Kota Sukabumi Public Expenditure Review

June 29, 2002

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Preface

Drafting team:

Giovanna Dore Evi Hermirasari Susiana Iskandar

Kai Kaiser Puti Marzoeki

Jacqueline Pomeroy Unggul Suprayitno

Farida Zaituni

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PUBLIC EXPENDITURE REVIEW KOTA SUKABUMI

This report is one of three regional reports – from North Sumatra, West Java and West Nusa Tenggara – which examine regional management of public resources in a decentralized Indonesia. This report focuses on the West Java city (kota ) of Sukabumi (as distinct from the kabupaten, or district of Sukabumi). The data was gathered from numerous sources, but the bulk of the information was obtained through a series of interviews conducted periodically over several months in Kota Sukabumi with civil servants, parliamentarians, representatives of civil society, the private sector, and citizens. Preliminary observations on the sectoral analysis and governance issues were discussed in an open workshop held in Kota Sukabumi on January 25, 2001. Overall, the leadership in Kota Sukabumi has been remarkably successful in grasping the opportunities presented by decentralization, and the introduction of a number of innovations in planning, budgeting and service delivery promises to deliver better results to its citizens. Nevertheless, the region faces a number of decentralization-related difficulties, including a shortage in funds for the development budget, grappling with health and environmental issues that require broader regional cooperation to solve, building capacity in nearly every part of government to deal effectively with problems for which they are now responsible, and adjusting underlying incentive structures to ensure that existing reforms are sustained and enhanced. The report is organized in four sections. Section I describes the general characteristics of the city and places it in the provincial and national context. Section II contains a discussion of the specific nature of the planning process used in Kota Sukabumi to develop the budget, and the city’s progress towards implementing a participatory planning process. Section III examines the basic structure of the city’s budget, including both expenditures and revenues, and any marked changes in these allocations under decentralization. Section IV describes the financial management system governing implementation of the budget. Section V looks briefly at the evolution of the governance dynamics in the city, and how changes in the relationships between the citizenry, the executive and legislative branches, and civil society might yield opportunities to enhance the checks and balances in the budget process and ultimately to achieve their development priorities.. Section VI evaluates several priority sectors in greater detail: health, education and environmental management Section VII summarizes some of the key themes that emerge from the overall analysis.

I. KOTA SUKABUMI IN CONTEXT Like all local governments in Indonesia, Kota Sukabumi is facing a number of challenges as it takes control of its resources, determines processes, and sets priorities which will maximize growth and the benefits of decentralization for its citizens. Kota Sukabumi is a largely urban environment of 252,000 people with a broad rural fringe. Its location in the temperate volcanic mountains about two hours from both the national capital of Jakarta

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and the West Java capital and industrial center of Bandung have resulted in the gradual approach of industry towards the city, but it has not yet experienced any large scale industrial investment. At the same time, it is surrounded by rich agricultural areas which supply the nearby urban centers. The results of Kota Sukabumi’s history of investment in health and education are demonstrated in development indicators above the provincial and the national average (Table 1), although they have dropped relative to other areas during the crisis years. However, these impressive indicators do not mean that poverty is not a problem in Kota Sukabumi. The government considers roughly 12,000 households to be poor1, and with an average family size of 5 persons, this yields a practical measure of about 24% of the city’s population. This estimate is substantially higher than the Susenas result of 7.2% but is likely to include a larger portion of those vulnerable to poverty, as well. The poor are scattered in neighborhoods throughout the city and in a few slum areas, and have been growing as the poorest from the neighboring rural districts come to the city to look for work opportunities. Economic activity includes small manufactures (esp. handicrafts); small-scale agriculture focusing on fruit, vegetable and cut flower production; fishpond, livestock and poultry production; commerce; and a very large informal sector. Employment in the informal sector is estimated to absorb 49% of the labor force, with open unemployment just over 20% (1999 data).

1 A variety of numbers are used in Kota Sukabumi to describe the number of poor, in addition to Susenas data. They used the base numbers of around 16,000 Pra-Sejahtera and Keluarga Sehat 1 families from the BKKBN (National Family Planning Board) annual survey, and then applied additional BAPPENAS and Ministry of Home Affairs criteria to narrow the focus on the poor and near-poor to 12,000 families. The Dinas Kesehatan (Health Service) conducted a verification process as part of their social safety net program, and further reduced the number to less than 7,000 for operational purposes.

Table 1: Kota Sukabumi human development indicators in national pers pective

Life Expectancy

(years)

Adult Literacy Rate (%)

Mean Years of Schooling

(years)

HDI HDI Rank

1996 1999 1996 1999 1996 1999 1996 1999 1996 1999 Kota Sukabumi

64.3 65.7 99.0 97.6 9.1 8.6 73.4 68.4 27 of 291

49 of 294

West Java

62.9 64.3 89.7 92.1 6.4 6.8 68.2 64.6 14 of 26 15 of 26

Indonesia 64.4 66.2 85.5 88.4 6.3 6.7 67.7 64.3 Source: BPS, BAPPENAS, UNDP, “Indonesia Human Development Report 2001”.

Table 2: School Attendance, 1999 School Participation Rate School Dropout Rate

age 7-12 age 13-15 age 16-18 age 19-24 age 7-15 age 16-18 age 19-24 Kota Sukabumi

98.1 91.2 72.4 13.2 1.4 4.8 3.3

West Java 95.4 72.2 45.4 11.4 3.3 10.3 11.3 Source: BPS, BAPPENAS, UNDP, “Indonesia Human Development Report 2001”.

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Kota Sukabumi has offered good access to schools, as reflected in high levels of educational attainment. Adult literacy is above the already-high provincial average, and far above national levels. Outcomes for women are only slightly below those for men, and still higher than the national averages. An educated population combined with constraints on economic opportunity have led many residents to migrate out of the city, often to destinations in the nearby industrial areas around Jakarta and Bandung, and others overseas. Both men and women are mobile.

II. The Planning Process Shortly after the current mayor took office three years ago, the city of Sukabumi undertook a public, consultative process to establish the city’s vision and mission so as to provide a framework for the general development strategy. This process reportedly included active participation from civil society and the private sector, in addition to the local government and legislature. The resulting choice of vision and mission which was incorporated into the guiding principles of their Propeda (medium-term regional development plan) and Repetada (annual implementation plan) was based mainly on enhancing their established role in the region: Kota Sukabumi will strive to be the premier center of health, education and trade for its own residents and for the surrounding area. As it began the decentralization process, Kota Sukabumi also chose to participate in a UNDP-sponsored pilot project designed to assist local cities in improving their overall governance. Project BUILD divides its work between the executive branch, the local legislature, and civil society, and focuses primarily on a participatory planning process as the main mechanism for promoting good governance and accountability among the parties. The resident Urban Management Advisor (UMA) provides general advice to all the stakeholders groups and guides the planning process. The UMA also helps to build capacity among the three stakeholder groups, for example, by providing training to the DPRD members,2 by working with the mayor and her staff to suggest methods to

2 Unfortunately, the funding for this training component was dropped from the program this year.

Table 3: Kota Sukabumi gend er-related development index, 1999 Proportion of

Population (%)

Life Expectancy

(years)

Adult Literacy Rate (%)

Mean Years of Schooling

(years)

Share of Earned

Income (%)

GDI

GDI Rank

Female Male Female Male Female Male Female Male Female Male Kota Sukabumi

51.6 48.4 67.6 63.7 97.1 98.2 8.1 9.1 25.5 74.5 56.4 144 of 294

West Java

49.6 50.4 66.2 62.4 89.2 95.2 6.2 7.3 26.1 73.9 54.6 17 of 26

Indonesia 68.1 64.2 84.1 92.9 6.1 7.3 55.9 Source: BPS, BAPPENAS, UNDP, “Indonesia Human Development Report 2001”.

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improve communication and participation, and by helping to organize a discussion forum and participatory role for civil society. Public participation in the planning for the 2002 budget consisted of a multi-stage process. Over the course of the budget cycle, these activities included:

Date Meeting Process April Musbangkel The Musyawarah Pembangunan Kelurahan is the

city sub-district meeting (at the neighborhood level, the smallest administrative unit in the city). The UMA guidelines required these meetings in all 33 kelurahan to have minimum 60% neighborhood participants and a maximum of 40% local government or other participants. The UMA provided a trained facilitator who helped the community prepare proposals beforehand, and the first level of review was conducted at this meeting.

June UDKP This kecamatan (sub-district) level meeting involved inputs from sectoral staff from the 7 sub-district governments, and the second cut at reviewing the proposals. Community prioritizes proposals, and opportunities for private sector partnerships and community self-funding are also identified. According to BUILD guidelines, at least 50% of participants at this meeting were required to be local residents.

July/Aug Rakorbang The Rapat Koordinasi Pembangunan (Rakorbang) is a full public meeting and discussion of the proposals at the city level, and their rough prioritization for inclusion in the budget, conducted by the Bappeda.. The Bappeda then works with the Sekwilda and the budget staff to finalize the budget. According to BUILD guidelines, at least 50% of participants at this meeting had to be local residents and/or civil society. By all accounts, this involved active participation by a range of stakeholders and very lively discussion.

January1 DPRD Final approval of the APBD and passage by local Perda.

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This process generated an initial shopping list of Rp. 480 billion in proposals presented at the city’s Rakorbang for debate and prioritization, of which Rp. 42 billion were incorporated into the approved budget. This amount represents 94% of Kota Sukabumi’s non-wage budget, an impressive indication of the city’s commitment to a demand-driven process. All participants in this budget planning process reported that communities were satisfied with the increased assets the program afforded them, although the government perceived two problems with the overall process. First, it was felt that initial expectations from this process were unrealistically high, and there was a need to scale down the exercise to manageable levels while meeting the underlying needs of the community and enhancing participation. Second, the result of the bottom-up winnowing process was that smaller projects tended to be discarded in favor of larger ones which had a wider constituency at the kecamatan and city-wide level. But these small projects are exactly the ones which can be easily implemented at the community level and which meet real community needs rather than the larger city needs. The question was how to revise this process while keeping the main principles intact. As a result, this year (2002) the city will use a block grant system: Rp. 50.250 million will be allocated to each kelurahan (33 total) for small scale works, while each of the seven kecamatan will receive 7.5 million times the number of its kelurahan to support coordination and technical assistance. It is anticipated that this Rp. 2 billion will generate numerous small projects at the kelurahan level, most of which can be completed by the community itself. Moreover, World Bank experience with community-implemented projects indicates that there are substantial cost savings to be gained with this strategy (a realistic expectation is as much as 30%), and many issues of corruption commonly associated with contracting procedures for larger scale projects tend not to develop or are more easily controlled. The questions of process will now shift to those of developing and supporting an effective participatory project proposal and selection process, and ensuring the implementation of basic principles of transparency and accountability in their implementation. Effective application of these pillars of good governance will help build strong grassroots support for reforms in the local government, and will strengthen demand for those reforms as well, particularly as they enable communities to exercise control over rent-seeking behaviors typically found in project implementation. On the other hand, failure to establish effective mechanisms of transparency and accountability in utilizing these grants runs the risk of jeopardizing community confidence in local government reforms carefully built up thus far.

Table 4: Estimated Expenditures on Kelurahan Block Grants for 2003 (Rupiah)

units Rp per unit value

Kelurahan block grants 33 50,250,000 1,658,250,000 Kecamatan (7) management assistance per kelurahan 33 7,500,000 247,500,000 total cost 1,905,750,000

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Goals and accountability The main mechanism for establishing government accountability for performance is in the setting of goals as part of the Propeda and Repetada (5-year and annual plans, respectively) process, and the mayor’s annual report on performance submitted to the DPRD. The FY2002 Repetada indicators include general and sectoral quantitative goals, as well as indicators of success such as the human development index and macro socio-economic indicators. There are a range of qualitative indicators in the Propeda, as well as quantitative macro and sectoral indicators. The Mayor’s Accountability Reports (Laporan Pertanggungjawaban Walikota, or LPJ) for FY2000 and 2001 report primarily on the physical and financial realization of the projects planned under the budget. While setting specific goals and targets is always a difficult exercise, a set of realistic, participative goals that better matches or reflects the communities’ and the government’s desired results or outcomes would strengthen the overall process.

III. BUDGETING IN KOTA SUKABUMI One of the ultimate objectives of decentralization is to enable the regions to provide the range and quality of services that are most appropriate to local conditions and the needs of the local population, and at the lowest cost. The budgeting process is the key to achieving this objective, a process where limited resources are prioritized and allocated among various demands. Kota Sukabumi’s budget is limited at just Rp. 452,8723 per capita, and opportunities for raising revenues are extremely narrow. This amount is substantially higher than the average for West Java, but less than the nation-wide average.

3 Based on data from Kota Sukabumi’s official revised mid-year budget documents.

Table 5: Total Per Capita Expenditures

(rupiah) 2000 (9 mos)

2001

All Tkt 2 243,355 571,178 All Kabupaten 229,190 561,966 All Kota 295,951 604,999 All West Java 103,920 220,949 West Java Kabupaten 88,449 200,559 West Java Kota 122,575 257,006 Kota Sukabumi 234,125 366,909* Source: MoF, from planned budgets. *MoF comparative data is based on planned budgets and does not include mid-year revisions. In Kota Sukabumi, this resulted in an increase to Rp 452,872 per capita in 2001.

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The budget for FY2001 Kota Sukabumi’s budget changed dramatically with decentralization. (Tables 6 & 7) Total expenditures more than doubled compared to the (9-month) FY2000 budget, and although the wage bill nearly tripled, non-wage expenditures still increased by 54%. Most of its revenues are derived from the central government’s general grant, or DAU, and the wage bill accounts for 61% of the total budget. This limits the development budget to just 19% of the total. This was the lowest proportional development budget of all the (six) cities in West Java which devoted an average of just over 29% of their budgets to development activities, and less than the average for all Tkt 2 governments in West Java with 26.3%.4

Revenues Like most local governments in Indonesia, Kota Sukabumi relies heavily on transfers from the central government, and among these transfers, the General Grant (DAU) predominates. Local taxes held steady from 1999/2000 through 2001, despite the fact that Law 34/2000 increased the range of possibilities for generating local tax revenues. The city would prefer to reduce its dependence on central revenues, but this seems unlikely in the medium term considering the already high level of tax effort (more below) and because the government is concerned about its negative impact on local business activity. General grant (DAU) The DAU and the mid-2001 adjustment accounts for 82% of Kota Sukabumi’s budget resources. The DAU for 2001 was calculated mainly on the basis of past spending 4 See Table 9 for a comparison of other Tkt 2 government budget structures.

Table 6: Kota Sukabumi Summary Budget (millions of rupiah)

1999/2000 (9 mos)

2000 2001

Total Expenditures 58,144 53,244 114,124 Wages 29,559 24,093 69,624 Non-Wage Recurrent Expenditures 12,716 9,260 22,709 Development Expenditures 15,869 19,891 21,491

Total Revenues 58,144 59,068 114,124 Central Transfers 48,564 47,909 93,132 SDO/DAU 44,408 26,447 81,300 Shared Revenues 4,156 4,074 11,832 Own Revenues (PAD) 8,297 8,124 12,205 Retributions 6,815 6,807 10,409

Source: Kota Sukabumi budget documents.

