An Analysis of Regional Public Expenditure and Financial

Investing in Indonesia’s Education at the District

Level

An Analysis of Regional Public Expenditure and Financial Management

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THE WORLD BANK OFFICE JAKARTAIndonesia Stock Exchange Building, Tower II/12-13th Fl.Jl. Jend. Sudirman Kav. 52-53Jakarta 12910Tel: (6221) 5299-3000Fax: (6221) 5299-3111

THE WORLD BANKThe World Bank1818 H Street N.W.Washington, D.C. 20433 USATel: (202) 458-1876Fax: (202) 522-1557/1560Email : [email protected] : www.worldbank.org

Printed in February 2009

Investing in Indonesia’s Education at the District Level: An Analysis of Regional Public Expenditure and Financial Management is a product of staff of the World Bank. The fi ndings, interpretation and conclusion expressed herein do not necessarily refl ect the views of the Board of Executive Directors of the World Bank or the government they represent.

The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denomination and other information shown on any map in this work do not imply any judgment on the part of the World Bank concerning the legal status of any territory or the endorsement of acceptance of such boundaries.

For any questions regarding this report, please contact Mae Chu Chang ([email protected]) and Cut Dian Rahmi Agustina (cagustina@

worldbank.org)


Level


ii Investing in Indonesia’s Education at the District Level

Glossary of Terms

APBD Regional Government Budget (Anggaran Pendapatan dan Belanja Daerah)

APBN State Budget (Anggaran Pendapatan dan Belanja Negara)

BAKD Local Government Financial Administration Guidance (Bina Administrai Keunangan Daerah)

Bappeda Regional Development Planning Agency (Badan Perencanaan Pembangunan Daerah)

Bappenas National Development Planning Agency (Badan Perencanaan Pembangunan Nasional)

Bawasda Regional Monitoring Agency (Badan Pengawasan Daerah)

BEC Basic Education CapacityBKD Regional Civil Service Board

(Badan Kepegawaian Daerah)BKKM Scholarship for Student

from Poor Family (BeaSISWA Keluarga Kurang Mampu)

BKM Special Assistance for Students (Bantuan Khusus Murid)

BOMM Operational Assistance for Quality Management (Bantuan Operasional Manajemen Mutu)

BOS School Operational Assistance (Bantuan Operasional Sekolah)

BPS Central Bureau of Statistics (Badan Pusat Statistik)

Bupati District Head CCT Conditional Cash TransferDAK Special Allocation Fund (Dana

Alokasi Khusus)DASK Work Unit Budget Document

(Dokumen Anggaran Satuan Kerja)

DAU General Allocation Fund (Dana Alokasi Umum)

Desa VillageDinas Local Technical Agency Offi ceDPA-SKPD Work Unit Budget Execution

Document (Dokumen

Pelaksanaan Anggaran Satuan Kerja Perangkat Daerah)

DPRD Provincial/District House of Representatives (regional parliament) (Dewan Perwakilan Rakyat Daerah)

DSSD Decentralized Social Services Delivery

GDP Gross Domestic ProductGDS Governance and

Decentralization SurveyGER Gross Enrollment RateGoI Government of IndonesiaGRDP Gross Regional Domestic

Product HDI Human Development IndexInpres Presidential Grants (Instruksi

Presiden)Kabupaten District (regency)Kecamatan SubdistrictKelurahan Urban villageKepmen Ministerial Decree (Keputusan

Menteri)Keppres Presidential Decision

(Keputusan Presiden)Km KilometerKota City (urban district)KUA General Budget Policy

(Kebijakan Umum Anggaran) LAKIP Government Agency

Performance Accountability Report (Laporan Akuntabilitas Kinerja Instansi Pemerintah)

LG Local GovernmentLPMP Educational Quality Guarantee

Agency (Lembaga Penjamin Mutu Pendidikan)

MBE Managing Basic Education MenPan State Ministry of State

Administration Reform (Kementerian Negara Pendayagunaan Aparatur Negara)

MoF Ministry of FinanceMoHA Ministry of Home AffairsMoRA Ministry of Religious AffairsMoNE Ministry of National EducationMPR People’s Consultative

Assembly (Majilis

iiiAn Analysis of Regional Public Expenditure and Financial Management

Permusyawaratan Rakyat) MSS Minimum Service StandardMusrenbang Annual Development

Coordination Meeting (Musyawarah Perencanaan Pembangunan)

NER Net Enrollment RateNGO Non-Governmental

OrganizationNTB West Nusa Tenggara (Nusa

Tenggara Barat)NTT East Nusa Tenggara (Nusa

Tenggara Timur) O&M Operations and MaintenancePAD Own-Source Revenue

(Pendapatan Asli Daerah)PEACH Public Expenditure Analysis

and Capacity Harmonization PER Public Expenditure ReviewPerpu Regulation in Lieu of Law

(Peraturan Pemerintah Penggati Undang-Undang)

Perda Regional Regulation (Peraturan Daerah)

PFM Public Financial Management PKU Program Management Unit Podes BPS Village Potential Survey

(Potensi Desa)PPA Tentative Budget Ceilings and

Priorities (Pagu dan Prioritas Anggaran)

PREM Poverty Reduction and Economic Management

RAPBS Annual Budget of Primary School (Rencana Anggaran dan Pendapatan Belanja Sekolah)

Regional Budget Consolidated Budget consisting Central Government Budget (Deconcentrated), Provincial Budget, and District Budget

Renja-SKPD Work Unit Annual Work Plan (Rencana Kerja Satuan Perangkat Daerah)

Renstra Educational Development Strategy (Rencana Strategis)

RGDP Regional Gross Domestic Product

RIPS School Master Plan (REncana Induk Pengembangan Sekolah)

RKA-SKPD Education Annual Work and Budget Plan (Rencana Kerja dan Anggaran Satuan Kerja Perangkat Daerah)

RKPD District Government Annual Work Plan (Rencana Kerja Pemerintah Daerag)

RPJMD Local Government Medium-Term Development Plan (Rencana Jangka Menengan Pemerintah Daerah)

SD Primary School (Sekolah Dasar)SDN State Owned Primary School

(Sekolah Dasar Negeri)SIKD Regional Finance Information

System (Sistem Informasi Keuangan Daerah)

SISWA Education System Imrpovement through Sector-Wide Appraches

SKPD Regional Government’s Working Unit (Satuan Kerja Pemerintah Daerah)

SMK Vocational High School (Sekolah Menengah Kejuruan)

SMP Junior High School (Sekolah Menengah Pertama)

STR Student Teacher RatioSub-national Budget Consolidated Budget

consisting Provincial and District Budgets.

Susenas BPS National Socio-Economic Survey (Survei Sosial Ekonomi Nasional)

SWA Sector-Wide ApproachUnicef United Nations Children’s FundUnesco United Nations Educational,

Scientifi c and Cultural Organization

WB World BankWDI World Development Indicators

iv Investing in Indonesia’s Education at the District Level

Foreword

Since the implementation of decentralization in 2001, district governments have been getting increased responsibilities to provide education services to the citizen. Basic and secondary education management authority has been fully transferred from the central to the provincial and district government. District education expenditure has grown rapidly both in terms of level and as a share of national education expenditure. The amount of district education expenditure has increased from Rp. 26 trillion in 2001 to 52 trillion in 2006 and they constitute 50 percent of the total national education public expenditures in 2006. Moreover, the education sector at the district level are also getting more priorities with the enactment of Law No. 20/2003 on the National Education System which requires central and sub-national governments to allocate a minimum of 20 percent of their budgets to the education sector.

In order for this signifi cant allocation of education spending to translate into improved education outcomes, it is important to understand the spending pattern of the district governments, so that a proper assessment on the effectiveness and effi ciency of the district government spending can be carried out.

This review of district education expenditures is one of the outputs of a larger set of analytical and design activities that will prepare the ground for System Improvement through Sector Wide Approaches (SISWA) Program in basic education. We hope that this report can benefi t the SISWA team, governments, and other stakeholders through its analysis on the current trends in education investments and outputs and can serve as a model for the broader program of local education expenditure analysis which hopefully will be carried out by the district government themselves to help them do better planning and budgeting and to inform future spending decisions.

Mae Chu ChangHuman Development Coordinator

The World Bank Indonesia

Wolfgang FenglerSenior Economist

The World Bank Indonesia

vAn Analysis of Regional Public Expenditure and Financial Management

Acknowledgments

This report was prepared by a core team led by Cut Dian Agustina (EASPR), together with Elif Yavuz (EASPR) and Ahmad Zaki Fahmi (EASPR). Excellent research and data analysis assistances was provided by Sukmawah Yuningsih and Adrianus Hendrawan (EASPR). Important substantive comments were also received from Andrew B. Ragatz (EASHD), Vincente Paqueo (EASHD) and Eduardo Velez Bustillo (Sector Manager, EASHD).

Valuable inputs were obtained from the Government of Indonesia, especially Prof. Dr. Suyanto and his team from the Directorate General of Primary and Secondary Education (Ministry of Education). We are also grateful for the assistances provided during the fi eld visit from the Bappeda and Provincial Education Offi ces in North Sumatra, Central Java, North Sulawesi, and East Nusa Tenggara and District Education Offi ces in Asahan, Kota Binjai, Kota Magelang, Wonosobo, Kota Menado, Minahasa, Belu and Timor Tengah Selatan.

A larger group within the World Bank contributed valuable inputs to this report, for which the core team expresses their appreciation: Ratna Kesuma, Prima Setiawan, Rosfi ta Roesli, Dandan Chen (EASHD), Meltem Aran, Sukarno Wirokartono, Bastian Zaini, Ahya Ihsan, Adrianus Hendrawan, Bambang Suharnoko (EASPR), and Ajay Tandon (HDNHE). Special thanks also go to Peter Milne for editing and Arsianti for assisting with formatting and production.

Overall guidance was provided by Wolfgang Fengler (Senior Economist) and Mae Chu Chang (Human Development Coordinator).

vi Investing in Indonesia’s Education at the District Level

Table of Contents

Glossary of Terms ii

Foreword iv

Acknowledgments v

Table of Contents vi

Summary 9

Chapter 1. Introduction 11

1.1. The Role of Districts in Investing in Education 11

1.2. Data Collection, District Selection, and Capacity Building for District Expenditure Analysis 12

1.3. Outline of the Review 12

Chapter 2. The Legal Framework and Flow of Funds for the Education Sector 15

2.1 The Legal Framework 15

2.2. The Flow of Funds for the Education Sector 18

Chapter 3. Education Expenditures at the Local Level 21

3.1. The Big Picture: Public Education Spending in Indonesia 21

3.2. Education Spending and the Importance of the Districts as a Spending Unit 22

3.3. District Expenditure Patterns and Trends 24

3.4. Economic and Programs Composition 26

3.5. Household Out-of-Pocket Spending 31

3.6. Spending at the School Level 32

Chapter 4. District Education System and Outputs 35

4.1. Education Infrastructure and Facilities 35

4.2. Human Resources in Education: Teachers and Students 37

4.3. Education Expenditure, Outputs, and Equity 39

4.4. Effi ciency at the District Level: Identifying Best Practice 45

Chapter 5. District Planning, Budgeting, and Monitoring for the Education Sector 47

5.1. Planning and Budgeting 47

5.2. Monitoring and Evaluation 50

5.3. Financial Management Assessment in Papua 51

Chapter 6. Key Findings and Policy Options Regarding the SWA 53

Annexes 57

References 61

viiAn Analysis of Regional Public Expenditure and Financial Management

Tables

Table 1.1. District covered by this study 13

Table 2.1. Education spending as percentage of local government spending, 2006 16

Table 2.2. Summary of intergovernmental fi nancing arrangement based on PP No. 38/2007 17

Table 3.1. National public expenditure on education (central + province + district), 2001-08 22

Table 3.2. Nominal education expenditures by level of government, 2001–06 22

Table 3.3. Share of development and routine expenditures by level of government, 2001-04 23

Table 3.4. Routine expenditure distribution by level of sub-national government, 2002-06 24

Table 3.5. Education expenditure as a share of total expenditure in visited districts, 2001-06 25

Table 3.6. Composition of routine and development education expenditure, 2001-05 27

Table 3.7. Budget planned vs. realized in the visited districts, 2005 28

Table 3.8. Public and apparatus spending on education 30

Table 3.9. BOS fund allocation based on school level and type in the visited districts, 2005 33

Table 4.1. Average service areas for schools in the visited districts, 2006 36

Table 4.2. Schools per 1,000 school-aged children in the visited districts, 2006 36

Table 4.3. Student teacher ratios (STR) in the visited districts, 2006 37

Table 4.4. Some indicators of school availability 43

Table 4.5. District expenditures per poverty quintile, 2005 43

Table 5.1. School monitoring mechanism 51

Table 1. Education spending by central government (decon), and local governments,

and household out of pocket, 2005 57

Table 2. Local government education expenditure, 2001-06 58

Table 3. Routine and development expenditure on education, 2004-06 58

Table 4. Economic classifi cation of education routine spending, 2006 59

Table 5. Public and apparatus spending on education 2005 and 2006 59

Table 6. NER, literacy rates, and mean years of schooling, 2005 60

Table 7. Number of students, classroom condition, and number of schools, 2006 60

Figures

Figure 2.1. Flow of funds of education expenditures 19

Figure 3.1. Trends in national education expenditures, 2001–08 22

Figure 3.2. Education spending by economic classifi cation, level of government and

routine district spending composition 23

Figure 3.3. Source of district education expenditures, 2005 24

Figure 3.4. District education expenditures by source of fund in visited districts, 2005 24

Figure 3.5. Education expenditure and percentage of total expenditure, 2001-06 25

Figure 3.6. Education expenditures in the visited districts, 2001-06 25

viii Investing in Indonesia’s Education at the District Level

Figure 3.7. Per capita education expenditure in the 10 visited districts, 2006 26

Figure 3.8. Economic composition of routine expenditures in visited districts, 2006 27

Figure 3.9. Program composition of the visited districts, 2006 29

Figure 3.10. The breakdown of public and apparatus spending in 10 visited districts, 2006 31

Figure 3.11. Household out-of-pocket expenditure in the visited districts, 2004-06 32

Figure 4.1. Primary schools per 1,000 primary school-aged children by sub-districts in Kab,

Belu and Kab. Wonosobo, 2006 36

Figure 4.2. STR for junior and senior secondary levels by sub-district in Kab. Belu, 2006 37

Figure 4.3. Over- and under-supply of elementary teachers by district and sub-district, 2006 38

Figure 4.4. Teacher qualifi cations in the visited districts, 2006 39

Figure 4.5. Primary school net enrollment rates of the visited districts, 2002-06 40

Figure 4.6. Junior secondary net enrollment rates of the visited districts, 2002-06 40

Figure 4.7. Senior secondary net enrollment rates of the visited districts, 2002-05 40

Figure 4.8. Primary school drop-out rates of the visited districts, 2002-06 41

Figure 4.9. Mean years of schooling in the visited districts, 2001-05 41

Figure 4.10. Literacy rates in the visited districts, 2001-06 41

Figure 4.11. Junior secondary school net enrollment rates by income quintile, 2006 42

Figure 4.12. Spending per capita, net enrollment rates at junior and senior secondary levels 42

Figure 4.13. Best practice frontier of education sector performance at the district level 45

Figure 4.14. Distribution of output index by input quintile 45

Figure 5.1 The normative framework for annual budgeting preparation process 49

Figure 5.2. Overall PFM scores for all assessed sub-national governments 52

Figure 5.3. Average scores for each strategic area 52

Figure 1. Total district revenue and education spending, 2005 57

Boxes

Box 2.1. The legal background of Indonesia’s “20 percent rule” 16

Box 3.1. What drives the education expenditure pattern? 28

Box 4.1. Minimum service standards in the education sector 44

Box 5.1. Lost in translation: How medium-term plans are translated intothe education sector plan 48

Box 5.2. School fi nancial management and formula funding in Kota Magelang 50

9An Analysis of Regional Public Expenditure and Financial Management

Summary

Highlights in education development

In 2006, 56 percent of education expenditure • was spent at the sub-national level. District governments are the main spenders, accounting for 51 percent of total spending, while provincial governments account for just over 5 percent. These shares of total education spending demonstrate the trend in education service delivery, with district government shares being relatively high compared with the central government.

District education expenditure has increased • since decentralization. However, the budget share of district education spending has been decreasing. This decreasing trend, particularly since 2005, may have been infl uenced by BOS (school operational assistance) transfers from the central government.

Aggregate spending at the sub-national • level in 2006, as well as in most of the districts visited, achieved the “20 percent rule”, if salaries are included in the estimation. The Constitutional Court ruled in 2007 that the “20 percent rule” would include all education spending (including salaries) at all levels of government.

Net enrollment rates (NERs) at the primary • school level in most of the visited districts are close to universal, except in some remote districts in Papua. Districts with high NERs at the primary level also tend to have high NERs at the junior secondary level. Differences in NERs at

the primary and junior secondary levels are more signifi cant in kabupaten (district) than kota (city) areas. This situation suggests a higher transition rate from primary to secondary schools in urban than rural districts.

There are variations in access to schools • and in teacher supply, but almost all of the districts visited score higher than the national average. Access to schools for districts nationally and in most of the visited districts is good at all school levels, although greater variation is found among sub-districts. In terms of student teacher ratios (STRs), based on WDI most of visited districts have below average primary STRs for low- and middle-income countries, indicating an adequate supply of teachers.

