Innovation of Regional Finance Laboratory (Inovasi Laboratorium Pengelolaan Keuangan Daerah)
Regional Finance and Asset Management Department (Badan Pengelola Keuangan dan Aset Daerah)

A. Problem Analysis

 1. What was the problem before the implementation of the initiative?
Nowadays issues concerning regional finance can be determined based on the lowest prosperity level in society meanwhile fund managed by the regional government raises each year. This problem demands competent and reliable strategies from planning to accountability level to create accountable and transparent public services that stimulate improvement of social welfare. Finance Issues: 1.The shortcomings of Regional Revenue and Expenditure Budget drafting process; 2.The leaks of Financial Management; 3.Settlement of Assets: •Settlement of lands that are lacking legal deeds and held by other parties such as data recollection, site survey and involvement of authorized stakeholder; •The incomplete documents of operational vehicles donated from either the central government or foreign/local non-governmental organizations such as data recollections and economic appraisals. 4.The procurement of goods and services, in which according to Anti-Corruption Committee: “Most reported corruption, collusion, and nepotism cases have connections with the procurement of goods and services, either on governmental and non-governmental institution”; 5.Low absorption capacity of budget; 6.The lack of capable and competent human resources in financial planning, management, and accounting skills. Indonesian Supreme Audit Board have given Unqualified Opinion for the East Java Provincial Government Financial Report years 2010-2013 and 2015. In 2014, the year when the Financial Report has received Qualified Opinion, one of the notable problems in regards to this opinion is the lack of ability and capability of the human resources in absorbing and adopting numerous regulations regarding mechanisms and procedures of the Regional Revenue and Expenditure Budget. Therefore, the East Java Provincial Government feels a great and urgent need for an Institution that focuses on improving the human resource aspect of the Regional Finance Planning, Management, and Accounting. Other than the lack of human resources skills in financial management and accountability issues, the (relative) enormity of the East Java Government’s expenditure budget must also be taken into account in the argument of establishing said Institution. East Java Government’s budget in 2015 was Rp.24.361.060.000.000 (±US$1.783.908.904), while in 2016 was Rp.24.368.070.000.000 (±US$1.784.422.232), which means from 2015 to 2016 the budget was raised around 7,01%. The relatively enormous budgets have to be managed by a quantity of 1.908 financial administrators, with details as follow: 1.Budget Users : 49 personnels 2.Proxy of Budget Users : 452 personnels 3.Revenue Treasurers : 33 personnels 4.Revenue Treasurer Assistants : 183 personnels 5.Expenditure Treasurers : 49 personnels 6.Expenditure Treasurer Assistants : 356 personnels 7.Financial Administration Officers : 94 personnels 8.Technical Event Officers : 199 personnels 9.Assets Administration Officers : 68 personnels 10.Salary Administration Officers : 104 personnels 11.Accounting : 74 personnels 12.Verification : 66 personnels 13.Repertory : 33 personnels 14.Fixed Assets Administration : 71 personnels 15.Supply Assets Administration : 77 personnels Moreover, total number of East Java public officers in 2016 was exactly 21.021 personnels. Having come from many educational backgrounds, they are expected to adequately comprehend and be skilled to maintain sustainability and achieve efficient, effective, and principled financial governance.

B. Strategic Approach

 2. What was the solution?
Comprehension of regional finance is an essential step to achieve efficient, effective, and principled financial governance. Efficient and effective planning is the key in managing regional finance that can seize the needs of dynamic development. Therefore, East Java Government have created a new breakthrough by establishing “Ini Lo PaK De” (Innovation of Regional Finance Laboratory) as “An Example of the Solution in Developing Human Resource Quality concerning Regional Finance” to improve regional finance officers in developing their skills in achieving sustainable, efficient, effective, and principled financial governance.

