EVALUATION OF INDONESIAN LOCAL GOVERNMENT FINANCIAL DISCLOSURE LEVEL YEAR Yan Rahadian, University of Indonesia, Depok, Jawa Barat, Indonesia

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1 EVALUATION OF INDONESIAN LOCAL GOVERNMENT FINANCIAL DISCLOSURE LEVEL YEAR 2007 Yan Rahadian, University of Indonesia, Depok, Jawa Barat, Indonesia Nanda Ayu Wijayanti, University of Indonesia, Depok, Jawa Barat, Indonesia ABSTRACT In 2005 the Government issued Peraturan Pemerintah (PP or Government Decree) Number 24 Year 2005 about Standar Akuntansi Pemerintahan (SAP or Governmental Accounting Standard). This decree assigned the central and local government to report their financial transactions based on SAP. Although this decree will not be effective until 2011, but the preparation of central and local government in implementing the SAP has started since the release of PP No 24 in This research acknowledged that up until now there have not been any empirical investigations about the development of central and local government s Financial Statement (FS) that refer to the SAP. Several previous researches focused on the theoretical assessment towards PP SAP, but not on the investigation of PP SAP implementation. The audit conducted by The Audit Board of Republic Indonesia (BPK RI) was also limited to the compliance of one FS or more with the guidelines in PP SAP, but not evaluating the government s FS in its entirety. This research conducted an empirical investigation on the Financial Statement of Pemerintah Daerah (PEMDA or Local Government) in Indonesia in Initially, this research formulated and calculated the index of FS disclosure and FS components of each PEMDA with reference to SAP. The result showed that the disclosure level of Balance Sheet, Laporan Arus Kas (LAK or Cash Flow Statement) and Laporan Realisasi Anggaran (LRA or Budget Realization Report) tend to be high and consistent, whereas the disclosure level of Catatan atas

2 Laporan Keuangan (CaLK or Notes to Financial Statement) tend to be low and consistent among all PEMDA. Secondly, this research conducted an explorative investigation on factors influencing the disparity of FS disclosure level among all PEMDA and the quality variance of FS components. The consistency of PEMDA s FS disclosure level score showed that the influencing factors were common, faced by all PEMDA and not related with the unique characteristics of each PEMDA. The result of an in-depth discussion with regulators, standard formulators, practitioners and PEMDA staff showed that those factors were related to: (1) technical guidelines of CaLK formulation; (2) the effects of other regulations; (3) CaLK socialization and formulation training; (4) priorities and concerns toward FS; and (5) human resources. Central government especially the Department of Finance and the Internal Affairs Department can use the result of this research to evaluate the readiness of PEMDA s FS disclosure in KSAP can utilize this research s checklist as an initial material in creating technical guidelines for CaLK formulation. PEMDA can use the result of this research for selfevaluation. This research recommends strategic steps i.e.: (1) FS disclosure regulations integration; (2) career development for government accountants; and (3) empirical and academic assessments on legal outcomes/standards/regulations/ bylaws. Furthermore the tactical steps proposed by this research are: (1) CaLK technical guidelines formulations; (2) CaLK socialization and formulation training; and (3) prompt decision-making to solve current issues, such as fixed asset. Keywords: PP No. 24 Year 2005, SAP, Governmental Accounting Standard, Local Government Financial Statement, Notes to Financial Statement, Audit Board of Republic Indonesia, BPK RI, Disclosure Level.