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patterns, and only 20% on the basis of an equalizing formula in order to ensure a rough match between revenues and spending obligations (civil service and ongoing projects of the devolved bureaus). In Sukabumi’s case, the DAU-to-wage bill equals just 1.17, confirming the match and illustrating the limited ability of central funding to provide significant resources beyond covering wages. Own revenues (PAD) Own revenues accounted for a modest 11% of total revenues, or just Rp 48,378 per capita. On the other hand, Kota Sukabumi’s own revenues at Rp 12.2 billion are substantially larger than what would be expected on the basis of its regional GDP.5 Based on the national average revenue effort, the city government could expect just under Rp 1 billion, when in fact they realized more than twelve times that amount last year. Thus the city’s caution over creating new taxes seems well justified, and it is unlikely to expect the city to increase taxes much further. Local taxes Kota Sukabumi generated 10% of its own revenues from taxes in 2001. Taxes for street lighting were the most important, accounting for 60% of the total local tax revenue. As a city lacking any natural resources, the government is unable to generate any revenues from the taxation of grade C minerals, an important revenue source for many kabupatens. Although law 34/2000 enables regions to establish local taxes through regulations approved by the DPRD (perda), Kota Sukabumi has not issued any new taxes nor has it raised existing tax rates. This cautious stance on taxes reflects a stated reluctance to overburden the local population during difficult economic times, and also the fear that tax increases would dampen business activity and thus conflict with their desire to promote Kota Sukabumi as a regional trading center. In early 2002, they were considering their first new tax, one on generators modeled after the perda recently imposed by Kota Bogor. Retribusi In contrast to the modest amounts generated from taxes, 85% of Kota Sukabumi’s own revenues came from retribusi. Rp. 10.6 billion was raised through retribusi, with 73% of that coming from payments for health services, a reflection of the prominent role health services and the hospital play in Sukabumi. Unlike other retribusi, these payments for hospital services are committed to revolve back into the hospital’s budget and do not simply get deposited into the city’s treasury for general budgetary purposes. The remaining revenues from retribusi are widely distributed among the other 30 categories, with the next largest (6%) coming from street maintenance charges, followed by bus terminal fees (5%). 5 Based on annualized FY2000 outcomes, the average tax (and revenue) effort for Tkt 2 is 2.357 + 0.000957*(Non-Mining GDP).

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Transfers and shared revenues Total transfers to Kota Sukabumi nearly doubled with decentralization, increasing from Rp. 47.9 billion to Rp. 93.1 billion in 2001, a gain of Rp. 45.2 billion. Rp. 37.5 billion of that increase comes from transfers alone. Shared revenues for FY2001 in Kota Sukabumi were roughly equal to the city’s own revenue generation. 40% of the shared national taxes stemmed from land and building taxes, followed with a surprising 28% coming from the motor vehicle fuel tax. The relatively large receipts from the shared motor vehicle fuel tax are likely a reflection of Kota Sukabumi’s proximity to the Jabotabek and Bandung urban areas, its role as a trade center, and the highly mobile population. Only 16% of shared tax revenues came from shared income taxes. Shared taxes remained steady from 2000 to 2001 (when calculated on a 12 month basis), although shared non-taxes increased dramatically – by a multiple of 311 – to account for 6% of total revenues. Even though Sukabumi has few natural resources to exploit, this increase in shared non-tax revenues stems from West Java oil & LNG production, with royalties designated to “other local governments in the same province.”

Table 7: Kota Sukabumi Revenues (rupiah)

FY 1999/2000 FY 2000 (9 mos) FY 2001

Total Revenue 58,144,415,000 59,068,153,000 114,123,654,000 Carry-Over 1,283,754,921 3,034,653,491 2,463,438,585Own Revenues 8296923079 8,124,462,509 12,205,397,415 Own Taxes 1,240,500,000 965,000,000 1,233,600,000 Own Levies 6,814,798,000 6,807,448,278 10,408,643,324 Enterprise Revenues 66,282,000 261,683,000 367,000,000 Other Local Revenues 175,343,078 90,331,230 196,154,091Equalization/Balancing Funds 48,563,737,000 47,909,037,000 93,131,992,000 Shared Taxes 4,135,980,000 4,052,264,000 4,988,485,000 Shared Non-Taxes 20,000,000 22,000,000 6,843,379,000 Routine Transfer/ SDO 29,496,599,000 26,446,930,000 81,300,128,000 Development Transfer/ Development Assistance 13,705,406,000 16,008,320,000 0 Other Allocation 1,205,752,000 1,379,523,000 0Borrowing 0 0 0Other Receipts 0 0 6,322,826,000 Receipts from Province 0 0 2,404,712,000 Receipts from Other Districts 0 0 0 Other Receipts from Center 0 0 3,918,114,000 Shared Taxes: 3,939,764,000 4,988,485,000 PBB (land & bldg tax) 2,739,764,000 1,993,057,000 Penghasilan Pasal 21 (income tax) 0 784,428,000

PBB-KB (motor vehicle fuel tax) 1,200,000,00

0 1,411,000,000 Custom on Land and Building Rights 0 800,000,000Source: Kota Sukabumi budget documents, various years

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Expenditures Civil service and the wage bill Besides its expenditure level of Rp. 452,872 per capita (higher than the West Java average but lower than the national average), Kota Sukabumi’s budget challenges are similar in many ways to other districts. Civil servant wages absorb 61% of total expenditures. Honoraria going to civil servants primarily out of the development budget (they are commonly linked to participation in development projects) appear to be quite modest due to limitations placed on staff concerning project payments and rates. For example, Cipta Karya (public works) staff may only receive one honorarium payment each. During this first year of decentralization, regional governments were forced to make a significant mid-year adjustment when the central government announced a retroactive increase in civil service wages. In Kota Sukabumi, this required a Rp 9.5 billion increase in the wages allocation at the time of the mid-year revision.6 To help pay for this, the city drew on a Rp 300 million contingency, but most of the increase was covered by an 11% increase in central transfers, consisting mainly of an additional Rp. 8.3 billion of shared revenues over the originally budgeted estimate. Initial conservative projections of own revenues were also revised upwards by Rp. 3.5 billion. Overall, the mid-year budget revision increased the total budget by 23%. The recurrent budget got a 20% boost, exceeding the 15.9% wage bill increase, meaning a 35% increase in non-wage recurrent expenditures. The development budget enjoyed an increase of 37%. Recurrent and development budgets Overall, Kota Sukabumi benefited greatly from decentralization, with their total revenues and expenditures nearly doubling. As with all district governments, however, the bulk of their budget goes to wages. The very high wage bill results in 81% of the 2001 budget being allocated to recurrent expenditures. Even with the dramatic increase in wages with decentralization, however, non-wage recurrent expenditures also increased sharply, more than doubling. The result left just 19% of resources allocated to the development budget,7 representing an 8% increase in Rupiah terms over FY2000. Considering that the

6 After consulting with civil servants, the government announced it would pay this obligation through a series of payments. This consultation process undoubtedly helped to avoid teacher strikes experienced in a large number of regions. 7 MoF data from initial approved budgets (not incorporating mid-year revisions) showed that at 16.9%, Kota Sukabumi had the lowest proportional development expenditures of all cities in West Java (29% on average), and the second lowest of all district-level governments in the province (26% on average) – only Kabupaten Sumedang had a marginally lower percentage at 16.4%. (see Table 9).

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FY2000 budget covered just nine months, this represents a significant and worrisome decline in annual public investment equivalent to 20% in nominal terms.8 At the same time, there is significant mixing of items in the development and recurrent budgets mainly owing to historical budget sourcing reasons, with the result being a fuzzy picture on recurrent vs. development expenditures. For example, the extensive school rebuilding program described in the sectoral report on education is funded out of recurrent expenditures and not out of the development budget. On the other hand, 76% of the development budget for the health sector is spent on drug purchases, which is more appropriately described as a routine, recurrent expense. The local government would benefit greatly from a thorough review of this part of the budget process before any meaningful analysis of the budget structure is conducted. Borrowing The only debt the city government has is through the water company, the PDAM, which has two outstanding loans: a Rp. 3 billion debt to the local government which it is actively repaying, and Rp. 15 billion to the Dutch government for infrastructure financing (dating from 1987). The debt to the Dutch government is not currently being repaid, and given the low level of revenues water services generate, they will probably not consider doing so until they settle their debt to the local government. This issue is addressed in more detail in the sector report on environmental management.

8 Without the mid-year adjustment, the FY2001 development budget would have decreased in absolute terms compared to FY2000. With the mid-year adjustment, the 2001 12-month equivalent budget declined by 20% from 2000, not accounting for inflation.

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Table 8: Kota Sukabumi Routine and Development Expenditures (rupiah)

FY 1999/2000 (9 mos) FY 2000 FY 2001

Per Capita Expenditures

% of Total Expenditure

Routine Expenditures 42,275,415,000 33,352,974,500 92,332,369,000 365,973 81%

Civil Servant Wages 29,558,925,000 24,092,640,500 69,623,619,000 275,963 61.0%

Goods Purchases 5,873,313,000 2,467,432,850 7,990,519,000 31,672 7.0%

Improvement Costs 422,834,000 306,679,150 1,186,647,000 4,703 1.0%

Running Costs 345,570,000 137,322,000 628,298,000 2,490 0.6%

Other Costs 3,546,360,000 0 10,276,805,000 40,734 9.0%

Principal & Debt Repayment 20,000,000 0 90,000,000 357 0.1%

Financial Help 0 0 250,000,000 991 0.2%

Transfer to Village 0 998,735,000 0 - 0.0%

Others 2,134,413,000 5,200,165,000 2,286,481,000 9,063 2.0%

Perhitungan Tak Tersangka 374,000,000 150,000,000 - 0.0%

Development Expenditures 15,869,000,000 19,891,059,000 21,491,285,000 85,184 19%

Industry 2,000,000 10,000,000 75,000,000 297 0.1%

Agricultural and Forest 177,955,000 513,829,000 195,000,000 773 0.2%

Water and Irrigation 500,000,000 80,372,000 39,000,000 155 0.0%

Labor 18,500,000 15,000,000 40,000,000 159 0.0%

Trade 426,500,000 1,090,275,000 2,013,600,000 7,981 1.8%

Transportation 4,299,240,000 6,561,514,400 4,069,444,000 16,130 3.6%

Mining and Energy 0 0 0 - 0.0% Tourism and Regional Communications 169,000,000 32,315,000 110,000,000 436 0.1% Regional Development and Pemukinanan 537,800,000 1,487,850,285 668,000,000 2,648 0.6%

Living Environment 408,849,000 382,410,000 511,710,000 2,028 0.4%

Education, Culture, etc 3,284,581,000 2,445,327,182 2,525,000,000 10,008 2.2%

Population and Welfare 42,900,000 35,000,000 40,000,000 159 0.0%

Health etc. 675,018,000 1,885,381,000 1,495,020,000 5,926 1.3%

Housing and Welfare 3,060,000,000 1,407,094,133 2,445,114,000 9,692 2.1%

Religion 53,440,000 350,000,000 609,000,000 2,414 0.5%

Technology 278,038,000 205,000,000 315,000,000 1,249 0.3%

Law 33,560,000 92,500,000 130,000,000 515 0.1%

Government Apparatus 1,806,619,000 3,202,191,000 6,023,200,000 23,874 5.3% Politics, Information, Communication, and Media 75,000,000 45,000,000 127,197,000 504 0.1%

Security and General 20,000,000 50,000,000 60,000,000 238 0.1%

Subsidy to Lower Regions 0 0 - 0.0%

Contingency 300,000,000

Total 58,144,415,000 53,244,033,500 114,123,654,000 452,346 100.0%

Source: Kota Sukabumi (revised) budget documents, various years

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Table 9: Budget Structures for West Java Local Governments

% of total expenditures

2000 2001 Routine Development Routine Development

All Tkt 2 63.30 36.70 66.89 33.11

All Kabupaten 65.78 35.02 61.50 32.85

All Kota 61.50 38.50 70.87 29.13

All West Java 73.39 26.61 73.71 26.29

West Java All Kabupaten 76.64 23.36 74.82 25.18

West Java All Kota 65.82 34.18 70.77 29.23

Kota Bandung 71.40 28.60 66.10 33.90

Kota Bekasi 57.64 42.36 69.29 30.71

Kota Bogor 77.17 22.83 77.39 22.61

Kota Cirebon 74.96 25.04 77.77 22.23

Kota Depok 47.41 52.59 50.99 49.01

Kota Sukabumi 66.33 33.67 83.10 16.90

Kab Bandung 69.92 30.08 72.34 27.66

Kab Bekasi 73.59 26.41

Kab Bogor 76.97 23.03 71.79 28.21

Kab Ciamis 79.01 20.99 82.10 17.90

Kab Cianjur 75.53 24.47 71.60 28.40

Kab Cirebon 74.73 25.27 79.66 20.34

Kab Garut 82.31 17.69 79.79 20.21

Kab Indramayu 78.17 21.83 66.12 33.88

Kab Karawang 75.48 24.52 59.13 40.87

Kab Kuningan 79.56 20.44 82.56 17.44

Kab Majalengka 76.93 23.07

Kab Purwakarta 73.90 26.10 78.86 21.14

Kab Subang 79.66 20.34 72.02 27.98

Kab Sukabumi 70.57 29.43 67.35 32.65

Kab Sumedang 74.23 25.77 83.56 16.44

Kab Tasikmalaya 82.87 17.13 79.68 20.32Source: Ministry of Finance note: MoF data uses planned budget data and does not incorporate mid-year revisions. For a consistent comparison, this table uses only MoF data while the text uses data incorporating on mid-year revisions.

Sukabumi-RPER 16

IV. Financial Management

Kota Sukabumi is a local government with 252,000 inhabitants, and about 5,000 local civil servants. The economic base is primarily trade and services. This makes Kota Sukabumi somewhat smaller that the average Indonesian kota with 440,000 inhabitants. The size spectrum of kotas ranges from under 24,000 (Kota Sabang, Aceh) to 2.6 million (Kota Bandung). Average kabupaten population size is higher at 616,000, with a range from 36 thousand (Kab Malinau) to 4.15 million (Kabupaten Bandung). Kota Sukabumi’s local government was organized into about twenty expenditure posts in 2001, of which about half were full-fledged agencies/dinases (see WBOJ 2002). It is ranked in the top quintile according to a composite Human Development Indicator (ranked 27th and 49th respectively in 1996 and 1999) (BPS/BAPPENAS/UNDP 2001:85). In 1999, its regional GDP was Rp. 3.7 million per capita (ranked 130 of 336 (excluding Jakarta), with a local government area average of 4.9 million. Overall Kota Sukabumi appears to have achieved a relatively good local public financial management system, and there are some promising signs that improvements continue to be considered. The local executive and legislative branches appear to have made good use of a UNDP BUILD Urban Management Advisor (UMA), particularly owing to the presence of a pro-active and apparently reform minded mayor (walikota). The UMA appears to have promoted participatory planning processes with active government support, and argues that even villagers are now better informed about the issues and are placing targeted demands for discussion to the local government. Further goals are the improved integration of the planning cycle (bottom-up process as they ultimately converge in the PROPEDA, REPETADA, RENSTRA, APBD), as well as improving performance measures and public feedback in this process. A case can still be made for a more routinized involvement of civil society in the budgetary process, for example through a pre-published round of regular hearings set out in a PERDA. Similarly, a “freedom of information” PERDA might help support a more pro-active approach at disseminating information (e.g., the budget). A major complaint of both the legislative and executive was that they did not know how many national resources (i.e., APBN DIPs) are spent on an annual basis in their city. This makes the effective allocation of APBD resources more difficult, and reduces accountability especially if the planning cycles are supposed to be reflective of overall improved regional development. One recommendation argues for a statement of deconcentrated expenditure plans and realizations to be filed with the local budget reporting. As the Head of Region apparently signs all deconcentrated project head (PimPro) authorizations, this may be one point at which to collect this information. This will work for realizations (in process), although it may not be enough to feed into the overall planning process. As an interim measure, perhaps dinases should be required to submit a list of all known deconcentrated projects in their sectors. Our impression of the overall budget implementation process is that it proceeds relatively smoothly. The main concern was the late announcement of the DAU, and the fact that it can only be disbursed on a monthly basis. Cash management in times of lower revenues

