simon delay emy boncodin jonathan dunn paul nankivell decentralisation an action plan from a pem...

Simon DelayEmy BoncodinJonathan DunnPaul Nankivell

DecentralisationAn Action Plan from a PEM perspective

Decentralisation: Action Plan 2 9/8/00

PlanIntroductionA. Short Term (during 2000 for the 2001 budget)

policy decisions on aspects of expenditure allocation

treatment of transferred responsibilitiesgeneral aligning of expectationsinfo to local governments

B. Medium Term (2001 and beyond)budget reformfiscal disciplineallocative efficiencyoperational efficiencycentral controlexternal audit


Introduction Importance

Probably biggest transfer of staff ever in the worldCovers nearly all the major government functions and over half of government spending

Expectations are high for more accountable, more efficient and more effective spending


Introduction: cont. Unusual

Functions virtually all transferred to Dati II, not provinces

Breadth of functionsNo positive listBig bang approach not transitional period

DifficultiesPolitical pressures for separatismA time of fiscal tightnessTimetable for preparation constrainedConstraining decisions on revenue sharing


A1. Determine treatment of Shared ResourcesOptions Define fiscal capacity to include all income sources. Define fiscal capacity to exclude shared income sources. Define fiscal capacity to include a proportion (say, half)

of shared resources.

Ultimately a political decision informed by modelling results


A2. Determine Policy on “Losers”Issues

what is the benchmark for current spending any allowance made for inflation applies to both Dati I and Dati II or just Dati II?

We suggest definition must allow for All staff inflation All responsibilities i.e. current plus new Possibly some permitted loss against this

figure e.g. 5%


A3. Determine aggregate DAU and modelDAU (plus shared resources) should cover

current routine responsibilitiescurrent development responsibilitiesallow policy on equalisation and losers to be metbe consistent with required law that 2.5 % of funds go to provinces

be consistent with minimum 25% rule in total


A4. Set responsibilities to be met from DAU if DAU at 25% is insufficient:-

need extra DAU orchange policy on equalisation or losers

if there are surplus funds:-transferred proportion of APBN staff (assume 10%?) transfer all deconcentrated non-staff responsibilities extra development funds

we suggest transferring non-salary routine costs

gives budget certaintygives some real freedom to Dati IIallows managed transfer of salary responsibilities


A5. Separate financial and physical transfers

Options1. Hold back all transfers of routine funds until 2002. 2. Hold back only staff-related costs until 2002.3.Transfer funds during 2001 as blocks of

transferred staff and responsibilities are identified (either by region or by function).

We suggest option 2 Allows budget certainty Allows time for managing staff transfers whilst

retaining certainty over salary payments


A6: General - Aligning Expectations Align expectations with reality for 2001 Limited opportunities for resource-reallocation Growth in local resources will be small No time to plan resource-use or reorganise? The benefits of decentralisation will not be

experienced much in 2001 This is a de facto transition period and real

benefits will take 4-5 years


A7: Better Info to Daerah Issue copies of draft PP immediately issue guidance figures on transfers quickly


B1: Budget Reform ProcessesTreat 2001 as a year for testing reforms to

budget preparation at daerah level e.g. budget classification and multiyear budget

reforms supported by central team/TA aimed at preparation of 2002 budget

Refocus the aid mobilisation and resource allocation role of Bappenas

consistent with a unified resource allocation and budget planning process

a multiyear budget framework


B2: Budget Reform Processes cont.Redefine processes of external assistance

mobilisation (consistent with decentralisation)direct loans to local governmentsvoluntary consortia of Dati II facilitated by provincesstill need some central involvement if a central guarantee


B3: Budget Reform Processes cont.Complete analysis of future potential

development budget flowsover three year perioddisaggregate the projected new spending between central and daerah level

distinguish between rupiah and foreign financingDetermine discretionary spending gap available for allocation between central and daerah;


B4: Budget Reform Processes cont.Monitor local project delivery arrangements

for central controlled projects Monitor the performance of implementation of

central financed and managed projects define scope for further redesign to focus on

decentralised delivery link this assessment to results of technical

assistance in daerah budget reform processes;


B5: Fiscal Discipline Dati II lack control over revenue sources

switch PBB to local tax & allow local tariff-settingfurther sources?Shift provincial sources to Dati II?

Local Governments need help in early notification of provisional grant figurescertainty of dates of cash transfers

– monthly/quarterly

– in advance/in arrears

Better accountability of DPRDpublic hearingsinvolve NGOstransparent budget/reporting process


B6: Allocative Efficiency Reform staff remuneration

switch funding to basic wages from honorariaincrease basic wagesreconsider differentials

Reform Development/Routine budget splitpromote integrated decisions on investments, running costs, maintenance etc.

Develop local capacity for…inter-sectoral planningprogramme evaluation

Need guidelines on Dati II allocations to desa


B7: Operational Efficiency Review procurement

need sufficient competition Develop performance indicators/benchmarking

systemsto be mediated through auditors?


B8: Central ControlIssuesResolve responsibilities for control & monitoring

Sectoral ministries responsible for sector specific standards

– But do they have field staff, skills– What controls on competing standards, priorities

Central ministry (DDN, Meneg OTDA, Dep Keu?) responsible for general administrative control

– But capacity?– Split of responsibilities– Mechanisms for feedback unclear


B9: Central Control cont.Suggestions

Specify indicators not standards and publish resultsUse them to identify good performanceemphasise performance audit rather than detailed sectoral control


B10: External Audit Continuance of multiple agencies

BPK/BPKPSectoral ministriesAuditor appointed by DPRDIrWilPropnew anti-corruption agency


B11: External Audit: cont.– Need clarity of mandates– Need public reporting– External auditor should

– be independent of local executive, DPRD and centre– Have capacity in performance auditing– develop comparative performance studies, best practice etc.– Have local government as their priority

This suggests:-– no role for BPK/BPKP, IrWilProp and DPRD-

appointed auditors– Creating new specialist agency

simon delay emy boncodin jonathan dunn paul nankivell decentralisation an action plan from a pem...

Documents

action plana6

action plana4

action plana2

action plana1

action plana5

action plana3

staff transfers

transfer funds