DOES VALUE FOR MONEY WORK? (An evidence of City Walk Program in Surakarta)

DOES VALUE FOR MONEY WORK? (An evidence of City Walk Program in Surakarta) THESIS

A thesis submitted in partial fulfillment of the requirement for the degree of Magister Sains

by Emi Indrawati

SRN: S 4307064

PROGRAM STUDI MAGISTER AKUNTANSI FAKULTAS EKONOMI UNIVERSITAS SEBELAS MARET SURAKARTA 2010

DEDICATION

My beloved Father who passed away……

……speechless…...regret…… When I realize ……I have done nothing…… …..to make you happy Just my pray is hopefully will make you happy Ever after…..

My struggling Mother……

Even there has been a distance ….

Have made our life so colorful….. Black… Red … Yellow … Gr een You are the best mom in the world…

My Soulmate…..

Precious moment to turn around our life…

With all my Aura …as Ray of me….makes my

life so Bright

To accomplish great things… We must not only act...but also dream Not only plan …but also believe

ACKNOWLEDGEMENT

Assalaamu’alaikum Wr. Wb. Alhamdulillah, Researcher thanks to presence of ALLAH SWT for the

overflows of blesses, grants, and guides so that Researcher able to finish this thesis well. This thesis is compiled to equip the duties and fulfill the preconditions to get the Master of Science degree in Faculty of Economics, University of Sebelas Maret Surakarta.

Researcher realizes that during the thesis process, there are many helps from other parties, directly and indirectly. Herewith, Researcher says many thanks to various the following parties:

1. Minister of National Education of Indonesian Republic, for the willingness to give grants in the form of scholarship “Beasiswa Unggulan Diknas”, in order to complete the study in Master of Accounting Study Program, Faculty of Economic, University of Sebelas Maret Surakarta.

2. Prof. Dr. Bambang Sutopo, M.Com., Ak., as The Dean of Faculty of Economics, University of Sebelas Maret Surakarta. I am proud to study in this faculty and have Mr. Bambang as the dean.

3. Mr. Dr. Bandi, M.Si., Ak., as The Head of Master of Accounting Program, Faculty of Economics, University of Sebelas Maret Surakarta.

4. Mr. Djoko Suhardjanto M.Com (Hons), Ph.D, Akt., as the main supervisor, for all the guidance, inspiration, help, motivation, critique, and suggestion that help the researcher to achieve the best result.

5. Christyaningsih B, S.E., M.Si., Ak., as the co-supervisor, for all the guidance, help, motivation, critique, and suggestion that help the researcher to attain the maximum result.

6. Dr. Hasan Fauzi, MBA. Ak, for opening the gate for me to study in this faculty by accepting me in MAKSI International Class. I also want to say my deeply thanks and appreciation for all your guidance, support, and motivation during study in MAKSI.

7. Drs. Jaka Winarna, M.Si., Ak as my “behind the scene” supervisor and my savior.

8. My beloved Bapak (Alm), why I could not make you happy……that was my deepest regret…….Mama……..the great supporter in my life…….. I have to make your dreams

come true…… Mas Har…something feels missing…….Aura, Ray, Raafiko…..all my angels, the only reason that make me survive…..

9. Manda……Mbak Uut what should I say about you……my savior……Novi Tri Astuti, thanks for being my financial advisor, Umi, Mas Chalik……let’s pray for our prosperous life after combating our “terrible” life….I can’t forget what we have had that experiences…..

Researcher realizes that this masterpiece is a long way off from perfection. Hence, researcher expects all the constructive suggestion and criticism regarding

B. Suggestions....................................................................... 101

C. Research Limitations........................................................ 101

D. Recomendations............................................................... 102 BIBLIOGRAPHY……………………………………………………

103 APPENDIX........................................................................................

LIST OF TABLE

Page Table II.1

26 Table IV.1

Issues on VFM

56 Table IV.2

Classification of Respondents

57 Table IV.3

Respondents’ Backgrounds

63 Table IV.4

Questionnaires Guidance Result

67 Table IV.5

Questionnaires Tabulation

90 Table IV.6

Retribution Revenue of Market Department Surakarta

91 Table IV.7

The Number of Visits

91 Table IV.8

The Ratio between Local and Foreign Tourist

92 Table IV.9

City Walk Tourist Visit Proportion

92 Table IV.10 Tourism Department Revenue

Tourist Visit Proportion

LIST OF FIGURE

Page Figure 1.

21 Figure 2.

Value For Money Elements

30

Framework

LIST OF APPENDIX

Page Appendix A.

Photograph Documentation Appendix B.