Sukabumi-RPER 17

flows seemed to consist mainly of “squeezing” disbursements with the DIK (ex-wages)/DIP structure. The Budget Team would typically select the lowest priority development expenditures for deferral/delay, to be operationalized by the Bagian Keuangan. The significant budgetary shock, due in large part to the centrally mandated retroactive wage payments, led to a more full fledged revision of the budget that was approved by the DPRD. The DIP/DIK process is currently input driven. It sets the spending limits and framework for the respective dinases. This appears to function well as a ceiling within which the Bagian Keuangan honors payment requests (SPPs). The fact that each dinas is only subject to one DIK and one DIP can consist of multiple projects suggests that there is not excessive rigidity in this process. The SPP process also did not seem to generate excessive complaints. However, the DIP/DIK system does not orient individual dinases to meet particular targets as part of the overall budget implementation process. Rather it focuses on making sure all the paperwork on ceilings and “inputs” (i.e., receipts) are in order. Incorporating some performance targets as part of the DIP process may therefore be useful. The local government has now allocated resources in the FY 2002 budget to implement the Inpres 7/1999 that requires all government agencies to submit a performance accountability reform. Although commentators noted that several agencies (including health) had established a good “vision” plan, it is not clear how successful matching these to an effective performance orientation will be. On the procurement side, the local government appears to follow the Kepres 18/2000. However, staff at the Public Works agency admitted that certain de facto restrictions are applied in contracts of less than one billion, based on an “unwritten rule” to only hire local contractors. The pre-qualification process seems to be the tool used to exclude external or non-desirable contractors. The PU said that this was also used to blacklist contractors with a bad history, but it can easily be seen that this process can be abused. This process in the tendering committee is not completely transparent, as unlike the tendering process and its public announcement they do not need to explain why a bidder was rejected in prequalification. On the audit side, only compliance audits are currently conducted by the internal auditor (Bawasda). The local auditor wants to broaden its audit scope to all local government activities. However, a view of their existing staff capacity currently makes the success of this effort dubious. Only one of the Bawasda’s 18 auditors has an accounting background, underscoring the need for additional staff and/or training. The development budget in FY 2002 allocated about 80 million for improving the audit process, but further measures appear to be needed, including improving capacity building, quality assurance (i.e. peer review) and audit monitoring system. Moreover, in 2002 the Bawasda audit plan does not yet seem to have been synchronized with that of BPK, BPKP, and BaWasda provincial. The audit findings almost exclusively include administrative measures, and don’t appear to consist of serious (e.g., legal) sanctions. Further, the only audience for audit reports is the head of the executive (the mayor), and it is her

Sukabumi-RPER 18

prerogative to make any findings public. The DPRD is increasingly getting involved in monitoring projects, but it is not clear how effective this monitoring (and reportedly occasional intervention…) is in improving the effectiveness of projects. The DPRD only have examples such as making sure that the right model of car had been purchased. However, sustained reforms on the governance side act as a pre-requisite for any improvements set out above. The Mayor has officially banned the line item of “third party revenues” (sumbangan pihak ketiga) from the budget arguing that this is not a transparent line item, a move which should be applauded9. Moreover, the PEMDA is planning to set up a website with information on public finance, as well as providing general updates to the public (again, budgeted in a FY2002 development project). The officials’ honoraria do not appear to drain significant resources from development projects. However, the contractor associations admitted that, while Kota Sukabumi was by no means the worst in the region, informal costs were still present. The contractors even admitted that parts of the DPRD were becoming involved in procurement in ways that made it more costly. Even strong initiatives by a pro-active mayor do not seem effective in solving these types of problems at an operational level. The government increasing forms of community participation in the form of block grants to local neighborhoods (52 million per kelurahan, and 42 for desas as these are considered to be able to generate some additional own revenues). These initiatives may benefit from the types of lessons of community monitoring and implementation, as found in other community based projects such as KDP. For example, there do not appear to be any pre-requisites for communities to receive these resources. It was also not clear the degree to which grant-funded project implementation will actually be monitored by the local government executive or community, or the degree of accountability for the use of these funds was present at the village level. The basic conclusion of our short visit is that good leadership – in this case a very active regional head – can make a difference. However, there are limits to what key leaders themselves can do and more importantly how sustainable their reforms can be expected to be. Strong sanctions and legal enforcement against civil servants, or legislators for that matter, do not appear to be present. Some rent-seeking (e.g., in the procurement process) still seems to occur, and there are some worrying indicators that the newly exercised authority of the legislature may actually aggravate rather than reduce this problem. There do not seem to be any strong indications that the fundamental incentives of the civil service act in such a way to reduce rent-seeking, for example in promotions. Rather, a feature typical of Indonesian national and local civil services appears to hold, with expectations about patronage networks reinforcing the tendency toward “shared-rent-seeking”. A more fundamental question, beyond the scope of this diagnostic, is whether there are any prospects for local civil service reform that would act to reduce rent-seeking and enhance service orientation?

9 In contrast, many other district governments are targeting increased collection of these unspecified revenues to supplement their PAD, thus significantly reducing transparency and predictability in revenue generation.

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Decentralization has brought about a significant realignment in the checks and balances that the executive, head of the executive (mayor), legislative, and broader civil society exert in the management of local public resources. Local governments now have more control over the career prospects of their own officials. The degree to which local governments can more fully can exert autonomy in their own civil service management as reflected in Law 22 is still unclear.10 In the absence of specific national regulations, only local governments that are determined to move forward with test cases will provide more clarity. Further work should be conducted to understand what the scope and possible benefits of reforms in this area might be. More fundamentally, do localized instances of civil service reform provide a means to proceed in an environment where national civil service reform measures do not appear possible? While Kota Sukabumi is clearly on the right track, it is easy to see that under less dynamic leadership this momentum could quickly stall. It is natural to ask where any countervailing pressures on responses to such slippages might come from: DPRD, executive, civil society, public outcry about deteriorating services? What is the sustainability of reforms? Have the participatory planning processes created enough public demand to ensure their sustainability in the face of potential future local governments attempts to roll them back or just provide them with lip-service?

V. Civil Society and Governance Issues Any description of the governance environment requires a description of the major stakeholders. Specifically, besides the executive and legislative branches, this means determining who are the main actors in civil society. In Kota Sukabumi, the main elements of civil society are NGOs and the media. NGOs are just beginning to develop into a serious force in Sukabumi – there are more than 100 registered NGOs in the city, but only about 15 are active on a regular basis. As is typical in many regions around Indonesia, the others tend to coalesce around a specific issue and then are unable to sustain activities over time or when the urgency of the issue diminishes. The media is quite active in the city, with two newspapers and three local radio stations (one sponsored by the city government). There are no universities in the city, and thus no active student movement. The grassroots community-based organizations (KSMs) typical of the Suharto era, such as the PKK and LKMD seem still to be active but have been marginalized. Being a largely urban area, there are no farmers groups or water-users organizations which have been more successful in sustaining activities. Mass organizations to not seem to have an overly strong presence, but the network of neighborhood mosques is clearly important in everyday public life.11 A number of impressions and opinions emerged over the course of discussions with government (executive and legislative), NGOs and the private sector, which we offer below. While these by no means constitute a systematic and consistent data set, they are

10 Articles 75-77 of Law 22/1999 gives regions broad autonomy in civil service management, while Law 43/1999 appears to give control primarily to the center. Local personnel issues are set out by Government Regulations 84 and 96-101 of 2000. 11 The government’s public consultation process effectively utilizes the network of local mosques.

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generally interesting and our instinct is that they are fairly widespread and commonly held opinions. Views on the Executive Branch It is widely perceived that the executive branch of government continues to dominate governance affairs, but that influence is now beginning to be shared with the DPRD. Relations directly with the people are seen to be stronger, but there is still very weak outreach and a tenuous relationship with NGOs. The level of participation has increased, but the government is still seen as difficult to access on a day-to-day basis. The relationship between the city government and sub-district and neighborhood governments is still evolving, and generally in a positive manner. “Money politics” is not generally perceived as a problem in the Executive-Legislative relationship, but there remain serious political difficulties between these agencies – the illustration that is consistently offered is their inability to solve the obvious problem of the costly and sometimes immobilizing congestion in the market and town center. Finally, KKN still exists. Views on the Legislative Branch This is an institution which is seen as not yet mature, but which has significant potential. Part of its potential is the freshness of the members, but this needs to be matched by appropriate training and education on legislative procedures and roles. The institution’s lack of transparency (it has a large, publicly-funded budget, but is not transparent in its use) does not help inspire trust and confidence. Members are perceived as being more loyal to their political parties than to their constituency. The legislature has begun to receive the aspirations of their constituents, but they haven’t yet developed effective mechanisms to act on them. Finally, politics can have a negative impact on their relationship with the Executive branch and affects their general effectiveness – again, the illustration that is consistently offered is their inability work with the executive branch to solve the obvious problem of the costly and sometimes immobilizing congestion in the market and town center. Views on Civil Society The long history of distrust of NGOs in Indonesia is not helped by the large number of registered NGOs compared to the small number which are active. On the other hand, most people believe that NGOs can be effective and have good potential, especially in particular sectors/areas of work. But there are many who are seen as weak, fragmented, not very dynamic, and only looking for a buck. The advocacy role of civil society is not very focused, nor is it fully effective. Implications for Governance The lack of trust among these stakeholders is hardly unusual in Indonesia today, but the perception that each group “has potential” and is at least looking in the right direction is quite positive, and under these circumstances we might expect the demand for

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governance reform to increase. In fact, there are a number of steps which could be taken to increase confidence and improve the general governance environment. The executive branch needs to find a mechanism to strengthen participation of NGOs in the planning process, as they have done directly with the communities so successfully. The general perception of NGOs, particularly the larger ones who have interests across the Kota and the Kabupaten, are not involved in the participatory process until the later stages (i.e. the Rakorbang), and thus somehow miss out on much of the meaningful opportunity for input into government activities. NGOs could also play a more useful and active role in monitoring and evaluating the implementation of projects and activities. The government should also pay particular attention to instituting principles of transparency and accountability in the application of the new block grant system to neighborhoods, particularly in aspects of procurement and implementation. Failure to do so could create new opportunities for corruption and jeopardize the more open and transparent relationship with constituents developed as part of the participatory planning process. At same time, the DPRD needs to establish some clear mechanisms for public access and effectively publicize them. The DPRD members we spoke with thought their frequent open public meetings adequately demonstrated their interest in eliciting public input, but not one NGO or private sector representative we met knew they could attend meetings without a direct, personal invitation. Information on how to contact DPRD members needs to be more widely available, for example through the media and other means such as public posters. The periodic magazines the DPRD has begun to issue are a good step forward, but need much wider distribution to be effective. The DPRD could cultivate significant public participation in the budget process by establishing a process of public debate in budget hearings. Meetings need to be scheduled and publicized in advance, with adequate information provided through the media on the subject and public nature of the meetings. Along with the Executive branch, they might also engage appropriate civil society groups to facilitate focus group discussions on specific issues and with specific target groups (women, youth, slum dwellers, the rural fringe residents). Civil society needs to continue to strengthen its operational capacity, and the UMA will continue to play an important role in this process – especially in helping them build provincial or national support networks. Independent monitoring of government activities (such as budget disbursement, procurement, operations and maintenance) could be encouraged. In many cases NGOs are much better equipped to undertake this type of activity than, say, the DPRD, and by allocating this function to NGOs the DPRD could, in fact, enhance levels of accountability and public trust.

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Sector Report: HEALTH Health Sector Budget The total allocation for the health sector is Rp. 19.2 billion or 17% of the total APBD12. Rp. 8.6 billion (44%) goes to the Dinas Kesehatan (including the Puskesmas, or Health Centers), and the remaining Rp. 11.0 billion goes to Syamsudin Hospital, a type B hospital belonging to the city government. From the total budget that goes to the Dinas Kesehatan , 78% is used to pay for staff salaries, leaving very little for development activities. From the total development budget, Rp. 821 million ( 76%) is allocated for drugs13. More detailed calculations reveal that city health expenditures are strongly skewed towards curative care14. Moreover, when salary costs are incorporated, only about 27.5% of the city’s health budget was used for preventive and promotive services. Rp. 250 million is allocated to the Dinas Kesehatan for operational costs for the 15 health centers (not including health center wages of Rp 4.9 billion). The amount received ranges between Rp. 13-20 million per health center, with the criteria for allocating the operational cost including: population, number of villages served, number of RW (hamlet), number of sub-health centers, number of posyandus, number of visits, number

12 Data here is based on mid-year budget revisions. 13 Prior to decentralization, drugs were centrally funded through an Inpres, and thus were categorized as a development expenditure. This convention has continued post-decentralization, although expenditures for drugs are usually considered a routine cost. 14 Calculations based on costings from provincial health project preparation work, World Bank.

Table 10: Features of the He alth Sector Budget (Rupiah)

APBD Dinas Kesehatan RSU Syamsudin Routine 18,040,455,000 7,255,109,000 10,785,346,000 wages 10,538,865,000 6,684,865,000 3,854,000,000 HC operational costs 250,000,000 250,000,000 other routine 7,251,590,000 320,244,000 6,931,346,000 Development 1,581,000,000 1,331,000,000 1,081,000,000 drugs 821,000,000 821,000,000 building rehab 325,000,000 75,000,000 250,000,000 Comm Disease Control 50,000,000 50,000,000 Maternal & Child Hlth 50,000,000 50,000,000 Geriatrics 10,000,000 10,000,000 School feeding 75,000,000 75,000,000 Total Routine + Development 19,371,455,000 8,336,109,000 11,035,346,000

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of 2-wheel and 4-wheel vehicles, geographical difficulties. In addition to this budgeted allocation, the city government returns to the health centers 40% of the retribution (patient fee) collected at the centers. This compares to a national average health center budget of Rp 10 million prior to decentralization. Data on expenditures for the previous fiscal year are incomplete, so it is rather difficult to determine definitively whether or not funds available for delivering health services declined. However, data from the Communicable Disease Control (CDC) division will be used as an illustration. In FY2000 (a 9-month fiscal year), the city received around Rp. 80 million directly from the APBN to support the delivery of CDC services, plus vaccines, insecticides (malathion for fogging), and abate (for larvaciding). The last two items are essential for Dengue control, a problem in Kota Sukabumi. During FY2001, the APBN amount for CDC was Rp. 35.3 million plus an additional amount for vaccines (but no allotment for insecticides or abate), while the city allocated Rp. 50 million from which they needed to set aside funds to purchase insecticides and abate. The direct impact of the reduced amount of money was a lower number of fogging activities undertaken by the city. In 2000, the city completed 40 fogging activities, while during 2001, funds were adequate for only 16 foggings.

Despite the smaller allocation for this year, the CDC staff do not believe the quality of their programs suffered because of the following reasons:

• Prior to decentralization, each CDC program was managed vertically from the center via the province, causing substantial inefficiency due to overlapping activities and poor utilization of staff time. A classic example given was inter-sectoral workshops conducted separately by the different CDC programs. Now the city conducts such workshops jointly for several programs, thereby saving money and staff time.

• Government subsidies are better targeted towards the poor. Using the Dengue example above, free fogging is only conducted when the patient comes from a poor family, while wealthy families are expected to pay for such services. The money collected in the form of user fees do not go into the city treasury, but are managed directly by the CDC unit at the Dinas Kesehatan, and can be used to further subsidize selected services for the poor

Table 11: Changes in the CDC Budget, 2000 -2001 millions of Rp.

(9 mos) 2000

APBD

(9 mos) 2000

APBN

2001

APBD

2001

APBN CDC 0 80 50 35.3 vaccines 0 additional additional insecticides 0 additional 0 abate 0 additional 0

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• When CDC was still centralized, the city often received programs that were not needed or were out of proportion with their needs, i.e. malaria control, and rectal swabs for cholera diagnosis. For the latter, the city received thousands of specimen kits while the real need was only 10% of the total number received. Unused supplies subsequently expired and had to be thrown away. With decentralization, program planning and priority setting can be evidence-based: for 2001, priority programs based on the city’s health profile were safe motherhood, child survival, dengue control, diarrhea control, Pneumonia (ARI) control, Neonatal Tetanus control, Tuberculosis control, HIV/AIDS and STDs control, and malnutrition. Certain programs such as immunization (including Tetanus Toxoid vaccination for school children), surveillance of acute flaccid paralysis, and rabies are also prioritized in support of global commitments.