3 1. INTRODUCTION Financial information disclosure and governmental financial disclosure practices have a considerable attention from all parties ever since This was caused by the policy of the Indonesian government to carry out an extensive reformation of all aspects especially the local financial aspect. This substantial reformation was marked by the change of government from the New Order era to the Reformed Order era. In local financial management, the reformed era was marked by the execution of decentralized government system specifically the local autonomy. The research conducted by Halim (2002) revealed that local government financial reformation was marked by the implementation of UU no. 22 Year 1999 about Local Government and UU no. 25 Year 1999 about Financial Conformity of Central and Local Governments which replaced UU no. 5 Year 1974 about Local Governmental Items and UU no. 32 Year 1956 about Financial Conformity of the State with Self-Regulating Municipalities. Another package from the local (and central) government reformation was the release of PP no. 24 Year 2005 about Governmental Accounting Standards on 13 June 2005 that act as guidelines for the government, central and local, to perform accounting functions in the administration. Although PP SAP was released in mid 2005, the 2005 FS must be prepared according to PP SAP. In his opening speech at the Training of Trainers (TOT) for SAP batch II, Mr. Timbul Pudjianto, General Director of Bina Administrasi Keuangan Daerah (BAKD or Local Financial Administration Guide) of the Internal Affairs Department, who was also the Consultative Deputy of KSAP, stated that of 476 PEMDA, whether it was province, municipality or town, only 212 PEMDA that had tried to present the 2006 FS according to SAP and Peraturan Menteri Dalam Negeri (Permendagri or Internal Affairs Minister Decree) no. 13 Year 2006 (

4 The aforementioned number was certainly expected to increase every year, so that in 2011 all PEMDA (and central government) can prepare and present an annual financial statement. Aside from the number, the FS quality is also expected to improve, in its compliance with SAP as well as the reliability and relevance of the information presented and disclosed in the FS. To ascertain that goal, an independent routine and periodical evaluation of the government FS preparation is needed. This evaluation is conducted comprehensively and is aimed to assess the completeness and quality of the FS as well as the subsequent strategic and tactical steps required to accomplish the 2011 target. Apart from the review by BPK, until now there have not been any specific researches that evaluate the government FS preparation. Yuhertiana (2006), Bastian (2006) and Himawan (2006), for instance, focused their researches on the theoretical qualitative assessment of SAP technical bulletin which was issued by Komite Standar Akuntansi Pemerintahan (KSAP or the Committee for Governmental Accounting Standards), but did not conduct an empirical investigation on the FS preparation and presentation. Meanwhile, the review by BPK focused more on PEMDA compliance level in their financial statement presentations with respect to various regulations, including SAP, but not evaluating comprehensively the readiness of PEMDA to present an extensive FS with quality. For example, several PEMDA had only prepared and presented one FS, but BPK gave an unqualified opinion as long as that FS complied with SAP. In other words, the assessment performed by BPK had not included completeness evaluation and the relevance of the information presented in the government FS. Based on the abovementioned considerations, this research conducted the first empirical investigation on PEMDA s FS in Indonesia for At the first stage of this research a mapping of FS disclosure level of all PEMDA in Indonesia is performed, with regards to guidelines in PP no. 24 Year Afterwards, the factors that influenced the disparity of PEMDA s FS

5 disclosure were investigated. Finally, a strategic and tactical proposal was formulated to increase the readiness and competence of PEMDA in presenting a reliable and relevant FS. 2. RESEARCH METHODOLOGY The research procedure to calculate PEMDA s FS disclosure level is as such: CHART 1 RESEARCH PROCEDURE AND DISCLOSURE QUALITY OUTPUT PEMDA S FS The research procedure to explore the factors that influenced PEMDA s FS disclosure level was an in-depth discussion with the parties related to PEMDA s FS presentation. Conceptual framework is as such: CHART 2 CONCEPTUAL FRAMEWORK OF PEMDA S FS DISCLOSURE LEVEL INFLUENCING FACTORS

6 After mapping PEMDA s FS disclosure level and identifying the influencing factors, eventually this research proposed strategic and tactical steps to improve PEMDA s readiness in presenting a relevant and reliable FS. This proposal is expected to help the government/regulators in formulating forthcoming policies to ensure the effectiveness of PP SAP implementation and other government regulations in This research does not construct any hypotheses or research models to answer the research problems. The first research problem about PEMDA s LK disclosure level will be resolved by calculating the disclosure index. An analysis will be conducted based on the descriptive statistic result of the disclosure level index score. For the second research problem about the influencing factors of PEMDA s FS, this research used an explorative approach, which was to freely identify those factors obtained from literature studies and interviews with parties related to the preparation of PEMDA s FS. As for the third research problem about the strategic and tactical proposals to improve the quality of PEMDA s FS disclosure, they will be achieved by mapping the disclosure index and the influencing factors. Therefore in general it can be concluded that this research does not propose any hypotheses that will be tested or any research models to test those hypotheses.

