Running head: BUDGET ANALYSIS

Budget Analysis

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Summary

Accountability is a critical factor in achieving successful development outcomes. Budget

support supplied by donors is a more accountable method of delivering development assistance

to a partnering administration than typical project-based assistance. While some financial aid

assessments have explored its effect on transparency, few assessments and evaluations have

studied the issue of responsibility in its entirety. This article deconstructs the concept of

accountability and contends that lessons learned from providing budget support in one region,

much less one state, is not simply extrapolated to presume that budget support will similarly

increase accountability in another setting. As a result, current local accountability systems are

thoroughly analyzed in light of broader political factors, mainly when financial support is

supplied directly to the local level of government in a decentralized country. This article

examines present local dynamics in Indonesia's 33 regions, Gorontalo, and forecasts how they

are altered by a donor giving budget help. This paper is topical in light of Indonesia's new

legislation governing the supply of financial assistance to local governments and donors' strong

interest in providing such service. This article discusses topics that are carefully considered in

the design of an aid program to guarantee that budget assistance does not contradict recent

reforms in Gorontalo but instead results in improved accountability and, as a response, more

sustainability outcomes.

Concepts and Issues

Vertical accountability among citizens and government is more likely when the budgeting

process is transparent but also when the system of government includes substantial balances and

checks and, when individuals engage in government, and when parliament and civil society have

a constructive relationship. Indonesia is adopting three critical budget reforms:

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 Integrating the budget to have previously excluded items, like subsidies.

 Introducing quality budgeting.

 Initiating moderate expenditure frameworks.

Nevertheless, the budgeting system continues to have numerous faults. The budget formation has

traditionally been more concerned with inputs than fulfilling the administration's political aims,

and the method is highly inflexible. In practice, accountability systems remain ineffective, and

the audit is cumbersome and non-autonomous. Senate, for instance, has a minimal role in

accountability, and its budget deliberations are focused on rejecting or approving specific line

items rather than on whether the budget converts the administration's political aims into results

for people. Budgets are becoming more integrated as additional revenue sources are included. To

increase vertical transparency and accountability, all revenue received from the national

government and payments generated by regional governments are included in local budgets. All

expenditures are justified to provincial legislatures. In actuality, local taxes and service fees

account for less than 10percent of regional revenue on aggregate. Regional governments receive

most of their money from the federal government, which is intended to eliminate regional

income disparity. This "adjusting fund" is composed of three components: shared revenue, which

includes central government-imposed income and property taxes, as well as income from

resources; a particular allocation grant that is not budgeted; and specific distribution grants that

are earmarked to finance national priorities.

Analysis

Gorontalo offered important lessons for other provinces and focused on a public spending

review by the World Bank. Gorontalo and others in general financial management, however, its

constituent regions are not very high, primarily because of a lack of competence. However, the
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World Bank's research revealed that Gorontalo is performing well in reporting, auditing, and

Gorontalo is continuously focusing on the public spending analysis of the World Bank because

the other provinces have learned many lessons. Compared to other areas, Gorontalo pays well in

overall financial management, although its constituent sections are not, due mainly to a lack of

capacity. Nonetheless, the World Bank's analysis found that the areas of Gorontalo perform well

in terms of reporting, auditing and supervision, partly because of the high capacity and

monitoring of public expenditure of the province. Due to its high poverty rate yet gradual

administration Gorontalo is a suitable candidate for trial budget support programs. Several

donors are proposing a pilot effort to improve delivery and financial management quality in

selected regions by providing regional governments with incentives. Budget support to high-

performing provincial governments would be given through the granting mechanism when

further improvements in financial management performance are made. Technical assistance was

considered to support the implementation of the reforms. Oversight, mainly because of

significant public expenditure capacity and provincial leadership. Given its considerable poverty

but progressive government, Gorontalo is likely to be a candidate for trial budget support

schemes. A pilot initiative examined by numerous donors would improve the quality of the

public service and financial management of chosen regions, giving regional governments

incentives. Budget support would be offered to high-performing provincial governments through

the allocation system, with additional improvements to financial management performance. The

offer of technical aid would also help to implement the reforms.

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Reference
Retrieved from, http://www.oecd.org/indonesia/43410364.pdf