• The city government’s strong support for health programs was demonstrated by the additional allocation made for purchasing hepatitis B vaccines and TB drugs when supply from the central government was inadequate. The additional funds allocated for this purpose were Rp. 121 million or another 17% of the initial drug allocation of Rp. 700 million.

Service Delivery to the Poor Sukabumi has used modified BKKBN criteria to identify the poor. These criteria include among others food availability, housing condition, and income. Using this system, in 2001, 6,526 families (approx 32,630 people) were identified as poor, or around 13% of the total population of the city. As in other districts and cities throughout Indonesia, Sukabumi City received JPS-BK funding for delivering free health services to the poor. In 1999, aside from direct transfer of funds to the health providers under JPS-BK (the health centers and the village midwives) for delivering basic health services, an additional Rp. 100 million was also transferred to a unit called the Bapel15. In Kota Sukabumi, this fund was used to pay for inpatient care for poor families. In theory, the poor were requested to pay maximum half of the inpatient costs. But in practice, if they really could not pay, the Bapel paid for all costs. Free outpatient care has been provided to the poor both at the health centers and the public hospital, funded through 2001 by the JPS-BK scheme. Beginning in 2002, the city will implement a different approach for providing targeted health services to the poor, utilizing a voucher system16. Instead of the Kartu Sehat used in the JPS-BK program to identify the poor, the city will use Kartu Keluarga Miskin. Each poor person requiring hospitalization is requested to get a referral slip from the nearest health center. In addition to the referral slip, the patient will also be given a voucher for inpatient care and another voucher for purchasing medicines from a designated pharmacy (apotik). The Dinas Kesehatan of Sukabumi City has worked out a plan, formalized in MOUs with the director of the public hospital (RSU Syamsudin), and 15 A Bapel is an agency established to managed JPKM ( Community Health Maintenance Program) funds. This money apparently did not come from the APBN as it did not come through the Ministry of Health, but rather from a special supplemental fund at Bappenas. 16 This was reportedly adapted from a successful Thai model.

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Apotik Waluya, a BUMD pharmacy owned by the city. The drug voucher will be used during hospitalization, and the pharmacy will use the voucher to make its claims to the Bapel after the patient is dicharged. When the patient is released from the hospital, the hospital will submit the voucher to the Bapel for payment based on actual expenses for the patient. This new system is targeted to pay for hospitalization only if it is related to childhood (under five) illnesses, maternal cases (cases related to pregnancy and delivery), and certain communicable diseases. The key differences between the JPS-BK plan and the new voucher system for inpatient care are summarized below:

JPS-BK Voucher System 1. The money is transferred to the

provider (hospital). The amount transferred is based on the estimated need of inpatient care for the poor.

2. The provider receives the money

prior to service.

3. There may be no relationship to aggregate total service costs.

4. The hospital is responsible for drug

costs.

5. There are no restrictions to the type of inpatient care.

6. The source of funds is the central government

1. The voucher is given to a patient needing inpatient care.

2. The provider submits the claim the Bapel after service delivery.

3. Reimbursement is based on actual

cost of service delivery. 4. A pharmacy is appointed to supply

drugs also through a voucher mechanism.

5. Targeted inpatient care only for

childhood illnesses, maternal cases, and selected communicable diseases.

6. The source of funds is the city

government and other local resource mobilization efforts17

Role as a Regional Service Provider About 60% of the patients admitted at RSU Syamsudin come from Kabupaten Sukabumi (not the city) which creates a conflict: the city sees its role as being a regional service provider, yet serving the poorer non-city residents will incur real costs which have to be

17 The city plans to claim management fee from private hospitals that use the services of specialists working in the public hospital under the government payroll. Another plan is to encourage medium and large enterprises around Sukabumi (there are about 40) to donate funds to the system.

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funded by the city government. To solve this problem, an MOU was signed between the head of Dinas Kesehatan Kabupaten Sukabumi (the surrounding region) and the director of the hospital. Under the terms of the MOU, the government of Kabupaten Sukabumi allocated Rp. 400 million to pay for inpatient care for its poor families, and enables the hospital director to claim payment to Dinas Kesehatan Kabupaten Sukabumi for services given by the hospital to poor patients coming from Kabupaten Sukabumi. The ASKES Issue ASKES is a parastatal insurance plan for civil servants which is funded through a 2% monthly wage deduction. PT ASKES was established based on a joint decree among the Ministry of Home Affairs, Ministry of Health and Ministry of Finance. About 30% of patients admitted at RSU Syamsudin are ASKES participants, but in contrast, hospital revenue from ASKES is only about 7-8%. This imbalance occurs because payments from PT ASKES to the hospital have no connection with the actual cost of services given to patients. For example, PT ASKES pays the hospital a flat rate of Rp. 80,000 for any type of surgery conducted. This compares to an actual cost of around Rp. 1 million for a simple surgery such as appendicitis. Moreover, the hospital often receives less than its claim for reimbursement for services given to patients because ASKES unilaterally disallows the charges ex post. It is clear that the obligation to serve ASKES patients has been a source of significant losses to the hospital over the years, but was balanced by the fact that the entire hospital budget was provided by the central government. With decentralization, the burden of these losses is transferred from the central government to the city government since all hospital routine costs now come from APBD. Reorganization and Personnel Management The Dinas Kesehatan Kota Sukabumi was restructured based on Local Regulation (Perda) No. 17/2000. The previous organization followed the standard matrix developed by the provincial government, consisting of 5 administrative units under the Kepala Tata Usaha (planning, personnel, finance, logistics and general) and six technical divisions directly under the Kepala Dinas Kesehatan (CDC, community health, nutrition, environmental health, health education and rehabilitation). The new organizational structure consists of two administrative units under the Kepala Tata Usaha (general and logistics, and finance and personnel), and three technical units (CDC, health services, and partnership and health development). One consequence of this change is that there are fewer structural positions after decentralization – about 14 structural positions were eliminated. One interesting result of this is that the planning unit was deleted from the organization and its functions become the responsibility of the technical divisions. This was intended to formalize what happened de facto before decentralization. During that period, despite the existence of a formal unit, planning was done in fact by the technical divisions, because structurally the chief of the planning unit had a lower echelon rank compared to the division chiefs and as such had no authority to influence decisions. As a result, the role of the planning unit was limited to compiling plans prepared by the technical divisions. The new structure simply formalizes this working relationship.

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The Dinas Kesehatan has a total staff of 356, including people working at the Dinas Kesehatan office, fifteen health centers, and the other implementing units (laboratory, drug warehouse, and health schools). Sixty nine staff worked at the Dinas Kesehatan office under the old organization. With the new, streamlined organization, the staff working at the Dinkes office was reduced to 49, and the rest were redeployed to the health centers and the other implementing units. This could be done without too much objection in Sukabumi city because each health facility is within the city area18. Under decentralization, Dinas Kesehatan Kota Sukabumi views its role as including licensing health professionals, and accreditation of health facilities. Working together with the IDI (medical association), and the IBI (midwife association), Dinkes has developed standards for licensing doctors and midwives, and has also adapted standards from the province to accredit health facilities. A secretariat was established at the Dinkes to conduct this function. Relationship to the Province & the Center Dinkes Kota Sukabumi is confident that it can function well without too much interference from the province or the central level. There is still the strong feeling that the province is still obligating the city to undertake certain activities through the APBN mechanism, which they disagree with. There is also some resentment over being called to the province for meetings which they thought only benefited the province – they view such activities as helping the province spend its APBN money for activities not necessarily needed by the city. They would prefer the province to take on a facilitating role in the future, in which the province visits the districts to discuss the needs of the city and helps them meet those perceived needs. They also see the province playing a significant role for cross district activities, including developing a province wide health insurance system and helping to negotiate new arrangements with ASKES. The Dinkes also believed that the center or the province could help in conducting some research/survey for program development at the city, since the Dinkes does not yet have such capacity. Changes in Health Status No changes can yet be observed as a result of decentralization because the one year elapsed time is too short to evaluate. Based on 1999 data, life expectancy at birth in Kota Sukabumi was 66.5 years (Susenas), the IMR was 38.6/1,000 live births . According to locally obtained data for 2000, the IMR was around 24/1,000 live births. These are substantially better than the average IMR for Indonesia of 52.2 per thousand live births19. Three maternal deaths were reported in 1999, but in 2000, 5 maternal death cases (2 of them were due to traffic accidents) were reported. If the number of live births was 4,630 as reported in the book of statistics for the city (Sukabumi Dalam Angka), the maternal

18 Redeployment of staff is a major problem in districts which have remote areas causing overstaffing in urban, populous areas, and understaffing in remote, scarcely populated areas. 19As per the 1997 Indonesia Demographic and Health Survey.

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mortality ratio (MMR) would be around 108 per100,000 live births20, which is way below the national ratio of 37321. Emerging Issues Sukabumi city detected its first 5 HIV positive cases in 2001. All cases are drug users. These cases were identified not from the sentinel sites but from the private health laboratories in the city. Tuberculosis is a big problem in Sukabumi city. In 1999, 365 new cases were found, yielding an incidence rate of .15%. These were cases identified at public facilities only, however, and the true rate is clearly higher. An interview with a private physician revealed that he diagnoses 2 new cases of TB per week in his practice. The cure rate at public facilities was 79% (lower than the targeted 85%) while the cure rate at private facilities is suspected to be much lower considering the high drop out rate of patients receiving treatment from the private doctors, as reported from the same interview. The higher drop out rate is mainly caused by the high cost of medicine when it is purchased from the pharmacies. It is also suspected that many private practicing physicians do not use the standard TB treatment recommended by the WHO, and the WHO recommended package is not sold readily at pharmacies22. Kota Sukabumi has also lately found more cases of leprosy and rabies, imported from surrounding districts. This reinforces the fact that health development in the city is very much influenced by the performance of the Dinas Kesehatan in its neighboring districts. Recommendat ions Improving the capacity to do health planning. The health sector has started in a good direction by conducting evidence based planning. But capacity still needs to be built in planning for a sector-wide reform, i.e., reform in conducting service delivery, reform in health financing, improved priority setting, and so forth. This can be done by inviting experts from outside, sending people to attend management training, conducting comparative studies, conducting well planned policy research, and so forth. Since Sukabumi city has agreed to participate in the World Bank’s PHP II, resources to do this should not be a problem. Improving the utilization of health facilities. Health facilities are very costly to run and maintain, and will be very cost ineffective if they are underutilized. To improve utilization several things must be addressed that relate to quality improvement. This may 20 note: if the two traffic accident deaths were excluded, the MMR would be 65/100,000 live births 21 According to the 1995 household and health survey, the last nation wide survey that yielded MMR data. Scattered surveys, such as the more recent one conducted for the five provinces in CHN-3 found that MMR in the 5 provinces (West and Central Java, NTT, Maluku, Papua) was more than 600 per 100,000 live births. 22 The Dinkes also had similar difficulty in purchasing TB drugs to cover the gap in supply from the central government. The standard WHO treatment packet was not available commercially, and the cost of building this packet was significantly higher than the cost of procuring it from the central government.

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include improvement of professionalism of the provider by making them more committed to clients, making them technically competent, well supervised and receive adequate incentives. The clients must also be well informed, so that they know what to expect and what their responsibilities are. The city Government should increase resources allocated for preventive and promotive care, which are essentially public goods. Improvement of health status will not be gained by focusing on curative care, particularly tertiary care at hospitals. In reality, only a very small percentage of the population will need and will benefit from inpatient care. The private sector can take over the bulk of curative care from the city Government. The Government’s main role in curative care should be a focus on delivering curative care to the poor, establishing and enforcing a sound regulatory environment, setting up and reviewing standards of care for public and private providers. This should not be seen as a challenge to the city’s commitment to being a center of health services for the surrounding region, but rather encouragement to consider a broader, and ultimately more sustainable, approach. The city would benefit from a basic assessment of its health system capacity, functions, and objectives. Would the city need to have as many health centers? Would its curative function be only to provide care for the poor? Would it also provide curative care to non-poor, but by charging a fee closer to the unit cost of service? Should it strengthen the promotive and preventive care? Then, if a system has been developed, what adjustments in staffing quantities and qualities would be needed? Resource mobilization. Health insurance is an option to involve the community in health financing through risk pooling. Because of that, it would be unfeasible to develop an insurance system just for the city population, but the initiative would work if there is a big enough pool of people to cover. This can be achieved if Sukabumi city develops its insurance program with the other districts and cities in West Java, an option the city government should explore. Because of externalities and economies of scale, some activities would more efficiently be organized or undertaken by a group of districts/cities. This could be achieved, for example, by establishing health boards or councils as a forum for discussing cross district issues. The city needs to find an effective way to communicate what roles and responsibilities it thinks the province and the center can play, for example, they can have a role in ensuring quality of services, setting standards, or providing technical assistance. The city should carefully consider its HIV/AIDS strategy, looking for the most appropriate avenues to strengthen the national strategy so as to meet local needs as they emerge, including especially HIV/AIDS-targeted health promotion and education activities.

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Sectoral Perspectives: EDUCATION Budget for Education Kota Sukabumi has made education, health and commercial development its priorities, and this is reflected in their education budget allocation as a proportion of the total APBD: 28.5% in 2000, 38.8% in 2001 and 30.9% in 2002 (Table 12). Out of this total, more than 85% has been allocated to cover recurrent expenses (salary, including the contract teachers and honorary staff, and operational costs). This amount excludes APBN projects23. Within the education sector, the development of the primary education has been made a priority. Table12 shows that investment for this level more than doubled in 2002 and will absorb between 67% (in 2002) and 96% (in 2000) of the total education development budget. In 2002, the availability of more funds allows them to allocate larger budgets to other levels as well. The most significant increases are for secondary education (Rp. 495 million compared to Rp. 54 million in 2001) and higher education (Rp. 1.2 billion compared to Rp. 69 million in 2001).

23 APBN 2002 financing includes Basic Education Project (Rp. 2.7 billion) and JPS Scholarship & School Grant (Rp. 147.2 million for the first semester of FY 2002, second semester figure not yet available) and provincial APBD (amount being verified).

Table 12: APBD Allocation and Education Budget Kota Sukabumi, 1999-2002

1999/2000 2000 2001 2002

APBD 58,144,415,000 58,768,153,000 108,867,687,894 155,163,971,000 Routine 42,275,415,000 38,877,094,000 88,629,307,640 112,278,072,000

Wages 27,675,215,500 67,132,534,792 82,676,246,000 Others 11,201,878,500 21,496,772,848 29,601,826,000

Development 15,869,000,000 19,891,059,000 20,238,380,253 42,885,899,000

Education 16,728,073,682 42,206,010,344 54,872,635,000

Routine 14,282,746,500 39,723,081,268 47,932,957,000 Wages 14,079,059,000 38,108,262,117 45,631,938,000 Others 203,687,500 1,614,819,151 1,938,425,000

Development 3,284,581,000 2,445,327,182 2,482,929,076 6,939,678,000 Note: FY 2000 budget is for 9 months (April-December).

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Performance, Challenges and Strategies The city authorities are fully aware that the quality of education is a function of many factors, such as the teachers, curriculum, and facilities. Some statistics indicate that the city has been able to strategically improve such factors. Enrollment Rate In general, the education sector is in a comparatively good shape. Some performance indicators have placed Kota Sukabumi among the best kota/kabupaten in West Java, and even in the country. The city records the SLTP gross enrolment rate of 122% (compared to the national rate of 82%), which is likely an indicator of its success in providing educational services to the surrounding areas.

