Assessing the development of performance audit methodology in the supreme audit institution: The case of Indonesia

Badan Pemeriksa Keuangan (BPK), or The Audit Board of the Republic of Indonesia, has introduced performance audits intensively since public sector audit reforms were initiated in 2001. However, the implementation of performance audits still faces several obstacles. This study examines the development of the performance audit methodology in BPK, which can be divided into three stages: before the revitalization of BPK in 2006, the initial development of performance audits during 2006-2010, and the maturity of the implementation of performance audits since 2011. This study concludes that several key factors have affected the implementation of performance audits at BPK, including the development of audit guidelines, the dynamics of medium-term government planning, the focus of the BPK’s Management, and assistance provided by other supreme audit institutions (SAI). To address new realities and challenges in the future, more sophisticated performance audit methods need to be adopted by BPK, such as big data analytics, the adoption of governance audits, and employing public policy analysis. Without adopting such methods, the institutionalization of ​​effective performance audits might not be achieved in the future.

The effect of audit opinions, implementation of audit recommendations, and findings of state losses on corruption levels in the ministries and institutions of the Republic of Indonesia

The prevalence of corruption in Indonesia is increasing every year. This fact has further undermined public confidence to strengthen governance and is a critical barrier to national development. This study aims to empirically examine the individual and combined impact of audit opinions, the implementation of audit recommendations, and findings of state losses by the Indonesian Supreme Audit Board (BPK) on the prevalence of corruption in ministries and institutions in the Republic of Indonesia. Using multiple linear regression analysis, this study used a purposive sampling method and investigated 72 ministries using secondary data from 2014 to 2017 obtained from BPK and the Corruption Eradication Commission of the Republic of Indonesia (KPK). This study indicates that audit opinions and the implementation of audit recommendations do not affect corruption in Indonesian ministries and institutions. In contrast, findings of state losses do have an influence. The combination of audit opinions, implementation of audit recommendations, and findings of simultaneous state losses do not affect corruption cases in Indonesian ministries and institutions. BPK can use the results of this study to formulate approaches and recommendations for auditing government financial reports that have a strong correlation with corruption eradication. Moreover, KPK needs to be more vigorous in its efforts to eradicate corruption, including establishing closer cooperation with BPK because the results of this research show that findings of state losses by BPK are closely related to corruption cases.

Rereading the Mathnawi of Mawlana Jalal Al Din Rumi from the standpoint of ethics management in the public sector

It is widely believed that a virtuous state always commits to uphold and consistently implement ethical values. If ethics cannot be maintained in the public sector, it would drive unethical behaviors of public officials that ultimately damage the public reputation and cause nepotism, irregularities, waste of public resources, loss of lives and properties, etc. Meanwhile, implementing ethical values into practice for public sector management requires a systematical approach and policies. Since the culture of a nation also influences people's behaviors, thus the role of cultural values should be considered in the management of ethical values in the public sector. This study examines the masterpiece work of Mawlana Jalal al-Din Rumi, The Mathnawi, as an example of a cultural resource. This study has two main purposes: Firstly, it aims to raise awareness about the advice of Mawlana Jalaleddin Rumi regarding the essentials of ethical management in the public sector through Mathnawi. The second aim is to encourage readers to analyze and evaluate their own cultural resources to understand and implement the ethical management philosophies they envisage through a systematic perspective. This study argues that the core elements of Mathnawi with supporting local cultural values can play a crucial role in strengthening the practice of ethical management in public sector organizations. Therefore, it can be said that Mathnawi includes advice regarding the key essentials of ethics management.

Mapping of budget stress in Indonesia: Consequence on budget implementation

The phenomenon of a budget deficit in local governments at the provincial, regency, and city levels shows that there is budget stress. Budget stress is a regional fiscal condition reflected in the lower revenue budget, while regional expenditure is getting higher. The consequence of budget stress is low budget implementation, and it reduces the quality of services to the public. This study aims to map the regions experiencing budget stress at the local government levels. Furthermore, this study examines and analyzes the consequences of budgetary stress on budget implementation. The research sample used local governments at the provincial, regency, city levels throughout Indonesia during 2016-2020. This study uses Ordinary Least Square (OLS) to test the research hypothesis. This study groups the five regions with the highest budget stress during 2016-2020. The results of this study can contribute to the theory, methodology, and implementation related to the budget. The theory's contribution is that the political budget cycle can maintain government performance through various efforts to reduce budget stress. This study also found that budget stress can reduce budget implementation. Therefore, the government needs to pay attention to indicators of budget stress.

Analysis of the RBA implementation and the preparation of an audit program at the Ministry of Villages, Development of Disadvantaged Regions and Transmigration

Risk-Based Audit (RBA) is an audit method that applies a risk approach in its implementation. By applying the RBA method, it is expected that an audit can be performed effectively and efficiently, thus producing maximum audit results. This study aims to analyze the implementation of RBA upon audits conducted by The Audit Board of Indonesia (BPK). Furthermore, this study analyzes the preparation of an Audit Program in line with the previously determined RBA. The research framework uses Agency Theory which emphasizes the relationship between management and principal. To ensure that management does not perform any manipulation, an independent third party must conduct the audit. This study applied a qualitative research methodology with a case study approach at BPK. The author expects to dig deeper into the application and implementation of RBA within BPK by using the case study approach support by audit documents and interviews with BPK Audit Team. The results showed that the implementation, performance, and monitoring of RBA by the BPK Audit Team were in line with the instructions and guidelines set by BPK.

