Abstract: This paper evaluate the compatibility between existing DAK allocation with its dejure definition and purpose, and to explore the factors that cause the incompatibility occurred. The result shows that existing DAK allocation has not been able to meet the definition and the purpose mandated in regulations, which is indicated by these following findings :1) In 2012, 99.4 % of total local governments have received DAK in which there were significant number of local governments did not fulfill the general criteria of DAK allocation; 2) DAK has not been prioritized to local governments with low financial capability; 3) There is a difference of DAK allocation between the amount proposed from ministry/agency (K/L) and the amount stated in national budget; 4) There are differences of programs/activities priority funded with DAK between the proposal from K/L and its realization in the local governments.
Key words: Intergovernmental Transfer, Specific Grant, Fiscal Decentralization, Local Financial Capability.