 3. How did the initiative solve the problem and improve people’s lives?
Governor of East Java established breakthrough by creating the Regional Finance Laboratory (Laboratorium Pengelola Keuangan Daerah, abbreviated to LPKD, in Bahasa Indonesia) to develop the competent and capable human resource required primarily in the financial sector that have functions as Technical Operating Subsidiary Unit (Unit Pelaksana Teknis, abbreviated to UPT, in Bahasa Indonesia) under the Regional Finance and Asset Management Department (Badan Pengelola Keuangan dan Aset Daerah abbreviated to BPKAD in Bahasa Indonesia). The Regional Finance Laboratory main tasks are: Regional Fiscal Policy Analysis, Competency Technical Training, Technical Counseling, Web-based and Face-to-face Counseling Clinic, and also Financial Database Service. The Regional Finance Laboratory will also be supported by several firm strategies as follows: Internal Factors: ( a)Facilities and Infrastructure An office building located in Jl. Sikatan No. 10 Surabaya that consists of: •Bromo and Semeru classrooms for e-learnings and technical trainings with a capacity of 40 people; •Ijen classroom for applicative and comprehensive practicing to prepare Financial Report; •Arjuno and Anjasmoro discussion rooms for Technical Consultation, Face-to-face Counseling Clinic and Latest Study Discussions; •Madakaripura Auditorium for general lecture, seminar, and Focus Group Discussions; •e-library room that functions as IT-based electronic library and financial database center; •Room accomodations for trainers and trainees. b)Service Commitment: All Regional Finance Laboratory officials hold the commitments in improving the service adjusted based on their tasks and functions, as follows: •14(fourteen) regional finance laboratory officials; •2 (two) front desk clerks; •6 (six) janitors; •8 (eight) security personnels; •3 (three) mechanical and electrical maintenance workers. External Factors: a)Competent Trainers and Tutors. The regional finance laboratory cooperates with academics and public officials from other regional units in selecting competent and capable trainers and tutors through the ToT (Training of Trainers) program;( b)e-learning High Quality Module: 1.General Module, having been adapted to the latest regional finance regulations for the technical training participants and aimed for participants whom are not familiar with regional finance; 2.Basic Module, aimed for the technical training participants who are just newly appointed to be financial management officials; 3.Intermediate Module, aimed for the technical training participants who are currently appointed to be financial management officials. c)Regional Fiscal Policy Analysis, the Regional Finance Laboratory conducts studies in regards to regional finance; d)Competency Technical Training, aimed to improve the human resources in regional finance comprehensions and skills; ( e)Technical Counseling, aimed to help solving regional finance-related issues in all East Java regional units in the Cities, Regencies and districts;( f)Web-based and Face-to-face Counseling Clinic, aimed to support acceleration in solving regional finance-related problems; ( g)Financial Database Service is Central Database for information regarding regional finance. Main Goals: 1.To produce human resources whom are capable and integrated from the planning up to the reporting stages of regional finance; 2.To equalize the regional finance comprehension; 3.To produce human resources whom are able to provide solution in regards to regional finance issues; 4.To produce human resources whom are able to prepare financial report by implementing regional financial data; 5.To produce human resources whom are able to conduct transfer knowledge of regional finance in their own regional unit. The Regional Finance Laboratory main targets are: 1.Financial Administration Officials of East Java Province; 2.Financial Administration Officials of East Java Regencies/Cities; 3.The Legislature ; 4.The Judiciary ; 5.East Java Officials Province; 6.Districts/City Officials in East Java; 7.Village Financial Administrator in East Java; 8.University; 9.General Society (Non-Government Organizations, Private Sectors).

C. Execution and Implementation

 4. In which ways is the initiative creative and innovative?
The Regional Finance Laboratory is an institution which provides counseling, training, comprehension and analysis about regional finance. The eminent characteristics of this institution are creative, innovative, and original. The Regional Finance Laboratory approaches are not yet applied by any other institutions in Indonesia in the field of human resources capacity and character building. The creative, innovative, and original approaches taken are: a)Competency Technical Training, a training implementation for regional finance administration officials that consists of trainees organizing, training plans; b)Technical Counseling, a program aimed to solve problems that are faced by the regional units in East Java province, regencies/cities, villages, and general society; c)Web-based and Face-to-face Consultation Clinic, this program will be conducted through direct and electronic media; d)Financial Database Service, Financial Database Service, public information service integrated to other services of Regional Finance Laboratory. e)Regional Fiscal Policy Analysis, this program is designed by Regional Finance Laboratory as self-learning program to improve capacity and character building of human resource concerning comprehension and information of regional finance. Moreover, it is a proactive contribution related to regional planning and budgeting policy.

