# _Allocations to the School Level_

Multiple sources contribute to school budgets, with the lion’s share coming from district governments before 2005. According to the GDS 1+ survey for budget data for 2002–03, 92 percent of primary school budgets are funded by district governments. This large share decreases in junior and senior secondary schools to 82 percent and 77 percent respectively, as the share of parental contributions increases from 4 percent in primary to 13 percent in junior secondary and 17 percent in senior secondary (World Bank, 2006a). However, a new allocation mechanism, introduced in July 2005, significantly altered school budgets at the primary and junior secondary levels. The change is that the central government now funds a substantial share of the schools’ operational income.

A new financing mechanism, introduced in 2005, significantly altered the composition of operational revenue sources at the school level, by allocating resources directly to schools. From 2001 to June 2005, the government allocated part of its fuel subsidy savings to a scholarship program (known as BKM) for poorer families. For the period July–December 2005, the GoI decided to change the direct recipient of the funds from households to schools by allocating block grants for school operational costs through the Operational Aid to Schools Program (Bantuan Operasional Sekolah, or BOS). Since July 2005, the GOI grants BOS resources to all schools at the primary and junior secondary levels while still partially continuing the BKM Scholarship program.<sup>15</sup> The BOS program is distributed to schools based on a per-pupil allocation mechanism.

The BOS program covers approximately 41 million students, of which 62 percent are at the primary school level and 38 percent at the junior secondary level (Table 7). The program disbursed Rp. 5.3 trillion from June–December 2005 and has started the transfer of Rp. 11.12 trillion for 2006, which equates to approximately 25 percent of the overall central budget for education.

|Table 7 Operational Aid to Schools per Levelof Education 2006|
|---|

||**Students (million)**|**BOS Allocation (trillion Rupiah)**|
|---|---|---|
|SD/MI|29.4|6.92|
|SMP/MTs|10.5|3.40|
|BKM|0.7|0.54|
|SafeguardingFund|-|0.26|
|**Total **|**40.6**|**11.12**|

_Source:_ MoNE 2006.

The BOS resources are transferred directly to schools on the basis of a per-pupil allocation formula. Schools set up bank accounts in which the funds are directly deposited, reducing the possibility of leakage and providing greater transparency. Primary schools receive Rp. 235,000 (~US$ 25) per pupil per semester, and junior secondary schools receive Rp. 324,500 (~US$ 35).

> 15 The schools that choose to participate in the program must sign a Letter of Agreement on the Provision of Aid. If a school agrees to take the funding Operational Aid from government, then they must comply with rules on the charging of fees including registration form cost, principal textbooks and supporting materials from library, cost for teachers training, examination fees, and activity fee. See also the forthcoming Poverty Assessment (World Bank 2006) on the poverty impact of the BOS program.

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