Paving Model and Mapping Appendix C.

Secondary Data

ABBREVIATION

LKPD : Laporan Keuangan Pemerintah Daerah (Local Government Financial Statements) LKPJ

: Laporan Keterangan Pertanggungjawaban (Accountability Report) PERDA

: Peraturan Daerah (Local Government Regulation)

PP

: Peraturan Pemerintah (Government Regulation)

SK : Surat Keputusan SKPD

: Satuan Kerja Perangkat Daerah UU

: Undang-Undang (Law)

ABSTRACT

DOES VALUE FOR MONEY WORK? (An evidence of City Walk Program in Surakarta) by

Emi Indrawati SRN: S 4307064

This research explores the evaluation of City Walk Program done based on the Value For Money concepts. The objectives of this research are: to examine how the evaluation of City Walk Program is done based on the Value for Money concepts and to examine the implication of the City Walk Program to society.

The design used in this research is exploratory study. Through the exploration, researcher will be able to develop concepts more clearly. Populations used in this research are the stakeholder of Surakarta. Stakeholders of this report are divided into internal and external users: executives, the civil servants as the preparers are the internal users and the others including legislatures and public in common are the external ones. Numbers of respondents are 30.This qualitative research uses an inductive data analysis technique, with Value for Money (VFM) approach to define the element of economy, efficiency and affectivity. To analyze with Value for Money (VFM) approach which are rationale, economy, efficiency, effectiveness, impact and continuous relevancy.

Based on the interview with all respondents, some aspect of VFM could be accepted by public otherwise some are not. From the rationale aspect, the majority of respondents who were asked opinions about the rationality of these programs Based on the interview with all respondents, some aspect of VFM could be accepted by public otherwise some are not. From the rationale aspect, the majority of respondents who were asked opinions about the rationality of these programs

Economy aspects prove that the value for money spent in this program have been obtained at the most economical level by public auction process conducted by the Procurement Committee of Planology and Urban Official of Surakarta.

Efficiency aspect gives facts interviews with some respondents said that the program is quite efficient; however, some others said it is not. The fact that the value of Rupiah used to finance this program is felt quite inadequate and almost all respondents agreed that the output of this development is equal with the rupiah spent.

The effectiveness of the program is not fully achieved. Short-term goal has been reached that is the arrangement of the city in several segments along the City Walk. Long-term goal for managing all aspects of urban areas has not been reached, including problems in the parking area on City Walk.

The construction of City Walk has positive and negative social impact. The increased community interaction in the area of City Walk is one of the positive examples. In other one, various violations and unpleasant actions in the area are the negative impact felt by the society. Economically presence of cadgers there, not so much contribute income to the government of Surakarta, also the case with the income of the vendors themselves did not change significantly due to the construction of City Walk. Impacts on cultural aspects, the development of City Walk which managed to make the city look better has contributed to the increasing number of tourist visits along the City Walk tourist destination.

The successful arrangement of the city through the construction of City Walk managed to change the look of the city, organize street vendors, although its effectiveness is still not fully achieved sinc the project has been running for several years, enough to make the intention of the Government of Surakarta to continue the arrangement of the city through the City Walk development in other areas.

Some recommendations are the socialization of performance measurement using Value for Money should be done soon both in the level of central government or local government, specially for the City Walk improvement Especially for the development of City Walk, by anticipating road users in the area of City Walk for cyclists and rickshaws should be made a special point at the location of City Walk to provide comfort and safety (because they do not have to cross to the north side of the road Slamet Riyadi).

Keywords: Value For Money, Rationale, Economy, Efficiency, Effectiveness, Impact, Continue Relevancy

ABSTRAKSI

DOES VALUE FOR MONEY WORK? (An evidence of City Walk Program in Surakarta) oleh

Emi Indrawati NIM: S 4307064

Penelitian ini bertujuan untuk mengeksplorasi evaluasi Program City Walk berdasarkan konsep pendekatan Value For Money. Tujuan penelitian ini adalah untuk mengetahui bagaimana evaluasi Program City Walk dijalankan berdasarkan konsep Value For Money dan bagaimana dampak program ini terhadap masyarakat.

Penelitian yang bersifat eksplorasi akan memudahkan penelitian untuk mengembangkan konsep secara lebih jelas. Populasi yang digunakan adalah para stakeholder kota Surakarta antara lain SKPD yang terlibat dalam Program City Walk, Legislatif, masyarakat umum yang terbagi dari beberapa perwakilan latar belakang. Pengevaluasian dengan menggunakan konsep Value For Money akan meliputi evaluasi tentang Rasionalitas,Ekonomi, Efisiensi, Efektifitas, Dampak dan Relevansi Kesinambungan.

