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LESSONS:

Local Government Finance and Governance Reform Sector Development Program

sector: Public Sector Management | country: Indonesia

Program Related

Technical assistance (TA) inputs. The TA work plan assumed that the policy and institutional reforms would be achieved early and that the remainder of the time would simply involve monitoring and evaluation of implementation. However, policy reforms take time, and continued monitoring and effort are required from the TA, the counterparts, the government, and ADB throughout the program to effect policy and institutional changes.

Long-term perspective. The adoption of a medium-term expenditure framework for the local government budget meant that the local government was equipped with a set of long-term objectives to guide and shape medium-term policy design and implementation. The close consultation involving the government, ADB, and other development partners strengthened the government – s ownership and increased the potential for funding agency buy-in.

Flexibility in design. A local government finance and governance reform program is complex and involves major changes in the legal and regulatory framework, institutional arrangements, local government financial infrastructure, and human capacity. Hence, sufficient time must be allocated to program implementation, and design flexibility must remain a key consideration.

Time lag between adoption of reforms and effective enforcement. The delays in the enforcement of minimum service standards were specifically mentioned.

Coordination among stakeholders. A key factor in the acceleration of local government finance and governance reform is coordination among stakeholders. Therefore, effective coordination and information sharing are essential to successfully implement a project involving government agencies and numerous stakeholders.

Project Related

Full commitment from the regional governments. The successful implementation of a project depends on the support and commitment of top level management, including provincial governors, Bupati, and Walikota at the Kepala Bagian/Dinas level, as well as Tim Admin and operators. Changes in personnel at the Kepala Bagian level who are in charge of implementing the Sistem Informasi Pengelolaan Keuangan Daerah (regional financial management information system or SIPKD)/regional Sistem Informasi Keuangan Daerah (regional fiscal information system or SIKD) system in the regional governments but without the commitment to the use of the SIPKD/regional SIKD system can discontinue the implementation of the SIPKD/regional SIKD system in the concerned regional government with smooth running system.

Realistic outputs are the key to success. The project was conceptualized and designed to cover 171 participating regional governments in the implementation of the SIPKD/regional SIKD in the regional governments. This was too wide a scope to cover over 36 months of implementation.

Project design needs to incorporate regional governments’ inputs. It is the view of the participating regional governments that the concept and design of the project can be improved. The initial design, which envisioned the implementation of SIPKD in 17 regional government work units, could be expanded to accommodate all working units since these units are all interrelated. Implementation in all work units would provide a clearer picture on the benefits of SIPKD.

Better design of procurement procedures. Procurement thresholds should be more carefully considered, particularly for the procurement of information technology hardware/software, which requires a precise and timely procurement process due to the fast- changing pace of technology and the risk of obsolescence. In addition, an early consultant support should be provided to the executing agency to assist it in the design of procurement procedures.

Better recruitment of consultants. Projects that require the hiring of a consultant who is responsible for the recruitment of other project consultants should consider the following during the planning stage: (i) using advance contracting and a retroactive financing method that allows the borrower to proceed, with ADB – s approval, with the selection (though not contracting) of consultants before the loan effectiveness or (ii) using ADB-provided funds for a TA covering the recruitment of project completion unit consultants, and later including this as part of the cost of the TA portion of the loan.

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