SP/Carlos Paath – Weak internal control systems and legal non-compliance cost the government Rp 57 trillion ($4.95 billion) in lost revenue during the first half of this year, state auditors announced on Tuesday.
Hadi Purnomo, the chairman of the Supreme Audit Agency (BPK), said the losses stemmed from 13,969 documented cases, of which 4,589 were classified as non-compliance, accounting for potential losses of Rp 10.74 trillion.
"The BPK's recommendation in such cases includes handing over assets, submitting money to the state coffers or to regional government coffers," Hadi said upon submitting the BPK's 2013 first half audit report, or IHPS I, to a plenary session of the House of Representatives.
Hadi said the BPK had found 5,747 cases of weak internal control systems and 2,854 cases of administrative mismanagement. The audit discovered only "779 findings... of inefficiency and ineffectiveness," but those cases amounted to Rp 46.24 trillion in losses, he said.
The agency has recommended improvements to government entities' internal control and administrative systems.
Hadi said the audit focused on financial reports from the central and regional governments, ministries and other institutions managing public funds, including financial bodies like Bank Indonesia and the Deposit Insurance Corporation (LPS).
The BPK has a broad mandate to investigate the management and accountability of state finances, assess government bodies' performance, and conduct "special audits," such as for environmental resources and fraud detection.
The BPK's submission to the House was a meta-assessment that encompassed "597 reports... [of which] 519 were financial [reports], nine performance audits and 69 special audits," Hadi said.
Several of the government bodies singled out by the BPK have followed up on the findings and surrendered their assets. "Over Rp 372.4 billion has been handed over to the state" as a result of non-compliance findings, Hadi said.
However, he added that this amount was still a far cry compared to the potential losses that the BPK had discovered.
Hadi urged the central and regional governments to carry out non-cash financial transactions or to only carry out transactions through the banking system for all programs, "so that BPK auditors can detect all the government's transactions easier," he said at a press conference in his office.
Hadi said the BPK had shared its recommendation on non-cash transaction systems with all the governors of Java and heads of state-owned enterprises.
He said he hoped to secure the governors' commitments on the request, adding it should only apply to their next procurement contracts and not retroactively.
He also said the policy should apply for tender winners on government projects, adding that such a system would also enable the BPK to determine the legitimacy of the source of funds used in the transactions before the data are sent to the State Budget Service Office (KPPN).
Hadi said that KPPN transaction data could be used to compare data from ministries and government institutions. "Because the BPK's financial transaction [data] is obtained from the KPPN, this will make it easier for auditors to trace the government's flow of funds," he said.
The government's transaction data is compiled by 177 KPPN offices. The BPK has so far conducted pilot projects with five of these offices. Hadi said he hoped the BPK's pilot project would connect all KPPN offices to the BPK's central database in the next two to three months.
The agency also wants to see changes to the process of competing for government tenders. At the moment, there is no requirement that participants must submit evidence that they have had no tax problems in the past three to five years.
In the future, the BPK would also like to see all government contracts quoted in rupiah denomination.
Andi Timo Pangerang, a deputy chairman of House Commission XI, overseeing financial affairs, said the BPK's ideas should be considered carefully first.
He said that the supporting infrastructure was needed to implement the plan, and that matters related to financial transactions were Bank Indonesia's authority.
However, Andi agreed that it was important to reduce the risk of fraud – or at least improve detection – by avoiding cash transactions. "Use cash as little as possible in payments and transactions," he said.