Key issuesAlthough districts spend the majority of • the total education budget, this spending is mostly on non-discretionary routine expenditure. At the sub-national level more than 90 percent of routine expenditure is allocated to personnel spending. Secondary level enrollment is still • problematic for many districts and across income groups. The bridge between primary and secondary education is important if the transition rate is to be increased. For people in lower income quintiles, access to education is still a problem and here transportation and

10 Investing in Indonesia’s Education at the District Level

Summary

education fees continue to play a major role. In certain districts signifi cant challenges remain in increasing literacy rates.The condition of education infrastructure in • many districts in Indonesia is still poor. This poor condition is all the more worrying because only less than 1 percent of routine spending is allocated towards maintenance and operational spending.There is still an unequal distribution of • schools and teachers, particularly among sub-districts. A problem of over- and under-supply of teachers, as well as insuffi cient numbers of teachers who meet the minimum qualifi cation standards, is observed in most districts. In primary schools, most teachers have only graduated from senior high schools, despite the legal requirement that teachers have at least a bachelor degree.An incoherent planning and budgeting • process is still observed in many districts both within the sector and between local governments and Education Dinas. This is probably caused not only by the low capacity of local governments, nor is it entirely explained by the lack of a regulatory framework, but largely due the absence of any planning culture and the lack of performance accountability.

RecommendationsDistrict governments need to prioritize • secondary education. This could be achieved by increasing budget allocations for programs that provide scholarships and encourage drop-outs to return to school. Improvement in the literacy rate will require not only an expansion of the school system to increase NERs but also an effort to reach the non-literate population who are now beyond school age. Local governments should include specifi c programs in their education budget priorities that attempt to combat illiteracy and provide a second chance to those who have been missed out on the opportunity to enroll in formal education.Districts need to improve their capacity to • assess the effi ciency of their spending and identify key issues within the education sector. Technical assistance might be needed to this end. In addition, the central government can also monitor the composition of local government expenditures and provide incentives

or disincentives in order to improve the budget composition. One of the mechanisms to achieve this is by using the budget composition of local governments as an indicator for deconcentrated spending targeting. Local governments need to re-evaluate • teacher allocations and employment, particularly with regard to uneven teacher distribution. Local governments should also link their teacher allocation planning with the incentives program as required by Law No. 14/2005 on Teachers and Lecturers. Re-evaluation of staffi ng needs to be supported by a clear staffi ng framework since teachers are members of the national civil service. The government needs to provide not only for staff transfers between schools within a district, but also staff transfers between districts and between provinces.Invest in teaching quality through teacher • certifi cation together with adequate mechanisms and performance control. Poor education quality is an issue for both rural and urban areas. Certifi cation of teachers can help to enhance learning outcomes if adequate mechanisms and performance controls, such as teacher attendance and teaching quality measurements, are implemented. A nationwide system of performance • measurement is required to ensure that local governments are accountable in developing education outcomes, as well as synchronizing budgeting and planning in their regions. Such a system would act as a balance between the full autonomy that is provided to districts in spending their funds and the outcomes they achieve with those resources. An appropriate performance accountability system can be instituted by using the minimum service standards (MSS) on a preliminary basis.


Chapter 1.

Introduction

1.1. The Role of Districts in Investing in Education

The Government of Indonesia (GoI) has made investing in the education sector a major priority and, in recent years, has been allocating an increasing percentage of its budget towards education. National public spending on education rose from 2.8 percent in 2001 to 3.1 percent in 2006 relative to GDP. The fuel subsidy reductions have allowed the GoI to reallocate public resources to education spending, for example through the school operational assistance (BOS) and conditional cash transfers (CCT). Remarkably, education has now displaced interest payments on debt as the largest item in the GoI budget. Public spending on education is estimated to increase further to 3.0 percent in 2008 according to budget data.

Since 2001, district governments have been responsible for the provision of education services and, as a consequence, now spend the majority of the total education budget. In 2006, about 56 percent of the GoI education budget was executed at the sub-national level. District governments are the main spenders, accounting for about 51 percent of total spending, with provinces accounting for the other 5 percent.

In order for public spending to translate into improved performance outcomes, it is crucial that district governments have suffi cient fi nancial management capacity. In addition, it is imperative for districts to be able to evaluate the effectiveness and effi ciency of their spending and, subsequently, use

this information to inform future spending decisions. With respect to the issue of governance, and in light of increased expenditure allocations for education to the sub-national level, the GoI hopes to strengthen the capacity of districts such that they use their resources well. An important priority here is the strengthening of good planning, budgeting, procurement, fi nancial management and accountability practices.

The forthcoming Education System Improvement through Sector Wide Approaches (SISWA) Program is a large budgetary support program that aims to tackle challenges related to governance, management and resource allocations. The SISWA program’s main development objective is to increase basic education enrollment, completion and quality by providing support for the implementation of the educational development strategies (Renstra) not just of the Ministry of National Education (MoNE) and the Ministry of Religious Affairs (MoRA), but also of sub-national governments. In order to ensure commitment and ownership of the SISWA program, a large component will provide grants to district education offi ces (education Dinas) based on their performance on basic education outcome indicators.

The review of district education expenditure and fi nancial management is an output from the Basic Education Capacity Program, which is aimed at preparing for the launch of the Government’s larger Siswa program under the new Renstra 2010-14 for basic education. Hence, this paper is one of the outputs of a larger set of analytical and design activities that will prepare the ground for a sector wide approach (SWA) program in basic education.


Chapter 1Introduction

1.2. Data Collection, District Selection, and Capacity Building for District Expenditure Analysis

This activity is primarily focused on district education expenditure and fi nancial management analysis, and was implemented jointly by the World Bank Jakarta Education Team and the Poverty Reduction and Economic Management (PREM) Team. The methodology applied in this analysis has been developed by the PREM team and is known as the PEACH approach, which stands for Public Economic Analysis and Capacity Harmonization. The PEACH has been used in a number of provinces ― Gorontalo, Aceh, Nias and Papua ― and is a programmatic approach to undertaking comprehensive expenditure analysis together with local stakeholders at the sub-national level. In this analysis the approach was used to analyze specifi cally the expenditures for the education sector at the district level.

Since it requires signifi cant effort to carry out rigorous expenditure reviews at the district level ― as already demonstrated by the various PEACH initiatives completed so far ― only 10 districts were covered in this initial effort. This district sectoral public expenditure review (PER), however, serves as a model for the broader program of local PERs expected to be carried out in relation to the national SISWA program.

In terms of the selection of districts for this expenditure analysis exercise, the activity team aimed to align the selection process with the district targeting approach used for the SISWA. Since the SISWA aims to provide budgetary support in an equitable manner to districts with a wide range of capacity across Indonesia, the team decided to target districts with a relatively good reputation in terms of budgeting, planning and expenditure management, as well as districts that are known to be ‘poor’ and lacking in capacity in the human development sector.1

To ensure regional equity, the team decided to focus on fi ve provinces, located in fi ve different regions/islands of Indonesia and, within those provinces, target rural as well as urban districts.

1 Here ‘poor’ are understood as both the fi scally poor, as well as the economically poor.

In addition, the project team also visited the provincial education offi ces to ensure that any comprehensive district data, compiled or summarized at the province level, would be taken into account when performing the analysis for the various districts. Furthermore, cross-checking at the provincial level allowed for the verifi cation not only of completeness and transparency of the district data, but also for an assessment of the data transfer mechanisms in the various regions and provide an opportunity to document potential shortcomings in information systems within the regional education system.

The data were collected by a team of research analysts that visited a large number of stakeholders ranging from district education offi ces (Dinas) to schools and local government planning units (Bappeda). Most districts were visited for a period of three days and the collected data were supplemented by additional data collection at the corresponding provincial Dinas offi ce. Generally, the provincial Dinas offi ce staff facilitated the meetings with the district teams. Regarding analysis at the school level, the team complemented its fi eld research with fi ndings coming from the GDS2 survey for those districts (out of the 10 selected) that were included in the survey, namely: Kab. Asahan, Kota Manado, Kab. Belu, Kab. Timtengsel, and Kab. Jayawijaya.

1.3. Outline of the Review

This PER comprises six chapters. Following this introductory chapter, the second chapter covers the legal framework for fi nancing the education sector, as well as the fl ow of funds spent on education services. The third chapter is the core of the paper and analyzes trends and patterns in public expenditures. The economic and programmatic composition of expenditures at the district level are also discussed here. Furthermore, household expenditures on education, as well as spending at the school level, particularly through the new BOS program, are analyzed. The fourth chapter focuses on the educational system and its outcomes at the district level. System inputs, such as education infrastructure and human resources, are examined and (distributional) outputs in terms of enrollment rates, literacy rates, etc, are discussed. The fi fth chapter reviews the planning and budgeting mechanisms found at the district level. Finally, the sixth chapter of this report contains policy options and the main messages of particular importance to the SISWA program.



Table 1.1. District covered by this studyCharacteristics of Regions Fiscal Resources GRDP Poverty Urban/RuralProvince North SumatraKab Asahan Low Medium Medium RuralKota Binjai Medium High Low UrbanProvince Central JavaKab Wonosobo Low Low High RuralKota Magelang High High Medium Urban

Province North SulawesiKab Minahasa High Medium Low RuralKota Manado Medium High Low UrbanProvince NTTKab Timur Tengah Selatan Medium Low High Rural

Kab Belu Medium Low Medium Rural

Province PapuaKab Jayawijaya Low Low High RuralKab Jayapura High Medium High RuralSource: World Bank staff calculations based on BPS/MoF data (Susenas, SIKD, GRDP).

Detailed Description of Main Deliverables/Outputs from the Activity

A number of outputs were delivered under this activity, of which this district expenditure review is one. The deliverables are summarized below.

District Database for Selected Districts: The district database contains the budget data compiled in the fi eld visits, which are mostly local expenditure and budget data, as well as qualitative information regarding the planning and budgeting processes in the various institutions. Further, data concerning outputs for main education performance indicators have been included and extracted mostly from existing data sources, such as Susenas, Podes and SIKD. In order to allow for trend analysis and to enlarge the likelihood of making viable cross-district comparisons, both expenditures and allocations for as many recent years as available were collected (2001-06/07). The format of the database is in Microsoft Excel, although some parts are complemented with STATA datasets.

District Education PER The district education PER provides inputs into the SISWA program and thereby aims to improve project design and single out district needs in terms of public fi nancial management and expenditure analysis support. The PER is not only focused on the description of trends and patterns in district expenditures, but also reviews the legal framework with regard to education spending and the planning and budgeting process.

District Level Education Expenditure Analysis ToolkitOne sub-component of this PER is a toolkit for districts on how to undertake expenditure analysis in the education sector. The toolkit is based on the experience and methodology coming out of the World Bank’s PEACH work and has been specifi cally adapted here for the education sector. This output is aimed at the strengthening district capacity and its dissemination is planned under the second component of the SISWA and the Basic Education Project.




In this chapter the legal framework and the fl ow of funds for the education sector are discussed. The system described here is largely applicable at the national level, as the majority of the regulations are effective across the entire country, although regional regulations were in place in some of the districts visited. The fl ow of funds structure also allows for national comparisons and hence can feed into the knowledge and know-how needed for the preparation of the SISWA district performance grant component.

2.1 The Legal Framework

The responsibilities of sub-national governments with regard to budget allocations for the education sector have been defi ned by a variety of laws and regulations. Among these laws and regulations are most importantly: Law No. 20/2003 on the National Education System, Law No. 14/2005 on Teachers and Lecturers, and the latest Government Regulation No. 38/2007 on intergovernmental relations and sub-national roles and functions. The contents of these legal documents are discussed below.

2.1.1. Education Financing Responsibilities at the Central and Sub-national Levels

Law No. 20/2003 on the National Education System requires central and sub-national governments to allocate a minimum of 20 percent of their budgets to the education sector, excluding spending

Chapter 2.

The Legal Framework and Flow of Funds for the Education Sector

on salaries from this benchmark.2 The central government is responsible for allocating a share of districts’ budgets towards the salaries of teachers who are appointed by the government. Funds for teacher salaries are transferred by the central government to district government budgets through general allocation fund (DAU) transfers. The allocation of funds to education units (education service group that provides formal, non-formal and informal education in each level and type of education) by central and sub-national governments are also transferred in the form of grants.

Aggregate spending at the sub-national level in 2006, as well as in the 10 districts visited, was still far from meeting the 20 percent mandate if salaries are excluded in the estimation. None of the 10 districts has been able to meet the mandate. In fact, all 10 districts have education expenditures (excluding salary expenditures) that are less than 10 percent of their local budgets. Kab. Timtengsel and Kab. Wonosobo have the highest shares, with 8.9 and 6.6 percent of total expenditure (excluding salaries), respectively, allocated to the education sector. The picture is, however, changed signifi cantly when salaries are included in the estimation. The aggregated districts at the national level and most of the visited districts have reached or surpassed the 20 percent mandate, except for the ones in Papua. The overall share of education spending to total expenditure

2 In 2007, the Constitutional Court specifi ed that teacher salaries would be included in the 20 percent budget allocation to education. This paper, however, only includes brief discussion on this issue as the revision of Law 20/2003 is still unavailable.


Chapter 2The Legal Framework and Flow of Funds for the Education Sector

including teachers’ salaries at the national level accounts for 28.3 percent, and only 6.3 percent if salaries are excluded.

Box 2.1: The legal background of Indonesia’s “20 percent rule”

• 1945: Indonesia Constitution stipulates in Article 31: (1) “Every citizen has the right to education” and; (2) “The government shall establish and conduct a national educational system which shall be regulated by law.”

• 2002: Nearly 60 years later, this Constitution article was amended to specify: “The state should allocate a minimum of 20 percent from the APBN budget to education expenditures, to respond to national education needs.”

• 2003: Later, Law No. 20/2003 on the National Education System (Part 4, Art. 49) again redefi nes the 2002 benchmark. The 2003 law narrows the range of spending items that count toward the 20 percent target by excluding salaries. As stated: “Education funds, excluding salary of educators and service education expenditure, are allocated at a minimum 20 percent of the APBN and a minimum of the APBD.”

• 2007: The Constitutional Court Decree No. 24/PUU-V/2007 specifi ed that teacher salaries will be included in the 20 percent budget allocation to education.

• 2008: The Constitutional Court Decree No. 13/PUU-VI/2008 provides an ultimatum for the government to comply with the 20 percent share.

Source: Investing in Indonesia’s Education, World Bank (2007a) and Constitutional Court decree.

Compared with other visited districts, Kab. Jayawijaya and Kab. Jayapura in Papua have the lowest shares of overall education spending. One of the reasons for the lower spending of education in these districts is the relatively low education spending per capita student, as well as fewer schools and teachers.

The spending structure within the education sector largely explains the diffi culty in meeting the target stipulated by Law No. 20/2003, rather than funding constraints. The signifi cance of the salary component in sub-national expenditures was striking in the districts visited, leaving only small shares available for other spending items. A similar pattern is observed when analyzing aggregate sub-national expenditures for the education sector, as on average 96 percent of district routine expenditures go towards salaries or incentives. Lack of resources is not the reason behind the low non-salary education spending, because districts have received massive increases in transfers (DAU), particularly in 2006. The increase in transfers has signifi cantly boosted district revenues, thus topping up the funds still further fails to address the main structural problem.

Table 2.1. Education spending as percentage of local government spending, 2006

DistrictsEducation spending share

(incl. salary)Education spending share

(excl. salary)

Kab. Asahan – North Sumatra 39.9 4.6

Kota Binjai – North Sumatra 26.3 3.7

Kab. Wonosobo – Central Java 37.0 6.6

Kota Magelang – Central Java 30.6 2.2

Kab. Minahasa – North Sulawesi 35.1 5.8

Kota Manado – North Sulawesi 30.2 2.4

Kab. Timur Tengah Selatan – NTT 35.7 8.9

Kab. Belu – NTT 32.2 6.4

Kab. Jayawijaya – Papua 14.0 3.8

Kab. Jayapura – Papua 17.8 5.0

Average of 10 districts 29.0 5.1

Aggregate districts (national) 28.3 6.3Source: World Bank staff calculations based on SIKD/MoF and districts’ APBD data.



2.1.2 Intergovernmental Financing Arrangements

The intergovernmental fi nancing arrangements for the education sector have been partially defi ned in Government Regulation (PP) No. 38/2007. This new government regulation specifi es the assignment of roles and responsibilities of each government level for all the decentralized sectors. The regulation has addressed some issues on intergovernmental roles and responsibilities which, according to many decentralization stakeholders, had previously not been clearly defi ned. However, further clarifi cations on issues such as sectoral fi nancing are still needed, particularly for those sectors that were decentralized to a considerable extent, such as education and health. The assignments for central, provincial and district governments within the education sector can be divided into fi ve sub-sections related to: (i) policy; (ii) planning and fi nancing; (iii) curricula; (iv) infrastructure and facilities; and (v) education personnel.

The planning and fi nancing sub-section of the new regulation classifi es the fi nancing responsibilities of each level of government by levels of education and program. The central government is responsible for the provision of overall guidance on fi nancial support for each level of education and program. Furthermore, the central government is responsible for the provision of resources for the higher education level and cross subsidies for early childhood education, primary, secondary, and non-formal education, as well as for special education services. As for provincial government, the primary responsibilities include providing fi nancial

support for secondary and vocational education, and special-needs education. Provinces can also provide additional support or subsidies for early childhood education, primary and non-formal education, as well as higher education. Finally, district governments are mainly responsible for providing resources on early childhood education, and primary and non-formal education. Districts do not have any additional support responsibilities. For a summary of these arrangements, see Table 2.2.

