The Republic of Indonesia is the largest archipelago in the world. It comprises 4 large islands and 30 smaller groups totalling 13,677 islands.
Indonesia is a unitary state composed of 27 autonomous provinces. These provinces are divided into 264 kabupatens (districts), 55 kotamadyas (municipalities), 3539kecamatans (sub-districts) and 66,437 desas/kelurahans (villages).
The Majelis Permusyawaratan Rakyat (Peoples Deliberative Assembly) and five other institutions of state, viz the Presiden (Presidency), the Dewan Perwakilan Rakyat (Parliament), the Dewan Pertimbangan Agung (Supreme Advisory Council), the Badan Pemeriksa Keuangan (Supreme Audit Board) and the Mahkamah Agung (Supreme Court) were created under the 1945 Constitution
The Majelis Permusyawaratan Rakyat (The Assembly) is supreme and the President its principal executor of state government. The President is not responsible to parliament but the enactment of laws and the State Budget require Parliamentary approval.
Ministers are not members of Parliament but are appointed by the President. The position of Parliament is strong. It cannot be dissolved by the President and all its members are concurrently members of the Majelis. In this way, if the President exceeds his powers, Parliament can convene the Majelis to bring him to account.
The Supreme Advisory Council's functions are to advise the President on matters of state. It has also the right to submit proposals to the executive.
The Supreme Audit Board is charged with auditing public funds and to report its findings to Parliament.
1.1 FINANCIAL PROCEDURE
Article 4 paragraph (1) of the 1945 Constitution and article 25 of the Indische Comptabiliteits Wet (ICW) or Indonesian Financial Administration Act, vests the President with all powers relating to finance, its control and regulation. Administratively this power has been delegated to the Minister of Finance in particular and with other Ministers responsible for financial management in general.
In the financial management process, the functions of officials raising revenues and disbursing funds are kept separate from those who are responsible for examining claims and authorising payments. The former function is delegated to Ministers/Heads of agencies who have responsibility for that part of the state budget under their control and the latter function is exercised by the Minister of Finance. Officials who receive, safeguard and disburse moneys or who have custody over securities or goods, have to maintain proper accounts for submission to the Supreme Audit Board. For good internal control, the laws and regulations require that the above functions should be kept separate.
Article 23, Chapter VIM of the 1945 Constitution makes for the following financial provisions:
The matters of public finance mentioned in Article 23(4) refers to the Indische Comptabiliteits Wet (ICW) or Indonesian Financial Administration Act as amended from time to time. The provisions in the ICW providing for the management and control of the public finances of the Republic are now considered inadequate and are being reviewed with the objective of replacing them with a new law which is attuned to the current situation and developments in financial administration. The bulk of the ICW deals with procedures for the management and control of funds provided in the state budget. The management of other public finances, such as regional finances and those of public enterprises are regulated by separate laws.
The budget cycle starts with the annual presentation of the budget bill by the Government to Parliament in compliance with the provisions contained in article 23 paragraph (1) of the 1945 Constitution cited earlier. The next phases of the cycle, namely the budget execution, control/audit and accountability are regulated by the ICW and its executive regulations. The executive regulations of the ICW concerning budget implementation are stipulated in a Presidential Decree on Guidelines for Budget Implementation.
The control/audit of public finance refered to in article 23(5) of the 1945 Constitution is legislated in Act Nr. 5 of 1973 relating to the Badan Pemeriksa Keuangan (Supreme Audit Board).
Financial management at the regional level is regulated by Act Nr.5 of 1974 (the Main Principles of Government in the Regions). The Act provides for regional autonomy and enumerates the powers relating to regional finance including the collection of regional revenues, the implementation of regional financial accountability, management and control, determination of the regional budget for revenue and expenditure (regional budget). Financial management in the regions is regulated by government regulations supplemented by regulations issued by the Minister of Internal Affairs and regulations issued by the authorities in the respective regions.
1.2 STATE TREASURY
The State Treasury collects all revenues from tax and non-tax sources. The Treasury encompasses all the General Treasury Accounts, the accounts for the Director General of the Budget, accounts maintained with Bank Indonesia and the cash offices throughout the Republic.
State revenues are derived from domestic revenues, namely income from oil and gas, income tax, value added tax, import duty, export tax, land and building tax, excise, other levies and non-tax revenue. Development funds comprise mainly foreign loans in the form of program and project aid.
