Decentralization is a tool to achieve one purpose of the state, especially in order to provide better public services and creating public decision-making process more democratic. Decentralization can be realized with the devolution of authority to the levels of government under it. Indonesia’s fiscal decentralization policy initiated in early 2001 has provided a variety of both national and regional implications. At the regional level, this policy is an effort to empower local independence of the available resources. Policy of implementation of fiscal balance execute through budget allocations to areas including equalization funding. Accordingly, in addition intended to assist regional affairs and finance various governmental authorities that has been assigned, transferred or assigned to the regions, the allocation of equalization funds also aim to reduce the funding gap between central and local governments, as well as reduce the gap between local government funding. Balance Fund is also known a intergovernmental transfer system. The system in Indonesia comprises three basic types of scheme: Revenue sharing Fund (Dana Bagi Hasil/DBH), General Purpose grant (Dana Alokasi Umum/DAU), and Grant for Specific Purpose (Dana Alokasi Khusus/DAK). Even though fiscal decentralization has been implemented nearly ten years, Indonesia’s achievements continue to be clouded by widespread concerns about transparency, accountability and governance. This lack of accountability, transparency and governance leads to arbitrary and non-participatory decision-making, in efficient project execution and rampant financial corruption in public bodies. 2. Assessing Revenue sharing Mechanism
This section addresses the role of revenue sharing mechanism from three different perspectives: a) Decentralization or Fiscal decentralization theory provides the basic criteria for analyzing revenue sharing mechanism in terms of transparency, accountability and governance. b) The New Public Management (NPM) approach has generated guide-lines for public sector reform, emphasizing the introduction of private sector management tools and incentive structures. The evaluation of revenue sharing mechanism can be considered a reform very much inspired by this approach. From a public management perspective we would regard to deep-rooted problems of effectiveness, efficiency and transparency in revenue sharing administration. c) Recently, contributions to revenue sharing mechanism have studied from a different angle, stressing their importance in regional development program. From this perspective we would consider revenua sharing to be important factors of change in the relationship between central government, local government and citizens.
2.1. Fiscal Decentralization.
In Indonesia, decentralization has generally been interpreted as regional autonomy. Although “decentralization” and “regional autonomy” describe distinct phenomena, these terms are often used interchangeably (Simarmata 2000). Autonomy and decentralization policy are strategic way in two fields. First, the policy is to respond of domestic problem of Indonesia such as disintegration, poverty, imbalance development, low quality life of people and human resource problems. Second, autonomy and decentralization are as a step to go economic globalization era (Halim, 2001). In addition, greater economy may be achieved by allowing citizens a freer choice within the market place ‘either by breaking up the monopolies that traditionally have provided most public services or through increasing the wherewithal of citizens to exercise among service options, (Dollery, B. E. and McLoughlin, 2007). The decentralization concept refers to the transfer of responsibilities and functions, as well as appropriate resources, to Provincial, District, and Community levels. According to Turner and Hulme (1997) transfers can be based on territorial or functional...
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