Indonesia

Managing Corruption in the Scaled-Up PNPM Program

PNPM team members: Behdad Nowroozi, Jana Halida Uno, and Unggul Suprayitno

March 2008

Why PNPM Is Interesting

Scale – Nationwide coverage Role in national poverty reduction strategy Local participation and accountability Robustness for post-conflict and emergency

work Governance and anti-corruption Simple and innovative FM features

PNPM’s Internal Architecture

Unearmarked block grants of $50,000-125,000 are sent directly to sub-districts (10-40 villages)

Community organizations plan and manage activities, aided by facilitators

Open menus (i.e. Multisectoral) Procurement and financial management are

done at sub-districts and villages Provincial and district oversight and support --

but no veto power

Geographical Coverage

From 1998 to 2006, KDP aqnd UPP have covered 34,000 of the poorest communities in Indonesia, covering approximately 49 percent of the entire country.

PNPM Challenge

KDP and UPP are VERY LARGE PROJECTS Total 1998-2006 financing is $1.8 billion They disburses about $200+ million/year

BUT PNPM IS MUCH LARGER It will disburse $1.2 billion each year over

time It will annually cover 70,000 villages, all of

them in a poorly communicated archipelago

PNPM Urban Challenge

“UPP” IS THE URBAN ARM OF PNPM Its scale-up is very steep Urban communities are more volatile than rural areas Initial greater use of revolving funds that are hard to

monitor

But opportunities for better FM management include

Good access to information Active urban civil society Ability to organize and resist High literacy rates

PNPMs Rural Challenge

Communities are highly dispersed and isolated

Functional illiteracy is high Distance to government is large

But there are opportunities too… High social solidarity/social capital Local elections Prior experience with revolving funds

KDP Corruption Cases ReportedKDP Corruption Cases Reported

Year Reported Classification Total Cases Misuse of Funds Funds Returned Outstanding

> 4,500 9 50,872 29,068 21,805 < 4,500 11 23,645 - 23,645

> 4,500 9 108,000 - 108,000 < 4,500 53 20,098 15,690 4,409

> 4,500 12 124,680 41,540 83,140 < 4,500 178 126,462 92,154 34,307

> 4,500 - - - < 4,500 83 55,519 22,142 33,377

> 4,500 - - - < 4,500 3 9,722 4,444 5,278

358 USD 518,998 USD 205,038 USD 313,960

2008

2004

2005

2006

2007

UPP Corruption Cases ReportedUPP Corruption Cases Reported

PNPM’s Design Strategy For Reducing Corruption

Lower costs of acquiring information Minimize transactions Promote participation and ownership Use social controls Strengthen transparency Strengthen formal oversight capacity Apply sanctions swiftly and consistently

FM Challenge

Weak national oversight agencies Highly dispersed subprojects Elite capture remains a concern Making controls meaningful Better use of audit Use technology to promote transparency

PNPM’s FM Innovations

Formal Transparency Policy Book-keeping by trained community members NGOs and journalists provide oversight and

reporting Risk-based audit manual for government

auditors Legal and paralegal assistance for using the

courts

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• Running text• Announcement of facilitator recruitment

• Important document: guidelines, letter, TOR, socialization materials, training module

• UPP today (news)

• Dialogue forum

•Complaint Handling

•Contact Number of Facilitator and Community

•Consultant’s Contract

• Dissemination of learning and article on interesting experience, best practice Data on : - Implementation progress : MIS and quick status - Utilization of fund at village, region, national level, - Profile of kelurahan

- Address of UPP Information Center

1000 - 3000 visitors per day

Strategy For Strengthening Formal Oversight Improving the audit

Increasing audit sample from 2.5% to 7.5% Tailoring the audit manual Sharing audit results with communities and local

governments

Strengthening capacity Twinning local audit agencies with national

agencies Special training Promoting feedback from clients

World Bank Supervision Strategy For Reducing Corruption Supervise frequently Check the checkers Visit the sub-projects and confirm end-uses Find allies in government and civil society Measure & report Respond quickly and consistently Graduated application of sanctions

Future Directions

Better use of Info Technology (i.e. websites)

Educate population, esp. leaders Restitution rather than sanctions Constant evaluation

PNPM-UPP

Illustrating Complaint Handling

29161570

7473

14760

2000

4000

6000

8000

Critique Suggestion Question Problem

UPP: Complaint Handling

Web based CHU

1000 - 3000 visitors per day

779

304

8742 43 10

211

0

200

400

600

800

Mechanism &Procedure

Misuse ofFunds

NegativeIntervention

PolicyChange

Ethic Force Majeur Others

Type of Complaint

Type of Case

SMS Broadcast & Tele Supervision

Request for SMS

Broadcasting

SMS Pool (Database at

PMT)Review

Broadcasting SMS

Archive in UPP Website

Yes

No

UPP COMPLAINT HANDLING FLOWS

CROSS CHECK FACT FINDING

CASE ANALYSIS

FEED BACK TO THE REPORTER DISEMINATION TO THE COMMUNITY

CASE IDENTIFICATION

HANDLING FACILITATION

NO CASE

CORRECT / CASE EXIST

RESOLVED

Case Indication/ Incompliance

COMPLAINT

UPPER LEVEL COMPLAINT

HANDLING UNIT

NOT YET RESOLVED

MIS INFORMATION

NO HANDLING AUTHORITY

HANDLING AUTHORITY EXIST

Recording

Information collecting stage

Handling stage

Documentation & Result Socialization

stage

Co

mp

lain

t H

and

ling

C

om

pla

int

Han

dlin

g

Resolving Line

Complaint Line

Resolving Distribution Line

Resolved?

COMMUNITY, NGO, UNIVERSITY, PROFESSIONAL, CARING GROUP

Resolved?

Resolved?

Facilitator / Community

Cadre

Facilitator Team

City Coordinator

OC

NMC

Project Manager

Board of Trustee

City CHU

Head of Ward / Head of Ward’s

office

City Coordination Team

NATIONAL COORDINATION

TEAM

Board of Trustee

CHU

Resolving Coordination

No

Yes

No

Yes

No

Yes

E-mail, Web, telephone,SMS

PO.BOX2222

JKPMT

COMPLAINT HANDLING MECHANISM

Head of Sub-district / Administration

Officer

Provincial CHU

Resolved?

Yes

No

Provincial Local Government

Case Degree 1

Case Degree 3

Case Degree 4

Case Degree 5

Forum of Board of Trustee

Case Degree 2