Agreement Number 64705

Agreement Number 64705

Parties

Commonwealth of Australia as represented by the Australian Agency for International Development

(“Commonwealth”)

Republic of Indonesia, acting by and through its Ministry of Finance, as represented by the Directorate General of Debt Management

(“Republic of Indonesia”)

General Introduction

1) This Agreement is made under Australia’s Education Partnership with Indonesia (“Education Partnership”), the partnership between the Commonwealth and the Republic of Indonesia,

representing Australia’s contribution to the Republic of Indonesia’s Education Sector Support Program (“ESSP”). The purpose of this partnership is to assist the Republic of Indonesia to

achieve its 2010-2014 Education Strategic Plan (RENSTRA) priorities. Under the Education Partnership, the Commonwealth will provide approximately AUD500million through the following components:

Component 1: Junior Secondary School Construction and Expansion Component 2: School and District Management (inclusive of the Professional

Development System for Education Personnel) Component 3: Madrasah Accreditation Component 4: Analytical and Capacity Development Partnership

2) This Agreement is related to the Subsidiary Arrangement between the Government of the Republic of Indonesia and the Government of Australia relating to Australia’s Education Partnership with Indonesia – Contribution to the Education Sector Support Program (ESSP) as signed by the Parties on 14 June 2011 as amended from time to time.

3) This Agreement represents the understanding of the respective responsibilities and contributions of both Parties with regard only to the provision of Professional Development for Education Personnel (“the Initiative”) of Component 2 of the Education Partnership, as per the Program Design Document approved by the Republic of Indonesia dated 16 November 2010.

It is agreed: 1 General Conditions; Definitions

1.1. The General Conditions (Appendix B) constitute an integral part of this Agreement. 1.2. Unless the context requires otherwise, the capitalized terms used in this Grant Agreement

have the meanings ascribed to them in the Appendix A (Definitions) of this Agreement. 1.3. For the purposes of this Grant Agreement, Section 3.12 of the General Conditions is modified

as follows: (a) the words "and construction sites" are excluded from Section 3.12(b)(i); and

(b) the words "any plants, installations, sites," and “buildings” are excluded from Section 3.12(b)(ii).

2. The Grant

2.1. The Commonwealth agrees to extend to the Republic of Indonesia, on terms and conditions set forth or referred to in this Agreement, a grant of up to one hundred and ten million Australian Dollars (AUD110,000,000 ) (“Grant”) to assist in financing the Initiative described in Schedule 1 of this Agreement (“the Initiative”).

2.2. The Republic of Indonesia may withdraw the proceeds of the Grant in accordance with Section I of Schedule 2 of this Agreement.

3. Implementation Arrangements and Responsibilities

3.1. The Republic of Indonesia shall finance all expenses associated with preparation, management and implementation of the Initiative, with the exception of those Eligible Expenses specified in Section I of Schedule 2 to this Agreement.

3.2. In particular, the Republic of Indonesia will finance: (a) staff, including monthly salaries and associated routine allowances; (b) staff honoraria, except professional fees for master trainers, trainers, assessors, keynote

speakers; (c) office and office equipment; (d) other administrative costs necessary for the efficient implementation of the Initiative; and (e) investment and maintenance costs of Information Technology hardware utilised for the

Initiative. 3.3. In matters pertaining to the implem entation of this Agreement, the Republic of Indonesia’s

Ministry with overall responsibility for implementing the Initiative will be the Ministry of Education and Culture (“MoEC”) through the Executing Agency, which is the Board of

Education and Culture Human Resource Development and Education Quality Assurance (Badan PSDMPK & PMP) .

3.4. The Parties acknowledge that regular consultation (at least quarterly) between the Parties is critical to the effective implementation of the Initiative. The Republic of Indonesia shall maintain the following institutional arrangement until the completion of the Initiative:

ESSP Governance (a) The Governance Oversight Group (GoG), co-chaired by the senior representatives of

MoEC and MoRA, and comprising senior representatives of the Indonesian Government, the Commonwealth and the European Union, and responsible for policy and strategic oversight of all initiatives undertaken as part of the ESSP.

(b) The Staff Development Technical Oversight Group (SDTOG), which is established within t he MoEC’s Board of Education and Culture Human Resource Development and Education Quality Assurance, comprised of relevant technical staff within MoEC, MoF, MoRA, MoHA, Bappenas, the Commonwealth and the European Union, and responsible for (i) work plans and procurement plans, (ii) coordination and approvals of Initiative Reports, and (iii) ongoing management, monitoring and oversight the delivery and output achievements of the Initiative.

(c) Key subjects to be discussed by the SDTOG include: (i) assessment/review of performance/budget execution and expenditure

priorities on the basis of the indicators described in (e.g.) the Performance Assessment Framework (Appendix G);

(ii) Annual review of action plans/budget for the forthcoming calendar year/revenue and expenditure priorities; implementation of the Agreement;

(iii) Consideration of audit report(s) and follow up required on audits; (iv) Regular financial/expenditure reports; (v) Review/update of Initiative’s risk management plan/strategy, as outlined in

Appendix H to this Agreement; (vi) Monitoring, evaluation and review plans and reports; (vii) Requirements for additional technical assistance for implementation;

(viii) Procurement plans/reports; and (ix) Progress on other Initiative’s related supports or objectives such as progress

on strengthening public financial management and/or procurement systems, technical assistance and implementation support delivered by contractors engaged by the Commonwealth, and development of relevant legislation.

