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Jakarta Post

EDITORIAL: Supreme auditors sell opinions

  • EDITORIAL

    The Jakarta Post

Jakarta   /   Mon, May 29, 2017   /   08:32 am
EDITORIAL: Supreme auditors sell opinions Illustration of Indonesian Supreme Audit (BPK). (tempo.co/Imam Sukamto)

The report of the politically independent Supreme Audit Agency (BPK) to the House of Representatives on May 19 that for the first time since 2004 put an unqualified opinion (clean) on the 2016 central government consolidated balance sheet should have been the highest accolade for the government, something to give it great pride in regards to its financial accountability.

Yet even more commendable was the announcement on the same day (May 19) by the Standard & Poor’s Global Ratings that the world’s most conservative credit rating agency had for the first time since 1997decided to upgrade Indonesia’s sovereign credit rating to investment grade (BBB-).

However, the good news about the govenment’s financial accountability seem questionable now after the revelation last Friday that the Corruption Eradication Commission (KPK) had caught two senior BPK auditors redhanded with big sums of cash suspected to have been bribes to influence the auditors’ opinions on the Villages, Disadvantaged Regions and Transmigration Ministry.

The KPK move only validated earlier suspicions and rumors that the opinions of BPK auditors — ranging from unqulified opinion (clean bill of health), qualified opinion, adverse opinion and disclaimer — were available for sale to government offices and state-owned companies.

The unqualified opinion on the 2016 financial statement should have been quite a great achievement as regards to the transparency and accountability in government financial reporting because the preparations for the consolidated balance sheet involved the collection and process of data from almost 90 ministries and agencies with more than 40,000 working units within the public sector across the country.

It was the first “clean bill of health” the central government received from the BPK since 2004 when it changed its financial statement from being simply a state budget implementation report to being an overall (consolidated) balance sheet of the central government. 

The best assessment the government financial reports got from the BPK between 2004 and 2015 was a qualified opinion, meaning the bulk of the report still did not comply with the government’s principles of accounting. Worse still, the BPK had often put a disclaimer on the government financial statement because the agency was unable to complete the audit since it lacked financial records.

The BPK report to the House did explain that the financial records of eight ministries and agencies still got qualified opinions and the reports of six ministries got disclaimers, meaning the audits of these ministries could not be completed due to an acute lack of records.

But the BPK statement said the whole balance sheet for 2016 still deserved an unqualified opinion because materially the records of the 14 ministries with qualified opinions and disclaimers represented only about 16 percent of the total volume of reports and records audited.

We were initially encouraged by the BPK’s unqualified opinion as it showed that significant improvement had been made in the internal control system, which is the first line of defense against corruption and inefficiency and effective internal control is key to an effective risk management system. 

But now, after the arrest of two senior BPK auditors, the whole audit process and integrity of the BPK has been given a big question mark.