Berdasar interview dengan responden, beberapa aspek Value For Money dapat diterima. Dilihat dari aspek Rasionalitas, mayoritas responden setuju bahwa secara logika dan nalar program ini dapat dipahami dan diterima oleh stake holder kota Surakarta. Secara ekonomi, bahwa pembiayaan untuk program telah mencapai taraf paling ekonomis yang diperoleh dari sistem lelang yang telah dijalankan sebelumnya. Aspek efficiensi menunjukkan bahwa tidak semua responden sepakat bahwa program telah berjalan efisien, meskipun semua responden sepakat bahwa hasil fisik pembangunan City Walk telah sepadan dengan nilai rupiah yang telah dikeluarkan. Berbeda dengan efisiensi, aspek efektifitas program belum tercapai. Dalam jangka pendek tujuan pembanguan City Walk tercapai dengan adanya wujud fisik City Walk, namun untuk tujuan jangka panjang terkait penataan perparkiran di sepanjang City Walk.

Pembangunan City Walk memiliki dampak positif maupun negatif. Interaksi masyarakat yang terjadi di area tersebut bukti dampak sosial yang positif dari program ini, namun juga ternyata berdampak negatif yaitu dengan adanya perusakan serta tindakan tidak terpuji lainnya terhadap perlengkapan di area City Walk. Dampak secara ekonomi dilihat dari kontribusi pedagang kaki lima tidak terbukti secara signifikan. Dampak dari aspek budaya, memperlihatkan penataan kota berkontribusi terhadap peningkatan jumlah kunjungan wisata terlebih di lokasi kunjungan wisata sepanjang City Walk. Penataan kota melalui pembangunan City Walk termasuk didalamnya penataan pedagang kaki lima, cukup membuat perhatian pimpinan daerah untuk terus melanjutkan penataan kota di wilayah yang lain.

Rekomendasi yang dapat disajikan adalah sosialisasi tentang penilaian dan pengukuran kinerja dengan menggunakan pendekatan Value For Money yang dapat dilakukan oleh pemerintah daerah maupun pemerintah pusat. Khususnya untuk pengembangan City Walk, perlu dibuatkan jalur khusus di area tersebut bagi para pengendra becak maupun motor sehingga pejalan kaki tetap merasa nyaman dan aman.

Kata Kunci: Value For Money, Rasional, Ekonomi, Efisiensi, Efektifitas, Dampak, Relevansi Kesinambungan.

CHAPTER I INTRODUCTION

This research explores the evaluation of City Walk Program done based on the Value For Money concepts and the implications of the City Walk Program to society. Chapter I explains research background; problem statement; research objective; and research benefit.

A. Research Background

Public sector reforms are occurring throughout the world in an effort to improve the efficiency, effectiveness, responsiveness and accountability of the public service. Local government reform, as a subset of the overall reform process, has been implemented in an attempt to increase transparency of those agencies empowered with providing essential services to our communities (Pilcher, 2005).

In today’s society both public and private organizations, and their citizens, are required to be “accountable”. Pilcher (2005) suggested that customer satisfaction, quality management and cost effectiveness all affect how accountability is de fined and measured. Accountability relies on the ability to provide an account of one’s actions – whether it be via a financial report or some other method. The public governance accountability has been a major concern in all societies and civilizations, although there are variations in the criteria, means, and agents of such accountability. Those variations are based on the nature of the policy ranging from traditional to modern, conservative to liberal, capitalist to

socialist. Even the connotations of accountability often differ among societies depending on their unique socio-historical formations, ideological inclinations, and cultural beliefs (Haque, 1994).

Accountability of public sector management can be achieved through performance appraisal. Performance appraisal or performance measurement is a management tool to improve the quality of decision making and accountability (Bastian, 2006). Through performance measurement, the decision making will be more reasonable and accountable. Measuring performance must be associated Accountability of public sector management can be achieved through performance appraisal. Performance appraisal or performance measurement is a management tool to improve the quality of decision making and accountability (Bastian, 2006). Through performance measurement, the decision making will be more reasonable and accountable. Measuring performance must be associated

be done for the future success. By knowing the importance of public sector accountability on performance measurement, it creates the motivation for researcher to explore in more detail.

