New accounting standard may still leave doubts

Sandy Darmosumarto, The Jakarta Post, Jakarta

Supreme Audit Agency (BPK) Chairman Satrio Budihardjo (Billy) Joedono said on Friday the new state accounting standard to be implemented in all state-related institutions nationwide in 2005 will not guarantee that auditors will clear financial report disclaimers.

Billy explained that the disclaimers were attached to state budgets in past years during discussions on the new accounting standard, which is currently being drafted by the agency and the finance ministry.

He said, "a disclaimer means the auditor has no basis on which to declare that the figures presented in budgets are accurate.

"Over the past four years the agency has not been convinced of the numbers reported by the government. We could not affirm whether state transactions were conducted in an appropriate way."

Billy added that despite the new standard, it would still be possible for the agency to attach disclaimers to any budget.

BPK noted that there are two reasons why BPK would attach a disclaimer. One is the effect of different accounting systems adopted by different government institutions. Another is an error in calculations.

A disclaimer would be attached based on whether or not the agency felt that a particular state institution has applied the new mechanism to check the accuracy of the reported state financial balance and assets owned by the government.

Under the current standard, "all expenditure for fixed assets such as buildings is considered lost spending," stated Billy.

This results in a distorted value for state inventory. On the contrary, the new standard, when implemented across the country, will have new asset measurement mechanisms that allow the agency to more accurately value assets, including buildings and foreign currency.

Once the new standard comes into effect, "there will not be an inventory of the state's wealth; instead, there will just be a list of the government's assets," stated Billy. "These include banks, fixed and variable assets, claims, savings, cash, and banks." why is banks mentioned twice?

Additionally, Billy said, "the problem lies in the government's failure to follow a standard that it ought to use in calculating state budgets.

"Government financial reports do not exist. Instead, what exists now are calculations on state budget," stated Billy.

The current state accounting practices utilize a single-entry method, not double-entry as planned in the new standard. The double-entry method will resemble the financial reports produced by private companies, in which a single transaction is recorded twice in terms of debit (loss) and credit (gain).

The new bookkeeping standard is currently it its last stages of completion and is expected to be completed in June next year. It will become the guideline for BPK to grade the completeness and clarity of government financial reports.