 5. Who implemented the initiative and what is the size of the population affected by this initiative?
The Regional Finance Laboratory is an institution that provides skill, proficiency, knowledge, technical comprehension, insight development and mindset to develop human resource in regional finance. Regional finance is activities which consist of financial planning, budgeting, organizing, reporting, monitoring and evaluation of financial management in East Java Province. Regulation that stipulates The Regional Finance Laboratory and becomes the legal basis for the institution is the Governor Decree Number 39 Year 2014 that was enacted on June 19th 2014 concerning Regional Finance Laboratory under East Java Regional Finance and Asset Management Department. It also supported by the Governor Decree Number 101 Year 2016 that was enacted on November 4th 2016 concerning Nomenclature, Organization Structure, Job Description, and Task Procedure of The Regional Finance and Asset Management Department Technical Operating Subsidiary Unit in which it will be used as Innovation in Developing Human Resource Quality concerning Regional Finance. ( Regional Finance Laboratory works and operates as front-liner in developing regional human resource quality and fiscal policy which pro-active, creative and innovative. Services given are adopted with latest information, technology and based on latest scientific evidences. UPT-LPKD also operates as knowledge center for activities that are related to regional finance.
 6. How was the strategy implemented and what resources were mobilized?
The development of Regional Finance Laboratory are performed through several steps as follows: 1.The inauguration of Regional Finance Laboratory office on October 20th 2014 by the East Java Governor which also symbolize the first operational day of the institution; 2.The inauguration of structural officials to fill the organization structure on August 26th 2014 with composition as follow: a.Director of The Regional Finance Laboratory; b.Planning and Program Manager; c.Human Resource Capacity Development Manager; d.Regional Finance Laboratory Administrarion Vice Manager. 3.General Module drafting, the making of e-Learning Application Module and undertaking the Training of Tutor which collaborated with Gadjah Mada University of Yogjakarta on March 13th 2013, and funded by the World Bank; 4.Counseling session with Australia-Indonesia Partnership and Decentralization team with Mr. J.B. Carassco as DFAT Counselor and Mr. Daniel Hunt as AIPD Deputy Program Director on September, 17th 2014 to synchronize the programs that will be conducted in Regional Finance Laboratory with AIPD’s commitment toward the development of regional finance and public service. The Regional Finance Laboratory establishes two programs as strategies as follows: 1.Planning and Program consist of accurate planning and implementation budget for instance: a.Database development to contribute data, information and services; b.Study result analysis using meta analysis method; c.Analysis of latest study. In which point b and c will be utilized as best practices of the planning policy materials for each district. 2.Human Resource Development through training and technical assistance, such as: a.Technical training aims to develop ability in planning and budgeting; b.Integrated monitoring and evaluation system; c.Consultation Clinic; d.Technical assistance to develop dissemination ability in regional financial management. Implementation of those strategies aimed to solve human resource issues by doing the following: 1.Technical training for financial administrator about planning, budgeting, managing, reporting and financial evaluation; 2.Competency assessment in regards to planning, budgeting, managing, reporting and financial evaluation of regional finance; 3.Assistance in performing regional finance programs; 4.Database development based on financial management data; 5.Information and communication technology improvements related to regional finance: Main Resources that are utilized: 1.Financial Resource a)Institutional Capacity Development Program by facilitating the Institution to achieve properly-functioned institutional percentage with a budget of Rp.2.497.633.000 (±US$182.900) in fiscal year 2016. b)Improvement and Development Program by capacity empowerment with a budget of Rp.4.422.800.000 (±US$323.900) to achieve human resource enhancement that comprehend regional finance in fiscal year 2016. c)Donors Involvement -The World Bank was involved in drafting the general module and accrual-based e-learning application; -Australia Indonesia Partnership Decentralization was involved in drafting the basic and intermediate training module, and assisted in selecting the tutors. 2.Human Resource Resource of Tutor: a)The East Java regional department officials who follow the Training of Trainers program; b)Academics, experts, and practitioners; 3.Technical Resource: a)Ten technical personnels with education and experience background in Finance concentrated on human resource capacity development and financial administration; b)Two technical personnel with background in general governmental affairs concentrated on Planning and Program; c)Two technical personnel with Information Technology background concentrated on Information Technology Development; d)Ten certified security personnels; e)Six cleaning service personnels; f)Three mechanical, electrical and hydrants outsourcing personnels.

