BPK Opinion and Findings on Public Sector Accountability

7.2.1 BPK Opinion and Findings on Public Sector Accountability

Brunori (2002: 1076-1077) argued that in a democratic society, accountability and transparency regarding the quality of a tax revenue system is essential for fiscal decisions and policy. Revrisor Baswir, an economist from the University of Gadjah Mada, estimated leakage in tax revenues at75 per cent (Investor Daily Indonesia 4 th February 2005). He argued that before the state revenue from tax income is reported to government, 25 per cent of the real potential tax revenue was not paid or reported. For instance the target of tax revenue in 2009 was Rp.100 trillion (US$ 9.09 billion) 103 , although the real potential of tax revenue might be Rp.130 trillion (US$13.9 billion). Moreover, when the tax revenues came into government, leakage occurred again at25 per cent of the total income tax, because the tax administrators were not depositing the tax into the state treasury. In addition, 25 per cent of the total tax revenue was used with a lack of accountability to the public. However, until now, BPK could not access the data and information required to audit tax revenues. As a result, the opinion of BPK on the financial reports of central government for six years (2004-2009) w as a ‗disclaimer‘ (no opinion), because BPK lacked enough information to provide an audit opinion. The Chairman of BPK argued that

BPK will still provide a ‘disclaimer‘ opinion on government financial statements if BPK cannot audit and access the tax information (Harian Ekonomi Neraca 20 th February 2008).

According to the BPK Vice Chairman, in 2005, BPK had direct communication with the President just once. Although some letters had been sent to ask for direct communication and consultation with the President in regard to reforming state finance

103 Rate US$1 = Rp.11,001 (as of 17 th January 2009).

management, there was no response. Based on a discussion between BPK and Parliament‘s budget committees 104 , BPK suggested some options to improve the state finance

management of government institutions. Member I of BPK (Angbintama I) reported that BPK sent letters to the President regarding problems with the state finance management system and gave some options and suggestions on how to solve the problems. BPK suggested the Financial Development Supervisory Board (BPKP), which had sufficient and competent auditors, to give assistance in supporting the new state finance management system in central and local government agencies. In addition, Member of BPK III (Angbintama III) suggested improving the state finance management and accountability, starting from the Ministry of Finance to improve its own state financial management. Moreover, the tax office is not transparent and the state revenue system has just started to implement the single account system. Moreover, it is no secret to taxpayers that there is the potential for tax revenue leaks.

According to Member of BPK III 105 , BPK findings indicate low commitment of the government to improve the state finances system. Moreover, weaknesses in state finance

management and accountability are due to the ineffectiveness of budget reconciliation, and the lack of integration of the IT systemfor financial management with the government accounting system. Moreover, not all public sector agencies have implemented single treasury accounts as stipulated in the Law on State Treasury (2004) (Warta BPK June 2007:2).

104 The consultation was held on 27 th February 2007 in the auditorium of BPK, Jakarta.

A consultation between BPK and budget committees Members of Parliament, on 27 th February 2007 in the auditorium of BPK, Jakarta

In this regard, the Minister of Finance, Sri Mulyani Indarwati, argued that difficulty of external examiners is caused by a lack of role of internal audit or the Internal Controller Unit (SPI) and the public administrators, who are still working to implement the new government accounting standardsaccounting standards (SAP 2005). This is the main reason why the financial reports of the departments (LKD), the Institutes (LKL), state- owned enterprises (SOEs) and regional-owned enterprises (ROEs) received a ‗disclaimer‘ opinion from BPK. Sri Mulyani argued that the full implementation of the new system of the SPI and SAP needs a long-term process and stated in Rakyat Merdeka newspaper

(17 th February 2007) as follows:

BPK and government have the same understanding that improvement in state financial management will need many years of recovery, because it involves the system. So, it is impossible to find a direct solution, because we are still in the process of recuperation. The government law (PP) for SPI has not cleared and not been determined, because the government is still reforming the BPKP as the internal control of government.

