State Audit Reform Sector Development Project (STAR-SDP ... · State Audit Reform Sector...

ASSESSMENT REPORT

ADB LOAN NO. 2127 – INO (SF) December 31, 2010

Republic of Indonesia National Development Planning Agency

ILMU Secretariat Jl. Besuki No. 9, Menteng

Jakarta Pusat 10310

State Audit Reform Sector Development Project (STAR-SDP)

State Audit Reform Sector Development Project (STAR-SDP)

ASSESSMENT REPORT ADB LOAN NO. 2127 – INO (SF) December 31, 2010

Republic of Indonesia National Development Planning Agency

ILMU Secretariat Jl. Besuki No. 9 Menteng

Jakarta Pusat 10310

State Audit Reform Sector Development Project (STAR-SDP) Investment Loan ADB LOAN NO. 2127 - IN0 (SF) – Assessment Report – December 31, 2010

TABLE OF CONTENTS

Page

ABREVIATIONS 2 EXECUTIVE SUMMARY 3 STAR SDP BASIC DATA 6 1. PROJECT DESCRIPTION........................................................................................ 7 1.1 Background of STAR-SDP ……….................................................................. 7 1.2 The Goal and Objectives of the Investment Loan……………………………. 7 1.3 Objectives of the Assessment Report and Methodology …..………………... 8 2. EVALUATION OF DESIGN AND IMPLEMENTATION................................ 9 2.1 Relevance to Design and Formulation ………………………………………. 9 2.1.1 Introduction of New Systems and Practices for Effective External Audit ….. 9

2.1.2 Introduction of New Regulatory Structures and Practices for Effective Internal Audit…………………………………………………………………

11

2.1.3 Designing a Professional Degree Education and Non-degree Education Program for Internal Auditors………………………………………………...

13

2.1.4 Introduction of New Practices for Parliamentary Oversight of Public Sector Audit …………………………………………………………………………

15

2.1.5 ILMU………………..……………………………………………………….. 15 2.2 Project Disbursement………………………………………………………… 16 2.3 Project Output………..………………………………………………………. 16 3.

EVALUATION OF PROJECT PERFORMANCE ………………………………

17

3.1 Introduction…………………………………………………………………... 17

3.2 Evaluation of Project Performance per Project Implementation Unit and Activities…………………………………………………………………….. 17

3.2.1 BPK ...………………………………………………………………………... 17 3.2.2 MOHA-IG …………………………………………………………………… 39 3.2.3 MOF-IG... …………………………………………………………………… 44 3.2.4 BPKP ….……………………………………………………………………... 46 3.2.5 MONE-IG …………………………………………………………………… 48 3.2.6 BPPK ………………………………………………………………………… 58 3.2.7 DPR Secretariat ……………………………………………………………… 59 3.2.8 ILMU………………………………………………………………………… 61 4. OVERALL ASSESSMENT AND RECOMMENDATIONS ……………………. 63 4.1 Overall Assessment…………………………………………………………... 63 4.2 Recommendations……………………………………………………………. 69

APPENDIX 1: Details of Activities Implemented and Output


ABREVIATIONS

ADB Asian Development Bank BAPPENAS National Development Planning Agency (Badan Perencanaan Pembangunan

Nasional) BAWASDA Inspectorate of Province/ Municipal/ City (Badan Pengawas Daerah)

BAKN State Budget Accountability Body (Badan Akuntabilitas Keuangan Negara) BPK The Audit Board of Indonesia (Badan Pemeriksa Keuangan)

BPKP Supervision of Financial and Development Agency (Badan Pengawasan Keuangan dan Pembangunan)

BPPK Financial Education and Training Agency of MOF-IG (Badan Pendidikan dan Pelatihan Keuangan)

CIU Component Implementation Unit DIPA List of Budget Implementation (Daftar Isian Pelaksanaan Anggaran) DPR Parliament (Dewan Perwakilan Rakyat)

DPRD Regional Parliament (Dewan Perwakilan Rakyat Daerah) EA Executing Agency

HRM Human Resources Management IDP Institutional Development Plan

IG Inspectorate General ILMU Investment Loan Monitoring Unit

IT Information Technology KEPPRES Presidential Decree / (Keputusan Presiden)

MOF-IG Ministry of Finance – Inspectorate General MOHA-IG Ministry of Home Affairs – Inspectorate General MONE-IG Ministry of National Education – Inspectorate General

PCU Project Coordination Unit PERDA Regulation of Regional Government (Peraturan Daerah)

PIU Project Implementation Unit PLMU Program Loan Monitoring Unit

PP Government Regulation (Peraturan Pemerintah) RPP Draft of Government Law (Rancangan Peraturan Pemerintah) SAI Supreme Audit Institution

SDM Human Resources (Sumber Daya Manusia) SEKWAN Secretariat of DPRD

SISWASDANAS National Level Regional Governance Information System (Sistem Informasi Penyelenggaraan Urusan Pemerintah Daerah)

SK Decision Letter (Surat Keputusan) SPKN State Audit Standard (Standar Pemeriksaan Keuangan Negara)

STAR-SDP State Audit Reform - Sector Development Program


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EXECUTIVE SUMMARY

STAR-SDP is a response to support both the external and internal audit function at central and regional level to ensure good governance, accountability and transparency. STAR-SDP establishes the foundations for a strong audit sector through a mixture of policies and capacity building initiatives. To leverage this reform the combination of policy-based and investment lending support is considered appropriate and timely at the present stage of public expenditure reform. STAR-SDP is supported by the Project Loan having the objectives of enhancing the capability of audit institutions by building upon past support, and by introducing techniques and approaches that allow the institutions to operate effectively and efficiently and incorporate international best practices. Achievements were achieved through implementation of activities under the five main components approaches as mentioned below.

New systems and practices for effective external audit have been established. The quality and coverage of BPK audits have been improved through the development and adoption of auditing standards and practices that meet international standards such as the State Finance Audit Standard (SPKN), Code of Ethics, Audit Management Guideline (PMP), new techniques for presenting audit reports, new procedures for specialized audits, and quality assurance system. BPK has also improved the capacity and management of its human resources in carrying out high quality audits through the establishment of a HRM Plan that is consistent with the new audit procedures, and participation of its staff in overseas and domestic degree and non-degree capacity building programs. Technology Information of BPK has strongly been enhanced, through the expansion and establishment of IT systems in its headquarter and regional offices. Under the STAR-SDP Project, BPK has managed to raise the ratio of total notebooks against professional staff from 1:6.55 in year 2004 to 1:2.00 in 2010. The above BPK achievements have been confirmed by the results of the peer review conducted by the Netherland Court of Audit (2008-2009), which concluded that since 2004 BPK has transformed its organization into a modern Supreme Audit Institution with legally embedded independence, a strong mandate and qualified staff to realize its tasks and objectives.

New Regulatory Structures and Practices for Effective Internal Audit has been introduced under the STAR-SDP efforts through the institutions of MOF-IG, BPKP, MOHA-IG, BAWASDA, and MONE. MOF-IG has successfully established a ministerial financial statement review manual, which has assisted MOF-IG in better management of risk-based audit procedures that have led to the improved quality of MOF financial statements. This was indicated by the audited MOF Financial Statement of 2008, which obtained a qualified opinion, an improvement in comparison to the audited 2007 MOF Financial Statements that obtained a disclaimer opinion.


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The issuance of Government Regulation (PP) 60/2008 concerning Government Internal Control System has made the mandates of BPKP clear. The clear mandates include conducting cross-sector treasury and other audit activities as instructed by the President, reviewing the government's financial statements prior to submission to the President, and managing the implementation of the Government's internal audit system. BPKP has also started to implement the GICS (Government Internal Control System) through the issuance of a decree (Perka BPKP-1326/K/LB/2009) in December 2009, which requires development of a task-force in each government institution to assist government agencies in the implementation of GICS. Currently, the required task-forces have been established and are operational in each government institution. A number of decrees of Head of Region concerning Internal Control System Implementation had been issued as a result of BPKP’s continuous effort in socializing the GICS. MOHA-IG has successfully issued a regulation (Permendagri No. 8 Year 2009) concerning Guideline of Regional Governance Supervision, which provides guidance for BAWASDA in carrying out a supervisory function on the implementation of the obligatory and voluntary functions of Local Governments. In order to support the implementation of Permendagri No. 8 Year 2009, MOHA-IG has developed an information system (SIWASDANAS) for handling audit mechanism carried out by BAWASDA and has enforced its implementation through the issuance of Permendagri No.1 Year 2010. These achievements have extended the scope of audit to Local Governments and improved the effectiveness of planning and management of internal audit carried out by BAWASDA. MOHA-IG has also developed and disseminated a standardized Model regulation in the Format of a Head of Region’s Decree and Regional Law that addresses the roles and responsibilities of BAWASDA. Given clearer roles and responsibilities in combination with STAR-SDP funded in-house training through the BAWASDA’s Institutional Development Plan, improved consistency and quality in the audit activities have started to be shown by the 50 participating BAWASDAs. The technical training (BIMTEK) in special topics which was part of the IDP, was effective in enhancing the individual capacity of BAWASDA staff, particularly those not having an accounting or public finance educational background. Approximately four to five topics of training were carried out for each individual BAWASDA and about three to four training topics were carried out for each SEKWAN.

A Professional Degree Education and Non-degree Education Program on state accounting and public auditing for Internal Auditors have been established by MONE-IG and BPPK, respectively. As of 31 December 2010, more than 80% of Bawasda and 90% of IG’s participants have successfully graduated from the scholarship program. This achievement has exceeded the project’s log frame target. The total number of graduates (578 participants) has increased the number of government internal auditors trained with accounting skill and knowledge. The participation of BAWASDA staff in the degree and non-degree programs combined with the technical training carried out in BAWASDA has significantly contributed to the capacity development of human resources, which in turn has improved the advisory capacity of BAWASDA. The results can be seen by the increase in the number of Local Government Financial Statements with unqualified opinion and the decrease of disclaimer opinions for the year 2006 - 2008.


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New Practices for Parliamentary Oversight of Public Sector Audit has started to be introduced. From 2007 to 2010 DPR Secretariat has developed BPK analysis reports and presented them to the Parliaments. These reports have assisted Parliament in better and easier understanding of BPK audit reports. The continuous effort in promoting the importance of BPK’s report follow-up to the Parliament has resulted in the establishment of the State Finance Accountability Agency (Badan Akuntabilitas Keuangan Negara or BAKN) within DPR with the main task of following up BPK’s audit findings. Furthermore, DPR Secretariat has developed the Standard Operating Procedures (SOP) for the BAKN. At regional level, a guideline on the follow-up of Audit Result of BPK by DPRD has also been developed and enforced through the issuance of Permendagri No. 13/2010. As a result of this achievement there has been an increase in the use of audit reports by DPRD members. The above achievements have resulted in the increased willingness of parliament to improve their oversight capabilities. This in turn will have a positive impact on the improvement of governance in the Republic of Indonesia.

Establishment of the Investment Loan Monitoring Unit (ILMU) in BAPPENAS. Since the beginning of the project, ILMU has successfully coordinated, supervised and monitored the project implementation. ILMU has ensured that the activities conducted by the Project Implementation Units (PIUs) were consistent with STAR-SDP’s objectives by performing a review of the PIU’s work-plan and by monitoring the work-plan to be implemented in a timely and cost effective manner. This has given support to PIUs in the achievement of the expected outputs and outcomes. In addition, ILMU has successfully submitted Audited Project Financial Statements (AFS) with unqualified opinion to ADB for the years 2005-2009.


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STAR-SDP BASIC DATA

A. LOAN IDENTIFICATION Project Title State Audit Reform – Sector

Development Program (STAR-SDP) No / Date of Loan

Agreement ADB 2127 – INO December 17, 2004

Total Loan SDR 16,680,000 (equiv. US$ 25,000,000) Total Grant US$ 5,000,000 Loan Period December 16, 2004 – December 31, 2010 Executing Agency of

Program Loan Directorate Treasury of Ministry of Finance

Executing Agency of Investment Loan

BAPPENAS

B. LOAN DATA

Appraisal • Date Started • Date Completed

December 16, 2004 December 31, 2010

Loan Negotiation • Date Started • Date Completed

November 10, 2004 November 11, 2004

Closing Date • Initial closing date • Extension

June 30, 2010 December 31, 2010

C. Date of ADB milestone

Review Mission 2005 December 1 – 22, 2005 Review Mission 2006 May 15 – June 7, 2006 Review Mission 2007 September 3 – October 8, 2007 Review Mission 2008 July 14 – 23, 2008 Review Mission 2009 February 13 – March 2, 2009 October 5 – 27, 2009 Review Mission 2010 April 5 – 30, 2010


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1. PROJECT DESCRIPTION

1.1 BACKGROUND OF STAR-SDP

State Audit Reform - Sector Development Program (STAR-SDP) is a program initiated by the Government of Republic of Indonesia to enhance public sector audit reform in line with the government bureaucratic reform. Substantially, the public sector audit reform will provide a significant contribution in establishing good governance. The reform will be a part of the government bureaucratic reform, which has become a priority in implementing national development, as stated in Rencana Pembangunan Jangka Menengah Nasional (RPJMN) 2004-2009. The government will perform better when the public sector audit reform is functioning for both external and internal audit. STAR-SDP will be the basis for the development of the audit sector through several supporting policies and activities aimed at supporting the public sector audit institutions. STAR-SDP requires financial support for the implementation of its activities, which has been provided by the Government of Indonesia through a loan from ADB and a grant from the Government of the Netherlands. On 13 December 2004, the Asian Development Bank (ADB) approved a package of financial assistance to the Republic of Indonesia to support the State Audit Reform Sector Development Program (STAR-SDP). The package comprised (i) a program loan, (ii) a project loan, and (iii) administration of two technical assistance (TA) grants for program loan coordination and monitoring, and project loan monitoring and quality assurance, and the other to assist implementation of the project loan. The program loan of $200 million (No. 2126-INO) was from ADB’s ordinary capital resources (OCR). The project loan [No. 2127-INO (SF)], came from the Asian Development Fund (ADF), in an amount of Special Drawing Rights 16,680,000 (about $25 million). The loan agreement of the project loan was signed on December 16, 2004. The Government of the Netherlands provided a total amount of $10 million in co-financing, $5 million in grant for the project loan and the remaining $5 million being allocated for technical assistance ($1.3 million for the program loan and $3.7 million for the project loan [TA 4474]) in respect of the above two grants).

1.2 THE GOAL AND OBJECTIVES OF THE INVESTMENT LOAN

The goal of STAR-SDP was to enhance governance, and the efficiency, economy, and effectiveness of the public sector audit. This would be achieved by strengthening audit institutions, which would operate to internationally accepted standards.

The objectives of the investment loan are to enhance the capability of the audit institutions by building upon past support and introducing techniques and approaches that will allow the institutions to meet their immediate mandates by operating effectively and efficiently, and incorporating international best practices. Investment support is expected to: (i) build a strong external audit function able to effectively operate at the national level; (ii) enhance the capability


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of the internal audit function and institutions; (iii) enhance the oversight capability of central and regional parliaments, and; (iii) increase public awareness of the audit function. In the project implementation, Bappenas, in this relation represented by Directorate of State Apparatus at the Deputy for Politics, Law, Defense and Security shall act as the Executing Agency (EA) for the investment loan. The investment project of the STAR-SDP comprises five main components are as shown in the table below:

Component Institutions

A Establishment of sector development project management in the form of an Investment Loan Monitoring Unit (ILMU) BAPPENAS

B Introduce New Systems and Practices for Effective External Audit BPK

C Introduce New Regulatory Structures and Practices for Effective Internal Audit

1. Inspectorate General 2. Regional Supervisory Boards 3. Central Government Internal Auditor

MOF-IG MOHA-IG

BPKP D Establish Degree and Non-Degree Education Programs

1. Inspectorate General Establish a Professional Degree Education Program for Internal Auditors MONE-IG

2. Establish a Non-Degree Program for Public Sector Auditors BPPK E. Introduce New Practices for Parliamentary Oversight of Public Sector Audit

1. DPR DPR-Secretariat

2. DPRD MOHA-IG

Originally, the project that started on November 17, 2004 was to run until June 30, 2010. However, based on the results of the ADB review mission (13 February – 2 March 2009) and the letter of the Economic Department of the Netherlands Embassy (September 1, 2009), the project had been extended until December 31, 2010 for the optimization of the project outputs.

1.3 OBJECTIVES OF THE ASSESSMENT REPORT AND THE METHODOLOGY The assessment report aims at providing the stakeholders with an assessment of the activities managed by PIUs and ILMU that are funded by ADB Loan No.2127-INO (SF), grant from the Dutch Government No.0024, and the Government of Indonesia (GOI) from the project start-up until December 31, 2010. This assessment report has been completed as a result of the cooperation between PIUs, project officer, project consultant and technical advisor consultant. Workshops and meetings have been conducted in order to meet all the PIUs and to collect all the data required to provide an assessment of their activities. A survey has been conducted on the scholarship program through questionnaires addressed to a sample of graduates of the program. Supporting documents such as project documents, manuals, guidelines, peer-review, reports made by external consultant, regulations have been mainly used to support this report.


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2. EVALUATION OF DESIGN AND IMPLEMENTATION

2.1 RELEVANCE TO DESIGN AND FORMULATION

Activities of STAR-SDP have been designed in accordance with the government bureaucratic reform implementation and objectives stated in the project documents. However, during the implementation of the activities per PIU, some activities have been added while others have been cancelled. This adaptation was sometimes necessary to implement new activities that appeared more relevant in regard to the achievements of the STAR-SDP and to cancel those that appeared less necessary or had already been carried out through other sources. We present below, the different changes in project activities, assessment on the modifications, and comparison of their relevance to the objectives of the project.

2.1.1 Introduction of New Systems and Practices for Effective External Audit

BPK

The main activities under BPK are focused on the development of new standards and work procedures that are consistent with legal and regulatory framework, as well as the development of the human resources management strategy and plan. Some of the project activities under the BPK component have been cancelled because they have been implemented using funding from the Government of Indonesia and not the investment loan facility. The cancelled activities are as below: (i) The printing of the newly revised code of ethics for management and staff that has been

developed to adjust BPK’s code of ethics to be consistent with international standards;

(ii) The revision approach to Audit Management, which was to assess the current work practices, revise audit management, validate and use new practices. This activity has been conducted directly by BPK without using STAR-SDP funding, except for printing the manual of new practices for staff;

(iii) The development of a risk-based audit manual with the objective of familiarizing BPK

staff with risk audit issues, developing new procedures for risk-based auditing, printing the manual for auditors, carrying out pilot-testing of the new procedures and obtaining validation from lessons learned from the experiences have been implemented by the BPK team using its own funding;

(iv) The development of a new specialized audit with the objectives of assessing current audit

practices, developing guidelines for specialized audits and covering government-wide


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audits, printing manual for staff, and pilot-testing for validation through lessons learned from the experiences have been implemented by the BPK team using its own funding;

(v) The introduction of pedagogic skills required for new audit standards with the purpose of

conducting quality professional courses for BPK staff that meet international best practices, according to Pusdiklat review, has been transferred to be included in the consultant activities in developing the competency-based curricula;

(vi) The development of audit report and disposition information system with the objectives

of developing a prototype system and implementing a version of SIPPA has been implemented by BPK using its own funding;

(vii) The development of electronic archiving of audit files and reports with the objective of

developing a prototype system and implementing a beta-version of electronic archiving has been directly implemented by BPK using its own funding;

(viii) The pilot-testing of new procedures for selected audit with the objectives of conducting

pilot-audit, providing specialist technical support and reviewing pilot-audit lessons learned have been implemented by BPK using its own funding;

(ix) The implementation of an in-service professional staff development program consistent

with the HRM plan was finally carried out by BPK using its own funding;

(x) The development of the program and courses to introduce the new procedures into regular BPK work practices has been transferred to be included in the consultant activities in developing curricula for competence-based training.