The effect of audit cost, information technology, and auditor's competence on audit quality during the COVID-19 Pandemic

The Corona Virus Disease (COVID-19) is endemic in Indonesia and affects many sectors, including the economic and government sectors. During the COVID-19 pandemic, BPK, as the government’s external auditors, continued to carry out the audit to maintain accountability for state finances despite budget refocusing and large-scale social restrictions (Pembatasan Sosial Berskala Besar, PSBB). This study aims to determine the significance of audit costs due to budget refocusing, IT utilization, and auditor competence on audit quality during the work from home (WFH) policy. This study processed questionnaire data from 70 auditors from three representative offices of BPK in provinces under three different categories, namely A, B, and C. The research data was processed using SmartPLS software to analyze data with measurement models and structural models with a 90 percent confidence level. Data processing shows that the effect of audit costs and the use of information technology on audit quality during the COVID-19 pandemic has a feeble and insignificant effect; thus, the hypothesis is not supported. Meanwhile, the competence of auditors has a significant effect on the quality of audit results; ergo, the hypothesis is supported.

Analysis of regional financial independence, potential for growth, and health services: A case study of regencies/cities in South Sulawesi

This study aims to analyze: (1) the financial independence and commitment of health services in the region; (2) the potential for growth in supporting health services in the region; and (3) the relationship pattern between financial independence and regional potential for growth to achieve the goal of fulfilling health service commitments in the region. This research is explanatory research using a quantitative approach. The results show that: (1) the average level of financial independence of regencies/cities in South Sulawesi Province fall under the high category and relatively independent in terms of source and allocation of regional budgets; (2) the average growth of all regencies/cities in South Sulawesi Province shows positive figures which implies that the prospect of their economic growth has accelerated along with several problems in each regency/city; (3) some regencies/cities with large APBD do not have an increased allocation of resources for health expenditure. On the contrary, some regencies/cities that fall under the category of low budget and financial independence have a better commitment to health service and expenditure. In addition, almost all regencies/cities categorized as having good potential for growth ended up having low performance in health expenditure. The local government has carried out fiscal decentralization, which is defined as the freedom for regions in carrying out policies related to budget politics in the region. Notwithstanding the preceding, the role of the central government is still greatly expected to advocate for the improvement of health expenditure quality.

ARE LOCAL GOVERNMENTS OVERCONFIDENT WITH THE EFFECT OF BUDGET FORECAST ERRORS ON BUDGET DEVIATION?

This study aims to examine the effect of budget forecast errors on budget deviations moderated by local governments’ overconfidence. The research sample used regency/city governments in Indonesia during the 2017-2019 period. The analysis tool uses Eviews version 10 and SPSS version 22. The results showed that budget forecast errors had a positive and significant effect on budget deviation, but the local government’s overconfidence cannot cause an effect of budget forecast errors on the budget deviation. Additional test results of this study also showed that regency/city governments who were overconfident tend to fail in controlling their budget which could cause a surplus or deficit compared to local governments that were not overconfident. The same conditions apply to budget forecast errors. This means that regency/city governments that are overconfident tend to estimate budgets that are too high for revenue and/or budget estimates that are too low for expenditure compared to local governments that are not overconfident. Consistent with the main test results, this study shows that budget forecast errors have a significant effect on budget deviation and tend to occur in the Central Indonesian region category. Furthermore, overconfident regency/city governments cannot moderate the effect of budget forecast errors on budget deviations. Finally, these findings indicate that there is no difference between the budget forecast errors and the budget deviation in the three categories of western, central, and eastern Indonesia.

POLICY ANALYSIS AND IMPLEMENTATION OF MUTATION AND EMPLOYEE PLACEMENTS ON PERFOMANCE AND CAREER DEVELOPMENT

This study aims to assess the effectiveness of employee mutations and placements applied to several institutions in Indonesia. This study uses the meta-synthesis method by conducting a review of 31 previous studies listed in the research media. The results of the study found that government agencies in Indonesia had implemented mutation policies based on applicable regulations ranging from the law to local regulations on several factors, the value of improving performance and productivity, career development and promotion, to filling vacant positions. However, several studies have found that there is still corruption, collusion and nepotism, political affiliation, family connections, and close relations with superiors which causes a mismatch between the placement of employees and their competencies. Transfer of employees based on a merit system is indicated to improve performance including public services in providing information to create public sector accountability. Career development and promotion can also expand knowledge and experience to produce creative and innovative employees to support the achievement of organizational goals.

THE EFFECT OF HUMAN RESOURCES AND INFORMATION TECHNOLOGY ON THE REVALUATION OF GOVERNMENT FIXED ASSETS

The central government has implemented a government fixed asset revaluation policy. The main objective of the policy is to present the fair value of fixed assets in the government's financial statements. However, the results of fixed asset revaluation are not accepted by the BPK and must be corrected and recorded in the government financial statements for the 2019 fiscal year. Competent human resources and the use of information technology are considered two factors needed to achieve the revaluation objectives. This study was conducted to determine the level of significance of these two factors by distributing questionnaires to BMN officers and assessors from 82 ministries/agencies throughout Indonesia. The research data were processed by path analysis method using the Structural Equation Model (SEM) partial least squares (PLS) through Smart PLS 3.3.2 software used to assess measurement models and research structural models. The results of data processing concluded that the competence of human resources and information technology has a significant effect on the revaluation of government fixed assets. However, information technology needs to be improved again because the significance value is only half that of the human resources competency value.