Table of Content iii

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4 Table of Content iii

5 List of Figure and Table iv

6 List of Terms and Abbrevations v

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8 Chapter Background West Java is one of the provinces with the rapid population growth compared to other provinces in Indonesia. In 2013, number of population in West Java Province was people and during the period of 2000 to 2010, it has an average growth of 1,89 percent per annum. Such areas with the rapid rate of population growth are e.g. Tasikmalaya Municipal and Bandung District. Large number of people often emerges various problems, including the health problems. According to the health data of West Java province in 2012, the percentage of population to access safe water is 35,32 percent or it filled the position of the lowest eighth of 33 provinces in Indonesia. In addition, the percentage of households that can access a good quality drinking water in West Java province filled the position of the highest eighth in number of 70,40 percent. Such condition is becoming one of the causes of many diseases suffered by community due to the lack of clean water access in West Java. The government is always working to improve community s access to clean water, e.g. by constructing facilities and infrastructure for water processing in some critical of water areas. The allocated budget for the programs to develop the water processing, facilities and infrastructure has not been able to ensure the expansion of water access for community. The elevation of water leakage, the lack of water supply, the rates or levies which is not yet oriented to full cost recovery (FCR), low participation of community and private sector in water infrastructure and facilities development, and the limited source of government-owned funds become the program was not worked efficiently and effectively. Therefore, to encourage the efficient and transparent budgeting process, especially in water supply sector, it is necessary to conduct a study that is able to trace the flow of funds in accordance with budgetary planning Goal and Objective The main objective of this research implementation is to provide inputs, in order to encourage water supply through the increasing of good government, in allocating an effective and efficient resources (budgetary planning) in performing the development of water service coverage. The scopes of the research which is: a. Program : Health Environment b. Type of Sector : Public c. Service Providers : Local Water Supply Utility (PDAM) and Local Goverment Agency (Non-PDAM) d. Category of Fund Flow : Public expenditure for clean water infrastructure development e. Scope of Geographical : District/Municipal. 1 Final Report : Public Expenditure Tracking Survey in Clean Water Sector Perkumpulan Inisiatif

9 The following stages to achieve the objective, which are: (i) (ii) (iii) To identify how resources are allocated and distributed to increase water supply coverage in the form of infrastructure and water distribution system. To describe the characteristics and portrait of infrastructure and water supply. To monitor the performance of the project implementation in technical and financial aspects, and obedience on service standards, whether there is a leakage, or an eficiency problems througout the services Research Questions The research question was designed as a guide towards research in finding answers to the main objectives related to water services according to the perspective of the service provider (the provider side), i.e.: a. How the public funds was allocated and disbursed for water supply provision to fulfilled the needs of community? b. How the scheme of public expenditure for operation and maintenance of water facilities for community? 1.4. Research Benefits This activity is expected to exemplify a kind of community participation, in monitoring the budgeting process in the government. Therefore, this activity will be able to ensuring the community rights,not only in water sector but in other public service sectors through the budgeting process, through the effective and efficient public expenditure. 2 Final Report : Public Expenditure Tracking Survey in Clean Water Sector Perkumpulan Inisiatif

10 2.1. Scope of Service Sector In districts/municipal, the clean and drinking water supplies are the responsibility of the Regional Head to provide water service for the community. The clean water supplies at local level are managed exclusively by local water supply utility (PDAM), which is as the local government s owned-company (district/municipal). The responsibility of PDAM is to provide service, organize public expedience and foster community opinion related to services they received. The PDAM is headed by the Board of Directors with the number of members and its structural organization is set out in its founding legislation. The Board of Directors is under the supervision of the Regional Head or designated body, as stipulated in Law No. 5 in 1962 on the Local Company. Beside PDAM, there is other local institution as an element of assistance to the Regional Head related to the planning implementation and the implementation of the construction control of Cipta Karya/Public Works sector i.e. Agency of Housing, Planing and urban development (Non- PDAM). Both institutions are obliged to fulfill the basic rights of community, especially to access clean water in their area. Therefore, the study implementation was limited to water service provider, which is under the governance structure; and the objective of this study is to give an opinion, overview, evaluation and feedback from community that will be the input to improve the performance of service in clean water provision sector Water Services by Local Water Supply Utility (PDAM) PDAM was established by the local government to serve the needs of water for the people impartially, and continuously by considering to the health standard. It is not only for public services; PDAM is also such a source of local revenues, managed by the principles of healthy economics. It does not only pursue maximum profit in its implementation but it should be functioned socialy. PDAM as a local government-owned company have a responsibilities as follows : 1. Providing drinking water supply services with quality and quantity in accordance with the health standards and service standard. 2. Organizing water supply system development which is integrated with sanitation infrastructure and facilities development. 3. Implementing the plans and programs of procurement process, including construction implementation, operation, maintenance and rehabilitation of water supply system. 4. Completing and supervising the use of water evenly and efficiently. 3 Final Report : Public Expenditure Tracking Survey in Clean Water Sector Perkumpulan Inisiatif

