FS DISCLOSURE LEVEL DETERMINANTS

1857 These are the common factors that are assumed to influence PEεDA‘s FS disclosure level specifically CaLK, which were identified in the Focus Group Discussion: 1. Existence and completeness of CaLK preparation guidelines SAP regulates the information required to be disclosed in CaLK as checklist benchmark in this research. However until now no technical guidelines about CaLK presentation and disclosure are present. KSAP have not issued a Technical Bulletin regarding CaLK. A technical guideline for CaLK preparation is necessary for PEMDA in the early stages of FS preparation because CaLK and Balance Sheet are the reports known only after PP SAP was implemented. CaLK is qualitative, thus without technical guidelines PEMDA will face difficulties in preparation. 2. Influence of other regulations Besides to explain the posts in Balance Sheet, LAK and LRA in details, CaLK also conveys qualitative information related to the accountability andor affects decision making. Those information are influenced by other regulation associated with local governments. Changes in regulations which happen frequently in recent years make it difficult for PEMDA to decide which information to disclosure in CaLK. Regulation clashes also cause difficulties for PEMDA in presenting a sufficient CaLK. 3. Socialization of CaLK preparation Related parties such as Finance Department, State Department and KSAP have not conducted sufficient socialization about CaLK. Various trainings that have been conducted only focused on Balance Sheet, LAK and LRA components. Therefore PEMDA staffs do not have adequate comprehension about CaLK. 4. Priorities and concerns of FS formulator and user Generally, both PEMDA and DPRD do not have sufficient concerns about FS except δRA and δAK. DPRD usually does not consider BPK‘s opinion of FS when accepting or rejecting accountability report of head of local government. FS components priority of concern is: 1 LRA; 2 LAK; 3 Balance Sheet; and 4 CaLK. LRA and LAK get primary 1858 concerns because these reports have been around for a while and are considered to have direct effect on the execution of PEεDA‘s activitiesprograms. Attention towards Balance Sheet was developed with the prerequisite to create an initial Balance Sheet with technical guidelines and sufficient socialization. CaLK is the FS component with the least priority and is not equipped with adequate socialization. 5. Human resources PEMDA has limited human resources in FS preparation. Aside from the lack of accounting graduates, an accountant‘s career steps in PEεDA have not been developed. Any staffs with additional education and SAP trainings are often transferred to other divisions so there is no knowledge transfer in FS preparation. Aside from the factors above, FGD also revealed several opinions related to PEεDA‘s FS presentation, such as: 1. FGD participants also confirmed the result of this research, that PEεDA‘s FS disclosure level, especially CaLK is still low and not compliant with PP SAP. In fact, several FGD participants thought that the preparations of many PEεDA‘s FS were mostly copying previous PEMDA FS. 2. δegal outcomeslawsbylaws, especially ones related to PEεDA‘s financial reporting, have not been tested academically and empirically by independent parties. This testing is necessary to objectively assess the implementation and limitation of related regulations so they can be perfected. 3. Other reports that PEMDA must prepare aside from FS are numerous and complex. This will affect the quality of the reports prepared by PEMDA. The number of reports to be prepared is organized by many conflicting regulations. Therefore it is proposed that research about various regulations related to these reports must be conducted to analyze the possibility of information convergence. If possible in the future PEMDA will only prepare one report which can fulfill the minimum amount of information needed by various parties. 1859 4. Most PEMDA do not have a sufficient information system to support transactions documentation and financial reporting presentation. 5. Fixed asset is still the most dominant issue faced by PEMDA. Overall it can be concluded that the factors influencing the disclosure level of PEεDA‘s FS are common and apply to all PEMDA. Therefore central government has an important a dominant role to resolve this problem.

3.7 RECOMMENDATIONS

In the attempt to achieve the 2011 target that all PEMDA may present a comprehensive and relevant FS, based on the aforementioned analysis, this research recommends 3 strategic steps executed in less than a year as such: 1. Regulations integration about financial reporting. To simplify FS preparation by PEMDA and to minimize the possibility of regulation disagreement, efforts to reassess and to integrate issued regulations are necessary. 2. Accounting career advancement in PEMDA. To give assurance to and attract PEMDA staff to have a career in Accounting, PEMDA and central government must develop career steps for an accountant. Therefore organization structure and compensation structure at central and local government must be evaluated to accommodate this need; and 3. Assessment of laws regulations bylaws, especially those related to PEεDA‘s FS. To ensure the effectiveness and efficiency of law outcomes, cooperation with academicians and researchers must be created to conduct academic and empirical testing. Besides those strategic steps, this research also recommends tactical steps for the following year, such as: 1. Formulation of CaLK technical guidelines or bulletin. The checklist developed by this research can be used as initial material to construct CaLK technical bulletin. However, note that the current SAP base must be adjusted into accrual base; 1860 2. Training and socialization of CaLK formulation. To complement the various FS preparation trainings and socializations, it is suggested to also conduct CaLK formulation training and socialization; and 3. Initiatives to solve the challenge of fast, accurate and conforming PEεDA‘s FS. To settle various issues in recent years, regarding fixed asset and information system, both PEMDA and central government must take prompt initiatives to address the problems immediately. 4. CLOSING 4.1 CONCLUSION Calculation result of disclosure level score for Balance Sheet, LAK and LRA showed that PEεDA‘s FS disclosure level for three FS components is fairly high and the deviation standard is low, showing a consistency of disclosure level among PEMDA. Meanwhile CaLK score showed very low disclosure level that applied to all PEMDA in Indonesia. The consistency of PEεDA‘s FS disclosure level score showed that the influencing factors were common to all PEMDA and not related to the unique characteristics of each PEMDA. Central government specifically Finance Department and State Department can use the result of this research to evaluate the readiness of PEεDA‘s FS presentation in β011. KSAP can use the checklist of this research as an initial material in formulating the CaLK formulation technical guidelines. PEMDA can use the result for self-evaluation

4.2 LIMITATIONS

This research is one the first empirical studies related to PEεDA‘s FS; therefore there were several limitations in this research, such as: 1. This research found difficulties in getting the FS issued by PEMDA aside from the ones in www.bpk.go.id . εost PEεDA‘s websites do not include FS. Direct procurement to PEMDA was improbable due to time constraint and bureaucracy. BAKD data source