7 The research variables used were local government s FS disclosure level index and the influencing factors. Local government s FS disclosure index is the FS disclosure index based on PP SAP. This research developed a checklist based on PP SAP. PEMDA s FS were evaluated based on the checklist and the score from the completed checklist was calculated. Each checklist component would get a score of 1 (one) if the information was disclosed or Yes, 0 (zero) if the information was not disclosed or No or N.A. (not applicable) if it was assumed that PEMDA did not have the related information. Disclosure level score is obtained from comparing the number of Yes with the number of Yes and No. The checklist consisted of the checklists for Balance Sheet, LAK, LRA and CaLK. Meanwhile the operating variables that represent the influencing factors were obtained from literature studies and thorough interviews. Research population was 530 PEMDA of provinces, cities and municipalities. Of this number, based on the data from BAKD and BPK s website ( a sample research of such was obtained: PEMDA with 2007 Balance Sheet (50,4% of total population); PEMDA with 2007 LAK (50,8% of total population); PEMDA with 2007 LRA (50,6% of total population); and PEMDA with 2007 CaLK (50, 6% of total population). This data was obtained directly from the Indonesian State Department s BAKD and BPK s website. The sample above had exceeded the number of all PEMDA with 2006 FS, which was 212 PEMDA. Meanwhile the data about influencing factors was acquired from interviews with parties related with the preparation of PEMDA s FS. In overall this research used two data analysis techniques. The first was descriptive statistics to analyze PEMDA s LK disclosure level. The second was explorative to analyze the influencing factors by literature studies and interviews.

8 3. RESULT AND REVIEW The initial result of this research was PEMDA s FS disclosure level, at provinces, towns and municipalities. This disclosure level was obtained from the checklist score (see research method sub-part variables operation). Disclosure level review below is presented based on FS components and on overall FS. 3.1 BALANCE SHEET DISCLOSURE LEVEL Disclosure level average was fairly high at 84%. This showed that the information presented in the balance sheet had included all information required by PP SAP. The deviation standard was very low at 5%, which showed that the balance sheet disclosure level among PEMDA was relatively consistent. The highest score of 96% were the Pekanbaru, Ogan Komering Ulu, East Ogan Komering Ulu, Pagar Alam, Prabumulih, Batang, Landak, South Halmahera, Jayapura, Bau-bau, Jayapura and Nunukan; whereas the lowest at 60% was DKI Jakarta. The information disclosed by most local governments but not found in DKI Jakarta were: (1) inventory details; (2) receivables details; and (3) equity funds classification. As for the ranks based on the average score per province, PEMDA from eastern Indonesia dominated the top 5: Papua, North Maluku, West Papua, West Sulawesi and East Kalimantan (average above 90%). However four of the five provinces had very low ratio of balance sheet issued and reviewed by BPK to total number of PEMDA in the province. Papua, for instance, although it had the highest score of 96%, there were only 2 provinces in Papua that had issued the 2007 balance sheets which had been audited by BPK, compared to the total 30 PEMDA in Papua province. Based on the ratio of number of PEMDA with issued FS to number of PEMDA in a province, then East Java, DI Yogyakarta, West Java, Bali and Gorontalo were placed on the top 5.