In terms of additional support or subsidies from the central government to the districts, these are channeled mostly through so called deconcentrated funds, while supplements from the provinces mostly stem from their own-source revenues. Among programs that are subsidized by the central and provincial governments are the school rehabilitation program, teacher training, subsidies for poor families (BKKM and BKM), youth reintegration programs (reintegrating school dropouts), teacher incentives, etc. In addition to deconcentrated funds that are channeled through provinces, the central government has also provided direct support to primary and junior high schools through school operational assistance (BOS), although primary schools are supposed to be a district government responsibility. As for school rehabilitation programs, particularly for primary schools, these are often jointly performed by central, provincial and districts governments under a specifi c MoU agreement with an agreed contribution from each party. Such co-fi nancing efforts occur in most districts and hence the central and provincial governments still play an important role in rehabilitation efforts, thereby challenging traditional decentralized responsibilities.

Table 2.2. Summary of intergovernmental fi nancing arrangement based on PP No. 38/2007

Central Province District

Primary fi nancing responsibility

Higher education- Secondary education - Vocational education- Special education service-

Early childhood - education Primary education - Non-formal education-

Additional support / subsidy

Early childhood education- Primary education- Secondary education- Non-formal education- Specifi c education- Special education service-

Early childhood - educationPrimary education- Non-formal education- Higher education-

Source: Government Regulation No. 38/2007.



2.1.3 Teacher Incentives

Teacher incentives are regulated by Law No. 14/2005 on Teachers and Lecturers, which covers professional incentives, functional incentives, special incentives, and additional benefi ts. Professional incentives are provided to those teachers who are certifi ed through a competency examination conducted by a nationally authorized institution. Functional incentives are given to civil servant teachers, as well as to non-civil servant teachers, at both public and private schools. Special incentives are available to teachers who teach in specifi c areas, such as remote areas, districts in border areas, disaster areas or other emergency situations. In addition to these incentives, teachers can also receive supplementary benefi ts in the form of insurance, awards, scholarships, etc.

Central and sub-national governments are all legally responsible for providing resources from their budgets to support teacher incentives. The professional and special incentives are to constitute the same amount as the current base salaries. The functional incentive for civil servant teachers depends on their rank in the civil service. Functional incentives for non-civil servant teachers, however, are subsidized; the level depends on the fi nancial capacity of the government. This incentive program is relatively new and implemented only in fi scal year 2007.

2.2. The Flow of Funds for the Education Sector

Funding for the education sector at the district level comes through multiple channels, most notably the central and sub-national (province and district) governments (Figure 2.1). Central government funds are channeled through several mechanisms that include: direct transfers to schools; deconcentrated funds/projects; APBN projects; and central representative offi ce projects.

The central government’s direct transfer of funds to the school level is implemented on a per student basis. The types of transfer include the recent BOS program, targeted to elementary and junior secondary schools, and the operational assistance for quality management (BOMM, or Bantuan Operasional Manajemen Mutu) program to support vocational and senior secondary schools. At present, these programs constitute the majority of funds at the school level and are hence of high importance.

Regarding the deconcentrated funds, the projects cover a variety of activities and vary in their disbursement mechanisms. Deconcentrated funds are often used for projects such as school or classroom reconstruction and school quality improvements. Depending on the particular design of a project, the funds may be channeled directly into school accounts, or through provincial Dinas accounts. The special characteristics of deconcentrated projects relate to the role of the province in the fl ow of funds, as the provincial Dinas are responsible and accountable for the supervision and management of those projects within their jurisdictions. In this case, the implementing units (school and/or district Dinas) are required to submit progress and completion reports to the provincial Dinas.

Another fi nancing mechanism is through APBN projects, which are funded, as well as executed, directly by the center. In these types of projects, the central government directly provides goods and/or services to schools. An example is the national multimedia project, whereby schools receive multimedia equipment (TVs, computers, etc) distributed directly by central government agencies.

In regions where representative offi ces exist, central funds are sometimes still channeled to these offi ces from the center. An example of this type of offi ce is the Educational Quality Guarantee Agency (LPMP, or Lembaga Penjamin Mutu Pendidikan). Among other tasks, the LPMPs are responsible for providing training to teachers in the provinces where such agencies are based.



In addition to the central government, provincial governments also provide funds to fi nance activities executed at the district/school level. Provinces often pay the salaries of contract teachers, provide incentives to teachers in remote areas, and fi nance school rehabilitation activities. Recently, the MoNE has signed a number of MoUs with several provincial and district governments regarding the co-fi nancing of school rehabilitation. The fi nancing share for each level of government concerned in this arrangement is different for each province depending on the fi scal capacity of the district, with some districts requiring more assistance than others. In the fi ve provinces visited, the contributions of provincial governments varied from 15 percent in North Sulawesi to about 30 percent in Central Java.

Resources allocated to the education sector by provincial governments are not always under the management of the provincial education Dinas. In the case of the school rehabilitation program and teacher incentives in remote areas in North Sumatra and NTT, the funds are classifi ed as social assistance expenditure and the transfers go directly into the district government account, bypassing the provincial Dinas. This adds to the complexity of sub-national expenditure analysis, particularly with regard to fund fl ows coming from the provincial level.

At the district level, the processes of allocating operational funds from district governments to schools are not uniform across districts. In most districts, the education Dinas is responsible for the

Figure 2.1. Flow of funds of education expenditures

LEVEL BUDGET

NATIONAL

PROVINCIAL

DISTRICT

APBN

MINISTRY OF FINANCE MINISTRY OF EDUCATION

Provincial Budget :

DAU /SDAPAD

Provincial Education Office

District Budget :DAU/ SDA

PADDAK

District Education Office

DAK Dekon Central Functions

Own Source

Revenue

Own Source

Revenue

DAU /SDA Tugas Pembantuan

BOS

Schools

Central Government

Agencies in the Regions

Fund originated from MoF

Fund originated from MoNE sectoral budget

Fund originated from Provincial Budget

Fund originated from District Budget

Source: Interviews with district and provincial education Dinas offi cials.



planning, budgeting, and execution of expenditures related to coordination activities and education management. However, there are a number of fl ows that are allocated directly to schools for some districts, such as Kota Manado, and provide resources based on a per student formula to both elementary, secondary and high school levels. In other districts, such as Kab. Minahasa, schools receive fi xed allocations on a quarterly basis.

Nevertheless, district Dinas share a common process in terms of coordinating the budgeting process for primary schools. All primary schools were required to submit their annual budgets (RAPBS) to Dinas in all districts examined. For junior secondary (SMP) and senior secondary (SMA/SMK) schools, however, the budgeting process varies. In some districts, such as Kota Binjai, schools have their own budget documents and there is relatively little interference from the Dinas before they submit their annual budget proposals to the district planning and budgeting committee. In other districts, such as Kab. Minahasa and Kab. Belu, the Dinas still coordinate and supervise the planning and budgeting of every individual school, including district junior and senior secondary schools. Moreover, in all districts visited the education Dinas were in charge of the planning, budgeting, and budget execution processes for capital, and operations and maintenance funds.


Chapter 3.

Education Expenditures at the Local Level

In this chapter, mainly education expenditures at the local level are discussed. However, in order to set the stage for this discussion, the chapter also provides an analysis of the role of the districts within the national public expenditure system for education (Section 3.1 and 3.2). In addition to this ‘big picture’ overview, private (i.e. household) expenditures and expenditures at the school level are analyzed, as these form the most signifi cant additions towards local education spending.

3.1. The Big Picture: Public Education Spending in Indonesia

Since the mid-1990s, Indonesia has seen an upward trend in government expenditure on education.3 The two exceptions were a temporary

3 In this chapter education spending for central government is defi ned following the sectoral budget classifi cation. From Sector 11: Education, National Culture, Belief in God Almighty, Youth and Sports Sector, the sub-sectors 11.1 Education and 11.2 Offi cial and Informal Education are included in the analysis, which together account for 98 percent of the sector total.

decrease during the crisis and a dip in 2004. The decrease in spending in 2004 was jointly caused by low budget execution and a crowding-out effect in most social sectors due to increasing fuel subsidies. Education expenditures peaked in 2003, when they accounted for about 14 percent of overall national expenditures (Table 3.1). Education expenditures as a share of GDP in 2005 relative to 2004 slightly declined, at about 2.6 percent, as did the ratio of overall national expenditures to GDP. In the absolute fi gures, education expenditures rebounded by 8 percent in 2005 and showed an even higher increase of about 24 percent in 2006. Budget fi gures for 2007 indicate another 9 percent increase, with the share of national education spending at 15.4 percent of total national expenditures.


Chapter 3Education Expenditures at the Local Level

Figure 3.1. Trends in national education expenditures, 2001–08

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2001 2002 2003 2004 2005 2006 2007 2008*

Billi

on ru

piah

0

2

4

6

8

10

12

14

16

18Pe

rcen

t

Total national education spending nominalTotal national education spending (2006=100)% of education to total expenditure

Source: World Bank staff calculations based on data from MoF.Note: Figures for 2007 and 2008 are partially based on budget estimates, as opposed to expenditures

Table 3.1. National public expenditure on education (central + province + district), 2001-08Rp trillionEducation 2001 2002 2003 2004 2005 2006 2007* 2008**Nominal National Education Expenditures 40.1 49.8 63.2 61.4 73.2 102.5 118.5 135.7National Education Expenditures (2006 prices)

63.4 70.5 83.7 76.7 82.8 102.5 111.3 116.4

Growth Real National Education Expenditures

- 11.1 18.7 (8.4) 8.0 23.9 8.6 4.5

Education Exp. (% Total National Exp.) 11.0 14.2 14.7 13.0 13.9 15.3 15.4 13.6National Education Exp. (% GDP) 2.8 2.7 3.1 2.7 2.6 3.1 3.0 3.0Total Nominal National Expenditures 363.7 350.6 429.9 472.8 528.1 671.9 768.5 1,000.1Source: World Bank staff calculations based on MoF and SIKD data.Note: * = estimated sub-national budget, ** = APBN-P and estimated sub-national budget.

3.2. Education Spending and the Importance of the Districts as a Spending Unit

In 2006, the majority of education expenditures, about 56 percent, was spent at the sub-national level. District governments are the main spenders, accounting for 51 percent of total spending, while provincial governments account for only just over 5 percent. These shares of total education expenditures demonstrate the trend in education service delivery, with the shares of the district governments being relatively high compared with the central government. In 2005 and 2006 there was an increase in central expenditures. This can be partly explained by additional new spending on the GoI’s BOS program, which started in 2005 and originates at the central level (Table 3.2).

Table 3.2. Nominal education expenditures by level of government, 2001–06

Rp trillion

2001 % 2002 % 2003 % 2004 % 2005 % 2006 %

Central 12.1 30 13.5 27 21.4 34 18.1 29 29.3 40 45.3 44

Development 8.2 60 9.2 62 16.0 69 12.5 63 - - -

Routine 3.9 40 4.2 38 5.4 31 5.6 37 - - -

Provincial 1.9 5 4.0 8 3.9 6 3.8 6 3.9 5 5.4 5

Development 1.4 70 2.6 66 3.1 80 3.0 79 3.0 78 4.3 79

Routine 0.6 30 1.4 34 0.8 20 0.8 21 0.9 22 1.1 21

District 26.2 65 32.6 65 38.3 60 39.8 64 40.0 55 51.8 51

Development 3.0 11 4.6 14 5.3 14 4.6 12 5.6 14 9.7 19

Routine 23.2 89 28.0 86 33.0 86 35.2 88 34.5 86 42.1 81

Total National Expenditures 42.3 100 51.3 100 64.8 100 61.8 100 73.2 100 102.5 100

Source: World Bank staff calculations based on data from MoF.



Although the districts spend the majority of the total education budget, these expenditures are mostly non-discretionary routine expenditures. Hence, while decentralization formally devolved the responsibilities for education down from the central level to the sub-national level, the majority of the development budget is still spent by the central government. Since 2001, the central government has been consistently covering more than 55 percent of total development spending (and typically more than 60 percent), with districts only covering about a quarter (Table 3.3). Thus, local governments have surprisingly little discretion in managing funds and shaping the key education sector decisions.

Furthermore, the majority of routine expenditures at the sub-national level is allocated to personnel spending, followed by goods expenditures (Table 3.4). Hence, although sub-national governments account for a signifi cant share of expenditures in the education sector, they have limited fi scal space for development expenditures. In 2004, development expenditures comprised about 30 percent of national consolidated expenditures on education, whereas in 2003 they accounted for a little more, at about 38 percent. The slight decrease in education spending in 2004 resulted predominantly from a decline in central development spending.

Table 3.3. Share of development and routine expenditures by level of government, 2001-04

2001 2002 2003 2004

Total development expenditures (Rp trillion) 12.6 16.4 24.4 20.1

Central development as % of total 65 56 66 62

Province development as % of total 11 16 13 15

District development as % of total 24 28 22 23

Total routine expenditures (Rp trillion) 27.7 33.6 39.2 41.6

Central routine as % of total 14 13 14 13

Province routine % of total 2 4 2 2

District routine as % of total 84 83 84 85


Figure 3.2. Education spending by economic classifi cation, level of government and routine district spending composition

67%

Central Government

Province2%

13% 4%

Salaries

RoutineDevelopment33%

District 96%85%

Source: World Bank staff calculations based on data from MoNE.



Table 3.4. Routine expenditure distribution by level of sub-national government, 2002-06Percent

Composition of routine expenditure

2002 2003 2004 2005 2006

Personnel expenditure 94 94 95 95 96

Goods expenditure 4 4 3 4 3

O&M expenditure 0 1 1 1 0.4

Travel expenditure 0 0 0 0 0.5

Miscellaneous expenditure

2 2 0 0 0

Other expenditure 0 0 0 0 0

Total routine expenditure

100 100 100 100 100


3.3. District Expenditure Patterns and Trends

In Indonesia, total education spending at the district level reached Rp 74.4 trillion in 2005. This was a combination of district government expenditures, deconcentrated funds spent in the regions, and private out-of-pocket expenditures on education. Total education expenditure has increased by 5.9 percent since 2004. District governments spent the largest share of total education expenditure in 2005, accounting for 53 percent of total expenditure (about Rp 41.8 trillion). Out-of-pocket expenditures for education are the second-largest component of expenditures, at Rp 24.3 trillion or 31 percent of total expenditure. As a largely decentralized sector, the central government only spent a relatively small share on education, accounting for 16 percent of total education expenditure. Deconcentrated funds for education declined from Rp 12.2 trillion in 2004 to Rp 8.2 trillion in 2005.

Figure 3.3. Source of district education expenditures, 2005

BOS, 6%

Sectoral centralspending, 10%

LGs spending,53%

HH out of pocketexpenditure,31%

Source: World Bank staff calculations based on SIKD/MoF, districts’ APBD data, and Susenas/BPS.

In accordance with these national trends, district governments in the 10 visited districts are the largest contributors to their respective district education budgets. District government shares of expenditures amount to about 90 percent of total education expenditures in the three districts of Kab. Jayawijaya, Kab. Jayapura, and Kab. Timtengsel. Resources from central government in the form of deconcentrated funds appear to play only a limited role in the education sector in most of the districts, except for Kota Manado, where deconcentrated funds account for around 41 percent of total education expenditures. At the same time, household out-of-pocket payments are signifi cant and on average constitute about 20 percent of the total district expenditures in the 10 districts examined.

Figure 3.4. District education expenditures by source of fund in visited districts, 2005

0%

20%

40%

60%

80%

100%

Kab. Asahan

Kota Binjai

Kab. Wonosobo

Kota Magelang

Kab. Minahasa

Kota Manado

Kab. Timtengsel

Kab. Belu

Kab Jayawijaya

Kab. Jayapura

National

Deconcentration fund LGs HH out-of-pocket

Source: World Bank staff calculations based on SIKD/MoF and districts’ APBD data.



Aggregate district government spending on education has increased in real terms since the implementation of decentralization in 2001. Education spending increased from Rp 29.3 trillion in 2001 to Rp 35.1 trillion in 2004 and further to Rp 36.8 trillion in 2006. As a share of total expenditure, spending on education shows an opposite decreasing trend from 37 percent in 2001 to 33 percent in 2004 and 28 percent in 2006. The decline in 2005 and 2006 might be due to the increase of central government support through the BOS program that started in July 2005.

Figure 3.5. Education expenditure and percentage of total expenditure, 2001-06

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2001 2002 2003 2004 2005 2006

Rp B

illio

n

20

22

24

26

28

30

32

34

36

38

Perc

ent

Total education expenditure % of total expenditure

Source: World Bank staff calculations based on SIKD/MoF and districts’ APBD data (at constant 2002 prices).

Most visited districts have increased their spending on education since the implementation of decentralization, except for Kab. Minahasa. Kota Manado has seen a signifi cant increase in its education expenditures, followed by Kab. Wonosobo. Education expenditures increased from Rp 15.0 billion in 2001 to Rp 100.5 billion in 2006 for Kota Manado, whereas Kab. Wonosobo more than doubled its

expenditures during the same period. On the other hand, Kab. Minahasa experienced a signifi cant decline in its spending, from Rp 177.2 billion in 2001 to Rp 86.3 billion in 2006 due to the division of Kab. Minahasa into four new districts. Kab. Jayawijaya experienced a decline in 2004 and 2005 as spending realization was still very low by the end of the calendar year. For the other districts, the trend has been relatively stable with an average annual growth rate of about 3.5 percent.

Figure 3.6. Education expenditures in the visited districts, 2001-06

0

50,000

100,000

150,000

200,000

250,000

Kab.

Asaha

n

Kota

Binjai

Kab.

Wonos

obo

Kota

Magela

ng

Kab.

Minaha

sa

Kota

Menad

o

Kab.

Timten

gsel

Kab.

Belu

Kab.

Jayap

ura

Kab.

Jayaw

ijaya

Rp m

illio

n

2001 2002 2003 2004 2005 2006

Source: World Bank staff calculations based on SIKD/MoF and districts’ APBD data (at constant 2002 prices).