Table 13: Primary Education Development Budget Kota Sukabumi FY 2000-2002

Educ. Development Primary Education % Primary %

FY Budget Allocation Ed. Allocation Increase 2000 1,821,953,000 1,751,953,000 96% 2001 2,245,000,000 1,994,988,376 89% 14% 2002 6,694,678,000 4,464,978,000 67% 124%

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Teacher Quality 89% of Kota Sukabumi’s elementary teachers have completed their D2 education24 (compared to the rates of 5 provinces: West Java 62%, North Sumatra 11%, Central Java 41%, East Java 50%, and DKI Jakarta 67%). More surprising is that 13% of them have an S1 university degree and some of them have Master’s (S2) degrees. (Table 14) The city’s relatively favorable geographical characteristics25 and, more importantly, leadership may be the key explanatory factors for such a remarkable attainment. Educational institutions are accessible to both students and teachers. Beginning in 1998, the Kepala Dinas made an intense effort to motivate elementary teachers to upgrade themselves (self-financed) to the D2 level. Later, for those who were less motivated, the city provided scholarships26. Currently about 6% of the teachers are finishing their D2 education. The remaining 5% of the teachers who are still have less than D2 education are largely nearing the pension age in a few years. The high level of motivation has led many elementary teachers to go beyond the minimum required education, D2. Of the 13% having S1 education, most majored in civics education (PPKn) and some majored in less relevant programs for their profession, such as law, business and marketing management. The decision to complete these majors is probably not by choice, but rather because of the limited supply of options: the only higher teacher training institution in the city, STKIP PGRI, offers only two programs: PPKn (civics education) and Business Management.

24 Training levels are classified as follows:

D2 2 years teacher’s training college certificate

S1 university Bachelor’s degree S2 university Master’s degree S3 university Ph.D.

25 Kota Sukabumi does not contain remote areas where enrollments typically are weak and teacher services more difficult to provide 26 Note this strategy could have a negative long term impact by rewarding with scholarships those who were reluctant to upgrade their skills, and implicitly punishing (withholding scholarships) from those who were willing to upgrade. This could make future upgrading activities more difficult as willing participants decline to participate via self-financing in order to obtain support they believe will follow.

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Improving School Quality and Efficiency As in all other districts and cities in the country, the city also has a problem with lack of teachers, poor quality of the school buildings and facilities, and limited capacity. Kota Sukabumi is employing a number of measures to overcome these problems. Regrouping. The city has been successfully resolving such issues at the primary school level through a regrouping program. Using school mapping techniques introduced by the Basic Education Project (BEP) and school profiles, the city identified a number of schools which qualified for regrouping: they are close to each other and each has a small number of students. As a result, the number of elementary schools is decreasing but each now enjoys better physical facilities, an adequate number of teachers, and simpler administration. The program has reduced the number from 170 down to 154 in 2000 – the target is 121 in 2005. Model Schools and School-based Management. This is not a typical “model” school which is created by and depends solely on central projects. Rather, this is a genuine effort to improve schools’ effectiveness and efficiency. Typically, some 4 to 6 schools are grouped, their combined facility renovated, and given a range of additional quality inputs including computer and language laboratories. The SBM concept is well understood and applied by the principals, teachers, other personnel, parents and the community. School boards are established in each model school. The target is for kecamatan to have one model school by 2004. An interesting addition to the standard plan is to use the successful model school to be a “learning place” for principal candidates in other schools. The Kepala Dinas confirmed that the government budgets

Table 14: Data of Primary school (SD and MI) teachers by level of education and personnel status, Kota Sukabumi 2001

Public primary schools Religious primary schools (Madrasah)

Level of Education No. of Teacher by Level of Education No. of Teacher by Personnel Status Personnel Status Kecamatan < D2 D2 S1 PNS Non- Total < D2 D2/ D2/ S1 PNS Non- Total PNS PGMI PGSD PNS

Warungdoyong 39 158 17 214 0 13 9 5 8 20 28 Baros 68 219 26 314 11 18 2 6 15 22 37 Cikole 35 250 58 273 70 2 27 14 17 31 Citamiang 45 189 25 246 7 9 13 3 9 6 15 Gunung Puyuh 35 148 17 200 3 20 14 15 23 38

Total 222 964 143 1247 77 0 38 87 2 28 61 88 149 Source: Basic Education Project, School Mapping, 2001. Note: Data for Kec. Lembur Situ and Kec. Cibeureum (which recently became kecamatans) are included in Kecamatan Baros.

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for model schools is not higher than the allocations for regular schools. However, the model schools do tend to generate more voluntary funds from parents and the community27. Programs targeting the poor “Sapujaga” program (i.e. students collecting small amounts of pocket money to help their needy friends) could be considered as an exit strategy for the JPS Scholarship and School Grant program. School renovation by community (Basic Ed. Project). As currently utilized by the city government, the grant and mandate given to the community (Komite Sekolah) under this structure to renovate primary schools has two positive side-effects: (i) building a sense of ownership within the community, and (ii) providing economic (job) opportunities for local people to work on the construction activities. Paket A, Paket B, Paket C, SLTP Terbuka. This program provides books and facilities to children of poor families at zero cost. The city might consider broadening this program, since books and materials can be a considerable cost for many families. In addition, this program merits improved socialization, as none of the civil society groups contacted as part of this research were aware of the program – on the contrary, the high cost of books was a key criticism of the government. DSP Free. The Dana Sumbangan Pendidikan (entrance fee) required for entry to secondary education is one of the most significant impediments for poor families who want to continue their children’s education. To overcome this issue, the city will attempt to abolish the DSP, beginning with a pilot program in one school in FY2002/03. If successful, this could be an important innovation in reducing drop-outs, especially when combined with no-cost book packages. Improving Institutional Capacity Decentralization has meant that personnel, facilities and authority for education programs have been handed over to the local government. As a result, the former Kandep (central ministry office) was merged with the former Dinas P&K (city government education office) to make one new Dinas Pendidikan dan Kebudayaan with a new, different structure, and with new tasks and responsibilities. This new body complies with Perda no. 14/2000 on the authorities of the government of Kota Sukabumi, with Perda no. 17/2000 on the establishment and organizational structure of the local apparatus, with the DPRD secretariat, and with the Walikota decree no. 65/2001 on the role, function, responsibilities and management of the Dinas Pendidikan dan Kebudayaan of Kota Sukabumi. The Dinas P&K now has two sub-divisions assuming quite new responsibilities: the Prapendas (pre-school and basic education) and Dikmen dan PLS (secondary education 27 Basic principles of transparency are applied to these additional funds, with expenditures publicly posted.

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and non-formal education). The two sub-divisions now also responsible for the curriculum and technical tasks for pre-schools, primary schools and secondary schools which previously were managed by the provincial level. To improve the staff’s ability to undertake the curriculum and technical work, the Kepala Dinas has planned some training programs. The new, streamlined organizational structure quickly resulted in a problem: officials and personnel from the two former offices were competing for a limited number of positions under the new organization. The Kepala Dinas came to a tactful decision and assigned an equal number of positions to both parties. For specific tasks, he forms task forces with balanced membership. This strategy has worked well up to this point, and has been successful in building synergy between the two groups. Recommendations Improving teacher quality. The city has underlying potential for good quality education: relatively convenient, accessible geographical conditions; highly-concerned government; and motivated teachers. With such potential, the city has successfully already upgraded teacher qualification of most primary school teachers to the D2 level. Nevertheless, there are certainly opportunities for improvement: (i) Qualification versus quality. Although the city has successfully upgraded the

qualification of the primary school teachers to D2 level education, there has not been any official assessment of the quality of the program. Most of the teachers attended the open-university (Universitas Terbuka, UT) program, which has been receiving some criticism about its quality and effectiveness in engaging the busy teachers with only limited face-to-face lectures. It may be useful for the government to conduct a D2 program quality assessment and provide it as feedback to the UT, as well as to assess in-service training needs.

(ii) Teachers’ enthusiasm vs. service availability. The teachers’ enthusiasm to continue their education has led them to go beyond the required qualification of D2. About 13% of the primary school teachers have completed their 4 year college (S1) education. In model schools the percentage is even more dramatic: 30% (for example, in SDN Dewi Sartika). But as mentioned earlier, most of them majored in civics and some in programs with even more limited correlation to their teaching profession – business management or law. These majors may not be taken by choice, but rather are forced by the program availability in the one local higher education institution. It is recommended that the government (Dinas Pendidikan) coordinate with such institutions to establish programs/majors which better fit the needs for education quality improvement.

(iii) In-service training activities have been limited to those arranged by the Basic Education Project (BEP). It is recommended that the BEP training program be carefully assessed to improve the quality of the program, target training to assessed needs within the system, and increase training availability.

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More broadly, planning for sector-wide capacity building (including planning, curriculum development and administration) would benefit from a comprehensive and in-depth needs assessment, thorough preparation of a training strategy that meets those needs, and a realistic costing, aspects currently lacking. The city has allocated about Rp. 600 million to improve the quality of staff in basic and secondary education, and in cultural affairs, but this is intended to cover personnel in both schools and dinas office levels. Since planning capacity is one area that needs to be built up, it might be advisable to obtain outside assistance in this area in the early stages. Teachers approaching pension age. The city has 1308 teachers at primary schools (SD and MI) with civil servant (PNS) status, and 165 with honorary/part-time status. Although there is no detailed data on their age profile, it is estimated that the majority of them were hired during the period of the SD Inpres establishment (mid 1970s- early 1980s) – meaning they will be entering their pension age in the same time, roughly in the decade after 2010. It is strongly recommended that the government assemble an age profile of the city’s teachers, assess how this issue would affect education programs, and prepare some anticipatory actions. Model schools. – Citra Bina Mandiri Sekolah Model SBM – maximizing facilities and teacher training. The school-based management approach applied in the model schools has successfully establish a good working partnership between the school and the community (especially parents). The school management’s willingness and ability to establish basic accountability has resulted in building the community’s trust and support to the school programs, including the provision of additional computers and teaching-learning aids beyond those provided by Dinas Pendidikan. One problem here, as in most schools in this country, is that such aids have not been fully utilized because the teachers are not adequately trained to use them. In order to improve the effectiveness and efficiency of these resources, it is recommended that the Dinas Pendidikan make an inventory of such aids, assess the teachers’ ability to use them, and provide appropriate training as needed.

Strengthening local education capacity. Decentralization has resulted not only in new tasks and responsibilities for local government (the executive branch), but also to the legislature (DPRD) and community at large. In addition to the training programs which have been planned by the Dinas Pendidikan for Dinas staff, it would be useful to undertake orientation and training programs which bring both the broader executive branch and members of the legislature (especially key commission members) to the same level of understanding on educational issues. Sector Report: ENVIRONMENTAL MANAGEMENT28 The city of Sukabumi suffers from several environmental problems because limited and/or inadequate consideration has been given to environmental aspects of physical 28 This version of the sector report is slightly abridged to fit more cohesively into the overall report; the original is available separately.

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planning and provision of infrastructure, and environmental considerations have not been mainstreamed into the overall development plan for city so far.

Solid waste generation, collection and management has emerged as the most visible environmental problem in the city of Sukabumi. Generation of waste has significantly increased as consumption rises, while collection efficiencies and service levels are not keeping up. The city’s main disposal facility is reaching capacity, and uncollected garbage piling up in the streets or being burned is becoming a familiar sight around the main streets of Sukabumi. Public awareness has been growing. Yet it is not mature enough to push for better management practices to be implemented.

Water scarcity is becoming a critical problem. The increasing demand for water, lack of a cross sectoral management strategy for the development and protection of water resources, and inadequate water resources data on which to base planning need to be addressed for Sukabumi to achieve a sustainable management of water resources. Access to water supply varies across the city; data indicates that only 40 percent of the population is served by a public water system, with the remaining 60 percent getting their water supply from deep wells. Watershed management has not been translated into action and is causing accelerated soil erosion, surface run-off, decreasing water quality.

Institutional Framework Before the implementation of the decentralization reform process, the Bappeda’s office was responsible for environmental management, there was very limited local government and civil society participation in the decision making process, and minimal ownership of the projects and program implemented.

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Five months ago, the Dinas Pariwisata, Penanaman Modal dan Lingkungan Hidup established the Office of Environmental Quality Management (OEQM). In addition to taking over the environmental management functions that had been performed by the Bappeda’s office, OEQM is responsible for enforcing environmental regulations. Currently, there are four environment staff working in OEQM, on three main areas: (i) Deep Wells (1 staff); (ii) Environmental Impact Assessment (1 staff); and Enforcement of Environmental Regulations (2 staff). Only two of the staff have bachelor degrees and adequate technical skills to perform their assignments. Staff salaries range from Rp. 200,000 to 1,000,000 per month, based on the level of staff higher education. Currently, there are no plans for hiring new staff, and there is no planning for training or upgrading technical skills of current staff. OEQM only receives a budget allocation for routine expenditures. Any budget allocation for development expenditures for the environment are directly managed by the Dinas Pariwisata, Penanaman Modal dan Lingkungan Hidup (its parent body). In 2001, routine expenditures for OEQM were Rp. 8.5 million, 25 percent of which was spent on salaries, and between 10 and 20 percent to cover the office administrative costs.

Table 15: Summary of Agency Responsibilities for Environmental Management, Kota Sukabumi

Agency Activity Dinas Pariwisata, Penanaman Modal dan Lingkungan Hidup

Responsible for all environmental activities formerly under the environment section in the Bappeda’s Office. Established and manages the OEQM.

Office of Environmental Quality Management

Enforcement of environmental regulations. Main divisions for (i) deep wells (1 staff); (ii) environmental impact assessment (1 staff); and enforcement of environmental regulations (2 staff).

Dinas Kesehatan Dan Lingkungan Hidup

Monitoring of water quality.

Dinas Kebersihan dan Pertamanan

Trash collection and landfill management.

Perusahaan Daerah Air Minum (PDAM)

City-owned BUMD, provides commercial water services.

Dinas Perhubungan The Dinas comprises two agencies: A. the agency for public transportation management responsible for (i) monitoring the traffic volumes; (ii) testing car emissions levels (In case of violation of emission standards the police is responsible for enforcing the standards); (iii) issuing and renewing permits for public transportation; (iv) managing the revenues from the public transportation permits; and (v) planning and modifying routes for public transportation B. the agency for construction and planning responsible for planning and construction of the ring road.

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There is a minimal overlap between the functions OEQM and some of the functions of the Dinas Kesehatan Dan Lingkungan Hidup with regards to monitoring of water quality. To minimize the function overlap and ensure results on the ground, the mayor of Sukabumi, the head of the OEQM and of the Dinas are working on an improved system of communication and sharing of information regarding their respective environmental programs. In addition, environmental management functions and services are also provided by the Dinas Kebersihan dan Pertamanan, the PDAM, and the Dinas Perhubungan. With decentralization, environmental management has become more participatory as the mayor consults with civil society and NGOs on environmental priorities to be addressed, discusses those priorities and needs with the various Dinas, the head of the OEQM, and DPRD before finalizing any decision on budget allocation. By doing this, the mayor is gradually reversing the pre-decentralization, top-down decision making process and increasing public participation in a phased manner.

Environment Sector Budget Before 2001, the bulk of the budget for both routine and development budgets for environmental management came from the center, and through the local BAPPEDA office it was allocated to the different environmental agencies of the Kota (i.e. SWCM, PDAM, Transport, etc.). In addition to the APBD allocation, there were INPRES allocations at provincial and/or district/municipal levels. With decentralization, the overall responsibility for environmental management has been shifted to the Dinas Pariwisata, Penanaman Modal dan Lingkungan Hidup, which has recently established the Kantor Pengendalian Lingkungan Hidup (or Office for Environmental Quality Management – OEQM) to administer those environmental functions previously performed by the Environment division with the Bappeda’s office. About 18 percent of the development budget of the Dinas Pariwisata, Penanaman Modal dan Lingkungan Hidup is allocated to environmental management. Other agencies and ministries performing environmental functions receive their budget allocations directly from DPRD, and thus the overall environmental management budget requires some compilation. The following table summarizes total budget allocation (routine and development) for environmental management across the various Dinases with environmental responsibilities in Kota Sukabumi, for the period 2000-2001. This is not a typical budget table, since it includes both routine and development expenditures sourced from the APBD, and also includes specific own revenue sources which go back into environmental management activities. The fact that the figures are presented this way (rather than simply as comprehensive expenditure figures) reflects weaknesses in the agencies’ overall budget management capacity (addressed in later sections) in that the revenues could not be linked directly to specific expenditure categories – they didn’t know how their revenue was spent, but knew it was spent within the relevant agency. Discussants within the agencies were clear that this was additional revenue to their APBD allocation.

