Received: 28.01.2021, Revision: 06. 02.2021, Accepted: 15. 02.2021, Published: 28. 02.2021
Ita Sari Bulan Br Tarigan, Lamtiur Lidia Gultom and Iskandar Muda
Faculty of Economics and Business, Universitas Sumatera Utara, Medan, Indonesia
Abstract: The importance of presenting this consolidated report in describing the regional financial condition as a whole requires serious attention from accounting entities (SKPD) in preparing the financial statements of each related entity. This study aims to identify constraints and problems that arise in the preparation of regional government consolidated reports and recommend what should be improved to minimize the obstacles and problems that arise in the preparation of regional government consolidated reports. The method used in this research is a case study method and is a qualitative research type. In accordance with the type and research method used, the data tabulation analysis technique was used to analyze the data. There are Constraints in the Implementation of Consolidated Regional Government Financial Statements, among others, the difficulty of collecting data, deadlines for preparing consolidated government financial reports, differences in accounting systems, and problems with Human Resources.
Keywords: Consolidated financial reports, Regional Financial Reports, SAP Implementation, Compliance with laws and regulations.
Indonesia is a developing country that manages state finances based on applicable laws. The form and content of the financial accountability report prepared and presented by SAP is stipulated by government regulations. In order to realize the objectives and role of the Government of Indonesia's financial reporting, consolidated financial reports are required.
The objective of this Standard Statement is to govern the preparation of consolidated financial statements in government units in order to present general purpose financial statements in order to improve the quality and completeness of the said financial statements. In this standard, what is meant by general purpose financial reports are financial reports that are intended to meet the common needs of most report users, including legislative institutions as stipulated in the provisions of laws and regulations.
The issue of the quality of government financial reports is widely discussed; this is indicated by the existence of several cases regarding the low quality of local government financial reports in Indonesia. This problem is evidenced by obtaining a disclaimer opinion, adverse opinion, and qualitified opinion. Findings related to the consolidation of regional government financial reports disclosed by the Supreme Audit Agency certainly have an effect on the quality of financial reports issued by the government. This also has a counterproductive impact on the government's efforts to increase transparency and accountability in financial management. Several problems in the implementation of consolidated financial statements, including difficulties in comparing information at various levels of government and determining the scope of the consolidation, competence in Human Resources (HR).
The purpose of this research is to explore the implementation of consolidation of regional government financial reports, and to identify the obstacles faced in implementing the consolidation of regional government reports.
Consolidated Financial Statements
General purpose financial statements of government units designated as reporting entities are presented on a consolidated basis in accordance with this Standard Statement to reflect a single entity. The consolidated financial statements of the central government as a reporting entity include the financial statements of all reporting entities, including the financial statements of public service entities. The consolidated financial statements of ministries / agencies / local governments as reporting entities include the financial reports of all accounting entities including the financial reports of Public Service Agencies / Regional Public Service Agencies. This Standard Statement does not address:
Consolidated financial statements of state / regional companies;
Accounting for investments in associated companies;
Accounting for investments in joint ventures (joint ventures); and
Joint statistical reports of the central government and local governments.
The accounting entity is a government unit of the user of the budget / user of goods and is therefore obliged to carry out accounting and prepare financial reports to be incorporated into the reporting entity. A reporting entity is a government unit consisting of one or more accounting entities or reporting entities which according to the provisions of laws and regulations are required to submit accountability reports in the form of financial reports. Consolidation is the process of merging accounts held by a reporting entity with other reporting entities, accounting entities and other accounting entities, by eliminating reciprocal accounts so that they can be presented as one consolidated reporting entity. The consolidated financial report is a financial report that is a combination of the entire financial statements of the reporting entity, or accounting entity, so that it is presented as a single entity.