9 Meanwhile the analysis of the information component in the Balance Sheet showed 5 information with the lowest disclosure: 1. Name of reporting entity or other identification visible on every page; 2. Scope of FS entity, whether it was a sole entity or a consolidation of several reporting entities; 3. Scope of FS entity, whether it was a sole entity or a consolidation of several reporting entities, on every page; 4. Date of reporting or the period included in the FS in accordance with other components of the FS visible on every page; and 5. Reporting currency and quantifier visible on every page. Of the abovementioned information, four did not have significance for decision making (although this had better be included in PEMDA financial reporting). The low disclosure level of point 2 is something substantial because it affects the readers of the FS greatly. The absence of this information may result in an error in comparing and analyzing PEMDA s performance. 3.2 LAK DISCLOSURE LEVEL Research sample for LAK component was 269 PEMDA or 50.8% of total population. Like Balance Sheet, the average LAK disclosure level was high at 83%. This showed that the information presented in LAK had included most of the information required by PP SAP. The deviation standard was very low at 4% which showed that the LAK disclosure levels tend to be consistent. The highest score of 96% was Landak, Rokan Hulu, Natuna, Malinau, Belitung and Tidore. Landak consistently showed high disclosure level, both Balance Sheet and LAK. The lowest score of 74% was Banten. Some information disclosed by most PEMDA but not by Banten was: (1) reporting currency and quantifier used; and (2) presented as comparative statement.

10 The top 5 provinces based on average score were West Sulawesi, North Maluku, West Papua, DKI and Riau (average score above 89%). Top 3 were North Sulawesi, North Maluku and West Papua, consistent with Balance Sheet disclosure. East Kalimantan and Papua were still in Top 10 (at 6 and 8). Riau was in fact consistent because it was number 6 in Balance Sheet disclosure. The contrary was DKI s LAK disclosure level at number 4, when its Balance Sheet disclosure level was at the lowest. As with Balance Sheet, the top 4 provinces ratio of number of PEMDA issuing LAK that had been audited by BPK to total number of PEMDA in the province was very low. West Sulawesi, although with the highest score at 95%, there was only 1 PEMDA issuing 2007 LAK that had been audited by BPK, compared to the total of 6 PEMDA in that province. Consistent with the Balance Sheet result, the ratio of number of PEMDA with issued FS to number of PEMDA in a province showed DIY, Bali, East Java, West Java and Gorontalo at the top 5 with a high ratio at above 80%. The analysis result of LAK s information components showed 4 points with the lowest disclosure: 1. Name of reporting entity or other identification visible on every page; 2. Scope of FS entity, whether it was a sole entity or a consolidation of several reporting entities; 3. Scope of FS entity, whether it was a sole entity or a consolidation of several reporting entities, on every page; and 4. Reporting currency and quantifier visible on every page. This result is consistent with the Balance Sheet result and of those 4 points the low disclosure level of point 2 is substantial because it affects the readers of the FS greatly. The absence of this information may result in an error in comparing and analyzing PEMDA s performance.

11 3.3 LRA DISCLOSURE LEVEL Sample number for LRA component was 267 PEMDA or 50.6% of PEMDA population. Unlike Balance Sheet and LAK, LAR s average is quite high at 78%. This showed that the information presented in PEMDA s LRA had included most of the information required by PP SAP. The deviation standard was very low at 5%, and showed that the LRA disclosure levels tend to be consistent. The highest score of 90% was Pekanbaru, Natuna, DKI, Ketapang, Bulungan, Kendari, Bau-bau, South Halmahera, Jayapura, Manokwari and Bengkulu. The lowest at 60% was North Hulu Sungai. Information disclosed by most PEMDA but not by North Hulu Sungai was: (1) transfer; (2) surplus/deficit; and (3) net financing. The top 5 provinces based on average score were DKI, West Sulawesi, NAD, North Maluku and Papua (average score above 84%). Other than NAD and DKI, 3 other provinces were consistent enough with high scores in Balance Sheet and LAK. DKI was consistent at LAK and LRA, while NAD, although not in the top 5 in Balance Sheet and LAK, but its score was consistently high, at above 80%. Further analysis revealed that the top 5 provinces ratio of number of PEMDA with LRA that had been reviewed by BPK to the total number of PEMDA in that province is very low. DKI, although with the highest score at 90%, had only 1 PEMDA with 2007 LRA that had been audited by BPK, compared with the total 7 PEMDA in that province. Consistent with the result in Balance Sheet and LAK, the ratio of number of PEMDA with issued FS to number of PEMDA in a province showed DIY, Bali, East Java, West Java and Gorontalo at the top 5 with a high ratio at above 85%. The analysis result of LRA s information components showed 6 points with the lowest disclosure: 1. Name of reporting entity or other identification visible on every page;