(xi) Procurement of computers was also cancelled. The cancellation of above mentioned activities has had no impact on the relevance of the project design nor has it affected the objectives of STAR-SDP. Activities that were added to the original project work plan with the objective of optimizing and complementing the activities under the BPK activities were as follows: (xii) The BPK Education and Training Center in cooperation with consultants, will prepare

Curricula for a Competency-based Training for the position groups of Auditor, Chief Inspectorate (ITAMA), Heads of Working Units (PISAT), Legal Affairs, Information Technology and Human Resources. The curricula will contain education and training materials that are expected to address the needs for the development of competencies of BPK Human Resources within the stated position groups.

The development of curricula for competence-based training activity shall include preparation of competency-based curriculum, delivery design, modules and other training instruments for achieving human resources competency standards as designated by the BPK Board.


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The addition of this activity is in line with the objective of supporting the Education and Training Center in the capacity enhancement of BPK Human Resources.

(xiii) In order to enhance the regional finance management auditing competency of BPK

auditors at the BPK regional representative offices, the Education and Training Center of BPK intends to develop a local government finance accounting and local government finance auditing laboratory and training modules. The development of a Laboratory of Local Government Finance activity shall include the development of curriculum and modules for education and training programs in local government finance management practices, training modules in local government finance management audit, the design of a training laboratory, and to provide training in the subjects of Local Government Finance Management.

This activity is relevant to the main objective of this project, which is to make available a

Local Government Financial Management and Audit Laboratory in order to meet the competencies required in the Standards of State Financial Auditing (SPKN).

(xiv) The development of new organization according to new regulations shall include the

development of an action plan and a design for an organizational and management structure that shall be in line with the new regulation.

This activity was added to be in compliance with the new regulation Law 15/2006.

(xv) The allocation of investment loan facility for the cancelled procurement of desktop and

laptop computers for BPK year 2008 was reallocated for use in activity that supports the development of BPK’s human resources. This newly added activity for obtaining a degree program for BPK staff has covered 90 persons for the domestic degree program and 5 persons in the overseas degree program.

All of the above stated additional activities reinforce the role of BPK and are relevant to ADB expectations, as they will improve the project objectives by adding value and complementing the other project activities. The outcomes and expected outcomes of these added activities are further described in Chapter 3.

2.1.2 Introduction of New Regulatory Structures and Practices for Effective Internal

Audit

MOHA-IG

The key role of MOHA-IG in STAR-SDP is to facilitate the empowerment and capacity building of BAWASDA at the Provincial and District level by developing a new model regulation, developing new audit procedures and introducing these regulations into provincial and local government.


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The recruitment of a legal expert through the loan to develop model regulation to be applied by BAWASDA was cancelled, and a local consultant has acquired international experience for developing the model regulation using non-loan facility. There has been no impact on the relevance, as the activity has been conducted through other sources. Considering the numerous activities to be implemented and the lack of staff in both numbers and skills to manage the project, MOHA-IG has been supported by a consultant. The consultant assists MOHA-IG in managing its daily activities including monitoring and reporting of BAWASDA activities. This activity is relevant to the aim of STAR-SDP, as it supports in the implementation of the overall MOHA-IG’s activities.

BAWASDA

BAWASDA has developed and implemented Institution Development Plan (IDP) as planned. Activities in the Institution Development Plan focus on the capacity building of BAWASDA.

MOF-IG

At the beginning of the project, MOF-IG was expected to develop new audit work procedures and carry out training of staff to introduce new procedures and skills to IG staff. However, this activity had been cancelled due to the development of Standard Operating Procedures (SOP) of IG’s audit on ministry’s operations and financial performance in 2007, in line with the reform program within MOF. This SOP development was funded by other sources, Rupiah Murni.

Accordingly, MOF-IG replaced the activity with development of ministerial financial statement review manual for IG, which was completed in early 2010. As stated in the Ministry of Finance’s regulation No.41/PMK.09/2010 dated 23 February 2010, the manual shall be used as a guideline for conducting review on the Ministry’s Financial Statements. The replacement of the major activity of MOF-IG is relevant with ADB’s expectations, as it will support the implementation of effective internal audit. The outcomes and expected outcomes of these added activities are further described in Chapter 3.

BPKP

The main activities of BPKP as originally planned were to develop an Institutional Development Plan consistent with the new legal framework and introduce new work procedures into regular BPKP work practices. The long-anticipated legal framework, PP 60/2008 concerning implementation of Government Internal Control System, was issued in 2008. This regulation provides clear mandates for BPKP.


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In order to support the implementation of BPKP’s mandates in the PP60/2008 according to articles 49 and 59, the following activities have been added: (i) Socialization and dissemination of PP60/2008 according to article 59 of the regulation to

ensure that related parties (government officials) are aware of the new law. (ii) Training on the implementation of government internal control system (GICS), which

includes development of technical guidelines, promotion and training of GICS, training and consultancy, capacity of state internal audit institutions as per article 59-c of the regulation.

(iii) Provide technical assistance for central and local government to assist them in GICS

implementation as per article 59-d of the regulation. (iv) Socialization of guidelines to support fungsi pengawasan internal (guidelines for internal

supervision) as per article 49 of the regulation. (v) The establishment of the Head of BPKP’s decree No. BPKP-1326/K/L/2009 dated 7

December 2009 regarding the guidelines on how to implement GICS as follow up to PP60/2008.

BPKP considers that in order to support implementation of BPKP’s mandates in the PP 60/2008, it has to improve the capacity of its human resources. Thus, BPKP has added activities, which include domestic and overseas training in several related audit topics, benchmarking several related professional auditor areas, international courses related to the capacity development of internal auditors, domestic technical training, comparative study in several related audit topics, domestic professional certification, and domestic training on IT development. In addition, BPKP will also procure IT equipments to equip its personnel in implementing the mandates.

All the activities added to the original plan are relevant and in line with ADB expectations, as they are supporting the implementation of the new regulation and improving the capacity of the entity. The outcomes and expected outcomes of these added activities are further described in Chapter 3.

2.1.3 Designing a Professional Degree Education and Non-degree Education Program for Internal Auditors

MONE-IG

The main activities of MONE-IG are related to the preparation of a degree education program in public accounting and auditing. The activities consist of reviewing the current education program for public sector auditing and accounting, developing new curricula for public sector auditing and accounting, implementing the new educational module through selected local universities, selecting candidates from IG and BAWASDA staff to participate in the scholarship supported program and evaluating the performance of the scholarship program.


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To ensure the successful implementation of the scholarship program, MONE-IG planned to hire an individual consultant for Quality Assurance to be in charge of conducting the survey in regard to the MONE-IG scholarship activities. However, MONE-IG was not able to find a consultant after two tenders, as the budget allocated to the assignment was too low and hence this activity has been carried out internally. There has been no impact on the relevance, as the review of the scholarship program has been conducted internally. In order to implement the scholarship program and to be more efficient, the local lecturers have been trained in Public Accounting and State Finance Audit, as lecturers in local universities lack skills in these fields. To improve the skills of internal auditors and reach international standards, international short-courses in IIA Australia and Netherlands have been scheduled. As the coordination between local government and local universities must be improved, as well as the contribution of local universities, MONE-IG has organized a workshop on coordination for updating the status of the scholarship program. These added activities are relevant to the objectives of STAR-SDP, as they support to develop skills and ensure a sound implementation of the scholarship program. The outcomes and expected outcomes of these added activities are further described in Chapter 3.

BPPK

According to the original plan, BPPK was only expected to review the current education/certification programs for government-sector accounting and auditing and subsequently develop the curriculum for a non-degree education program and the training modules for the program implementation. However, after completing development of the curriculum and modules, the Executing Agency and BPPK decided to extend the role of BPPK with implementation of short-course training to BAWASDA employees using the curriculum and modules previously developed. This additional activity is in line with the project expectation because it supports the capacity development of BAWASDA and utilizes the output of previous activity. Moreover, BPPK has solid experience in preparing and conducting training. The outcome of this added activity is further described in Chapter 3.


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2.1.4 Introduction of New Practices for Parliamentary Oversight of Public Sector Audit

DPRD Secretariat

DPRD Secretariat has developed an Institution Development Plan (IDP) for their capacity building, which has enabled DPRD to implement the new practices in delivering BPK’s audit report to DPRD committees as originally planned.

DPR Secretariat

DPR Secretariat was expected to implement the introduction of new practices for parliamentary oversight of public sector audit. Accordingly, DPR Secretariat would develop user-friendly formats of BPK’s audit report to be followed up by Parliament. DPR Secretariat has continuously developed such formats and introduced these to Parliament. In addition, Parliament has been introduced to the importance of BPK’s report follow-up. As a result, members of Parliament are now aware of the importance of BPK’s audit findings follow-up, indicated by the establishment of the State Budget Accountability Body (Badan Akuntabilitas Keuangan Negara or BAKN) within DPR. The Board’s main task is to follow-up BPK’s audit findings. To improve the capacity of BAKN members, thus enabling them to carry out their duties, the DPR Secretariat had included a new activity, i.e. comparative study for the BAKN team with the Netherlands. This activity is in line with the expectations of ADB and DPR Secretariat’s expected outcomes. The outcome of this added activity is further described in Chapter 3.

2.1.5 ILMU

Bappenas as the Executing Agency established an Investment Loan Monitoring Unit (ILMU), the activities of which are to coordinate, control and monitor the activities of STAR-SDP within other PIUs. The detailed tasks of ILMU include preparing consolidated quarterly report from the PIUs, completing mid-term reviews, carrying out surveys, hiring external auditors for annual audits, preparing the project completion report, and supporting the administration of ILMU including office rental, office operations and other administration. Most of the detailed tasks have been carried out successfully as planned. However, development of mid-term review was not carried out due to still insignificant number of activities that have been implemented until mid 2007. This activity has been replaced by Development of project Assessment Report as of 31 December 2009. The cancellation of these activities had no impact on the relevance of the design as the activities have been implemented through other source, TA 4479.


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Some activities were added to the initial work plan to optimize and complete the action of ILMU: (i) The development of a system on accountability improvement, which consists of creating a

web-based information system for accountability improvement on project implementation, (data storage software) and was added to simplify the transfer of documents between STAR-SDP stakeholders.

(ii) The development of performance evaluation indicators, which consist of the development

of a performance evaluation indicator report in order to provide indicators to evaluate the output of tasks in accordance with the national mid-term development plan.

(iii) The development of an institutional evaluation on public sector supervisory bodies to

evaluate the policies and the internal audit institutions prior to and after the issuance of PP60/2008, and to provide inputs for the development of the national mid-term development plan.

(iv) The development of a system for keeping archives. This activity was added to support the

compliance to the loan agreement, which requires for the project closing purposes to collect the data of the project.

(v) The recruitment of a consultant for implementation of a public campaign on the functions

of internal audit institutions. This activity is a continuation of the baseline survey conducted in 2008.

All these added activities reinforce the role of ILMU and are relevant to the ADB expectations, as they improve the project by adding relevant and useful activities. The outcomes and expected outcomes of these added activities are further described in Chapter 3.

2.2 PROJECT DISBURSEMENT

The accumulated disbursement of loan and grant as of December 31, 2010 was US$26.54 million or 88% of the total budget. The cumulative disbursements under the loan stood at about US$21.89 million or 87%. With regards to the US$ 5.0 million Dutch grant, US$4.65 million had been disbursed or 93% of the total grant.

2.3 PROJECT OUTPUTS

The project outputs are numerous and many activities have been already implemented by each PIU. Appendix 1 presents per PIU the different outputs and information on the extent to which the expected outputs were achieved for the completed activities. All the outputs achieved as at 31 December 2010 are in line with the deliverables expected at the beginning of the project. Although some activities have been postponed, creating a slippage in schedule, the results of the project in term of outputs is a success.


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3. EVALUATION OF PROJECT PERFORMANCE

3.1 INTRODUCTION An effective state audit function is key to an effective and well functioning accountability framework for parliaments, the executive, the judiciary, and civil society. As part of the overall control of public sector management, the function provides an independent, objective, and professionally conducted assessment on the veracity, accuracy, credibility, and reliability of information on the economy, effectiveness, and efficiency of government. While Indonesia has had institutional arrangements for public sector audit since the early 1940s the legal, policy, and institutional frameworks have not been significantly evolved to promote transparency and accountability.

Firstly, a weak legal framework exacerbates the lack of clarity between internal and external audit functions. Secondly, the allocation of resources has not always been in line with policy and legal mandates. Thirdly, parliamentary oversight has been deficient. Fourthly, public awareness of the benefits of audit has been very low. Fifthly, capacity has been weak. Due to decentralization, the enormous transfer of resources has necessitated strengthening the regional audit institutions to effectively fulfill their internal control and audit functions.

3.2 EVALUATION OF PROJECT PERFORMANCE PER PROJECT IMPLEMENTATION UNIT (PIU) AND ACTIVITIES

3.2.1 BPK 3.2.1.1 Background

Since Indonesia’s independence in 1945 until about 2003, the management and audit policy of the State Finance in Indonesia still referred to the Dutch heritage system, the Indische Comptabiliteitswet (ICW) and the Instructie en voor de verdure bepalingen Algemeene Rekenkamer (IAR). During that period, it was difficult to create an atmosphere of fiscal accountability and transparency and as a result this had a negative impact on the performance of state finance audit performed by BPK. Some of the causes that led to the ineffectiveness of state finance at that time were largely due to the lack of clarity in the definition of state finance as BPK’s audit object; the lack of clarity in the separation of review and oversight functions between agencies including the purpose and scope of their duties; the absence of government accounting standards; the lack of clarity on the period for submission of the government report to BPK and the House of Representatives, as well as the BPK audit period; and the lack of clarity in the follow-up process and utilization of BPK’s audit findings by the Government and Parliament. In May 2002, the Minister of Finance of the Republic of Indonesia produced a White Paper entitled “Reform of Public Financial Management System in Indonesia, Principles and Strategy,” which was a response to improve state financial management, as well as to help restore the Indonesian economy that had collapsed due to the economic crisis in 1997. The first step to improve the


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management and financial accountability of the state finances was started by amending the Indonesian Constitution 1945. Within the framework of ensuring that the State Finance Management shall be carried out in a transparent and accountable manner for the welfare of the people, the 1945 Constitution of the Republic of Indonesia declares in Chapter 23E article (1) that the Audit Board of the Republic of Indonesia (BPK) is the external auditor and Indonesia’s Supreme Audit Institution (SAI):

“In order to audit the management and accountability concerning the state finances a Supreme Audit Institution shall be established.”

1945 Constitution of the Republic of Indonesia

The objectives of establishing BPK to audit state finances in accordance with the above statement are to achieve transparency and accountability in state financial management. Audit shall be carried out on all state financial matters, including all state revenues – either from tax or non-tax sources, all state assets, state receivables and liabilities, state treasury, and also the management of state expenditures.

Chapter 23E article (2) of the 1945 Constitution declares that the BPK’s audit result shall be handed to the House of Representatives (DPR), Regional Representative Councils (DPD) and Regional House of Representatives (DPRD), in accordance with each house’s respective line of authority. This declaration shall be carried out in order for each of the houses of representatives to be aware of how the Government is managing the state finances so that they can carry out their function of budgetary oversight. The amended Constitution provided clearer definition of BPK’s position, roles, authorities, and how to elect members of BPK’s Board. The State Finance Law (Law Number 17 Year 2003), passed in March 2003, details the entities over which BPK has audit jurisdiction. In all, about 10,000 auditable entities are spread across the country, including Parliament, the Supreme Court, 70 Government departments and agencies, some 480 regional governments and as many regional parliaments, Central Bank and approximately 8,500 central and regional state-owned enterprises. Issuance of Law Number 15 Year 2006 concerning the State Audit Board, provides a mandate to BPK to audit Central and Regional Government, other State Institutions, Central Bank of Indonesia (Bank Indonesia), State Owned Enterprises, Regionally Owned Enterprises, Public Service Agencies, Foundations, Institutions or other Agencies required due to the nature of their respective duties. Thus, in order to enforce its constitutional mandate under the Law Number 15 Year 2006, BPK needs to expand and improve its institutional capacity. As part of the state financial reform initiative package, in October 2004 the government of Indonesia approved the start of Project-STAR-SDP to support the state audit reform. The purpose of this project is to strengthen the coordination and development of public sector audit.


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3.2.1.2 Issues The primary issues:

Some audits and the resultant audit reports lacked quality. Some audit reports did not comply with a model comprising best practices and related audit report standards, reflecting on the internal systems in place to ensure quality audits and quality audit reports. Audit managers and auditors in charge, rather than organization officials such as the chairmen or other officials sign reports. BPK, as the Supreme Audit Institution of Indonesia, notwithstanding some direct help from external funding agencies, has insufficient numbers of qualified audit staff to carry out its mandate as stated above, particularly those required to carry out the various specialized audits now considered integral to effective auditing. In 2004, BPK could only audit 12% of the entities from its estimated audit universe and, in particular, only 30% of the regional governments. A weak BPK, particularly one with little regional presence, leaves the public sector without an effective external auditor.

Moreover, BPK could not meet the State Finances Law requirement that states by 2007, the financial accountability statements of some 480 regional governments have to be audited within 6 months of the end of the financial year. Given the significant resource transfers after decentralization, this weak fiduciary environment needs to be urgently addressed. The oversight issues:

Parliament does not usually receive or have regular access to individual BPK audit reports, and even when they do, Parliament receives only summaries of edited versions of individual reports. Line Ministries appear to have no legislated obligation to address issues raised in audit reports. According to new laws and regulations, Regional Parliaments have the right to approve the audited annual accountability report of the Head of Local Government. However, in the main they do not have the skills to carry out this oversight function. Types of audit issues: Too few types of audits are conducted. Financial audits comprise the vast majority, with performance audits making up most of the remainder. Other types of audits such as forensic, contract, compliance, program, computer, public debt, environmental, export/import, policy, and privatization audits are rarely if ever conducted. Recruiting issues: Recruiting requirements that limit hiring accountants and exclude multi-disciplinary candidates may be impeding expansion of the nature and types of audits that can be conducted. Training issues: Training has not been adequate to increase performance audits and/or the variety of types of audits that could be conducted. Training has not kept pace with the movement to increase use of


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computerization and enhanced information technology. Training has been unable to correct deficient audit and report quality or to strengthen the internal quality assurance system. Computerization and enhanced IT issues: Audit follow-up may be limited because the system does not adequately track audit recommendations so that they can be followed up. Substantive follow-up on fraud cases referred to the Attorney General’s Office is lacking and does not result in an affirmative prosecutorial action. An electronic system for tracking compliance with continuing professional education requirements is still under development, and responsibility for managing the system has yet to be decided.

