Empower state audit agency

By Vincent Lingga

JAKARTA (JP): The government's commitment to improve the efficiency and effectiveness of its budget management and its financial accountability remains largely a verbal pledge, as shown by the findings made by the Supreme Audit Agency (BPK).

The report on BPK's audit of the 1999/2000 budget and the financial accounts of several state companies conducted in the first semester of this year discovered 1,933 instances of deviations from budgetary rules and irregularities in financial management, involving Rp 3.3 trillion (US$371 million).

The auditors also found irregularities involving over Rp 1 trillion in potential losses to the state.

But what makes the prospect for a higher standard of accountability look even poorer is the fact that most of the ministries and government institutions that were audited do not see the deviations and irregularities as serious wrongdoings.

Budget Director General Anshari Ritonga said the irregularities could not immediately be blamed on the audited institutions, further arguing that the deviations did not automatically cause state losses.

Ritonga even implicitly admitted that no significant progress had been made regarding BPK's recommendations for better financial accountability in the public sector.

"I have not yet read the audit report. But I assume the findings were very much similar to BPK's previous audits, namely deviations from rules or breaches of procedure that did not necessarily inflict losses on the state," Ritonga said, in commenting on the BPK report to the House of Representatives last week.

The Ministry of Mines and Energy, where BPK found irregularities involving almost Rp 79 billion, said the BPK report to the House was outdated because it did not include "the clarifications and correction we made immediately at a follow-up meeting with BPK auditors."

"The clarifications and correction we made have reduced the amount involved in what BPK considered irregularities to a mere Rp 150 million. We are now further investigating these few cases of deviations," Minister Purnomo Yusgiantoro added.

According to Purnomo, projects under construction often cannot fully meet budgetary rules or procedures due to unexpected problems in the field, such as delays in the delivery of materials or equipment, or land acquisition.

The question now is: Does the Supreme Audit Agency, the sole agency mandated by the Constitution to conduct an independent audit on state finances, and the government institutions, speak a different language or use different terms of reference in reading the audit findings?

"Not at all," asserted BPK Chairman Satrio Budihardjo 'Billy' Joedono.

"We strictly apply the State Treasury Law and other regulations, rulings and presidential decrees on budget management and financial accounts," Joedono said in an interview.

The problem, according to him, is that the government's tolerance of breaches of rules or deviations from regulations seems to have been stretched to such a level that things, which cannot immediately be classified as malfeasance, can simply be justified post hoc.

"But as an auditor that wants to build a high standard of accountability we always insist on zero tolerance on any aberrations or deviations from rules, even though they do not immediately inflict losses. We always check what was done against what is required by the law or regulations", Joedono added.

"After all," he said, "good discipline starts with strict adherence to the rules of the game, to every provision of the law, however petty it might seem to be."

The fact that the Agency auditors often find, time and again, similar breaches of rules, shows that most government institutions seem ignorant of BPK audit findings and recommendations.

Even the House itself rarely uses BPK's audit reports as a reference to exercise its control over the government.

"The bulky report (consisting of hundreds of pages) usually ends up in the House archive immediately after delivery by the BPK chairman," Benny Pasaribu, Chairman of House Commission IX for state finances and banking, said.

Pasaribu added that if House members thoroughly read the BPK reports they could be more informed and focused in the exercise of their oversight of the various ministries.

But the technical jargon and such vague or unintelligible phrases in the report such as "deviations from austerity and budget efficiency", "deviations from order and discipline in law enforcement" or "deviations from the effectiveness of financial management" do not help attract the attention of House members.

Obscure phrases even make the report boring and hard to digest.

Joedono argued that the Audit Agency could not use bombastic or pompous words or make wild accusations simply to attract the attention of House members, otherwise BPK or its auditors might end up in messy litigation, on charges of defamation.

"After all, we are not a judicial agency that makes investigation and formulates charges.

"But we have made some improvements in our reports to make them much easier to comprehend. The reports are now supplemented by executive summaries on the various sectors that were audited, and each of the House Commissions was given the summary that covers the sectors under its oversight," he said.

The main problem seems to be rooted in the lack of enforcement power and follow-up mechanisms of BPK. Moreover, there is a lack of clarity in the mandate, scope, role and degree of independence of BPK, the Development Finance Comptroller (BPKP) and the inspectorate generals, which serve as internal auditors at ministries.

There is no systematic follow-up mechanism to ensure implementation of audit findings, and BPK audit findings are not made available to the general public.

That is because the Constitution's provision that requires BPK to report its audit results to the House is interpreted narrowly and rigidly as if to mean that only the House can have access to its audit findings.

After the establishment of BPKP in 1983, the government did not pay much attention to the role of BPK, as evidenced by the meager resources allocated to the agency to develop its human resources.

"Some institutions sometimes object to giving access to our auditors, arguing that they have been audited by BPKP. And we can do nothing about it," Joedono said.

Until now, he added, the Audit Agency, like other state institutions, remains subject to zero growth in new recruitment, despite the extension of its auditing work to include individual income tax revenues and state banks, which were previously inaccessible to BPK auditors.

There is also an urgent need to review the internal audit framework of the government and to rationalize the roles and responsibilities of both BPK and BPKP.

Joedono acknowledged the work of both audit agencies often overlapped, causing inefficiency.

Joedono confirmed that the government had recently introduced accounting standards for public accounts, but it would likely take some time before the accounting system in the public sector was fully integrated.

No wonder, therefore, that the government is not yet able to produce a consolidated report that captures all budgetary and non-budgetary transactions as well as state companies' and local administrations' finances.

This certainly inhibits effective monitoring of government financial transactions.

"The annual budget implementation report to the House consists only of a cash flow statement. It is not a balance sheet in the real sense," Joedono asserted.

Worse still, the general public has never been informed that even this cash flow statement rarely gains a clean bill of health from BPK.

"We did not give any opinion regarding the government budget report to the House for fiscal year 1999/2000 (ended in March, 2000)," Joedono disclosed.

Needless to say that catchwords such as "transparency and accountability" that the government often pronounces as the basic principle of good governance require appropriate institutions and public reporting requirements and a central agency, which can enforce fiscal discipline in a transparent and accountable manner.

Enhanced transparency in the reporting of the government's financial position also requires an appropriate integrated government accounting system that is not yet in place in the country.

The House must ensure that BPK, as the sole independent audit agency of the government, is not only maintained but strengthened.

Proper exercise by the House of its oversight role over the work of BPK and its audit findings and implementation of Bepeka recommendations would go a long way to curbing malfeasance in the public sector.

The writer is a senior editor at The Jakarta Post.