12 2. Scope of FS entity, whether it was a sole entity or a consolidation of several reporting entities; 3. Scope of FS entity, whether it was a sole entity or a consolidation of several reporting entities, on every page; 4. Reporting currency and quantifier; 5. Reporting currency and quantifier visible on every page; and 6. Presentation of disbursement qualifications based on organizations. This result is consistent with the Balance Sheet and LAK results. Point 6 needs particular notice because this information is needed by LRA users to evaluate the efficiency of organization unit, by comparing the realization and the budget. 3.4 CaLK DISCLOSURE LEVEL Sample number for CaLK component was 267 PEMDA or 50.6% of PEMDA population. Unlike Balance Sheet, LAK and LAR, CaLK disclosure level was low at 47%. This showed that the information presented in CaLK had not included most of the information required by PP SAP. Standard deviation was low at 9% and showed that the CaLK disclosure levels tend to be consistent. The highest score of 68% was West Sumatera, while the lowest at 11% was North Kolaka. The top 5 province based on average score were NTB, Bali, DIY, NTT and East Kalimantan (average score above 54%). This composition differed greatly from the result of Balance Sheet, LAK and LRA. Although those 5 provinces were not at the top 5 of Balance Sheet, LAK and LRA, but their disclosure levels were above 80%. Further analysis showed the top 3 provinces, NTB, Bali and DIY had the highest ratio of the number of PEMDA with CaLK that had been reviewed by BPK to total number of PEMDA in that province. NTB had the highest CaLK score of 56% and the number of PEMDA with CaLK in 2007 that had been audited by BPK were 9 out of 11 PEMDA.

13 Besides that, consistent with the results of Balance Sheet, LAK and LRA, the ratio of number of PEMDA with issued FS to number of PEMDA in a province showed DIY, Bali, East Java, West Java and Gorontalo at the top 5 with a high ratio at above 83%. Meanwhile the analysis result of CaLK information component showed low disclosure level. Of 286 checklists, more than 55% scored below 50% or nearly 75% scored below 70%. Based on an in-depth analysis of CaLK presentation it was discovered that although several information component had been presented, the contents were merely details of posts included in Balance Sheet, LAK and LRA, without other economical explanation (this research was not designed to provide substance over disclosure quality, merely to quantify the number of disclosures). Moreover, several information component of CaLK especially the part about the general policy of the disclosed information, had not illustrate the fiscal/financial policy and macro economy related to APBD (Local Revenue and Expenditure Budget) and APBD accomplishments. This happened also on the information about performance. 3.5 OVERALL DISCLOSURE LEVEL Overall this research analyzed the 2007 FS disclosure of 277 PEMDA (55.7% of total PEMDA in Indonesia). This number is improved compared to BAKD s data that stated that there were 212 PEMDA with FS in However not all PEMDA issued a completed and BPKaudited FS. The composition of sampled PEMDA based on FS components issued are as such: PEMDA issued all 4 FS components in 2007 and were audited by BPK (92.1% of total sample or 51.3% of total PEMDA population); PEMDA issued 3 FS components in 2007 and were audited by BPK (3.6% of total sample or 2% of total PEMDA population); 3. 7 PEMDA issued 2 FS components in 2007 and were audited by BPK (2.5% of total sample or 1.4% of total PEMDA population); and