Domestic revenues are used to finance the operating budget and the balance (referred to as government savings) is used to finance the development budget. The operating budget covers expenditure on personnel, goods and services, maintenance, official travel, subsidies/aid, repayments of foreign loans and other recurring expenditures.
1.3 LIMITATION
This chapter describes the financial and accounting practices in the national context since these procedures and practices are identical in the regional situation.
2.1 ANNUAL APPROPRIATIONS
Before the start of the budget year, the government prepares the budget estimates which are to be submitted to Parliament for approval. The budget estimates are presented in the form of a budget bill together with a budget paper from the government.
The budget bill comprises the state revenues expected to be earned from the routine revenue and development revenue sources. Routine revenues are classified according to the type/source of revenue (budget items) and the estimated amounts for each type. Development revenues which are received in the form of foreign aid (loans), are broken down into program aid and project aid, together with their estimated amounts.
The budget bill also includes the routine expenditure budget and development expenditure budget. Both the routine and the development expenditure budgets are broken down into sectors and sub-sectors which specify the budget objectives/functions and the respective amounts allocated to each sector and sub-sector.
When the approved budget bill becomes law, the government cannot change revenue policies or expenditure provisions without parliamentary approval.
The budget process begins with the submission of the budget bill by the government (President) at a plenary session of Parliament in early January, followed by discussions in parliamentary committees from about January to March.
Prior to the tabling of the budget bill a preliminary discussion is usually held between the government and the budget committee of Parliament. Within the first seven days of each calendar year, the President introduces the budget bill together with the budget paper in a plenary session of Parliament.
The budget committee then submits the results of its discussions to the plenary session of Parliament. The budget debates go through four stages:
2.2 BRIDGING FINANCING
Article 23 of the 1945 Constitution states that in the event that Parliament does not approve the budget proposed by the government, then the government shall implement the budget of the previous year. This has never happened in practice, with the budget bill always being approved on time.
2.3 EMERGENCY EXPENDITURES
Parliament approves allocations for sectors and sub-sectors for both the operating and development budgets. The President as executor of the approved budget appropriates sums to the various agencies according to programs, activities and projects. An allocation is also made to "Finance and Accounts Budget Center" (Budget Center XVI), which provides among other things a sum to meet emergency expenditures.
2.4 SUPPLEMENTARY BUDGET AND BUDGET AMENDMENTS
When amending or supplementing the budget, the government prepares a report of actual expenditure at the end of the first half year and a forecast statement of expenditure for the second half year. The first half yearly report on budget implementation is discussed by the government with Parliament. If, before the end of the budget year, additional funds are required, the executive submits a bill on the amendments and supplement to the budget for the approval of Parliament.
2.5 THE ROLE OF PARLIAMENTARY COMMITTEES IN FINANCIAL ACCOUNTABILITY AND MANAGEMENT
There are 11 parliamentary committees, namely Committee I up to Committee X, and a Budget Committee. Each committee has its own scope of duties, or has working relations with several ministries, agencies and nongovernmental institutions. On the other hand, the scope of duties of the Budget Committee, covers all ministries, governmental and non-governmental institutions, as well as the general secretariats of the highest state institutions with respect to budget matters.
Within their respective scope of duties, the parliamentary committees deliberate on budget preparation, legislation and implementation; review the financial statements, compliance with laws, regulations and the broad outline of state policy; and generally liase with the Budget Committee on relevant matters.
In carrying out these tasks, the committees may conduct meetings with the respective ministers, government officials, the public, or even conduct working visits to government and other agencies.
The Budget Committee has specific tasks to:
3.1 MINISTRY OF FINANCE
The Minister Of Finance has overall control over the budget. He has responsibilities for the collection, custody and accounting for all state revenues. The Minister also exercises controls at Wm time of budget preparation by determining expenditure 'ceilings', during implementation when spending has to be within approvals specified in the operating expenditure 'List of Activities' (DIK) or the development expenditure List of Projects' (DIP); and at the time the annual financial statements are compiled. All expenditure incurred by government agencies are processed and paid by the State Treasury.
Budget amendments and supplementary budgets are channeled through the Ministry. Transfer of allocations between operating expenditure items are submitted to the President for approval through 'he Ministry and in the case of development expenditure items additionally through the Chairman of the Planning Board (Bappenas). Transfers o? allocations between sectors or sub-sectors, however, require parliamentary approval.