3.2.1.3 Objectives

It is expected that the STAR-SDP activities carried out in BPK will support development of new systems and work procedures for BPK that would be consistent with an enhanced legal and regulatory framework. The activities shall also provide support for: (i) enhancing audit planning and management; revising the code of ethics; training for risk-based auditing procedures; undertaking specialized audits; presenting audit reports; (ii) managing human resources, including implementing a strategic human resources development program; (iii) enhancing IT management, including establishing an extensive IT policy and providing IT equipment; introducing a strategic approach for information resources management and undertaking testing for practical applicability of procedures; computers and equipment to utilize IT-based audit techniques shall also be provided; and (iv) developing a model public relations program, implementing a program for raising public awareness, and gaining public support for an effective public sector audit function.

Source: STAR-SDP Loan Agreement 3.2.1.4 Assessment of Performances

Develop and Print Auditing Standards From 1995 until 2006, BPK had used the Government Audit Standard (Standar Audit Pemerintahan, SAP) as guidance for its operation and duties. In line with the state financial reform initiative and in consideration of the development of audit theory, the people’s dynamics that requires the application of good governance principles, which stresses on the issues of transparency and accountability, and in particular to meet the requirements as stated in Chapter 5 of Law No.15 Year 2004 concerning State Finance Accountability and Management Audit and Chapter 9 article (1) letter e of Law No.15 Year 2006 concerning Finance Audit Board (BPK), BPK has to revise and enhance the SAP 1995. Support for the development of the new Auditing Standards by STAR-SDP began in 2005 and was completed by January 2007 through the assistance of two International Consultants (Mr. Jan Van Dam and Mr. Terry McLaughlin) and a Team of Domestic Auditing Standards (Center for Development of Accounting – University of Indonesia). The process of producing the new audit standard comprised of preparation on review of the draft by the BPK revision team, evaluation of the revision draft by the STAR-SDP consultants, consultation and discussion with government,


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academics, and practitioners, exposure to the BPK Board Meeting to gain approval and feedback, and finally a public hearing (assisted by PT. Yurindo Utama) to obtain final input and feedback from the public. The project also funded the printing of the new auditing standard for distribution. After the New Auditing Standard was approved by BPK’s Board in January 2007, BPK issued Regulation 1 Year 2007 concerning the State Finance Audit Standard (Standar Pemeriksaan Keuangan Negara, SPKN) and with that the State Finance Audit Standard (SPKN) was formally implemented and is in full force for audits carried out from FY2008. The changes that SPKN has covered that were specified in Law 15 Year 2004 and Law 15 Year 2006 among others were the type of audits, audit standards, implementation and reporting of audit results, and observation of audit result follow-up by auditee. SPKN lays down the professional requirements for auditors, audit quality and audit reports. Audits carried out based on the SPKN have enhanced the credibility of information that is reported or obtained from the entity that is being audited because the collection and evidence-testing is carried out objectively. The SPKN also provides clear methodology and audit standard of procedures for auditors to carry out three types of audits: financial audit, performance audit, and special purpose audit. Therefore, external auditors now have a clear reference to carry out state finance accountability and management audit. The methodology and approaches defined in the SPKN are also compliant to international standard as development of the SPKN, referring to among others the Generally Accepted Auditing Standards United States General Accounting Office (US GAO), the Auditing Standards of International Organization of Supreme Audit Institutions (INTOSAI), the Generally Accepted Auditing Standards AICPA 2002, and the Standards for the Professional Practice of Internal Auditing 2003. Development of SPKN clearly has met one of the objectives, which are for it to be a reference to quality audit for auditors and auditing institutions in carrying out audit on state finance accountability and management. The establishment of the State Finance Audit Standard has initiated further development of audit guidelines that are useful to BPK’s auditors. Development of the Audit Management Guideline (Panduan Manajemen Pemeriksaan, PMP) in 2008, which is a revision of SAP 2002, has provided BPK with standardized audit procedures, forms, notes, and reports that will be used for preparing Audit Work Plan (RKP), audit planning, audit implementation, audit reporting, and observation of audit result follow-up, audit evaluation, and references related to state finance accountability and management audit. The audit procedures guideline provided by PMP is linked to each stage of audit as follows: the audit planning phase, the audit execution phase, the reporting phase, and the monitoring and evaluation phase. Audit implementation using a combination of SPKN, PMP and BPK’s Code of Ethics has ensured that the audit carried out shall be well managed, strictly controlled, properly guided, and using standardized procedures for each of the three types of audit, as well as for each phases of audit. Highlight of achievements: In order for BPK to optimally carry out its task and mandates in promoting transparency and accountability of state finance in consideration of its limited human resources and budget but also taking into account the large number of objects to be audited, BPK needs a well structured audit strategy based on scale of priority. BPK uses audit priority as follows: Firstly, audit of financial statements that have to be carried out routinely every year. Secondly, audit of state revenues and expenditures both at central and local levels. Thirdly, audit


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of state expenditures that are susceptible to corruption, such as procurement of goods and services. Fourthly, audit of strategic sectors in the economy and those that would affect a large number of people.

Ministries Financial Audit Result BPK started to carry out audit on Ministries (LKKL) from 2006, whereas before that period a Ministry did not prepare a financial statement but a ministry budget accountability report. Table 2 below shows the improvement of audit opinion results for the ministries. BPK findings was that due to the limited audit coverage; the weakness of SPI on recording and reporting supply, revenue, and fixed assets; and non-compliance with the law and regulations, BPK provided disclaimer opinion to the 33 LKKL. However, in 2009, disclaimer opinion were decreased only to the 8 LKKL.

Table 1

Opinion for Ministries for Year 2006 – 2009

LKKL Opinion

Total Unqualified Qualified Adverse Disclaimer

FY 2006 7 37 0 36 80 FY 2007 15 31 1 33 80 FY 2008 34 30 0 18 82 FY 2009 44 26 0 8 78

Source: BPK

Local Government Financial Audit Result Audit of Local Government Financial Statement (LKPD) has been carried out by BPK since FY2004. However, audit of LKPD in FY2004 and FY2005 was performed on the budget realization report. Local Government has been required to prepare financial statements only since FY2006, which consist of budget realization report (LRA), balance sheet, cash flow report, and notes on the financial statement (CaLK). BPK’s opinion of LKPD for the period FY2004 – FY2009 can be seen at the following Table 3. BPK findings was that the internal control system was weak and there were issues of non-compliance with prevailing law and regulations such as: weak accounting and reporting control system, weak revenue and expenditure budget realization control system, and weak internal control system. In general, BPK findings on the weak internal control system (SPI) were due to the inadequate planning, non-existence coordination between related parties, the authorized control officer was not doing his job optimally, and the inadequate human resources competency. BPK audit result of LKPD for year 2009 uncovered state losses due to 1,246 cases in a total value of Rp307 billion consisting of fictitious procurement of goods and services; incomplete supply of goods and services; mark-up; personal use of government assets, multiple travel expenses claims, and others.


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Table 2 Opinion for Local Government for FY2004 - FY2009

LKKL Opinion

Total Unqualified Qualified Adverse Disclaimer

FY 2004 21 249 10 7 287 FY 2005 17 308 12 25 362 FY 2006 3 326 28 106 463 FY 2007 4 283 59 123 469 FY 2008 12 324 31 116 483 FY 2009 14 259 30 45 348

Source: BPK RI. Based on the experience of BPK audit of LKPP, LKKL, and LKPD for the period of FY2004 – FY2009, there are a number of recommendations made by BPK for improving the state finance internal control system and promoting improved transparency and accountability in the Public Expenditure Management (see “Recommendations” in Chapter 4).

Performance and Special Purpose Audit Result During the period between FY2004 and FY2009 period BPK has increased the coverage of performance audit and also audit for special purposes, especially for aspects of financial statements such revenues, expenditures, offshore debt, and other topics that involved financial balance, forestry management, forestry rehabilitation, subsidy, management and accountability of school operational support fund (BOS). Some findings by BPK concerning performance audits are: (1) Implementation of Preventing and Restraining of Bird Flu in 2006 and 2007 was not well coordinated between central and local government; (2) the Land Affairs Office’s services are not effective, since many of the officers are involved in the front office receiving application documents and at the same time are also in the back office processing the documents, thus providing ample opportunity for abuse of authority; (3) education services at four Education Divisions in 2008 were not effective due to the service provided not being in accordance with the minimum service standard, the uses of goods not being according to plan, and uses of budget not being directed towards the objectives. Special purpose audit (PDTT) has only been carried out by BPK since 2008, and it covers among others audit of financial matters (with topics such as revenue, expenditure, foreign debt, financial balance, etc.), investigative, and audit of government internal control system, as well as audit with the perspective of environmental and sustainable development. The highlight achievement was PDTT of Oil and Natural Gas in 2008 whereby BPK has successfully uncovered the fact that a contractor for the State Oil Company (Pertamina) had miscalculated the depreciation cost of a contract over a certain period and was therefore obligated to make a refund to Pertamina thus creating a savings for the state finances in the amount of US$1.31 billion. Other findings of BPK in respect of the oil and natural gas sector have been used by the Government in issuing management policy based on cost recovery approach and using cost recovery control in order for the upstream management of oil and gas to become more transparent and accountable.


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In connection with Law No. 15 Year 2004 and Law No.15 Year 2006, BPK has achieved the establishment of better cooperation with Public Accountant Firms (KAP) and has issued BPK Decree No.10/K/I-XIII.2/7/2008 concerning Requirements of Public Accountants and Public Accountant Firms for carrying out state finance audit. As of August 2009, there were already 109 KAP and 340 auditors that have been registered and published on BPK’s website. The KAP and registered auditors have eased the burden of BPK to a degree, as they have been carrying out external audit on financial statements of State Owned Enterprises (BUMN), Local Government Owned Enterprises (BUMD) and Public Service Institutions (BLU) since 2008. Outcome: The development and implementation of the State Finance Audit Standard, the Audit Management Guideline, the Audit Guidelines (for Financial Audit, Performance Audit, and Special Purpose Audit) and other Technical Audit Guidelines have significantly improved the performance and quality of BPK audit. Since the audit reform has started, BPK has successfully increased its audit coverage in the performance audit, special topic audits such as in foreign debts, fiscal balance, implementation of subsidy, and a number of high profile audits. Currently, BPK’s audit quality has earned more recognition from the public, as well as from the international circle as reflected in the peer review report carried out by The Netherlands Court of Audit in July 2009, which stated the following conclusions and recommendations:

• The manuals for financial audit, performance audit and special purpose audit are appropriate and explain the different types of audit. They define general principles and set more specific criteria and approaches for the phases in the audit process (planning, fieldwork, reporting, follow-up and evaluation). The audit methodology has been compared with international auditing standards and it has been concluded that it was compliant;

• The general approach to financial audit complies with international standards;

• The performance audit manual complies with international standards, but there is some room for improvement to make it more useful to the auditors;

• BPK's Board approved the special purpose audit manual in February 2009. The manual complies with international standards. However, it does not adequately clarify what type of audit should be used when or the procedural differences between the three types of special purpose audit.

Source: Peer Review by NCA

Increase Oversight Effectiveness of BPK Board - Acquire Experience from Other SAIs

From FY2006 through FY2009, and supported by STAR-SDP, BPK has carried out comparative study activities at other Supreme Audit Institutions in order to increase the oversight effectiveness of the BPK Board. BPK’s activities covered: The comparative study at US GAO and OAG Canada in FY2006 provided knowledge and experience in Human Resources Management, Research and Development, Training Center, IT Audit and International Relations.


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The comparative study at Auditor-General New Zealand in FY2006 provided an opportunity to enhance oversight effectiveness of the BPK Board through acquiring knowledge on Quality Assurance of Audit, Information Technology, Local Government Audit, and Human Resources Management. The comparative study at SAI Germany and France in FY2007 focused on obtaining knowledge and experience on Organizational Issues, Human Resources Management, Education and Training, Research and Development, Information Technology, Internal and External Relationships, and Auditing. The comparative study at SAI India in FY2008 covered knowledge and lessons learned in Utilization of Information Technology in Audit Implementation in India, Roles of SAI in Corruption Eradication Efforts in India, Assessment Centers at CAG India, which are used to assess the performance of the auditors, Standard Operating Procedures (SOP) applicable to CAG India, Manual / guidelines used in audits, and Quality Assurance System applied at CAG India. The objectives of the comparative studies were to obtain knowledge, experience and sound lessons learned from the other SAI so that BPK-RI has the capacity to:

• Enhance the quality of audit by improving the audit planning process, implementation and reporting phases, and better application of information technology in supporting the auditor in carrying out the audit, as well as making for easier handling of the monitoring and supervision efforts by the managers;

• Identify policies, tasks, functions, methods, facilities and infrastructure available in INTOSAI members that could be implemented in BPK-RI;

• Improve utilization of information technology for supporting the implementation of performance audit, financial audit, compliance audit, and managing quality assurance.

Highlight of achievements: As a result of these comparative study activities, BPK is currently actively involved in several committees, working group, task force of International Organization of Supreme Audit Institutions (INTOSAI) and Asian Organization of Supreme Audit Institutions (ASOSAI). BPK involvement in the international institution circle is in order to improve its audit performance, organization and human resources quality. BPK also has bilateral cooperation with several other SAI in order to strengthen, enhance, and develop the framework for cooperation based on mutual beneficial relationships between the SAIs in the field of public sector audits. As of December 2009, BPK has signed 13 MOU with other foreign SAI for improving institutional capacity and human resources capability. BPK has been involved in the Working Group on Environmental Audit (WGEA), as a member of the steering committee in 2004 and since then being responsible for preparing a Guidance Material on Auditing Forestry, and BPK was actively involved in the preparation of Guidance Material on Auditing Mining & Minerals, Auditing Fisheries, and Auditing Climate Change. BPK hosted the 8th WGEA meeting in August 2009 in Ubud, Bali. The outcome of this activity has been the improvement of BPK in carrying out environmental audit as shown by one example of the findings of BPK special purpose audits between 2006 – 2007 on the Department of Energy


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and Minerals Resources (ESDM), 4 provinces, 28 local governments, 1358 holders of Mining License, 40 contractors, and related institutions: from the concession provided by the Department ESDM to 3 contractors and one holder of KP concerning a total land area of 238,962 Ha it was found that 98,548 Ha was in Kutai National Park, and 130.82Ha was in protected forest in the East Kutai region. Sixteen heads of local government in South, Central, and East Kalimantan and South Sumatra provided concessions of 1,757,477 Ha of land, whereas 1,209,712Ha was in production forest, protected forest and conservation forest. Moreover, BPK has also taken six initiatives beyond the call of duty that have had an effect on executives and legislatives: extending the audit objects, both from the revenue side and state expenditure side; requiring auditee to hand in their management representation letter; requesting auditee to prepare action plan for improving the opinion of financial report audit; assisting government entity in the implementation of their action plan, including to overcome the scarcity of human resources with knowledge in accounting and financial management; structural reorganization of State Owned Enterprises (BUMN), Local Government Owned Enterprises (BUMD), and Public Services Institution (BLU) so that they are managed in a more corporate manner and become sustainable; and suggesting to the House of Representatives (DPR), Regional Board of Representatives (DPD), and Regional House of Representatives (DPRD) to establish a Public Accountability Board (PAP). As a result to the six initiatives since year 2008 there have been signs of positive improvements in the state finance system: (1) significant number of government institutions at central and regional level have provided action plans to BPK for the improvement on their financial audit opinion; (2) increased improvement has been noted on financial statement audit opinion of government institutions, including for large ministries such as Ministry of Industry, Ministry of Finance, Ministry of Defense, Ministry of Agriculture, and Ministry of Education; (3) there has also been notable improvement in local government financial statements audit opinion between 2006 and 2008; (4) legislative institutions have also met BPK’s recommendations to establish a State Finance Accountability Board through Law No. 27 Year 2009 concerning MPR, DPR, DPD and DPRD; and finally the Directorate General of Tax has become more cooperative in being audited by BPK. Outcome: As a result of the number of comparative studies carried out by BPK under -STAR-SDP support the leadership and direction from BPK’s Board have been improved. BPK’s Board has broadened the coverage of audit objects, issued direction to increase the number of performance audits, provided more and more advisory services, and boldly carried out a number of high profile audits. Clearly all of these initiatives show that the oversight effectiveness of BPK Board has improved.

Adjust BPK Code of Ethics to be Consistent with International Standards

Through this STAR-SDP activity, Domestic Consultants (Sukrisno Agus and Dwi Andayani Budi Setyowati) were contracted in June 2006 to assist BPK in developing a new code of ethics. The consultants reviewed the draft of the new code of ethics prepared by the BPK’s drafting team and provided feedback and recommendations. As of August 2007, BPK supported by the consultants has successfully developed a comprehensive New Code of Ethics for the Board members and


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auditors. Embedded in the code of ethics are the three basic elements of independence, integrity, and professionalism. These three elements shall be the basis for regulating the attitude of BPK’s staff and auditors in carrying out their jobs for the sake of upholding the prestige, honor, image, and credibility of the institution. The code of ethics also includes the mechanism for the enforcement of the code of ethics, as well as the type of sanctions. Enforcement of the Code of Ethics received serious attention from the Board of BPK because the position of state finance auditors is a profession that is most susceptible to issues such as abuse of authority and conflict of interest. Therefore, BPK has established an Honorary Council of Code of Ethics (consisting of three BPK officers and two academics) to enforce the Code of Ethics. BPK has also taken the initiative of properly disseminating the Code of Ethics among the management and professional staff to ensure that all of its auditors are familiar with the values and principles. For example, in order to ensure independency in carrying out an audit the auditor is prohibited from: (1) being submissive to intimidation or pressure from another party; (2) leaking any information of the auditee, and; (3) being influenced by prejudice, interpretation or other interest, be this the auditor’s personally or another party’s interest in the audit result. Furthermore, in accordance with the new Code of Ethics in every audit engagement, the auditors must sign a statement of independence to ensure the state of independence from the entities to be audited.

A peer review carried out by the Netherlands Court of Audit recommended that in order to keep the Code of Ethics alive, BPK should periodically reiterate its values and principles in various ways for both newcomers and established employees and for both senior and junior staff. Furthermore, the peer review team recommended that in addition to the Code of Ethics, a self-assessment method for SAIs could improve awareness among BPK’s personnel of risks to their own integrity. Outcome: The development and enforcement of BPK’s Code of Ethics has provided BPK auditors with a high standard of self-esteem, respect, image, and credibility in carrying out their duties. Such outcomes can certainly be enhanced if BPK diligently follows-up the recommendations provided by the NCA peer-review.

Develop New Techniques for Presenting Audit Reports A domestic consultant (PPA Economic Faculty of University of Indonesia) was contracted in May 2007 and started work in June 2007 to develop new techniques for presenting BPK-RI audit reports. After a draft was developed by the consultant, a workshop and afterwards simulated tests were carried out by the consultant for every type of audit before the techniques were tested on a selected pilot-project. A final workshop was organized to validate the draft manual based on the pilot-project results. Final drafting of the Techniques and Procedures Manual for BPK Audit Reports was completed by taking into account BPK feedback and recommendations. The final draft manual was presented to the BPK Board in February 2008 to obtain its approval.