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Solid Waste Collection and Disposal The Dinas Kebersihan dan Pertamanan is responsible for the collection, management and disposal of solid waste in addition to managing the cemetery, parks, and the road lighting for the city of Sukabumi. A new director has been appointed in August 2001 to manage the transition to decentralization. The following table shows the allocations for both routine and development expenditures by economic categories for the period 2000-2001. The solid waste collection and management office has 442 employees, the majority of which are temporary workers hired on a daily basis to work for the collection and disposal of solid waste. The permanent workforce provides the administrative functions. The overall level of education of the workforce is fairly low: the majority of the workers has only a high school diploma and only few people possess bachelor degrees. This results in a lack of technical skills and a rather poor work performance overall. The average salary of a regular employee is around Rp. 240,000 per month, while the salary of a temporary worker is about 20 percent lower, and varies depending on whether they work on the landfill site and/or on the garbage trucks.

Table 16: Total Resources for Environmental Management (Rp. Millions)

2000 (9 mos) 2001

Routine Budget Bappeda’s Office 70.6 0 Dinas Pariwisata, Penanaman Modal dan Lingkungan Hidup 0 8.5 Dinas Kebersihan dan Pertamanan 1,277.00 2,605.00 Dinas Perhubungan 6,976.00 2,000.00 PDAM n.a 500 Sub-total Routine 8,323.6 5,113.5

Development Budget Bappeda Office 164.00 0 Dinas Pariwisata, Penanaman Modal dan Lingkungan Hidup 0 153.00 Dinas Kebersihan dan Pertamanan n.a. n.a. Dinas Perhubungan 4,500.00 9,000.00 Sub-total Development 4,664.00 9,153.00 Resources from Fee Collection Revenues from Solid Waste Collection and Management 207.5 283.3 Revenues from Wells Groundwater Extraction Fee 13.00 16.00 Revenues from Transportation Fee 409.00 620.00 Grand Total Environmental Resources (Rp. Millions) 13,617.1 15,185.8 Per capita Environmental Resources (Rp.) 544.6 607.4

Source: DPRD Budget, January 2002

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Solid waste is disposed of in a 5.3 hectare sanitary landfill, which was built 10 years ago and has almost reached capacity. There are plans to enlarge the landfill for about 3 more hectares. Both the equipment operating at the landfill site and to collect the garbage is old and not well maintained. 15 trucks collect solid waste, three times a day, from the 246 temporary pick up stations scattered around the city. Total solid waste daily production is about 455,000 m3, of which only 40 percent is properly disposed of in the landfill. The remaining 60 percent is either illegally dumped in the river and/or the streets and/or burned. Household solid waste reaching the dumpsite is generally high in moisture and organic content, and low in calorific value. Sanitary landfills and composting are thus the most suitable technologies for treatment and disposal, while incineration (burning) is relatively ineffective and expensive. Therefore, the Dinas is developing a plan to complement the upgrading/expansion of the landfill with the construction of a small scale composting facility. The initial investment needed is of about Rp. 50 million and it has already been proposed to the local government. Composting solid waste is seen as a profitable option for solid waste disposal mostly because the composting end products can be sold to the agricultural businesses operating in the areas surrounding the city of Sukabumi. Solid waste collection tariffs are very low, and do not generate enough revenues to guarantee cost-recovery. The current tariff structure includes three levels of tariffs: (i) Rp. 500 for households; (ii) Rp. 2,500 for small companies and/or industries; and (iii) Rp. xxx for restaurants and markets. The Dinas is currently collecting revenues from

Table 17: Solid Waste Collection Routine and Development Expenditures/Resources

(Rupiah)

Routine Expenditure 2000 (9 mos) 2001 Salaries 613,164,000 1,425,192,000 O&M Total 639,665,000 1,128,985,000 Landfill 639,665,000 926,812,000 Lightning 0 72,333,000 Park Management 0 129,840,000 Revenues from Solid Waste Collection* 207,565,000 283,300,000 Sub-total Routine 1,277,536,000 2,605,127,000

Development Expenditures n.a. n.a Landfill n.a n.a Lighting n.a n.a Park Management n.a n.a Sub-total Development n.a n.a Grand Total SWCM Expenditures n.a n.a Source: Dinas Kebersihan dan Pertamanan; DPRD Budget Data, January, 2002 *Own revenues from Solid Waste Collection Fees were applied to routine expenditures, but the breakdown is unavailable.

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households and small companies and/or industries. Revenues from restaurants and markets are paid directly to the local government due to the limited administrative capacity of the Dinas itself to manage the revenues during the implementation of the decentralization reforms. Tariffs levels were set back in 1995 and have not been updated since then. The Dinas is currently working with the local government to increase existing tariffs in a phased manner. However, there is no clear indication of when the new tariff plan will be ready and/or implemented. The following table shows the revenues from solid waste collection for the period 2000-2001: Note that FY2000 covered only nine months, thus revenues over FY2000-2001 are proportionately stable. Around 20 percent of the households do not pay solid waste collection bills, and the number of customers not paying is on the increase as a result of loose and/or non-enforcement of sanctions for those not paying, and because of dissatisfaction with the level of service the Dinas is offering. Informal surveys, conducted by several NGOs involved in solid waste collection and management indicate that customers are willing to pay between Rp. 5,000 and 10,000 per month for an improved service. In rural areas, solid waste are collected only once a month for the same urban rate of Rp. 500 per month. Many of the customers living in rural areas do not pay their bills and/or dispose of their solid wastes illegally. There is an NGO that does advocacy and public awareness for solid waste collection and management. In addition it also complements the solid waste collection services available in Sukabumi by collecting the garbage in some areas of city and delivering it to the various temporary collection points. The NGO does not charge any fee for providing such service; however, it receives voluntary contributions from some of the residents benefiting from the service. Water Utilities PDAM is the only water utility company serving Kota Sukabumi, where it serves 20,900 households. The reasons for such a limited client base include PDAM’s inability to guarantee a continuous twelve month supply of water, and the apparent preference for obtaining water from deep wells. The inability to provide continuous water supply is due to: (i) water scarcity during the months of August, September and October (resulting from deforestation in the catchment area); (ii) poor condition of the water distribution network; and (iii) the increasing number of illegal hookups to the water distribution network.

Table 18: Revenues for Solid Waste Collection Rupiah, 2000-2001

2000 (9 mos) 2001 Revenues from Solid Waste Collection 207,565,000 283,300,000 Source, Dinas Kebersihan dan Pertamanan; DPRD Budget Data, January 2002.

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To broaden its customer base and improve the quality of the water provision, PDAM has recently expanded its distribution network to four slum areas in the Kota, and there are plans for reaching an additional slum area.

In 2001, the 14 percent allocation for debt interest servicing, has been allocated from the total budget for routine expenditures. It was the first year that PDAM could allocate some funding to resume the repayment of the Rp. 3 billions loan from the local government, since the onset of the economic crisis. The loan was originally taken to construct the water treatment plant. PDAM is planning to finish repaying the debt in the next two/three years. In addition to the Rp. 3 billions debt to the local government, PDAM also has an outstanding loan from the Dutch government of Rp. 15 Billions since 1987. There are no plans for repaying such loan in the short-to-medium term.

Over the last year, customers’ bills and revenues from sales of water to the poultry farms in the Kota’s more rural areas have been the main source of income for PDAM, and accounted for Rp.400 million. In addition, over the last three years, PDAM could count on Rp 300 million generated from the interest on savings to be used to repay the Rp 3 billion loan from the local government to build the water treatment plant. To improve its financial situation, PDAM is currently undergoing a financial and administrative restructuring.

PDAM employs 165 staff, of which only 30 percent possesses a university education and enough technical skills to perform water quality monitoring analysis. The majority of the non-technical staff performs administrative duties, and is dispatched around the Kota to read water meters. Salaries for technical staff average R900,000 per month, while those for non-technical staff range between R200,000 and 600,000 per month. The use of non-technical staff to read water meters combined with their low salaries is seen as the major cause for mistakes in the reading of water meters, and consequently low water bills, and for the increasing number of illegal hookups to the water distribution network.

Table 18: The PDAM Budget, 2001 (Rupiah millions)

2001 %

Routine 1,750 39% O&M water treatment, distribution

350

energy & water treatment

262.5

salaries 525 other 612.5 debt interest 980 Investment & R&D 5,250 61% Total Budget 7,000 100%

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Over the past year only, more than 200 illegal hookups have been discovered, and about 10 percent of the non-technical staff appeared to be involved in the business of allowing illegal hookups. Unfortunately, only a small percentage of the 200 illegal only connected households agreed to become a PDAM customer, and none of them paid the fee for illegal hookups. To stop the practice of illegal connection (partly motivated by the low salary rates), PDAM has devised a performance-based system salary increase, a pension scheme, as well as a system of warnings for both the illegal connected households and PDAM’s employees.

Table 19 presents the water tariff structure currently being applied in Kota Sukabumi:

Table 19 Drinking Water Tariffs – Phase I

NO RATE RATE WATER CONSUMPTION M3

CODE GROUP CLASSIFICATION 1-10 11-20 21 - 30 ABOVE 30 SUBSCRIBE

1 05 Non Business (A) Rp 550 Rp 825 Rp 1100 Rp 1650

2 06 Government Offices Rp 550 Rp 550 Rp 1100 Rp 1650 Rp 5000

3 07 Social (Special) Rp 440 Rp 550 Rp 825 Rp 825

4 08 Social (Public) Rp 440 Rp 440 Rp 440 Rp 440

5 01 Small Business Rp 1375 Rp 1375 Rp 2750 Rp 2750

6 03 Small Industry Rp 1650 Rp 1650 Rp 3300 Rp 3300 Rp 7500

7 11 Non Business (B) Rp 1100 Rp 1375 Rp 1375 Rp 1650

8 02 Big Business Rp 2200 Rp 2200 Rp 3850 Rp 3850 Rp 10000

9 04 Big Industry Rp 2750 Rp 2750 Rp 5500 Rp 5500 Note: Effective from October 2000 for November 2000 payment

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In 2001, water tariffs were significantly increased for the first time since 1997. Despite the 70 percent increase, these tariffs remain to too low to guarantee cost-recovery. PDAM claims that current tariffs should, at least, be adjusted for inflation on a yearly basis, and a proposal outlining an inflation-based adjustment structure for the tariffs has been already submitted to the mayor for consideration. Water quality is considered good in the city of Sukabumi. There are no polluting industries and the run off from agriculture is very limited so far. Responsibility for monitoring water quality is of the Dinas Keseahatan, which is also actively working to raise awareness among the population about the health impacts of water pollution. There were no budget data and/or information about allocation for this type of awareness program and/or for monitoring of water quality. Traffic Management The Dinas Perhubungan is responsible for the planning and management of traffic and public transportation in Sukabumi City. The Dinas comprises two agencies: (i) the agency for public transportation management ; and (ii) the agency for construction and planning. The former is mainly responsible for (i) monitoring the traffic volumes; (ii) testing car emissions levels (In case of violation of emission standards the police is responsible for enforcing the standards); (iii) issuing and renewing permits for public transportation; (iv) managing the revenues from the public transportation permits; and (v) planning and modifying routes for public transportation. The agency does not receive any budget

Table 20 Drinking Water Tariffs – Phase II

NO RATE RATE WATER CONSUMPTION M3

CODE Group CLASSIFICATION 1-10 11-20 21 - 30 ABOVE 30 SUBSCRIBE

1 05 Non Business (A) Rp 600 Rp 900 Rp 1200 Rp 1800

2 06 Government Offices Rp 6000 Rp 600 Rp 1200 Rp 1800 Rp 5000

3 07 Social (Special) Rp 480 Rp 600 Rp 900 Rp 900

4 08 Social (Public) Rp 480 Rp 480 Rp 480 Rp 480

5 01 Small Business Rp 1500 Rp 1500 Rp 3000 Rp 3000

6 03 Small Industry Rp 1800 Rp 1800 Rp 3600 Rp 3600 Rp 7500

7 11 Non Business (B) Rp 1200 Rp 1500 Rp 1500 Rp 1800

8 02 Big Business Rp 2400 Rp 2400 Rp 4200 Rp 4200 Rp 10000

9 04 Big Industry Rp 3000 Rp 3000 Rp 6000 Rp 6000

Note: Effective from March 2001 for April 2001 payment

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allocation for development; however, it manages a budget allocation for routine expenditures. The latter is used for (i) planning public roads; and (ii) upgrading and maintaining public roads. The agency manages the budget allocation for development expenditures. The following table summarizes the budget allocation for the period 2000-2001:

The implementation of decentralization reforms has not changed particularly any aspects of the Dinas work and processes. There still little coordination (for either planning and/or management) between the Dinas and any other Dinas responsible for environmental management. However it has been recognized that there should be more cooperation and collaboration among the various agencies as the problems related to traffic management are increasing pressures on the overall environment quality of the city of Sukabumi. The Dinas has completed the planning of the new ring road to relieve the existing road network from the increased volume of traffic and the resulting management problems. The construction of the ring road is the most cost effective alternative to upgrading the existing road network in the center of Sukabumi. Public transportation is available mainly by minivans through the 26 routes serving Sukabumi city of which 16 are fully operative and 11 are only partially operative due to low demand. Public transportation companies need to renew their route permits every two years through a bidding process. Currently, the public transportation system satisfies only 75 percent of the demand, and, the Dinas estimates that another 10-15 percent is made up by illegal minivans. Recommendations Overall, the environmental management in the city of Sukabumi is satisfactorily. However, to effectively harness the benefits of decentralization, and to maintain the delivery of satisfactory environmental services and avoid any serious decline in future service delivery, the local government needs to address the following issues in the short-to medium term:

Table 21 Transport Resources, 2000 -2001

Routine Expenditures 2000 2001 Public transportation management 2,000,000,000 Construction and Planning 0 0 Sub-total Routine 2,000,000,000 Development Expenditures Public transportation management 0 0 Construction and Planning 9,000,000,000 Sub-total Development 9,000,000,000 Revenue from Transportation Fee 409,080,000 620,000,000 Grand Total Expenditures 11,620,000,000

Source: Dinas Perhubungan, DPRD Data, January 2002

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Environmental Institutional Development Next 18 months (i) Build technical skills and increase the number of employees in the office of

environment quality management for the office to be able to perform its functions; (ii) Improve strategic and budget planning at all levels among the various institutions

responsible for environmental management; (iii) Strengthen enforcement of current environmental standards and regulations; (iv) Increase expenditures and mainstream the utilization of new funding sources to

improve the efficiency and quality of existing environmental services; Medium Term (v) Devise a plan for cross-agency collaboration to monitor environmental quality

and raise awareness on the benefits of proper environmental quality management; (vi) Mainstream civil society participation in decision making for environmental

management; Solid Waste Collection and Management Next 18 months (i) Restructure the solid waste collection tariffs to reflect at least the actual costs of

the service and, automatically, adjust for any yearly increase in inflation; (ii) Enforce an effective collection of the existing tariffs; (iii) Design and implement an asset management plan to account for the beginning of

the construction of the composting facility, and 3.5 hectares enlargement of the existing landfill;

(iv) Devise a phased upgrade of the landfill and solid waste collection equipment; (v) Devise a training program to upgrade (i) the technical skills of the personnel

working at the landfill site and in the collection of solid waste; and (ii) the administrative, budget planning and management skills of the personnel employed in the Dinas’ offices;

(vi) Formalize the voluntary “door to door” collection service offered by the NGO and set a monthly, minimum tariff to finance such service;

(vii) Implement a program of public awareness to inform the local community of the benefit of proper collection and disposal of solid waste;

(viii) Medium Term (ix) Progressively reduce the number of the temporary workers performing both

administrative and, especially, technical functions to improve the quality of the service and make it cost efficient. The overall reduction of the temporary workforce would also facilitate the restructuring of existing salary structure for the permanent staff;

(x) Conduct regular surveys to assess the quality of the service and local community’s suggestions and demands to improve the services of solid waste collection and disposal;

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Water Utility Next 18 months (i) Modify the current tariff structure to reflect at least the actual costs of the service

and, automatically, adjust for any yearly increase in inflation; (ii) Strengthen the collection of water tariffs and the enforcement of sanctions for the

non-paying customers; (iii) Invest in expansion, upgrading and maintenance of the existing water delivery

network in the areas of Sukabumi suffering from chronic water shortages between July and September;

(iv) Upgrade the technical skills of the workforce employed in reading the water meters and reform the existing salary structure of permanent workforce;

(v) Strengthen the budget planning and financial management skills of the PDAM high level staff;

Medium term (vi) Devise an debt management plan to service any existing debt without depriving

PDAM from significant portions of its yearly budget. Transport Medium term (i) Complete the land acquisition and commence the construction of the ring road.