11 5. Carrying out water management system for community and drinking water services orderly and organized. 6. PDAM can work on the projects funded APBD) or the national budget that was drafted by central government (APBN) Water services by Local Government Agency of Housing, Planing and Urban Development (Cipta Karya) In line with the implementation of regional autonomy, the development of Cipta Karya Sector has been divided by the government affairs division which is stipulated in the Government Regulation No. 38 in 2007 on the Government Affairs Development between the Government, Provincial Government and District/Municipal Government. The District/Municipal Government plays the role in the development and supervision of the Cipta Karya Sector in district/municipal area, and implements a management of Cipta Karya sector development as a follow up of the implementation rules at the provincial Government level. The Local Government has a role and function in implementing two major activities i.e. planning program and budgets, and control, monitoring and evaluation. In the context of planning, district/municipal government needs to design a planning process as a foundation and commitment in implementing the development and budget planning. The programming consists of a review of Rencana Pembangunan Insfrastruktur Jangka Menengah (RPIJM), MDG s Action Plan and Special Allocated Fund (DAK). While the budget planning includes the preparation of Memorandum Program (MP) and program synchronization. Monitoring on special allocated fund in drinking water/clean water sub-sector and sanitation sub-sector is such a form of monitoring on fund from the national budget (APBN) which is allocated to local area for funding special activities as local affairs and include national priorities. The scope of monitoring on technical aspects of DAK include, (1) conformity activities with the Local Government Work Plan (RKPD), (2) conformity Budget Implementation Documentation (DPA) of Local Government Unit (SPKD) with technical guidance and its implementation, and realization and planning in physical and financial. Referring to the MDG targets, the role of central and local government through Directorate General of Cipta Karya under the Ministry of Public Works is to ensure the environment preservation e.g. to reduce half proportion of inaccessible community to safe drinking water, by providing the piped and non-piped drinking water with the good quality source of water and its distant >10 meters from the contaminated sites. Further, it can be tap water, public taps, boreholes or pump, protected wells, protected springs and rainwater. While bottled water is not categorized as a drinking water source related to its sustainability access. Local governments in the planning and implementation of infrastructure development should refer to the minimum service standards (SPM) as stipulated in the Minister of Public Works Regulation No.14/PRT/M/2010 on Minimum Service Standard in Public Works and Spatial Planing sector, which includes : 1. Water supply to meet community daily basic needs, at least clean water is continuously accessible by average community. 2. Target achievement of minimum service standards for clean and drinking water supplies to fulfill daily minimum basic need i.e. 100% of minimum basic needs in Water Processing Installation in each district or municipal. 4 Final Report : Public Expenditure Tracking Survey in Clean Water Sector Perkumpulan Inisiatif

12 2.4. Organizational Structure of Water Services Sector Both governments water supply organizations are fully responsible to the local/regional head (Bupati), since both institutions are set and defined through Local Regulation. The structure of the government s organizations that become the scope of study implementation can be seen in the following diagram. Figure-1. Structure of Water Service Organization of District/Municipal Government NATIONAL LEVEL PRESIDENT MINISTRY OF PUBLIC WORKS PROVINCIAL LEVEL GOVERNOR DISTRICT/MUNICIPAL LEVEL REGIONAL HEAD/ MEYERS PROVINCIAL GOV OF PUBLIC WORKS (CIPTA KARYA) LOCAL WATER SUPPLY UTILITY (PDAM) SUB PROVINCIAL OF PUBLIC WORKS (CIPTA KARYA) VILLAGE/COMMUNITY LEVEL COMMUNITY Source : Analysis Result, 2013 (processed from interview result with the key informan) 5 Final Report : Public Expenditure Tracking Survey in Clean Water Sector Perkumpulan Inisiatif

13 When it was established, basic assets of PDAM came from asset grants from central or local government. PDAM assets can be added by sparing part of APBD, or investment from the central government, or legitimate loans and others on the approval of DPRD. While the local government in district/municipal through public works agency has a source from APBD and Special Allocation Fund (DAK). 6 Final Report : Public Expenditure Tracking Survey in Clean Water Sector Perkumpulan Inisiatif

14 3.1. PETS (Public Expenditure Tracking Survey) PETS (Public Expenditure Tracking Survey) is a tracing or tracking survey which is conducted to share information in respect of the resources of allocated fund for public services in their area. In general PETS activities are performed to track the resources flow in any governmental bureaucracy level; and to discover how much the allocated fund source in each level; and how much will be distributed. This survey is also conducted to assess whether there is a leakage of public funds and public expenditure efficiency problems, which have impact on the quality and quantity of services. The survey objective is to describe the scheme and mechanism of public funds distribution and public expenditure efficiency in disbursement unit i.e. clean and drinking water supply. In addition, through the PETS survey also allows assessment on the accountability mechanisms, incentives for service quality and the relationship between the perpetrator and service provider. Through this survey, was intended to study and to understand where the budget flow, and to identify where the leakage areas of fund in water services supply. It is expected to be able to help the local government in making decision or policy in order to promote transparency and its service accountability Main Source of information Main source of information in the process of data collection is conducted in two ways i.e.: 1. Formal ( secondary data) Information is obtained by sending a directly written application to the government institution or water service provider, to collect the data and information, with the step that referred to the Law No. 14/2008 about The Disclousure of Public Information. 2. Informal (primary data) The informal way is conducted by mapping the key informants, which is the targets are the policy and decision makers, with contact numbers in order to ask for their willingness to share data and information. The data and information required in the tracking survey is as in the following table. 7 Final Report : Public Expenditure Tracking Survey in Clean Water Sector Perkumpulan Inisiatif