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According to the assessment made by The Netherlands Court of Audit, the BPK Audit Reports were very long, contained many findings and referred in most cases to shortcomings only and not to causes and effects. Because some financial audit objectives can be defined as performance audit objectives, the review team suggested that when BPK auditors are assessing an internal control system and compliance with laws and regulations, for example, the BPK auditors have already partly assessed in some aspects the performance audit domain.

“To increase the effectiveness of BPK reports, it was recommended that BPK reports should be more concise with a strong focus on causes, effects and solutions and not merely on findings. Furthermore, BPK should make an effort to enhance the attractiveness of its reports by using communication experts and more visualizations to present its analysis and conclusions”.

Netherlands Court of Audits Peer Review July 2009 Outcome: Currently BPK’s audit reports are better understood and used more by its stakeholders especially by DPR and DPRD.

Develop Improved Methods for Assessing the Use of New Standards and Procedures (Quality Assurance)

A domestic consultant (Public Accountant Office of Kosasih and Nurdiyaman) was contracted in May 2007 to assist BPK in developing a quality assurance system. The consultant developed the first draft of new standards and procedures in quality assurance based on the analysis of five Supreme Audit Institutions practices. After the draft of Quality Assurance Guideline was discussed with BPK and tested on a pilot basis, a final version was prepared and presented to the BPK Board to obtain their final approval. In order to ensure the quality of state finance audit, BPK established and implemented the Quality Control System (Sistim Pengendalian Mutu, SPM). The SPM is an important element to achieve reliable assurance in that an audit is in compliance with prevailing laws and regulations, as well as the BPK Audit Guidelines. SPM, which supports quality of an audit consists of nine elements: (1) Independence and Mandate; (2) Leadership and Self-governance; (3) Management of Human Resources; (4) Audit Standard and Methodology; (5) Institutional Support; (6) Relations with Stakeholders; (7) Continuous Improvement; (8) Results, and; (9) Audit Performances.

To obtain reliable assurance that SPM has covered all of the quality control elements, BPK established a Quality Assurance System (SPKM) in March 2009. Based on the BPK decree Number 3 Year 2009, ITAMA will be responsible for carrying out internal quality assurance against all SPM elements as stated above, while a peer review shall be responsible for the external quality assurance review. BPK internal supervisory board has planned to carry out a review on all of the first eight elements within the next four year period (2010 – 2013) to ensure that quality assurance is running effectively before a peer review is to be conducted in 2014.


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Source: BPK-RI

According to the peer review conducted by the Netherlands, BPK has fulfilled the basic requirements for quality assurance by means of several instruments. However, the development of a description of the vision, tasks, players and relationships between the instruments necessary for quality assurance is recommended. Outcome: BPK’s quality assurance system has been established and implemented for the FY2010 – FY2013.

Develop HRM Plan Consistent with New Audit Procedures

The Audit Board of Republic of Indonesia (BPK) has acknowledged and put into effect the BPK’s Strategic Plan for FY2005 – FY2010. In order for its implementation, the strategic plan has to be translated into operational work-plans by all units of BPK. According to the Human Resources Bureau, the Human Resources Development Plan was set up in order to provide direction for the Human Resources Bureau, Training and Education Center Unit, Planning, Evaluation and Development Unit as the custodians who are responsible for managing human resources matters in BPK.

Supported by the STAR-SDP, BPK contracted a domestic consultant (PT People Prime Consultant) in November 2006 to assist BPK in developing a HRM plan. The consultant developed seven modules for supporting the development of a BPK Human Resources Management Plan: (1) Strategic Organization Review; (2) Position Analysis; (3) Performance Appraisal System; (4) Development Plan of Career; (5) Assessment Center Plan; (6) Design of Officer Development Program; and (7) Implementation Plan.

BPK clearly understands that the quality of the people working at BPK forms the backbone of BPK's audit performances. The quality of audit results is highly dependent on the capacity of the auditor in planning an audit, implementing the audit in accordance with the standards, analyzing available information, preparing a report, and following-up on audit recommendations. Therefore, BPK stresses developing and achieving human resources with high integrity and professionalism that can support BPK efforts in pushing for a more transparent and accountable state finance management. In order to address the issues of the human resources management, BPK has

MSDM=HRM S&MP=Audit Standard and Methodology DK=Institutional Support PB=Continuous Improvement Hub BPK= Relation Stakeholders Hasil= Results I&M=Independence and Mandate, KTKI=Leadership and Internal Governance


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successfully developed the Human Resources Management Plan (HRM Plan). The HRM process according to the HRM Plan is divided according to the stage of employee’s progress from recruitment stage until resignation or retirement stage as shown by Diagram 1 below. At the Orientation stage, BPK recruits new employees based on the human resource planning using certain method or tools that are adjusted according to the requirements of the vacant position. Candidates who successfully pass the selection are given the status of CPNS and orientation training and apprenticeship for a year. At the end of the year the candidate is evaluated to determine whether they deserve to be BPK staff. At the Performance and Output stage, all BPK’s employees have equal opportunity to pursue a career in accordance with available career management. Competency and performance assessment are carried out on the employees to determine whether they are able to pursue a better career, should remain static, or even in some cases be demoted in accordance with the applied performance management criteria. The employees at this stage are also given training and education in addition to their assignments. The Resignation and Retirement stage is the final stage of a BPK employee being a civil servant. HRM plan tries to accommodate by having a retirement preparation program and if possible to provide early retirement for employees who qualify for it.

Diagram 1 BPK’s Human Resources Management Process

Source: BPK Audit Forum, Volume XII, October 2009

Highlights on the achievements: BPK’s HRM development efforts and initiatives have achieved the following:


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Staff Performance Issue

BPK's existing staff classification and remuneration system is, in general, still based on its former ranking and qualification periods system rather than on employee performance. However, a major success is that promotion is no longer based on seniority. Further negotiations with the Ministry of Civil Servant Empowerment are taking place to modernize BPK's employment conditions. BPK has already enhanced its HRM policy by allowing early retirement in combination with early pension/a golden handshake. BPK has increased its staff from 2,823 (1,664 at Head Office and 1,159 at Regional Offices) in FY2004 to 5,462 staff (2,468 at Head Office and 2,994 at Regional Offices) in 2009 through a strict recruitment process and in line with their HRM Plan. HRM Instruments Issue

BPK's HRM unit has developed a variety of modern instruments such as national placement policy based on educational background, BPK-sponsored studies, periodic rotation policy between the regional offices and head office, promotion system based on civil service criteria, competence evaluation, education, experience and input about actual performance, and career development program in which there is equal opportunity to work in audit and non-audit units. Since many of the HRM instruments are relatively new and several supporting provisions have not yet been fully enforced, it will still be some time before the instruments are fully effective and enforced.

Resources Allocation Issue

According to information supplied by the Human Resources Bureau, the ratio of BPK's support staff to auditor directly involved in audit is almost 40/60. Although there is no general target figure for this ratio it might be rewarding to evaluate the actual need for such a high percentage of support staff. Although there is no clear line between direct and indirect activities, it is safe to assume that given BPK's many challenges the current ratio is not optimal. Outcome: The HRM plan has been implemented and enforced by the BPK Board and has provided clear guidance for management and implementation of HRM policy and it has improved the staff utilization, as well as addressed some of the human resources issues.

Conduct Professional Courses for BPK to Meet International Best Practices

BPK conducted 10 training activities in 2006 covering: (1) Fraud Detection and Investigation; (2) IT Training for BPK Regional Officers; (3) Audit Electronic Data Processing (EDP); (4) Legal Aspects of Public Accountants; (5) VBA for Excel; (6) Accounting Policy and State Accounting System in the Regions; (7) Legal Matters; (8) Public Works; (9) Regional Financial Accounting System, and; (10) Procurement Certification of State Goods and Services.


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In 2007 BPK conducted another 3 types of training activities covering: (1) Banking Training; (2) Development of Competency and Professionalism in Handling Indications/Cases, and; (3) Secretarial Courses. Between 2005 and 2010 BPK has utilized STAR-SDP support to increase the number of trained staff with the following outputs: 877 staff were trained in public sector accounting; 56 staff was trained in HRM; 56 staffs was trained in Law; 350 staffs was trained in management; 544 staff received training in general accounting; and 30 staff in information technology.

Acquire International Professional Skills, including Certification in Specialized Audits

The project design anticipated that 200 staff members of BPK-RI should benefit from international education, professional certification, and participation in secondment programs. Based on this activity, BPK achievement in the number of staff acquiring international education and professional certification is as follows: • International Certification

A selected number of BPK-RI staff participated in international certification efforts with the following results: 28 staff were successfully awarded the Certified Fraud Examiner (CFE); 15 staff were successfully awarded the Certified Internal Auditor (CIA); and 10 staff were successfully awarded the Certified Information System Auditor (CISA). One staff has successfully acquired a Certified Public Accountant (CPA) certification.

• Short Course Training of Audit in Public Works has been conducted at several BPK regional offices and 60 staff have participated in the training. From 169 staff that participated in the procurement of goods and services training based on Presidential Decree 80, 83 BPK staff were successful in acquiring the certification.

• Secondment to other SAI Under the secondment program of STAR-SDP Project, BPK has successfully sent their staff as follows:

US GAO (FY2005 – FY2010) GAO’s annual International Auditor Fellowship Program is designed to strengthen the capacity of SAIs to fulfill their missions and to enhance accountability and governance worldwide. The objectives for sending BPK staff to this secondment activity were: to enhance skills needed for strengthening the institutional capacity of BPK RI; to foster continuous learning and knowledge sharing, and; strengthen professional networks to promote institutional relationships between Supreme Audit Institutions (SAI), donors, and other partners in the accountability community. Since FY2005, BPK has sent 10 staff to participate in this program.

Auditor General New Zealand (FY2005-2006) The objective for sending BPK staff to this program was to understand the function and task of the Auditor General and to gain experience in conducting financial audit in New Zealand. BPK has sent 11 staff through this program.


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Jabatan Audit Negara, Malaysia (FY2007 – FY2009) In the 2007 program, BPK’s auditors were sent to learn about the process of audit on tax revenue including the preparation of audit strategy, planning, risk analysis, audit methodology, audit field work, information system audit, and audit reporting. In the 2008 program, BPK’s auditors were sent to learn the tax system applied by the Revenue Board of Malaysia (IRB) and the tax audit process and methodology conducted by JAN. In the 2009 program, BPK’s auditor were sent to learn the customs and excise systems applied by the Kastam Diraja Malaysia (KDM), the customs and excise audit process and methodology (JAN), and the audit plan memorandum. Netherlands Court of Audit (FY2009) The objective for sending BPK staff to this program was to learn how to improve human resources systems through development of the competency model, assessment of personnel competency, setting of individual key performance indicators, evaluation of personnel performance, development of personnel competency, personnel performance reward, coach and mentor staff, and empowerment of line managers. BPK sent 4 auditors to this program.

China National Audit Office (CNAO), Beijing, China (FY2009) The objective for sending BPK staff to CNAO was to learn how to enhance capacity in IT audit, knowledge sharing, and strengthen professional networks in promoting institutional relationships between Supreme Audit Institutions (SAI), donors and other partners in the accountability community. BPK has sent 4 staffs through this program.

Acquire Professional Skills / Degree Program

Based on this activity, BPK managed to achieve an increase in the number of staff with professional skills and degree programs as follows:

Scholarship for Masters Degree in Accountancy at UGM Yogyakarta: The first batch has started in 2006, and 20 participants have successfully completed the Masters Program. Scholarship for Masters Degree in Management at UGM Yogyakarta: The batch started in 2009, and 19 participants have successfully completed the Masters Program.

Scholarship for Masters Degree in Information Technology at ITS Surabaya: The batch consisting of 10 participants have started their study in January 2009 and now have completed their study.

Scholarship for Masters Degree in Public Policy at UI Jakarta: The batch consisting of 19 participants have started studying in January 2009 and have now completed their study.

Scholarship for Masters Degree in Law at UGM Yogyakarta: The batch consisting of 18 participants have started in January 2009 have now completed their study.


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Scholarship for Masters Degree in Asset Valuation at UGM Yogyakarta: The batch consisting of 20 participants have started in January 2009 have now completed their study.

Scholarship for Masters Degree in Forensic Accounting at Wollongong University, Melbourne in Australia: The batch consisting of 5 participants have started their study in January 2009 have now completed their study.

International Short-courses / Seminars

Based on this activity, BPK achievement in the number of staff having completed specific short-course training or seminars can be seen below. • The International Short-course on Environmental Auditing in Sydney (FY2008), and the

Course/Seminar Level A Certificate in Occupation Testing in London, United Kingdom (FY2008).

• Several short-courses in FY2009 comprising of: Applying International Financial Reporting System (IFRS) course in Malaysia; International Petroleum Contract course in Sydney, Australia; Planning, Monitoring and Evaluating course in Hanoi, Vietnam; Strengthening Investigative Audit Capacity for Investigative Auditors course in Singapore and China; Executive Coaching (Singapore); Risk Based Operational (Hongkong); Investment in Excellence (Singapore); Mastering Financial Negotiation (Singapore); and Defense Economic Program (England).

• By 2010 the BPK-RI staff have completed several short-courses comprising of: Coaching for Managers in Singapore; Organization Assessment and Development in Bali; Effective Event Management in Singapore; Managing and Measuring Operational Risk in Paris; Leadership and HRM in Bali; Competency Based Learning in Bali; Environmental Auditors in Sydney, Australia; Training of Trainers & Teachers and Curriculum Design in Bali; Business Process Management in US; Managing Security Sector Resources in UK; Assessor Training in Jakarta; Project and Program Impact Assessment in Canada; Corruption and Anti Corruption Executive Program in Canberra, Australia; Health Program Evaluation – Scoping the Evaluation in Melbourne, Australia; Assets and Liability Management and Capital Adequacy Planning in Singapore; Results Based Management Implementation and Performance Indicators in Kuala Lumpur, Malaysia; Talent Management – Developing Key Personnel in UK; Change Management Certification in Australia; The Sovereign Debt Management Forum in US; Annual Financial Services Compliance in Sydney, Australia; and Project Management in Bali.

Outcome: Through the implementation of the foregoing, international professional skills have been acquired, including certification in specialized audits. BPK has successfully managed and increased the number of staff having international education and professional certification. With the higher number of BPK staff having international education and professional certification BPK has shown that there is an improvement in the capacity of its staff to carry out a wider variety of audits.


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BPK achievement statistics shown below reflect that there has been an improved capacity of staff to carry out a wider variety of audits, as evidenced by the increased total number of audit results: • BPK carry out three types of audits: financial audit, performance audit, and special

purpose audit. Statistics of audits carried out by BPK’s for the period of 2004-2009 showed an increase in the total numbers of audits according to the types of audits: a total of 2,899 financial audit reports, 194 performance audit reports, and 3,070 special purpose audit reports with total findings in the amount of Rp702.65 trillion.

• During the period 2004-2009, performance audit was not a priority issue however, as the

BPK Board had decided to increase the audit objects coverage from 2% in FY2006 to 5% in FY2010. Statistics of BPK achievements in performance audits shows an increase in audit objects: 41 audit objects in 2005, 23 audit objects in 2006, 51 audit objects in 2007, and 61 audit objects in 2008.

• In order to meet the public demand and in the effort of supporting the eradication of

corruption, BPK has strengthened its special purpose audit teams by way of developing a special investigation unit. Achievements in BPK special purpose audit findings, among others were the controversial case of the Indonesian Banking Development Institution Foundation (YPPI) in 2008, as it involved a number of Central Bank Board Members and well-known members of the House of Representatives; the recommendation by BPK to liquidate the Indover Bank Amsterdam (IBA) by the Indonesian Central Bank; and the investigative audit on the General Election Commission.

Develop Curricula for Competency-Based Training

BPK supported by STAR-SDP contracted a consultant in February 2009 to develop a competency-based curriculum, design and deliver modules and other training materials such as case studies, role play and exercises for achieving Human Resources Competency Standards. The contracted consultant has already carried out an in-depth interview of stakeholders, designed the framework for a competency-based curriculum and validated it with the real needs of stakeholders with related positions, identified existing competencies for six job-classes in BPK (Auditors, ITAMA, PISAT, Legal Affairs, IT, and Human Resources), and started development of the syllabus for the six job classes in BPK. As of December 31 2010, this activity has been completed and 30 modules have been produced based on the priority needs of the six job classes in BPK.

Outcome: BPK has developed and established a curricula for competency based training.

Laboratory of Local Government Finance The objective of this activity was to develop a BPK learning laboratory of local government financial management and its audit function according to the new State Auditing Standards. BPK supported by the STAR-SDP contracted a consultant to develop a curriculum and modules for


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training of local finance management practices, curriculum and modules for financial management auditing in accordance with SPKN, design a training laboratory, and conduct training of trainers.

The Laboratory of Local Government Finance was established in 2008 and since then has started to prepare modules on Local Government Financial Management and Audit to be used by the newly appointed auditors. Outcome: Well-designed training modules have been developed and qualified trainers for Local Finance Management Training have been trained and used especially by the newly joined BPK auditors.

Establish Information Technology Policy for Acquisition, Support and Replacement and Asset Management

BPK had prepared and established an IT policy by 2007. The BPK IT policy covers IT for Managing Knowledge Repository, IT for Analysis and Decision Making, and IT for Operational Activities Tool Outcome: Improved streamlining of IT purchases, utilization, replacement have resulted in lower IT costs and greater staff productivity.

Expand Infrastructure in Regional Offices

When Law Number 15 Year 2006 was put into effect, it provided a mandate to BPK to open regional offices in all of the 33 provinces in Indonesia. In 2004, BPK had 7 regional offices in 7 provinces. As of 2009, BPK already had regional offices in every province. This means that within the period of just 5 years BPK has managed to establish 26 new regional offices. This increase in the number of new regional offices established has also significantly increased BPK’s assets from Rp204 billion in 2004 to Rp2.7 trillion in 2009, a 1,125-fold increase. Expansion of the BPK organization to 33 regional offices with representation in each of the provinces in Indonesia has positioned Information Technology (IT) as an important supporting element in order to increase the productivity, efficiency and work effectiveness of BPK. Before the expansion of the BPK organization, utilization of IT was limited to simply providing IT as facilities; however, during the period 2004 until 2009 development of IT was aimed at supporting efforts to achieve the BPK strategic plan and supporting BPK in carrying out audits. Audit activities by BPK require that its auditors be where the action is, meaning that BPK auditors have to be in close contact with all government programs and the people involved in carrying out and being responsible for the programs. The addition of the new regional offices made the efforts to obtain maximum information a very costly matter. Therefore, particularly with the use of IT, costs can be limited using principles of economy, efficiency and effectiveness. Maximum coverage with minimum effort must be a priority. Under the STAR-SDP Project, BPK has managed to equip the headquarters and regional offices with 1,800 new computers (450 PC and 1,350 Notebook), thus raising the ratio of total notebooks


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against professional staff from 1:6.55 in year 2004 to 1:2.00 in 2010. This improved ratio means that there are more professional staff in BPK that are better equipped to carry out audits in a more efficient manner than there were in 2004. In the past BPK’s auditors were criticized for using limited samples in their audits. Currently, by using computerized data analysis tools BPK’s auditors have the capacity to review one hundred percent of the data. Automated data analysis tools have made filtering large volumes of data much more practical and effective, providing auditors with the ability to work with greater quantities of data, and with data that is more complex. Outcome: A better prepared audit planning in a large audit assignment that reduces the complexity of audit implementation, improve the ability for managing different activities simultaneously, and increase the effectiveness of audit. Improved communications between team members that eliminates difficulties in information sharing activities between them and reduces resources needed in carrying out the audit.