VII. The Emergence of Key Concerns

Kota Sukabumi has clearly achieved substantial success in addressing the challenges and opportunities of decentralization, particularly in the areas of participatory budgeting, and in re-crafting and implementing programs in the strategic areas of health and education. Despite these many successes, a number of key issues and concerns emerged during our analysis which cut across a wide range of government activities. The first issue is the need to build capacity throughout all parts of government (both executive and legislative branches) and in civil society. In health, this is reflected in the need for staff who can undertake effective health planning exercises, and in the need to improve the utilization of health facilities. Developing health insurance, initiating cross-regional cooperation, and determining a useful role for the province will all require staff with the ability to plan and think strategically. In education, a comprehensive and in-depth needs assessment on capacity in planning, curriculum development and administration (including costing) will be an essential element in the city’s ability to continue their progress in this sector. The need for capacity building (particularly planning and budgeting) is noted in nearly every aspect of the environmental management, from monitoring and enforcement of environmental standards, to meeting needs for solid waste disposal. The government’s basic financial management capacity

Sukabumi-RPER 49

will have to be strengthened substantially if initial reforms and improvements in transparency and accountability are to take root and expand. The government would be wise to focus on this issue, conduct a comprehensive needs assessment, and develop a government-wide strategy, including costings and mapping out potential resources. Capacity building in the DPRD is also necessary if the executive and legislative branches are to continue their initial steps toward improved governance. Under the old centralized system, DPRD members received extensive orientation and training through the Ministry of Home Affairs. This responsibility (and budget) has now devolved down to the district level, and few local governments (including Kota Sukabumi) have been able to organize and provide adequate training at a time when there are many new members of local parliaments. In order to carry out their tasks effectively, members must clearly understand their roles and responsibilities, and in many cases must develop good sectoral knowledge. The BUILD Project has provided some of this capacity building, but the amounts have been limited and indications are that this will be eliminated from the program. The executive branch and DPRD leadership should work together with MOHA and possibly with other district governments to develop a comprehensive training and skills development program for all DPRD members. While decentralization to the district level is clearly everyone’s focus right now, there are a number of problems districts encounter which require organization and cooperation at higher levels, either across districts or at the provincial level. The importance and difficulties of these issues are only just beginning to be recognized, and Kota Sukabumi is no exception. The city has already started addressing some of these, for example, in setting up the MOU with Kabupaten Sukabumi to cover health service delivery for their poor residents. A number of other problems are looming, however: the development of a health insurance scheme will require risk pooling across districts or possibly at the provincial level, and effective disease control for emerging problems such as rabies and leprosy requires working closely with surrounding regions. Potentially serious roblems in water and watershed management are already apparent and can only be solved in close cooperation with surrounding areas, and an increasing number of environmental issues are likely to emerge that will require this type of approach. The executive and legislative branches would be wise to start working together to develop a cross-regional strategy and consultation mechanism. The third major area of concern is the sustainability of reforms already achieved, including enhanced community participation. It was noted earlier that good leadership is important element, but there are limits to what key leaders themselves can do, and how sustainable their reforms can be expected to be without accompanying deeper structural reforms. Have the changes that have been instituted thus far taken root and generated sufficient interests to enable them to survive in the face of a change in leadership? Strengthening the participatory aspects of government and the service orientation of government workers will only come with changes in underlying incentive structures, including stronger transparency accountability requirements throughout government, and civil service reforms that would act to reduce rent-seeking, including changes in performance monitoring and promotions. Local governments are currently limited in

Sukabumi-RPER 50

their ability to make changes in the structures and the numbers of civil servants, but it is not too early to begin exploring the scope for localized civil service reform.

Annex 1 Financial Management – Diagnostic Questionnaire

1. Planning and Participation # Questions Indonesian Triggers Typical

Source Comments

Obtain copies of the POLDA, the PROPEDA, the REPETADA, the RENSTRA of the Bupati, and the RENSTRA of some dinasses. When were they last completed? When are the next versions anticipated?

Bapeda BAPEDA to send relevant documents

Can you explain to us the planning process in your kabupaten/kota?

Bapeda Appears to be similar to national practice, although BUILD UMA has pushed hard to make process more participatory

The 5 year plan process Bapeda The annual process Bapeda Do you have a timetable for the planning processes? (if

not, ask for key dates) Bapeda Planning process is supposed to be completed

prior to budget preparation starting in September prior to the fiscal year.

Is there a “planning circular?” Who issues this? What does it say? Can we have a copy?

Bapeda

If there is no planning circular. How is the planning process started? By whom?

Bapeda

Are there central guidelines on the planning process? What do they say? Can we have a copy?

Bapeda

How are the priorities in the PROPEDA determined? Bapeda Who writes the first draft of the PROPEDA? What

happens with that draft? Bapeda Bapeda

Does the PROPEDA include a costing of the plans/programs/projects?

Bapeda

Does it include a “fiscal outlook” or similar? Is there a spending limit set for the planning period? Are there sectoral/dinas level spending limits?

Bapeda

Does the PROPEDA include indicators of success/performance/output?

Bapeda AWAITING DOCUMENTS

Are quantitative goals included? Bapeda AWAITING DOCUMENTS Does Government report regularly on the achievement

of the goals? How does it do that, and to whom? Bapeda AWAITING DOCUMENTS

Has there been a formal review of the last REPELITA? Bapeda Did any consultations with non-government entities on

the PROPEDA take place? Why? Was it useful? Bapeda

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Was the PROPEDA discussed in the DPRD? Did the DPRD propose changes? Did Government include the changes in the final document? Did the changes lead to increased spending? How was this financed?

Bapeda, DPRD

Is the PROPEDA a published document? How is it published? Does the region publish easily accessible “simple versions” of the document?

Bapeda

How is the PROPEDA coordinated with the provincial PROPEDA? With the central PROPENAS? Is there a formal check by the province/the central government on this?

Bapeda

REPETADA Bapeda Does the PROPEDA include a costing of the

plans/programs/projects? Bapeda

Is there a fiscal outlook or similar in the REPETADA? Bapeda How are the priorities in the REPETADA determined? Bapeda In the village level meetings (Musbangda), do the

villagers know how much funds are available for development projects in their village? Are they active in voicing there demands, or passive in that they receive proposals? Are they aware of the impact of the previous years’ projects?

Bapeda/village council/head of village

Did any consultations with non-government entities on the REPETADA take place? Which ones? Why? Was it useful?

Bapeda

Does the REPETADA include a costing of the plans? Bapeda AWAITING DOCUMENTS Does it include a “fiscal outlook” or similar? Bapeda Does it include indicators success/performance/output? Bapeda Are quantitative goals included? How do you know

whether the goals are met? Does Government report regularly on the achievement of the goals? How does it do that, and to whom?

Bapeda

Were last year’s REPETADA and its results formally reviewed? When?

Bapeda

Was the REPETADA discussed in the DPRD? Did the DPRD propose changes? Did Government include the changes in the final document? Did the changes lead to increased spending? How was this financed?

Bapeda, DPRD

Is the REPETADA a published document? How is it published?

Bapeda

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How is the REPETADA coordinated with the provincial REPETADA? With the central one? Is there a formal check by the province/the central government on this?

Bapeda

What is the role of the POLDA? Bapeda What is the role of the RENSTRA? Bapeda What do you think are the main problems in the

planning system? Bapeda

How are the results of consultations integrated into the final documents? Are interest groups shown drafts of documents, or are only the final versions more widely distributed?

Bapeda

How are these publicized? Is there a local media? Bapeda Are there medium term plans for budgeting? Are

agencies ever allowed to “carry over” revenues, or a projects ensured over multiple years.

Bapeda

Do bottom up consultations only occur with villagers, or do cross-village or interest group issues figure prominently. What are the main forms of public hearings or discussions?

Bapeda

Do the main social sectors (e.g., heath and education) prepare relative needs studies?

Bapeda

Are distributional or “pro-poor” considerations discussed explicitly in the budget planning process?

Bapeda

Budgeting What do you think are the main problems in the

planning system? Bagian

Keungang (BK) The process seems to be quite smooth overall. The major problem this year was the late announcement of the DAU on 5th January 2002, which delayed the final completion of the APBD.

Please explain to us the budget process in your region? Bagian Keungang

After the various consultation processes (e.g., musbangdes etc), a Tim Annggaran is formed to discuss the budget proposals

What is the role of the Komite Anggaran? Who are its members?

Bapeda, Bagian Keungang

The Komite Anggaran team has thirteen members

What is the role of the spending units? The spending units are effectively the same as the dinas’s/badan’s (i.e., each agency is booked as a pos)

Sukabumi-RPER 54

What is the role of the dinasses? The dinas’ submit estimates of their overall expenses, which evolve into a single DIK on the routine side, and DIPs depending on the number of projects the pos will implement.

What is the role of the finance bureau? The finance bureau will review figures, including consistency with standard prices

What is the role of the Bupati? She is very active, and takes a coordinating role.

What is the role of the DPRD? Appear to have taken an early and active role in the process. Normally hearing with a professional group, LSM or any other representative group, not individual constituencies. This contributed to the fact that the submission for the Tim Anggaran (RAPBD) was not really changed before it became the APBD.

Are any parties outside the government and DPRD consulted in the budget process? If so, why? Was it useful? If not, why not?

Others can partake in the process, and meetings of the Tim Anggaran seem to be open to outsiders (?). But at this stage, not much interest in getting early drafts by the public (e.g., journalists). They are currently setting up a web site and information center, and the BG hopes to provide more public information in the future

Is there a budget preparation timetable? Can you give us a copy?

Starting in September, with planned completion two moths thereafter. Region Head appoints team.

Is there a budget circular? Who issues the circular? Is the budget circular approved by the Bupati/Walikota? Who else approves this?

The Komittee Anggaran is in charge of finalizing proposals, charged by head of region, but not clear if what type of official circulars are disseminated.

Are there central guidelines on the budget process? Can you show us a copy? If the answer is negative, ask whether they have heard of/seen PP105/2000, the surat edaran of the minister of home affairs on the budget?

Bagian Keuangan

PP 105 means that regions have to follow a balanced budget. This effectively means that revenue projections or a starting point of the overall budget

Sukabumi-RPER 55

What guidelines are there for the structure/reporting format of the budget?

Bagain Keuangan

Follow central guidelines in the form of Home Affairs guidance. They have received letters on changes to accrual standards from BAKUN, but think this is very difficult.

Are there any of the following in the budget circular (if not in the budget circular, ask when and how they are determined).

The overall envelopes by pos on the routine side a set based on economic classification, almost as draft DIK documents.

- Revenue forecasts (who makes them?) Dispenda. Shared tax estimates are based on targets from center (e.g., PBB) or estimates from province.

- Overall spending limits Spending limits (DIPs and DIKS) are by project, set after the budget is approved but consistent with its line items.

- Spending limits per sector DIPs/DIKs, adjustments made through priotarization of disbursement rates during the year if adjustments necessary

- Limits on the wage bill Does not appear to be the case outside the direct calculations based on set rates.

- Limits on the wage bill per sector The BK will look at the echelon structure and associated rates, but not really basic wage bill. But these don’t seem to lead o adjustments in the organization of the dinas directly.

- Limits on the number of civil servants per unit Seems to be the task of discussion in staffing team. The DPRD explicitly said that they did not get directly involved in staffing and organization matters – this was argued to be the prerogative of the executive.

- Limits on the number of contract workers Did not seem to the any per se, beyond what emerged from spending priorities/amounts that emerged from the budget.

- Limits on development spending DIPs, although low priority ones are squeezed first if there is a budget balancing problem in the course of the year.

Expenditure norms (e.g. guidelines on how many trips, how much office expenses, etc.)—if so, how many of these norms?

Only located in DIKs. Adjustments in SPPs disbursements occur first in low priority development projects.

Are overall spending limits and sectoral limits approved/agreed with the DPRD? When (before or after the detailed dinas’ budget preparation starts)?

Yes, as part of APBD. Only when there is a shift in line items is DPRD approval required. Otherwise DIPs/DIKs seem to be main orienting documents during budget year, and any prioritazation there is decided by Komite

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Anggaran and Bagian Keuangan. Dinas have some flexibility, but DIKs dominated by wages. Most flexibility appears to be in DIPs.

Do Dinasses/spending units prepare their own budget submission? Do you have a copy of such a submission? What is the process by which such a submission is prepared?

Submissions are handed to Tim Anggaran, and appear to be in the form of draft DIPs by pos. These agencies to appear to submit project proposals (i.e., DIPs) to the Tim A, which then collates these in the final budget.

When the finance bureau receives a dinas/spending unit’s budget submission, what happens? Are spending norms checked? Are proposed spending levels usually accepted, or are they cut? Do you have a copy of a spending unit’s final submission [ask for the same dinas as with the first submission]

A Tim Khusus for DIPs is set up at BAPENAS to review the roughly 160 DIPs in the budget. They do some reviews of the projects and then set up the final DIPs. They draw on the standard spending prices prepared by the Bagian Keuangan. They follow central guidelines established by (MOHA) decree.

What happens if finance bureau and dinas have a conflict over spending levels? Can you give an example? What is the role of the Komite Anggaran?

The Tim Anggaran sets the overall priorities is DIPs and DIKs have to be squeezed during the year, but Bagian Keuangan staff will hold discussions with them

Do the dinas’s proposals include figures on DIPs for co-administration? If not, is such information available in the region?

No. The BG complained that a comprehensive picture of other deconcentrated expenditures was not available to them, or the Wali for that matter. They felt that this should be the case at “base camp.” Deconcentrated spending levels did not significantly seem to affect the amounts that were allocated to sectors in the APBD.

How are the proposed projects checked on financial/economic viability? Who does this?

Bappeda, Sector Agencies

Projects are evaluated throughout the process, mainly by the Tim A. However, the DIP team and technical teams will sometimes review projects. For example, last year a project on a bus sub-terminal was reallocated because the housing complex that it was supposed to serve had not yet been built. With DPRD approved, the money was moved to a bridge building project in the wake of a flood. The BK noted that KS was different in the officials did not cling to their projects.

What percentage of the development budget do you think is operation and maintenance rather than capital spending?

Bapeda, Sector Agencies

To be determined from individual DIP (lembaran kerja) one by one.

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What percentage of the development budget is honorarium?

Bapeda, Sector Agencies

Very small (see e.g., DIP) on the official books due to the limitations set on staff in being paid for projects and their rates. Each staff, for example of the PU, could only serve in a single project. Seems to be quite small. For example, the Dinas PU reported a development budget of 25 billion for a staff of about 50. As each staff could only received one project payment, it is estimated that the official honorarium bill was 12*200,000*40=80 million.

Are proposed PERDAs on PAD passed at the same time as the budget?

Dispenda PERDA APBD and then SK Bupati/Wali Kota, which is a distribution of that DPRD approved PERDA

Have you issued PERDAs on PAD since January 1, 2001? Which ones? Please describe the process by which these were issued.

Dispenda None. But they were currently looking at a new tax on generators, like Bogor. They were only expecting about 15 million from this tax, but there was still quite a bit of opposition. Public consultations were however in progress.