14 4. 5 PEMDA issued 1 FS component in 2007 and were audited by BPK (1.8% of total sample or 1% of total PEMDA population). The number and composition of this research sample is credible enough so that the result will be representative of the financial reporting condition of all PEMDA in Indonesia in To see the overall disclosure level is to calculate the average score unweighted for the 4 components of FS in Result shows that the top 5 PEMDA are Pekanbaru (Riau), Dumai (Riau), Natuna (Riau), Malinau (Kaltim) and Nunukan (Kaltim). All 5 PEMDA consistently have high scores for Balance Sheet, LAK and LRA disclosure at above 90% and CaLK disclosure score at above 50%. Whereas the lowest 5 PEMDA are Lubuk Linggau (Sumsel), Bangka Barat (Babel), Pulang Pisau (Kalteng), Gorontalo (Gorontalo), South Minahasa (Sulut). These 5 PEMDA consistently have Balance Sheet, LAK and LRA disclosure score below 80% and CaLK disclosure level below 37%. Evaluation based on average score of disclosure level for all FS components of PEMDA in each province showed the top 5 are West Sulawesi, North Maluku, Riau, East Kalimantan and Riau. However just like FS components analysis, the number of PEMDA in each province must be calculated to interpret those rankings. For Riau and East Kalimantan, disclosure score were obtained from the average of 6 and 8 PEMDA, so they are valid enough as the provinces with the highest disclosure level. Meanwhile 3 other provinces, West Sulawesi, North Maluku ad Riau, precautions must be taken when concluding that these provinces have the highest score, considering each were affected by less than 3 PEMDA. 3.6 FS DISCLOSURE LEVEL DETERMINANTS This section will analyze the determinants or factors influencing the disparity of FS disclosure level among PEMDA and the difference among FS components. The analysis is based on the aforementioned disclosure level scores, literature studies and in-depth discussion with regulators, reviewers, standard formulators, consultants and PEMDA staff (discussion

15 participants were invited as individuals and were not acting on behalf of any institutions, however opinions were assumed to reflect the institutions where they work). Disclosure score for each component (Balance Sheet, LAK, LRA and CaLK) tend to be consistent among PEMDA. This is noticeable from the standard deviation of below 5%. The same applies for the standard deviation of all FS disclosure at 4%. Therefore this research concludes that the influencing factor of PEMDA s FS disclosure do not come from the unique characteristics of each PEMDA. In other words this research estimates that the factors influencing PEMDA s FS disclosure level are common and experienced by all PEMDA in Indonesia. Moreover, because the disclosure level of Balance Sheet, LAK and LRA are high and consistent enough, then the determinants analysis of disclosure level will be focused on CaLK. These are the common factors that are assumed to influence PEMDA s FS disclosure level (specifically CaLK), which were identified in the Focus Group Discussion: 1. Existence and completeness of CaLK preparation guidelines SAP regulates the information required to be disclosed in CaLK (as checklist benchmark in this research). However until now no technical guidelines about CaLK presentation and disclosure are present. KSAP have not issued a Technical Bulletin regarding CaLK. A technical guideline for CaLK preparation is necessary for PEMDA in the early stages of FS preparation because CaLK (and Balance Sheet) are the reports known only after PP SAP was implemented. CaLK is qualitative, thus without technical guidelines PEMDA will face difficulties in preparation. 2. Influence of other regulations Besides to explain the posts in Balance Sheet, LAK and LRA in details, CaLK also conveys qualitative information related to the accountability and/or affects decision making. Those information are influenced by other regulation associated with local governments. Changes in regulations which happen frequently in recent years make it difficult for PEMDA to decide

