Designing provincial financial assistance to villages: A policy analysis of flat intergovernmental transfers under heterogeneity in Bogor, Indonesia

Type of the article: Research ArticleAbstractProvincial financial assistance is a distinct but under-examined tier of Indonesia’s intergovernmental transfer system, sitting alongside the national village fund and the regency village fund allocation. This is a theoretical policy analysis of the design of West Java’s provincial assistance to villages in Bogor Regency, a flat grant of IDR 130 million per village. The aim is to assess, against fiscal federalism and administrative burden theory, whether a uniform per-village transfer is an appropriate design for a recipient population that is highly heterogeneous in development status. The analysis draws only on official regulations, budget records, and published statistics for 2017–2025, with no primary survey or interview data. Three design properties are examined: the allocation rule, the disbursement procedure, and the participation channel. The analysis shows that the flat rule directs a proportionally smaller fiscal share to lower-capacity villages than to higher-capacity ones, that the multi-step disbursement procedure generates an administrative burden disproportionate to the grant’s modest size, and that no regulation between 2017 and 2025 provides any channel for villages to participate in setting the amount, the earmarks, or the procedure. The grant equals only about 13.8% of the average national village fund, yet imposes a comparable compliance load. The study concludes that the appropriate reform is not a larger grant but a redesigned one: a basic-plus-need allocation formula, a simplified and digitalized disbursement process with a binding calendar, and an institutionalized consultative forum. The framework is transferable to other provinces operating uniform village grants.