15 Table-3.1. List of Required Data and Public Information No. Type, Title of Data and Documents Location Agency of Housing, Planing and Urban development (Ciptakarya) Bandung & Garut District 1. Local government budget APBD 2. Local government department/agency Work Plans and RKA-SKPD Budgets document 3. Budget implementation document DPA SKPD 4. Government Performances Report LAKIP SKPD 5. Financial Accountability report LKPJ 6. Annual Audit Report LHP SKPD Local Water Supply Utility (PDAM) in Bandung and Garut District 1. Buisness Plan and company Profile of PDAM Buisness Plan 2. Financial Report LKPJ 3. Annual Audit Report LHP The period and documents of water supply implementation that will be studied and tracked are the planning and budgeting documents in the period of 2010 to 2012 which were carried out by the Agency of Cipta Karya and PDAM. The primary data is obtained based on the number of respondents or key informants who will be interviewed in accordance with the method of sampling determination Scope of Survey Area and Sample Determination Scope of Geographical Coverage of surveyed area was conducted in two districts, i.e. Garut and Bandung. Scope of survey activities was conducted in the water supply project such as water infrastructure provision which is implemented by PDAM and Dinas Tata Ruang dan Permukiman. Study on the infrastructure supply projects was focused on activities which were carried out in the period of 2010 to It was conducted related to the consideration of fear of memory recall bias of respondents for a long enough period. Names of the responsible institutions on water supply in the two districts i.e.: 1. Local government agency of Cipta Karya in Garut District; 2. Local government agency of Cipta Karya in Bandung District; 3. PDAM Tirta Raharja, Bandung District; 4. PDAM Tirta Wening, Garut District. 8 Final Report : Public Expenditure Tracking Survey in Clean Water Sector Perkumpulan Inisiatif

16 Sample Determination Plan and Respondents Coverage Characteristics of interviewed respondents are water service beneficiaries or user (demand side) and water services supply (supply sider). The target of those interviewed can be seen in the table below. Table-3.2 Target Respondents Group No Categories Total Respondent Total Bandung Garut 1 DPRD (House of Representatives) 2 Cipta Karya Loc-Gov Agencies 3 Sub-district Apparatus Village Apparatur Contraktor PDAM Service Users Total Sampling technique used a purposive sampling. Minimum sample size was determined in number of 52 key informants. Characteristic of informant or respondent is key actors who have authority or occupation in water service provider institution. A number of 200 respondents of the user community also were interviewed to explore common issues related to water services they use. Respondents were determined in random by using simple random techniques Survey Instrument This survey used instrument of questions list (questionnaire) which were prepared and given in accordance with the capacity of respondent. The questions list was classified into four parts i.e.: 1. Respondents Data The question in this group consisted of six questions (A1 - A6). Questions of this group were asked to any respondents. 2. Implementation of Public Fund Distribution These questions were related to the realization of planning up-to accountability and public. This group s questions were the essence of PETS. Big questions in this group are How the public funds was allocated and disbursed for water supply provision to fulfilled the needs of community? There are 19 questions (A7-A26) in this group. The questions of this group were also asked to the policy makers and service providers, which are deemed to know the source flow and public, such as local government Board of Planing and Development officers, members of local 9 Final Report : Public Expenditure Tracking Survey in Clean Water Sector Perkumpulan Inisiatif

17 parliament particular the Budget Agency, and related agencies. Additionally the contractor was also asked due to he was in a tip position of public expenditure flow. 3. Water Services in Supply side. The big question was How the scheme of provision, operational and maintenance of urban water facilities? A total of 21 (A27-A51) questions were only asked on PDAM. It is enabled to be asked for the Bappeda employee and related agencies who know the information of supply side. 4. Demand side for Clean Water Service. In this group there were 8 key questions (A52-A60) which were asked to citizens as beneficiaries. This question was also aimed to take pictures of supply side, related to community s assessment and expectation for services they receive and as a further research base evidence on citizen report card Data Analysis Technique Secondary data and primary data have been analyzed using several techniques according to the type of data and research purposes. The tecniques used include are: 1. Content analysis This technique is used to analyze secondary data by viewing the contents of a data plan budget program plans, and other relevant data. This technique is used as a preliminary analysis to conduct further analysis is comparative analysis. 2. Comparative Analysis This analysis technique is used to look at the efficiency of the budget of each region/distirct. Content analysis result obtained from previous stages are used to compare the program plan, budget plan, and budget spending, including changes in the budget plan. The result of this comparison will show how much the efficiency of the budget that has been done by each departement in the water supply in Bandung and Garut district. 3. Descriptive Qualitative The technique is used to look deeply and describes the result of interviews conducted with key stakeholders and households survey. The main purpose of this analysis only to see and describe the general condition of water services provided by government for this, partiularly in relation to the quantity of clean water. More over, this analysys is also used to describe the qualitative interviews were conducted to look and recall memories of the stakeholders and their answers related to suitability of the program plan and budget implementation. 10 Final Report : Public Expenditure Tracking Survey in Clean Water Sector Perkumpulan Inisiatif