16 which information to disclosure in CaLK. Regulation clashes also cause difficulties for PEMDA in presenting a sufficient CaLK. 3. Socialization of CaLK preparation Related parties such as Finance Department, State Department and KSAP have not conducted sufficient socialization about CaLK. Various trainings that have been conducted only focused on Balance Sheet, LAK and LRA components. Therefore PEMDA staffs do not have adequate comprehension about CaLK. 4. Priorities and concerns of FS formulator and user Generally, both PEMDA and DPRD do not have sufficient concerns about FS (except LRA and LAK). DPRD usually does not consider BPK s opinion of FS when accepting or rejecting accountability report of head of local government. FS components priority of concern is: (1) LRA; (2) LAK; (3) Balance Sheet; and (4) CaLK. LRA and LAK get primary concerns because these reports have been around for a while and are considered to have direct effect on the execution of PEMDA s activities/programs. Attention towards Balance Sheet was developed with the prerequisite to create an initial Balance Sheet with technical guidelines and sufficient socialization. CaLK is the FS component with the least priority and is not equipped with adequate socialization. 5. Human resources PEMDA has limited human resources in FS preparation. Aside from the lack of accounting graduates, an accountant s career steps in PEMDA have not been developed. Any staffs with additional education and SAP trainings are often transferred to other divisions so there is no knowledge transfer in FS preparation. Aside from the factors above, FGD also revealed several opinions related to PEMDA s FS presentation, such as: 1. FGD participants also confirmed the result of this research, that PEMDA s FS disclosure level, especially CaLK is still low and not compliant with PP SAP. In fact, several FGD

17 participants thought that the preparations of many PEMDA s FS were mostly copying previous PEMDA FS. 2. Legal outcomes/laws/bylaws, especially ones related to PEMDA s financial reporting, have not been tested academically and empirically by independent parties. This testing is necessary to objectively assess the implementation and limitation of related regulations so they can be perfected. 3. Other reports that PEMDA must prepare aside from FS are numerous and complex. This will affect the quality of the reports prepared by PEMDA. The number of reports to be prepared is organized by many conflicting regulations. Therefore it is proposed that research about various regulations related to these reports must be conducted to analyze the possibility of information convergence. If possible in the future PEMDA will only prepare one report which can fulfill the minimum amount of information needed by various parties. 4. Most PEMDA do not have a sufficient information system to support transactions documentation and financial reporting presentation. 5. Fixed asset is still the most dominant issue faced by PEMDA. Overall it can be concluded that the factors influencing the disclosure level of PEMDA s FS are common and apply to all PEMDA. Therefore central government has an important a dominant role to resolve this problem. 3.7 RECOMMENDATIONS In the attempt to achieve the 2011 target that all PEMDA may present a comprehensive and relevant FS, based on the aforementioned analysis, this research recommends 3 strategic steps (executed in less than a year) as such: 1. Regulations integration about financial reporting. To simplify FS preparation by PEMDA and to minimize the possibility of regulation disagreement, efforts to reassess and to integrate issued regulations are necessary.

18 2. Accounting career advancement in PEMDA. To give assurance to and attract PEMDA staff to have a career in Accounting, PEMDA (and central government) must develop career steps for an accountant. Therefore organization structure and compensation structure at central and local government must be evaluated to accommodate this need; and 3. Assessment of laws/ regulations/ bylaws, especially those related to PEMDA s FS. To ensure the effectiveness and efficiency of law outcomes, cooperation with academicians and researchers must be created to conduct academic and empirical testing. Besides those strategic steps, this research also recommends tactical steps for the following year, such as: 1. Formulation of CaLK technical guidelines or bulletin. The checklist developed by this research can be used as initial material to construct CaLK technical bulletin. However, note that the current SAP base must be adjusted into accrual base; 2. Training and socialization of CaLK formulation. To complement the various FS preparation trainings and socializations, it is suggested to also conduct CaLK formulation training and socialization; and 3. Initiatives to solve the challenge of fast, accurate and conforming PEMDA s FS. To settle various issues in recent years, regarding fixed asset and information system, both PEMDA and central government must take prompt initiatives to address the problems immediately. 4. CLOSING 4.1 CONCLUSION Calculation result of disclosure level score for Balance Sheet, LAK and LRA showed that PEMDA s FS disclosure level for three FS components is fairly high and the deviation standard is low, showing a consistency of disclosure level among PEMDA. Meanwhile CaLK score showed very low disclosure level that applied to all PEMDA in Indonesia. The consistency of