Consultant for Developing Assessment Center

The objective of this activity is to support the BPK Human Resources Management Plan through the development of a comprehensive BPK-RI assessment center for all BPK-RI management and staff. The consultant for developing the assessment center was contracted in August 2008. Since then, training for the assessment center management and the BPK-RI assessors has been conducted (10 assessors have been certified). The consultant has developed an Assessment Center Manual and Management System, provided assessment tools such as psychometric test, competency questionnaires, competency-based interviews, problem analysis for BPK management and auditors, provided reference book for Assessment Center and Human Resources Management, and has started the assessment process for 100 BPK-RI management and staff. The assessment center has been established, fully staffed, and equipped. Assessment of all BPK staff will be conducted in time and in line with the HRM Plan. After a full and comprehensive assessment has been completed the HRM Bureau will have a better idea on how to optimize management of BPK human resources effectively and efficiently; for example, some staff may require extra training, others may need to be rotated, some will have to take early retirement, etc. As of December 2010 the assessment center has been established, the assessors have been selected, trained, and BPK has started to assess BPK officers and staff. Outcome: Better management of human resources capacity and BPK’s capacity building strategy and policy have enhanced BPK’s performances as external auditor.

Develop Program for Public Awareness and Support for Effective Audit

A domestic consultant (Inke Maris and Associates) was contracted in October 2006 to design and develop a Public Relations Strategic Plan 2008-2012. In general, the objective of this activity is to


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build public awareness of BPK-RI in order to improve its roles and performance in the public interest, and in particular to provide stakeholders with a friendlier product concerning BPK audit findings. In 2009, the consultant has provided a final version of the Public Relations Strategic Plan, a Standard Operation Procedure (SOP) for BPK Public Relations Bureau, capacity-building workshop for BPK public relations officers and staff, carried out talk shows on radio and television, and held an exhibition for “International Public Service Expo 2009.” Based on the strategic plan BPK has developed a Message House, which is mainly a collection of key messages concerning BPK-RI that will be communicated continuously to the public. It is forecasted that the messages will create a public opinion in regard to the real role and functions of BPK. The messages contain information on the vision of BPK, jobs and achievements of BPK, participation of stakeholders in BPK’s work, norms and BPK strategic plan. All of these messages have been communicated to the public using a communication mix strategy. The communication mix strategy implemented has used the combination of the three main communication channels, which are public relations, advertising, and mass communications. The combination of the three communication channels has successfully delivered the key messages in a clear, efficient, and effective manner. Achievement on this activity, for example, was the TV Talk Show entitled “BPK Review,” which earned a high rating (2nd ranked among Metro TV Talk Shows). Outcome: Improved public awareness of the role and responsibilities of public sector auditors. As of 31 December 2010 BPK has started to further develop and maintain their own public awareness program by using their budget.

Peer Review The Audit Board of the Republic of Indonesia (BPK-RI) is a Supreme Audit Institution, which is dedicated to safeguarding good governance by ensuring transparency and accountability of the public sector of the Republic of Indonesia. In order to function as a Supreme Audit Institution it must safeguard its independence, which in turn requires the responsibility of being transparent and accountable. The Netherlands Court of Audit (NCA), as a member of the International Organization of Supreme Audit Institutions (INTOSAI) was asked to conduct a peer review to assess the quality of the BPK-RI institution. The NCA conducted its peer review of BPK from December 2008 until June 2009, and the final report was submitted in July 2009. The NCA peer review found that BPK’s role as a SAI is now secure, as nearly all the crucial elements of Law Number 15 Year 2006 have been effected. The review also found that the BPK-RI audit manual framework, consisting of rules and regulations, manuals and guidelines, complies with international standards. Furthermore, BPK-RI has established and put in place a quality control system, and a quality assurance system has been designed.


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The peer review team also found that Audits reviewed had been performed in compliance with BPK’s audit manual framework. All quality control elements identified by BPK were evident in the audit process reviewed. Moreover, the work performed by selected BPK-RI audits teams provided reasonable assurance to express an opinion. The BPK-RI auditors interviewed by the NCA peer review team had a very good knowledge of their audit subject, audit objective and audit methodology. They all followed internal guidelines and were able to provide the proper supporting audit documentation. Finally, the NCA peer review found that BPK had already followed up the recommendations made by the previous peer reviewer. Therefore, based on the above findings it was concluded by the NCA peer review team that since 2004 BPK has transformed its organization into a modern Supreme Audit Institution with legally embedded independence, a strong mandate and qualified staff to realize its tasks and objectives. Outcome: BPK better understands its strength and weakness and how to improve into becoming a Supreme Audit Institution of the Republic of Indonesia with internationally accepted standards.

3.2.2 MOHA-IG 3.2.2.1 Background and Issues

State auditing arrangements require an external audit function (reporting to the legislature) and an internal audit function (reporting to the executive). The internal audit function is integral to the internal control system under the executive and hence complements and facilitates external audit, which utilizes its findings. At the regional government level, regional internal audit agencies (BAWASDA), formed as part of the implementation of Laws 32 and 33, report to the respective chief executive.

The key role of MOHA-IG in the STAR-SDP Project is to facilitate the empowerment and capacity building of BAWASDA at the Provincial and District level. This would enable the regional institutions to meet the requirements of the internal audit functions of the local governments in line with Law Number 32 Year 2004 concerning Local Governments. Given their role in reporting to the executive, independence is always a problem for BAWASDA, as they need their position, structure, and responsibilities clarified through decrees and regulations across regional governments.

Primary Issues:

The more significant challenge of BAWASDA is their inability to carry out financial and operational audits, as most staff members do not have an educational or professional background in accounting or auditing (about 40% of BAWASDA staff did not complete high school study and only 6% of the staff had academic training in accounting), plus the turnover of qualified staff is

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3.2.2.2 Assessment of Performances

Establish component implementation management unit

In order to implement and manage the STAR-SDP Project MOHA-IG has established the MOHA-IG PIU by providing the necessary staff and equipment. Under the ADB procurement guidelines the project has provided consulting services and domestic staff such as component implementing manager, secretary, and support staff. Furthermore, the MOHA-IG has made procurement of goods consisting of computers, printers, and vehicles. Procurement of said goods was carried out in accordance with ADB procurement guideline.

Develop Model Regulation

MOHA-IG has completed a standardized model regulation in the Format of a Head of Region’s Decree (Surat Keputusan, SK) and Regional Law (Peraturan Daerah, Perda) that addresses the roles and responsibilities of BAWASDA. MOHA-IG has also developed an action plan to disseminate the standardized SK and Perda through a series of familiarization workshops. To ensure national consistency, MOHA-IG has established an inter-governmental team to develop model regional regulations (SK or Perda) to be adopted by BAWASDA. The regulation shall, among others, require BAWASDA to review Local Government Accountability Statements. MOHA-IG has disseminated the draft nationwide as the basis for formal adoption by the Local Governments and has established a tracking system to monitor the adoption of the model regulation by the Local Governments. Outcome: The model regulation has been successfully developed and disseminated. The model regulation contains the objectives, duties and responsibilities of the BAWASDA. Implementation of this activity by MOHA-IG to the Regional Governments shall make clearer the roles and responsibilities of BAWASDA for carrying out internal audit at the regional level. In turn this will lead to improved quality and consistency in audit activities in the regional governments. To ensure sustainability, constant updating of the model regulation is necessary so that it will always remain in compliance with current and prevailing regulations and standards.

Develop New Audit Work Procedures

MOHA-IG under the support of STAR-SDP initiative has issued Permendagri No. 1 Year 2010 concerning the application of a new audit work procedure system called the National Level Regional Governance Information System (Sistem Informasi Penyelenggaraan Daerah Tingkat Nasional, SIWASDANAS). SIWASDANAS is an information system for handling audit mechanism that can be accessed on line (LAN) or via the internet. The SIWASDANAS system is available for use by the internal auditors either at Inspectorate General of Ministry of Home Affairs, Provincial Inspectorate, or the Regional Inspectorate, using an internet connection. Outcome: The SIWASDANAS has been established.


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Introduce new Regulations and Work Procedures into Provincial and Local Government MOHA-IG has issued Permendagri No. 8 Year 2009 concerning Guideline of Control of Regional Governance Implementation (Pedoman Pengawasan Penyelenggaraan Urusan Pemerintah Daerah). This regulation provides guidance for carrying out audit on the implementation of obligatory and voluntary functions by Local Government.

MOHA-IG has also successfully developed new audit manuals and practices in 2009, which will provide guidance for its auditors to undertake audit assignment that will be in line with international best practices. Outcome: Clearer separation of authority between provincial and city/regency BAWASDA in carrying out audit on local government. Standardized audit procedures shall improve the quality of the audit.

Establish Public Awareness and Support for Effective Audit The objectives of this activity are to build public awareness by designing public campaigns and compiling a public awareness report to improve the role and performance of MOHA-IG in the public interest and in particular to provide stakeholders with friendlier MOHA-IG audit products. The activities that were carried out on the public awareness effort were to: firstly, identify the existing condition of public awareness for supporting an effective audit; secondly, develop an effective and efficient public campaign model using electronic media, printed media, and interactive dialog; thirdly, produce an audio-visual media campaign in the form of public advertisement as a model for public campaign with the objectives of increasing the public knowledge and awareness in order to support a successful audit process. In a survey on the effectiveness of a public campaign efforts using television broadcast as the media, there is evidence that the number of members of the public who became aware of the issue on “BAWASDA change of name into Provincial / District Inspectorates” had increased by 48.1% from 33.9% to 83%. In another public campaign survey conducted on the issue of “public rights to contribute to an effective audit,” it showed that there was a 33% increase from 33.7% into 66.7% of the number of people who became aware of the issue as a result of the public campaign effort. Outcome: This activity has shown results in improved public awareness concerning the role and responsibilities of public sector internal auditors.

Provision of Audit reports to relevant DPRD Committee

A consultant was contracted under the STAR-SDP Project to assist MOHA-IG in developing a guideline for DPRD to follow-up on BPK’s Audit Report Results. The objective for having prepared the manual, which is named Follow-up of Audit Result of BPK by DPRD was so that Local Governments could follow-up on BPK recommendations.


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After the guideline manual was completed, MOHA issued the Permendagri No. 13/2010 in January 2010 concerning the Guidance of Audit Function Implementation for DPRD to Follow-up of Audit Result of BPK (Pedoman Pelaksanaan Fungsi Pengawasan Dewan Perwakilan Rakyat Daerah Terhadap Tindak Lanjut Hasil Pemeriksaan Badan Pemeriksa Keuangan). Outcome: The oversight function of DPRD has been improved Development and Implementation of Institutional Development Plan by BAWASDA and SEKWAN

All of the 50 BAWASDA and 31 SEKWAN had developed and implemented an Institutional Development Plan (IDP) by December 2009. The IDP activities consisted of procurement of facilities such as vehicles, notebooks, printer, relevant reference books, as well as capacity building through relevant technical assistance/training in order to enhance the individual and institutional capacity of BAWASDA and SEKWAN. The topics for the training were specifically designed to meet the needs of BAWASDA and SEKWAN in the fields of local finance management, accounting, and audit. The training (BIMTEK) with special topics was effective in enhancing the individual capacity of BAWASDA staff, particularly those not having an accounting or public finance educational background. Approximately four to five topics of training were carried out for each individual BAWASDA and about three to four training topics were carried out for each SEKWAN. Training carried out by BAWASDA has addressed their need for additional state auditing and accounting training to improve their capacity in carrying out their major functions, as shown in the percentage of the following training as shown in Figure 2 below :

- Audit Laporan Keuangan Daerah / Local financial statements audit (38.7 %) - Investigative audit (21.7 %) - Review Laporan Keuangan daerah SKPD / Local financial statements review (11.6%)

Figure 2 Training Program Attended by the Local Internal Auditors after STAR-SDP

Outcomes: Improved BAWASDA capacity in carrying out their internal audit functions


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3.2.3 MOF-IG 3.2.3.1 Background and Issues

The Project activities at the Inspectorates General attached to about 20 ministries is being supported through a project implementation unit (PIU) under the MOF-IG. The main objective is to develop new regulatory structures and practices for effective internal audit practices. The key activities consist of developing a review manual for ministerial financial report, providing computers and equipment to IGs, organizing secondment of IG staff to audit institutions from developed countries and introducing a human resources development program (audit training and certification). The internal audit institution must be strengthened for better results by respecting the right process and reinforcing the human resources to ensure the capacity building.

3.2.3.2 Assessment of Performances Establish PIU MOF-IG has procured IT equipment for the PIU and another 19 IG of relevant ministries. Notwithstanding the training given during the inception mission, the PIU at MOF-IG lacked experience and understanding on how to undertake procurement procedures relating to loan financed projects. With the assistance of ILMU, MOF-IG has successfully procured the IT equipment necessary to establish the PIU and to support implementation of new procedures, coordinate tasks between entities and support quality and following-up.

Develop ministerial financial statement review manual for IG Previously, prior to the development of a ministerial financial statement review manual, review activity of all the ministerial financial statements was carried out using assumptions based on a private entity audit oriented approach. The assumptions on the conditions are different to the assumptions on conditions of a public entity, for example for valuation of assets. Under the STAR-SDP support, a consultant was contracted to assist in developing a review manual and pilot tested it before it was officially used for reviewing ministerial financial statements. MOF-IG has pilot tested the review manual in MOF and has successfully improved preparation of MOF financial statements in 2008. The audited MOF Financial Statements in 2007 received a disclaimer opinion while the audited MOF Financial Statement of 2008 received the qualified with conditions opinion.


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After successfully achieving good results on the pilot testing of the review manual, MOF has issued the Ministry of Finance Regulation No. 41/2010 in February 2010 to enforce the implementation of the ministerial financial statement review at other ministries. Outcome: An improved MOF financial statement quality, which has been achieved through the standardized review practice and procedures.

Secondment to other IG In order to strengthen the human resources and to develop skills in different IGs, secondments to other IGs have been conducted in the Netherlands, Australia, and ADB Office in Manila. The main objective for this activity was that the MOF participants could learn and study implementation and management of government audit and in particular risk management. The knowledge acquired by the participating MOF staff was important to support one of the main functions of MOF and which was to provide advisory services to other units in the MOF concerning government audit and risk management.

Outcome: One of the achievements of MOF-IG is that they have already prepared a risk map of the Ministry of Finance so they can better manage audit and in turn they can optimize resources.

HR Development: Professional Training & Certification MOF IG has established the human resources development program for training and professional certification. The trainings implemented were as follows: • Auditing Governance: Strategy, Ethic and Risk Management • Auditor In-charge Tools and Techniques Training • Audit Command Language (ACL) Basic Training • Information Technology (IT) Audit Training • Forensic Auditing Training • Intermediate Performance Audit Training • Process Thinking for Auditors • Risk Based Auditing: A Value Added Propertion • Risk Based Operational Audi Training • Risk Management Training: Course Design for Public Sector • Risk School Training • Risk Management and Public Sector Internal Audit Training

Outcome: Employees having attended these training sessions have developed their knowledge in performance audit and IT and this in turn reinforces the IG reliability. For professional certification consist of CFE (Certified Fraud Examiner) review/training, CISA examination, and CIA (Certified Internal Auditor). MOF-IG has chosen Yayasan Pendidikan Internal Auditor (YPIA) as provider for CIA review, and PT Cahaya Froudita Expert as provider for CFE review. There was no provider appointed for conducting the CISA review.


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3.2.4 BPKP 3.2.4.1 Background and Issues

BPKP has about 6,700 staff members in 25 provincial offices. The fact that BPKP has carried out some audit work of the IGs and BAWASDAs reflects the mismatch between mandate and resources. More significant is that the BAWASDAs and IGs, given their increasing independence, now consider this method of undertaking audit work as sub-optimal, as they perceive a clear conflict of interest given that BPKP reports to the central executive and they report to the regional executive. The primary issue concerning BPKP in the beginning of STAR-SDP implementation was whether or not its staff, facilities and other resources are appropriate for its mandate, which has been diminished in scope by law and presidential decree, as BPKP can no longer: (i) initiate audit activities in regional governments (Presidential Decree 74/01, which assigns only regional internal audit organizations the right to audit local governments’ budgets); (ii) perform financial audits of state-owned enterprises (Law 19/03), or; (iii) perform financial audits of private limited liability entities (Law 1/95). The law and presidential decree did not sufficiently define BPKP’s objectives, scope, organizational structure, or staffing, and is unclear about BPKP’s duties and functions in a decentralized Indonesia.


PP60/ 2008 regarding Government Internal Control System (GICS) Referring to PP 60/ 2008, BPKP has now been mandated as internal auditors of the Government and is responsible to the President of Indonesia. Its mandates have been made clear and include internal audits in three specific areas: (a) conduct cross-sectoral, treasury, and other audit activities as instructed by the President; (b) review of the government's financial statements prior to submission to the President, and; (c) manage the implementation of the Government's internal audit system. In relation to the implementation of BPKP’s mandate, i.e. manage the implementation of the Government's internal audit system, the head of BPKP issued a decree (Perka BPKP- 1326/K/LB/2009) in December 2009 regarding the guidelines on how to implement GICS. This decree is based on the article 47 of PP60/2008 that states that “all the ministers/head of institutions, governors, regents/mayors shall be responsible for the implementation of the GICS within their respective institution.” As stated in the decree, a task-force shall be established in each institution to help government agencies implement GICS. This task-force supports the effectiveness of the Internal Control System by performing internal control on the implementation of the tasks and functions of the government institutions including the accountability for the state finance and providing guidance


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in the implementation of GICS. Currently, the required task-force has been established in each government institution. BPKP’s Institutional Development Plan (IDP) The main activity of BPKP at the beginning of the project was to develop an IDP reflecting its new mandate. The IDP has been developed by BPKP which in line with its new mandates as stated in PP No. 60/2008. BPKP has also developed manual on internal supervision on cross sectoral activities. This manual is a follow up to article 49 of PP60/2008 which provide mandate to BPKP as internal auditor of State Financial Accountability on Cross Sectoral Activities. Outcome: BPKP has implemented its IDP as a clear guidance to develop its institution to be more empowered for carrying out their new mandates in line with the PP 60/2008.

Socialization and Dissemination of PP60/2008, Training on the implementation of GICS, Provide technical assistance for central and local government on GICS implementation, and Socialization of guidelines to support internal supervision function. Article 59 of PP No.60/2008 states that BPKP will be the trainer on the internal control system implementation which include the development of the internal control system implementation guidelines , the internal control system socialization, conduct training and consultancy on the internal control system, carry out capacity building government internal auditor. In this regards, BPKP through local offices has conducted socialization, training and technical assistance on the the internal control system implementation as required in PP 60/2008 in central and regional government institutions. As a result of these initiatives, decree of the head of region concerning internal control system implementation in the respective institution have been established in certain provinces/ districts. In addition, working team for internal control system implementation has been established in several regional institutions. This is in line with requirement as stated in Head of BPKP’s decree No.BPKP-1326/K/LB/2009 issued in December 2009 regarding the guidelines on how to implement GICS as follow up to PP60/2008. Furthermore, BPKP has carried out diagnostic assessment on selected regional institutions regarding the institution’s capacity in implementing the diagnostic. The result of diagnostic assessment has potrayed the strenghts and weakness of the institution on GICS implementation and recommendations and actions plan to succesful GICS implementation. Outcome: Improvement of GICS implementation in central and regional government institutions.

