The distribution of Village Fund (VF) has entered its third year in 2017, yet delays in distribution and disbursement continue to occur and could potentially undermine the quality of VF spending. The challenge is how to develop a simple mechanism that accommodates village capacity, while upholding the principle of accountability.

A study conducted in ten villages (in five kabupaten (districts)) showed various issues contributing to this problem, including additional requirements imposed by kabupaten and/or kecamatan (subdistricts), low administrative capacity of village governments, leadership change during elections of kabupaten head or village head, and untimely changes to central government policies. However, best practices are also found in some locations.

This policy brief recommends (i) limiting additional requirements for disbursement of VF from local government (down to the kecamatan level); (ii) improving village administrative capacity, including the role of kecamatan in providing technical support and use of information technology; (iii) clarifying the scope of authorities of village/regional heads in the transfer and disbursement of VF; and (iv) preventing frequent changes in central government VF policy and improving the timeliness of regulatory changes to be more in line with the implementation schedule in regions/villages.