Estimating Corruption in Indonesias Education System: Evidence from the BOS Program* Notes on findings Daniel Suryadarma Research

School of Social Sciences, The Australian National University daniel.suryadarma@anu.edu.au 15 October 2008 I. Reason for choosing BOS to measure corruption in education a. BOS per student allocation for the 2005/2006 school year is Rp.235,000 and Rp.324,500 for primary and junior secondary school (PS and JSS) students, respectively. b. It is for every student in a school. Thus, if a school reported receiving less than this amount per student, there is leakage. II. Data source: Governance and Decentralization Survey 2 (GDS2) a. Interviewed school principals, school committees, and collected school secondary data. b. School principals and school committees are asked the amount of BOS received by the schools. c. School principals are asked the number of students receiving BOS. d. School secondary data contains information regarding the number of students in the 2005/2006 school year. e. So, there are two sources of information for the amount of BOS each school receives (school principal and school committee) and there are two sources of information on the number of BOS recipients (school principal and school secondary data). III. Sample description a. GDS2 visited 1251 schools. The following are dropped from the sample: 1 school was interviewed before May 2006; 23 schools did not receive BOS; and 9 observations do not have school identification. Thus, there are 1218 schools left. b. Out of 1218, principals of 1176 schools answered the amount of BOS received and number of BOS recipients; school committees of 846 schools answered the amount of BOS. In sum, 823 schools have BOS information from both sources. c. From the school secondary data, 1229 schools have greater than zero number of students in the 2005/2006 school year.
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These are very preliminary findings from a chapter in my dissertation.

d. I remove 5% of the sample to avoid excessively large or small values (2.5% at the top, 2.5% at the bottom). IV. Comparing different sources of information Limiting the sample to schools that have all four sources of information, I end up with 703 schools: 473 primary and 230 junior secondary schools. The table below shows the mean and standard deviation of BOS amount and student size from different sources of information. Looking at the table, it appears that school principals overstate BOS amount and understate student size. However, the large standard deviations mean that the differences are not statistically significant. In economic terms, meanwhile, it appears that the most meaningful differences are at the junior secondary level, where the differences in BOS amount and student size are 13 million Rupiah and 41 students respectively.
Source of information Principal School committee Secondary data Primary school (N=473) BOS Amount Student size 41.0 (29.6) 39.7 (30.6) 202.9 (127.8) Junior secondary school (N=230) BOS Amount Student size 116.0 (80.8) 103.0 (78.2) 443.8 (258.2)

214.7 485.2 (128.6) (280.8) Notes: standard errors in parentheses; sample limited to schools with non-missing values in all four sources of information; BOS amount in millions of rupiah

It is unclear which source of BOS information is trustworthy. One way would be to get the information from a third, and more reliable, source, such as the Ministry of Finance or Ministry of National Education (see Section VI.a. below). With regards to student size data, on the other hand, given that enumerators record secondary data from school records, one would think that schools records are more reliable compared to the principals response. V. Results I begin by calculating the amount of BOS received by each student in each school. Table A provides the mean BOS allocation per student based on the combination of information sources. Comparing the different sources of information, using total BOS amount from school principals always yields a higher per student allocation than using school committee information, holding the source of student size information constant. This is also the case

when I use student size information from school principals. It always yields a higher per student allocation compared to using school secondary data, holding source of BOS amount constant. Looking at primary schools, the mean BOS allocation per student ranges from 194 thousand Rupiah to 266 thousand Rupiah depending on source of information, while it ranges from 232 thousand Rupiah to 391 thousand Rupiah for junior secondary schools. Interestingly, it appears that regardless of the source of information on BOS amount, using principal information on student size results in a per student allocation that is higher than stipulated by regulations and vice versa when using information on student size from school secondary data. Table A. Mean BOS received per student (in thousands of Rupiah) Junior Secondary Source of Information Primary School School BOS Amount Student Size Principal Principal 266.5 390.9 Principal Secondary data 196.7 249.6 School committee Principal 240.2 338.7 School committee Secondary data 193.7 231.6 Note: According to the law, BOS allocation per student is 235 thousand and 324.5 thousand Rupiah for primary and junior secondary schools respectively. Given that BOS allocation per student is supposed to be 235 and 324.5 thousand Rupiah for primary and junior secondary levels, Table A indicates the existence of leakage, especially when student size data is taken from school records. Table B, meanwhile, shows the share of schools that experienced leakage, i.e. their BOS allocation per student is less than the stipulated by regulations. Regardless of the source of information, Table B shows that between 66 and 76 out of 100 primary schools experience leakage, while the share is slightly lower among junior secondary schools, between 61% and 74%. Table B. Schools experiencing leakage Source of Information BOS Amount Student Size Principal Principal Principal Secondary data School committee Principal School committee Secondary data Primary School (out of 473) N % 310 65.5 329 69.6 329 69.6 360 76.1 Junior Secondary School (out of 230) N % 141 61.3 146 63.5 158 68.7 171 74.3

Although thought provoking, Table B does not show the extent of BOS allocation that is actually missing from the schools. In order to get an indication of the extent of corruption, Table C shows the mean leakage in primary and junior secondary schools. Unsurprisingly given the results in Table A, the mean share of money missing is negative when calculated using student size information from principals. When calculated using student size data from school records, meanwhile, around 16% to 18% of BOS money did not reach primary schools, while the leakage is higher in junior secondary schools, between 23% and 29%. Comparing this to results from Uganda (Reinikka and Svensson, 2004), where the average leakage is 87%, corruption in the BOS program appears to be much less seriously. However, given the large resources allocated to this program, an average leakage of 20% is still substantial. In addition, the large standard deviation indicates that some schools experience much worse leakage. Table C. Mean leakage Junior Secondary Primary School School % % -13.4 -20.5 (288.7) (394.0) Principal Secondary data 16.3 23.1 (44.3) (31.1) School committee Principal -2.2 -4.4 (130.2) (251.3) School committee Secondary data 17.6 28.6 (58.8) (37.4) Notes: standar deviations in parentheses; values are calculated using the following formula: (1 (Actual BOS received /BOS that should have been received))*100; negative values mean the amount of actual BOS received is larger than the amount that should have been received. Source of Information BOS Amount Student Size Principal Principal

VI. Ways to improve and future work a. More data i. Gain access to the schools names from GDS2 confidential data. ii. Gain access to either Ministry of Finance or Ministry of National Education, to check the actual amount of money sent to the GDS2 respondent schools. b. Determining who took the money

i. Randomising BOS recipient (education provincial office, education district office, school principal, school committee) and revisiting the schools at the end of the school year to ask how much they received. ii. Given the randomised nature of the above potential study, one could also compare usage of the BOS funds.