Budget Resources

6.3.1 Budget Resources

Budget resources are the most essential resources to support the programs and activities of BPK as an independent and professional audit institution. They are needed to build new offices; recruit new qualified auditors; carry out training; provide scholarships, workshops and seminars; support the remuneration system; to improve the quality of audit research; and to procure goods and services and so forth.

However, before audit reform, BPK had inadequate budget from the Ministry of Finance. At the same time, the Financial Development Supervisory Board (BPKP), an internal audit institution, had a much higher budget allocation than BPK. Member IV of BPK (6 December 2006) explained how in the past the function of BPK as an external audit institution was ignored by the government. An internal audit institution, BPKP, had exactly the same duties and functions as BPK, however larger sums of money went to BPKP than to BPK (see Table 6.2 below). Due to a limited budget, BPK had not enough resources to audit all entities, lacked auditor quantity and quality, lacked modern stationery and so on. This indicates the efforts of the E xecutive to reduce BPK‘s position and functions. Budget resources are a key factor for BPK to perform its roles and functions to improve its

independence, professionalism and integrity. An ex-auditor (24/11/2006) 89 argued that the reasons he left BPK were to get a better financial compensation and a more promising

career pathrather than one where promotion was based on seniority. Most important, however, was to escape the bureaucratic work culture. This statement indicates that the bureaucratic and promotion system based on seniority instead of work performance in BPK pushed qualified BPK auditors to work in the private sector rather than remain in the public sector.

Since audit reform, especially from 2006 after the Law on BPK was issued, BPK ‘s budget has increased significantly, this has had a significant impact on capacity of BPK to audit the public sector. In 2003, BPK audited only 50 per cent of all public sector entities due to its limited budget (Arif 2004: 14). In 2009, after increasing its budget to eight times higher than in 2003, BPK audited all public sector entities, except the tax office and SOEs.

89 He is accountant who was graduated from US, highly skilled and leaved his position as a manager and auditor

According to Member II of BPK (14/02/2007), the increasing budget of BPK has mostly been allocated for: (i) improving the income of auditors and applying a revised remuneration system, (ii) recruiting new auditors and employees, (iii) improving BPK‘s telecommunications network, IT and the local area network (LAN) program and website, (iv) opening new representative offices, and (v) modernising and optimising equipment for audit support activities.

Table 6.2 (below) shows that the budget allocated to BPK before audit reform was much smaller than after reform.

Table 6-2 Annual Budget Allocation for BPK before (1993-2000) and after Audit Reform (2001-2009) Year

Amount in Rupiahs (billion)

42.39 Before audit reform

After audit reform

2009 1.725.48 Source: Adapted from 1. BEPEKA Statistics 1995/1996 (BPK RI 1996).

2. BEPEKA Statistics 1996/1997 (BPK RI 1997). 3. BPK RI Statistics 2001 (BPK RI 2002). 4. BPK RI Statistics 2002 (BPK RI 2003). 5. BPK RI Statistics 2003 (BPK RI 2004). 6. BPK RI Statistics 2004 (BPK RI 2005b). 7. BPK RI Statistics 2005 (BPK RI 2006b). 8. BPK RI Statistics 2006 (BPK RI 2007b). 9. Website of BPK (www.bpk.go.id, accessed on 17/08/2009).

Since the audit reform (2001), Parliament and government increased BPK‘s budget each year. From 2005, budget of BPK had increased more than five times higher from Rp. 329.36 billion (in 2005) to Rp.1,725.48 billion (in 2009).This was after they foundsignificant improvement in BPK ‘s performance auditing public finance, which was saving state expenditure and increasing state revenue.

The budget resources of BPK come not only from the state budget, but also from loans and grants from other countries, and international donor organisations such as ADB, USAID and AusAID. The increased budget for BPK was intended to improve the quality of audit reports. Since the budget increases, BPK has had a greater role and more accountability in managing its budget. BPK has a strong commitment to improve its

strategic plans for ensuring better performance (Ariyani 30 th May 2005). In line with the increasing budget, BPK has improved its independence and autonomy to audit the

accountability of the public sector in managing public resources (Ciantrini 2004:17-19). In addition, the organisation of BPK ‘s Financial Bureau has expanded into three

sections: (1) the budget and monitoring section that is responsible for budget planning and monitoring the implementation of budget, (2) the treasury section that is responsible for preparing policies for management and accountability of state finances and the financial statements for BPK, and (3) the accounting section that is responsible for administering accounting data and preparing financial statements.