscal Decentralization and Capacity Development Objectives

Indicators

Progress

Rate

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.

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).

Comment Final public consultation workshop is scheduled for April 2010 in Surabaya, East Java.

2

Rating refers to Phase 1 activities.

Future reports will be rated according to achievement of milestones/target phase 2.

3

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.

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DSF Quarterly Report March 2010

Output 2: Fiscal Decentralization and Capacity Development Objectives

Indicators

Progress

Rate

Comment

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.

1

Rating pertains to Phase 1.

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).

Phase 2 is currently on hold pending further discussions with GOI.

Empirical analysis on regional government investment in public infrastructure based on audited financial data for 2004-2007 completed June 2009.

3

Socialization workshop on the project is scheduled for May 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).

Output 3: Increasing Accountability Objectives

Indicators

Progress

Rate

Comment

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. UPDMoHA demonstrated the ability to access knowledge of internal GOI processes, work across ministries (MoHA and MoF), and diligently

27

DSF Quarterly Report March 2010

Output 3: Increasing Accountability Objectives

Indicators

Progress

Rate

DIPA registration.

prepare and revise documents. UPDMoHA 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.

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 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.

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.

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 decentralizationrelated 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.

Comment

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.

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

28

DSF Quarterly Report March 2010

Output 3: Increasing Accountability Objectives

Indicators

Progress

Rate

Comment

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.

N/A

Activity pending

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).

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.

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

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 1

This project is complete and has met its objectives. The database is well received and commended as a useful

29

DSF Quarterly Report March 2010

Output 3: Increasing Accountability Objectives

Indicators

Progress

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.

Rate

Comment 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.

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.

DSF will continue to work with AKLN to update and upgrade the system.

Output 4: Planning and Performance Measurement Objectives

Indicators

Progress

Rate

Comment

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 NationalRegional 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).

4

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.

3

This is an additional activity not listed in the Log Frame.

The first part of the activity will produce, by end April 2010, a

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

30

DSF Quarterly Report March 2010

Output 4: Planning and Performance Measurement Objectives

Indicators

Progress

Rate

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).

substantial review paper on regional development policy that will draw on lessons learned from past experiences and build upon the RPJMN for 20102014 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.

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.

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

Comment

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

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

31

DSF Quarterly Report March 2010

Output 4: Planning and Performance Measurement Objectives

Indicators

Progress

Rate

develop a local economic development facility. The client is the Directorate of Urban and Rural Affairs (Bappenas). The addendum has been submitted for approval.

Comment (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 interministerial 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.

32

DSF Quarterly Report March 2010

Output 4: Planning and Performance Measurement Objectives

Indicators

Progress

Rate

Comment

4.4. Improved quality and availability of subnational 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.

33

DSF Quarterly Report March 2010

34

DSF Quarterly Report March 2010

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 DFID AusAID CIDA

Contribution Currency GBP USD CAD

Total

Contribution Amount 24.36 1.00 0.50

42.74 1.00 0.50

Cash Received in USD million 27.50 1.00 0.50

44.24

29.00

USD equivalent

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) Total Available Funds

24,836 45,209,090

35

DSF Quarterly Report March 2010

Budget (USD) Fund Allocations approved in January 2007 Focal Area 1 Tax Assignment and Own-source Revenue

2,968,714 -

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

Focal Area 2

1,808,059

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 Improved Evidence Base of Good and Bad Local Perda

49,703 117,682

Focal Area 3

5,413,244

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

36

21,298,513

97,908

Project Operations thru March 31, 2010

7,700,000

Staff costs

4,200,000

Operations costs

3,500,000

DSF Quarterly Report March 2010

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 ACN 4/2009: Management Strengthening and Institution Building for Local Public Service Providers (MSIB-LPSP) ACN 5/2009: Institutional Building for the Integration of National Regional Development and Spatial Planning ACN 6/2009: Building Capacity for the Development of Sub-National Government Capital Markets for Municipal Bonds ACN 7/2009: Government Training and Education Centre Development: Introducing Competency Based Standards for Improved Public Service Delivery ACN 8/2009: Institution Building for the Accelerated Development of Border Areas

550,000 500,000 500,000 900,000 797,000 500,000

ACN 9/2009: Capacity Building through Decentralization Education and Training (DET) for Public Service Delivery ACN 10/2009: Strengthening Local Government Natural Resource Management Capability

1,593,520

ACN 11/2009: Formulation of Norms, Standards, Procedures and Criteria (NSPK) for Local Government Service Delivery ACN 12/2009: Strengthening Data Provision to the Regional Financial Information System by Sub-National Governments with Stand-Alone Electronic Data Bases ACN 13/2009: Improving the Policy Framework for Fiscal Decentralization

1,000,000

ACN 14/2009: Costing and Pilot Implementation of Minimum Service Standards

1,200,000

750,000

250,000 900,000

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 Approved additional DSF Executive Operations Work Plan 2009 - 2011 Knowledge Management for Aid Effectiveness DSF Executive Operations

2,788,505 700,000 1,502,043

Additional donor contribution for DSF Operations Total allocations to programming & DSF Executive staffing & operations Total Unallocated and Uncommitted Funds

700,000

1

586,462 42,627,538 2,581,552

1

Fund balance for unallocated and uncommitted funds fluctuates according to the prevailing exchange rate and return on investment.