3.2 OTHER CENTRAL AGENCIES
Besides the Ministry of Finance, the Badan Perencanaan Pembangunan Nasional (Bappenas) or National Development Planning Board is involved in budget management. This institution is involved in development planning, approving and/or revising development programs and projects as well as monitoring progress.
Besides Bappenas, the Coordinating Minister for Economy, Finance and Development Control also has a say in the procurement of goods and services valued at over 3 billion rupiah.
3.3 THE ROLE OF THE CENTRAL BANK
The central bank of the Republic is Bank Indonesia, which is state-owned and responsible for regulating, supervising and maintaining the stability of the rupiah. In this role, the Governor of the Bank is a member of the Monetary Council (Dewan Moneter) which determines monetary policy.
The Bank also acts as banker to the government and operates bank accounts for this purpose throughout the Republic. It issues, administers and redeems government debentures and extends credit to the government by accepting treasury bonds as collateral. Not later than three months after the budget year, the government is required to inform Parliament of the total credits received from the Bank. The Bank controls and manages the gold and foreign exchange reserves.
3.4 PRIVATISATION
Perseros are public enterprises which are commercial in nature and which are either partly or fully owned by government. Although privatisation of government bodies is not common in Indonesia, Perseros are encouraged to go public by selling their shares to the general public.
As mentioned earlier, the Badan Pemeriksa Keuangan (Bepeka) or Supreme Audit Board is one of the five high organs of state and its importance and role stem from this constitutional position. According to the 1945 Constitution and Act NR. 5 of 1973, Bepeka is responsible not only for the audit of the state and regional governments but also of public enterprises.
In carrying out its work, Bepeka relies on audit findings generated by internal control units within the agencies. It is entitled to all necessary information and any person or body which refuses access to such information, or furnishes false information, is guilty of an offence.
Bepeka reports to Parliament in the following manner:
Bepeka's Annual Audit Report is presented directly by the Chairman of Bepeka to the Chairman of Parliament at a meeting attended by the Vice Chairmen and members of both institutions. At that meeting, the Chairman of Bepeka offers a brief statement on the principal audit findings covered by the Annual Audit Report.
4.1 BEPEKA'S RELATIONSHIP WITH PARLIAMENT
Bepeka has close working relationship with Parliament. Bepeka provides written replies to questions raised by Parliament on the Audit Reports and on the Annual Financial Statements findings reported to it. Members of Parliament may at times meet with Bapeka to discuss financial matters that arise during members visits to the regions. There are also occasions where Bapeka is invited as observer to parliamentary sessions, meetings and public hearings held by it with the government or other bodies where state financial matters or audit matters are discussed.
4.2 AUDITING STANDARDS
The auditing standards used by Bepeka are set out in the official publication titled 'Norms for the Audit of Financial Accountability of 1976.'The U.S. General Accounting Office auditing standards and executive directions were used as guidelines standards to the extent that they were applicable to local conditions. Bepeka is reviewing these norms in the light of the INTOSAI Auditing Standards published in March 1989.
5.1 BUDGETING SYSTEM IN INDONESIA
The emphasis of the traditional budget was to ensure that annual revenues were properly raised, collected and classified, and annual recurrent expenditure was properly allocated, authorised and charged. Compliance with financial controls and budgetary limits were prime considerations rather than consideration of what was achieved with the moneys spent.
The Performance Budgeting System (P.B.S.) was introduced in 1970/71 with the implementation of the national development plan. Appropriations for development were based on approved programs as listed in the Projects Schedule (DIP). The DIP which is approved by the Minister of Finance and Chairman Bappenas would specify project details, sources of funds and the objectives. Physical progress of each project is monitored and funds released accordingly. Strict control is maintained to ensure spending is within budget ceilings and progress in accordance with the objectives and plans. PBS was also extended to the operating budget about the same time and expenditure allocations based on the Activity Schedule (DIK) approved by the Ministry of Finance. As with the development budget, funds from the operating budget are allocated to ministries/institutions for various programs and activities. The DIK would specify the body responsible for the budget (eg. budget office of the ministry), the activities to be carried out, the executing office, work measurement units and target units/volume of work to be performed.
The introduction of PBS has improved budget management because it not only looks at the financial and physical aspects of implementation but also its economic implications. The accounting system is also geared towards providing information to measure the performance of departmental activities.