18 3.4. Collection of Data and Information Secondary Data Table 3.3. Availability of Secondary Data in Bandung District For Garut District, it was very difficult to obtain some required documents; as a result, information of public expenditure in water supply was unable to be tracked. It was only obtained documents of DPA in Further information can be seen in the following table. Tabel 3.4. Availability of Secondary Data in Garut District No Requested Documens Request Status status Dinas Tata ruang dan Permukiman in Garut District 1 APBD Inaccessible Unavailable 2 RKA-SKPD Inaccessible Unavailable 11 Final Report : Public Expenditure Tracking Survey in Clean Water Sector Perkumpulan Inisiatif

19 3 DPA- SKPD Accessible DPA 2011 Available 4 LAKIP Inaccessible Unavailable 5 LKPJ Inaccessible Unavailable 6 LHP-SKPD Inaccessible Unavailable PDAM Tirta Wening 1 Bisnis Plan 5 tahunan Inaccessible Unavailable 2 LKPJ Inaccessible Unavailable 3 LHP Inaccessible Unavailable 4 Bidding Document Inaccessible Unavailable Primary Data A number of 52 questionnaires were addressed to interview the key actors has been obtained in accordance with total targets, although not all required information can be known. The detail of the interviewed key actors consisted of 23 key actors in Bandung District and 29 key informants were in Garut District, who has the position in both institutions of water system. Number of 200 questionnaires has been obtained from community, which consists of 100 respondents in Bandung District and 100 respondents in Garut District Local Groups Engagement In implementation, public expenditure tracking survey involved civil society groups who live in each target study areas. Most surveyors who conducted data collection and information were also local people of each study area. In Bandung District, this survey involved Forum Delegasi Anggaran (FDA). FDA is an organization formed in 2006 as a Civil Society Group (CSO) and individual in Bandung District that focus on carrying and encouraging joint-issues through pro-poor budget advocacy and the fulfillment of citizen basic rights. In Garut District, this survey involved civil society organization as members of Masyarakat Peduli Anggaran Garut (MAPAG). MAPAG is an organization formed in 2006 as a civil society group (CSO) and individual in Garut District which focuses on carrying and encouraging public service issues through pro-poor budget advocacy and the fulfillment of citizen basic rights. It has objective to encourage such a change/reformation of planning and budgeting process, and transparency and accountability in Garut District through the providing, management and empowerment of information. Members of MAPAG are civil society groups in Garut District. 12 Final Report : Public Expenditure Tracking Survey in Clean Water Sector Perkumpulan Inisiatif

20 4.1. Policy of Allocation and Mechanism of Resources Flow in Water Sector through Agency of Cipta Karya (Non-PDAM) At local government officers level, there were 23 key informants as target respondents in Bandung District, but only 19 people who are willing to be interviewed. Respondents understanding related to policy of public resources distribution in water supply can be divided into two categories i.e. first category is related to policy that manage the planning and budgeting; and second category is related to mechanism of its water supply. In Garut District, there were only 15 key informants of 29 target respondents (technical implementer) and 4 informants (representatives of parliament) who were successfully interviewed. Most of them said that there are lots of rules in water resource, from law to local regulation 1. In the implementation of water supply program and activities, the policy as guidelines refers to the Presidential Regulation No. 54 and No. 70 in 2012 on Procurement of Goods and Service. The parties or actors who play the roles in public expenditure distribution in services and water supply can be seen in the following Table 4.1. Table-4.1. Actor who Have Role in Public Expenditure Disbursement in Water Service Sector Actor Planner Budgeting Implementer District Level Head of Local=Gov Agency, Regional Board of Planning and Development, Director Comitte in PDAM Local Government Financial and Asset Management agency, Parliament member in B comission and C commision who handle technical prgram and health sector Third Party Village Level Village Aparatus, water management Community group Source: Result from interview, Managed from local and central - Through government program - Proposal Submission Self-managed & third party 1 Ministry of Public Work Regulation No. 18 in 2007 on SPAM Implementation, PP No. 16 in 2005 on SPAM, Law No. 7 in 2004 on Water Resources, Law No. 31 in 2009 on Meteorology, PP 43 in 2008 on Groundwater, PP 42 in 2008 on Water Resources Management, Local Regulation No. 14 in 2002 on Groundwater Management, Local Regulation No. 1 in 2011 on Local Taxes, Governor Regulation No. 31 in 2006 on Groundwater Utilization, PP No. 20 in 1994 on Public Participation and Enterprise, Ministry of State Apparatus Decree No.63/KEP/M.Pan.2003 on General Guidelines for Public Service 13 Final Report : Public Expenditure Tracking Survey in Clean Water Sector Perkumpulan Inisiatif