An important insight from institutional theory is that performance may be viewed as institutionally de fined, as institutional factors determine the interests being pursued by organizations (Scott 1987 in Brignall and Modell 2000). More succinctly, the definition of performance are as follow:

Generally, performance will be de fined narrowly to the extent that (a) elites dominate an organization, (b) a high degree of professionalization exists, and (c) the organization performs a technical function, outputs of which are measurable. Performance will be construed much more broadly, by contrast, to the extent that (a) the norm of participative democratic governance operates, sometimes in the formal structure or rules of an organization, (b) the interests of multiple constituencies are given recognition, and (c) the organization’s function is non-technical and outputs elude measurement. Meyer and Zucker (1989, p. 111 in Brignall and Modell 2000)

In addition to these determinants of what is regarded as ‘good’ performance, it is important to consider the dependence of the organization on different groups of stakeholders. Even if the existence of multiple and con flicting interests increases the need to balance these by establishing some trade-off between them, organizational dependence on a particular constituency reduces the likelihood of balance (Oliver, 1991).

The purpose of this research is in order to know how the evaluation process is done in the public area of City Walk that was implemented by Planology and

Urban Official of Surakarta (Dinas Tata Ruang dan Perkotaan). The end of evaluation on public sector is to determine the continued action in order to give the satisfaction to different groups of stakeholders related to the public facilities or public programs. Besides that, the evaluation on the such programs will give the public trust about the accountability governance.

The City Walk Program is selected for several reasons. First, City Walk is one of the strategic programs that implemented by the government of Surakarta. In developing the quality of urban space, strategic area is the vital thing. The space area is formed by a series of components or characteristics of the region. It becomes an important focus in the development of urban space, particularly in supporting the living space for its citizens (Pemkot, 2006). Surakarta city has a strategic area that potential for social resources, cultural, and economic backgrounds.

Second, the City Walk development is to increase productivity of regional potential sectors that leads to an optimal interaction between sectors. It is inevitable that before developing City Walk along the main road of Slamet Riyadi, the presence of sidewalk vendors looked disorganized and irregular. Moreover, the view along the main road was very crowded since motorcycles passed the pedestrian areas. Currently, such conditions have changed with the completion of City Walk. The clean, beautiful and comfortable situations after the presence of City Walk are available. The sidewalk vendors along the main roads are well arranged, the passing motorcycles are limited in specific area, and the pedestrian Second, the City Walk development is to increase productivity of regional potential sectors that leads to an optimal interaction between sectors. It is inevitable that before developing City Walk along the main road of Slamet Riyadi, the presence of sidewalk vendors looked disorganized and irregular. Moreover, the view along the main road was very crowded since motorcycles passed the pedestrian areas. Currently, such conditions have changed with the completion of City Walk. The clean, beautiful and comfortable situations after the presence of City Walk are available. The sidewalk vendors along the main roads are well arranged, the passing motorcycles are limited in specific area, and the pedestrian

Related to the importance of accountability in public sector management, it is necessary to evaluate the City Walk program that was announced by the Local Government of Surakarta. Evaluation of the program need to do even there was no problem on its implementation. Evaluation can be done independently in managing the program as a part of internal management process. Furthermore, evaluation is a periodic assessment involving the exercise of judgement of policy or program implementation by reference to predefined performance criteria. The approach to enhance the public sector accountability that used in this research is the Value For Money concept. More over until this time the Local Government of Surakarta has not run such evaluation yet. According to Central Expenditure Evaluation Unit (2007), the Government’s Value For Money is part of a framework introduced to secure improved Value For Money from public expenditure. The objectives of the Value For Money are to analyze exchequer spending in a systematic manner and to provide a basis on which more informed decisions can be made on priorities within and between programs (CEEU, 2007).

Value For Money is one of a range of modernization initiatives aimed at moving public sector management away from the traditional focus on inputs to concentrate on the achievement of results. Grimsey and Lewis (2005) stated that Value For Money is de fined as ‘the optimum combination of whole life cost and quality (or fitness for purpose) to meet the user’s requirement’, is that

1. Projects be awarded in a competitive environment;

2. Economic appraisal techniques, including proper appreciation of risk, be rigorously applied, and that risk is allocated between the public and private sectors so that the expected Value For Money is maximized;

3. Comparisons between publicly and privately financed options be fair, realistic and comprehensive. These considerations are normally examined on a case-by-case basis that risk allocation depends on each project’s risk pro file, while the competitiveness will vary from project to project and from one time to another.

Doing some evaluation by using Value For Money concept on the public sector is rarely done. It is not commonly used as tools to measure the performance. That is why the researcher chooses the topic, besides it seldom to be examined by other, its one of new topic and much important idea on the public sector. Moreover by this research will give another freshly atmosphere on performance measurement on public sector.