In terms of education shares of total expenditure, the trend varies among the 10 districts. In most cases, at least one district from each province has experienced a declining share in its budget allocation for education. The sharpest decline was experienced by Kab. Minahasa, which also suffered the largest decline in its total expenditure fi gure. The share of

Table 3.5. Education expenditure as a share of total expenditure in visited districts, 2001-06Percent

Districts 2001 2002 2003 2004 2005 2006Kab. Asahan 50.0 45.3 45.5 45.5 44.9 39.9Kota Binjai 21.7 29.5 31.2 32.8 31.0 26.3Kab. Wonosobo 32.8 40.9 35.0 40.9 40.3 37.0Kota Magelang 35.9 29.9 35.4 34.1 36.0 30.6Kab. Minahasa 52.6 61.0 56.0 49.6 38.3 35.1Kota Manado 8.2 36.6 10.2 42.1 37.6 30.2Kab. Timtengsel 41.4 35.7 34.0 22.8 38.3 35.7Kab. Belu 35.8 30.7 34.8 35.0 35.8 32.2Kab. Jayawijaya 22.0 18.7 17.6 23.6 20.5 17.8Kab. Jayapura - 6.2 7.2 21.7 22.7 14.0




education to total expenditure declined from 52.6 percent in 2001 to 35.1 percent in 2006. Conversely, Kota Manado, which is situated in the same province as Kab. Minahasa, saw a signifi cant increase in its allocation to the education sector, from 8.2 percent in 2001 to 42.1 percent in 2004, and subsequently to 30.2 percent in 2006. Kab. Jayapura also experienced an increase in its allocation to education, while Kab. Jayawijaya saw the opposite trend. Kab. Belu in NTT, however, showed a stable allocation pattern in terms of its expenditures to education, within a narrow range of 31 to 36 percent between 2001 and 2006.

The majority of districts visited have per capita education expenditures that are higher than the national average. Kab. Jayapura in Papua has the highest per capita spending on education at almost Rp 800,000 per person. Kab. Asahan in North Sumatra and Kab. Wonosobo in Central Java have the lowest per capita spending level at slightly above Rp 200,000. Kab. Asahan has a relatively low poverty rate, at 12 percent, while in contrast Kab. Wonosobo has a poverty rate exceeding 30 percent. Although further research is required, this quick snapshot shows that education spending per capita is not necessarily higher in the districts with lower poverty rate.

3.4. Economic and Programs Composition

The vast majority of district education expenditures constitutes routine spending, leaving limited space for development spending at the kabupaten or kota level.4 On average, from 2001 to 2006, routine expenditure for all districts in Indonesia accounted for 87 percent of total education expenditures. Yet, while constituting of a relatively small share to total expenditure, development expenditure experienced a signifi cant increase from Rp 3.0 trillion in 2001 to Rp 9.7 trillion in 2007. A similar trend was observed in the 10 visited districts. More than 90 percent of education expenditures were allocated to routine spending in Kab. Asahan in 2001-05. Nevertheless, relative increases for development spending were found in Kab. Wonosobo, Kota Magelang, and Kab. Belu, while Kota Manado and Kab. Jayawijaya saw declining allocations to development expenditure. Kab. Timtengsel showed a relatively constant allocation pattern, with an average of 13.3 percent allocated to development in 2001-05.

4 World Bank 2007(b) indicates that while decentralization formally devolved the responsibilities for education to the central level, the majority of development budget in education is still spent by central government.

Figure 3.7. Per capita education expenditure in the 10 visited districts, 2006

0 100 200 300 400 500 600 700 800 900

Kab. Asahan

Kab. Wonosobo

National

Kab. Belu

Kota Binjai

Kab. Timtengsel

Kota Menado

Kab. Jayawijaya

Kab. Minahasa

Kota Magelang

Kab. Jayapura

(Rp’000)

Source: World Bank staff calculations based on BPS, SIKD/MoF and districts APBD data.



Table 3.6. Composition of routine and development education expenditure, 2001-05Percent

District2001 2002 2003 2004 2005 2006

Rtn Dev Rtn Dev Rtn Dev Rtn Dev Rtn Dev Rtn Dev

Kab. Asahan 93.0 7.0 92.6 7.4 92.6 7.4 93.1 6.9 96.5 3.5 89.5 10.5

Kota Binjai 89.0 11.0 91.0 9.0 84.1 15.9 91.1 8.9 90.3 9.7 89.2 10.8

Kab. Wonosobo 96.7 3.3 92.5 7.5 88.5 11.5 84.2 15.8 90.7 9.3 87.8 12.2

Kota Magelang 97.2 2.8 92.7 7.3 71.2 28.8 87.7 12.3 88.2 11.8 94.2 5.8

Kab. Minahasa 98.2 1.8 99.9 0.02 98.9 1.1 96.8 3.2 88.6 11.4 84.8 15.2

Kota Manado 83.2 16.8 98.8 1.2 91.8 8.2 96.4 3.6 96.0 4.0 92.7 7.3

Kab. Timtengsel 87.1 12.9 90.5 9.5 89.5 10.5 84.4 15.6 82.2 17.8 77.0 23.0

Kab. Belu 95.4 4.6 94.5 5.5 86.1 13.9 87.2 12.8 87.8 12.2 84.2 15.8

Kab. Jayawijaya 68.5 31.5 76.9 23.1 86.9 13.1 97.9 2.1 90.7 9.3 75.2 24.8

Kab. Jayapura - - 51.3 48.7 45.8 54.2 92.1 7.9 80.1 19.9 74.1 25.9

All districts Indonesia 89.3 10.7 86.9 13.1 87.1 12.9 88.9 11.1 86.1 13.9 81.3 18.7


Education spending on personnel absorbs the bulk of routine functions at the aggregate level and in the visited districts. In 2006, personnel spending accounted for more than 90 percent of routine spending for districts in Indonesia. For most of the visited districts the number was similar, with more than 95 percent of routine resources for the education sector going towards personnel. For Kab. Minahasa, Kab. Asahan, and Kota Manado, personnel spending reached almost 100 percent of routine spending. Spending on goods and services accounts for about 4 percent and less of routine spending for districts overall and all visited districts, respectively.

A worrying observation relates to the levels of operations and maintenance expenditure, which are less than 1 percent of routine education spending. The low allocations for this function are far from suffi cient to bring any improvement in education infrastructure and facilities. It appears that most districts still rely on central and provincial assistance in terms of maintenance, or classify such expenditures under other categories.

Figure 3.8. Economic composition of routine expenditures in visited districts, 2006

0%

20%

40%

60%

80%

100%

Kab.

Asaha

n

Kota

Binjai

Kab.

Won

osob

o

Kota

Mag

elang

Kab.

Mina

hasa

Kota

Men

ado

Kab.

Timur

Teng

ah

Selat

anKa

b. Be

lu

Kab.

Biak N

umfor

Kab.

Jaya

pura

Kab.

Jaya

wijaya

Nation

al

Personnel Goods Maintenance Travel Others




Budget absorption rates are generally high for recurrent expenditure, while absorption for development expenditure is less optimal. In three out of the 10 districts studied, the absorption rate does not reach 90 percent. One of the factors that may hinder full absorption of the budget is the late

approval of the APBD. Until fi scal year 2007, many district governments failed to approve their APBDs until after January 1. This may delay the disbursement of capital expenditure and cause projects to lag behind schedule.

Table 3.7. Budget planned vs. realized in the visited districts, 2005Rp million

DistrictsRoutine Expenditure Development Expenditure

Plan Realized % Realized Plan Realized % Realized

Kab. Asahan 169,597.7 169,389.8 99.9 6,358.8 6,165.2 97.0Kota Binjai 56,260.3 543,32.0 96.6 5,819.1 5,808.6 99.8Kab. Wonosobo 131,356.5 122,133.4 93.0 12,637.4 12,580.8 99.6Kota Magelang 59,860.4 54,670.5 91.3 8,760.9 7,348.7 83.9Kab. Minahasa 89,064.5 88,447.5 99.3 11,425.3 11,425.0 100.0Kota Manado 108,452.8 108,338.4 99.9 5,672.0 4,526.3 79.8Kab. Timtengsel 84,365.9 86,648.1 102.7 19,641.3 18,720.5 95.3Kab. Belu 75,116.1 74,685.0 99.4 15,544.6 10,344.0 66.5Kab. Jayawijaya 50,683.8. 46,436.1 91.6 5,119.5 4,745.0 92.7Kab. Jayapura 50,586.8 50,133.2 99.1 12,490.0 12,490.0 100.0


Box 3.1. What drives the education expenditure pattern?

The consistent pattern across districts on high salary shares are partly driven by three factors namely: (i) the expansion on the number of teachers, (ii) inherited teachers from centralized era, and (iii) lack of fl exibility in teacher’s mobility. The expansion on the teacher numbers is somewhat based on the subjective perception that there is still an undersupply of teachers in district schools. Based on the teacher employment and deployment survey conducted by the World Bank in 2005, 74 of 276 primary schools that claim to have an undersupply actually show an oversupply according to the current teacher entitlement formula. This general perception might explain as well the growing numbers of teachers in districts in Indonesia as well as in the visited districts, where in average these districts have 5 percent of growth rate in their number of teachers between 2004 and 2006.

The large number of civil servant teachers inherited from centralized era contributed to the problem of excess supply of teachers. Prior to decentralization era, teachers were allocated to schools align with the expansion of school Inpres program. However, with the falling of birth rate, the needs of primary school have declined and some districts have even merged their schools, creating an excess supply of teachers. The World Bank Education Sector Review (2005) indicates that prior to decentralization, Indonesia have already had over 2 million teachers for the entire school system in Indonesia. Of this fi gure, 93 and 62 percent that were employed in primary and junior secondary schools respectively are civil servants. The transfer of responsibility in the decentralization era has caused districts to inherit the large wage bill of those civil servant teachers employed in centralized era.

The fact that civil servant teachers are employed under the national civil service regulation provides district with less fl exibility for teacher employment and deployment. Proper sizing of teachers were constrained by the facts that there is still ambiguity on who is responsible in terms teacher employment and deployment across government in the country. However, the new Government Regulation No. 38/2007 on intergovernmental relations and sub-national roles and functions is expected to clarify and address the uncertainty in the responsibility of teacher deployment and employment.



Analyzing expenditures at the program level shows that districts’ priorities vary, but in 2006 most of the districts targeted the Education Infrastructure and Facilities Development Program, as well as the Pre-school and Basic Education Program. Five out of ten districts allocated 50 percent or more of their non-salary budgets to the Education Infrastructure and Facilities Development Program. Kab. Wonosobo has the smallest allocation to this particular program, but that is mostly because it classifi es its allocations on infrastructure and facilities under basic education and secondary education programs. After infrastructure and facilities, the majority of districts’ second-largest allocation at the program level is to pre- and basic education programs that focus on capacity building and quality enhancement. The visited districts in North Sumatra, Central Java, and South Sulawesi allocated more than one-fi fth of their budget plans to these programs, which include activities such as science competitions, mathematics advancement programs and exercise programs, as well as support for the preparation of fi nal school examinations.

Budget allocations for staff capacity building and educational development program, institutional management program, and planning, implementing, monitoring and evaluation program remain low. The allocations for the teacher and education personnel capacity building program range between 1 and 14 percent of the non-salary budget. Kab. Minahasa hardly allocates any resources to this program, while Kota Binjai allocates close to 14 percent. There is a tendency for kota to allocate larger shares to these programs than the kabupaten, except in the case of Kab. Belu. The institutional and organizational management program receives even lower allocations, and seems far from being on the list of priorities. It seems that allocations to this program are less than 1.0 percent of budgets in all of the visited districts. Similar results are observed when analyzing the planning, implementation, monitoring and evaluation program, which includes activities such as data collection and coordination, work plan preparation, socialization of the education strategic plan, etc. Most of the districts allocate less than 1 percent, except for Kota Magelang and Kab. Timtengsel, which allocate 5 and 6 percent of their non-salary planned budgets, respectively.

Figure 3.9. Program composition of the visited districts, 2006

0%

20%

40%

60%

80%

100%

Kab.

Asa

han

Kota

Bin

jai

Kab.

Won

osob

o

Kota

Mag

elan

g

Kab.

Min

ahas

a

Kota

Man

ado

Kab.

Tim

teng

sel

Kab.

Bel

u

Kab.

Jaya

pura

Kab

Jaya

wija

ya

Teacher and Education Staff Competency Development ProgramEducation Infrastructure & Facilities Development ProgramAccess to Non-Formal Education Enhancement programSecondary Education Development ProgramPre-School and Basic Education Development program

SNP Acreditation Quality Enlargement & Enhancement Program

Planning, Implementation, Monitoring & Education Development Evaluation ProgramCredit Score, Administration Clarification, Mutation, Pension, & Death Assessment ProgramYouth and Sport Development ProgramArt and Culture Development ProgramScholarship ProgramInstitutional and Organization Management Program

Source: World Bank staff calculations based on districts DASK and LAKIP data 2006.



Under the ‘public’ and ‘apparatus’ budget format, most visited districts spend a large share of their education expenditures on the public category.5 The introduction of Ministerial Decree No. 29/2002 has changed the district government budget format from ‘routine’ and ‘development’ classifi cations to ‘apparatus’ and ‘public’ expenditure categories. The Format No. 29/2002 of expenditure affects mainly the structure of expenditure, while the revenue structure has remained largely the same. Under this format the focus of spending is on benefi ciaries rather than on programs and projects. A large allocation of spending on the public category, however, has created a somewhat biased classifi cation, since most districts categorize their spending based on a subjective perception that education belongs to public service. The inconsistent classifi cation of the education sector under the Format No. 29/2002 among districts is partly due to unclear guidance and vague defi nitions of what belongs to public and apparatus spending.

Table 3.8. Public and apparatus spending on educationPercent

District2005 2006

Apparatus Public Fin. Assist Total Apparatus Public Fin. Assist Total

Kab. Asahan 96.58 3.39 0.03 100.0 89.73 10.27 - 100.0

Kota Binjai 90.42 9.58 - 100.0 89.85 10.15 - 100.0

Kab. Wonosobo - 97.61 2.39 100.0 - 97.48 2.52 100.0

Kota Magelang 11.32 88.68 - 100.0 13.70 86.30 - 100.0

Kab. Minahasa 2.05 97.95 - 100.0 3.09 96.91 - 100.0

Kota Manado - 100.00 - 100.0 - 100.00 - 100.0

Kab. Timtengsel 14.62 85.38 - 100.0 17.02 82.98 - 100.0

Kab. Belu 0.61 99.39 - 100.0 0.77 99.23 - 100.0

Kab. Jayapura 85.49 14.51 - 100.0 74.15 25.85 - 100.0

Kab. Jayawijaya 89.90 10.10 - 100.0 75.21 24.79 - 100.0


5 For the purpose of time series analysis, the classifi cation based on routine and development expenditure is adopted in this review and not on public and apparatus classifi cation.

The general administration component received the largest allocation in both apparatus and “public” category. General administration on average accounts of more than 55 percent of spending in apparatus and “public” category. On average, operations and maintenance only accounts for 6 percent of apparatus spending and 25 percent of “public” expenditure category. However, Kab. Asahan and Kota Binjai in North Sumatra, as well as Kab. Jayapura in Papua, spent the majority of their “public” expenditure category on operations and maintenance and capital. Spending on capital investment accounts for the smallest proportion, averaging less than 1 percent for apparatus and about 15 percent of the “public” expenditure category. Overall, although education expenditure allocated a large share of the spending to the public category, the proportion goes mainly to general administration and leaves only a small proportion for capital.



Figure 3.10. The breakdown of public and apparatus spending in 10 visited districts, 2006

Apparatus Public

0%

20%

40%

60%

80%

100%

Kab. Asahan

Kota Binjai

KotaMagelang

Kab.Minahasa

Kab.Timtengsel

Kab. Belu Kab.Jayawijaya

General admin Operational & Maintenance Capital

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Kab.Asahan

Kota Binjai

Kab.Wonosobo

KotaMagelang

Kab.Minahasa

KotaMenado

Kab.Timtengsel

Kab. Belu Kab.Jayapura

General admin Operational & Maintenance Capital


3.5. Household Out-of-Pocket Spending

At the national level, districts’ out-of-pocket spending contributes signifi cantly to total education expenditures and has increased by 32 percent between 2004 and 2005. According to the Governance and Decentralization Survey (GDS) data, the majority of household spending on junior and senior secondary schools is directed towards books, writing materials and transportation. Expenditures on enrollment and monthly schools fees are relatively small, probably due to the impact of the BOS program, which provides support from the central government directly to schools. According to Aran (2007), of the households that had at least one child enrolled in a primary school that received BOS, 72.6 percent reported that their monthly school fees were reduced in the 2004-05 academic year, while at the junior secondary level 82.6 percent of households that had children enrolled in schools that received the BOS program reported fee reductions.

Most of the 10 visited districts, household out-of-pocket spending declined in 2006 compared with previous years. Two districts in North Sulawesi and one district in North Sumatra experienced a signifi cant decline in their out-of-pocket spending between 2004 and 2006. Household spending in Kab. Minahasa dropped in real terms from Rp 51.7 billion in 2004 to Rp 11.8 billion in 2006, while spending by households in Kota Manado declined by 64 percent from Rp 42.9 billion in 2004 to only Rp 45.5 billion in 2006. Out-of-pocket spending declined from Rp 22.7 billion in 2004 to Rp 7.8 billion in 2006 for Kota Binjai. Kab. Asahan and Kab. Belu show relatively stable expenditure patterns at the household level, although there was a slight decline in 2006 compared with the previous year. Kab. Jayapura and Kab. Jayawijaya are the only districts that experienced increases in their household spending between 2005 and 2006. The signifi cant decline that was experienced by the three districts mentioned above is probably the result of the scholarship programs provided by district governments, which is an addition to the BOS support from the central government.