21 Related to mechanism of public resource disbursement, its information is the public fund resource in water supply consists of two sources, i.e. Local Government Budget (APBD) dan Special Allocation Fund (DAK) which come from the central government. Public fund which is sourced from APBD, the programs of cleant water infrastructure development are determined through a series of development planning process or Musyawarah perencanaan pembangunan (Musrenbang) or deliberation process which is conducted every year. This process is appropriate to the Law No. 25 in 2004 on National Development Planning System, which is written to be Local government development plan (RKPD) and submitted to House of Representative (DPRD) for approval. This process is accompanied by the preparation of local government agency work plan and budgets (RKA) in this case is Housing, Planning and urban development Agency, or called as Agency of Cipta Karya under the Provincial Public Work Agency. Figure-2 Mechanism of Local Government Planning and Budgeting RENSTRA SKPD RENSTRA SKPD 5 tahunan 5 tahun RENSTRA SKPD 1 tahun RKPD 1 tahun KUA PPAS 1 tahun NOTA KESEPAHAMAN PIMPINAN DPRD Dibahas dengan DPRD RENSTRA SKPD PEDOMAN PENYUSUNAN RKA- SKPD TAPD 1 tahun RAPERDA APBD Source : Analysis Result, Final Report : Public Expenditure Tracking Survey in Clean Water Sector Perkumpulan Inisiatif

22 In addition, other source from Special Allocation Fund (DAK) is allocated to finance the need of community s basic services facilities and infrastructures, especially clean /drinking water service. DAK is an allocated fund in national budget (APBN) for particular area in related to a decentralized funding to finance specific activities determined by the central government on the basis of national priorities; and finance specific proposed activities by the particular area. The Regional Head (Bupati) in this case need to arrange the use of DAK plan, which is set forth in a definitive plan and concept of budget implementation list (DIPA) after receiving letter of detail budget allocation (SRAA) from the Ministry of Finance, in a ministerial regulation on the allocation stipulation and common guidelines for DAK management of the relevant year. Those three documents further are assisted or confirmed by the head of regional office (Regional Office) of local DJP, and as a result, the head of DJP regional office will issue a letter of authorization for budget implementation list of DAK. Then, the Regional Head prepares the budget implementation documents (DPA/DIPA SKPD), which contains activities and allocated budget for infrastructure or other sectors that receive budget. In Figure-3, describes a mechanism of definitive plan verification which then turned into DIPA. Figure-3. DAK Mechanism in Infrastructure DJPb will issue a letter of authorization (SRAA) for List of implementing budget on DAK The Government technical agency or depertement will issue the tecnical guidelines Regional Offices of DPJb will use the Letter of Budget Implementing list and the guidelines as a sources to verify the definitive plan and concept of DIPA from technical department Gov t agency/dept with regard to the guideline try to write-up the definitive plan and concept of DIPA - DAK Government Agency/dept use the DIPA as the guide to implementing the budget from DAK. Source : Special Fund Allocation (DAK) mechanism, Lembaga Penelitian SMERU, April Final Report : Public Expenditure Tracking Survey in Clean Water Sector Perkumpulan Inisiatif

23 The ministry of technical issued technical instruction and the local government must follow it in managing activities which are funded by DAK. Especially clean/drinking water supply infrastructure division, the ministry of public work issued technical instructions of using DAK in infrastructure after DAK allocation has been set by the minister of finance minister. For example, the Minister of Public Works Regulation No. 15/PRT/M/2010 on Technical Instruction of DAK Usage for Infrastructure has been published which intend to ensure suitability, discipline, and precision in simple water supply construction, then these infrastructures can be used reliably and sustainably. In the scope to select the DAK activities in drinking water/clean water sub-sector, the local government is necessary to study first the existing system. In respect of criteria explanation, calculation, necessary data and stages in the drinking water infrastructure planning which includes new construction and expansion of service network has been written in the technical manual Policy of Allocation and Resource Flow Mechanism through Local Water Supply Utility (PDAM) Based on information of eight key informants (official officer of PDAM), PDAM as Badan Usaha Milik Daerah (BUMD) has two sources of funding i.e.: APBD/APBN This funding source is such a subsidy or capital investment of government that comes from tax revenue and non-tax revenues. Public-Private Partnership (KPS), Private Company Social Partnership Fund (CSR) and or through Community Based Organization (CBO) The above fund source is an alternative financing source for SPAM development, in the form of guarantees and interest subsidies from the central government based on the Presidential Decree 29/2009. Community manages this fund through local financial institution. In general, source of funding which is usually contained in PDAM is i.e.: (i) (ii) (iii) Equity or fund source from internal cash of PDAM and District/Municipal government is for excavation of house installation program. PDAM conduct such a mechanism due to PDAM has sufficient funds to meet part of the investment needs. Commercial Bank s Loan, it is a financing source from a commercial bank s loan with a particular amount of equity as a loan companion, especially for PDAM that have sufficient companion fund and apply minimum rates over the production cost (base rate). Trade Credit is a financing source from commercial bank s loan through third party and it is paid in installments by PDAM income within 10 years or more which can be repaid as agreed between both parties. 16 Final Report : Public Expenditure Tracking Survey in Clean Water Sector Perkumpulan Inisiatif