(d) Additional consultation meetings may be requested by the Republic of Indonesia or the Commonwealth on any subject relevant to the implementation of the Initiative.

3.5 The Republic of Indonesia through the Executing Agency shall ensure that the SDTOG established and maintained pursuant to Clause 3.4(b) above is provided at all times with adequate funds and other resources, and staffed by qualified and experienced personnel in adequate numbers, as shall b e necessary to accomplish the entity’s functions, responsibilities and objectives.

4. The Initiative

4.1 The Initiative Description is outlined in Schedule 1 to this Grant Agreement. 4.2 To this end, the Republic of Indonesia shall implement the Initiative through the Executing

Agency, which is the Board of Education and Culture Human Resource Development and

Education Quality Assurance (Badan PSDMPK & PMP) at MoEC, in accordance with the General Conditions (Appendix B), and shall cooperate fully with representatives of the Commonwealth including its contractors in implementing their respective activities under the Education Partnership.

4.3 Without limitation upon the provision of Clause 4.2 of this Agreement, and except as the Republic of Indonesia and the Commonwealth shall otherwise agree, the Republic of Indonesia through the Executing Agency shall ensure that the Initiative is carried out in accordance with this Agreement and the Procedures Manual as outlined in Part A, Section VII, Schedule 2 of this Agreement.

4.4 The Parties agree that the implementation of the Initiative under this Agreement will be guided by the following principles:

(a) Implementation will be based on a partnership approach in which joint management of the

Initiative is carried out by the Commonwealth and the Republic of Indonesia. (b) T he Republic of Indonesia’s leadership and ownership of the Initiative is maximised. (c) T he Commonwealth’s support through AusAID is aligned to the Republic of Indonesia’s

needs and priorities. (d) Fairness, transparency, openness, accountability and mutual trust in all dealings. (e) Focus on quality, sustainability and equitable development that meets the needs of the

Republic of Indonesia and beneficiary communities. (f) The strategic orientation of policies and strategies. (g) T he effective and efficient use of Initiative’s resources. (h)

A commitment to joint monitoring and evaluation within an agreed performance assessment framework.

(i) Ensuring the pace of implementation is appropriate and responsive to the absorptive capacity of the Republic of Indonesia and appropriate capacity building measures are implemented.

(j) be based on the R epublic of Indonesia’s sectoral policy and plans as detailed in National Education Strategic Plan (RENSTRA) 2010-2014 as may be amended from time to time.

5. Remedies of the Commonwealth

5.1. For the purpose of Section 4.02(a)(vii) of the General Conditions (Appendix B of this Agreement), the Additional Events of Suspension consist of the following:

(a) The policy on Professional Development for Education Personnel, as referred to in Education Ministerial Regulations related to recruitment, selection, preparation of school principals and competency development for school principals and school supervisors, has been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the ability of the Republic of Indonesia to perform its obligation under this Agreement;

(b) Six months after the date of this Agreement, the Republic of Indonesia has not provided to the Commonwealth a Tax Letter, satisfactory to the Commonwealth and confirming that the Eligible Expenses will be exempt from Value Added Tax (VAT), which has been adopted by the Republic of Indonesia, in accordance with Section 2.07 of the General Conditions; and

(c) The Republic of Indonesia is aware of an alleged misuse of the proceeds of the Grant involving fraudulent or corrupt behaviour as defined in Schedule 2, Section VI Part D:

Fraud, and the Republic of Indonesia has not taken timely and appropriate action satisfactory to the Commonwealth to remedy the situation.

6. Effectiveness

6.1. For the purpose of Section 7.01(a)(ii) of the General Conditions (Appendix B), the Additional Conditions of Effectiveness consist of the following:

(a) ESSP governance arrangements in relation to this grant component, comprising the Governance and Oversight Group (GoG) and the Staff Development Technical Oversight Group (SDTOG), have all been duly established in a manner acceptable to the Commonwealth and the Republic of Indonesia has advised the Commonwealth, in writing, of the names, positions and contact details of the members of each; and

(b) The School and District Management: Education Personnel Professional Development Procedures Manual, in form and substance satisfactory to the Commonwealth, has been duly adopted by the Republic of Indonesia, pursuant to Schedule 2, Section VII Part A: Procedures Manual, of this Agreement.

6.2. The Effectiveness Deadline is the date ninety (90) days after the date of this Agreement, or such later date as the Commonwealth may specify in writing to the Republic of Indonesia.