Figure 3.11. Household out-of-pocket expenditure in the visited districts, 2004-06

0

10,000

20,000

30,000

40,000

50,000

60,000

Kab.Asahan

Kota Binjai Kab.Wonosobo

KotaMagelang

Kab.Minahasa

KotaMenado

Kab.Timtengsel

Kab. Belu Kab.Jayawijaya

Kab.Jayapura

Rp m

illio

n

2004 2005 2006

Source: World Bank staff calculations based on Susenas/BPS data.

3.6. Spending at the School Level

School budget consists of funding from multiple sources, with the largest share coming from the recently launched BOS program. The BOS program started in July 2005 and funds channeled through the program are directly transferred from central government to each school’s bank account. The funds are intended to lower or eliminate school fees, while maintaining the quality of education. According to the BOS guidelines, the operational costs can include the cost of registration of new students, text books and reference books, stationery, examinations, teacher development and training, school maintenance, transport costs for poor students, remuneration of temporary teacher, and electricity, water and telephone.

Before the implementation of the BOS, the largest share of school budgets came from the district government and household/community contributions. In 2006, the BOS constituted more than 50 percent of school budgets on average. In SDN 1 Kalijajar and SDN 1 Candimulyo — the visited schools located in Kab. Wonosobo in Central Java — the BOS program contributed up to 82 and 91 percent of the total school budget in 2006, respectively.

All public and private schools in Indonesia are eligible to apply for BOS and a recent quantitative assessment based on GDS 2 data found that the BOS program coverage is very wide. In the GDS 2 sample, only one school out of

the 1,251 primary and junior secondary schools did not receive BOS (or did not know if they had received BOS). In addition, according to the Susenas panel data, 74.2 percent of households with children in primary school and 64.6 percent of households with children at junior secondary school thought that at least one of their children’s schools had received BOS.6 There was some regional variation in the perceived coverage of BOS: for instance, while in Java and Bali 77.8 percent of households with children in primary school (and 67.3 percent of households with children in junior secondary school) reported that their child’s school received BOS, in Papua only 37.8 percent of households with children in primary school (and 35.5 percent of those in junior secondary school) reported that their child’s school received BOS funding.

The allocation of BOS covered almost 40 million students in 2007, accounting for Rp 11.8 trillion. The program distributed 73 percent of the funds to the primary school level and the remaining 27 percent to the junior secondary level. The size of the grant to a school is determined based on the number of students. The per-pupil BOS allocation has increased from Rp 235,000 to Rp 276,000 per student per year for primary schools, and from Rp 324,500 to Rp 376,000 per student per year for junior secondary schools since 2007. By covering school operational costs as well as lowering and often eliminating school fees, the BOS program is expected to encourage poor children to attend school and thereby assist in meeting

6 There may be a downward bias in the coverage from household data if program socialization to households was sub-optimal.



the government’s mandate of completing the nine years of basic education.

In terms of the use of BOS funds, it was found that schools used most of the funding for ‘quality-enhancing’ rather than ‘access-increasing’ investments. GDS 2 data report the responses from school principals and school committees in the use of BOS funding at the school level. According to these data, at the primary school level 95.4 percent of school principals reported that BOS funding was used for textbooks and stationery, 74.5 percent reported it was used for maintenance of school facilities, 71.1 percent reported it was used for teacher honoraria and salaries, and only about 46.5 percent said it was used to assist poor students. The percentage of junior secondary schools that reported assisting poor students using the BOS grant was higher, with 56.7 percent of school principals reporting that the funds were used for providing aid to poor students.

The needs determined at the school level refl ected to a degree the use of BOS funds. However, the relationship between the needs of schools and the use of BOS funds was at times unclear. For instance, at schools where the number and quality of teachers is ‘adequate’ as reported by the school committee and school principal, one would expect to see less spending from BOS on teacher salaries.

However, 67.5 percent of schools that reported having an ‘adequate’ number of teaching staff still chose to spend part of BOS on teacher honoraria.

Greater socialization of the program is still requested by respondents in the GDS 2 survey. Aside from the large share of principals who reported that they had received suffi cient information, 20 percent of school principals nonetheless reported that the socialization of the BOS program was inadequate. From the parents’ side, 79 percent of respondents had children in primary and junior secondary schools that received BOS funding. Of these parents, only 73 percent reported having received socialization on school fees and costs. This refl ects both the need and the demand of more program socialization to schools and parents.

The allocation of BOS by level of education for the visited districts was 63 percent to primary school level and 37 percent to the junior secondary school level in 2005.7 The BOS funds in the visited districts were allocated to more than 3,500 schools and 663,000 students in 2005, of which 13 schools are special schools for disability students with 491 pupils in total. As for the distribution of BOS based on school category, on average around 67 percent of BOS funds were allocated to public schools, while the remainder went towards private schools.

7 The number covers public and private schools at primary and junior secondary level, but excludes religious schools that are in similar level with primary and junior secondary school.

Table 3.9. BOS fund allocation based on school level and type in the visited districts, 2005Rp million

Districts Primary level Junior secondary Public school Private school

Kab. Asahan 16,528 5,793 19,427 2,891

Kota Binjai 2,071 2,310 3,080 1,301

Kab. Wonosobo 9,943 8,800 16,496 2,247

Kab. Minahasa 3,750 1,940 3,289 2,401

Kota Manado 5,370 2,940 4,231 4,080

Kab. Belu 7,447 2,257 6,316 3,388

Kab. Timtengsel 5,640 1,693 3,562 3,771

Kab. Jayawijaya 3,135 1,292 2,876 1,552

Kab. Jayapura 1,097 1,774 2,186 685

Source: World Bank staff calculations based on MoNE data (http://bos.dit-plp.go.id/aboutBOS.php).



Most visited districts received BOS in 2005. Kab. Asahan received the largest allocation, at more than Rp 22 billion in 2005, followed by Kab. Wonosobo at Rp 18.7 billion. Meanwhile, the two districts in Papua received the lowest allocations, corresponding to the number of students in these districts. Based on GDS 2 survey, some schools in districts in Bengkulu, Gorontalo, North Maluku, NTT, and North Sumatra had to pay a special fee to retrieve the funds, while some schools in districts in Papua reported that they had to pay a special ‘tax’ of 11.5 percent to retrieve the BOS grant. In the fi ve visited districts that are also covered by the GDS 2, the allocation of BOS funds is reported largely for books. On average for the fi ve districts, 95 percent of school principals perceived that the funds had an impact on book availability, 71 percent reported that it had improved school maintenance, and 47 percent believed that BOS had enhanced the education access of poor students. Some schools in these fi ve districts have also been able to provide support for the fi nancing of transportation costs of poorer students, particularly schools in Kab. Timtengsel in NTT. Although most schools did not return payments they had previously received from parents or the community after the implementation of BOS, in some cases the money was returned either in part or completely, even when the schools received smaller amount of BOS than expected.


Chapter 4. District Education System and Outputs

4.1. Education Infrastructure and Facilities

In general, the condition of education infrastructure in many districts in Indonesia is still poor. Poor education infrastructure is particularly apparent at the primary level. In 2006 about 25 percent of classrooms across Indonesia were classifi ed by the MoNE as badly damaged. Another 30 percent was lightly damaged. The condition of schools at the junior and secondary school levels is better, but even so an estimated of 19 and 10 percent of classrooms, respectively, were classifi ed as damaged.

Poor classroom condition was refl ected in the 10 visited districts. Kab. Belu and Kab. Timtengsel in NTT have the highest percentage of primary school classrooms that are heavily damaged. About 40 percent of classrooms in these two districts were badly damaged and only 35 percent of classrooms are considered acceptable. In contrast, Kota Binjai in North Sumatra and Kota Magelang in Central Java have the highest percentage of acceptable classrooms condition, with more than 75 percent of classrooms being in a good condition. For junior and secondary schools, most districts visited in eastern Indonesia, excluding Kota Manado, have classroom conditions worse than the visited districts in Central Java and North Sumatra. The rehabilitation of schools needs to be made a priority at the district level, particularly since poor classroom conditions affect the quality and outcomes of investments in the education sector.

In most districts, the main text book is not always available on a one book-one student basis. Data from the GDS 2 survey in the respective districts show that on average at the primary level only 50 percent of students have one Indonesian language book and one math book, while at the junior secondary level the percentage is even lower at 41 percent. As for the visited districts covered in the GDS 2 survey, only Kab. Asahan and Kab. Timtengsel provide one main book for students. Kab. Asahan provides one Indonesian language book and one math book per primary student, while Kab. Timtengsel provides one math book per student at both primary and junior secondary levels.

There are variations in access to schools in the visited districts, but all score better than the national average. Access in most districts is good at all school levels, although greater variation is found among sub-districts. The service area ranges from 0.2km2 to 40km2 for primary levels, 1km2 to 212km2 for junior secondary levels, and 1km2 to 732 km2 for senior secondary levels. As expected, smaller service areas are found in the cities (Kota Binjai, Kota Magelang, and Kota Manado) since these districts are smaller in geographical size and have more schools than kabupaten. Districts in Papua have the highest school service areas compared with other districts. Kab. Jayapura has particularly large service areas compared with the national average, with primary, junior and senior secondary schools covering areas as large 148km2, 547km2, and 1,030km2 for the three levels, respectively. The national average stands at 23km2 for


Chapter 4District Education System and Outputs

primary schools, 115km2 for junior secondary schools, and 292km2 for senior secondary schools.

Table 4.1. Average service areas for schools in the visited districts, 2006

District PrimaryJunior

secondarySenior

secondary

Kab. Asahan 7 39 51

Kota Binjai 1 2 4

Kab. Wonosobo 2 14 58

Kota Magelang 0.2 1 1

Kab. Minahasa 3 13 43

Kota Manado 1 2 3

Kab. Belu 8 53 163

Kab. Timtengsel 9 62 232

Kab. Jayawijaya 40 212 732

Kab. Jayapura 148 547 1,030

National Average

23 115 292

Source: World Bank staff calculations based on various District Education Profi le and Susenas/BPS data.

The ratio of primary schools per 1,000 primary school-aged children shows that the number of schools in some of the visited districts is lower than the national average. On average, the visited districts have seven primary schools per 1,000 primary school-aged children. The highest number of schools is found in Kab. Minahasa, while the lowest number is found in Kab. Jayawijaya, with 12 and 4 primary schools per 1,000 primary school-aged children, respectively. Again, with only four primary schools per 1,000 primary school-aged children, Kab. Jayawijaya

scores below the national average of seven. The distribution of schools, however, is more unequal among many sub-districts. For example, in Kab. Belu, the sub-district of Malaka Barat has a ratio that is six times lower than that of the sub-district of Sasita Mean, while the sub-district of Selomerto in Kab. Wonosobo has a ratio of four times higher than sub-district Mojotengah within the same district. The lower number of schools in some districts and sub-districts, however, does not necessarily refl ect insuffi ciency in school services, as some schools may have a limited number of students. In this case, merging schools and students might improve effi ciency.

Table 4.2. Schools per 1,000 school-aged children in the visited districts, 2006


SecondarySenior

Secondary

Kab. Asahan 5 2 1

Kota Binjai 5 3 2

Kab. Wonosobo 5 1 1

Kota Magelang 6 3 2

Kab. Minahasa 12 6 2

Kota Manado 6 4 2

Kab. Belu 6 2 1

Kab. Timtengsel 7 2 1

Kab. Jayawijaya 4 3 1

Kab. Jayapura 9 6 3

National Average

7 3 2

Source: World Bank staff calculations based on various District Education Profi le and BPS data.

Figure 4.1. Primary schools per 1,000 primary school-aged children by sub-districts in Kab, Belu and Kab. Wonosobo, 2006

Kab. Bel Kab. Wonosobo

0 2 4 6 8 10 12 14

Malaka baratAtambua

Malaka timurTasifeto timurTasifeto barat

KobalimaRinhat

Kakuluk mesakLamaknen

Malaka tengah

RaihatSasita mean

0 2 4 6 8 10 12 14 16

mojotengahgarung

sapurankertek

leksonowatumalang

wonosobokejajar

wadaslintangkalikajarkaliwiro

kalibawangkepil

sukoharjoselomerto

Source: World Bank staff calculations based on various District Education Profi le and BPS data.



4.2. Human Resources in Education: Teachers and Students

The number of the students per classroom is typically much lower than the national standard in most districts. At the primary level, the number of students per classroom ranges from 16 to 32 students per classroom. This is lower than the ceiling of 30 to 40 students per classroom set in the national standard. The numbers are also lower in the junior and senior secondary levels, with the exception of Kab. Belu and Kab. Jayawijaya. Kab. Belu has 44 and 47 students per classroom for the junior and senior secondary levels, respectively, while Kab. Jayawijaya has 48 students per classroom at the junior secondary level.

Student-teacher ratios (STRs) at the junior and senior secondary levels in many visited districts are above the national average. On average, the sample districts have STRs of 19 at the primary, 16 at the junior secondary, and 17 at the senior secondary levels, while the national averages are 19, 13, and 13, respectively. The highest STR at the primary level is found in Kab. Jayawijaya in Papua. As for the junior and secondary levels, the highest STRs are found in Kab. Belu, with 23 at the junior secondary level and 42 at the senior secondary level. The World Development Indicators (WDI) 2006 show that low- and middle-income countries on average have STRs of 31 at the primary level, and 24 for junior secondary level. Based on WDI, most of visited districts have below average STRs for low- and middle-income countries, indicating an adequate supply of teachers at the primary level.

Table 4.3. Student teacher ratios (STR) in the visited districts, 2006


secondarySenior

secondaryKab. Asahan 21 15 15Kota Binjai 22 13 12Kab. Wonosobo 19 17 13Kota Magelang 17 15 12Kab. Minahasa 16 13 18Kota Manado 19 12 17Kab. Belu 17 23 42Kab. Timtengsel 19 15 15Kab. Jayawijaya 24 21 16Kab. Jayapura 15 12 12National average

19 13 13

Source: World Bank staff calculations based on various District Education Profi le/Dinas Education and MoNE.

Despite adequate numbers of teachers in most districts, there are highly unequal allocations of teachers across sub-districts. In Kab. Belu, the STR varies from 9 to 40 at the junior secondary level and from 17 to 54 in the senior secondary level. As for the primary level, the STR ranges from 15 to 27 in Kota Manado and from 12 to 32 in Kab. Timtengsel. Looking at geographic location, sub-districts within cities have relatively smaller variations in STR than in rural districts. As for the visited districts taken overall, the two districts in NTT have larger variations among their sub-districts than other districts in teacher distribution. Of particular concern is the senior secondary level in the sub-districts in Kab. Wonosobo and Kab. Belu, where some students have no teacher. This could be because the school is located in another sub-districts due to the remoteness of certain sub-districts.

Figure 4.2. STR for junior and senior secondary levels by sub-district in Kab. Belu, 2006

0 5 10 15 20 25 30 35Batuputih

Amanuban Barat

Amanuban Tengah

Boking

Polen

Amanuban Timur

Koto'olin

Toianas

Mollo Utara

Kualin

Nunkolo

Sub-dist rict in Kab. Timtengse l(prima ry level)

0 5 10 15 20 25 30 35 40 45

Raimanuk

Weliman

Tasifeto Barat

Raihat

Lamakanen

Malaka Tengah

Malaka Timur

Lasiolat

Sub-dist rict in Kab. Tim tengse l(junior secondary level) (senior secondary level)

0 10 20 30 40 50 60

Lamakanen

Malaka Barat

Tasifeto Barat

Malaka Tengah

Kota

Sub-dist rict in Kab. Tim tengse l

Source: World Bank staff calculations based on various District Education Profi le/Dinas Education.



Problems in teacher distribution can partly be explained by the preference of teachers for employment in urban areas, giving rise to shortages of teachers in rural areas. Adding more teachers will not solve the problem of teacher distribution, while re-assessing the teacher/staff placement might provide a better solution. The required teacher supply at the primary level is calculated based on the number of classrooms. As mentioned in the minimum service standards, every primary school should have a minimum of six classroom teachers, one sports teacher, one religion teacher, and one school principal. On this basis, in six out of 10 of the visited districts there is an over-supply of teachers in primary schools, although an under-supply of teachers still exists within some sub-districts. In addition, STRs at the primary level in most districts are half the targeted STR of 40:1 indicated by the minimum service standards. If more teachers are added, this will need to be carefully planned by looking at geographic location and taking into account other circumstances that can affect student numbers over time. A mechanism to re-allocate teachers from over-supplied areas to rural or under-supplied districts and sub-districts should be encouraged, together with a mechanism to enable schools to regroup within a specifi c geographic area.

Figure 4.3. Over- and under-supply of elementary teachers by district and sub-district, 2006

Districts

-1500

-1000

-500

0

500

1000

Kab M

inaha

sa

Kab T

imten

gsel

Kab J

ayaw

ijaya

Kab W

onos

obo

Kota

Mana

do

Kota

Binja

i

Kota

Mage

lang

Kab B

iak N

umfor

Kab B

elu

Kab A

saha

n

Over

/unde

-supp

ly of

teach

ers

Sub -d istricts

-100-80-60-40-20

020406080

100120

KabTimtengsel

KabWonosobo

KotaManado

Kab Belu Kota Binjai KabAsahan

KotaMagelang

%

% of sub-districts with under-supply teachers% of sub-districts with over-supply teachers


An over-supply of teachers will particularly affect the education budget in terms of the composition of part-time and full-time employed teachers. The share of part-time teachers reaches 11 percent in Kab. Minahasa and 28 percent in Kab. Wonosobo.8 A high share of part-time teachers leads to higher personnel costs given that part-time teachers are more expensive than full-time teachers on an hourly basis.9 The national education PER (World Bank, 2007a) suggests that, in order to improve cost effectiveness, increasing certifi cation of these teachers should be encouraged with the aim of employing them on a full-time basis.