Overseas Training in Several Related Audit Topics, International Courses related to the Capacity Development of Internal Auditor, Domestic Technical Training, Domestic Professional Certifications

These additional activities which have been added to BPKP’s 2010 Work Plan in order to improve the capacity of its human resources to support implementation of BPKP’s new mandates have been carried out. Outcome: Improved capacity of BPKP’s staff to carry out its new mandates.


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3.2.5 MONE-IG 3.2.5.1 Background and Issues

A formal education program to prepare a public accounting and auditing degree is being developed and implemented under MONE-IG leadership. The main activities consist of: • Reviewing the current education program for public sector auditing and accounting; • Developing new curricula for public sector auditing and accounting; • Implementing the new educational module through selected local universities; • Selecting candidates from IG and BAWASDA staff to participate in the scholarship

supported program; • Evaluating the performance of the scholarship program. The main task of MONE-IG in the STAR-SDP Project is to organize the implementation of the education program for bachelor degree (S1) and master level (S2) in state accounting. The program is being developed to increase the independence and professionalism of the state internal auditors for 50 BAWASDAs and 20 IGs by providing them with a scholarship program. MONE-IG has to recognize and take into consideration the need to use the existing local education infrastructure, the fact that BAWASDA staff need education ranging (from a tertiary degree to specialized audit and accounting certification), the need for courses to be affordable and sustainable beyond the project and the fact that IG and BAWASDA staff cannot be away from their position for too long. The limited knowledge of BAWASDA staff in state accounting and auditing has resulted in lack of advisory function being provided to local governments in the preparation of their financial statements. This has contributed to the lack of local financial statements with unqualified opinion as shown in the figure 1 below. In 2004, 21 out of 287 local governments received unqualified opinion from the results of BPK's audit report, but in 2006, only 3 of 463 local governments have received unqualified opinion from BPK.

The limited knowledge of BAWASDA staff in state accounting and auditing is due to the following reasons: (i) Most of internal auditors have no educational background in accounting and auditing,

either in general accounting or government/state accounting. Based on PLMU STAR-SDP 2006 survey results (Figure 3), indications are that in local inspectorate, only 10.12% of 8,955 respondents have an accounting background, most staff (43.70%) having a social science background.

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Establish component implementation management unit In order to implement and manage the STAR-SDP Project, MONE-IG has established the MONE-IG PIU by providing the necessary staff and equipment.

Review current education/certification programs for government-sector accounting and auditing The education and certification in local universities is not adapted for public accounting and public audit. The output of this activity is a review report about the current education and certification programs for government-sector accounting and auditing. This activity has been realized prior to designing and developing the public sector modules to be implemented in local universities. The recommendations and ideas provided by this report were used to develop the modules. Outcome: This activity gives assurances that existing programs do not yet meet the specific needs of public sector internal auditors and that duplication and overlap are avoided. This was a basis to further develop a relevant scholarship program.

Develop public sector modules required With this activity, 16 modules for the S2 program and 40 modules for the S1 program have been established and the curricula printed. Those programs have been developed to meet the needs of public sector internal auditors. Outcome: Well-designed modules that have been developed and used in the scholarship program conducted by MONE-IG.

Establish a mechanism to select regional universities and institutes and establish an agreement between MONE-IG and the selected universities. The selection mechanism has been disseminated in 2006 and 36 local universities have been selected to provide S1 and S2 program specialized in public accounting. Contracts have been signed and universities have all conducted the public accounting program. MONE-IG identified suitable universities based on regionalization that are capable of providing the applicable degrees (S1 and S2) and non-degree courses on public accounting. These universities had to respect criteria: they have to be ranked “Grade A” for Jakarta and at least “Grade B” for the provinces. MONE-IG has then informed CPIU at MOHA-IG about the list of selected universities with the program available and capacity.


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The local universities have been selected in consideration of the wide geographic areas of Indonesia to fulfill BAWASDA expectations by being located nearby. This activity has been successfully completed and is a solid basis for the implementation of the program. Outcome: Selected qualified and well located universities for the implementation of the scholarship program. Establish guidelines for scholarship program Prior to launching the scholarship program, administration and academic requirements for candidates were established. This is the framework of the scholarship program as it has to be awarded in a fair and consistent manner. Outcome: Standardized scholarship requirements and procedures.

Conducting English Test and Academic Potential Test Potential participants for the scholarship program had to take an “English and potential” test, which was part of a selection process to ensure a solid graduation rate. This activity has been effective and should be continued for the following scholarship batch to maintain a high rate of graduation success. Outcome: The best candidates have been selected to participate in the scholarship program.

Scholarship program implementation According to the Report and Recommendation of the President (RRP): INO 35144 about performance indicator of the scholarship program implementation that 80% participant from local inspectorates and 90% participants from inspectorate general of ministry should have certificates graduation; until end of project in 2010, 86% participant from local inspectorates and 89% participants from inspectorate general of ministry have received the certicates graduation (see table below).

Participants Not yet Completed Completed Total

Postgraduate Undergraduate Postgraduate

Local Inspectorate 29 20 304 353

Inspectorate General of Ministry 23 10 274 307

Total 52 30 578 660


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The number of people who have been trained using the opportunity to enrol in the scholarship program shows the attraction of this activity for staff. Many are interested in attending a scholarship program to develop their skills. We conducted a survey by contacting respondents who had graduated from the scholarship program in order to gain their point of view and opinion regarding the program. Here is a summary of the main answers given by respondents to the following questions:

• Strengths and weaknesses of the Part-Time and Full-Time program

Part-Time Program: Strengths

The program is generally conducted over the week-end and according to the participants, this is considered as strength because: - They live far from the university and have no time to waste on transportation

during the week days; - They can work the rest of the week and keep their position. Their career is still

ongoing; - For young mothers, the part-time program gives them time to look after their

family and children.

Weaknesses

During periods of important workload, people cannot focus on their study.

Full-Time Program: The program is conducted during the week and is full-time, which means that the participant cannot continue to work.

Strengths

The schedule of the participants is dedicated to the scholarship program: thus they focus more on their study and will have a better knowledge than a part-time participant.

Weaknesses

Participants who choose to attend the full-time program have to leave their job and thus have no salary during the period. There is an allowance provided to those participating, but they are unanimous in saying that this is not sufficient. If the participants live in the same region as the university, they will take the part-time program and receive Rp. 250,000 for living costs. If they live in a different region to the university and are in the full-time program, they will receive only Rp. 1,000,000 for living costs.


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• Relevance of modules

During our survey, we noticed that there was some disparity between universities. Some are very much in line with the public finance program, but as it is the first batch of the scholarship program, the curriculum still remains very general with a lot of private finance topics despite the creation and implementation of modules. Participants are really interested in public accounting and the program should really focus on this topic. Participants emphasize that there are not enough exercises and practical applications. They found the program too theoretical.

• Improvement linked to the program

All the participants recognize that they are more proficient thanks to the program: • They have a better understanding of accounting and public finance issues; • They have a broader knowledge and more developed skills in public finance; • They are more self-confident; • It’s easier for them to discuss with BPK and other interlocutors about audit and

accounting subjects; • They can give advice to colleagues and are doing their job faster and in a more

efficient manner.

• Career

Being a graduate of the scholarship program doesn’t appear to be an immediate solution to a rise in the hierarchy however. Nevertheless, all the graduate participants are considered by their management as being more reliable; therefore, they have more responsibility and their management asks them to do more because they are confident in having qualified employees Thus it is likely that over the long-term these participants will have a good career evolution once they have demonstrated their new found skills. We must report however, that on occasions participants who have graduated from the scholarship program are then transferred to another department that is not related to accounting services. This shows a lack of cooperation and information between the human resources department and the management.

• Benefits of the program

Participants who had no accounting background have nowadays developed strong skills and can cooperate in an efficient manner with their colleagues.


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This program has helped to increase the number of accountants, which at times was very low depending on the region, plus has provided a better understanding in public finance and has enabled the participants to work more swiftly and in a more efficient way. An increase in the capacity of the institution has been noticed if several people have attended the scholarship program, as it increases knowledge and the perspective for the participants; this is an asset for the institution and a motivation for the participants.

• Recommendations on the scholarship program:

Information about the scholarship program should be clearer and given in time to all employees; meetings can be organized to talk about the scholarship program, in which graduates bear witness to the benefits of the activity and inform future participants. However, the schedule has to be defined in advance so that participants are able to apply in time. People who don’t have an accounting background probably need a longer preparative course before entering the university, as it’s sometimes hard for them to follow the technical courses. The ratio of real to theoretical cases in the exercise should be increased and more accounting and audit modules should be developed. Indemnities for full-time program participants are too low; these are not sufficient for the participants. According to the recommendations provided by the scholarship coordination workshop conducted by MONE-IG in November 2009, the state accounting education modules that are currently used by the universities still require adjustment and enhancement based on the actual needs of local government officers. The sustainability of the project must be supported by the local government, which should help MONE-IG in funding the scholarship program. Universities should show more initiative in offering their state accounting education program directly to local government. The local government training center has to cooperate with universities to have a program in line with that disseminated by universities. A joint decree letter should be established by the minister of state apparatus empowerment (PAN), MONE-IG and MOHA-IG as a legal framework for local government to be able to allocate funds from their budget for the purpose of the training and scholarship program to provide staff with accounting knowledge.


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Universities should conduct a survey to obtain comments from the participants on the program and education provided, as well as follow-up with their students to analyze their careers after they have graduated.

• Conclusion on the scholarship program:

While some improvements are possible as it was its initial batch, the scholarship program can be declared a success. The graduation rate has been good: 80% of BAWASDA staff and 90% of IGs staff have received their graduate certification. Participants and the institutions are both satisfied with the program and they are convinced that this is a good opportunity to develop skills and enhance work quality. The feed-back from the graduate participants has been largely positive and a lot of employees are eager to attend the same curriculum. This activity has to be maintained in order to ensure the improvement of institutions in the goal to reach international standards.

Review of scholarship program For six months, a consultant has conducted a review of the scholarship program in the selected universities through several approaches, such as in-depth interview of PIU STAR-SDP in universities and workshop activities. The main objective of the activity was to improve the modules and syllabus in order to increase the quality of the education program on public accounting and state finance audit. The outputs of this activity are a review report of the scholarship program implementation, 38 syllabus documents and 532 modules for the education program of public accounting and state finance audit. Outcome: Improve the quality of the scholarship program.

Training-of-Trainers for Lecturers The lecturers in local universities have no skills in public accounting and state finance audit. In order to train students, they will have to acquire sufficient knowledge. The aim of this activity was to improve the lecturers’ skills and knowledge regarding public accounting and state finance audit and to increase awareness of the lecturer or academics to make a greater contribution in order to improve the quality of the public accounting management and state audit procedure.


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This activity has been a success, involving 150 participants from 36 selected universities. It has increased awareness of the lecturers on public accounting management and state audit procedure/system. To improve the knowledge of the lecturers in public accounting, except the training-of-trainers, the university has involved local or national officers (accountants from BPKP, BPK, Ministry of Finance, Tax Officers) for teaching future trainers. As a result of the training, lecturers were ready to conduct the course in public finance and had the right skills to teach the newly designed modules. Outcome: Qualified lecturers and teachers for the scholarship program.

Workshop on coordination for the Government Accounting Education Program

The main objectives of the activity were: (i) To gather information regarding the action plan of local governments in order to improve

the skills of their human resources, especially in the public accounting and auditing sector.

(ii) To improve the coordination between local government and local universities in order to

sustain the education program of public accounting and state finance audit for local government staff.

(iii) To increase the contribution of local universities in order to improve the quality of the

education program’s modules. A total of 120 participants consisting of 80 participants from local government and 40 participants from local universities were involved in the workshop activity and a workshop report was written. This activity has to be maintained if the scholarship program continues.

International short-course in IIA Australia and Netherlands

The successful graduate participants have attended a comparative study for state finance accounting program. This will increase their skills by attending an international short-course. Outcome: The graduates have acquired international standards and obtained a new perspective in state finance accounting.

Scholarship program overall conclusion

The implementation of the scholarship program, non-degree program managed by BPPK and MOHA-IG has significantly contributed to the development of human resources in BAWASDA, in combination with other government reform initiatives, thus enabling them to provide better

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Establish PIU BPPK has successfully established the PIU by providing IT equipment and procuring vehicles in order to assist and support the STAR-SDP Project by improving telecommunications and transportation. Review current education/ certification programs for government-sector accounting and auditing and develop new programs and curricula required for 16 modules BPPK has proceeded with a review of the current education program to define a relevant approach in order to design 16 modules of new programs and curricula and to give assurances that existing programs do not meet the specific needs of public sector internal auditors and that duplication and overlap are avoided. The non-degree education curriculum and modules have been successfully developed and are in line with public finance. The curriculum and modules have been disseminated through workshops. Furthermore, all the modules are available online and can be downloaded by anyone, which has proven an effective means of dissemination of the content of the modules to BAWASDA and local government employees. Outcome: This activity gives assurances that existing programs do not yet meet the specific needs for government-sector accounting and auditing and that duplication and overlap are avoided. This is a basis to further develop well-designed modules that have been used in the non-degree program.

Training-of-trainers Trainers have been successfully trained by BPPK in 25 universities to enable them to teach the new modules and have the right knowledge about them. Outcome: Qualified lecturers and teachers for the scholarship program.

Short-course program to promote public accounting and auditing modules The short-course program to promote public accounting and auditing modules has been conducted in universities. A test has been carried out prior and after the short-courses training to evaluate the benefits of such an activity. It appears that the participants have globally improved their marks, which indicates success in terms of skills and knowledge improvement according to the expectations. Outcome: Increased capacity of BAWASDA.


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3.2.7 DPR Secretariat 3.2.7.1 Background and Issues

After an audit, the Executive should follow up on the external auditor’s findings. This oversight function is normally performed by Parliament and regional parliaments, which receive the audit reports from the SAI. At the central level, the Parliament (DPR) reviews BPK’s reports. However, the members lack any specific background or training in financial management, and need technical support from a skilled secretariat similar to that prevailing in other democracies. Studies indicate, however, that the Parliamentary secretariat staff has inadequate training. Usage of secretariat services by Parliament is low, while dependency on short-term consulting support is great, and concerted measures to upgrade the supporting infrastructure are lacking. Consequently, BPK’s reports are considered as information only and are neither discussed nor followed up comprehensively. Parliamentary members point to the clear lack of experience and technical skills required to interpret the audit findings that are often hidden in voluminous reports DPR has to accomplish several duties such as budgeting function, legislation function and oversight function regarding finance and policy executed by government. This last duty comes under the STAR-SDP Project. Regarding the STAR-SDP Project, DPR’s contribution consists of: developing a plan to provide DPR members with BPK audit findings and recommendations in a format that is understandable to non-specialists, developing a client-friendly audit reporting format, and procuring IT equipment for the DPR secretariat. Article 23 of the Indonesian Constitution states that BPK must submit the audited financial statements of the Government of Indonesia to DPR. However, follow-up on the report by DPR is considered limited.


In 2006, a division was created inside DPR to follow-up on the BPK findings, although the people working for this division lack skills and knowledge to carry out these duties. The objective of activities under DPR is to introduce new practices for parliamentary oversight of public sector audit has been achieved. However, DPR Secretariat considers it is not practical to develop a user-friendly format for the submission of BPK’s report to parliament. Therefore, DPR Secretariat decided to develop analysis of BPK findings on a case-by-case basis. The DPR Secretariat has produced analysis reports of BPK’s findings and recommendations (three reports in 2007, nine in 2008, fourteen in 2009, and fifty in 2010) and submitted the reports to DPR members.


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Outcome: As of December 2010, the DPR Secretariat has analyzed and produced analysis reports of BPK’s findings by themselves to be read and used by the DPR members. As a result of BPK’s continuous effort in promoting the importance of BPK’s report follow-up to the Parliament, a State Finance Accountability Agency (Badan Akuntabilitas Keuangan Negara or BAKN) has been established within DPR. BAKN is positioned to be at the same level as DPR’s Commissions, with the main task of following up on BPK’s audit findings and indicates the willingness to improve oversight capabilities. Outcome: DPR Secretariat has developed the Standard Operating Procedures for BAKN operation.

3.2.8 ILMU 3.2.8.1 Background and Issues

Since the commencement of the project, the ILMU Secretariat has initiated coordination, assistance, supervision, monitoring and evaluation of the implementation of activities in all PIUs, plus ILMU’s internal activities. Coordination of the institutions involved in the STAR-SDP Project includes coordination between ILMU, PIU and ADB, including coordinating the substance and implementation of PIUs’ specific activities such as scholarship programs for bachelor degree (S1) and master degree (S2); and coordinating activities in BAWASDA. ILMU provides assistance and consultancy to the PIUs, particularly on procurement and financial matters on a regular and ad hoc basis. In conducting these tasks ILMU is assisted by various experts. ILMU regularly supervises and evaluates the drawdown of loan and grant. For this purposes, ILMU advises PIUs of the number of the Withdrawal Application (WA) for payment using the direct payment method, which is arranged with sequential numbering.


Coordination, supervision and monitoring function of ILMU

ILMU is the Investment Loan Monitoring Unit in BAPPENAS, which is the Executing Agency for the investment component. This unit is headed by a senior official of BAPPENAS. The objective of ILMU establishment is to coordinate, control, and monitor the activities of STAR-SDP within ILMU and the other PIUs. In implementing the coordination, supervising and monitoring task, ILMU is provided with various experts particularly for project accounting and reporting, procurement, project monitoring, and financial management.


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As of December 2010, ILMU has successfully coordinated, supervised and monitored the project implementation by preparing the annual and quarter reports, organizing workshops, monitoring disbursement, coordinating PIU’s, Bappenas and ADB. Furthermore the preparation and implementation of work-plans are prior to ILMU’s review and approval to ensure the consistency with STAR-SDP’s objectives. To ensure that the project is implemented in accordance with the project time-line and objectives, coordination meetings are held on a regular basis, to which all the PIUs are invited to discuss challenges found throughout the project implementation and action plans formulated to overcome such challenges.

Outcome: In general the project has been carried out according to the work-plan and its amendments.

PIU’s have successfully implemented their activities (outputs and outcomes) by being supported by ILMU. Due to the project management done by ILMU most of the activities have been implemented in a timely manner and the few delayed activities will likely be implemented through the remaining project period.

The annual disbursement allocated to realize activities is in line with the annual budget defined in the work-plan. No loan cancellation has happened during the project, which indicates that the disbursement schedule have met the expectations.