5.2 BUDGET CLASSIFICATION
The state budget comprises the operating budget and the development budget. To carry out the task of general government, a operating budget comprises the routine revenue budget (domestic receipts) and a routine expenditure budget. The development budget also consists of a development revenue budget and a development expenditure budget.
The main source of revenue is from tax and non-tax income from oil and gas. The development revenue budget consists of program and project aid. The routine expenditure budget includes expenditure on personnel, goods and services, official travel, subsidies/aids to the regions, debt charges and others. Development expenditure is composed of rupiah financing (funded from operating budget surpluses) and foreign aid. Rupiah financing is applied to development projects including government participation in public enterprises.
Indonesia observes the balanced budget convention-the bigger the budget surplus, the smaller the loan element. Every effort is made to increase surpluses and reduce borrowing.
The budget is classified under four categories:
This category classifies expenditure according to sectors and subsectors.
Organisational classification refers to the allocations by ministries/ institutions.
This classification is made by classes of objects (eg. personnel, and maintenance)
The state budget as already mentioned comprises the operating and development budgets. Expenditure is either for consumption (operating budget) or for investment (development budget).
6.1 PLANNING
The state budget is prepared on the basis of the Five Year Development Plans (Repelita) in accordance with the Broad Outlines of State Policy (GBHN). The GBHN provides in essence, the general design for national development- a long term development outlook covering the next 25-30 year period and the Five Year Development Program (Pelita).
The objectives of the Five Year Development Program are:
Although the Development Programme is on a five year cycle, funding is on an annual basis.
In the preparation of the budget estimates by the executive, and in the deliberation on the budget bill in Parliament, the organs of state rely on the GBHN and Repelita in order to reach consensus.
6.2 ROLE OF CENTRAL AGENCIES AND THE DIRECTORATE GENERAL (BUDGET) IN BUDGET PREPARATION.
Each budget year the executive prepares the estimates for presentation to Parliament. The President with the assistance of the Finance Minister and National Development Planning Board (Bappenas) is responsible for the final preparation of the estimates prior to parliamentary approval.
The Finance Minister is chiefly responsible for the preparation and drafting of the estimates. However, in the matter of evaluating and selection of the development project plans, he shares this responsibility with the Badan Perencanaan Pembangunan Nasional (Bappenas).
In practice, it is the Directorate General for the Budget of the Ministry of Finance which has the responsibility of examining and preparing the estimates. This body analyses and examines all proposals of the executive agencies (ministries/ institutions), and ensures that specified budget ceilings are not exceeded.
6.3 BUDGET STEPS
The steps involved in the budget preparation process are as follows:
- The budget bill;
- The operating and development budget summaries. Expenditure is by Budget Centre and Echelon 1 Units with breakdown by sectors, subsectors, programs, activities, and projects and revenues are shown by source/type. These summaries come with explanatory notes.
- A budget paper explaining the Estimates. At the time the Bill is debated in Parliament, ministries start preparing their Activity Schedules (Dlk) and the Project Schedules (DIP) for approval by the Minister of Finance and Bappenas. These schedules will only be amended if changes were made by Parliament.
7.1 ROLE OF MINISTRIES/INSTITUTIONS IN SPENDING AND CONTROL
Under Article 5(2) of the 1945 Constitution, the President may issue decrees or regulations on financial or other matters. Similarly, the Minister of Finance is empowered to issue financial management instructions which are binding on all public officials, while individual Ministers may issue such regulations as are necessary for bodies under their particular portfolio. Basically, public officials responsible for financial management must ensure that:
7.2 INTERNAL AUDITING
Each ministry/institution has an Inspector General who carries out internal audit functions. All transactions and financial records are audited by the Inspector General before the accounts are sent to the Bureau of Finance of the ministry concerned for onward transmission to the Minister of Finance who is responsible for producing the annual financial statements. In carrying out the audit, each Inspector General:
The audit reports of each of the Inspectors General are submitted to the chairman of their respective ministry/institution with copies to the SAI (BAPEKA) and to the Agency for Finance and Development Control (BPKP) which is a central agency responsible for monitoring internal controls.
7.3 THE PUBLIC DEBT
Ideally development expenditure must be met from surplus funds from the operating budget and from development revenue. Shortfalls from these sources to finance development programs will be met from loan borrowings. Financial policy dictates that borrowings may only be used for financing development programs and projects.
