The objective of the Local Government and Decentralization Project for Indonesia is to improve the accountability and reporting of the central government's Specific Purpose Grants (DAK) for the infrastructure sub-sectors within pilot local governments (LGs). There are three components to the project, the first component being DAK reimbursement. This component will be implemented using an output based disbursement financing approach. Under this approach, the project will reimburse the existing DAK for infrastructure (roads, water, sanitation, and irrigation) based on reported and verified physical outputs delivered by participating LGs. The second component is the institutional strengthening to central and local governments and project management support. This component will support the strengthening of the basic institutional functioning of the project. Finally, the third component is the Verification of Outputs (VO). This component will constitute State Finance and Development Supervisory Board (BPKP) verification of outputs. BPKP will finance the VO function, plus any needed hiring of new staff and capacity enhancement from their own budget