24 (iv) (v) Public-Private Partnership is a financing source from private companies based on cooperation agreement between the private companies with the district/municipal government that has potential market (captive market) and the readiness of local government. The bond is a financing source from the bond issuance that will be paid from the PDAM revenue Policy of Mechanism to Implement Water Supply Program Provision of water supply mechanism is regulated in Presidential Decree No. 70 in 2012 on Government s Procurement, which was previously regulated in Presidential Regulation No. 54 in 2012 to manage the procurement process for central and local government. In outline, the government needs to identify the required goods and service need along with understandable specifications. List of the government s goods and service further is included into a general plan of goods and service procurement. The government will manage its procurement activities such as self-management 2 or through a supervisor, or provider of provisions (third party) and it must be done by first specify the budget user or authority user. In Government Regulation No. 54 and 70 in 2012, there are three requirements for goods and services that are required by the government i.e. 1. Goods, in the form of tangible and intangible things e.g. internet service. 2. Construction services, in related to physical construction development or physical development etc. 3. Consulting service and other services, which require a special skills and thinking process. Type of goods and service including its characteristic will determine procurement system, method qualification, procurement schedules, procurement document, self estimated price (HPS) and the bid bond which is to be used in a selection process of goods and services providers. In Figure-4, is an outline of the process of government procurement provisions. 2 The works which its operation and maintenance require direct local community s participation or it is managed by implementing agencies at local or central area 17 Final Report : Public Expenditure Tracking Survey in Clean Water Sector Perkumpulan Inisiatif

25 Figure-4. Mechanism Scheme in Implementation of Government s Goods and Services Procurement Government Good s and Services Needs General Plan of Gov t Good s and Services (RUPBJ) Self-Managed (Swakelola) Procurement Process Thrid Party Executors : 1. Governmet Officials 2. Government Agency/ Departement 3. Community Groups The Budget directly to distributed to community Good s Procurement 1. Auction a. General Auction b. Simple Auction 2. Direct Vote Procurement 3. Direct Procurement 4. Contest 5. Limited Auction Constructions Services Procurement 1. General Auction 2. Limited Auction 3. Direct Election 4. Direct Vote Procurement 5. Direct Procurement Consultant Procurement 1. Proper test a. General Proper Test b. Simple Propet Test 2. Direct Election 3. Direct Procurement 4. Contest Source: Analysis from Presidential Decree No. 70 and 54 in 2012 on Government s Procurement For PDAM, budget execution process through the procurement process still refers to the provisions of the government, because status of PDAM is a local government-owned company. However, the budget users or budget users authority in determining the procurement system, method qualification, procurement schedules, procurement documents, the self estimated price (HPS) and auction guarantee that would be used in the selection process of goods and service provider are determined by the director of general division of the company. In the implementation of clean water supply program, Agency of Cipta Karya in Garut District applies self-managed procurement system and construction service, while PDAM is more dominant to use construction service. 18 Final Report : Public Expenditure Tracking Survey in Clean Water Sector Perkumpulan Inisiatif

26 4.4. Period of Public Fund Disbursement Mechanism of Disbursement Regarding the mechanism of public fund disbursement procedural in water supply, respondents answered it has been conducted in normative. They replied that the citizens or agency submit a proposal, and it is done in varying ways. Some mentioned it should go through the process of development planning (Musrenbang); and some submitted proposal to the relevant official officers e.g. members of DPRD and the Regional Head. While respondents of PDAM replied that they did not understand this because it has been arranged by the central, and they just implement it Disbursement Period Regarding time of fund disbursement, respondents have different answers. Respondents of Public Work Agency, which is responsible for submitting public budget proposal on water supply, replied that the money is disbursed between April to September. While respondents of the agency which is responsible for implementing the programs and activities mentioned that the money is disbursed between May to June. Different answers were received from respondents in rural community level, they mentioned that the use of public funds for clean water is generally realized between July and October. Disbursement period is considered in line with its procedural (according to agency official officers). However, according to the result of confirmation with the village officials, fund disbursement for clean water projects is slower than other programs. Table-4.2. Period of Fund Disbursement for Clean Water Service Activities Level Period of public fund disbursement 1. Proposal on Public Fund Community, Agency of Cipta Karya, PDAM 2. Legitimation of Public Fund TAPD, DPRD dan Bupati, DPPKAD 3. Public fund disbursement Agency of Cipta Karya & PDAM October- December January-March April May 4. The Use of Public Fund on Bidding Plan 5. Disbursement & the Use of Public Fund Source : Interview Result Auction in each Agency of Cipta Karya & PDAM Third Party/Contractor June-July July- October 19 Final Report : Public Expenditure Tracking Survey in Clean Water Sector Perkumpulan Inisiatif