In addition, she promised to take seriously the need to provide clear steps and will not tolerate any government agencies, SOEs, and ROEs that are identified by BPK as practicing corruption and irregularities. Moreover, government agencies are still adapting to an accrual-based accounting system as required by the new government accounting standards (SAP 2005). The statement from the Ministry of Finance indicates that although the government works better by various policies and efforts to reform the public sector, there issignificant evidence there remains a lack of human resource capacity and overly bureaucratic systems in implementing the new state accounting, financial and auditing standards.

The Minister of Finance continues to encourage government entities, including her Ministry, to submit financial statements and reports no more than 60 days after audit The Minister of Finance continues to encourage government entities, including her Ministry, to submit financial statements and reports no more than 60 days after audit

2007). A 2005 case involving1,303 hidden bank accounts (of government officials) containing Rp.8.7 trillion of state money could be solved if the government has the courage to close these unauthorised accounts and uncover who the owners are.

BPK reported the reluctance of the government in responding to the President about BPK audit results. After that, the President requested all government officials to follow up every BPK finding and recommendation. He also committed to monitoring government agencies to follow up audit findings. The Vice President, Jusuf Kalla, argued that all public officials would be investigated based on BPK audit results. However, it will

be a long process to examine cases of irregularities in public administration and criminal cases (Media Indonesia, 2 nd December 2006). An example of support from the Executive

was their support regarding BPK findings that indicated irregularities in the Ministry of Health and the ‗mark-up‘ of health insurance funds for poor people. Another example was when the Executive asked WHO to give a cheap price for Avian flu vaccine for examining virus samples of H5N1 (Koran Tempo 21 st February 2008).

In 2007, from a total 76 of government agencies, 31 received a ‗disclaimer‘ opinion . 20 of 31 ‗disclaimer opinion‘s agencies, they had the highest state budget allocation. BPK found Rp.19.27 trillion of state assets in 19 departments that were not well In 2007, from a total 76 of government agencies, 31 received a ‗disclaimer‘ opinion . 20 of 31 ‗disclaimer opinion‘s agencies, they had the highest state budget allocation. BPK found Rp.19.27 trillion of state assets in 19 departments that were not well

In 2008, the recording of all state and regional inventory and assets begun and was reported to the Ministry of Finance to avoid the loss and misuse of public sector assets. According to Member of BPK I (Angbintama I), the poor management of state assets that

caused public sector assets to be unsafe, is also one of the reasons for a ‗disclaimer‘ opinion on central government financial statements (Kompas 11 th April 2008). BPK also

found fraud relating to many foreign grants in the form of goods, money or assets, because they were not reported to the government, in this case the Ministry of Finance (Kuncoro,

13 th December 2009). The President commented in Bisnis Indonesia (22 nd February 2008) that ―Now, our

state finance management is still under repair. In the future, we will have a better system to provide the right management of state finances ‖. He also added that the government is preparing regulations to strengthen the role of BPKP as an internal audit institution of government (Bisnis Indonesia 22 nd February 2008). In addition, collaborative solutions between BPK and government institutions were conducted to correct the financial

statements of these institutions. For instance a discussion was held on 21 st February 2008 to follow up the financial reports of the Ministry of Defense and the Indonesian National

Army, which receiving the largest state/national budget and assets. From this meeting, BPK presented recommendations to provide better management and accountability for these institutions and expected an agreement that they would follow up BPK reports (Warta BPK February 2008b: 2).

The facts and information above indicate the government‘s lack seriousness in following up the findings and reports of BPK. The government has not yet fully implemented the new system of state and regional management finance. This resulted in many irregularities and indications of state losses in BPK findings. Moreover, BPK still cannot audit foreign aid or tax revenues. The following section explainsperceptions and comments on government support to BPK reports, based on the survey data and interviews.