Teacher qualifi cations at the primary level often fail to fulfi ll Ministry Regulation No. 19/2005, which requires teachers to have a bachelor degree. Most teachers at the primary level have only graduated from senior secondary school (SMA) or are diploma II graduates. More than 75 percent of teachers in the two districts in NTT and around 60 percent of teachers in the two districts in North Sulawesi are high school graduates. The district average shows that only 12 percent of primary teachers have bachelor degrees. The share of teachers with bachelor degrees is higher at the junior and senior secondary levels. At the junior secondary level, bachelor degree teachers

8 Part-time teacher is defi ned as teacher with teaching hour less than 24 hours per week based on minimum teaching hour requirement in Law No. 14/2005 on Teachers and Lecturers. Figure is estimated using Sakernas/BPS data.

9 See more on hourly based teachers’ salaries in World Bank, 2007a.



accounted for more than 70 percent in Kota Binjai and Kab. Wonosobo. However, 33 percent of teachers at the junior secondary level in Kab. Timtengsel are only high school graduates. The share of bachelor degree graduates is signifi cantly higher at the senior secondary level, with an average 82 percent of teachers holding bachelor degrees. Districts with the highest share of teachers having completed graduate studies are found in Kota Magelang, Central Java. Overall, no districts meet the standard service minimum in terms of teacher qualifi cations. Based on Regulation No. 19/2005, 90 percent of their teachers are required to have bachelor degrees, while the three education levels in all visited districts are still below this requirement. Kab. Wonosobo was found to be the closest in meeting the requirement at the senior secondary level, where 89.4 percent of teachers have at least a bachelor degree.

Figure 4.4. Teacher qualifi cations in the visited districts, 2006

Primary

0%

20%

40%

60%

80%

100%

Kab.Asahan

Kota Binjai

Kab.W

onosobo

KotaMagelang

Kab.Minahasa

KotaManado

Kab. Belu

Kab.Timtengsel

<=SLTA D-I D-II D-III S1 S2

Junior

0%

20%

40%

60%

80%

100%Kab.

Asahan

Kota Binjai

Kab.W

onosobo

KotaMagelang

Kab.Minahasa

KotaManado

Kab. Belu

Kab.Timtengsel


Senior

0%

20%

40%

60%

80%

100%

Kab.Asahan

Kota Binjai

Kab.W

onosobo

KotaMagelang

Kab.Minahasa

KotaManado

Kab. Belu

Kab.Timtengsel



The GDS survey indicates that teacher absenteeism in sample districts is relatively low. Data in four visited districts also covered in the GDS survey show that the share of absent teachers to total teachers in school is less than 10 percent. The lowest level is found in Kota Manado, with hardly any absent teachers, while a relatively high level is found in Kab. Jayawijaya, at 32 percent of primary teachers absent and 29 percent of junior secondary teachers absent during school time. Reasons for absence were given as being engaged in tasks outside school, sickness, on leave, or attending other private business. The aggregate share of all sample districts in the GDS shows 6 and 3 percent of teachers absent at the primary and junior secondary levels, respectively. The survey on teacher deployment and employment, however, shows that teacher absenteeism rate is 19 percent at the national level.

4.3. Education Expenditure, Outputs, and Equity

4.3.1. Education Outputs

The primary school net enrollment rates (NER) in most of the visited districts are close to universal, with the exception of Kab. Jayawijaya. Kab. Jayawijaya lags behind other districts with an average enrollment rate of 72 percent in 2005. Enrollment rates shows a relatively stable trend towards universal primary school enrollment in most districts. Kab. Timtengsel and Kab. Jayawijaya experienced the most signifi cant improvements, while Kab. Jayawijaya still lags signifi cantly. The current enrollment rate in Kab. Jayawijaya means that it is one of only seven districts out of 451 districts in Indonesia with NERs of less than 80 percent, all located in Papua. This shows that while most districts in Indonesia are close to achieving universal enrollment at the primary level, many districts in Papua still lag behind.



Figure 4.5. Primary school net enrollment rates of the visited districts, 2002-06

0

10

20

30

40

50

60

70

80

90

100

Asahan KotaBinjai

Wonosobo KotaMagelang

Minahasa KotaManado

Belu TTS Jayapura Jayawijaya

2002 2004 2006

Source: World Bank staff calculations based on Susenas/BPS data

In general, NERs at the junior secondary level are lower than those at the primary level. Districts with high NERs at the primary level also tend to have high NERs at the junior secondary level, with the exception of Wonosobo. Differences in NERs at the primary and junior secondary levels are more signifi cant in kabupaten than city areas. The three visited cities have less than 10 percent difference between the primary and junior secondary levels. This situation suggests a higher transition rate from primary to secondary schools in urban districts than in rural districts. Kab. Wonosobo in Central Java presents an interesting case: despite having a high primary NER, its junior and senior secondary NERs are close to those found in Kab. Jayawijaya, Papua. This highlights the policy challenge of achieving nine years of mandatory schooling in lagging districts.

Figure 4.6. Junior secondary net enrollment rates of the visited districts, 2002-06

0

10

20

30

40

50

60

70

80

90

100

Asahan KotaBinjai

Wonosobo KotaMagelang

Minahasa Kota Manado


2002 2004 2006


Only two out of 10 visited districts have relatively high NERs at the senior secondary level. The expansion of student enrollment at the high school level remains challenging for many districts. The cities (Kota Magelang, Kota Binjai and Kota Manado) have relatively higher NERs at the senior secondary level than the rural districts. Nonetheless, enrollment rates in the cities are still less than 75 percent of the senior secondary school-aged population. In the more rural districts, including Kab. Wonosobo, Central Java, enrollment rates barely reach 40 percent of the senior secondary school-aged population.

Figure 4.7. Senior secondary net enrollment rates of the visited districts, 2002-05

0102030405060708090

100

Asahan Kota Binjai Wonosobo KotaMagelang

Minahasa KotaManado


2002 2004 2005


Districts with low enrollment rates do not necessarily have high drop-out rates. Drop-out rates, defi ned as the percentage of children in each school-age group who attend school but do not fi nish, are relatively low in all districts, even those districts where NERs are relatively low. For example, Kab. Wonosobo, where the high school enrollment rate has been low for several years, has a zero percent high school drop-out rate. Kab. Jayawijaya is similar, with the lowest primary school NER but a drop-out rate that is lower than four other districts. In the case of these two districts, the low enrollment rates are probably due to the high number of school-aged children who have never attended school. Providing greater access to school should be a priority in these districts. In the case of districts with higher enrollment rates, keeping children in school needs to be prioritized to avoid increasing drop-outs. Programs to provide scholarship and attract youth back to school needs to be strengthened and refl ected in budget allocation.



Figure 4.8. Primary school drop-out rates of the visited districts, 2002-06

00.5

11.5

22.5

33.5

44.5

55.5

Asa

han

Kota

Binj

ai

Won

osob

o

Kota

Mag

elang

Belu

TTS

Mina

hasa

Kota

Man

ado

Jaya

wijay

a

Jaya

pura

Drop

Out

Rate

(%)

2002 2004 2005


The mean number of years of schooling for the entire population has stagnated in some districts. These districts, such as Kab. Wonosobo, Kab. Timtengsel and Kab. Belu, are also districts with relatively low NERs above the primary school level. A steady improvement in mean years of schooling occurred in Kab. Asahan, Kab. Minahasa and Kab. Jayawijaya, albeit from a low base. The trend in mean years of schooling is in line with the NER trend at the junior secondary level in these districts. Meanwhile, in Kota Magelang and Kota Manado the mean number of years of schooling for the entire population has surpassed the number of years required to fi nish high school.

Figure 4.9. Mean years of schooling in the visited districts, 2001-05

0

2

4

6

8

10

12

Kab.Asahan

Kota Binjai Kab.Wonosobo

KotaMagelang

Kab.Minahasa

KotaManado

Kab.Timtengsel

Kab. Belu Jayapura Jayawijaya

MYS

2001 2002 2003 2004 2005


Despite the increase in enrollment rates, some districts still face the challenge of improving the literacy rate for the whole population. The literacy rate is as low as 38 percent of the population in

Kab. Jayawijaya, whereas in Kab. Minahasa and Kota Manado the literacy rate almost reaches 100 percent. Unsurprisingly, districts that have recently seen an increase in enrollment rates, such as Jayawijaya, face a challenge to improve literacy rates for their entire populations. Any improvement in the literacy rate in these districts will require not only an expansion of the school system to increase NERs but also an effort to reach the non-literate population who are now beyond school age. The local government should include in their education budget priorities specifi c programs that attempt to combat illiteracy and provide a second chance to those who have been missed the opportunity to enroll in formal education.

Figure 4.10. Literacy rates in the visited districts, 2001-06

0.0

20.0

40.0

60.0

80.0

100.0

Asa

han

Kota

Bin

jai

Won

osob

o

Kota

Mag

elan

g

Min

ahas

a

Kota

Man

ado

Bel

u

Tim

urTe

ngah

Jaya

pura

Jaya

wija

ya

%

2004 2005 2006


4.3.2. Expenditure and Equity in Education

Enrollment at the primary level is relatively equal across income quintiles, although there are concerns that this is not the case at the higher levels. At the primary level, NERs for the two highest income quintiles are close to 100 percent, while there are slight variations among other income groups. Kota Magelang, Kota Binjai and Kab. Minahasa have universal NERs at the primary level, even for the lowest income quintile. The variation among income groups increases at higher education levels. Junior secondary NERs for high income quintiles reach close to, and even exceed, 90 percent, while for the lowest income group the average is 70 percent. The rate declines to an average of 76 and 38 percent, respectively, for lowest and highest income groups at the senior secondary level.



Lower enrollment in the lowest income quintile is one of the major causes of overall low NERs in some districts. The enrollment rate in the highest income quintile tends to be high even in those districts with low NERs. In Kab. Jayawijaya and Kab. Wonosobo, the low overall NERs at secondary education levels are mostly due to the low enrollment rates in the lower income quintiles.

Figure 4.11. Junior secondary school net enrollment rates by income quintile, 2006

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

Kab. Asahan

Kab. Belu

Kab. Jayapura

Kab. Jayawijaya

Kab.Minahasa

Kab. TimorTengahSelatan

Kab.Wonosobo

KotaMagelang

Kota Manado

Q1 Q2 Q3 Q4 Q5


Although there is no signifi cant correlation between education spending per capita and enrollment rates, the two variables are nonetheless positively correlated, A relatively higher correlation can be seen between spending per capita in 2004 and NERs at the senior secondary level in 2005, rather than at the junior secondary level. Increasing per capita spending on education may help to increase the net enrollment rate particularly at the secondary level. The relatively limited number of schools is another characteristic of lower enrollment districts. Around 60 percent of all villages in Kab. Jayawijaya do not have a single primary school in the village and the average distance from these villages to the nearest school is 7km. At the secondary level the average distance to the nearest school is 23km in Kab. Jayawijaya, compared with 1km and 2km in Kota Binjai and Kota Magelang, respectively. The distance increases at higher school levels, reaching 32km in Kab. Jayawijaya. Nevertheless, abundant numbers of schools do not necessarily lead to higher enrollments, as in the case of Kab. Wonosobo, where the distance to school at the junior and senior secondary levels is relatively shorter, but the NER is still low.

Figure 4.12. Spending per capita, net enrollment rates at junior and senior secondary levels

Senior Secondary

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

0 20 40 60 80 100

Senior Secondary NER (%)

Educ

atio

n ex

p pe

r cap

ita 0

4

Junior Secondary

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

20 30 40 50 60 70 80 90 100

Junior Secondary NER (%)

Educ

atio

n ex

p pe

r cap

ita 0

4

Source: World Bank staff calculations based on SIKD/MoF and Susenas/BPS data.



Table 4.4. Some indicators of school availability

DistrictsVillage with no

elementary school% of villages with no

elementary schoolAvg distance to

school (km) for SMPAvg distance to

school (km) for SMA

Kab. Asahan 12 4.4 4 6

Kota Binjai 0 0 1 2

Kab. Wonosobo 0 0 3 6

Kota Magelang 1 7.1 2 1

Kab. Minasaha 11 5.7 3 19

Kota Manado 3 3.4 2 16

Kab. Belu 12 5.8 7 5

Kab. Timtengsel 3 1.3 10 4

Kab. Jayawijaya 221 60.4 23 36

Kab. Jayapura 38 28.8 19 32

Source: World Bank staff calculations based Podes/BPS data.

The limited number of schools within some districts might be due to the limited budgets of district governments for the construction of new schools at the secondary level. Thus, although most district governments are allocating higher proportions of their non-salary budgets for infrastructure and facilities, in reality they still depend to a large degree on central and provincial support to fund new school projects.

The spending pattern at districts suggests that poor districts have lower per capita spending, as well as lower per student spending.10 Lower per student spending is partly explained by the lower educational attainment and enrollment of students in the poor districts compared with rich districts. In terms of share of expenditure allocated to education, there is only a slight difference between the poor and rich districts both for shares including and excluding personnel.

Table 4.5. District expenditures per poverty quintile, 2005

District quintile

Per capita district expenditure (Rp)

Education expenditure per school student (Rp)

Non-personnel education % tot exp

Private HH out-of-pocket (Rp million)

Poorest 858,296 1,097,255 6.99 26,067

2 807,164 941,367 5.02 43,121

3 595,605 1,048,785 5.38 62,138

4 896,367 1,402,839 5.01 66,642

Richest 912,590 1,574,280 4.68 114,132

Source: World Bank staff calculations based on SIKD/MoF and Susenas/BPS data.

10 High per capita spending in the Kab. Jayapura in Papua is more an exception than a regular pattern for poor district nationally.

Lower education shares (non-personnel education spending) in rich districts is partly explained by high private household expenditure on education. Kab. Asahan and Kota Manado, two rich districts, have private household expenditure on education of Rp 67 billion and Rp 59 billion, respectively, with shares of education excluding salaries of only around 2 percent of total expenditure. Meanwhile, poor districts, such as Kab. Jayawijaya and Kab. Timtengsel, have only Rp 4 billion and Rp 7 billion in out-of-pocket education expenditure, and education spending excluding salaries of 6 and 7 percent of total expenditure, respectively. In addition, richer districts also allocate a larger proportion of their budgets to other major sectors, such as health and infrastructure, thus shifting their allocations away from education.



Box 4.1. Minimum service standards in the education sector

The manual of minimum service standards (MSS) for education was released by the MoNE in 2001, based on the Education Ministerial Decree No. 53/2001. The MSS provide technical specifi cations for regions on how to conduct education activities from kindergarten up to the secondary level.

In general, the manual is divided into eight main components, which include the school curriculum, students, education personnel and teachers, facilities and infrastructure, organization, fi nancing, school management, and community participation. Under every main component there is a set of indicators related to the minimum service standards. The responsibility for achieving these indicators is divided between central, provincial, district governments, and the schools. For example, on the ‘personnel and teachers’ component, the indicator of availability of qualifi ed teachers is under the authority of provinces, districts and schools. At the moment, some provinces, such as Central Java and Yogyakarta, have prepared their own MSS based on the manual provided by the MoNE.

Four years after the MoNE released the MSS manual the government issued a new regulation, PP No. 19/2005 on the National Education Standards. The regulation follows Law No. 20/2003 on the National Education System and covers broader aspects of education standards. In 2007, another government regulation, PP No. 38/2007, was issued on the assignment of responsibilities across inter-governmental levels, including the education sector. Both government regulations emphasize the need to update the previous MSS manual. Updating the manual is particularly important to align the various regulations as well as to avoid contradictions. The alignment of contents is needed, for example, in the categorization of the main components for minimal standards, while avoiding contradictions is important in the fi nancing responsibility. PP No. 38/2007 indicates that the fi nancing of senior high schools is under the provincial responsibility, while the MSS manual indicates that senior high school fi nancing is the responsibility of all government levels (central, provincial and district).

Although there is no solid theory or practice that can be used as a basis for preparing the MSS, the government or the MoNE needs to take into account the following while updating and revising the MSS: the measurability of indicators and the accessibility of indicators. The issue of measurability of indicators particularly applied to some indicators such as work mechanisms, school performance, and administration discipline. These indicators require further elaboration for measuring the minimal assessment. Finally, accessibility of indicators relates mainly to the availability and the level of diffi culty regarding data collection for the indicators.

The most important issue to consider, however, is the usability of MSS. Currently, there is no formal reporting channel with regard to the fulfi llment of MSS requirements of provinces, districts and schools. Government Regulation PP No. 19/2005 indicates that central and sub-national governments need to include MSS in their work programs. However, there is no strong enforcement nor are there penalties for those that do not comply or follow the MSS. A World Bank report (2005) found that the motivation for adopting MSS was often only to meet the bureaucratic reporting needs rather than accountability to citizens. Strong enforcement together with clear accountability mechanisms are needed in order to put the MSS into practice and to improve education service delivery through adherence to standards.



4.4. Effi ciency at the District Level: Identifying Best Practice

Results based on the so-called “best practice frontier” analysis show wide variations in education sector performance across districts. This analysis attempts to develop a best practice frontier for those districts that maximize their outputs given a certain level of inputs, and hence it can also be interpreted as the level of effi ciency of the education system in a district. The plotted line in Figure 4.13 represents the maximum level of output achieved for any given level of input and is called the production frontier. Kab. Halmahera Tengah, Kota Tomohon, and Kota Kendari are among the best achieving districts in terms of using only low to medium levels of inputs, while Kota Padang and Kota Yogyakarta score the highest given their medium to high level of inputs. The 10 visited regions are shown as red dots in Figure 4.13. Kab. Biak Numfor, Kab. Minahasa, Kota Binjai, Kota Manado, and Kota Magelang perform relatively well given their input levels.

