In the context of government decentralisation and regional autonomy,1 the central government initiated a policy on a financial equalisation fund between the central and regional governments. The fund is implemented through financial transfers from the central government to the provincial, district/municipal, and village governments.
These are now known as regional transfer funds. Article 1, Paragraph 3 of the Law No.33 of 2004 on Financial Equalisation between the Central and Regional Governments defines a governmental financing system within a unified state that covers the disbursement of finances between the central and regional governments as well as equal distribution between regions in a proportional, democratic, fair, and transparent manner. It takes account of the region’s potential, conditions, and needs, together with the obligation, authority, and means of enforcing such authority, including its financial management and monitoring.