Improving Performance Audit Capacity in Indonesia: Toward a More Effective and Efficient Government
Indonesia sought to improve performance audit capacity of its Supreme Audit Institution (BPK) by sharpening staff skills, revamping training modules, and building relationships with more developed auditing institutions. Indonesian delegates visited with counterparts in South Africa to discuss policies, guidelines, and training curricula; and developed an action plan for mainstreaming updated policies, training, and techniques for the implementation of performance auditing in Indonesia.
The Government of Indonesia needed to improve the effectiveness of government spending—a goal articulated in its five-year plan (RPJM)—and thereby enhance the country’s economic growth. Performance audits are the standard tool for assessing government spending efficiency, effectiveness, and economy, but Indonesia’s Supreme Audit Institution (BPK) did not have adequate capacity to carry out high-quality performance audits nor to train staff in performance audits.
Historically, BPK has a strong reputation among peers for financial audits, which have been its primary focus. However, few BPK auditors possessed the necessary qualifications and expertise to carry out expert performance audits, and the existing BPK structure did not have a dedicated performance audit department. Since the demand for performance audits is on the rise both in the government and in civil society, the knowledge exchange was timely and helped BPK further strengthen its capacity to carry out quality performance audits, adopt modern performance audit techniques, and improve training and support for BPK staff.
Like Indonesia, South Africa is an emerging leader among middle-income countries and faces similar challenges such as reducing poverty and improving infrastructure and sanitation. These economic similarities enable certain shared understandings; in addition both are English-speaking countries, which reduces communication barriers. The Auditor General of South Africa (AGSA) has a demonstrated record of carrying out sound performance audits, and South Africa is also the Executive Secretariat of AFROSAI-E, the African Association of Supreme Auditing Institutions (English-speaking). Indonesia is the same for ASOSAI, the counterpart Asian association. AFROSAI has long had an excellent training program in performance auditing. By adopting performance auditing skills and policies from South Africa, BPK can provide sound, realistic, and effective recommendations on government spending and opinions about whether the government has achieved the development outcomes with economy, efficiency, and effectiveness.
The exchange started June 12, 2014, with an internal discussion at BPK about goals for the exchange. An audio conference was held one week prior to the exchange between BPK Deputy Directors and Managers and knowledge providers from AGSA and AFROSAI to lay groundwork and establish expectations. The team of about 10 BPK members included representatives from the research department that formulates policies, guidelines, and training curriculum for performance auditors; the Inspector’s office from the BPK; the ASEANSAI secretariat; and the technical unit responsible for performance audits. They visited South Africa, June 21-28, 2014, to discuss performance audit planning, execution, reporting, and follow-up action as well as specialized auditor training.
After returning to Indonesia, BPK conducted a follow-up workshop in November 2014, where the 10 participants shared their learning and experience with an extended BPK staff. Each participant also prepared a report on the probability of the adoption of what they learned in South Africa to the Indonesian context.
The existing BPK structure did not have a dedicated performance audit department, but they agreed to develop one similar in structure to AGSA following the knowledge exchange.
- BPK learned more about performance audit techniques in all stages—preparation, execution, reporting, and monitoring of follow-up action.
- A new BPK Board Chairman, selected by Parliament on September 15, 2014, announced that BPK would focus on and conduct more performance audit assignments in the future.
- The Department of Research and Development (R&D) prepared the Performance Audit Framework and submitted it to the BPK Board at the end of March 2015. This framework is a basis for further development of the performance audit department, including specialized training.
- BPK staff noted that practice and compliance areas require further budget support from management and agreed to raise these questions with management.
- BPK realized how important the R&D stage is in a quality performance audit. Research must be done before proceeding with assessment.
- Match participants who face similar challenges, with one just slightly more developed than the other. South Africa faced similar issues as Indonesia; and though South Africa is slightly more developed, all participants could relate to one another more easily. South Africa’s knowledge-providing solutions and different perspective on the same issue were easily relatable to the Indonesian delegation.
- Consider national politics regarding exchange timing. New board members were selected by parliament just a few months after the exchange, and announced that BPK would conduct more performance-based audits in the future.
- Adapt the providing country’s lesson to the recipient country’s context. The BPK could use the performance audit training program adapted to their needs.
The World Bank task team proposed and prepared the program at a time when the BPK needed to improve the performance audit approach. The in-country-based task team worked with the BPK team to select a provider country and worked with the Lead FM Specialist in the Bank office in Pretoria, South Africa. The Bank financed the exchange with a grant of US$29,464.45.
BPK agreed to adopt the AGSA training program, including curriculum and models, which will improve their capacity to carry out performance audits. Instead of a leveling program (member, leader, supervisor training), the training is based on the auditing cycle (preparation, execution, and reporting). The auditor may move to the next program after demonstrating competence in the current training.
As BPK does more performance audits in the future, they may establish a specialized performance audit unit because performance auditing requires different skills and tools from a financial audit.
BPK may form a partnership with other research agencies, including universities with experts in relevant areas, to help guide coordination between the R&D and Technical Audit units.
Reflecting on the knowledge exchange, Alec Green, Performance and Audit Department, AGSA stated, “This is one of the best ways to really share information.”
One of the knowledge providers, Grace N. Z. Nelwamondo, Chief Performance Auditor, Office of the Auditor General, Namibia commented, “From what I have seen, [the exchange] is going to make [Indonesia] more equipped, more effective, more efficient . . . It will expose the BPK more; it will challenge BPK because now they have to decide whether they’re going to specialize in performance auditing, which is actually advisable, even if it means they have to start off small…. I have seen it in other countries how performance auditing has been in demand – how effective it is.”
On the recipients’ side, Dian Primartanto, Deputy Director for Research and Development on Special Audit Purposes, BPK, summed it up thus: “I could take lessons learned from my visit to Auditor General of South Africa, is the important role of research and development division. I learned that the R&D [Research and Development] Division in AGSA had become the supporting role, giving inputs and suggestion to the Auditor General in choosing the topics and objects of performance audits. It is interesting for me that when they formulate the topics, the R&D really puts in to their consideration what are the government concerns and priorities. Therefore the audit proposal runs parallel to the program and priorities of the South African Government[…]. As a consequence, there is an additional perspective that makes the overview of the audit proposal more complete. Lastly, and most important, is how the Auditor General takes the R&D’s inputs into decision-making.”
BPK Deputy Director for Taxes Audit, Ahmad Adib Susilo, noted, “When they are going to audit, they have specialists that help the auditing team on planning the audit process such as a specialist on Public Health. [Also] they have made clear divisions who work for financial, performance or compliance audit. Each of them becomes an expert in their respective field.”