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A. RECEIPT OF FOREIGN GRANTS BY LOCAL GOVERNMENTS THROUGH
THE MMAF
Foreign grants to local governments must be through the national government Article 5, Government Regulation No. 2 of 2012. For this to take place, proposals regarding activities
to be inanced by a foreign grant must be via the MMAF. A grant agreement is made between the national government, in this case the Minister of Finance, and the Donor. Grants are then
forwarded to local governments based on an agreement between the Minister of Finance and the respective GovernorRegentMayor. This method of grant receipt refers to the latest
regulations and their implementation guidelines, namely: 1. Government Regulation No. 10 of 2011 on Procedures for the Procurement of Foreign
Loans and Receipt of Grants 2. Government Regulation No. 2 of 2012 on Grants to Local Governments
Minister of MAF
Minister of Planning
Minister of Finance,
DJPbRKUN
Minister of Finance,
DJPbKPPN
Assessment; DRKH
Grants transferred
Grants entry
Fund transferred to RKUD
Register at SA-BUN
Veriication NegotiationAgreement Signing
Enter into and sign Grant Agreement
Minister of Finance,
DJPU Donor
Minister of Finance,
DJKP Local
Government
START Allocation
Endorsement letter
DIPA
SPM
SP2D Comprehensive
Plan Annual
Plan
SPPH
STOP Proposal
Figure 13. Receipt of foreign grants by local government through MMAF
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3. State Minister for National Development PlanningHead of the National Development Planning Agency Regulation No. 4 of 2011 on Procedures for Planning, Proposal Submission
and Assessment, and Monitoring and Evaluation of Activities Funded by Foreign Loans and Grants
4. Minister of Finance Regulation No. 188PMK.072012 on Grants from the National Government to Local Governments
The following is the method for the receipt of foreign grants by local governments: 1. The Minister of Marine Affairs and Fisheries proposes activities to be funded by a foreign
grant to the Minister of National Development Planning Minister of Planning, based on a proposal of hisher own or originating from a local government.
2. The Minister of Planning then: a. Evaluates the activities proposal by referring to the National Mid-Term Development
Plan RPJM and with regard to the Grant Utilization Plan RPH b. Includes the successful activities proposals in the Planned Activities for Grant Funding
List DRKH c. Submits the DRKH to the MMAF and Minister of Finance
d. Activities proposals not yet included in the DRKH, provided that they fulil the requirements of feasibility and readiness, can be submitted to prospective donors. These
activities proposals can subsequently be listed in the next year’s DRKH. 3. With regard to the DRKH or an activities proposal that fulils the requirements of feasibility
and readiness according to the Minister of Planning, the Minister of Marine Affairs and Fisheries submits an activities funding proposal to the Minister of Finance or Directorate
General of Debt Management DJPU.
4. With regard to an activities funding proposal from the Minister of Marine Affairs and Fisheries and the DRKH, or an activities proposal that fulils the requirements of feasibility
and readiness according to the Minister of Planning, the Ministry of Finance then: a. Determines the allocation of a foreign grant to local governments based on the Minister
of Marine Affairs and Fisheries’ activities funding proposal b. Proposes the activities to be funded by the grant and conducts discussions and
negotiations c. If a consensus is reached, signs a grant agreement with the prospective foreign donor
d. Submits the grant agreement to the MMAF 5. With regard to the grant agreement and the determination of allocation of a foreign grant
to local governments, the Minister of Marine Affairs and Fisheries then proposes a list of local governments to receive the grant and the grant amount to the Ministry of Finance or
Director General of Fiscal Balance DJPK.