7. Representative; Addresses Republic of Indonesia

The Republic of Indonesia’s representative is the Director General of Debt Management. The Republic of Indonesia’s address is:

Directorate General of Debt Management Ministry of Finance of the Republic of Indonesia Frans Seda Building 2 nd floor, Jl. Dr. Wahidin Raya No. 1 Jakarta 10710, INDONESIA Facsimile Number: (62-21) 3846635

Commonwealth of Australia

The Commonwealth’s representative is the Head of AusAID Indonesia. The Commonwealth’s address is:

The Head of Australian Assistance for International Development (AusAID) Indonesia Australian Embassy Jl. H.R. Rasuna Said Kav. C15-16 Jakarta Selatan 12940, INDONESIA Facsimile Number: (62-21) 2550 5582

ANNEXURES to this Agreement form an integral part of it.

EXECUTED AS DEED [insert] on the [number] day of [month] in the year of 2013 in two (2) originals in the English language, both of the texts being equally authentic.

Signed for and on behalf of the

Commonwealth of Australia represented by the Australian Agency for International Development in the presence of

(Signature of witness) (Signature of FMAs.32B Delegate)

(Name of witness) Name of FMAs.32B Delegate

(Title) Title of FMAs.32B Delegate

Signed for and on behalf of the Republic of Indonesia acting by and through the Ministry of Finance in the presence of

(Signature of witness)

(Signature)

Ayu Sukorini

Robert Pakpahan

Director of Funds, Expert Staff of Minister of Finance Directorate General of Debt Management

on State Revenue with Full Mandate as

Directorate General of Debt Management

…………………. (Signature of witness)

……………… . . . (Name and Title of witness)

…………………. (Signature of witness)

……………… . . . (Name and Title of witness)

Schedule 1 Initiative Description

The objective of the Initiative is to assist the Republic of Indonesia to deliver on its Education RENSTRA (Strategic Planning) target of improving quality of basic education, through capacity improvement of school officials. The Australia’s Education Partnership with Indonesia (“Education Partnership”) will support development of the system that will enable Indonesia’s principals, district officials and supervisors to access Professional Development as one of several activities under the Education Partnership that aim to support achievement of this objective. This Grant Agreement represents the largest investment.

At the end of the Initiative, the change expected is that management of school and Madrasah is improved. The following Outputs will be delivered by the Initiative:

Output 1. The professional development system is operational and accessible in all provinces to school and madrasah principals, supervisors and education officials.

Output 2. School and Madrasah principals, supervisors, education officials in approximately 250 districts enrol and participate in professional development.

Output 3. At least 15% (fifteen percents) of participants are included from the Islamic Education Sector.

Output 4. Professional competencies of school and Madrasah principals, supervisors and education officials have improved as the result of professional development under this Initiative.

Schedule 2 Initiative Execution

Section I. Withdrawal of the Proceeds of the Grant Part A. General

1. The Republic of Indonesia may withdraw the proceeds of the Grant in accordance with Part B of this Section, Appendix B: General Conditions and Appendix C: Disbursement and Withdrawal Procedures and such additional instructions as the Commonwealth may specify by notice to the Republic of Indonesia to finance the Eligible Expenses as set forth in Table 1 in Clause 2 below.

2. The following table specifies the categories of Eligible Expenses that may be financed out of the proceeds of the Grant (“Grant Category”) and the allocation of the maximum amounts of

the Grant to each Grant Category:

Table 1: Eligible Expenses for the Professional Development for Education Personnel 2013 to 2016

Grant Category

Maximum Amount allocated (in AUD)

To cover the costs of specific inputs required to deliver outputs of the Initiative I. Implementation of professional development for education personnel

104,850,000 (Principal Preparation Program / PPP, Continuing Professional Development / CPD for School and Madrasah Principals, Supervisor s’ Support Program to School and Madrasah Principals, Education Capacity Development for Local Government)

II. Management and Operating Costs for the central management team at 3,600,000 MoEC (through the Board of Education and Culture HRD and Education Quality Assurance / Badan PSDMPK & PMP), including accommodation, transportation and per diem costs related to implementation, monitoring and evaluation activities of the Initiative.

III. Procurement of training materials and resource packages for professional 1,000,000 development activities that are a part of the Initiative

IV. Procurement of services to support web-based learning, MIS and M&E 550,000 systems

TOTAL

AUD110,000,000

Part B. Withdrawal Conditions; Withdrawal Period

1. The Republic of Indonesia will open an Australian dollar denominated Special Account (SA) in the Central Bank of the Republic of Indonesia. This SA shall be opened solely for the purposes of receiving the Grant, and shall not contain funding from any other source or for any other purpose.

2. The Commonwealth will make the Grant available for disbursement by advance and replenishment. An indicative disbursement plan, which might be changed from time to time, is set out in Appendix E of this Agreement. Changes to the indicative disbursement plan must have the prior written approval of the Commonwealth, and shall be made through an exchange of letters between the Republic of Indonesia and the Commonwealth.

3. The Commonwealth will pay the Republic of Indonesia an initial advance of twenty million Australian Dollars (AUD20,000,000) which may be requested through several withdrawal applications. The ceiling of the Special Account is outlined in Clause 4.6 of Appendix C (Disbursement and Withdrawal Procedures) of this Agreement.

4. The local currency equivalent of the Grant will be calculated on the basis of the exchange rate on the date of transfer of the funds by the Commonwealth.

5. The grant amount will also cover any transfer fee incurred for the transfer of funds from the Commonwealth’s account to the Republic of Indonesia’s account.