Borrowings may only be authorised by Parliament and in accordance with existing laws and regulations. In practice parliamentary approval is not sought for each loan but rather as a lump sum when the budget Bill is debated. Where borrowings are made on behalf of regional governments or public enterprises, subsidiary loan agreements are drawn up with the parties concerned.
In general, foreign borrowings are used for capital investments, infrastructural and human resource development. Direct external loans take the form of:
All borrowings are disclosed in the annual financial statements.
Each work unit charged with financial accountability and management is obliged to produce a report on the implementation of its budget. There are two types of reports, i.e. a report by the official charged with general management (administrative management) and the other by the cashier. Both reports are matched at the Administration Office of the ministry/institution concerned in order to assess the correctness and completeness of the budget accounting data.
Each ministry/institution is required to keep its own books. The ministry/ institution records, together with accounting information obtained from the Ministry of Finance (Treasury Offices, Directorate General for the Budget), are verified for accuracy and completeness before being posted to the ledgers.
Each ministry/institution financial statements must be sent within the time limit set by the Finance Minister for comparison with the Annual Financial Statements prepared by the Ministry of Finance. Statutory provisions require that the Annual Financial Statements be submitted to Parliament not later than two years after the end of the respective budget year, after it has been audited by the SAI (Bepeka).
With regard to development expenditures, besides the routine reports submitted, monthly reports on physical and financial progress are prepared. In addition, quarterly reports are submitted by the project officers to the respective ministry/institution which monitors the projects and compares them with the respective DIP and monthly project reports. The ministries/institutions then prepare an activity report on their projects for submission to Bappenas which is charged with the task of monitoring development projects and keeping the President informed of their progress.
The central government's accounting system is currently undergoing transition. During the 1980s a new accounting system was developed which has presently entered its initial implementation phase. The transition was executed in stages, not only because the change from the prevailing system to the new system requires time, but also because such a change is expensive in terms of both money and manpower. The present accounting system will continue to operate until the new system is fully implemented at all central government agencies.
9.1 DESCRIPTION OF THE EXISTING CENTRAL GOVERNMENT ACCOUNTING SYSTEM
The existing government accounting system can be described as consisting of three distinct and independent subsystems. These subsystems include the following:
Although there is a subsystem for accounting for agency fixed assets, and a subsystem for foreign borrowings, these subsystems are not yet fully developed and integrated into the existing government accounting system. Information on fixed assets and foreign liabilities are therefore not yet included in the annual report.
9.2 NATURE OF THE EXISTING ACCOUNTING SYSTEM
The existing government accounting system uses the cash basis principle whereby revenues are recorded in the period when cash is received and expenditures are accounted for when cash is disbursed.
The government accounting system is based on a single fund concept. All government revenues collected (including proceeds from foreign borrowings and grants) and all expenditures incurred (including the use of borrowed funds) by agencies of the central government are authorised only under the Budget Law.
The existing system adopts the single entry method of bookkeeping. The accounting process starts with the preparation of the monthly List of Transactions for Receipts and the Schedule of Transactions for Disbursements by the Offices for Budget Administration (KTUA) at various locations in Indonesia.
Each KTUA forwards one set of these schedules together with copies of the supporting source documents to the Finance Bureau of each ministry/institution (usually located in Jakarta), to the CSFA in Jakarta, and to the Data Processing Centre-Directorate General of the Budget (DPC-DGB) in Bandung, West Java. The CSFA and DPC-DGB respectively process the documents which they receive and produce reports from the centralised records.
9.3 SPECIFIC LEGISLATION
The responsibility of the Ministry of Finance over accounting and financial reporting matters is regulated by the Presidential Decree on the implementation of the State Budget which is modified from time to time, and in the Budget Law.
9.4 SUPPLEMENTARY REGULATIONS
From time to time the Minister of Finance and/or the Directorate General for the Budget issue decrees/circulars concerning regulations and directives covering financial accountability and reporting.
9.5 ACCOUNTING STANDARDS
A majority of the guidelines set down in the past which are still practised under the existing system were issued by the Directorate General for the Budget. The development of these guidelines into accounting standards and procedures which conform with generally accepted accounting principles still has to be realised.
9.6 THE NEW GOVERNMENT ACCOUNTING SYSTEM
Recognising the deficiencies of the existing system, the central government decided to upgrade the Central Government Accounting System (CGAS). The CGAS has been developed and the pilot scheme tested. Phased implementation of this new system started in fiscal year 1991-92.