37

DSF Quarterly Report March 2010

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

Investment Income

1,383,065

Other Income Total Receipts

29,000,052 24,836

44,243,625

30,407,953

2,968,714

2,152,400

59,547

-

-

-

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 Fiscal Agency Intergovernmental Framework Fund

227,500

227,500

-

476,214

476,214

-

55,000

47,467

4,301

305,000

54,176

9,031

Disbursements Focal Area 1 Tax Assignment and Own-source Revenue *

Exploring Future Reform Options in Functional Assignment Supporting the Establishment of Financially Feasible Minimum Service Standards Alternative Mechanism of Service Delivery

200,000

199,755

-

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 Mapping and Analysis of Local Planning and Budgeting Processes

375,500

58,823

1,728

49,703

49,703

-

Focal Area 2

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

-

421,705

421,705

-

CDD Summit

38

DSF Quarterly Report March 2010

Budget (USD) 58,666

Actual (USD) 58,666

Commitments (USD) -

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

-

Policy Development for PNPM

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

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

Quick starts

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 Improving and Piloting the Implementation of Monitoring and Evaluation System of Special Allocation Funds Utilization Improving the Policy Framework for Fiscal Decentralization

250,000

680

8,318

550,000

7,886

10

900,000

22,655

-

Building Capacity for the Development of Sub-National Government Capital Markets for Municipal Bonds Decentralization Support Facility II Capacity Strengthening Program for Local Government Legislatures Government Training and Education Center Development: Introducing Competency Based Standards for Improved Public Service Delivery Institutional Building for the Integration of National Regional Development and Spatial Planning Capacity Building for Regional Development Policy Formulation

900,000

9,274

7,586

500,000

-

-

797,576

-

-

500,000

10,106

3,568

150,000

32,547

70,825

Institution Building for the Accelerated Development of Border Areas Strengthening Local Government Natural Resource Management Capability

500,000

8,607

-

750,000

-

-

Approved Work Plan 2009-2011 in process of registration (1st round) Approved DSF Work Plan 2009 - 2011 (2nd round)

4,726,944

Approved additional DSF Executive Operations Work Plan 2009 - 2011 Total Project Disbursements

2,788,505

Administration fee Total Disbursements Outstanding commitments Total Cash Available (= receipts - disbursements commitments)

7,650,000

42,627,538

16,285,241

442,436

290,001

43,069,974

16,575,242 535,175

535,175

13,297,536

39

DSF Quarterly Report March 2010

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)

0

13.3

14.46

12.57

27.5

6

9.24

0

1

0

0

0

0.5

0

0

0

29

6

9.24

0

Investment Income

1.38

0.29

0.44

0

Other Income

0.03

0

0

0

30.41

19.59

24.14

12.57

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

Expected Receipts Projected Cash Remaining from prior period Paid in Contributions DFID AusAID CIDA Cash Receipt during current period

Expected Cash Available to DSF TF Disbursements

Quick starts Project Operations

40

0.1

0

0

0

4.33

0.3

3.3

3.04

DSF Quarterly Report March 2010

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 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

0

0.2

2.69

1

16.28

5.065

11.475

9.99

0.29

0.06

0.09

0

Public Services

Governance Reform Total Project Disbursements (Projections) Administration fee 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

41

DSF Quarterly Report March 2010

Annex C: List of Acronyms A4DES: ACNs: ADB: AKLN: AMSD: APBD: BAPPEDA: BAPPENAS: BKN: BNPP: BPS: CB: CBT: CSO: DAK: DET: Diklat: DIPA: Ditjen Bangda: DJPK: DKI: DPD: DPR: DPRD: DRSP: DSF: EPPD: FAA: FGD: GA: GDFD: GDP: GFR: GOI GR: GTZ: HDI: HRM: HTML: KKDT: LAN: LRA: MC: MoF: MoHA: MOUs: MP: MSIB-LPSP: MSS:

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Aid for Development Effectiveness Secretariat Activity Concept Notes Asian Development Bank Administrasi Kerjasama Luar Negeri (Bureau of Foreign Cooperation) Altenative Mechanisms of Service Delivery Anggaran Pendapatan dan Belanja Daerah (Regional Government Budget) Badan Perencanaan Pembangunan Daerah (Regional Planning & Development Agency) Badan Perencanaan dan Pembangunan Nasional (National Planning & Development Agency) Badan Kepegawaian Negara (National Civil Service Agency) Badan Nasional Pengelola Perbatasan (National Border Management Agency) Badan Pusat Statistik (Central Statistics Agency) Capacity Building Competency-Based Training Civil Society Organization Dana Alokasi Khusus (Special Allocation Fund) Decentralization Education and Training Pendidikan dan Pelatihan (Education and Training) Daftar Isian Pelaksanaan Anggaran (Budget Implementation Entry List) Direktorat Jenderal Pembangunan Daerah (Directorate General of Regional Development) Direktorat Jenderal Perimbangan Keuangan (Directorate General of Fiscal Balance) Daerah Khusus Ibukota (use in DKI Jakarta, Special Region of the Capital of Jakarta) Dewan Perwakilan Daerah (House of Regional Representatives) Dewan Perwakilan Rakyat (House of Representatives) Dewan Perwakilan Rakyat Daerah (Provincial Legislative Council) Democratic Reform Support Program Decentralization Support Facility Evaluasi Penyelenggaraan Pemerintahan Daerah (Guidelines for Regional Government Evaluation) Fiscal Agency Agreement Focus Group Discussion Grant Agreement Grand Design of Fiscal Decentralization Gross Domestic Product Grant Funding Request Government of Indonesia Government Regulation Gesellschaft f端r Technische Zusammenarbeit Human Development Index Human Resources Management Hyper Text Markup Language Kawasan Khusus dan Daerah Tertinggal (Directorate of Special Regions and Less Developed Areas) Lembaga Administrasi Negara (State Administration Agency) Laporan Realisasi Anggaran (Budget Realization Report) Management Committee Ministry of Finance Ministry of Home Affairs Memorandum of Understanding Member of Parliament Management Strengthening and Institution Building for Local Public Service Providers Minimum Service Standard

DSF Quarterly Report March 2010

NSPK: OSS: Otda: Otsus: PAN: PDOK: PEA: Perda: Perdirjen: Permendagri: Perpres: PGs: PGSP: PK-EKD: PMK: PUM: RAB: RED: RIA: RPJM: RPJMN: SAF: SC: SEB: SEB-DAK: SIKD: SSS: STATCAP: TA: TAF: TF: TKP2E-DAK:

ToR: TOT: TPOD: UNDP: UPD: USAID: WB:

Norma, Standar, Prosedur, dan Kriteria (Norms, Standards, Procedures and Criteria) One Stop Shop Otonomi Daerah (BAPPENAS: Directorate of Regional Autonomy; MoHA: Directorate General of Regional Autonomy) Otonomi Khusus (Special Autonomy) Pendayagunaan Aparatur Negara (State Ministry of Administrative Reform) Penataan Daerah dan Otonomi Khusus (Directorate of Regions Management and Special Autonomy) Public Expenditure Analysis Peraturan Daerah (Local Regulation) Peraturan Direktur Jenderal (Director General Regulation) Peraturan Menteri Dalam Negeri (Ministry of Home Affairs Regulation) Peraturan Presiden (Presidential Regulation) Provincial Governments Provincial Government Support Program Pengembangan Kapasitas dan Evaluasi Kinerja Daerah (Directorate of Capacity Building and Regions Performance Evaluation) Peraturan Menteri Keuangan (Ministry of Finance Regulation) Pemerintahan Umum (Directorate General of Public Administration) Rencana Anggaran Biaya (Government Budget Estimation) Regional Economic Development Regulatory Impact Assessments Rencana Pembangunan Jangka Menengah (Mid-Term Development Plans) Rencana Pembangunan Jangka Menengah Nasional (Mid-Term National Development Plans) Special Allocation Fund Steering Committee Surat Edaran Bersama (Joint Circular Letter) Surat Edaran Bersama Dana Alokasi Khusus (Special Allocation Fund Joint Circular Letter) Sistem Informasi Keuangan Daerah (Regional Financial Information System) Single Source Selection Statitical Capacity Building Technical Assistance The Asia Foundation Trust Fund Tim Koordinasi Penyusunan Kebijakan Perencanaan Pemantauan dan Evaluasi Dana Alokasi Khusus (Coordination, Planning, Monitoring and Evaluation Team for Special Allocation Fund) Terms of Reference Training of Trainers Tim Persiapan Obligasi Daerah (Municipal Bonds Preparation Team) United Nations Development Programme Urusan Pemerintahan Daerah (Directorate of Local Government Affairs) United States Agency for International Development World Bank

43

DSF Quarterly Report March 2010

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