6. The MoF will immediately acknowledge receipt of the funds, in writing, to the Commonwealth and the local currency equivalent.

7. Any interest income attributable to the Grant may be utilised by the Republic of Indonesia solely for the implementation of the Initiative and in line with the Eligible Expenses.

8. Any interest income attributable to the Grant will be reported to the Staff Development Technical Oversight Group (SDTOG) on an annual basis.

9. Detailed conditions governing withdrawals of the Grant are set out in the Appendix C of this Agreement and in the related Procedures Manual outlined in Part A, Section VII of this Schedule 2.

10. Notwithstanding Part A of this Section I, no withdrawal from the Special Account shall be made for payments:

(a) for goods, works and services not procured by the Republic of Indonesia; (b) for expenses incurred before the Effective Date of this Agreement and after the Closing

Date of this Agreement 11. Notwithstanding any allocation of an amount of the Grant to a Grant Category under Clause 2,

Part A of this Section I, if the Commonwealth reasonably determines at any time that such amount will be insufficient to finance such expenses, it may, by notice to the Republic of Indonesia, reallocate any other amount of the Grant which in the opinion of the Commonwealth not needed for the purpose for which it has been allocated under this Agreement, to the extent required to meet the estimated shortfall.

12. The Republic of Indonesia shall ensure the proceeds of the Grant Categories I, II, III and IV are made available and included in the Appropriation List (Daftar Isian Pelaksnaan Anggaran / DIPA) of MoEC’s internal Work Units as eligible entities to pay the Eligible Expenses and shall ensure that the following Work Units carry out Professional Development for Education Personnel in accordance with this Agreement and the Procedures Manual:

a. Centre for Development of Education Personnel (Pusat Pengembangan Tenaga Kependidikan / Pusbangtendik), under the Board of Education and Culture HRD and Education Quality Assurance/ Badan PSDMPK & PMP;

b. Institute for Development and Empowerment of School Principals (Lembaga Pengembangan dan Pemberdayaan Kepala Sekolah / LPPKS), Technical Implementation

Unit reporting to the Board of Education and Culture HRD and Education Quality Assurance/ Badan PSDMPK & PMP located in Solo, Central Java;

c. Institutes for Education Quality Assurance (Lembaga Penjaminan Mutu Pendidikan / LPMP ), Technical Implementation Units reporting to the Board of Education and Culture HRD and Education Quality Assurance/ Badan PSDMPK & PMP and located in 30 provinces in Indonesia;

d. Centres for Development and Empowerment of Teaching and Education Personnel (Pusat Pengembangan Pemberdayaan Pendidik dan Tenaga Kependidikan / P4TK), Technical Implementation Units reporting to the Board of Education and Culture HRD and Education Quality Assurance/ Badan PSDMPK & PMP with 12 offices across Indonesia.

13. For the purpose of the General Conditions (Appendix B), the Closing Date is 30 June 2016.

Section II. Taxes

1. For the purpose of Section 2.06 of the General Conditions (Appendix B), the Republic of Indonesia is permitted to use a proportion of a Withdrawal to pay for reasonable Taxes (excluding Value Added Tax (VAT)) levied by, or in the territory of, the Republic of Indonesia on or in respect of Eligible Expenses, or in their importation, manufacture, procurement or supply.

Section III. Procurement Part A. Procurement for the Initiative (the Professional Development for Education

Personnel)

1. All goods and services required for preparation, management or delivery of the Professional Development for Education Personnel to be financed out of the proceeds of the Grant shall be procured in accordance with procedures consistent with the requirements set forth or referred to in:

(a) Presidential Regulation of the Republic of Indonesia (PERPRES RI) Number 54 of year 2010 on Procurement of Goods/Services and its amendments as in Presidential Regulation (PERPRES RI) Number 70 of year 2012, subject to the additional procedures set out in Appendix F (Clarification Relating to Procurement for the Initiative) to this Agreement.

(b) the Procedures Manual; and (c) Part A of this Section.

2. The Commonwealth acknowledges that the procurement procedures required by legislation referred in Clause 1 Part A of this Section III may be amended by the Republic of Indonesia from time to time. Such changes must be informed to the Commonwealth in writing by the Board of Education Human Resource Development and Education Quality Assurance (Badan PSDMPK & PMP) at as the Executing Agency.

Procurement Plan 3. In accordance with the Procedures Manual, the Republic of Indonesia through the Executing

Agency shall prepare and furnish for approval by the Commonwealth an Annual Procurement Plan setting forth:

(a) anticipated major procurements (above the equivalent of AUD20,000) to be undertaken in the next Republic of Indonesia’s financial year

(b) the particular contracts for the goods and services required to carry out the Initiative, eligible under Grant Categories III and IV;

(c) the proposed methods of procurement of such contracts that are permitted under the Initiative, and

(d) the related Commonwealth review procedures, including such contracts which shall be subject to the Commonwealth’s review and approval.

4. The Procurement Plan shall be endorsed by the SDTOG and submitted to the Commonwealth for approval before commencing any procurement under the Initiative.