19 PEMDA s FS disclosure level score showed that the influencing factors were common to all PEMDA and not related to the unique characteristics of each PEMDA. Central government specifically Finance Department and State Department can use the result of this research to evaluate the readiness of PEMDA s FS presentation in KSAP can use the checklist of this research as an initial material in formulating the CaLK formulation technical guidelines. PEMDA can use the result for self-evaluation/ 4.2 LIMITATIONS This research is one the first empirical studies related to PEMDA s FS; therefore there were several limitations in this research, such as: 1. This research found difficulties in getting the FS issued by PEMDA aside from the ones in Most PEMDA s websites do not include FS. Direct procurement to PEMDA was improbable due to time constraint and bureaucracy. BAKD data source was limited due to inadequate filing system. Consequently there are possibilities that several PEMDA s FS are not included in the research sample; 2. This research is aimed to reveal descriptively the disclosure level of PEMDA s FS, therefore the result of this research cannot provide any evaluation about the quality of information presented in PEMDA s FS; and 3. This research emphasize on the usage of secondary data of PEMDA s FS, literature studies and discussion with parties related with PEMDA s FS preparation. Due to budget and time limitation, this research did not conduct a broad confirmation to all sampled PEMDA. 4.3 SUGGESTIONS Based on the aforementioned results, several things may be developed in subsequent researches, such as:

20 1. Conduct an empirical research about the integration of financial and non-financial reporting of PEMDA by reevaluating all regulations related to reporting; 2. Expand this research by using research methodology of case study or questionnaire; and 3. Develop this research by performing statistical testing about influencing factors and the effect of disclosure level towards decision making. REFERENCES Bastian, Indra Akuntansi Sektor Publik: Suatu Pengantar. Jakarta: Penerbit Erlangga. Bastian (2006) seperti dalam Forum Dosen Akuntansi Sektor Publik (FDASP). Buletin Teknis Standar Akuntansi Pemerintah, Telaah Kritis PP No. 24 Tahun Edisi Pertama. Cetakan Pertama. Yogyakarta: BPFE, Gibbins, Michael, Alan Richardson, and John Waterhouse The Management of Corporate Financial Disclosure: Opportunism, Ritualism, Policies and Processes. Journal of Accounting Research 28 (1): Halim, Abdul Akuntansi Keuangan Daerah. Edisi Ketiga. Jakarta: Salemba Empat. Himawan (2006) seperti dalam Forum Dosen Akuntansi Sektor Publik (FDASP). Standar Akuntansi Pemerintahan, Telaah Kritis PP Nomor 24 Tahun Edisi Pertama. Cetakan Pertama. Yogyakarta: BPFE, Kristamuljana, Sammy, Beberapa Perkembangan dalam Pengungkapan. Skripsi FEUI. Pemerintah Republik Indonesia. Peraturan Pemerintah Republik Indonesia Nomor 24 Tahun 2005 tentang Standar Akuntansi Pemerintahan

21 Yuhertiana (2006) seperti dalam Forum Dosen Akuntansi Sektor Publik (FDASP). Buletin Teknis Standar Akuntansi Pemerintah, Telaah Kritis PP No. 24 Tahun Edisi Pertama. Cetakan Pertama. Yogyakarta: BPFE, AUTHOR PROFILES Yan Rahadian earned his master degree in Accounting at the University of Indonesia, Jakarta, Indonesia in Currently he is a lecturer of Public Sector Accounting at University of Indonesia, Jakarta and Managing Editor of the Journal of Accountancy (JAKI). Nanda A. Wijayanti earned her MBA degree at the Sejong University, South Korea in Currently she is a junior lecturer of Public Sector Accounting at University of Indonesia Jakarta and Head of Business Division of Accounting Laboratory, Accounting Department University of Indonesia.