simon delay emy boncodin jonathan dunn paul nankivell decentralisation an action plan from a pem...
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Simon DelayEmy BoncodinJonathan DunnPaul Nankivell
DecentralisationAn Action Plan from a PEM perspective
Decentralisation: Action Plan 2 9/8/00
PlanIntroductionA. Short Term (during 2000 for the 2001 budget)
policy decisions on aspects of expenditure allocation
treatment of transferred responsibilitiesgeneral aligning of expectationsinfo to local governments
B. Medium Term (2001 and beyond)budget reformfiscal disciplineallocative efficiencyoperational efficiencycentral controlexternal audit
Decentralisation: Action Plan 3 9/8/00
Introduction Importance
Probably biggest transfer of staff ever in the worldCovers nearly all the major government functions and over half of government spending
Expectations are high for more accountable, more efficient and more effective spending
Decentralisation: Action Plan 4 9/8/00
Introduction: cont. Unusual
Functions virtually all transferred to Dati II, not provinces
Breadth of functionsNo positive listBig bang approach not transitional period
DifficultiesPolitical pressures for separatismA time of fiscal tightnessTimetable for preparation constrainedConstraining decisions on revenue sharing
Decentralisation: Action Plan 5 9/8/00
A1. Determine treatment of Shared ResourcesOptions Define fiscal capacity to include all income sources. Define fiscal capacity to exclude shared income sources. Define fiscal capacity to include a proportion (say, half)
of shared resources.
Ultimately a political decision informed by modelling results
Decentralisation: Action Plan 6 9/8/00
A2. Determine Policy on “Losers”Issues
what is the benchmark for current spending any allowance made for inflation applies to both Dati I and Dati II or just Dati II?
We suggest definition must allow for All staff inflation All responsibilities i.e. current plus new Possibly some permitted loss against this
figure e.g. 5%
Decentralisation: Action Plan 7 9/8/00
A3. Determine aggregate DAU and modelDAU (plus shared resources) should cover
current routine responsibilitiescurrent development responsibilitiesallow policy on equalisation and losers to be metbe consistent with required law that 2.5 % of funds go to provinces
be consistent with minimum 25% rule in total
Decentralisation: Action Plan 8 9/8/00
A4. Set responsibilities to be met from DAU if DAU at 25% is insufficient:-
need extra DAU orchange policy on equalisation or losers
if there are surplus funds:-transferred proportion of APBN staff (assume 10%?) transfer all deconcentrated non-staff responsibilities extra development funds
we suggest transferring non-salary routine costs
gives budget certaintygives some real freedom to Dati IIallows managed transfer of salary responsibilities
Decentralisation: Action Plan 9 9/8/00
A5. Separate financial and physical transfers
Options1. Hold back all transfers of routine funds until 2002. 2. Hold back only staff-related costs until 2002.3.Transfer funds during 2001 as blocks of
transferred staff and responsibilities are identified (either by region or by function).
We suggest option 2 Allows budget certainty Allows time for managing staff transfers whilst
retaining certainty over salary payments
Decentralisation: Action Plan 10 9/8/00
A6: General - Aligning Expectations Align expectations with reality for 2001 Limited opportunities for resource-reallocation Growth in local resources will be small No time to plan resource-use or reorganise? The benefits of decentralisation will not be
experienced much in 2001 This is a de facto transition period and real
benefits will take 4-5 years
Decentralisation: Action Plan 11 9/8/00
A7: Better Info to Daerah Issue copies of draft PP immediately issue guidance figures on transfers quickly
Decentralisation: Action Plan 12 9/8/00
B1: Budget Reform ProcessesTreat 2001 as a year for testing reforms to
budget preparation at daerah level e.g. budget classification and multiyear budget
reforms supported by central team/TA aimed at preparation of 2002 budget
Refocus the aid mobilisation and resource allocation role of Bappenas
consistent with a unified resource allocation and budget planning process
a multiyear budget framework
Decentralisation: Action Plan 13 9/8/00
B2: Budget Reform Processes cont.Redefine processes of external assistance
mobilisation (consistent with decentralisation)direct loans to local governmentsvoluntary consortia of Dati II facilitated by provincesstill need some central involvement if a central guarantee
Decentralisation: Action Plan 14 9/8/00
B3: Budget Reform Processes cont.Complete analysis of future potential
development budget flowsover three year perioddisaggregate the projected new spending between central and daerah level
distinguish between rupiah and foreign financingDetermine discretionary spending gap available for allocation between central and daerah;
Decentralisation: Action Plan 15 9/8/00
B4: Budget Reform Processes cont.Monitor local project delivery arrangements
for central controlled projects Monitor the performance of implementation of
central financed and managed projects define scope for further redesign to focus on
decentralised delivery link this assessment to results of technical
assistance in daerah budget reform processes;
Decentralisation: Action Plan 16 9/8/00
B5: Fiscal Discipline Dati II lack control over revenue sources
switch PBB to local tax & allow local tariff-settingfurther sources?Shift provincial sources to Dati II?
Local Governments need help in early notification of provisional grant figurescertainty of dates of cash transfers
– monthly/quarterly
– in advance/in arrears
Better accountability of DPRDpublic hearingsinvolve NGOstransparent budget/reporting process
Decentralisation: Action Plan 17 9/8/00
B6: Allocative Efficiency Reform staff remuneration
switch funding to basic wages from honorariaincrease basic wagesreconsider differentials
Reform Development/Routine budget splitpromote integrated decisions on investments, running costs, maintenance etc.
Develop local capacity for…inter-sectoral planningprogramme evaluation
Need guidelines on Dati II allocations to desa
Decentralisation: Action Plan 18 9/8/00
B7: Operational Efficiency Review procurement
need sufficient competition Develop performance indicators/benchmarking
systemsto be mediated through auditors?
Decentralisation: Action Plan 19 9/8/00
B8: Central ControlIssuesResolve responsibilities for control & monitoring
Sectoral ministries responsible for sector specific standards
– But do they have field staff, skills– What controls on competing standards, priorities
Central ministry (DDN, Meneg OTDA, Dep Keu?) responsible for general administrative control
– But capacity?– Split of responsibilities– Mechanisms for feedback unclear
Decentralisation: Action Plan 20 9/8/00
B9: Central Control cont.Suggestions
Specify indicators not standards and publish resultsUse them to identify good performanceemphasise performance audit rather than detailed sectoral control
Decentralisation: Action Plan 21 9/8/00
B10: External Audit Continuance of multiple agencies
BPK/BPKPSectoral ministriesAuditor appointed by DPRDIrWilPropnew anti-corruption agency
Decentralisation: Action Plan 22 9/8/00
B11: External Audit: cont.– Need clarity of mandates– Need public reporting– External auditor should
– be independent of local executive, DPRD and centre– Have capacity in performance auditing– develop comparative performance studies, best practice etc.– Have local government as their priority
This suggests:-– no role for BPK/BPKP, IrWilProp and DPRD-
appointed auditors– Creating new specialist agency