Procurement Process 5. The Procedures Manual shall set forth the agreed process for procurements under this

Agreement. 6. Both parties agree that a sample of major procurements may be audited periodically and

independently at the request of the Commonwealth. 7. The Republic of Indonesia may request the Commonwealth to undertake specific major

procurement action on behalf of the Initiative. 8. Both Parties agree that the Commonwealth will provide a Procurement Specialist through the

managing contractor to support the Board of Education Human Resource Development and Education Quality Assurance (Badan PSDMPK & PMP) at MoEC to develop the procurement capacity for an initial period of 6 months. The initial period for the deployment of the Procurement Specialist may be extended with the agreement of the SDTOG.

9. The Board of Education and Culture Human Resource Development and Education Quality Assurance (Badan PSDMPK & PMP) as the Executing Agency of this Initiative is responsible for:

(a) The development of the MoEC’s staff capacity in procurement. (b) The oversight of major procurement tender documentation. (c) Oversight of the selection process and associated documentation. (d) Review and improve small scale procurement practices and as required. (e) Review and improve existing procurement process and recommend

improvements as required. (f) Developing an Initiative Procurement Manual aligned with existing or proposed

rules, procedures and legislation of the Republic of Indonesia.

Section IV. Review and Planning Part A. Annual Meetings

1. In the first quarter (January to March) of each calendar year, the SDTOG will convene the Initiative’s Annual Review and Planning meeting.

2. The Board of Education Human Resource Development and Education Quality Assurance (Badan PSDMPK & PMP) at MoEC will develop and circulate the following papers two (2) weeks in advance of the meeting:

(a) The Annual Initiative Report that summarises overall progress and achievements over the previous 12 months and answers the Key Evaluation Questions outlined in Clause 1, Part B, Section V of this Schedule.

(b) A costed draft of the Initiative’s Annual Work Plan for the next 12 months which identifies priorities and provides detail of proposed funding levels compared against funding and expenditure levels for the previous year.

3.3 At this meeting the SDTOG will: (a) Assess the performance of the Initiative against the Performance Assessment

Framework indicators based on the most recent available data and/or monitoring and evaluation reports.

(b) Identify issues and where possible causes of concern arising from the performance assessment and, where necessary, seek to identify measures to be implemented to address these.

(c) Review the proposed Initiative’s Annual Work Plan for the following year in relation to Initiative priorities and funding availability.

(d) Agree a final Annual Work Plan for implementation.

Part B. Coordination

1. The Board of Education Human Resource Development and Education Quality Assurance (Badan PSDMPK & PMP) at MoEC will be responsible for providing the Secretariat to the SDTOG for:

(a) the drafting and distribution of the agenda and working papers and reports to SDTOG members;

(b) the collation, analysis and reporting of Performance indicators data; (c) coordinating and distributing financial reports; (d) development of the draft Annual Work Plan and finalising the Work Plan following

endorsement by the SDTOG; (e) preparation of papers and reports for the Annual Review meeting; (f) development of the Risk Management Plan and Performance Assessment Framework

for the Initiative; (g) updating the Risk Management Plan as requested by the SDTOG; (h) other specific responsibilities/tasks as relevant/appropriate to the Initiative; and (i) preparation of requests for Technical Assistance for presentation to the SDTOG.

2. The Board of Education Human Resource Development and Education Quality Assurance (Badan PSDMPK&PMP) at MoEC may also be supported by technical assistance provided by the Commonwealth, only as it relates to coordination functions.

Part C. Risk Management

1. The Republic of Indonesia through the Board of Education Human Resource Development and Education Quality Assurance (Badan PSDMPK & PMP) at MoEC will develop a Risk Management Plan / RMP for the Initiative within 6 months of the execution of this Agreement, as outlined in the Appendix H of this Agreement. Once endorsed by the SDTOG, the RMP will form an integral part of this Agreement.

2. The RMP is to be reviewed annually by the SDTOG and updated as risks are addressed and mitigated by the Board of Education and Culture Human Resource Development and Education Quality Assurance (Badan PSDMPK&PMP) as the Executing Agency.

Section V. Monitoring and Evaluation, and Reporting Part A. Monitoring and Evaluation

1. Oversight of the Initiative will be carried out jointly by the GoG and the SDTOG in accordance with the Procedures Manual outlined in Part A, Section VII of this Schedule 2, with technical assistance provided by the Commonwealth. The oversight includes:

(a) the monitoring of the Initiative against indicators in Quarterly Progress Reports set out in Clause 2 Part B of this Section V;

(b) the monitoring of the Initiative against indicators in Annual Initiative Reports set out in Clause 4 Part B of this Section V; and

(c) a joint review mission between the Republic of Indonesia and the Commonwealth, to be held annually as outlined in the Procedures Manual.

2. Independent performance management of the Initiative will be conducted by a contractor engaged by the Commonwealth. With respect to the Initiative, this will include

(a) the implementation of financial and compliance reviews. The Republic of Indonesia will facilitate, as required, the work of this contractor;

(b) the implementation evaluation activities undertaken on an annual basis, including quantitative surveys, qualitative studies and case studies; and

(c) the implementation of ad hoc research and investigation activities arising from Quarterly Progress Reports and Annual Initiative Reports, as well as the analysis described above.