The new CGAS consists of an integrated system that will facilitate accounting for and reporting of the financial transactions, assets, liabilities, and equity of the entire Central Government and of its agencies. The new CGAS consists of two major subsystems, namely the Central Accounting System (CAS) which will be implemented by the CSFA at the Ministry of Finance, and the Agency Accounting System (AAS) which will be implemented by each ministry/agency of the Central Government.
The Central Accounting System includes three accounting subsystems as follows:
9.7 FEATURES OF THE NEW ACCOUNTING SYSTEM
The existing system and the new system are similar in two respects, viz. in the use of the cash basis principle and in the adoption of the single fund concept.
In other respects, the new system is very different from the existing system. In particular, the new system is decentralised. Unlike the existing system where agency accounting records and central accounting records are maintained centrally either in Jakarta or in some other location, the new accounting system will be decentralised for both the AAS and the CAS. Each ministry/institution which has offices and/or projects in the regions will have an accounting unit in that region. All accounting source documents and the accounting records of each office/project in the region will be maintained, and financial reports prepared by the agency regional accounting unit concerned. The central accounting system will also have one Regional Central Accounting Field Office (RCAFO) in each region/province. The CAS copy of the source documents and the CAS records of transactions in the region will be maintained by these RCAFOs.
The new accounting system uses double entry bookkeeping-a change from the previous single entry system. Further, the new system will be fully computerised. Both the AAS and the CAS will eventually be fully automated to the financial reporting stage.
The new system is an integrated system. Accounting activities starting from the review of the source documents, the preparation of the transaction file and the journal entries, the posting to the general and subsidiary ledgers, and the preparation of the trial balance, will be done centrally by the RCAFOs. These RCAFO activities are part of the support activities provided by the CAS. Copies of basic source documents and the relevant computer files in the FCAFOs will be provided to the agency accounting units. From the computer files provided by the FCAFOs, each agency accounting unit will generate the office/project level financial reports and the regional level agency financial reports. The same computer files that are provided to the agency accounting units will be used by the CAS to generate the Central Government-wide reports, specifically the financial statement.
The new system will facilitate the preparation of both the Budget Accountability Reports and the Financial Position Reports. It will include subsystems on treasury accounting, accounting for fixed assets, government investments, and long-term liabilities. These subsystems will facilitate the preparation of the financial position of the central government.
The new system also adopts a set of accounting and financial reporting policies and standards. Guidelines have been developed to support the basic accounting standards for central government accounting. These instructions may still evolve in accordance with the development and implementation of the new accounting system.
The Budget Law requires that the Budget Accountability Report be submitted by the President to Parliament not later than two years after the end of each fiscal year. This accountability report shows the extent to which actual budget implementation complies with the provisions of the Budget Law.
The implementation of the new central government accounting system should significantly shorten the time needed by the executive to submit the annual financial statements to Parliament.
10.1 STEPS IN THE ACCOUNTING PROCESS (EXISTING SYSTEM)
The State Treasury Offices (STO) which are subordinated to the Directorate General for the Budget of the Ministry of Finance, and are located all over the country, are responsible for collecting all central government revenues and for making disbursements in their respective areas of responsibility. The STOs collect the documents supporting receipts and disbursements daily and forward them the next day together with their accountability reports to the Office for Budget Administration (KTUA) charged with processing these documents.
The 33 KTU As spread over the whole territory examines the documents that they receive, enter them in computer files and generate the monthly List of Transactions for Receipts and the List of Transactions for Disbursements by ministry/institution.
The KTUA submits copies of the List of Transactions with supporting documents to the following agencies:
In common with the State Treasury Offices, the Directorate for Budget Administration (DBA) at the Directorate General for the Budget collects receipts and makes disbursements for certain types of transactions, particularly those involving foreign borrowings.
Each month the Directorate for Budget Administration also prepares a List of Transactions by ministry/institution and submits it together with the supporting documents to the Finance Bureau, the CSFA, and DPC-DGB.
The Finance Bureau of each ministry/agency reviews the List of Transactions and the source documents received from the KTUA and the DBA and then updates the agency accounts. At the end of the budget year, it prepares the Budget Accountability Report for the agency and submits a copy to the Minister of Finance through the CSFA.