 7. Who were the stakeholders involved in the design of the initiative and in its implementation?
Based on the Minister of Administrative and Bureaucratic Reform of the Republic of Indonesia Decree Number 10 Year 2011 concerning Changes Management General Guidance, stakeholders are characterized into three qualifications: Key Stakeholders, Primary Stakeholders, and Secondary Stakeholders. 1.Key Stakeholder Key stakeholder is officials who hold legal authority in making decision based on executive aspect according to its level which is the Chief Executive Officer of East Java Financial and Asset Management Department and the Director of UPT Regional Finance Laboratory. 2.Primary Stakeholder Stakeholders who have direct connections with policies, programs and activities. They should be positioned as the main determinants in the decision making process. The primary stakeholders are Planning and Program Manager, Human Resource Capacity Development Manager, Regional Finance Laboratory Administrarion Vice Manager. 3.Supportive (Secondary) Stakeholders Secondary stakeholder does not have direct connection to policy, program and event but somehow they possess concern through their advice and influence toward social attitude and government legal decision for instance: a.East Java Finance and Asset Management Department staffs; b.Staffs of UPT Regional Finance Laboratory; c.Information Technology consultants from Sepuluh Nopember Institute of Technology Surabaya; d.Academics who are involved in drafting learning module from Airlangga University of Surabaya, Gadjah Mada University of Yogyakarta, Diponegoro University of Semarang, Brawijaya University of Malang, Andalas University of Padang, University of Indonesia, Padjajaran University of Bandung, Hasanudin University of Makassar, Sam Ratulangi University of Manado, and Trunojoyo University of Madura; e.East Java regional units and Regencies/Cities and Villages. f.Donors •World Bank, involved in assisting the establishment of regional finance laboratory; •Australia Indonesia Partnership Decentralization, involved in structuring regional finance laboratory; •KOMPAK Governance for Growth, involved in advising the development of Regional Finance Laboratory.

 8. What were the most successful outputs and why was the initiative effective?
The development programs of UPT Regional Finance Laboratory in fiscal year 2016 achieve outputs as follow: 1.Technical counselings for regional units of East Java province in 2016 were held for around 20 sessions and followed by 792 participants. In 2015 were held for around 18 classes and followed by 655 participants. The average participants comprehension level in 2016 reached 92,47% compared to 2015 which only reached 70,51%. (supporting data attached); 2.Counseling Activities: a.Technical Training participants were from outside East Java Regional Government, such as the Head and Members of Papua Province Legislature, South Kalimantan and South Sumatera Training Body, and Deli Serdang (North Sumatera) Regency Government, with a total of 183 participants; b.Brainstorming sessions were conducted twice in collaboration with Situbondo and Sidoarjo Regencies Governments, with a total of 110 participants; c.Counseling for Pamekasan, Blitar, Situbondo and Sidoarjo Regencies Governments, with a total of 514 participants; d.General Lecture for educational institutions with a total of 298 students from Diponegoro University of Semarang, Padjajaran University of Bandung and Panca Marga University of Probolinggo; 3.Producing studies such as: a.Expenditure Standard Analysis (Book) (Analisis Standar Belanja, abbreviated to ASB, In Bahasa Indonesia); ( b.East Java Development Plan and Budget Synchronization (Book); ( c.Regional Finance General Module Update. 4.UPT Regional Finance Laboratory employed 30 professional tutors in accordance with their educational background; ( 5.Information Technology Service The Regional Finance Laboratory produced fourteen online videos for e-learning; ( 6.Counseling Clinic consisted of 16 face-to-face and 11 online-based counseling with a total of 37 issues were discussed. ( Main topic of the issues: a.Administration; b.Asset Management; c.Executive and Legislative; d.Accounting; and e.Drafting process of Budget Implementation Document. ( 7.Database Service, in 2016 The Regional Finance Laboratory added a search engine feature within the e-library to quicken the problem solvings concerning regional finance. Concrete examples from the existence of UPT-regional finance laboratory that can be perceived by other departments are: 1.Accurate planning, budgeting and punctual submission of Accountability Report; 2.Regional finance administrators able to comprehend drafting process of financial report; 3.Regional finance administrators able to differentiate assets (regional belonging and assests); 4.Mutual perception about regional finance toward enacted regulations; 5.Ability to provide solution concerning regional finance issues as a form of Knowledge Transfer.