3. The Republic of Indonesia shall provide access to data required to facilitate monitoring and audit activities conducted by the Commonwealth, including its contractors. The Republic of Indonesia will facilitate the Commonwealth, including its contractors, to carry out interviews and/or surveys with program implementers, beneficiaries and associated stakeholders.

Part B. Initiative Reports

1. The Republic of Indonesia through the Executing Agency (Board of Education and Culture Human Resource Development and Education Quality Assurance / Badan PSDMPK & PMP) shall monitor and evaluate the progress of the Initiative and prepare Quarterly Progress

Reports and Annual Initiative Reports in accordance with Section 3.09 of the General Conditions (Appendix B) and with a view to answer the following key evaluation questions:

(i) What progress has there been in establishing and operationalizing a national system for continuous professional development (CPD) for principals?

(ii) Are principals participating in the CPD system? (iii) Are principals undertaking CPD supported by supervisors? (iv) Have the competencies of participating principals and supervisors improved?

2. The Republic of Indonesia through the Executing Agency shall report progress quarterly against the cumulative indicators identified below. The indicators are disaggregated by key evaluation question and further indicators may be added to the list. The Quarterly Progress

Reports shall be furnished to the Commonwealth no later than 30 days after the end of period covered by each such report, that is in first week of February, May, August and November each year, commencing with the Quarterly Progress Reports covering the July to September 2013 quarter, until the completion of the Initiative:

(i) Number of principals and supervisors who enrol in the professional development programs under the Initiative (in this reporting period), disaggregated by gender and province.

(ii) Number of Units of Learning completed by enrolled principals and supervisors under the Initiative (in this reporting period), disaggregated by gender and district and indicating the success rate.

(iii) Number of enrolled principals and supervisors having improved their competency (assessed though their individual performance appraisal) after undertaking Units of Learning under the Initiative, disaggregated by gender and province.

(iv) Number of district officials who enrol in the professional development programs under the Initiative (in this reporting period), disaggregated by gender and province.

(v) Number of district officials who have completed the professional development programs under the Initiative (in this reporting period), disaggregated by gender and province.

3. In addition, the Republic of Indonesia through the Executing Agency shall prepare and submit an Annual Initiative Report in February each year to report implementation in the previous year, commencing in February 2014, as outlined in Section IV, Part A, Clause 2(a) of this Schedule.

4. The Annual Initiative Report shall articulate answers to the Key Evaluation Questions set out in Clause 1; Part B of this Section V. Answers to these questions will be based on information from the Performance Assessment Framework (PAF, in Appendix G). The PAF will be developed jointly by the Commonwealth and the Republic of Indonesia within 3 months of the execution of this Agreement, with budget and provision of technical assistance indicated in the Procedures Manual. It will include inter-alia indicators used for the Quarterly Progress Reports (see Clause 2 above) as well as the following indicators:

(i) Percentage (%) of central disbursed funds (APBN) for CPD and PPP this year. (ii) Percentage (%) of districts disbursing allocated funds (APBD) for PPP this year. (iii) Percentage (%) of districts that have implemented PPP this year.

(iv) Percentage (%) of districts that have implemented CPD this year. 5. The templates of the Quarterly Progress Report and Annual Initiative Report will be agreed

between the Republic of Indonesia and the Commonwealth and formalized through an exchange of letters.

6. The last Annual Initiative Report shall be furnished to the Commonwealth no later than two months after the completion of the Initiative (Closing Date) and with content in accordance to Section 3.09(c) (i) of General Conditions (Appendix B).

7. The Republic of Indonesia through the Executing Agency shall report quarterly the number and nature of complaints received and progress in resolution of complaints in relation to the professional development for education personnel.

Section VI. Financial Management, Financial Statements and Audits Part A. Financial Management System

1. The Republic of Indonesia shall maintain a financial management system in accordance with Section 3.10 of the General Conditions (Appendix B).

2. Without limitation of clause 1 of this Section, the Republic of Indonesia shall prepare and furnish to the Commonwealth as part of the Quarterly Progress Report and the Annual Initiative Report, unaudited financial statements for the Initiative covering the calendar quarter, in a form and content satisfactory to the Commonwealth as detailed in the Procedures Manual.

Part B. Audit

1. The Republic of Indonesia may carry out audits of the Initiative in accordance with Indonesian law.

2. Independent auditing of the Initiative will be the responsibility of the Commonwealth. The Commonwealth will procure an independent auditor to conduct annual financial audits and compliance reviews. The Republic of Indonesia will facilitate the work of the Commonwealth- appointed independent auditor as required.

3. The objective of the Annual Financial Audit is to express an opinion on the Financial Statements relating to the Initiative. This includes the administration for Grant funds flowing through the government systems of the Republic of Indonesia to various levels of beneficiary. The objective of the Annual Compliance Review is to examine compliance with agreed control systems and procedures as described in this Agreement and the Procedures Manual.

4. In addition, the Commonwealth may, from time to time, at its sole discretion, and in consultation with the GoG and SDTOG, commission an audit team to conduct additional audits in accordance with the Procedures Manual.