The documents received from the STOs and the DBA are used by the DPC-DGB to update its records and to produce the monthly and annual budget realisation reports. The DPC-DGB system covers the budget realisation of all ministries/institutions of the central government, which provides the most comprehensive single report in this area. Monthly reports on the overall budget realisation are prepared by the DGB using data from its several subsystems.
The CSFA reviews the List of Transactions and the source documents received from the KTUA and, using computerised processes, updates the CSFA accounts. In common with the DPC-DGB system, the CSFA system covers the budget realisation of all agencies (ministries/institutions) under the central government.
The CSFA has yet to develop a computerised subsystem for processing the DBA transactions. Because of this, the CSFA records cannot be used as the primary basis for preparing the financial statement. Apart from processing the documents received from the KTUA, the CSFA also receives and processes in a separate subsystem the month-end accountability reports submitted by the State Treasury Offices.
The CSFA is the office under the Minister of Finance which is responsible for preparing the financial statement submitted to Parliament. This report is prepared using the final year-end budget realisation reports prepared by the DPC-DGB as the primary source of information. However since the DPC-DGB subsystem was developed primarily to meet the management and operating information requirements of the DGB, the data that is accumulated in some cases are not consistent with account structure required for reporting on the budget accountability.
For this reason, the CSFA makes adjustments in the DPC-DGB reports using data from the reports generated by the other subsystems (namely the agency budget accountability reports of ministries/institutions, the reports submitted by the Directorate General for Taxes and the Directorate General for Customs and Excise, and the reports from the CSFAs own subsystems), to produce the Central Government Financial Statement.
The financial statement prepared by the Ministry of Finance is submitted by the Minister of Finance to the President after it has been audited by the Bepeka (SAI). The President subsequently submits this report to Parliament for approval.
10.2 SCOPE OF THE ANNUAL FINANCIAL STATEMENT
The annual financial statements include only the annual report on budget accountability submitted by the executive to Parliament. This report shows the revenue and the expenditure budget approved by Parliament, the actual revenues and expenditures realised by all agencies of the Central Government, and the discrepancy between the budgeted and the actual amounts.
10.3 FORMAT OF THE PUBLIC ACCOUNTS
The annual financial statements submitted by the executive to Parliament are prepared in the format specified by the executive and approved by Bepeka. The format of this report conforms with the format of the state budget approved by Parliament since the objective is to compare the approved budget ceilings with actual realisation.
The annual financial statements consist of the following components:
In addition, the annual financial statements include a summary report showing the increase or decrease in the surplus/deficit for the current period and the cumulative surplus/deficit of the Central Government.
11.1 ROLE OF THE SUPREME AUDIT INSTITUTION (SAI)
Bepeka is charged with the task of auditing state finances which includes auditing budget implementation. Bepeka, however, is not responsible for the continuous monitoring of budget implementation, whether in terms of physical progress or financing. The monitoring of budget implementation is fully the responsibility of the executive.
During its audits, however, Bepeka reviews the results of monitoring undertaken by the executive, by examining plans with actual results, both physical and financial accomplishments. An evaluation of the performance of activities in terms of economy, efficiency and effectiveness is also carried out.
11.2 THE PARLIAMENTARY BUDGET COMMITTEE
The Budget Committee is a parliamentary committee charged with the task of reviewing the first semester report on the budget realisation submitted by the executive to Parliament. The discussions held with the executive (Ministry of Finance) focus on the possibility of amending and supplementing the budget in the following semester.
11.3 OTHER AGENCIES
As explained previously, development projects are centrally monitored by Bappenas, which establishes priorities for development projects. These development projects are listed and circulated to all ministries/institutions. On the basis of this list, all agencies are required to prepare a quarterly physical progress report on projects for submission to the governor of the province/head of the first level region where the project is located and to the respective ministry/institution for analysis and evaluation.
Officials of the ministries/institutions use these quarterly reports as means of controlling and monitoring project implementation execution in their respective spheres of activities. The development project reports, whether they have been prepared on a regional basis by the governor concerned or sectoral basis by the respective ministries/institutions, are used by Bappenas to analyse and evaluate the physical progress of all development projects during a given budget year. The evaluation results of all development projects are reported to the President by Bappenas.
The accounting reforms now taking place will have lasting impact on financial accountability and management. In particular data collection and transmission will be facilitated and compiled faster, with more accurate information generated on a timely basis. The processes of budget preparation and implementation in the Republic of Indonesia are expected to be improved considerably by these far-reaching accounting reforms.