27 Related to the proposed program/project for clean water infrastructure supply, there were only 22 of 52 respondents who answered the questions. The interesting finding was, respondents of the agency proposed a clean water program that is addressed to rural areas such as piping, artesian well, public hydrant, or public taps, etc. While village respondents, such as the village head, proposed for water to irrigate agriculture, not drinking water/clean water Program and Water Supply Activities in through Agency of Cipta Karya Tracking results in related to the proposed programs and budgets in 2011 by Agency of Housing, Planning and Urban Develpment or Cipta Karya (Non-PDAM), can be seen in the following table. Table-4.3 Type of Program and Activities, and Budget in 2011 Agency of Housing, Planning and Urban Development, Garut District Cipta Karya Budget Before changed After changed 2011 Indirect Expenditure IDR IDR Direct Expenditure IDR Unused IDR No Source: DPA-SKPD Garut District in 2011 Based on the above information, it was indicated there were a number of allocated fund where the use and disbursement flow is unclear, i.e. in amounting of IDR or 36 percent of the budgeted plan amount. From the amount of allocated fund, in amount of IDR was planned to be distributed in the form of clean water installation supply in nine rural locations, i.e.: Table-4.4 Detailed Program and Activities, and Budget in 2011 Agency of Housing, Planning and Urban Development, Garut District Name of Location Type of Working Volume Allocated Fund 1. Sub-district of Cisurupan, Cipaganti Village Unclear 1 unit IDR Sub-district of Cilawu, Karyamekar Village Unclear 1 unit IDR Sub-district of Bungbulang, Tegalega Village Unclear 1 unit IDR Sub-district of Malangbong, Karangmulya Village Unclear 1 unit IDR Sub-district of Cisewu, Cisewu Village Unclear 1 unit IDR Sub-district of Cibalong, Karyasari Village Unclear 1 unit IDR Sub-district of Cikelet, Kertamukti Village Unclear 1 unit IDR Sub-district of Wanaraja, Sukamenak Village Unclear 1 unit IDR Sub-district of Bungbulang, Gunung Jampang Village Unclear 1 unit IDR Total Allocation IDR Source: Budget Implementation Document of Cipta Karya agency in Garut District in Final Report : Public Expenditure Tracking Survey in Clean Water Sector Perkumpulan Inisiatif

28 In Garut District, there was a work infrastructure package of IDR in 2011, but there is no clarity yet whether the fund was really used to perform in the specified location. Agency of Housing, Planning and Urban Development (Cipta Karya) in Garut District cannot provide some supporting data and documents for this survey. Therefore, process of public flow tracking was unable to be completely identified. However, general description is Table 4.4, is quite clear and explainable. There is an inefficiency budget that requires to be accounted for its disbursement. It also occurs in PDAM Tirta Wening, Garut district which did not provide to access supporting data and documents. Based on community s complaints and the information of the Government s Procurement Institution, said that PDAM Tirta Wening has received capital investment from the government of Garut District in amount of 1,5 billion in 2011, but the usage of the fund information was not disseminated and inaccessible by community. In Bandung District, more detail in respect of the water supply programs and its activities in 2012 can be seen in the following table. Table-4.5 Type of Program and Activities in 2012 Agency of Housing, Planning and Urban Development, Bandung District Program Healthy Environment Settlement Activities Achievement Indicator Output Outcome Target Budget Sum IDR Target 2 villages Water Installation Construction The increasing of service coverage of basic environment settlement infrastructure; clean water/drinking in rural area from 16,6% to 17,2% in service area and from 8,40% to 8,42% of total population. Infrastructure and facilities for rural drinking water in two villages (clean water) are established. Drinking water service coverage in rural are is increased Poor community which are not provided by adequate clean water facilities and infrastructure. Table-4.6 Analysis of Comparison of Public Budget for Clean Water Supply in 2012 Agency of Housing, Planning and Urban Development, Bandung District Clean water supply public expenditure RKA DPA DPPA LPP- APBD Personnel expenditure Goods & service expenditure Capital expenditure Total Total Budget Increasing ( ) (%) 81% 22% -13% Source: RKA, DPA, DPPA and Accountability Report of APBD Implementation, Bandung District in 2012 (Local Regulation No. 18 in 2013 dated 5 th September 2013) 21 Final Report : Public Expenditure Tracking Survey in Clean Water Sector Perkumpulan Inisiatif