5. An annual audit report will be produced by the Commonwealth contracted independent auditor and will summarize the findings of the financial audits and compliance reviews. The audit reports will include advice detailing any non-compliance and/or weaknesses in the implementation of the Initiative and its procedures and recommendations for strengthening identified weaknesses and taking action on non-compliance.

6. Findings of the annual audit report will be shared to representatives of the SDTOG and be discussed at the first SDTOG meeting to occur after the audit findings are issued. The Executing Agency is responsible to action the recommendations from the audit reports.

Part C. the Initiative’s Accounts and Records

The Republic of Indonesia agrees that it will: (a) maintain a sound administrative and financial system capable of verifying all Acquittal

Statements; (b) keep proper and detailed accounts, records and assets registers along with adequate

management records for the Initiative providing clear audit trails in relation to expenditure under this Agreement;

(c) afford adequate facilities for audit and inspection of the financial records referred to in this Agreement by the Commonwealth (through AusAID) and its authorised representatives at all reasonable times and allow copies and extracts to be taken; and

(d) ensure that its accounts and records are held for the term of this Agreement and for a period of ten (10) years after the Closing Date of this Agreement.

Part D. Fraud

All Parties involved in the implementation of the Initiative are committed to preventing and detecting fraud by observing the following:

1. The Parties are committed to preventing and detecting fraud. 2. The Republic of Indonesia is responsible for preventing and detecting fraud involving or

relating to the Initiative. 3. The Republic of Indonesia must immediately report in writing within 5 working days to the

Commonwealth any detected fraudulent activity involving or relating to the Initiative. 4. The Republic of Indonesia is required to investigate any fraud and must undertake an

investigation in accordance with the Procedures Manual and standards or, where requested by the SDTOG, in accordance with procedures and standards as directed by the SDTOG.

5. Following the conclusion of an investigation, where the investigation finds fraudulent activity, the Republic of Indonesia will:

(a) Initiate recovery action in accordance with recovery procedures, including if appropriate civil litigation, available in the Republic of Indonesia; and

(b) Refer the matter to the relevant Republic of Indonesia police or other authorities responsible for prosecution of fraudulent activity; and

(c) Where a Republic of Indonesia employee is involved in fraudulent activity, take the relevant disciplinary procedures in accordance with relevant Code of Conduct or similar Republic of Indonesia provisions where these exist.

Part E. Anti-Corruption

1. The Commonwealth and the Republic of Indonesia are committed to preventing and detecting corruption and bribery. Both Parties through their employees, agents or representatives will not make or cause to be made, nor will they receive or seek to receive, any offer, gift or payment, consideration or benefit of any kind, which would or could be construed as an illegal or corrupt practice, either directly or indirectly to any party, as an inducement or reward in relation to the execution of this Agreement or any arrangement or provision of funds in relation to the Initiative. The Parties will use their best endeavours to ensure that their respective employees, agents, representatives or other entities involved in the Initiative will also adhere to this provision.

2. For the purposes of this Part, the term “corrupt” includes (but is not limited to) any action or practice which would warrant disciplinary procedures being taken against an individual under applicable laws.

3. In the event of alleged misuse of Initiative funds involving fraudulent or corrupt behaviour as defined above, the Commonwealth may reduce or suspend its funding until such time as the matter is mutually resolved by the Parties.

Section VII. Other Undertakings Part A. The Procedures Manual

1. The Republic of Indonesia shall develop and adopt, and thereafter ensure the Initiative is implemented in accordance with, a Procedures Manual in a manner and substance acceptable to both the Commonwealth and the Republic of Indonesia, which shall, among other things, set out:

(a) The nature and quality of professional development for education personnel that is required under this Agreement, including reference to how gender equity, poverty and disability will be considered in the program and its units of learning;

(b) Institutional, management and implementation arrangements for carrying out the Initiative and the ESSP;

(c) Procedures for procurement and recruitment of trainers, facilitators and other specialised staff;

(d) Reporting requirements, financial management and audit procedures; (e) Standard procurement documentation and procedures, as referred to in Section III of

this Schedule to be applied by the Republic of Indonesia in relation to the Initiative; (f) Eligibility requirements and preparation for the implementation of the Initiative which

requirements and procedures are to include: (i) appraisals and selection procedures for resource persons under the Initiative; (ii) quality standards and assurance; (iii) criteria for the selection of participating districts including districts identified as poorer, more isolated, unserved and underserved districts, as well as districts with low education quality and inequities in gender representation; and (iv) appropriate environment and social safeguards;

(g) Arrangements for managing program information, and for records and data management;

(h) Procedures for safeguarding against and detecting fraud and corruption, and for reporting, investigating and taking action on detected fraud;

(i) Sanctions that shall be applied to consultants and contractors found to be committing or assisting fraud, corruption, collusion or coercion in relation to the Initiative;

(j) Sanctions that shall be applied to public officials found to be committing or assisting fraud, corruption, collusion or coercion in relation to the Initiative, such sanctions to include relieving the officer of his or her duties on the Initiative during the investigation period;

(k) Requirements for MoEC to enter into agreements with entities involved in

implementing the Initiative, including MoRA and district governments; (l) Arrangement for monitoring and evaluation; and (m) Procedures for public complaints and procedures for participants of the Professional

Development to seek clarification of and to provide feedback on the delivery of the Initiative.