The researcher unfortunately failed to get more detail application on how Value For Money concept works in public sector specially in Indonesia. There are some limited research that really related to Value For Money concept. Some previous research used are conducted by Solikhin (2006), Bourn (2000), ANAO (2004), Mardiasmo (2005). The common tools in measuring the performance on public sector are Balance Scorecard (Mardiasmo, 2005), SWOT Analysis and also Cost Benefit Analysis. Even there some limited reference about the implementation of Value For Money concept, the researcher still try to explore how exactly Value For Money will work on public sector.

B. Problem Statements

Related the importance of program evaluation to create accountability, there are some problems that need to be disclosed and solved related to City Walk Program. Some problems that would be disclosed and solved are

1. How is the evaluation of City Walk Program done based on the Value For Money concepts?

2. What are the implications of the City Walk Program to society?

C. Research Objectives

In line with the problem statements, there are two objectives of this research. The objectives are

1. To examine how the evaluation of City Walk Program is done based on the Value For Money concepts.

2. To examine the implication of the City Walk Program to society.

D. Research Contributions

There are some contributions for local governments and literature enrichment taken from this research. Those contributions are as follow

1. It describes the implementation of Value For Money concept in public sector area, especially in Local Government of Surakarta.

2. It enriches the literature of developmental study related to the performance measure using Value For Money concept.

CHAPTER II LITERATURE REVIEW

Chapter II reveals literature review, and conceptual schema in this research. Literature review explains about previous research, New Public Management, Performance Measurement, Value For Money, City Walk Program, and Framework. The detail of this chapter is explained in the following section:

B. Literature Review

1. Previous research

There are some researchers like Solikhin (2006), Mardiasmo (2005), Bourn (2000), ANAO (2004) studied the performance measurement on public sector as well as Value For Money. Solikhin (2006) has done some exploratory research on how important for government to make a financial report and performance report as stated on PP No. 8 year 2006. Before the enactment of Government Regulation Number 8/2006, Accountability Report and Financial Report are disclosed separately. In order to implement performance budgeting, it is mandatory to combine governmental accounting system and performance management system. Since those systems are in the early step of development in Indonesia, such combination resulted into several problems. This research elaborate problems of current system and try to offer recommendations derived from the literature reviews.

Solikhin (2006) concludes that the reports they made has several main purposes, they are

1) Creating the accountability of government practice and being responsive to the society ideas.

2) Creating the transparency.

3) Creating the participative society.

4) Creating the society trust to government.

The other research related to performance measurement on public sector is done by Mardiasmo (2005). He said that currently, the regional autonomy and fiscal decentralization in Indonesia has evolved to reflect its response to increasing demand in good governance. The development and implementation of public sector accounting as a tool to create transparency and public accountability The other research related to performance measurement on public sector is done by Mardiasmo (2005). He said that currently, the regional autonomy and fiscal decentralization in Indonesia has evolved to reflect its response to increasing demand in good governance. The development and implementation of public sector accounting as a tool to create transparency and public accountability

Mardiasmo (2005) reveals also about the role of management accounting in public sector, which has evolved from traditional administration to New Public Management (NPM), incorporating Public Expenditure Management (PEM) to ensure correct implementation. This paper also recognizes the significant trust from society and investors towards the government in the accountability sense. Thus concepts such as dimensions of public accountability, private and public sector risk management, are strengthening the Value For Money (VFM) audit, and dual horizontal accountability is discussed in depth.

A recognized tool within the paper is the need to develop a measurement system based on a balanced scorecard specifically designed for the public sector that is relevant to accountability and the NPM. As debates have existed in what governments should incorporate from accounting techniques, this paper analyses the change in public sector financial accounting, management accounting, financial statements as a tool towards public accountability, and the importance of government audit to ensure Indonesia’s path in improving the implementation of good governance.

The third researcher studied about Value For Money is John Bourn. Bourn (2000) made some observations and evaluations of VFM audit in some countries. He said that auditors focused on the reliability of processes and procedures. This The third researcher studied about Value For Money is John Bourn. Bourn (2000) made some observations and evaluations of VFM audit in some countries. He said that auditors focused on the reliability of processes and procedures. This

Ultimately, Value For Money depends on the outputs and outcomes – improvements in health care, better education, more reliable transport systems – delivered by public money. This is what parliament and taxpayers are most interested in. The Modernizing Government program in the UK is encouraging departments to give much more attention to longer term sustainable outcomes in their development of policies and programs. The VFM examinations also now focus on outputs and outcomes rather than the processes involved in delivering them. This does not mean that they will not assess whether there is scope to improve procedures but our starting point is intended outputs rather than the delivery process.