Figure 4.13. Best practice frontier of education sector performance at the district level

-5

-4

-3

-2

-1

0

1

2

3

4

-6 -4 -2 0 2 4 6 8 10 12

Input Index

Outpu

t Inde

x

HalmaheraTengah

Kota TomohonKota Kendari Kota Padang Kota Yogyakarta

MinahasaBinjai

ManadoMagelang

Asahan

WonosoboBelu

Timtengsel

Source: World Bank staff calculations based on Susenas/BPS and districts’ budget data.

Some districts seem to have problems transforming higher levels of inputs into higher levels of output achievement. Figure 4.14 shows that the average output index for districts in the lowest quintile of the input index is higher than the average for districts in the second quintile, while the average output index for districts who are in the fourth quintile of input index are almost equal to average for district in the third quintile. Variation in output achievement (as demonstrated by the length

of the boxplot in the graph below) is considerable for districts in the second and third quintiles of input index. The top performer in each quintile generally corresponds to the districts at the best practice frontier. These districts, particularly the one in the lower quintile of input index warrant further study of their high performance despite resource constraints.

Figure 4.14. Distribution of output index by input quintile

Quintiles of inputs index

Average

4

2

0

-2

-4

1 2 3 4 5

Dist

ribut

ion

of o

utpu

t ind

ex

Source: World Bank staff calculations based on Susenas/BPS and districts’ budget data.

The “best practice frontier” was developed using the framework applied by Tandon (2005) and the WHO (2005) for the health sector. “Outputs” and “inputs” in this regard are represented by the respective output and input indexes. The index has been constructed through factor analysis techniques, where several variables with different underlying dimensions are combined into a single composite variable. The variables that constitute the input index are: (i) realized education expenditure; (ii) average service area of schools (primary, junior high, and secondary, in km2); (iii) number of teachers per level of school; and (iv) the number of schools per 1,000 students at each age group. The use of these inputs is assumed to contribute to the production of several education outputs that are captured in the output index. These are: (i) net enrollment rates at the different school levels; (ii) adult literacy rates; and (iii) means years of schooling. The data used for the current exercise are for 2005.

While it should be approached with caution, the best practice frontier can be useful for several purposes, among others to identify districts that are outperforming others despite resource



constraints, or likewise identify districts that are lagging behind despite the high levels of inputs. In the analysis here, the second case seems to be more prominent. In general, higher levels of inputs correlate with higher levels of achievement. However, some districts seem to be less effi cient than others. Kab. Asahan is less effi cient than Kota Manado, given that the two districts are using almost similar levels of inputs, while Kab. Asahan obtains signifi cantly fewer outputs. Kab. Wonosobo is also relatively ineffi cient compared with Kab. Timtengsel, because the district uses substantially higher levels of inputs but obtains similar levels of outputs as Kab. Timtengsel. Kab. Halmahera Tengah and Kota Sawahlunto are both interesting outliers, because at their minimal levels of inputs they achieve output levels higher than many other districts, including those with more substantial levels of inputs. Due to the limitation of this study, unfortunately the reasons for difference in performance of these districts have not been thoroughly examined in this study. Further case studies need to be conducted to understand the reasons behind why some districts achieved higher level of performance than other districts.


Chapter 5. District Planning, Budgeting, and Monitoring for the Education Sector

5.1. Planning and Budgeting

The regulatory framework for the planning and budgeting process in the education sector mandates concurrence between the process at the district government level and the sectoral level. As illustrated in Figure 5.1, the district education sector medium-term plan (Renstra Dinas) should be derived from the local government medium-term development plan (RPJMD). The education annual working plan (Renja-SKPD) undergoes a two-way synchronization process with the district government annual working plan (RKPD). The education annual working and budget plan (RKA-SKPD) is then developed based on the budget ceiling and priorities (PPA) and is used to formulate district government annual budget (APBD). The fi nal education budget document, the budget implementation document (DPA-SKPD) can only be formulated after the APBD is approved by both the district head/mayor and the district/city parliament (DPRD).

In practice the annual planning and budgeting routines in the education Dinas start when each sub-division prepares its annual plan. The plan should be normally prepared using the input from the annual school survey, medium-term plan documents,

and the annual budget plans from schools (RAPBS). The sub-division for human resources is responsible for preparing the annual teacher needs assessment. The sub-division for planning and program development then compiles and refi nes these documents, and produces a draft of the RENJA SKPD (Working Unit Annual Work Plan). The annual work plan is then discussed during the annual development planning coordination meeting (Musrenbang) at the local level. This meeting should be attended by representatives from all local government working units and also community representatives. The outcomes of the annual meeting are an input for the fi nal draft of the district government annual work plan. The tentative budget ceiling and priorities (PPA) and a draft of the general budget policy (KUA) are then discussed with the local parliament and jointly signed off. Based on the budget ceiling and priorities, the education Dinas prepares the fi nal budget and work plan (RKA SKPD) for the coming year. The fi nance unit of the district government then compiles all RKA SKPD into a budget draft (RAPBD) document. The district parliament and government subsequently discuss this draft and, after being fi nalized, the draft becomes the fi nal budget (APBD), which has to be approved by the provincial government. The education Dinas then concludes by preparing a budget execution document (DPA SKPD).


Chapter 5District Planning, Budgeting, and Monitoring for the Education Sector

Box 5.1. Lost in translation: How medium-term plans are translated intothe education sector plan

Not long after the new mayor was elected in 2005, Kota ‘Pasir Putih’ began to prepare a new medium-term plan for the period 2005-10. The plan calls for a bold new vision of “Pasir Putih as World Class Tourism City by 2010, towards a safe, competitive, prosperous, just, and dignifi ed community”. To achieve this vision, four strategic objectives were identifi ed: (i) creating effective and effi cient government and public service system; (ii) existence of tourism-based city spatial plan; (iii) developing infrastructure that meets international standards; and (iv) creating an enjoyable urban environment.

To achieve these four priorities, the city government will follow 22 strategies and 12 sub-strategies. Education is part of a sub-strategy under strategy number four, which relates to the creation of effective public services. The strategy for the education sector reads as follows: “to provide broad access to education through subsidies to the poor population”. Elsewhere in the plan under the heading of “Strategic Breakthrough Matrix”, the city government formulated a matrix delineating goals, strategies, policies and programs for each Dinas. The plan sets out clear and quantifi able targets for the education Dinas, namely: (i) improve net enrollment rates for all levels of schools from 63.1 to 80.70; (ii) increase students’ average grade for all school levels from 5.74 to 7.29; (iii) increase the absorption rate of secondary school graduates to industries; and (iv) implement school management systems based on national education standards. The matrix also specifi es the different programs that complement these objectives. To achieve objective 1, the following programs are mentioned: BOS for SD, SMP and SMA; Retrieval and Community Schooling Program (KEJAR) for those who cannot attend formal schools; building new schools and classrooms; provision of school furniture; and scholarship programs.

However, these relatively clear and quantifi able targets stated in the medium term plan seem to get lost in the education sector plan. While many of the programs mentioned in the city’s plan are incorporated in the education sector plan, there seems to be a disconnect between these two plans. First, the matrix of objectives of the education Dinas does not follow the structure of the city’s plan. Moreover, the fi rst few pages of the education sector plan are more about programs to improve offi ce administration. Second, the education sector plan does not contain specifi c quantifi able targets on enrollment or on average grades. Hence, instead of becoming a more detailed elaboration of the city’s medium-term plan, the education sector plan seems to have pursued a different path.

Unfortunately, the case of Kota ‘Pasir Putih’ is not uncommon. The medium-term plan of Kabupaten ‘Rancak’ (2004-2008) starts with a good analysis of problems in the education sector. It identifi es improving enrollment fi gures and the quality of education as the two main priorities of the district government, followed by an analysis of the proximate causes of low enrollment and quality. The plan mentions the following problems: lack of access of the poorest group and distance to schools, uneven distribution of teachers between urban and rural areas. The plan also contains a matrix of programs that need to be implemented for the four-year period along with an indicative budget. The listed programs seem to be addressing the identifi ed problems and, among others, entail training for teachers, scholarships for poor students, and the construction of new schools.

Again, the relatively reasonable medium-term plan of the district does not seem to be followed by a clear medium-term plan from the education sector. The education sector plan does not have any quantitative targets and the program matrix is not as specifi c as was the one in the local government’s medium-term plan. Even worse, the budget (APBD) that describes the district’s actual activities does not seem to be aligned with the medium-term plan. For example, despite the fact that the medium-term plan emphasizes the uneven distribution of teachers between rural and urban areas as a priority area, for the three years of medium-term plan implementation (2004 to 2007) there appears to be no budget allocated for teacher incentives to work in remote areas.



Both medium-term and annual planning processes seem to be mostly prepared by Dinas offi cials with little apparent consultation with other stakeholders. In the visited districts, the medium-term plan documents (RPJM/Renstra) for education Dinas are usually publicly available. Interviews during the fi eld visits further indicated that the preparation of these documents is led and coordinated by the planning and program development sub-division of the education Dinas in consultation with other sub-divisions in the Dinas.11 The main reference document for this exercise is the regional medium-term plan (RPJMD/Renstrada). Education statistics, which are collected through annual school surveys, provide another input for the planning process. By using these statistics, the education planner estimates the need for additional teachers, classrooms, and other school needs. Other documents that are used include RIPS (Rencana Induk Pengembangan Sekolah, or the School’s Master Plan), which have to be submitted by schools to the Dinas.

Figure 5.1 The normative framework for annual budgeting preparation process

RPJMD Renstra-SKPD

RKPD Renja-SKPD

KUA/ PPA

APBD

RKA-SKPD

DPA-SKPD

LG/ TAPD SKPD

Source: UU No. 25/2004 and PP No. 58/ 2005.

11 A typical structure of education Dinas consists of sections based on school level under its responsibility (SD, SMP, SMA/SMK), and several sections based on its functional responsibilities (human resources, planning and program development, and administration/fi nance).

In most districts visited, the Dinas coordinates the budgeting processes for schools at the elementary level, while the budgeting processes of schools vary between regions at the secondary level. In most districts, junior and senior secondary schools are treated as independent working units (SKPD) that manage their own budgetary processes and individually submit their budgets and work plans (RKA-SKPD). Exceptions are Kab. Timtengsel, Kab. Jayapura, and Kota Magelang, where the Dinas still coordinates school budgeting processes at the secondary level.

The current planning and budgeting practices in kabupaten leave little room for stakeholders to participate. In current practices, the available channels for the school and grassroots stakeholders to inform the planning and budgeting process are mostly through the annual school survey and, to some extent, the annual budgeting cycle via the annual development coordination meeting (Musrenbang), where the work unit plan is discussed together with the results from bottom-up planning meetings. However, this forum is rarely used effectively for channeling the aspirations of sector specifi c stakeholders, such as school committees or teachers’ associations.

District level planning and budgeting often do take into account funding from central and provincial governments. Deconcentrated projects should use inputs from local Dinas in selecting the location in which to implement their programs. Then, the Dinas at the district level usually know in advance which programs or projects are likely to take place in their localities and can prioritize their spending to avoid overlap with other programs. District participation, however, does not include the selection of those programs that are most suitable for implementation in their districts, or the monitoring and evaluation of the programs.



Box 5.2. School fi nancial management and formula funding in Kota Magelang

Kota Magelang is a small city with a population of only 129,854 people. The city’s development theme is to become a ‘service city’ for other districts in its vicinity. There is substantial interest from the surrounding districts in the education services provided by Kota Magelang, and this is one of the reasons behind the current development theme. In order to accommodate the increasing demand for education, as well as to attract more demand, improvements in education quality is thus perceived as necessary.

The education Dinas in Kota Magelang has conducted several education programs with the assistance of donors, such as the Decentralized Social Service Delivery (DSSD) program and the Managing Basic Education (MBE) program. The DSSD is focused on improving the transparency of school budgets, and aims to produce a unifi ed budget reporting format, while the MBE program is focused more on fi nancial management that feeds into the formulating of funding formulas. The unifi ed budget reporting standards coming from the project have now been made as a permanent procedure for schools in Kota Magelang. Schools have to provide a unifi ed accountability report, based on their funding resources, to the Dinas. The resources mostly come from the government, the school’s own businesses (i.e. cooperatives), and community contributions.

Each school report is collected by the Dinas to be subsequently included into a unifi ed report. Based on this report, the education Dinas, district governments, donors, as well as community, know the level of allocation and expenditure by levels of education. To encourage the submission of unifi ed budget reporting by schools, the education Dinas provides certain school assistance subsidies only when they submit their reports according to the budget standards. The school subsidies are particularly intended to meet their objective in improving the education quality. The subsidy to school is allocated based on a specifi c funding formula developed under District Basic Education program. The formula takes into account a set of indicators such as number of students, number of poor students, students score, national examination result, teacher cost, etc. As a result of budget unifi ed reporting, as well as funding formula program, which takes into account other factors (not just based on student numbers), the Dinas will be able to identify the actual school needs and assists in a more equitable funds distribution.

5.2. Monitoring and Evaluation

Annual school surveys and school visits by superintendents are the two mechanisms for Dinas to collect information on schools. These constitute the backbone of the school performance monitoring system at the district level. Table 5.1 summarizes the main features of these two mechanisms. Kota Binjai is the only visited district where the district Dinas has attempted to design its own monitoring instrument, which it plans to roll out in 2007. The information-collection instrument used in Binjai is similar to the MoNE-designed annual school survey. However, in Binjai, the education Dinas attempts to obtain more detail on some questions, such as the number of students per classroom, completeness of administrative documents, and the condition of each type of facilities.

Apart from regular monitoring activities, districts also perform random monitoring on activities fi nanced by the APBD. Monitoring tends to be unsystematic and performed randomly without a robust sampling methodology. Apart from DAK fi nanced activities, which have relatively clear guidelines on who and what should be monitored, monitoring of APBD-fi nanced activities is usually limited to the regular reporting from schools on the use of funds. Reporting on activities fi nanced by deconcentrated expenditures is done directly from schools to the program management unit (PMU) at the provincial level. There is no obligation for schools to copy the report to the Dinas at the district level. In almost all districts visited, there was no attempt to consolidate the deconcentrated projects into one single report.



Systematic evaluations on the effi cacy of APBD-fi nanced activities do not appear to exist. No district visited has ever conducted an effi cacy study on its APBD fi nanced programs. Hence, decisions regarding the inclusion of activities in the annual budget and the medium-term plan are not based on systematic evaluations.

Dinas are obliged to submit a performance accountability report (Lakip), but there is no clear framework on how to follow up on this report. Based on Presidential Decree No. 7/1999, any government department, including the Dinas both at the province and district levels, is obliged to prepare an annual performance accountability report (Lakip), to be submitted to the State Ministry of State Administrative Reform (Menpan). Almost all districts visited prepared this report annually, with the exception of Biak Numfor. Generally, the report outlines all activities under the management of the Dinas, including the amount of money spent from all sources (including the APBN), the number of outputs achieved, and a comparison with the targets planned. As with budget performance indicators, there are cases where inputs, such as the amount of money disbursed, are being reported as outputs of activity performed. Once the reports are submitted, there seems to be no clear framework on how they should be used or how they can feed into future policy planning.

5.3. Financial Management Assessment in Papua

The capacity of district governments to manage local public fi nance was assessed through the Public Financial Management (PFM) Survey. The survey was applied to sub-national governments overall and not specifi cally to education Dinas. Although not directly linked with the education Dinas, the results do refl ect to some extent the performance in PFM of local offi cials, including Dinas offi cials.

The PFM assessment of district governments and the provincial government in Papua was conducted through the revised PFM assessment framework. The original version was developed by DG BAKD (Bina Administrasi Keuangan Daerah/ Local Government Financial Administration Guidance) of the MoHA and the World Bank in 2005 and has been applied to around 50 sub-national governments. The PFM framework is divided into nine strategic areas: (i) local regulatory framework; (ii) planning and budgeting; (iii) cash management; (iv) procurement; (v) accounting and reporting; (vi) internal audit; (vii) debt and investment; (viii) asset management; and (ix) external audit and monitoring.

Table 5.1. School monitoring mechanism

Mechanism Instrument Information Collected Main use of Information

Annual School Survey

MoNE-designed questionnaire, uniform across districts in Indonesia.

Student condition: enrollment, • drop out, no. of graduating, no. of continuing to higher level.Teacher condition: by level of • education, by taught subject. Classroom condition.• Amount and sources of fund • received.

Input into annual planning • and budgeting processEstimate of annual teacher • needsAnnual education statistics • (profi l pendidikan)

School Visit Visit by school superintendent (pengawas)

Spot check on quality of learning,• Current issues faced by schools.•

On the spot problem • solvingInput into budgeting • proposal

Source: Various interviews during the fi eld visits.



Figure 5.2. Overall PFM scores for all assessed sub-national governments

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

Kab. Paniai

Kab. Nabire

Kab. Mimika

Kab. Peg. Bintang

Kab. Jayawijaya

Kab. Merauke

Kab Jayapura

Kab. Biak-Numfor

Prov. Papua

Kota Jayapura

OverallW/o procurement

Source: PFM Survey, 2007.

The capacity of district government and the provincial governments in Papua to manage local public fi nance ranges from poor to acceptable. As shown in Figure 5.2, sub-national governments located around the capital (Prov. Papua, Kota Jayapura and Kab. Jayapura) score signifi cantly better than those in the highlands or landlocked regions (Kab. Paniai, Kab. Jayawijaya, and Kab. Peg. Bintang). On average, planning and budgeting, accounting and reporting, and external audit and monitoring are the weakest areas, while procurement and internal audits are the strongest. Figure 5.3 shows that other than those two strongest areas, no area has an average score of more than 50 percent. It should be noted, however, that the procurement area cannot be assessed effectively due to the ad hoc nature of procurement committees and an inability to capture the “behind the scenes” activities.

