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publication November 18, 2020

Revealing How Indonesia’s Subnational Governments Spend their Money on Education: Subnational Education Public Expenditure Review 2020

About the report

  • Effective and efficient subnational public expenditure in education is key for Indonesia to realize its human capital development goals.
  • However little information is available to understand how subnational governments plan, allocate, and execute their budgets.
  • This report analyzes data from the Ministry of Finance, the Ministry of Education, and budget and expenditure data from 27 districts and cities throughout Indonesia to try to answer the question: “How do subnational governments spend their money on education?”

Download full report (.pdf) | Summary (Bahasa .pdf)Presentation (.pdf)

Key Findings:

  • Planning. Districts and cities plan largely based on quantity of inputs (e.g., number of teachers, school materials) rather than quality of outputs (e.g., school performance or student learning outcomes).
  • Budget Allocation. Despite a constitutional mandate of 20 percent allocation to education, 22 percent (112 out of 508) of districts/cities and 35 percent (12 out of 34) of provinces do not fulfill it.
  • Budget Execution. Districts that do allocate 20 percent of their budget for education as per the mandate, are not always able to fully execute their budget. Only 70 percent of (270 out of 388) districts/cities have more than 95 percent realization rates.
  • Local Governance. Districts/cities with high standards of local governance (as measured by the Indonesian Local Governance Index, ILEG) tended to allocate the minimum 20 percent of their budgets to education and demonstrated a high level of executing capacity.
  • Expenditure Categories. Most expenditure categories in education financing data are not standardized across districts/cities and provinces, leading to difficult comparisons and analysis for improved decision-making.
  • Salary Spending. Education spending at district/city level is dominated by payment of civil servant teacher salaries and limited resources for non-salary spending. Non-salary budgets are intended to cover costs of various programs and activities, such as scholarships, additional grants for schools, teacher training, and other operational costs, which seem important for improving student learning outcomes. However, many districts/cities do not have the flexibility to implement such programs due to large fixed costs for salaries.
  • Though an increased overall budget for education has improved education access, it has yielded limited contributions to improving learning outcomes for students.
  • Recommendations:
    • Reassess districts/cities’ financial and technical capacity in delivering education services. Some districts/cities were found to have limited resources to implement non-salary related education programs which is often less prioritized despite its importance for improving learning outcomes. Districts/cities face capacity constraints in budgeting, planning, and execution when implementing their education budgets. The Ministry of Education and the Ministry of Finance could identify districts/cities with low capacity and provide tailored capacity building and technical assistance activities for these districts/cities in planning and executing education programs.
    • Consolidate and prioritize effective education programs. Some districts/cities run a variety of education programs and in some cases go beyond their mandates despite limited resources. MoEC should provide better guidance to subnational governments on what works to improve learning outcomes. Subnational governments should instead prioritize spending on a smaller number of programs, but that are effective in raising student learning outcomes. Spending for early childhood education and development, for example, is lagging in most districts and should be further prioritized as it is a stronger predictor for improved student learning.
    • Simplify and standardize budget classifications. The current budget classifications are comprehensive, but too complex. There is a need to further revise, simplify, and develop a simpler classification of education programs and activities that will produce better data and statistics, maintain comparability and consistency in the allocation of costs across subnational governments over time, and help both central and subnational governments track progress and ensure that their decisions are evidence-based. The Ministry of Finance and the Ministry of Home Affairs (MoHA) can work closely with the Ministry of Education and Culture (MoEC) and subnational governments to develop a simpler classification. MoHA and MoEC could deliver training and provide a helpdesk to ensure that subnational governments are able to do their reporting based on the new upgraded and standardized classifications.
    • Leverage technology to strengthen accountability. Big data could be introduced to collect, integrate, and analyze financial, administrative and outcomes data for improved decision-making. A lack of systematic monitoring of local government education expenditures and outcomes weakens enforcement of national priorities and undermines evidence-based policy making.  Development of an integrated education data management system would help to establish an education quality index across Indonesia. Publishing an education quality index for each district/city can help to promote local oversight and accountability for education service delivery.

This report was produced with financial support from the Australian Government (Department of Foreign Affairs and Trade) under the Improving Dimensions of Teaching, Education Management, and Learning Environment (ID-TEMAN) program.