Auditing state accounts

Auditing state accounts

The four-day government conference on the auditing of state financial
accounts which opened on Thursday has disclosed the enormous
difficulties encountered by the Supreme Audit Agency (BPK) in properly
executing its tasks and the inadequacy of the financial accountability
of the various government agencies. BPK's difficulties and constraints
seemed to have been caused mainly by the inadequate legislation
regarding its audit authority and function. But what makes the
government financial accountability seemingly questionable is the fact
that the audit of the state financial accounts has been based largely on
the standards set by the government itself.

Therefore, as BPK board member Gandhi observed at the conference, it
would be understandable if many doubted the objectivity of the audit
reports because the audit standards were set by the party being audited
(the government) itself. The quality of the government's accountability
would not seem so questionable if the BPK, which is constitutionally
supposed to be on an equal footing with the government, were able to
execute its audit authority properly.

However, as discussions at the conference showed, the power of the
BPK in auditing the government accounts has been so limited that we get
the impression that the Supreme Audit Agency is actually supreme only in
a definitional sense. And, upon a closer look, we become aware that it
exhibits an extreme lack of substance.

That is really worrisome because the BPK, as stipulated in the
Constitution, is responsible for auditing the financial accounts of the
central and provincial governments and state companies. The House of
Representatives also depends on the BPK-audited reports for forming its
opinions and making its decisions on the annual state budget accounts.

Of course, auditing is not a goal in itself, but is merely a means
for improving effectiveness and efficiency in achieving prescribed
goals. Nonetheless, high-quality auditing is required to enforce good
accountability. Further down the line, the quality of audits is
determined largely by the accounting and auditing standards that are
suitably designed for the public sector financial accounts.

Gandhi also revealed that the BPK could perform only financial audits
and that they related to conformity with laws and regulations. Another
more important aspect -- the operational audit -- to determine the
effectiveness and efficiency with which the government uses its
resources cannot be done due to the absence of standard government
accounting principles and uniform standards for the auditing of
government financial accounts. Therefore, BPK cannot declare any
opinions on the financial accounts either of the various government
agencies or the government as a whole (state budget accounts).

It is encouraging, though, to learn from the conference that the BPK
is finalizing new standards for the auditing of government financial
accounts. Because the standards are being formulated by BPK as a state
agency whose constitutional position is equal to the government itself
we are confident that the standards will enhance an objective audit of
the government accounts and will improve the accountability on the part
of the government. But we also realize that the standards themselves
will not mean much if they are not fully enforced with the full support
of the government. Likewise, the willingness of the government is
crucial for making the much-needed amendments to the 1973 law on
BPK's role and function possible.

The legislation should indeed be adjusted because the BPK's task will
become increasingly challenging as the size and complexity of government
transactions increase and new forms of revenues and new categories of
public sector expenditures emerge.