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publication May 16, 2018

2017 Public Expenditure and Financial Accountability Assessment for Indonesia

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  • The Public Expenditure and Financial Accountability (PEFA) is an international methodology to assess public financial management performance. For Indonesia, the assessment covers three completed fiscal years of 2014, 2015, and 2016.
  • The assessment covers institutions receiving budget from the central government, including line ministries and agencies, oversight institutions and parliament. Public corporations, public-private partnerships and social security funds are covered only to the extent that they receive central government budget allocations. Local governments are covered through the central government transfers they receive and oversight practices.
  • Results from the assessment demonstrate that Indonesia has established a strong legal and regulatory framework aligned with most international standards on public finance management (PFM). Main PFM standards have been adopted on accounting, budget classification, internal control as well as internal audit.
  • The Treasury Single Account is in place and constitutes the backbone of the expenditure management and control. Strong fiscal discipline is achieved through a budget formulation and execution processes guided by a strong macro fiscal framework and clear fiscal rules. The transparent and participatory budget formulation process is noteworthy; budget documentation and classification are comprehensive, and the scrutiny by the parliament is more effective.
  • There are opportunities to improve PFM budgetary outcomes by strengthening the effectiveness of the systems currently in place, these include:
    • strengthening budget reliability
    • continuing efforts to enhance the link between medium-term planning and budgeting process with the annual budgeting process
    • standardizing and consolidating performance information
    • strengthening the service delivery effectiveness of the PFM system with a stronger public investment management framework, a system to monitor public procurement performance, and a system to monitor subnational government spending, and finally to
    • being more responsive to the Supreme Audit Agency (BPK) audit recommendations.

 

Summary of 2017 PEFA assessment for Indonesia

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The assessment shows that 17 of the 31 indicators scored either ‘A’ or ‘B’, both considered to be above the basic alignment with international good practice. The remaining indicators received scores of either ‘C’ or ‘D’, which suggests basic alignment with the international standards for a ‘C’ and weak performance for a ‘D’.