In the last budget round, did the DPRD change the region’s budget proposal? By how much? If up, how was this financed?

Bapeda, BagKeu

No, the APBD was really quite the same as the RAPRD. This was attributed to the fact that the Tim A pushed forward efficiently, and apparently has pre-consultations with the DPRD while they were waiting for the DAU.

When was the budget for 2002 submitted to the DPRD? At that time, did you already know the DAU for 2002? Revenue share of resource revenues, income tax? How was this last year (the first year of decentralization)?

Officially beginning of January, once they found out the exact amount of the DAU in early January. Since the PBB estimates (i.e., targets from center) were not available, they based their estimates on last years figures.

When was the budget for 2002 approved? For 2001? Bapeda 25th January 2002 What do you think are the main issues in budget

preparation? Bapeda General feelings, except for late DAU, is that

things went quite smoothly What incentives are there for agencies to categorize

expenditures as either routine or development? Development projects are still the most

attractive as they represent “softer” money. There seems to be no real difference in the degree to which certain line items are subject to auditing.

Sukabumi-RPER 58

Budget Implementation After the budget is approved by the DPRD, what

happens then? Bagian

Keuangan DIPs/DIKs are prepared by special team, organized apparently by Bappenas and Bagian Keuangan

Who prepares the DIPs and DIKs? Bagian Keuangan

Special Team with spending unit, with BK as member of ST

Who approves the DIPs and DIKs? Bagian Keuangan

Special Team with spending unit, with BK as member of ST

To what unit are the DIPs and DIKs issued? (one per dinas, or for every spending unit, or for every project?)

Bagian Keuangan

One per pos (i.e. Dinas), and one per project.

In 2001, when was the last DIP issued to the spending unit? [if this is late in the year, ask for the reason of delay]

Bagian Keuangan

For FY 2001, DIPDA followed DAU transferred, DIP APBN relatively smoothly (since the PIU was a former Kanwil which used to DIP APBN), DIPP (PIU is local government) delayed to September/October, since there were problem on converting DADPD to DIPP and MOF realized and slow responded. No DIP issued yet until February 2002 for FY 2002, may create a delay again

Who obtains copies of the DIPs and DIKs? What happens to the copies?

Bagian Keuangan

BK, Technical Units, and Sekda

Please provide us with a copy of a DIP and a DIK [if not possible ask to see one and note down the level of detail].

Bagian Keuangan

DIP copy provided (see references), DIK copy will be sent

Are there any cash projections made in your region? Who makes the projections? How often are they updated?

Bagian Keuangan

Do spending units have their own bank account? If yes, why is this so? How many official bank accounts are there in the region?

Bagian Keuangan

Yes, but only for less than ten million amounts. Exceptions are for wages and travel, and these are paid in cash from own dinas account apparently. Otherwise special SPP has to be submitted, which is paid from Bagian Keuangan.

What is the process by which a spending unit can open a bank account? [the key here is whether the finance bureau approves]

How often are bank accounts of spending units replenished? What type of spending is done from these bank accounts routine only, or routine and

After SPP request is approved. Only part of routine is done from these accounts.

Sukabumi-RPER 59

development)? Do revenue-collection units have bank accounts? Can

you give an example of that? How many revenue accounts are there? [the key here is that there should be no separate revenue accounts]

Yes. Dinas Pendapatan receives statements from these apparently on monthly basis. They also receive statements of PBB Bank accounts.

Can spending units use the revenues collected to make payments?

Bagian Keuangan

No, except Swadana unit (e.g., hospital). A Swadana unit is one which can generate revenue and spend on its own

Can you tell us how the main categories of PAD are collected?

Dinas Pendapatan

Based on guidelines by MoHA, with responsibility to different agencies. Different regions have different means of cross-checking (e.g., market retribusi). In Sukabumi, Dispenda receives information from Bank and from technical dinas. In effect, they can’t effectively control cash receipts, but this did not seem to be a major source of worry.

What is the process for receiving DAU? Bagian Keuangan

Regions can only receive one twelfth per month. This is frequently a complaint of cash flow, particularly as expenditures are “lumpy” (e.g. for development projects). Bagian Keuangan submits SPP to KPKN, KPNN issues SPM. Timing of the payments seems to be OK.

What is the process for receiving DAK? N/A What is the process for receiving the revenue share of

the income tax? The land and real estate tax? Last year there was a four or five months

delay in PBB payment according to Dinas Pendapatan, but it has now been reduced to a month of less.

What is the process of receiving the provincial shared taxes?

Dinas Pendapatan gets copy of payment to the Banks, and every quarter they receive the sharing.

Are there any difficulties in receiving the above three revenue items from the center?

Did not seem to be the case.

Budget Adjustment How many budget adjustments occurred in the previous

fiscal year?

Bapeda There was one official adjustment.

Sukabumi-RPER 60

Please explain to us the budget adjustment process in the region? What were the main causes for submitting a budget adjustment?

Bapeda In FY 2001 it was increase in wage bill.

What happens if revenues fall short of planning? How are expenditure cuts determined? Who determines? When is this determined?

Bapeda Adjustments are either based on DPRD approval (new PERDA) or “squeezing” of disbursement rates. Squeezing occurs within the framework of existing DIKs/DIPs based on prioritization of Tim Anggaran

What happened last year with the salary increase for civil servants in July 2001?

Bapeda Wages went up as reflected in budget revision, kota received contingency from center

Did you apply for the contingency fund from the ABPN? Did you get any? How was the process? Do you think it was fair?

Badan Keuangan

Yes, about 3 trillions

What happens if a spending unit is spending more than budgeted for?

These are checked within the DIK envelope in the SPP process. Pak Yusdi Boerwawi and his four staff in the BK said this is one of the main things they look for. Unless there is approved reallocation, they can not spend over the budget ceiling.

Is there a formal in-year review of budget implementation? When? Who is involved?

Tim A. There is currently a development project underway to measure performance objectives (see FY 2002) development budget

Is the budget adjustment approved by the DPRD? When?

Yes. In 2001 this happened on the 11th of September.

If a spending unit wants to adjust its spending without changing its total spending, can it do so? What are the approvals needed? Who approves? Is this a difficult process? Are there different rules for small adjustments?

Flexibility is set by DIK detail. Wages are pretty fixed, as are development projects. No only flexibility is in non-wage DIKs really. However, flexibility is typically sought out of the development projects.

Procurement

Please describe a typical procurement process in your region? (Note: You can take a concrete example, say a road building project)

Can a spending unit already start procurement without a DIP?

Bagian Keuangan, Dinas

Procurement process cannot be done without approved budget

Does a spending unit need approval to start a procurement process?

Bagian Keuangan, Dinas

Budget approval, SK Pimpro/\bendaharawan appointment, SK Tender committee

Sukabumi-RPER 61

Does a procurement needs to be advertised? How? (In the regional newspaper? On billboards, ….)

Dinas Mandatory for tender ceiling in local/regional newspaper

Is there a procurement committee? Who are usually member of such a committee? Is there a separate committee for each procurement? How many procurements per year does the region undertake?

Dinas Technical Dinas, legal, general affair, finance and Dinas user PU CIPTAKARYA has 35 contract package with 2 tender committee

Are there any members of civil society on the procurement committees? Do you think regulations allow for this [actually, law 28/1999 allows this, but it seems little known]

Dinas NONE

Are there regional regulations on procurement? Can we have a copy?

Dinas Following national KEPPRES 18/2000

Are you aware of KEPPRES 18/2000? What does it say? To what extend do the regional regulations on procurement differ from KEPPRES 18?

Dinas “

Who ensures that these procurement regulations are followed?

Dinas AUDITOR

Are there simple procedures for small procurements? How do they work? What is the limit for “small”

Dinas Less than 10 million, swakelola (force account) Keppres 18/2000 which they can do by themselves, i.e. conducting workshop, purchase gasoline for operational vehicle, procure daily office supplies. The treasury will pay from his/her petty cash

Are the results of procurements published? How? Dinas Notice board and letter to bidder How can you ensure that local contractors gain most of

the government contracts? [this is a trick questions—to see whether they skew procurements in favor of locals]

Dinas There is informal rule that less than 1 Billion only local bidder

Has there ever been a protest against a procurement from the public? Can you tell us about it?

NONE

Has there ever been a case of corruption with a procurement? Can you tell us about this? Did anyone get convicted in the case (in government or elsewhere)? In any other case?

Dinas, Auditor NONE

Is there a registration requirement for contractors? Is there evidence of collusion in tenders? How many

groups typically bid for tenders? Are there a maximum number of tenders a contractor can bid for?

Dinas Contractor capacity index is typically used to screen, but sometimes it is hard for them to catch up as to what names are fronts

Do you have a “blacklist” of contractors that are not allowed to bid?

Dinas NONE

Sukabumi-RPER 62

What do you think can be improved in the procurement process?

Dinas No restriction. Formally and informally for external bidder to participate in the tendering process.

Once a procurement is completed, how is it paid for? Dinas Normal withdrawal procedures Who prepares the payment order? How many copies of

this order are made? Who gets the copies? What happens to the copies? What checks are done on the payment request? Is there a check on physical delivery? By whom?

Bagian Keuangan

After reviewing invoices, progress report, other supporting docs. Bendaharawan prepares payment request (SPP) and submit to Bagian Keuangan. Which then review and check with budget documents. Bag.keuangan issue payment order (SPM) which instruct local bank to transfer the money to contractor account

Who issues the payment? Who issues the cheque? Who gets a copy of the check issued? Are there any cash payments for procurement done? How are they made? How are they accounted for?

Bagian Keungan/Dinas

Bag. Keuangan issue the check. Cash only for small payment (10 Million)

Who checks whether the goods paid for are actually delivered? How?

Bagian Keuangan

Supporting documents include statement of goods received

Can you explain us the process of wage payments? [note: you can take a concrete example, say a school and teachers]

Bagian Keuangan

Based on DIK, Bendaharawan routine in each spending unit prepare a staff wage list and submit SPP to bagian Keuangan which will issue SPM, after receiving SPM, Bendaharawan routine will withdraw the money from local bank and distribute it.

Is there a central payroll for all regional government workers?

Bagian Keuangan

NONE

If not, is there a regular payment of wages to government workers? Who makes the payments?

Bagian Keuangan

Dinas

Who checks whether those receiving wages actually work for the government? Can you tell us how this is verified?

BaWasda, Bagian Kepegawaian, Dinases ect

Head of Unit, Auditor. The Bawasda reported a case of somebody being fired because of ghost worker status. However, main checking mechanism is within own pos

How many workers are paid in the region [check the number you get from finance with that which you get from the bureau of personnel affairs]

Badan Pegawaian

NOB

For 2001 at the beginning of decentralization, who paid the wages for those civil servants that were about to be decentralized?

Badan Pegawaian

Sukabumi-RPER 63

Are wages paid from a central account or from spending units accounts?

Bagian Keuangan

Echelon III and above are paid from central account to personal bank accounts. Other wages are paid from own pos account. In education, all echelon receive by cash

How are wages paid? In cash? Cheque? Direct deposit? Bagian Keuangan

Cash

What do you think can be improved in the wage payment process?

Bagian Keuangan

More payments should be made through banking system.

Accounting and Reporting Who keeps account of budget implementation in the

region? The finance bureau? The supervising dinas? The spending units? The revenue bureau? The Kas Daerah? All of them?

Bagian Keuangan, Dispenda, Dinas

All of them, but only Dispenda does reconciliation (in the sense that it checks e.g., PBB payments from bank receipts it is copied on with actual receipts), since has a application system to do so

What kind of budget implementation reports are there in the region? [daily, weekly, monthly, quarterly, semi-annual, annual] Who makes these reports? To whom? Do you have a flow chart of all the reports?

Bagian Keuangan, Dispenda, Dinas

Monthly, quarterly and yearly prepared by each spending unit

What type of classification do the various reporting entities use in their accounting? In their reporting?

Bagian Keuangan, Dispenda, Dinas

As recommended by MoHA pedomans

Has central government issued regulations on accounting classification? On accounting standards?

Bagian Keuangan, Dispenda, Dinas

Following central regulation

Is there an accounting handbook for the regions? Bagian Keuangan, Dispenda, Dinas

Central regulation (MOHA)

Is there a (computer-based) accounting system in the spending units? The dinasses? The finance bureau? The Kas Daerah? Anywhere else?

Bagian Keuangan, Dispenda, Dinas

NONE, except for Dispenda, which has IBM special program

Which of these reports are accessible for the public? How do they get access?

Bagian Keuangan, Dispenda, Dinas

Theoretically, as are the budgets, but Bagian Keuangan could not recall that anybody asked

Sukabumi-RPER 64

Which of these reports are to the DPRD? Bagian Keuangan, Dispenda, Dinas, DPRD

Budget realization. DPRD says they often look into how money was actually spent (e.g., Kijang versus Escudo)

[if there is one] how long after finishing a month/quarter/semester is the implementation report available to the Bupati? To the DPRD? [ask for a report, and check the date on it]

Bagian Keuangan, Dispenda, Dinas, DPRD

February submit to DPRD for March discussion

Has the annual report for 2001 been submitted to the Bupati? To the DPRD?

Bagian Keuangan, Dispenda, Dinas, DPRD

As of end January it had been completed, as submitted to both parties (see references)

Has the annual report for 2000 been submitted to the Bupati? To the DPRD?

Bagian Keuangan, Dispenda, Dinas, DPRD

Yes

Does the accountability statement of the head of region have a budget section?

Bagian Keuangan, Dispenda, Dinas, DPRD

Yes

Are any of these reports audited? By whom? Bagian Keuangan, Dispenda, Dinas, DPRD

NONE, information to be confirmed BPK will do the audit

Does the internal auditor write a report on budget implementation? Can we have a copy?

Bagian Keuangan, Dispenda, Dinas, DPRD, BaWasda

Partial

Is there an independent external auditor? Who is it? Bagian Keuangan, Dispenda, Dinas, DPRD

BPK. From local government point of view, BPKP and BPK are independent external auditor. Constitution, BPK is a supreme audit who has a right to audit local budget.

Does BPKP audit any of the regional accounts? How about “co-administered” spending?

Bagian Keuangan, Dispenda, Dinas, DPRD

Still accepted BPKP, inc. for local gov. company

What are the standards that the audit agency use? Are there central regulations on audit? Is there a handbook on audit?

Bagian Keuangan, Dispenda, Dinas, DPRD

Central regulation

Sukabumi-RPER 65

How does the local auditor establish its workplan for the year? Is there coordination with other auditors?

Bagian Keuangan, Dispenda, Dinas, DPRD

Yes. Coordination seems to be more theoretical than actual

What is the capacity of the local auditor? (Total staff, level of training) How is capacity improved?

BaWasda 18 out of 30 staffs are auditor with only one staff has accounting education background. There is continual audit training

Do you ever recall a auditor report leading to legal action?

BaWasda NONE

What levels of administrative sanctions are typically taken? What are these based on?

BaWasda Reminder and administration sanction (PP20)

Are local audit reports published? BaWasda NONE, only to Head of District. Is pricing, for example in procurements, part of audits?

How are reference prices determined? BaWasda Only compare to standards cost which issued

by Bagian Umum, Sekda, and used by Bagian Keuangan

Human Resources for Financial Management How many people work in the finance bureau? In the

Kas Daerah? In the Bawasda? What is their education and experience level?

Bagian Keuangan about 26. Bachelor in Bawasda

How many trained accountants (CPA or similar) work in the region in total?

NONE

How many people work in financial management in the dinases? In the spending units?

Does the DPRD have special staff to support them in financial issues

Not really

Is training only for MS Excel? If not, are other packages used?

The Dinas Pendapatan has a system from IBM Indonesia which is in place since 1998.

What packages are used? Do these provide an integrated form of financial management? Do these provide for on-going realization reports?

Only in Dispenda. The system allows for new lines to be added (e.g., as they have done with the DAU). One drawback of the system is that it does not export summary tabulations for Excel. These have to be typed in if used somewhere else. An integrated system still seems to be a ways off.