Financial and procurement project audits As stated in the Loan Agreement, ILMU is required to prepare an audited consolidated financial report of the project each year and submit the report to ADB within six months after the close of the fiscal year. ILMU needs to recruit an independent auditor to audit BPK PIU activities in order to conduct an independent audit. The audit reports produced by this audit firm are used by BPK auditors, which have audited the other PIUs, to be able to give an opinion on the overall combined financial statements. The audited financial reports have been completed with unqualified opinion and submitted to ADB in a timely manner for the years of 2005-2009. Thus, this component may be considered successful. Outcome: ADB can rely on accurate financial data from which to analyze the project’s implementation and performances. Development of Performance Evaluation Indicators Performance evaluation indicators have been developed to provide BAPPENAS with indicators to evaluate the output of their tasks in accordance with the national mid-term development plan.


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Outcome: The developed indicators have been used as a basis to assess BAPPENAS performance on their evaluation.

Provide National Consultant Firm for Evaluation of Public Sector Supervisory Bodies ILMU has developed an institutional evaluation on public sector supervisory bodies. The objective of this activity is to develop a report that will provide inputs containing policies and procedures to implement PP60/2008 and alternatives to develop synergy between internal audit institutions such as IG, Regional BAWASDA and BPKP. Outcome: The report has provided recommendation on harmonization efforts to develop synergy among internal audit institutions


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4. OVERALL ASSESSMENT AND RECOMMENDATION

4.1 OVERALL ASSESSMENT

In the previous sections, we have presented per PIU and per activities the achievements and benefits, or expected outcome of the activities that have been implemented from the beginning of the project until December 31, 2010. In this section, assessment will be presented per component as originally designed in the preparation of the project. Based on this assessment per component, an overall assessment on the achievements of the investment loan objectives will be concluded.

4.1.1 Introduction of New Systems and Practices for Effective External Audit The objectives of this component have been fully achieved. Under the support of STAR-SDP, BPK being the Supreme Audit Institution of the Republic of Indonesia has successfully established new systems and practices for carrying out an effective external audit. Supported by the STAR-SDP, BPK has enhanced its capacity and capability by successfully developing and implementing new auditing standards, audit management guideline, code of ethics, audit guidelines, audit technical guidelines, system and procedures, new strategy and implementation plan for Human Resources Management, new management for Information Technology (IT) resources, and new public awareness program. Under the STAR SDP’s component objectives, BPK has achieved: Improvement of Audit Quality

• Establishment of new systems and work procedures that are in line with international standards, which assist BPK auditors in better managing of audit planning, audit implementing, and audit reporting. Before the audit reform, audit standard and manual was unclear, but now newly improved audit standards that are clear, and based on international best practices have been established and put into effect through the State Finance Audit Standards (SPKN), the Audit Management Guideline (PMP), audit guidelines (for financial audit, performance audit, special purpose audit), number of Audit Technical Guidelines, and new techniques for presenting audit reports. In order to maintain the quality of audit, BPK has started to implement a comprehensive continuous quality assurance initiative. Before the audit reform, a code of ethics for auditors had not been clearly defined, but now through the issuance of BPK Regulation No. 1 Year 2007 concerning Code of Ethics an auditor is bound by a clearly defined code of ethics, which if violated shall be punishable. In order to further enforce the code of ethics an Honorary Council of Code of Ethics was established. Since the establishment of Law No. 15 Year 2004 and Law No. 15 Year 2006, follow-up action of audit result has not been regulated and BPK was not allowed to use auditors


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from outside BPK. Currently, follow-up action of BPK’s audit result by government officers or institutions shall be supervised and reported to BPK. BPK has issued and enforced BPK Decree No.10/K/I-XIII.2/7/2008 concerning Requirements of Public Accountant and Public Accountant Firms for carrying out state finance audit for and on behalf of BPK. Prior to the audit reform era, BPK’s audit result was handed over to DPR, assumption of abuse leading to crime was reported to Government, and audit results were not publicized. Currently, BPK’s audit result is handed out to DPR, DPD, and DPRD; assumption of abuse leading to crime is reported to the Police, Public Attorney Office, and Corruption Eradication Committee (KPK). Moreover, all of the audit results that are handed out to DPR/DPD/DPRD are also put on the BPK website so that may be known to the public.

Improvement of Human Resources

• Under the establishment of strategic approach for human resources management initiative, BPK has developed and implemented the Human Resources Management Plan that covers analysis of position, career management, competency standard, position evaluation, assessment center, and competency profiling. BPK has also prepared and developed modules and training of Local Government Financial Management and Audit Laboratory, as well as modules and Training of Curriculum Based Competency for the six (6) Job Families in BPK RI. Therefore, the current recruitment process is based on job description, competency and requirements and not by unspecified criteria that is based on needs. Career development is based on competency and assessment, structural position and functional position now have equal interesting career path. While management of human resources before the audit reform era was based on orientation of staff administration. Currently, management of human resources is based on competency- based management, job analysis, job evaluation and job grading. Whereas, training of auditors is synchronized with the individual.

• Based on BPK’s individual staff development plan, BPK has selected staff to undertake

specialized international certification and currently has achieved 28 Certified Fraud Examiners (CFE), 12 Certified Internal Auditors (CIA), and 9 Certified Information System Auditors (CISA). Moreover, selected BPK auditors have also been trained in specialized audit areas such as IT, forensic, military, and commercial and central bank audits, while others have and some still are pursuing international and domestic Masters Degree program, and more than 1,300 BPK staff have also been trained through domestic short-courses. Furthermore, each BPK staff member has to prepare his/her individual development plan (IDP) and individual performance appraisal for one year. Therefore, each of BPK’s staff has to prepare a work-plan for one year and at the end of the year be assessed based on the performance achieved within that particular year. Before the audit reform era, BPK staff simply had to wait before being assigned a job.

Improvement of Infrastructure & Facilities

• Establishment of Information Technology (IT) management policy for acquisition, support, replacement, and asset management. Through this effort BPK has managed to


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not only supply 1,800 new computers (450 PC and 1,350 Notebook Computers), which has improved the ratio of total notebook against BPK professional staff from 1:6.55 (FY2004) to 1:2.00 (FY2009), but also improved the system for BPK’s main duty of carrying out audit by way of preparing audit planning, implementing audit work, and reporting audit result. BPK has managed under the support of STAR-SDP to modernize the idle (old) work equipment of BPK into providing support of hardware (notebook, printer, scanner, VOIP) in order to carry out better audit work. Installation and development work on IT pilot schemes for supporting video conferencing and distance learning techniques, and the use of electronic tools for audit team management have also been started.

Improvement of Public Awareness

• Establishment of public awareness program through the development and implementation of the Public Relation Strategic Plan 2008-2012, with the objective of building public awareness of BPK-RI in order to improve BPK’s role and performance in the public interest, and in particular to provide stakeholders with a friendlier product concerning BPK audit findings. BPK has become more active in public awareness campaign, as well as cooperation with international SAI through a strategic public awareness plan and improved communication channels to the public via media workshops, press releases, and SAI relationship. Clearly BPK’s public relations effort has now significantly improved compared to the previously simply protocol oriented public relations approach.

A peer review (2008-2009) carried out by the Netherland Court of Auditors concluded that since 2004 BPK has transformed its organization into a modern Supreme Audit Institution with legally embedded independence, a strong mandate and qualified staff to realize its tasks and objectives.

4.1.2 Introduction of New Regulatory Structures and Practices for Effective Internal Audit

In general, the objective of this component has been partially achieved. New regulatory structures have been introduced in MOHA-IG, MOF-IG and BPKP that have clarified the roles of each internal audit institution. Some of the regulations were issued to enforce implementation of new practices for effective internal audit. However, some regulations that have been issued need to be followed up with manuals and practices. MOHA-IG has issued a regulation (Permendagri No. 8 Year 2009) concerning Guideline of Control of Regional Governance Implementation (Pedoman Pengawasan Penyelenggaraan Urusan Pemerintah Daerah), which provides guidance for carrying out supervisory function on the implementation of obligatory and voluntary functions by local government. A standardized model regulation in the format of a Head of Region’s Decree (Surat Keputusan, SK) and Regional Law (Peraturan Daerah, Perda) has also been developed that addresses the roles and responsibilities of BAWASDA. The draft of this model regulation has been disseminated nationwide as the basis for formal adoption by the local governments. A tracking system has also been developed to monitor the adoption of the model by the local governments. The adoption of


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this new regulation will lead to improved quality and consistency in audit activities in the regional governments MOHA-IG has developed an information system (SIWASDANAS) for handling audit mechanism that can be accessed online (LAN) or via the internet. This system will enhance the effectiveness of BAWASDA in carrying out regular audit process, audit of the ending of government of a head of local government, and improved transparency of BAWASDA’s internal audit reports, as the SIWASDANAS can be used for audit in connection to a public inquest. The implementation of this system has been enforced through the issuance of Permendagri No. 1 Year 2010. An institutional development plan (IDP) has been implemented in the 50 BAWASDA, which consist of technical training and procurement of facilities in order to enhance the capacity of BAWASDA in carrying out their duties. Under the STAR-SDP support, MOF – IG has developed a review manual for reviewing ministerial financial statements. MOF-IG has pilot tested the review manual in MOF and has successfully improved the preparation of MOF financial statements in 2008. As a result to this initiative there has been an improvement on the audited MOF Financial Statements in FY2008 which received the qualified with conditions opinion compared with MOF Financial Statements in FY2007 which received a disclaimer opinion. After successfully achieving good results on the use of the review manual, MOF has issued the Ministry of Finance Regulation No. 41/2010 in February 2010 to enforce the implementation of the ministerial financial statement review at other ministries. A government regulation (PP 60/2008) was finally issued at the end of 2008 that defined the new mandates of BPKP. This regulation has also made a clear segregation of duties between the internal audit institutions. Its scope of work has now been mandated to include internal audits of three specific areas: (a) conduct cross-sectoral, treasury, and other audit activities as instructed by the President; (b) review of the government's financial statements prior to submission to the President, and (c) manage the implementation of the Government's internal audit system. BPKP has started implementing its new mandate concerning the implementation of the Government's internal audit system, through the issuance of a decree (Perka BPKP- 1326/K/LB/2009) in December 2009, which requires the development of a task force in each institution to help government agencies implement GICS. Currently, BPKP is developing an IDP consistent with its new mandates as stated in PP 60/2008. This IDP is expected to assist BPKP in carrying out all its duties.

4.1.3 Designing a Professional Degree Education and Non-degree Certification Program

for Internal Auditors

The objective of designing a professional degree education and non-degree certification program based on the allocated STAR-SDP investment loan funding has been partially achieved.


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A degree education program on state accounting and public auditing has been developed and implemented under MONE-IG coordination. The program uses modules developed under the STAR-SDP Project and has been implemented in 36 local universities. As of December 31, 2010, the number of students graduating from S2 master degree program was 578. The remaining 52 participants are expected to graduate in 2011. A non-degree education program on state accounting and public auditing has been developed by BPPK. Under the coordination of BPPK, the short-course program has been implemented in 25 local universities and attended by 887 participants. The short-course program uses modules developed by BPPK under the STAR-SDP Project. The implementation of the degree and non-degree programs, combined with the technical training of BAWASDA under MOHA-IG coordination has significantly contributed to the development of human resources in BAWASDA. This is summarized in the schematic below:

The improved capacity of BAWASDA combined with public expenditure reforms of Indonesia managed by other ministries have enhanced their capacity in providing better advisory services to local governments in preparing their financial statements. The improved advisory service of BAWASDA has contributed to the increase in number of Local Government Financial Statements with unqualified opinion and the decrease of disclaimer opinions for the years 2006 - 2008.

4.1.4 Introduction of New Practices for Parliamentary Oversight of Public Sector Audit

The achievement of objectives to introduce new practices for parliamentary oversight of public sector audit under the DPR Secretariat has been partially achieved. The DPR Secretariat considers that it is not practical to develop a user-friendly format for the submission of BPK’s reports to parliament. Therefore, the DPR Secretariat has decided to develop analysis of BPK findings on a case-by-case basis. The DPR Secretariat has produced analysis reports of BPK’s findings and recommendations (three reports in 2007, nine in 2008, fourteen in 2009, and fifty in 2010) and submitted the reports to DPR members.

MONE-IG

to design new program and curriculato provide modules to select local universities as provide new programto select candidates of scholarship program To set up the program budget in DIPAM & E program

MOHA-IG

to conduct correspondence with Local Inspectorate, in order to increase participant of Local Inspectorate’s staff in scholarship program

Human Resources

Development in Local

Inspectorates

MOHA-IG

to set up IDP budget in DIPAto identify Local Inspectorate needs in order to develop the IDP activities (included technical training and supporting facilities) coordinator of IDP Program

BPPK

to establish the short course/training programto design modules of the training program for Local Inspectorate’s staffSC

HO

LAR

SHIP

PR

OG

RA

M

(Deg

ree

Prog

ram

)

IDP

PRO

GR

AM

(T

echn

ical

Tra

inin

g)TR

AIN

ING

(Non

Deg

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Prog

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)


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In addition, continuous effort of DPR Secretariat in promoting the importance of BPK’s report follow-up to the Parliament has resulted in the establishment of a State Finance Accountability Agency (Badan Akuntabilitas Keuangan Negara or BAKN). BAKN is positioned to be at the same level as DPR’s Commissions, with the main task of following up on BPK’s audit findings and shows a willingness to improve oversight capabilities.

Under the coordination of MOHA-IG, a guideline on the follow-up of Audit Results of BPK by DPRD has been completed. The implementation of this guideline has been enforced through the issuance of Permendagri No. 13/2010 in January 2010 concerning the Guidance of Audit Function Implementation for DPRD to Follow-up of Audit Results of BPK. Moreover, an IDP has been developed and implemented in 31 DPRD secretariats, mainly to improve their capacity in assisting local parliament in following up audit reports of BPK.

4.1.5 Establishment of an Investment Loan Monitoring Unit (ILMU)

Since the beginning of the project, ILMU has successfully coordinated, supervised and monitored the project implementation. ILMU has ensured that the activities conducted PIUs were consistent with STAR-SDP’s objectives by performing a review of the PIU’s work-plan and by monitoring the work-plan to be implemented in a timely and cost effective manner. This has supported PIUs in the achievement of the expected outputs and outcomes. In addition, coordination meetings have been held on a regular basis, inviting all the PIUs to discuss the challenges they have encountered throughout the project implementation and decide the action plans to overcome such challenges. As required in the loan agreement, ILMU has also successfully submitted audited consolidated project financial statements with an unqualified opinion to ADB for the years 2005-2009. However, there are several activities that are still ongoing, such as the Development of Performance Evaluation Indicators, the consultant for public campaign and the development of the project completion report. These activities are expected to be completed in 2010 and will contribute to the achievement of all objectives of the ILMU component.

4.2 RECOMMENDATIONS 4.2.1 Additional accountants for Central and Local Governments including Bawasda for

the Improvement of Public Expenditure Management A total of 578 accountants consisting of Bawasda (304) and IG’s staff (274) have graduated from the scholarship program of STAR-SDP. Subsequently, these graduates will improve the audit quality of the institutions in which they are working.


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However, the STAR-SDP initiative in building the capacity of BAWASDA is not sufficient in realizing the state finance management accountability improvement due to the fact that around 25,000 additional accountants are needed in central and regional governments including BAWASDA. Therefore, the government should continue implementing similar scholarship program to meet the need for the additional accountants in order to improve the public expenditure management.

4.2.2 BPK’s Code of Ethics

In order to keep the Code of Ethics effective, BPK should periodically reiterate its values and principles in various ways for both newcomers and established employees, and for both senior and junior staff.

4.2.3 Improvement of BPK’s HRM policies The Peer Review conducted by the government of the Netherlands in 2009, has provided BPK with some recommendations for enhancing BPK’s HRM as follows:

• Awareness regarding importance of HRM

BPK should create greater awareness amongst managers regarding the importance of human resources management and the available HRM policies and instruments. Furthermore, it is recommended that BPK maximize the potential of its operational flexibility and ability to promote and reward talented people. Finally, BPK should involve line management in selecting new staff and putting the right person in the right place.

• Feedback and good performance need to be rewarded

A strong performance appraisal cycle concentrating on the relationship between manager and employee is needed in which feedback in both directions is a must. Results of the appraisals must be discussed at a higher lever to obtain a better picture of developments within a particular unit.

• Professionalism and knowledge

Professionals should be appointed to positions where they are needed. This would make BPK less dependent on external specialists and consultants. The prevailing opinion at BPK is that by law it can recruit only auditors, even for non-audit positions.

It is recommended that the present uncertainties in BPK's recruitment rules be evaluated.

Staff rotation is important to exchange experiences and remain dispassionate. BPK has decided to assess its entire staff. We wonder whether it would not in fact be better to wait until the individual performance measurement system is ready so that both attitude and performance can be measured simultaneously. • Coaching and development of skills

BPK should be aware that auditors need frequent guidance and coaching from their managers, as well as training. Managers, however, also need extra training and attention to keep pace with


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developments that affect their role and attitude. Managers should give guidance and draw on the creativity and knowledge of their personnel because much of their potential is currently under-utilized. If BPK makes the efforts to meet the recommendations given by the peer review team, there is great confidence that BPK can further improve its staff utilization and in turn lead to more greater reduction in staff issues (raised through staff survey).

4.2.4 Scholarship program managed by MONE-IG

4.2.4.1 Design of the program Information about the scholarship program should be clearer, published widely and at an appropriate time prior to the implementation The existing modules should be revised to be more focused on public accounting and state auditing The content of the education modules should be improved to include more exercises on real cases rather than theoretical lectures. In addition these modules must be revised periodically to be compliant with law, as often as there is a change in regulation. Training-of-trainers will have to be improved to continue to support a good quality education. Living cost allowances need to be reassessed region-wide for full-time program students to cover their general living expenses so that they will be able to more fully concentrate on their studies.

4.2.4.2 Further monitoring of MONE-IG More intensive monitoring of MONE-IG should be provided for the scholarship program to ensure the remaining 111 participants graduate as expected in 2010.

4.2.5 BPPK Design of Non-degree Program The non-degree program designed by BPPK has been implemented through the short-course program in the selected local universities. These short-courses have been specifically designed to be in line with the needs of BAWASDA in public accounting and state auditing. Considering the quality of the tailored program and modules and their successful implementation in the local universities, they need to be continuously applied after the project closing. Modules have to be updated in accordance with applicable laws and regulations. In order to assess the non-degree program benefits, a survey needs to be conducted after the program completion.


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To ensure the sustainability of these activities, BPPK must revise the modules periodically to be compliant with the law, as often as there is a change in regulation. The competence of the trainers has to be improved by performing more training-of-trainers, the public accounting modules must be more practical and less theoretical, while the short-course program for Heads of BAWASDA and Regional Secretaries has been cancelled because of a lack of interest from the Heads of BAWASDA. The program has to be changed and adapted to meet their needs.

4.2.6 MOHA-IG Activities

MOHA-IG needs to continuously monitor the adoption of model regulation that addresses the roles and responsibilities of BAWASDA in order to ensure the effective implementation nationwide. For sustainability reasons the SIWASDANAS system has to be constantly updated to be in accordance with current prevailing regulations and IT evolutions. MOHA-IG needs to encourage and train DPRD secretariat in the implementation of the guideline to follow-up BPK reports by DPRD.

4.2.7 BPKP To be able to implement its new mandates, more standards of operation need to be developed to correspond to the elements of GICS as stated in the PP 60/2008. As new mandates occurred during the project, numerous activities have been added to the original work-plan. Considering the limited time allocated to the implementation of these activities, BPKP needs to enhance its cooperation with ILMU and ADB.

