1. Whilst Indonesia is a “middle income” country with one of the highest rates of growth in South East Asia, more than 43% of the population continues to live in poverty (<USD2 per day), therefore, there is a clear need for programs such as the National Program for Community Empowerment (PNPM) - the Government of Indonesia’s flagship poverty reduction program and the largest Community Driven Development (CDD) program in the world, dispersing USD 711,287,224 from January to November 2013 to over 6,000 sub-districts across Indonesia. There are obvious geographical and logistical challenges which come with the need to disburse such large amounts of funds across a vast archipelago of over 17,500 islands; in addition, maintaining controls, quality and adequately monitoring such a large and diverse program is a continuous effort across multiple GoI agencies as well as PSF, donors and other stakeholders.
2. This Governance Update aims to discuss the key areas of project governance, giving an update on new challenges as well as initiatives which are in progress or planned. The areas discussed are representative of mechanisms significant for good program governance and in general, most are functioning effectively. Although RLF case numbers increase – 75% of all cases reported as occurring in 2013 and 82% of all large cases (those involving >USD21,000) relate to RLF, GoI is committed to addressing RLF operational weaknesses. A recent RLF thematic mission as well as the pending RLF Management Information System (MIS) to be launched in March 2014 in four pilot provinces – West Sumatra, Central Java, NTT and Yogyakarta, are expected to have a significant impact on strengthening governance in this area. The MIS will assist GoI in greatly improving its monitoring, accounting and reporting capacity as well as early detection of risk as the majority of RLF payments, which are currently being processed manually can be reconciled more efficiently and effectively. Mission findings and RLF pilot results are expected to inform further RLF initiatives as well as the Livelihoods agenda in 2014 to continue to address the inadequacy of controls, monitoring and support in the RLF. …