Another research about implementation of Value For Money is conducted by Australian National Audit Office (ANAO) in 2004. The independent auditor has tried to conduct performance audit using the Value For Money approach in some Australian National Audit Office. In considering “Value For Money” they focused on the Performance Management Principles and on the following criteria

1). Effectiveness - the extent to which the Performance Audit Services Group (PASG) reviews achieve the desired outcomes. 2). Efficiency - the extent to which the PASG maximizes the outputs produced from a given set of inputs or minimizes the input cost of producing a given set of outputs.

3). Economy - whether the PASG provides input in the most economic manner.

The approach of the performance audit used by Australian National Audit Office (2004) included the following key steps, they are

1). Identifying the key stakeholders, discussing the approach, deciding the timing of review and agreeing on specifics of the review. 2). Agreeing a definition of what constitutes “Value For Money”. 3). Reviewing where the context of “Value For Money” fits within the

overall objectives of the ANAO. 4). Reviewing the mechanisms to measure “Value For Money”. 5). Reviewing the role of the JCPAA, parliamentarians and agencies in the

assessment of the provision of “Value For Money”. 6). Reviewing the background information around the selection and conduct of performance audits within the ANAO.

The conclusion of this research is these review indicated that the ANAO’s over riding objective through the conduct of a performance audit. The Performance Audit Services Group (PASG) seeks to achieve this in a cooperative fashion with the bodies being audited and welcomes suggestions and comments at any time. The ANAO facilitates this interaction through regular meetings during audits, post-audit surveys for a significant cross-section, and consultation on audit programs.

2. New Public Management (NPM)

NPM shifts the emphasis from process accountability towards a greater element of accountability for results (Hood, 1995). Although the term NPM appeared recently, it is actually predicated on a set of ideas that have been in public administration since its earliest beginnings (Hood, 1995). While there is considerable diversity about the specific components and purposes of NPM across jurisdictions (Pollitt and Bouckaert, 2000), it is generally seen as advocating that governmental organizations be split into business units and assigned performance targets for which managers are held accountable.

Common (1998) stated that it is possible that governments are able to put an ideological gloss on NPM strategies to suit local political agendas. It appears that Common (1998) stated that it is possible that governments are able to put an ideological gloss on NPM strategies to suit local political agendas. It appears that

Hood (1995) argued that over the 1980s there was a move in a number of OECD countries towards the NPM. Central to this change in modes of public management was a shift towards “accountingization” This development can be claimed to be part of a broader shift in received doctrines of public accountability and public administration At the same time, accounting changes formed an important part of the assault on the progressive-era models of public accountability. NPM involved a different conception of public accountability, with different patterns of trust and distrust and hence

a different style of accountingization. The basis of NPM lay in reversing the two cardinal doctrines of PPA; that is, lessening or removing differences between the public and the private sector and shifting the emphasis from process accountability towards a greater element of accountability in terms of results. Accounting was to be a key element in this new conception of accountability, since it reflected high trust in the market and private business methods (no longer to be equated with organized crime) and low trust in public servants and professionals (now seen as budget-maximizing bureaucrats rather than Jesuitical ascetics), whose activities therefore needed a different style of accountingization. The basis of NPM lay in reversing the two cardinal doctrines of PPA; that is, lessening or removing differences between the public and the private sector and shifting the emphasis from process accountability towards a greater element of accountability in terms of results. Accounting was to be a key element in this new conception of accountability, since it reflected high trust in the market and private business methods (no longer to be equated with organized crime) and low trust in public servants and professionals (now seen as budget-maximizing bureaucrats rather than Jesuitical ascetics), whose activities therefore needed

Most commentators have associated NPM with approximately seven dimensions of change, together with their associated doctrines, and some speculative ideas about their implications for accountingization. The seven elements are as follows:

( 1) A shift towards greater dissemination of public organizations into separately managed “corporatized” units for each public sector “product” (each identified as a separate cost centre, with its own organizational identity in fact if not in law, and greater delegation of resource decisions, in a movement towards “one-line” budgets, mission statements, business plans and managerial autonomy).

(2) A shift towards greater competition both between public sector organizations and between public sector organizations and the private sector.

(3) A move towards greater use within the public sector of management practices which are broadly drawn from the private corporate sector.

(4) A move towards greater stress on discipline and parsimony in resource use and on active search for finding alternative, less (4) A move towards greater stress on discipline and parsimony in resource use and on active search for finding alternative, less

( 5) A move towards more “hunds-on management” (that is, more active control of public organizations by visible top managers wielding discretionary power) as against the traditional one.