 9. What were the main obstacles encountered and how were they overcome?
The existence of Regional Finance Laboratory is fully supported by the Indonesia Finance Ministry under the Directorate General of Regional Fiscal Balance (Direktorat Jenderal Perimbangan Keuangan, abbreviated to DJPK, in Bahasa Indonesia) since it helps the central government in solving regional finance issues to achieve Good Government Governance. In actualizing that expectation, The Regional Finance Laboratory establishes coordination with Domestic Affairs Ministry in regards to institutional empowerment, training materials improvement and the activities supply needs. According to the Internal Environment Analysis (Analisis Lingkungan Internal, abbreviated to ALI, in Bahasa Indonesia), there are several obstacles need to be solved by The Regional Finance Laboratory. Obstacles and Its Resolutions: 1)Obstacle: The absence of a Governor Decree that enacts educational retribution to support The Regional Finance Laboratory operational expenditure. Resolution: Arrange a Governor Decree that enacts educational retribution service to support operational expenditure in collaboration with KOMPAK Governance for Growth as donor. 2)Obstacle: Learning modules have not yet been adapted with the complex characteristics of East Java. Resolution: Upgrade learning module periodically to match with the East Java’s complex characteristics accompanied by KOMPAK Governance for Growth. 3)Obstacle: Uneven distribution of human resources based on their number and expertise. Resolution: Drafting organizational structure and job descriptions based on Governor Decree Number 101, 2016 concerning Nomenclature, Organization Structure, Job Description, Function And Task Procedures of The Regional Finance and Asset Management Department Technical Operating Subsidiary Unit. 4)Obstacle: Limited amounts of equal perceptions and comprehensions about financial management policy, system and procedure. Resolution: Conduct periodic focus group discussions about regional finance issues. 5)Obstacle: Limited amounts of facilities and infrastructures that are used for regional finance training. Resolution: Develop more facilities and infrastructures to support regional finance training.

D. Impact and Sustainability

 10. What were the key benefits resulting from this initiative?
Regional Finance Laboratory is a new innovation and the first regional institution in Indonesia which provide huge advantage for general society through financial management quality development’s program which can be proven from testimonials below: ( a.Yuli Nurhayati (East Java regional staff) “Previously, finance in my opinion is only about money circulation (in-out) but after joining technical training in The Regional Finance Laboratory I understand that finance consists of planning, administration, report, and monitoring. Training in this institution provides description of accrual basis financial report which is presented technically and detail, tutor explanations are understandable. When problems occur in our office they are able to provide solution.” b.Nasson Utti (Papua’s Regional Legislative) “Technical finance training which is conducted by Regional Finance Laboratory provides new insight and knowledge regarding problem and performance planning basis. We appreciate East Java regional government in possessing laboratory which able to store and serve complete data therefore development planning basis can be measured and developed in national scale. It also can be used as evaluation material for the future governor so it can be concluded that this institution databases are effective and remarkable”. Advantages of the Regional finance Laboratory: 1.Comprehension measurement of East Java human resources in regard to Regional Finance Laboratory database; 2.Increasing of human resource skills in drafting regional units financial report; 3.Establishment of mutual perception the regional finance comprehension; 4.Increasing of regional finance administrative order; 5.Regional Fiscal Recommendation used as guidance in making financial decision; 6.Regional finance information online based; 7.Regional finance database used as electronic and scientific materials for general society; Outputs achieved by the Regional Finance Laboratory aim to manifest effective and efficient services by improving accountability toward the society. East Java province received compliments and awards from numerous parties because of its commitments to improve the performance of regional finance for instance: Awards Received in 2015 •Pangripta Nusantara Awards 2015 (for Category of Development and Planning) on April 29th 2015; •Best Excellent Service Awards on April 29th 2015; •The Evaluation Report of Accountability and Performance of Ministry/Department and Regional Government on December 15th 2015. Awards Received in 2016 •East Java Province received Unqualified Opinion from the Indonesian Supreme Audit Board on June 13th. •Pioneer of Financial Awards for Regional Government Category on January 15th 2016; •On May 26th 2016, “Ini Lo PaK De” (Innovation of Regional Finance Laboratory) nominated as SiNovik Top 35 Public Service Innovation; •Transparency of Information of Regional Government Awards on December 20th, 2016. This award is given because of its Transparency and Accountability of East Java Regional Finance. Impact measurements that are taken as follow: a. Comprehensible module as learning method to increase number of participants whom are able to comprehend learning outcomes each year; b.Regional Fiscal Recommendation used as guidance for Regional Budgeting Team in making financial budget; c.Increasing number of human resource and society whom are able to comprehend regional finance based on online database viewers; d.Improvement of human resource comprehension about regional finance thorugh web-based counseling and information.

