Introduction
Indonesia that has 33 provinces, 399 regencies (Kabupaten) and 98 municipalities (Kota) was implementing decentralization of government since the reform era. By this process, the local people expect will get higher benefit from their local administration through well managed projects and programs, also accountable, transparent, efficient and effective conduct of its financial system. The local stakeholders also hope responsiveness from their local government to fulfill their aspiration and real interests.
However, the reality in the ground is opposite with the public expectations. The level of selective governance indicators situated Indonesia in relatively low amongst countries in the world in the score of voice and accountability and rule of law (Kim, 2009, p.331). Klitgaard (1988 cited in Larmour, 2007, p.351) stated that corruption is happening because disappearance of accountability when officials have monopolies of power and high discretion to action. Furthermore, Larmour (2007, p.350) argued that corruption caused by bad individual, bad system and some combination.
Moreover, Philp (1997, cited in Hindes 2004, p.4) stated that “…. the identification of corruption requires a clear understanding of the public interest, something that is notoriously open to dispute”. Democratization in local government level cannot decrease significantly corruption, and prevent local government to misappropriate the fund spending. In 2010, Indonesia is still situated by Transparency International’s global corruption barometer as 110th most corrupt country in the world with score of corruption perception index of 2.8.
Most of corruption in local government occurred both in budget acquisition and spending, as continuing of the New Order inappropriate habit. Hence, the government cannot implement public sector activities efficiently and effectively. The misappropriation is still constant with around 30 per cent of budget spending corrupted by government employee. The average higher price 30 per cent acquisition of goods and services from paper to personal computer is likely confirms the thesis. Furthermore, their outcomes also cannot be measured and comparable with other agencies.
It is important to shape national integrity system to prevent corruption and other misappropriation in government bodies (Larmour, 2007, p.352). In this essay I argued that conducting performance audit by The Indonesian Board of Audit (BPK) is vital mechanism to reduce corruption and also other misconduct, lack of accountability and low of quality of services provided by the government agencies.
Performance audit and its objectives
Indonesian Board of Audit as an independent external government audit agency has a constitutional mandate to boost transparency and accountability in government budgets acquisition and spending. Through the fourth amendment constitution, BPK has been revitalized as the only institution that has a burden to audit the government’s budget acquisition and spending. However, the scope of BPK’s audit include national budget (APBN), state owned enterprise (BUMN), regional budget (APBD), regional owned enterprise (BUMD), Central Bank (BI), public service board (BLU) and state owned legal board (BHMN).
While Corruption Eradication Commission (KPK) is focusing their effort to combat corruption, BPK more focus on auditing to prevent corruption and to encourage good internal control system in government agency. To implement its constitutional burden, previously BPK has been conducting financial and compliant audit that is completely conducted since 2007. BPK providing audit report that consist of opinion on financial statement and recommendation to many stakeholders such as Central Parliament (DPR), Regional Representatives Board (DPD), Regional Parliament (DPRD) and the public in general (BPK, 2006).
More than six decades, BPK tends to more focusing its activities on financial audit rather than performance audit or value for money audit and special purpose audit. The hegemony by New Order regime affected lack of human resources and budget that constraints BPK to fulfill its mandate. However, the revitalization of The BPK process from 2004 to 2009 has been reducing this limitation, including having representatives offices in 33 provinces from 8 before. The number of human resources and budget is also increasing significantly since the development (BPK, 2006).
Despite inefficiency and ineffectiveness has been detected since the New Order regime, there is no significant breakthrough to change reality. Performance audit will assess the economy, efficiency and effectiveness of government programs and projects related to input, output and outcome. It is the right time to conduct performance audit to assure the achievement of good governance.
In the New Order administration, the government employees were kept in big number, but with a low productivity. They cannot deliver good quality of goods and services and tend to corrupt. Most of them doing administration job, however, in the same time occurred lack of human resources in the field such as health, education and construction. Most of their activities are inefficient and the bad system is frustrating among employee besides lack of management in human knowledge.
For years, Indonesian government performance is not measured, as a result there are no responsibility, competition and benchmarking among government officer. Implementing New Public Management (NPM) approach is important because there is higher expectation from society to get good quality of service and to avoid corruption. The procurement system for instance is corrupt, so the government has to spend higher price than private sector does in getting the same good and services. It is because the procurement process in most government institution is not transparent and not based on competitive market mechanism that prevents the government to get the lowest price.