The low score in planning and budgeting was mainly caused by incomplete and weak planning documents, as well as cluttered budgeting processes. Law No. 25/2004 specifi ed that districts should have a medium-term development plan (RPJMD) and an annual district working plan (RKPD). In addition, each working unit (SKPD) of the district needs to have a strategic plan (Renstra) and an annual SKPD working plan (Renja). While the RPJMD and RKPD are available, only a few SKPDs within the region surveyed that have either a Renstra or a Renja. There are inconsistencies among the various planning documents. For example, the Renstra and, to a lesser extent, the RKPD are often not aligned with the RPJMD.

Figure 5.3. Average scores for each strategic area

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

LOCAL REGULATORYFRAMEWORK

PLANNING AND BUDGETING

CASH MANAGEMENT

PROCUREMENT

ACCOUNTING AND REPORTINGINTERNAL AUDIT

DEBT AND PUBLIC INVESTMENT

ASSET MANAGEMENT

EXTERNAL AUDIT ANDMONITORING

Source: PFM Survey, 2007.

Low capacity in fi nancial units and working units of sub-national governments lead to poor accounting and reporting. The fi nancial units in most districts struggled to cope with the various regulations on local fi nancial management enacted during the past fi ve years that affected the budget structures of sub-national governments. Decentralization of some fi nancial management functions to district government working units (SKPD) and the additional tasks specifi ed in Ministry Decree No. 13/ 2006 to provide cash management and fi nancial reporting to each SKPD further complicated the situation. While the objective of the decree is to reduce the burden, it does not envisage that these additional tasks require increased capacity not readily available to district governments. As a result, staff in the fi nancial units now need to guide, monitor and advise fi nancial offi cers in the SKPD on how to perform their tasks.


Chapter 6.

Key Findings and Policy Options Regarding the SWA

1) The Legal Framework and Flow of Funds for the Education Sector

Key Findings:

Legal Framework Law No. 38/2007 on functional assignments still • lacks clarity on the roles and responsibilities of different levels of government. The obligatory and discretionary functions of each level of government remain vague. For example, in fi nancing responsibility, whereas the district is responsible for providing education funds at the primary level, the central and provincial governments can still contribute a signifi cant share for education fi nancing at the district level. Legally, both central and district governments • are obliged to contribute towards (co-fi nance) incentives for teachers in special area. However, in practice budget allocations or contributions from each government level towards this item remain unclear. These incentives are particularly important in attracting teachers to remote areas.

Flow of FundsThe central government still spends a signifi cant • share of total education expenditures — particularly rehabilitation and development spending — potentially limiting the policy-making ability of the districts.

Also, in regions where such offi ces exist, central • funds are still channeled through the representative offi ces of the central government. Complicating the fl ow of funds is the fact that • resources allocated to education by provincial governments are not always under the management of the education Dinas, because they are classifi ed as “social assistance” and hence fl ow directly into district governments’ accounts.

Key Policy Options:

Identifying unclear areas in functional assignments • by developing a road map that provides a clear framework on the responsibilities of central, provincial, and district governments, including the appropriate contribution size of each level of government in education fi nancing of districts. The road map should also enable district • governments to have greater participation in the planning and execution of deconcentrated spending in their districts. The aim is to provide them with adequate fi nancing and managerial autonomy to execute their functional assignments (based on the principle that money follows function).Consistency in terms of the channeling • mechanism of education spending from province to district. In addition, the correct categorization of education spending, which is supposed to be recorded under the education sector, is necessary in order to monitor education fund fl ows to the


Chapter 6Key Findings and Policy Options Regarding the SWA

districts. Numerous fungibility issues may arise due the issue of ‘misclassifi cation’.

2) District Education Expenditures

Key Findings:

Overall Spending • Since decentralization, as expected most districts have increased their spending on education. Since 2005, however, the share of spending on education appears to be decreasing as revenues rise, possibly as a result of the BOS transfers (hence through a substitution effect). Economic Classifi cation• Most district education spending is routine and of this the largest part goes towards salaries. In general, there is limited space for spending on development. In most districts, there are negligible allocations from education spending towards maintenance, although many districts have classrooms in poor condition.Functional/Programmatic Analysis•

There is a clear emphasis on increasing o access to facilities/infrastructure, as opposed to investments more directly targeted at quality enhancements, particularly at the secondary level of education. Districts appear to have only limited o funds for management/operations.Limited funds for improving teacher o quality almost certainly impair teacher capacity.

This appears to be the case in some of the analyzed districts and may equally be an issue at the national level. However, caution is required in interpreting the data, as shortcomings are observed at the district level in the classifi cation of programmatic/functional budgeting for improving teacher quality. Given this issue of inconsistent classifi cation, determining expenditure by education level has proved problematic.

BOS• FundsThe sustainability of the program is an o important consideration given that BOS

makes up the majority of funding at the school level.The BOS program has had more impact o on quality enhancement than on access increasing investment. BOS funds are perceived as having more impact on the availability of books, stationery and school maintenance, as well as honoraria for temporary teachers, than on helping poor students.

Out-of-Pocket• SpendingOut-of-pocket spending remains o signifi cant but has declined slightly. The majority of household spending is directed towards books, stationery and transportation. Expenditures on enrollment and monthly school fees are relatively small, probably due to the impact of the BOS program.

Key Policy Options:

The central government needs to monitor the • composition of local government expenditures and provide incentives/disincentives in order to improve the budget composition. One of the mechanisms to achieve this is by using the budget composition of local governments as an indicator for deconcentrated spending targeting. District governments should include an analysis • of unit costs in district planning and budgeting to identify school needs in order to cover their operational costs. An analysis of unit costs will then assist districts in planning and allocating their budgets appropriately by channeling funds to schools that have diffi culty in narrowing their budget gaps (the gap between available funds and the operational costs of the school). Strengthening the monitoring and evaluation of • the utilization of BOS funds is important if the program is to achieve its objective of widening access to education, particularly for the poor. The tendency for BOS funds to be utilized more for teacher honoraria than for poor students could serve to undermine the primary objective of the BOS program if not addressed.



3) Education Systems and Outputs

Key Findings:

Infrastructure / Material ChallengesInfrastructure quality in most districts is poor, • especially at the primary level. This may be the result of limited funding for operations and maintenance at the district level.Initial observations also point towards shortages • of essential learning materials in some districts, predominantly books.

Number of SchoolsThe team observed an unequal distribution • of schools, especially in certain sub-districts. However, with the exception of some regions of eastern Indonesia, the number of schools overall appears suffi cient. In order to provide a comprehensive overview of the situation analyses should also include transportation modes, as these are important in determining the size of school service areas.

Teacher DistributionSimilar unequal teacher distributional issues were • observed, particularly at the sub-district level.

Teacher Qualifi cation Most teacher qualifi cations are still not up to • the standards/level set in Law No. 14/2005 on Teachers and Lecturers. It is important to clarify which level of government will be responsible for teacher certifi cation costs.

Enrollment Despite almost universal coverage at the primary • level, signifi cant challenges remain in certain districts, particularly in remote areas, such as Papua. Secondary level enrollment is still problematic • and it is important to increase the transition rate between primary and secondary education. For people in the lower income quintiles access to • education is still a problem, with transportation and education fees continuing to act as barriers to access. Literacy rates are still low in certain districts • and there may be a need for non-formal adult education in some areas.

Best Practice (Districts Performance)Districts with a higher level of inputs do • not necessarily see higher levels of output achievement.Some districts with lower input levels have •

outperformed others with higher input levels. These successful districts should be studied further.

Key Policy Options:

A nationwide system of performance measurement • is required to ensure that local governments are accountable in developing education outcomes in their regions. Such a system would act as a balance between the full autonomy that is provided to districts in spending their funds and the outcomes they achieve with those resources. Districts needs the capacity to assess the effi ciency • of their spending and identify key issues within the education sector. This will provide important inputs for their planning and budgeting process. To this end, technical assistance will help districts to improve their capacity in planning and budgeting.Local governments need to plan teacher allocation • and employment effectively, particularly with regard to the issue of unequal distribution of teachers. Local governments should also link their teacher allocation planning with the incentives program as required by Law No. 14/2005 on Teachers and Lecturers.

4) Planning, Budgeting, and Monitoring for Education at the District Level

Key Findings:

Planning and BudgetingThe regulatory framework for planning and • budgeting in the education sector mandates concurrence between the process at the local government and the sectoral levels.Both the medium-term and annual planning • processes seem to be prepared by the Dinas with limited consultation with other stakeholders.District planning and budgeting processes do try • to take into account funding from central and provincial governments. Most districts share a common process in that • the Dinas coordinate the budgeting process for primary schools. However, for junior and senior



secondary schools the process is different since most districts treat them as independent working units that manage their own budgetary processes and individually submit their budgets and work plans.

MonitoringAnnual school surveys and school visits by • superintendents are the two mechanisms through which the Dinas collect information and monitor schools:

Apart from regular monitoring activities, o districts also perform random monitoring on activities fi nanced by the APBD.Systematic evaluations of the effi cacy of o APBD-fi nanced activities do not appear to exist.The Dinas are obliged to submit o performance accountability reports, although there is no clear framework on how to use these reports for subsequent policy improvement.

Key Policy Options:

The absence of a coherent planning and • budgeting process is not only caused by the lack of capacity of local governments or the absence of a regulatory framework linking planning and budgeting. The dearth of a planning culture and the lack of performance accountability are also likely contributors to the problem. Hence, in addition to improving capacity in planning and budgeting, changing the bureaucratic culture and instigating an appropriate performance accountability system are also likely to prove necessary. Any capacity-building activities at any level should • work in line with the existing system and budget cycle. Capacity-building activities need to be carefully planned in order to enhance the current system and avoid confl icting with and duplicating it.


Annexes

Figure 1. Total district revenue and education spending, 2005

0

100,000

200,000

300,000

400,000

500,000

600,000

0 500,000 1,000,000 1,500,000 2,000,000

Revenue 2005 (Rp million)

Educ

atio

n Sp

endi

ng 2

005

(Rp

mill

ion)

Source: World Bank staff calculations based on SIKD/MoF

Table 1. Education spending by central government (decon), and local governments, and household out of pocket, 2005Percent

Districts Deconcentration LGs HH out-of-pocket Total

Kab. Asahan 0.00 72.37 27.63 100

Kota Binjai 0.17 60.59 39.25 100

Kab. Wonosobo 0.33 78.76 20.91 100

Kota Magelang 0.53 73.78 25.68 100

Kab. Minahasa 2.03 82.58 15.39 100

Kota Menado 41.82 38.22 19.96 100

Kab. Timtengsel 0.62 93.45 5.92 100

Kab. Belu 0.57 81.83 17.60 100

Kab. Jayawijaya 0.06 92.46 7.48 100

Kab. Jayapura 1.03 94.99 3.98 100

Source: World Bank staff calculations based on SIKD/MF and districts’ APBD data.


Annexes

Table 2. Local government education expenditure, 2001-06Rp million

Districts 2001 2002 2003 2004 2005 2006

Kab. Asahan 148,449 141,451 159,201 159,857 140,340 151,315

Kota Binjai 28,538 45,766 54,088 53,024 48,077 51,255

Kab. Wonosobo 64,977 95,861 110,022 126,837 107,692 113,363

Kota Magelang 42,338 42,272 59,321 52,865 50,595 52,406

Kab. Minahasa 177,156 199,877 223,540 131,045 9,839 86,274

Kota Menado 15,013 73,634 24,463 102,091 90,225 100,524

Kab. Timtengsel 90,332 76,522 79,424 54,970 84,233 93,819

Kab. Belu 60,723 57,298 69,531 70,916 67,973 75,077

Kab. Jayawijaya 79,064 75,040 73,266 50,237 40,915 77,456

Kab. Jayapura - 21,183 28,784 51,718 50,062 53,949

Note: Kota Manado data 2006 are based on planned budget.Source: World Bank staff calculations based on SIKD/MoF and districts APBD data (at constant 2002 prices).

Table 3. Routine and development expenditure on education, 2004-06Rp million

Districts2004 2005 2006

Routine Development Routine Development Routine Development

Kab. Asahan 148,864 10,993 135,412 4,928 135,440 15,875

Kota Binjai 48,293 4,731 43,433 4,643 45,719 5,536

Kab. Wonosobo 106,853 19,985 97,634 10,057 99,516 13,848

Kota Magelang 46,375 6,489 43,704 6,890 49,352 3,054

Kab. Minahasa 126,863 4,182 70,706 9,133 73,138 13,135

Kota Menado 98,463 3,628 86,607 3,618 93,138 7,386

Kab. Timtengsel 46,375 8,594 69,267 14,965 72,209 21,610

Kab. Belu 61,845 9,071 59,704 8,269 63,238 11,839

Kab. Jayawijaya 49,161 1,076 37,121 3,793 41,172 13,574

Kab. Jayapura 47,629 4,089 40,077 9,985 40,003 13,946

Note: Kota Manado data 2006 are based on planned budget.Source: World Bank staff calculations based on SIKD/MoF and districts APBD data (at constant 2002 prices).


Annexes

Table 4. Economic classifi cation of education routine spending, 2006Rp million

Districts Personnel Goods Maintenance Travel Others Financial Assistance

Total

Kab. Asahan 189,665 1,673 14 274 - - 191,626

Kota Binjai 62,375 1,726 539 45 - - 64,685

Kab. Wonosobo 131,879 4,097 548 226 - 4,049 140,799

Kota Magelang 68,896 649 150 129 - - 69,825

Kab. Minahasa 101,781 1,515 132 51 - - 103,479

Kota Menado 131,059 522 154 40 - - 131,775

Kab. Timtengsel 99,548 1,510 398 708 - - 102,164

Kab. Belu 85,047 2,885 370 1,169 - - 89,472

Ksb. Jayawijaya 55,868 1,747 525 112 - - 58,252

Kab. Jayapura 55,587 743 195 73 - - 56,598

Note: Kota Manado data 2006 are based on planned budget.Source: World Bank staff calculations based on SIKD/MoF and districts APBD data (at current prices).

Table 5. Public and apparatus spending on education, 2005 and 2006Rp million

Districts2005 2006

Apparatus Public Financial Assist.

Total Apparatus Public Financial Assist.

Total

Kab. Asahan 135,536 4,758 46 140,340 135,774 15,540 - 151,315

Kota Binjai 43,469 4,607 - 48,077 46,050 5,205 - 51,255

Kab. Wonosobo - 105,119 2,573 107,692 - 110,501 2,862 113,363

Kota Magelang 5,729 44,866 - 50,595 7,182 45,223 - 52,406

Kab. Minahasa 1,639 78,200 - 79,839 2,665 83,609 - 86,274

Kota Menado - 90,225 - 90,225 - 100,524 - 100,524

Kab. Timtengsel 12,311 71,921 - 84,233 15,968 77,851 - 93,819

Kab. Belu 417 67,556 - 67,973 581 74,496 - 75,077

Kab. Jayawijaya 36,551 4,104 - 40,655 41,172 13,574 - 54,746

Kab. Jayapura 42,795 7,266 - 50,062 40,003 13,946 - 53,949

Note: Kota Manado data 2006 are based on planned budget.Source: World Bank staff calculations based on districts APBD data (at constant 2002 prices).


Annexes

Table 6. NER, literacy rates, and mean years of schooling, 2005

DistrictsNER (%) Literacy rate

(%)Mean years of

schoolingPrimary Junior Senior

Kab. Asahan 97.25 93.05 58.69 95.89 7.29

Kota Binjai 97.98 90.99 73.37 98.33 8.79

Kab. Wonosobo 98.21 66.26 31.69 87.53 6.02

Kota Magelang 99.54 93.94 72.39 95.99 9.25

Kab. Minahasa 96.13 87.87 64.26 99.19 8.35

Kota Menado 98.86 93.15 68.54 99.40 9.61

Kab. Timtengsel 95.00 66.07 33.41 79.18 6.39

Kab. Belu 93.34 70.74 44.04 79.60 6.16

Kab. Jayawijaya 96.68 93.25 69.56 96.39 7.75

Kab. Jayapura 78.96 61.89 32.97 38.34 6.18

Source: World Bank staff calculations based on SUSENAS/BPS data 2005.

Table 7. Number of students, classroom condition, and number of schools, 2006

Districts

Students per classroom(%)

% badly damaged classrooms

No of schools per 1,000 school-aged population (per

level)

Primary Junior Senior Primary Junior Senior Primary Junior Senior

Kab. Asahan 29 38 41 29.5 4.1 3.9 5 2 1

Kota Binjai 32 37 27 4.8 2.6 3.5 5 3 2

Kab. Wonosobo 25 36 36 31.0 1.6 1.6 5 1 1

Kota Magelang 27 37 34 2.4 1.2 1.7 6 3 2

Kab. Minahasa 16 28 32 18.0 14.3 10.6 12 6 2

Kota Menado 26 34 31 21.9 3.3 1.2 6 4 2

Kab. Timtengsel 26 44 47 43.2 4.5 2.5 6 2 1

Kab. Belu 18 35 36 38.8 13.2 7.1 7 2 1

Kab. Jayawijaya 30 48 40 - 32.5 17.3 4 3 1

Kab. Jayapura 22 35 36 - 19.1 21.4 9 6 3

Source: World Bank staff calculations based on Districts Education Profi le 2006.


References

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Level


Documents

An Analysis of Regional Public Expenditure and Financial