 11. Did the initiative improve integrity and/or accountability in public service? (If applicable)
Various approaches conducted by the regional finance laboratory to strengthen integrity concerning public service are: •Integrity: 1.Commitment of Stakeholder In obtaining transparent and accountable financial management, the Governor of East Java and all regional officers committed to improve human resource ability and integration of IT. It can be seen from the growing number of regional finance administrators whom comprehend regional finance and regional budget absorption in 2015 from 94,19% to 96,99% in 2016; 2.Decreasing number of cases concerning lawsuit of treasury and compensation Settlement of problems concerning lawsuit of treasury and compensation declined which in 2015 reached Rp.11.350.000 (±US$844) and in 2014 reached Rp.25.487.500 (±US$1.896); 3.Systematic Management of Assets Up to 2014, land certificate/deeds that published was 1.617 (84,35%), meanwhile in 2015 was 58 certificate/deeds, therefore the total numbers of land certificate/deeds from 2014 to 2015 are 1.675 (87,38%). Moreover, approximately 242 (12.62%) areas are still under certification process. 4.Improvement procurement of goods and services through integrated online application named e-procurement It can be seen from high number of procurement of goods and services based on regulations and enhancement of auction process in 2014 was Rp. 25.717.666.563.046 (±US$1.913.516.857) and in 2015 was Rp. (±US$2.317.866.885); 5.Management of capable and competent human resources in financial planning, management, and accounting skills to achieve effective and efficient public service. •Accountability: 1.Indonesian Supreme Audit Board have given Unqualified Opinion for the East Java Provincial Government Financial Report years 2010-2013 and 2015-2016. In 2014, the East Java Province received Qualified Opinion; 2.In 2015 East Java Provincial Government Received 80,04 or A predicate meanwhile in 2014 received B+ predicate for Accountability of Performance. Human resource development should be the main priority for regional governance since high quality human resources are the main factor to increase optimum capability in acquiring good governnce of regional finance. Therefore, services provided by Regional Finance Laboratory will become firm strategies to improve efficient, effective and responsive capacity by focusing on: •Human resource development; •Institution empowerment; and •Institution Reformation. The development of regional finance laboratory aimed to achieve and pursuit good government governance that principled, tranparent and able to improve social welfare.

 12. Were special measures put in place to ensure that the initiative benefits women and girls and improves the situation of the poorest and most vulnerable? (If applicable)
Regional budget of East Java provincial government in 2016 compared to 2015 raised to 7.01% but the percentage number of poverty line was still high therefore advices related to improvement of social welfare are needed. One of activity establishes by the regional finance laboratory to improve human resource capacity and capability is providing advice related to policy through Regional Fiscal Policy Analysis. Analysis that given by the regional finance laboratory was “Pro Poor Budget Analysis” by focusing economic, poverty line, potential finance, expenditure orientations from numerous aspects for instance infrastructure, education, health, and other economics supports. The result of Regional Fiscal Policy Analysis concluded that most of Pro Poor Budget were distributed without systematic programs and regional activities therefore recommendation that were given aimed to achieve efficient, effective, and principled financial governance by focusing on Gender Analisis Pathway.

Contact Information

Institution Name:   Regional Finance and Asset Management Department (Badan Pengelola Keuangan dan Aset Daerah)
Institution Type:   Local Government  
Contact Person:   Jumadi Jumadi
Title:   Doctor Enggineering  
Telephone/ Fax:   +62313554069 (Tel) / +62313554052 (Fax)
Institution's / Project's Website:  
Address:   Jalan Sikatan 10
Postal Code:   60175
City:   Surabaya
State/Province:   East Java

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