Indonesia Indonesia National Program for Community Empowerment (PNPM) PNPM team members:Jana Halida Uno, Unggul Suprayitno, Zoe Elena Trohanis, and Behdad Nowroozi Fiduciary Forum March 24-28, 2008 1/17/2019

Why PNPM is Interesting Scale Central role in a new MIC’s national poverty reduction strategy Local participation and accountability Robustness for post-conflict and emergency work Simple and innovative FM features Governance and anti-corruption 1/17/2019

Brief Description Provides tertiary services and infrastructure through direct transfers and facilitated community planning Scaled-up as a quick response to East Asian financial crisis in 1998 Nationwide program as of 2008 covering initially 40,000+ urban and rural communities @$1.2 billion/yr 1/17/2019

General PNPM Challenges Enormous size of PNPM Disbursement of $1.2 billion each year over time Coverage of 70,000 villages – all of them in a poorly communicated archipelago Weak national oversight agencies Increasing role for local governments with even weaker FM capacities 1/17/2019

PNPM’s Fiduciary Risks Risks posed by overall size and dispersion over communities (high oversight costs) Risks posed by community management of block grants Risks posed by low capacity of local government staff to supervise and monitor sub-project implementation Risks posed by uneven capacity of field consultants to assist Sub-District Financial Management Units on financial management 1/17/2019

Key Challenges to FM Specialists Making controls meaningful Distinguishing transactional from structural problems Striking right balance between formal oversight and simplicity of procedures/documentation Using feedback-based system rather than just ex ante controls Measuring effectiveness of FM interventions 1/17/2019

PNPM Integrated Internal Control Framework Monitoring and oversight by: Community participatory monitoring Government monitoring Consultants and facilitators NGO monitoring MIS and reporting Bank supervision Audits 1/17/2019

PNPM’S Supervision Strategy Lowering costs of acquiring information (i.e. use of SMS reporting) Promoting social controls (i.e. cross audits, community FM groups) Strengthening formal oversight (i.e. tailored FM manuals) Check the checkers Visiting the sub-projects, not just offices (check end-uses) Finding allies for oversight and reform Measuring which interventions are most effective – and adjust 1/17/2019

Going Forward: PNPM’s Risk-Based Oversight Framework (2008-2011) Strengthen effectiveness of local auditors Use threat of audit more effectively and make audit findings more accessible Better use of IT (i.e. websites, hand phone reporting) Improve access to information Further train all parties involved on financial management Promoting cross audits between villages Provide legal and paralegal assistance for using the judicial system 1/17/2019

THANK YOU 1/17/2019