Hughes (2003, p.44) stated that New Public Management as “… it represent a major shift from the traditional public administration with the greater attention now being paid to the achievement of result and the personal responsibility of managers”. Moreover, he also argued that NPM tends to encourage organizations and personal more flexible, clearly setting their objectives and measured its performance through some indicators. Implementing New Public Management, despite a lot of critiques on it, is important to leverage the performance of government (Pollitt, cited in McLaughlin et. al. 2002, p.275). By reducing cost and enhancing better work, actually Indonesian government is re-engineering its system to a better condition.
The BPK can monitor and boost NPM implementation by conducting performance audit. While financial audit findings and recommendations will encourage the government to prevent irregularities, improve its financial management and internal control system, performance audit and assurance review will encourage the government to improve performance of the administration, by higher its effectiveness and efficiency. Ives (1996, p.29) argued that reform in government will leads to the issues such as more streamline and flexible staffing, more rational means for distribution of resources, more responsive and accountable to political leader, and corporatization of major activities including market mechanism in procurement process to reduce corruption.
Reforming closed, hierarchical and unaccountable administration by implementing performance audit is important to leverage public support. Performance audit as an independent, systematic and objective audit to examine the operation of an institution resulted in opinion whether the audited entities has been operate in economy, efficient and effective mechanism, whether their internal procedure to achieve that goals is adequate, and finally how to improve the management practice. Performance audit related topics such as, risk management and assessment, efficiency and effectiveness the use of financial and human resources, information system, project management, weaknesses in particular control system and monitoring approach (ANAO 2010. pp.30-31). Performance audit is like “candle in the dark to help reaching sunshine in the end of tunnel”.
Even though, NPM implementation is only part of administration reform in developing countries, furthermore, Polidano and Hulme (1999, p.124) stated that there are other major part such as “capacity building, controlling corruption, political decentralization and local empowerment”. Some of parts reform has been conducting by BPK, another part is conducting by other institution, and the factor like capacity building and controlling corruption could be maintained by performance audit and cooperation with internal control officers (APIP).
The challenges and problem solving
However, there are challenges related performance audit implementation such as lack of benchmarking, availability of standard, procedure, best practice guide and other practical guidance. Hence, BPK should develop such standards, procedure and guidance related performance audit implementation, besides arrange its strategic planning to implement performance audit.
Audited entities cannot avoid performance audit by BPK, since as an external independent government auditor BPK has constitutional burden to conduct auditing, including performance audit. There are no law barrier to implement performance audit, because the Indonesian Board of Audit act 2006, State Finance act 2003 and Auditing act 2004, has been given the BPK chance to conduct performance audit.
Any obstacles may come from harmonizing with internal control officers (APIP) in local government (Bawasda) and central government (BPKP) to avoid overlapping of duty. Moreover, these internal control bodies can initiate and enhance implementation of reform agenda in many government agencies. However, the other problem is these internal control institution cannot avoid intervention from their supreme leader.
In addition, to raise the capacity building of the BPK, it is important to get transfer knowledge from other audit institution that for long period has been implementing performance auditing. As a member of international community such as Asian Organization of Supreme Audit Institutions (ASOSAI) and International Organization of Supreme Audit Institutions (INTOSAI), BPK can ask assistance from other supreme audit institution such as Australian National Audit Office (ANAO) by training or internships its auditor.
Prior to the broad scope of affecting program, BPK should secure strong support from its member of board, and also any means of other stakeholder. To start the program, BPK can focus on certain object of audit entities as a pilot project. If the pilot project is successful, it can be broader to all of BPK audit objects. The BPK should also implement performance audit program through ‘leads by example’ to boost its legitimacy (Andrews, 2008, p.240). Before implemented to other audit entities, BPK should achieve high quality of performance, such as by showing high opinion from peer review by other county’s supreme audit board that member of International Organization of Supreme Audit Institutions (INTOSAI).
This program also must involved many donor institution such as The IMF, World Bank, European Union, and Ausaids to fund and assist the program. These international financial institutions and donors countries involvement must be managed to avoid overlap role, different perspectives, different agendas and lack of understanding to program (Polidano and Hulme 1999, p.129). Besides harmonizing donors countries, Indonesia should also convinced them about seriousness, focuses and high sense of ownership to succeed the effort.
Conclusions
Indonesian government is necessarily to conducting performance audit to boost the level of accountability in many government institutions especially in local government. There are many obstacles to implement this type of auditing, since there are many internal control institutions in central and local government that should be harmonizing, potential opposition from audited entities, also the lack of model, standard and benchmark.
To solve this challenge, BPK should complete the standards needed, pilot projecting and enhance its human resources to conduct this new type of audit. Because, the ultimate goals of conducting performance audit is boosting accountability, transparency, reducing corruption in government body and achieving good governance to fulfill stakeholder expectation.
References:
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__________________, An Extract of The Auditor-General Act 1997, Canberra.
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