(6) A move towards more explicit and measurable (or at least checkable) standards of performance for public sector organizations, in terms of the range, level and content services to

be provided, as against trust in professional standards and expertise across the public sector. (7) Attempts to control public organizations in a more “homeostatic” style according to pre- set output measures (particularly in pay based on job performance rather than rank or educational attainment), rather than by the traditional style of “orders of the day” coming on an ad hoc basis from the top.

There are no systematic cross-national studies showing degrees of variation in public management reform in a robust and reliable way. Although NPM is currently fashionable and generally presented in the government literature as the “one-best way” in governing organizations, generating, amongst other benefits, enhanced accountability. (Osborne and Gaebler, 1992) suggest that it is unclear whether NPM reforms lead to better accountability. Indeed, there is increasing evidence that application of NPM within the public sector has met with limited success (Pollitt and Bouckaert,

2000). Thus, Mintzberg (1996 in Gendron, Cooper, and Townley (2001) argues that there is no universal governance recipe. Each mode of public management has its strengths and weaknesses (Dunleavy and Hood, 1994). Hence, when assessing public-sector management, policy-makers must identify the circumstances under which each mode of public management, and their possible combinations, is likely to work. This should be followed by a careful debate about the nature of the public sector's core competencies and what are the desired outcomes (Dunleavy and Hood, 1994).

3. Performance Measurement at Public Sector

Ghobadian and Ashworth (1994), there is a growing awareness that financial measures are no longer sufficient for planning and control purposes. Decision makers in both the private and public sector need to look beyond financial measures and reporting to the wider perspectives of total performance. This signals a radical shift from treating financial figures as the foundation for performance measurement, to treating them as one among a broader set of measures.

The public sector has not escaped this general trend and has been under pressure to introduce a more comprehensive performance measurement system Ghobadian and Ashworth (1994). Hyndman and Anderson (1991) quote from two Government publications to support this view. They state that the “Financial Management Initiative ”called for “ all managers at all levels in central government to have a clear view of their objectives, and means to assess, and The public sector has not escaped this general trend and has been under pressure to introduce a more comprehensive performance measurement system Ghobadian and Ashworth (1994). Hyndman and Anderson (1991) quote from two Government publications to support this view. They state that the “Financial Management Initiative ”called for “ all managers at all levels in central government to have a clear view of their objectives, and means to assess, and

Currently, there are many governments trying to improve their performance by creating systems to measure and assist them in understanding their public service performance. Public sector performance measurement system is a system that aims to help public managers to assess the strategy achievement through the financials and non financial measurement (Mardiasmo, 2005). Mackay (1998) revealed that the system for monitoring and evaluating public sector performance are used to measure the quantity, quality and target of goods and services output. Moreover, this system is also a tool to help government understand the causal effect of its performance. Mardiasmo (2005:122) says there are three purposes of public sector performance measurement, namely

a. It helps to improve government’s performance and helps to focus on goal congruence.

b. It helps the resources allocation and decision making.

c. It describes public responsibility and improves the communication among government units.

In order to improve the public sector management, the Supreme Audit Institutions has made a standard. The standard is written in ISSAI 100 that reveals the performance audit. The content of ISSAI 100 describes that performance audit In order to improve the public sector management, the Supreme Audit Institutions has made a standard. The standard is written in ISSAI 100 that reveals the performance audit. The content of ISSAI 100 describes that performance audit

a. Audit in economy area examines the administrative activities in accordance with administrative principles and practices, as well as management policies;

b. Audit in efficiency area examines the utilization of human, financial and other resource. It includes the examination of information systems, performance measures and monitoring arrangements;

c. Audit in effectiveness area examines the performance related to the goal achievement of audited entity. It also audits the actual impact of an activity compared to the intended impact.

Performance measurements provide many benefits for public sector. According to the Bastian (2006:275), the benefits of performance measurement are

a. Ensuring the executor to understand its duties.

b. Ensuring that the scheme of performance achievement is agreed by all employees.

c. Monitoring and evaluating the implementation of performance. It can also be used to compare the implementation with the work schemes in order to take action to improve performance.

d. Providing rewards and penalties for performance objective.

e. Using the performance measurement as a communication tool between subordinates and leaders.

f. Examining the problems that occurred in the public sector organization.

g. Ensuring that the objective of decision-making has been taken.

h. Examining the actions to improve the performance of public sector organization.

