BPK aims to boost presence in newly empowered provinces

BPK aims to boost presence in newly empowered provinces

Evi Mariani, The Jakarta Post, Jakarta

The fiscal decentralization program introduced more than two
years ago has provided regional administrations with greater
access to various sources of funds, but there are fears of
rampant corruption or irregularities without the presence of an
effective audit system.

The Supreme Audit Agency (BPK) is expected to play a key role
in ensuring transparency and good governance in the management of
funds and assets by regional administrations.

Farzana Ahmed, a financial management specialist at the
Indonesia branch of the Asian Development Bank (ADB), said that
improvement in regional audits was extremely urgent, because a
lot a lot of money was being handled at the regional level.

"There has to be a role expansion of the BPK, but the question
is how to do so in a cost-effective manner," she told The Jakarta
Post last week.

The BPK is planning to boost its regional presence by opening
offices in the country's 30 provinces. In order to complete the
program by 2007 -- as stipulated under last year's amendment to
the 1945 Constitution -- the agency will need to recruit a huge
number of auditors.

BPK senior auditor Soegiharto said there were 11,570 audit
objects at the regional level that had to be checked by the
agency.

However, BPK's reports show that the office can only complete
about 350 objects on average, or about 3 percent of the total
number of audit objects.

"We only have seven representative offices in provinces with
only 656 auditors and a limited budget to audit those 11,570
objects," he told The Jakarta Post on Thursday at his office.

It has been suggested that the BPK recruit auditors from the
Development Finance Comptroller (BPKP), which already has a
strong presence in provinces and regencies.

The BPKP was introduced by former president Soeharto in 1983
with the same audit task as the BPK's, but its status has never
been clear. While it is an internal auditor, its office remains
outside government institutions -- which already have their own
internal audit divisions, known as the inspector general. It is
also not an independent external auditor like the BPK, because it
reports directly to the President. With such a confusing audit
structure and overlapping between the BPK and the BPKP, there
have been calls for the government to dissolve the latter.

The decentralization program allows regional governments to
raise local taxes and obtain higher portion of revenue from local
natural resources.

Under the recently approved State Finance Law, the BPK will
also have a mandate to audit the budget of local governments and
audit companies owned by the local governments.

To help address the problem of poor audit capability in the
regions, the ADB has planned around US$700,000 worth of technical
assistance.

"The purpose of the grant is to assist the government in
developing a clear picture on how the audit institutions should
be structured and to develop a long-term plan," she said.

"We did an internal survey and we found that at the regional
level, (there's a lack of) qualified financial people," she said.
"We hope the technical assistance would provide the government
with some alternatives," she said.

She added that the technical assistance would come up with
some conclusions next year.

Box

BPK audit findings
(percentage of deviations)
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2001 2002

Semester II Semester I

Central government 13.1 16.1
Routine spending 20.5 9.8
Development spending 6.4 15.6

Province 3.7 27.9
Routine 1.8 8.1
Development 5.1 30.7

District/Cities 12.7 21.8
Routine 13.8 21.6
Development 11.6 22.0
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Source: BPK reports, February 2003