2. Except as the Commonwealth may otherwise agree in writing, the Republic of Indonesia shall not amend, suspend, abrogate or waive the Procedures Manual or any part thereof.

Part B. Miscellaneous

The Republic of Indonesia through the Executing Agency shall prepare and furnish to the Commonwealth at least eighteen (18) months before the Closing Date a plan designed to ensure the sustainability of the Initiative’s achievements, in accordance to Section 3.09(c) (ii) of the General Conditions (Appendix B).

Appendix A: Definitions

1. “Agreement” means this Grant Agreement including its Schedules and Appendices. 2. “Bappenas” means the Republic of Indonesia’s National Development Planning

Agency and any successor thereto. 3. “Continuing Professional Development” abbreviated as “CPD” is a continuing

professional development for existing school and Madrasah principals. 4. “Education Capacity Development for Local Government” is capacity development

of education officials at district and province levels. 5. “Education Partnership” means the partnership between the Commonwealth and the

Republic of Indonesia which represents Australia’s contribution to the Government of Indonesia’s Education Sector Support Program.

6. “Education Sector Support Program” and “ESSP” mean the program of activities designed to support the implementation of the Government of Indonesia’s 2010-2014 Education Strategic Plan (RENSTRA), as per the ESSP Design Document, approved by the Republic of Indonesia, dated 16 November 2010.

7. “Executing Agency” means the unit at the Ministry of Education and Culture (MoEC), which is the Board of Education and Culture Human Resource Development and Education Quality Assurance (Badan PSDMPK & PMP), which has the overall responsibility for executing and implementing the Initiative.

8. “Fraudulent activity’” or “fraud” means dishonestly obtaining a benefit, or causing a loss, by deception or other means and includes suspected, alleged or attempted fraud.

9. “General Conditions” means the AusAID General Conditions for Partner Government Grants, in Appendix B.

10. “GOG” mean the Governance and Oversight Group, comprising senior representatives from the Republic of Indonesia, the Commonwealth and the European Commission, established for the purposes set out forth in sub-paragraph (a) of Clause

3.4 to this Agreement. 11. “Grant Agreement” means this Agreement. 12. “Grant Category” means a category set forth in the Table 1, Clause 2, Part A of

Section 1, in Schedule 2 of this Agreement. 13. “Initiative” has the meaning given in Clause 2.1 of this Agreement.

14. “MoF” means the Republic of Indonesia's Ministry of Finance and any successor thereto.

15. “MoEC” means the Republic of Indonesia's Ministry of Education and Culture and any successor thereto.

16. “MoHA” means the Republic of Indonesia’s Ministry of Home Affairs and any successor thereto.

17. “MoRA” means the Republic of Indonesia's Ministry of Religious Affairs and any successor thereto.

18. “Operating Costs” means reasonable Initiative-related expenses incurred on account of project implementation support and management including communication supplies and charges; document production and copying; costs of participants’ transport, accommodation and per diems; but excludes administrative and management fees, overhead costs of implementing institutions, salaries of and honoraria for officials and staff of Central, Provincial and District governments responsible for managing the implementation of the Initiative.

19. “Parties” means the Commonwealth and the Republic of Indonesia. 20. “Principal Preparation Program” abbreviated as “PPP” is a professional development

program for the candidate principals. 21. “Procedures Manual” means the manual to assist the Republic of Indonesia in the

implementation of the Initiative and referred to in Part A of Section VII of Schedule 2 to this Agreement; as such Procedures Manual may be amended from time to time with the prior agreement between the Commonwealth and the Republic of Indonesia

22. “Procurement Plan” means the Republic of Indonesia’s Procurement Plan for the Professional Development for Education Personnel under Output 1.1., 1.2. and 1.3 of the Initiative, referred to in Clause 3 and Clause 4 of Part A, Section III of Schedule 2 to this Agreement; as the same shall be updated from time to time with the prior agreement of the Commonwealth.

23. “Province” means a province, an administrative division of the Republic of Indonesia. 24. “RENSTRA” means the Republic of Indonesia’s Strategic Education Plan 2010-

2014. 25. “SDTOG” means Staff Development Technical Oversight Group, comprising

designated officials from the Indonesia Government, European Union and the Commonwealth, established for the purpose set out forth in sub-paragraphs (b) and (c) of Clause 3.4 to this Agreement.

26. “Special Account” abbreviated as “SA” means a denominated account opened by the Ministry of Finance (MoF) Republic of Indonesia solely for the purposes of receiving the Grant funds for the Initiative –Professional Development of

Education Personnel, and shall not contain funding from any other source or for any

other purpose. 27. “Supervisors’ Support Program to School and Madrasaah Principals” is capacity

development program for school and Madrasah supervisors to support principals in

doing continuing professional development (CPD) 28. “Tax Letter” means the letter issued by the Republic of Indonesia setting out the

procedures for the levy, reimbursement of, or the exemption from, taxes under the Initiative.

Appendix B General Conditions