Make Savings when Budgets are Being Formulated Institutionalizing Budget Transparency Overhauling Management of Public Welfare Funding

Behind the Glitz of the 2010 Budget -10- Projections and Suggested Improvements for Budget 2011 The management of the 2011 APBN will very likely be plagued by the same chronic problems, with a repetition of wasteful practices, some extent of commodification of the budget to serve the interests of the elite, slow rates of expenditure and the continued incidence of misappropriation. The government has decreed that the overall policy direction of the 2011 budget will be ―acceleration of economic growth which is fair and supported by good management and synergy between central and regional governments‖. President SBY’s speech before the DPR when presenting the Government Financial Statement was not very different to his 2010 speech. He reported only the good news about Indonesia’s situation. But the contents of the President’s speech bore little resemblance to actual budget policies. For example, the government claims that, to stimulate economic growth in 2011, Rp 121.7 trillion will be spent on capital items, but a look at overall projected expenditure by category reveals that spending on capital items is not yet a true priority. Thus it fades away in comparison to subsidies Rp 184.8 trillion, civil service costs Rp 180.6 and spending on goods Rp 131.5 trillion. The government claims that fiscal transfers to regions dana perimbangan have risen sharply between 2005 and 2011. But in fact they have stagnated at around 30-31 of APBN expenditure. The inclusion of School Operational Assistance BOS funding within fiscal transfers to regions has muddied the waters, given that regional governments merely include BOS funding in their budgets without having any discretion on how it is spent. President SBY’s assurances about budgets savings to support which he has promised to issue new presidential decisions is in no way reflected in the draft 2011 APBN. Indeed, Budget and Work Plans of Government Ministries and Agencies for 2011 RKA KL provide evidence of capital expenditure proposals which are basically designed to serve bureaucratic interests. The proposals could result in wastage of funds and will in no way contribute to economic growth. They include funding for the supply of 4 041 official motor vehicles of various sizes to ministries and agencies valued at Rp 371.5 billion; and the purchase of 3 109 notebook and desktop computers for 7 public institutions at a cost of Rp 32.5 billion. The inclusion in RKA KLs of so bids for so many vehicles and computers at prices above the norm is indicative of the chaotic Ministry of Finance’s haphazard approach to sifting through bids submitted by public insititutions. It is almost certain that at some time in the future the BPK will again uncover a range of misappropriations – a regrettable situation sadly repeating itself. What is needed here is boldness on the part of President SBY to completely overhaul the current budget policy formulation and management system. Following are some suggestions from Seknas FITRA on how budget processes in 2011 might be improved. 1. Review Strategies for Bureaucratic Reform: Place Moratoriums on Additional Remuneration and Civil Service Recruitment The payment of extra remuneration to civil servants in order to reduce corruption and improve the performance of the civil service has been proven to be ineffective. In 2011 spending on the civil service is project ed to grow yet again to Rp 17.9 trillion. Annual salary increases for civil servants and recruitment of aditional staff will place increasingly greater routine expenditure demands on the budget, thereby progressively reducing the scope for expenditure on development. Thus, the government should give priority to terminating payments of extra remuneration to civil servants, placing a freeze on recruitment and re-thinking its approach to bureaucratic reform.

2. Make Savings when Budgets are Being Formulated

To ensure that talk of budget savings is not just political rhetoric, savings must be identified when the budget is being formulated. As the State’s chief financial officer the Minister of Finance must put in place a more more effective system for the evaluation of budgetary bids submitted by Behind the Glitz of the 2010 Budget -11- government institutions. The Ministry of Finance should also introduce standardized nomenclature for budget line items in RKA-KLs, should weed out bids based on above standard prices and should issue regulations governing expenditure by public institutions on official travel and advertising.

3. Institutionalizing Budget Transparency

Observance of the new law on freedom of access to public information known as UU KIP must become part and parcel of efforts to improve budget management processes. All public institutions must immediately restructure to make it easier for the general public to gain access to budgetary information. Documents such as RKA-KLs, DIPAs, government financial statements and reports of budget outcomes should all be placed on public institutions’ websites.

4. Overhauling Management of Public Welfare Funding

There is no doubt that the central government is committed to spending more on public welfare. But, surely, the most important thing about public welfare spending is that it be spent to good effect in reducing poverty. Public welfare programs must not be allowed to become catch-alls for projects which have little to do with public welfare. Accordingly, agencies like the National Team for Accelerating Poverty Reduction TNP2K for short should have a role in sifting through spending proposals from public institutions in areas of public welfare like poverty reduction, education and health.

5. The DPR Should be an Agent for Change in Budget Management Systems