6. Based on the proposal of the Minister of Marine Affairs and Fisheries, the Minister of Finance or DJPK issues a letter of approval to forward the grant to each local government once the
grant agreement has been signed. 7. Based on this letter of approval, a grant agreement regarding the forwarding of the grant is
signed by the Minister of Finance or authorized oficial and the respective GovernorRegent Mayor or authorized oficial. The grant agreement is automatically registered by the Minister
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of Finance or Directorate of Accounting, Evaluation and Settlement Dit EAS. 8. Based on the agreement on forwarding the grant:
a. The GovernorRegentMayor or authorized oficial prepares a Comprehensive Plan and or Annual Plan
b. KPA Grants Director General of Fiscal Balance prepares an Annual Budget Allocation Document DIPA and requests validation from the Minister of Finance or designated
oficial Article 20, Government Regulation No. 2 of 2012 and Article 8, Minister of Finance Regulation No. 188 of 2012. In the event that a foreign grant is received after
the determination of the State Budget APBN, the grant can be forwarded to the local governments after the validation of a DIPA grant, to then be budgeted for in the Revised
APBN. In the event that a foreign grant is received following the revision of the APBN, the grant can be forwarded to the local governments after the validation of a DIPA
grant, to be then reported on in the National Government Financial Report Article 9, Paragraphs 1 and 2 of the Minister of Finance Regulation No. 188 of 2012.
c. Each local government budgets for the receipt and utilization of grants in their respective Local Government Budgets APBD based on Annual Plans and includes them
in the Budget Utilization List DPA. In the event that the grant is received after the determination of the APBD, the grant can be utilized after the GovernorRegentMayor
amends the GovernorRegentMayor Regulation on the APBD Details and informs the Chairperson of the Local Parliament. The revision is included in the DPA to then be
budgeted for in the Revised APBD. In the event that the grant is received after the inalization of the Revised APBD, the grant can be utilized after the GovernorRegent
Mayor amends the GovernorRegentMayor Regulation on the APBD Details and informs the Chairperson of the Local Parliament. The revision is included in the DPA to be then
reported on in the Local Government Financial Report Articles 11 and 13, Minister of Finance Regulation No. 188 of 2012.
9. A foreign grant can be distributed through ive methods, namely: a. Funds transfer from the State General Treasury Account RKUN to the Local Government General Treasury Account
RKUD; b. Direct payment; c. Special account; d. Letter of credit; andor e. Preinancing. The method selected depends on the Donor’s existingpreferred system. This time, the transfer
of funds from the RKUN to the RKUD is recommended Article 16, Minister of Finance Regulation No. 188 of 2012, taking into consideration that this is the method generally used.
The steps are as follows: a. The Donor channels a grant to the RKUN at the request of the Minister of Finance
b. The GovernorRegentMayor submits a a Grant Channeling Request Letter to KPA
Grants based upon payment requests from goodsservices providers andor a Fund Disbursement Order SP2D issued by the Local Government General Treasurer
Bendahara Umum Daerah, along with the following supporting documents: 1 Statement of Absolute Responsibility SPTJM
2 Grant Channeling Letter of Consideration from the MMAF. In this case, the MMAF
veriies evidence as the basis for local governments’ requests for the channeling of grants
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3 Other documents as required by the Grant Forwarding Agreement c. KPA Grants issues and submits a Payment Order SPM to the State Treasury Service
Ofice KPPN d. KPPN issues a Funds Disbursement Order SP2D as the basis for the transfer of funds
from the RKUN to the RKUD 10. KPA Grants performs accounting and reporting activities with regard to the implementation
of grant channeling based on the SP2D issued by the KPPN and prepares a Financial Report consisting of: a Budget Realization Report, a Balance Sheet, and Financial Report Notes.
11. The GovernorRegentMayor or authorized oficial submits quarterly reports on activities implemented to KPA Grants and the Minister of Marine Affairs and Fisheries Article 25,
Paragraph 2, Minister of Finance Regulation No. 188 of 2012.
Additional clariication: 1. The advantages of this grant receipt option are as follows:
a. It ensures that the receipt of grants supports national development priorities, because in the planning stages the Ministry of Planning will have assessed the activities for conformity
with the National Mid-Term Development Plan RPJM {N}. b. It ensures that the receipt of grants is recorded in the government inancial system,
because the receipt and channeling of grants makes use of the APBN mechanism. 2. The disadvantage of this grant receipt option is that its associated planning process takes
a relatively long time, because it has to go through the assessment processes of both the Minister of Planning and the Ministry of Finance both DJPU and DJPK. In order to mitigate
this impact, the assessment process at Bappenas and the Ministry of Finance DJPU and DJPK can be conducted simultaneously.
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B. RECEIPT OF FOREIGN GRANTS BY LOCAL GOVERNMENTS THROUGH A TRUST FUND