4.2.8 DPR Secretariat

The DPR secretariat needs to support BAKN in improving its capacity in carrying out its new mandate. The BAKN team needs to be educated to have a sufficient understanding of the issues related to its role. This can be provided by comparative studies and training.

APPENDIX 1

Details of Activities Implemented and Output

Appendix 1a : ILMU Bappenas Appendix 1b : BPK Appendix 1c : MOHA-IG Appendix 1d : MOF-IG Appendix 1e : BPKP Appendix 1f : MONE-IG Appendix 1g : BPPK Appendix 1h : DPR Secretariat

Appendix 1a

Component Activities Output Achievement of expected outputs

Provide domestic project management expert SOP and Procurement plan template

An Indiviual consultant has been contracted in October 2005 and extended until May 2006 according to the expected output.

Provide IT equipment IT Equipment IT Equipement has been provided and installed according to the expected output.

Provide PCU Websites STAR-SDP Website The STAR-SDP Website has been updated with new information according to the expected output.

Workshops

- Consignering, Bandung (5-7 Jul 2007)

- Regional Workshop, Palembang (10-12 Sep 2007)

- Regional Workshop (1st Semester 2008)

- Regional Workshop (2nd Semester 2008)

- Consignering (1st Semester 2008)

- Consignering (2nd Semester 2008)

- Regional Workshop (1st Semester 2009)

- Regional Workshop (2nd Semester 2009)

- Consignering (1st Semester 2009)

- Consignering (2nd Semester 2009)

Audited Consolidated financial report Audited Consolidated Financial Report 2005 - 2009

Reports have been done and disseminated according to the expected output.

Development of System on Accountability Improvement

Web-base information system for accountability improvement on project implementation.

The web-base information system has been created and implemented according to the expected output.

Consultant for development of Institutional Evaluation on Public Sector Supervisory Bodies

Institutional Evaluation on Public Sector Supervisory Bodies

The workshop report has been done and disseminatedaccording to the expected output.

ILMU Bappenas

Establish PCU

Financial and procurement project audits

Workshop reports

Page 1 of 15

Component Activities Output Achievement of expected outputs

National Consulting Firm for the Development of Performance Evaluation Indicator

Performance Evaluation indicator for State accountability and supervision Department

The indicator had been succesfully developed and delivered to Bappenas. Currently, the indicators has been used as reference.

Page 2 of 15

Appendix 1b

Components, Activities Outputs Achievement of expected outputs

Provide Equipment 6 Personal Computer1 Printer1 Server2 UPS

IT equipments have been procured and installed according to the expected output

Provide Vehicles 1 vehicle Vehicles have been procured and delivered according to expected outputs.

Develop and Print Auditing Standards

Auditing Standard (SPKN) published and have been printed (7500 books)

By international experts:The outcomes of auditing standard draft review including the recommendations.

By domestic expert : Translated documents related to auditing standard docThe advisory council exposure in BPK board meetingThe outcomes of auditing standard draft review including recommendations

SPKN have developed according to the expected output.

Provide equipment 6 Personal Computer1 Printer1 Server2 UPS

Equipment has been provided and installed.

Outputs have been successfully reached.

Provide vehicles 1 vehicle Vehicle has been provided to PIU according to the expected output.

Increase oversight effectiveness of BPK board - acquire experience from other SAI

Visits to SAIsRelated visit reports to DPR

Comparative studies have been conducted (US GAO, ANZ, Germany, France, India, Japan) and reports have been released and disseminated.

Output has been successfully reached.

Adjust BPK code of ethics to be consistent with international standards

Develop a new code of ethics. A new code of ethics has been written and approved by Board.


Manual and Procedures in Presenting Audit Report

New Techniques and Procedure in presenting audit reports was presented in BPK Board

Audit Management Guidelines (using other Fund)

Manual has been printed (300 units deluxe version7,500 units standard version).


Develop improved methods for assessing the use of new standards and procedures (quality assurance).

New Quality Assurance System New Quality Assurance system has been developped and approved.


BPK


Develop and Print Auditing Standards

Develop New systems and work procedures consistent with new legal and regulatory framework

Develop new techniques for presenting audit reports.

Page 3 of 15


BPK

Develop HRM plan consistent with new audit procedures.

Master Plan Strategic of HRM A Master Plan Strategic HRM for BPK has been developed, adopted and implemented.Modules have been developed and a periodic monitoring progress has been conducted.


Conduct professional courses for BPK to meet international best practices.

Training to be implemented BPK has implemented 10 training activies to meet international best practices :1) Fraud Detection and Investigation; 2) IT Training for BPK regional officers; 3) Audit Electronic Data Processing (EDP); 4) Legal aspect of public accountant; 5) VBA for Excel; 6) Accounting policy and state accounting system in the regions; 7) Legal matters; 8) Public works; 9) Regional financial accounting system; 10) Procurement of goods and services training.

A report has been produced after each training.Output have been successfully reached.

Report of the activity In the field of international professional skills, and certification in specialized audits. ● Training executed : 1) Audit in public works for BPK Palangkaraya office; 2) 83 of 169 participants were successfull in Certification procurement of goods and services based on Presidential Decree 80

Reports of the activities have been written.


Review module, report of the review and report of the result for CISA, CIA, CFE and CPA

International certifications have been conducted for :- 10 participants get the CISA- 15 participants get the CIA- 28 participants get the CFE- 1 participants get the CPA

Reports have been written.

Outputs have been succesfully reached.

Short-course/training Training about goods and service and public works to be conducted

- 160 participants attended the certification of goods and services training.- 60 participants attended the training in public works


Secondment to Other SAI

Report and copy all materials received from the program

Secondement to other SAI have been conducted in New Zealand, Malaysia, The Netherlands, China and US

Acquire professional skills/degree program

TOEFLTPA

In-country Masters Degree batch 1 (UGM)

Overseas Master Degree

In-country Master Degree batch 2 (UI, UGM and ITS)

TOEFL, TPA and In-country Masters Degree have been completed and reports of result have been written.

20 participants get S2 degree.

5 participants has completed their Master Degree program

85 of 90 participants has completed their study

Output has been successfully reached

Develop a strategic approach for human resources management

Implement staff development program

Acquire international professional skills, including certification in specialized audits.

Page 4 of 15


BPK

International Short-Course/ Seminar have been conducted and reports and copy of all material received from the program have been done.

- International Short Course on Environmental Auditing, has been conducted in Sydney- 2 participants have attended A" Level Certificate in Occupation Testing, in London, England- 2 participants have attended "Applying IFRS "course in KL, Malaysia- 2 participants have attended Petroleum Contract Short Course- 5 participants have attended Monitoring, and Evaluating Course batch 1 in Hanoi, Vietnam- 2 participants have attended "Strengthening Investigative Audit Capacity for Investgative Auditors" course in Singapore- 2 participants have attended Executive Coaching Training in Singapore- 2 participants have attended Risk Based operational Course in Hongkong- 7 participants attended Investment in Excellence Course in Singapore- 5 participantes attended Planning, Monitoring, and Evaluating Course Batch II in Vietnam- 2 participants attended Overseas Training on Defense Economics Program in England- 3 participants attended Mastering Financial Negotiations in Singapore-2 participants attended Strengthening Investigative Audit Capacity for Investigative Auditors in Shanghai-5 participants attended Coaching Managers in Singapore-1 participant attended Business Process Management Certificate Program in San Fransisco-1 participant attended Managing Security Sector Resources in Shrivenham, UK-3 particpants attended Talent Management Developing Key Personnel in London-15 participants attended Assessor Training in Jakarta, Indonesia- 3 participants attended Organization Assessment and Development in Bali, Indonesia-3 participants attended Effective Event management in Singapore-3 participants attended Managing and Measuring Operational Risk in Paris-13 participants attended Prosci's Change Management Certification Program in Perth, Sydney and Melbourne-2 participants attended Project and Program Impact Assessment in Montreal-2 participants attended Corruption and Anti Corruption Executive Program in Canbera-3 participants attended Environmental Auditor Certification Workshop in Sydney-1 participant attended Health Program Evaluation: Scoping the Evaluation in Melbourne-2 participants attended Annual Financial Services Compliance in Sydney-1 participant attended The Sovereign Debt Management Forum in Washington, US-2 participants attended Result Based Management Implementation and Performance Indicators in KL, Malaysia

Report and copy all materials received from the program

International Short-Course/Semninar

Page 5 of 15


BPK

Develop Curricula of Competence-Based Training

- A conceptual framework

- Competency-Based Curriculum for 6 job families in BPK

- Learning Design for each subject included in the competency-based curriculum

- Modules and other training materials for achieving hard and soft competency required for the job family of (Auditors, ITAMA, PISAT, Legal Affairs, IT and Human Resources)

- Report of dissemination activities and technical education and training program

All the components of the activity have been done according to the expected outputs.

Laboratory of Local Government Finance

- Training curriculum and modules - Instructors/Trainers- Reference books

- training curriculum and modules have been released.- 29 instructors have been trained and reference books have been released.-872 staff have been trained


Establish information technology policy for acquisition, support and replacement and asset management.

- IT Strategic Plan for year 2006-2010

- Guidelines to develop IT Policy and Plan

- Delivered reports and the supporting documentation

- Delivery examination report

- IT Strategic Plan has been released on 29 Aug. 06.- Guidelines to develop IT Policy and Plan have been released.- Examination report has been delivered on February 27,2006.


Achieve policy goal of 1:1 ratio of computers to professional staff.

3 phases for the delivery of goods (Desktop, Notebooks, IT material.)

Material have been received according to what was planned :- 600 laptops & computers in 2005- 650 laptops & computers in 2006- 550 laptops & computers in 2007


Pilot video-conferencing and distance learning for audit skills improvement courses.

Delivery and completion of the goods related for video conferencing and distance learning.

Goods have been delivered on time ( 1 unit group video conference, 6 units personal video conference, widescreen TFT and MCU software) and according to objectives of the activity.


Expand infrastructure in regional offices

Install IT equipement (router, access switch, console monitor, voice gateway, etc) and arranged office facilities.

Equipements have been received and office IT facilitues have been arranged according the following schedule : - in 2005: 8 offices - in 2006: 15 offices - in 2007: 18 offices - in 2009: 24 offices


Introduce a new strategic approach for information resources management

Page 6 of 15


BPK

Assessment Center Infrastructure

- Integrated Audio Video System for BPK RI's Assessment Center (Dome Camera, Mic Recording, Monitor LCD, CCTV, Computer, Laptop, Digital Voice Recorder, Computer network and Telephone connector, etc) - Office Equipment for BPK RI's Assessment Center (Telephone, Laser Pointer, Mono Laser Printer, Fax Machine, Scanner, Photocopy Machine, External Hard Disk, dll)

Goods have been delivered and site is ready to be used,: Output has been successfully reached.

Develop New Organization according to the new regulation

- Action Plan- Monthly report- Analysis & Evaluation Report- Final draft report- Final report

Reports have been released in time and are in line with expectedoutpits.

Page 7 of 15


BPK

Consultant for developing Assessment Center

-The BPK Assessment Center Manual and Management System-Individual assessment Service Report of 100 (one hundred)BPK's Employee-Assessors training and Certification for 10 (ten) BPK's staff-Refference Book of Assessment Centre and HRM including CD-Final Report

The final report has been released as well as the BPK's assessment center proposal.


Develop model public relations programs

Communication/Public Relation Strategic Plan 2008-2012

The communication and public relation strategic plan has been released according to the expected output.

Pilot public awareness campaigns

-Standard Operating Procedures of BPK's Public RelationsTraining and couching on Public Relation-TV and radio talkshow -Public products and documentation

-TV and radio talkshow have been conducted - Public awareness campain is fisnished.

Output have been succesfully reached.

Conduct Peer review Peer Review Report Peer review report has released. BPK received satisfactory result according to the expected output.

Conduct Peer review

Develop program for public awareness and support for effective audit

Page 8 of 15

Appendix 1c


Provide staf Component implementing manager Secretary Supporting Staff

Staff has been provided according to the expected output.

Provide equipment Computer Printer Vehicle

Equipment has been provided according to the expected output.

Develop a new model regulation

New model to be developed New model has been provided according to the expected output.

New audit work procedures to be developed

New audit work procedure (SIWASDANAS)

- Current audit WP has been assessed- Workshop has been conducted to familiarize stadd with issues;- New audit WP and manual have been developed;- Workshop to familiarize staff with the new WP and manual has been conducted;- New WP and manual have been piloted;- Siswasdanas has been disseminated;


Introduce new Bawasda regulations and work procedure into provincial and local governments

Introduced Bawasda regulation and work procedure

- Recruitment of consultant or contract variation of the consultant who develop New work procedure.- Workshop to be attended by 50 participants for dissemination and validation of new WP and manual


Public campaign Design public campaigns (include the manual and material)

The design of the pubic campaign has been done and tested through publication by media according to the expected output.

Manual of understanding BPK audit report for DPRD

Manual for understanding audit report has been developed according to the expected output.

Testing report Manual has been tested according to the expected output.

Ministry of Human Affair Decree/ Permendagri

Permendagri has been finalized according to the expected output.

MOHA-IG


Develop a model regulation

Develop new audit work procedures

Provision of Audit reports to rellevant DPRD committeeProvision of Audit reports to rellevant DPRD committee

Establish public awareness and support for effective audit

Introduce new Bawasda regulations and work procedure into provincial and local governments

Page 9 of 15

Appendix 1d

Component, Activities Outputs Achievement of expected outputs

Provide IT equipments - 4 PCs- 2 Printers- 1 Fotocopy machine

IT equipments have been procured and installed according to the expected output.

Provide equipment - 95 PCs- 38 Printers- 19 Fotocopy machines- 2 units of Suzuki APV

IT equipments have been procured and installed for PIU and 19 IGs.Vehicles have been procured and delivered according to expected outputs.

Secondment to other IG - The staffs from MOF IG, MOHA IG and MONE IG have participate to those Secondments- Secondments reports

MOF-IG has just conducted the first batch international secondment in Netherland (2008) and second batch in New Zealand and Australia (2009). The other secondment was conducted in OAG of ADB Manila (2010). As at December 31, 2010, Outputs have been successfully reached.

Training and certification A number of IG staff have CIA, CISA and CFE certification

CIA, CISA & CFE examination have been done and paid.

Establish PIU

Provide equipment required to support implementation of new procedures

Secondment to other IG

HR Development: Professional Training & Certification

MOF-IG

Page 10 of 15

Appendix 1e


Provide IT equipments IT equipments The procurement of IT equipments for PIU operation had been completed in 2009 and outputs reached.

Consultant for Development of BPKP's Institutinal Development Plan (IDP)

IDP IDP had been competed in line with its new mandates

Consultant for Development of Guideline on internal supervision on inter-sector activities

Guideline on internal supervision on inter-sector activities

The guideline had been developed as follow up to new mandates provided to BPKP in PP 60/2008

IT Equipments to support BPKP new mandates

IT Equipments IT equipments have strenghtended BPKP's capacity in carrying out its new mandates

Implementation of GICS Task force to be established in each institution to help government agencied to implement GICS

According to the expected output, a task force has been established in each government institution.

Establish PIU

BPKP

Implementation of PP60/2008 regarding Government Internal Control System (GICS)

Page 11 of 15

Appendix 1f


Provide equipment 4 Personal Computer2 Printer1 Copier1 pax Office LAN

IT equipments have been procured and installed according to the expected output.

Provide vehicles 2 unit Car Rental Service Vehicles have been procured and delivered according to the expected output.

Review current education/certification programs for government-sector accounting and auditing

Review report:There was no S1 and S2 Program in public accounting/ state finance audit in local universities

S1 and S2 Program specialize in public accounting/state finance audit have been developed.

Workshop has been conducted.


Develop public sector modul (S1) required

16 modules of the new program/ curricula are printed for S2 Program

40 modules of the new program/ curricula are printed for S1 Program

S1 and S2 modules in new program has been established.

Workshop has been conducted .


MONE-IG


Establish S1 dan S2 degree program in government accounting/state financial auditing

Page 12 of 15


Establish a mechanism to select regional universities and institutes

Selection mechanism are developed

Selection mechanism has been disseminated according to the expected output.

36 local universities are selected to provide S1 and S2 program specialize in public accounting/ state finance audit

Selection of local universities has been implemented according to the expected output.

36 contracts and 80 MOUs are signed

Contracts between MONE-IG and the universities has been signed according to the expected output.

Establish guidelines for scholarship program

Administration and academic requirements are printed.

Administration and academic requirements for candidates of S1 and S2 program have been established according to the expected output.

Conducting english test and Academic Potensial Test

1,029 staff in Bawasda (681 persons) and IGs (348 persons) participated in the test.

TPA and English test have been implemented according to the expected output.

Scholarship program Implementation

86% of bawasda staff and 90% of IGs staff has received the certification graduate.

660 participants from Bawasda and IGs staff have been involved in the scholarship program .

578 beneficiaries of scholarship program in master degree have completed the study

The scholarship program has been implemented in local universities is conducted to participants according to the expected output.

Review of the Program Review reports 2007 & 200938 Syllabus532 Modules

Recruitment of firm consultant has been procured according to the expected output.

Review for scholarship program

Establish an agreement between MONE-IG and the Selected Universities

Selection of the regional universities and institutes on a competitive basis

Establish Scholarship Program for Bawasda and IGs Staff

Page 13 of 15

Appendix 1g


Provide IT equipments - 6 Laptops- 2 Printers- 2 LCD Projector- 1 Fotocopy machine

IT equipments have been procured and installed according to the expected outputs.

Procure vehicles - 3 vehicles Vehicles have been procured and delivered according to the expected outputs.

Review current education/ certification programs for government-sector accounting and auditing

Develop new programs and curricula required for 16 modules

16 TOT modules - Recruitment of consultant firm to develop the program - Consultant have developed and printed the modules

Modules uploaded in STAR-SDP's website

- Consultant have uploaded the modules in STAR-SDP's website

TOT is conducted and attended by 75 participants

-Consultant has conducted TOT


Short-course program to promote public accounting and auditing modules

Short courses implemented in universities - BPPK has offered the short-course program

to 25 of 36 selected universities participating in the STAR-SDP scholarship program-Participant have been selected-Short coursed have been conducted - Certificate have been provided to participants


BPPK

16 modules of new programs and curicula

- Consultant firm to develop the program has been recruited- 16 Modules have been developed and printed- Consultant has disseminated the modules through workshopOutputs have been successfully reached.

Short courses

Establish PIU

Develop and review non dedree education program

Training of Trainer (TOT)

Training of Trainer (TOT)

Page 14 of 15

Appendix 1h


The analysis reports have been submitted to DPR and being utilized.

As a result of BPK’s continuous effort in promoting the importance of BPK’s report follow-up to the Parliament, a State Finance Accountability Agency has been established within DPR. BAKN is positioned at the same level as DPR’s Commissions, with the main task of following up on BPK’s audit findings and indicates the willingness to improve oversight capabilities.

DPR Secretariat

Provision of audit reports to relevant DPR committees

Development of analysis reports of BPK’s findings and recommendations

Analysis reports of BPK’s findings and recommendations (three reports in 2007, nine in 2008, fourteen in 2009, and 50 in 2010

Page 15 of 15

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