29 In Table 4.6 above indicates that in 2012 the government of Bandung District allocated IDR Budget in amount of IDR is capital expenditure which is sourced from APBD and reached IDR and the Special Allocation Fund reached IDR that included into the healthy settlement environment program through water supply and basic sanitation for poor community. Furthermore, referring to DPA in 2012, the planned fund to be allocated was increasing 81% or around IDR from the former planned budget i.e. IDR So, total use of budget reached IDR Component of the increase budget was in 121% or approximately IDR Meanwhile, allocated budget for personnel expenditure and goods-service expenditures were actually decreasing. By the budget additional, automatically it has effect on target location i.e. from two villages to be eight target villages for water/drinking water supply infrastructure and facilities. However, based on analysis of Budget Implementation Changed (DPPA) and accountability report of APBD implementation in 2012, it is indicated that there is a change in budget implementation and reached 22% or about IDR , from the implemented budget previously which is noted IDR to be IDR It was driven by the additional new target locations, the former was 8 to be 20 targeted villages. The additional occurred in a component of capital expenditure (IDR ) and personnel expenditure (IDR ) and reached 25% for each expenditure component and 6% (IDR ) for component of goods and services expenditure. Nevertheless, the budget implementation report noted there was efficiency in amount of 13%, or approximately IDR of total expended i.e. IDR to be IDR In other word, there was an increasing of 4 percent, or approximately IDR of the used budget to be IDR In component of the public budget implementation for water supply through the healthy environment program, according to result of the accountability report of APBD implementation, the use of budget was more on capital expenditure. Table-4.7 Accountability Report of APBD in 2012 Agency of Housing, Planning and Urban Development, Bandung District Component of Finance DPPA 2012 LPJ APBD 2012 Personnel Expenditure IDR IDR Goods & service procurement IDR IDR Capital expenditure IDR IDR Total IDR IDR Source: Accountability Report of APBD Implementation in 2012 (Local Regulation No: 18 in 2013, 5 September 2013 In addition, from the results of other public expenditure tracking, it is indicated inefficiencies of budget utilization in the goods and services procurement process. This can be seen from the procurement process of work packages in clean water infrastructure which 22 Final Report : Public Expenditure Tracking Survey in Clean Water Sector Perkumpulan Inisiatif

30 is located in Alam Endah village and Cibeureum village in 2012 i.e. in amount of IDR Table-4.8 Budget Implementation in Alam Endah and Cibeureum village in 2012 Agency of Housing, Planning and Urban Development, Bandung District Location Working Source of fund Type APBD DAK Total Cibeureum, Desa Kertasari Pipeline IDR IDR IDR Alam Endah, Rancabali Network IDR IDR IDR Total IDR Source: Budget Implementation Document of Cipta Karya agency in Bandung District in 2012 In Table 4.8 above it can be seen that total capital expenditure for Alam Endah village was IDR It was sourced from DAK in amount of IDR and APBD was IDR While the capital expenditure for Cibereum village was IDR It was sourced from DAK in amount of Rp and from APBD was IDR Thus, it can be seen that most of the fund source for water supply activities in two villages came largely from DAK. If it is then said in percentage, the allocation of DAK was 91 percent and APBD was 9 percent. Furthermore, referring to mechanism of disbursement flow of its budget usage is the auction stage of activities. From the results of data tracking is, the procurement process can be described as in the following table: Table-4.9 Analysis Result of Comparison in Process of Goods and Service Procurement in Agency of Housing, Planning and Urban Development, Bandung District 2012 Location Working type Total Bidding Auction Result Be won Efficiency 23 Final Report : Public Expenditure Tracking Survey in Clean Water Sector Perkumpulan Inisiatif Difference Cibeureum % Piping Alam endah % % Source : Bidding and Procurement document of Cipta Karya agency in Bandung district 2012 Referring to Table 4.8 above it can be concluded that the amount of allocated budget was IDR and there was efficiency from the auction of goods and services i.e. 57 percent or around IDR Ironically, result of efficiency was not clarified what the use for. It clearly indicated the leakage of public budget in those two villages where its use was unaccountable and cannot be accounted for. Total budget which was disbursed and implemented in 20 targeted villages in 2012 reached IDR The leakage of budget is indicated in two villages and its term was efficiency which reached 57 percent or around IDR with unclear

31 accountability. It strengthens the allegation that there was a similar leakage or practice in implementing public funds for water facilities construction in other 18 villages Program and Activities of Water Supply in through PDAM In 2010, PDAM Tirta Rahardja has received capital investment from the local government of Bandung District in amount of IDR. 10 billion (written documents) and it was confirmed by the Local Regulation No. 2 in 2010 dated March 29, Fund which was sourced from APBD in 2010, and capital investment in 2012 was in amount of IDR. 8.6 billion from APBD in 2012 (refer to Local Regulation No.1 in 2012). Table 4.10 Budget of Puclic Fund for Water Supply of PDAM Tirta Raharja, Bandung District in the Period of Budget of PDAM Capital IDR IDR IDR Budget Utilization IDR IDR IDR. - Unused IDR IDR IDR Source: Compilation document contract and bidding document of PDAM in In table-4.9 above, in 2010, PDAM Tirta Rahardja received capital investment from local government of Bandung district in amount of IDR. 10 billion. The following is budget allocation disbursement for water supply: Table 4.11 Implementation Budget Mechanism by PDAM Tirta Raharja in 2010 PDAM Budget in 2010 Local Government investment IDR Project Package IDR Auction Winner IDR Efficiency IDR Source: Reviewed by Document of Project Agreement Contract by Open Auction method in 2010 PDAM received the public fund through the auction process was in amount of IDR The fund was used for the package of procurement and distribution pipes development project with a volume of meters in Dayeuh Kolot village, Bandung District. It was won by the third party in amount of IDR (through the prequalification tender). Thus, the indication of efficiency in public expenditure reached IDR , which have no clarity for the use or utilization. Tracking result of work packages on water supply in 2011, it was found that PDAM Tirta Rahardja did not receive fund allocation from the local government, but in 2011 there were 24 Final Report : Public Expenditure Tracking Survey in Clean Water Sector Perkumpulan Inisiatif