The Specific Allocation Fund (DAK) is one of the mechanisms of transferring funds from the central to regional governments, aiming among other things, to increase the availability of physical facilities and infrastructure in the regions in accordance with national priorities as well as decrease the discrepancy in growth rates between regions and between service sectors. DAK plays an important role in the dynamics of facilities and infrastructure development of basic services in the regions because—in accordance with principles of decentralization—the responsibilities and accountability for providing basic services to the community have been shifted to the regional governments.

In order to analyze the allocation and management of DAK as well as its accountability, The SMERU Research Institute recently conducted a study on DAK which focused on three major DAK receiving sectors: education, health, and road infrastructure. The results of this study are presented in this edition of our newsletter. A number of nongovernment organizations have monitored accountability and transparency with regard to DAK implementation, including the organization FITRA; we present the results of their monitoring of DAK in the education sector in this edition.

It appears that there are still problems with DAK in regard to both central and regional credibility and accountability, which must be considered from a new perspective if they are to be solved. Seven years after decentralization, fund transfers from the center still dominate the implementation of decentralization. Institutional and policy improvements must take place using a new approach regarding the relationship between the regions and the center that does not create financial dependence on the side of the regions. In contrast, these changes should strengthen regional governments’ accountability to their people. Finally, economist Robert A. Simanjuntak provides a number of critical notes for how to shape DAK in the future.