There are some differences between the benefits of performance measurement according to Bastian (2006) and Mardiasmo (2005). The benefits of implementing performance measurement according to Mardiasmo (2005:122) are

a. Giving the comprehension knowledge related to the management performance measurement.

b. Giving the direction to attain the performance target.

c. Monitoring and evaluating the actual performance.

d. As a basic reason for giving reward and punishment.

e. As a communication tools between super ordinates and sub ordinates.

f. Helping the identification of customer satisfaction.

g. As a guarantee that all decision making are done objectively.

Mainly both two statement are the same, even there are some different impressions. In Bastian views, he adds the benefit on performance measurement are examining the problems and also to examine the improving actions. On the other hand, Mardiasmo says about the satisfaction of customer (Society). On the researcher point of view, the out put of performance measurement on public sector doing by auditor is not an opinion but more in the recommendation on the next action in improvement the programs. So that’s way the researcher agrees with Bastian opinions.

Auditor should not concentrate solely on past criticism in doing its duties. The auditor's conclusions and recommendations are important aspect of the performance audit and, where appropriate, are written as a guide for action. Generally, the recommendations suggest the improvements needed rather than how to achieve the intended performance. In performance audits, the judgments made by auditor will be more subjective since the report does not related directly to financial or other statements. Consequently, the auditor may find that materiality by nature or by context is more important consideration than materiality by amount (ISSAI 400).

4. Value For Money Concept

a. Definition

Value For Money is a basic measurement for the government’s performance. Government’s performance can not be measure only by taking attention to the Value For Money is a basic measurement for the government’s performance. Government’s performance can not be measure only by taking attention to the

VFM reviews the evaluations of major spending programs and other priority areas of government activity. The VFM examination of the programs/areas in question and consider whether or not a robust rationale exists for the allocation of public monies. Where such rationale exists, VFM reviews will examine alternative (more efficient or effective) means of delivery without detracting from the quality of the results and impacts achieved. VFM reviews also propose arrangements for the better management of the program into the future (VFM Guidance, 2007).

The VFM reviews contain elements of process, result and impact evaluation. VFM reviews may be carried out at three basic levels (VFM Guidance, 2007) 1). Policy – e.g. Cross Departmental Review on Road Safety (lead Department, Transport); Review of Social Welfare Payments to Orphans (lead Department, Social and Family Affairs);

2). Program – e.g. Review of IDA Property Portfolio (lead Department, Enterprise, Trade and Employment); Compensatory Allowance Scheme (lead Department, Agriculture and Food);

3). Project or Activity – e.g. the Operation and Management of IT Systems in the State Laboratory; BSE Eradication (lead Department, Agriculture and Food).

According to the Government Auditing Standards (GAS), the concept of performance audit is included in the article no. 1.25 to article no. 1.29. Explicitly, these articles refer to the concept of Value For Money. The concept of Value For Money is derived from the attainment on economy, efficiency and affectivity in managing the government practices. In order to measure the performance based on VFM objectively, it needs some performance indicators. Performance indicators for VFM divided into two parts; they are cost allocation indicator (economy and efficiency) and service quality indicator (affectivity). The economy principle means using input with a certain quality and quantity in the lowest price. This principle is related to how far public sector organization can minimize input resources that are used by avoiding extravagant expenditure. Efficiency principle means the achievement of maximum output with certain input or the use of the lowest input to achieve certain output. Effectiveness principle is comparison between the achievements level with the target. The model below explained how the VFM elements are related each other:

Source: Mardiasmo (2005: 135) Figure 1. Value For Money Elements

The examples of concepts used by Mardiasmo in passing very aesthetically applied into the realm of the private sector. However, these concepts can be applied in the realm of the public sector. VFM elements of economy, efficiency and effectiveness look at this concept drawings. In this model, Mardiasmo explains more about the example components of economy, efficiency and effectiveness. In line with the definition of VFM as mentioned in GAS, the economic components are closely related to the cost allocation in obtaining the input. Another, the component of efficiency are related on how the used of input meet with its capacity (Efficiency 1) or how the input used will give the certain out put (Efficiency 2). Finally, on effectiveness components are about how the out The examples of concepts used by Mardiasmo in passing very aesthetically applied into the realm of the private sector. However, these concepts can be applied in the realm of the public sector. VFM elements of economy, efficiency and effectiveness look at this concept drawings. In this model, Mardiasmo explains more about the example components of economy, efficiency and effectiveness. In line with the definition of VFM as mentioned in GAS, the economic components are closely related to the cost allocation in obtaining the input. Another, the component of efficiency are related on how the used of input meet with its capacity (Efficiency 1) or how the input used will give the certain out put (Efficiency 2). Finally, on effectiveness components are about how the out

b. Differences between Audit and Evaluation