Presentation of Consolidated Financial Statements
The consolidated financial statements consist of Budget Realization Report, SAL Change Report, Balance Sheet, Operational Report, Change in Equity Report, Cash Flow Statement, and Notes to Financial Statements. The consolidated financial statements as referred to in paragraph 7, are presented by the reporting entities, except:
Consolidated financial statements of cash flows that are only presented by entities that have a general treasury function;
Consolidated financial statements of changes in excess budget balances that are only prepared and presented by the Central Government
The consolidated financial statements are presented for the same reporting period as the reporting entity's financial reporting period and contain a comparative amount with the previous period. The Central Government submits the consolidated financial statements of all state ministries / institutions to the legislative body. Local governments submit consolidated financial statements of all accounting entities under it to the legislature. In this standard the consolidation process is followed by the elimination of reciprocal accounts. However, if such elimination is not possible, then it is disclosed in the Notes to the Financial Statements.
A reporting entity is defined in laws and regulations, which generally have the following characteristics:
The entity is financed by the APBN or financed by the APBD or obtains separation of wealth from the budget,
The entity is formed by statutory regulations,
The head of the entity is an appointed government official or a state official appointed or elected by the people,
The entity shall make accountability either directly or indirectly to the people's representatives as the party approving the budget
The accounting entity maintains accounting and submits financial reports in connection with the budget / items it manages which are addressed to the reporting entity. Every government unit that receives a budget or manages goods is an accounting entity that is obliged to carry out accounting and periodically prepare financial reports according to Government Accounting Standards. These financial reports are submitted internally and tiered to higher units in the framework of consolidating financial statements by the reporting entity. With the determination according to the applicable laws and regulations a certain accounting entity which is deemed to have a significant influence on the achievement of government programs can be designated as a reporting entity.
The consolidation referred to in this Standard Statement is carried out by combining and adding up the accounts held by the reporting entity with other reporting entities, or held by the accounting entity with other accounting entities, by eliminating reciprocal accounts. The reporting entity prepares financial statements by combining the financial statements of all the accounting entities that are under it organizationally.
In the Notes to Financial Statements, it is necessary to disclose the names of the entities that are consolidated or combined and their respective status, whether they are reporting entities or accounting entities. In the event that the consolidation is not followed by the elimination of reciprocal accounts as referred to in paragraph 12, it is necessary to disclose the names and amounts of the reciprocal account balances, and also to state the reasons for not having carried out the elimination.
This Statement of Governmental Accounting Standards (PSAP) is effective for reports on accountability for budget implementation starting in 2010. In the event that the reporting entity has not been able to apply this PSAP, the reporting entity can apply the Cash-Based PSAP Towards Accruals no later than 4 (four) years after 2010
Compliance with Legislation
The audit of financial reports is guided by the State Financial Audit Standards (SPKN) stipulated in BPK Regulation No.1 of 2007. The Audit Result Report (LHP) based on the SPKN must disclose that the examination of compliance with the provisions of laws and regulations has a direct and material effect on the provisions of laws and regulations.
Invitations that have a direct and material effect on the presentation of the financial statements have been issued by the examiner. As executors of auditing financial statements, the auditor must prepare an audit report stating whether the financial statements presented are in accordance with generally accepted accounting principles in Indonesia or generally accepted accounting principles in a comprehensive manner (SAP statement number 03). The laws and regulations that become the reference for the management of government finances include Law no. 17 of 2003 concerning State Finance, Law no. 1 of 2004 concerning the State Treasury, Law Number 15 of 2004 concerning Audit of the Management and Accountability of State Finances, and Government Regulation Number 71 of 2010. With regard to regional financial management, the main guidelines used are Permendagri No. 13 of 2006 concerning Guidelines for Regional Financial Management. In general principles of regional financial management in accordance with Permendagri No. 13/2006 states that regional finances must be managed in an orderly manner, comply with laws and regulations, be effective, the University of North Sumatra 21 is efficient, economical, transparent, and responsible by taking into account the principles of justice, appropriateness and benefits for the community. For accrual basis application, local governments must also refer to Permendagri No. 64 of 2013 concerning the Implementation of Accrual-Based SAP in Local Governments.
Accounting standards are guidelines or principles governing accounting treatment in preparing financial statements for reporting purposes to report users. In Indonesia in 2010, accrual-based Government Accounting Standards (SAP) were completely prepared by the Government Accounting Standards Committee (KSAP) and stipulated as Government Regulation in Government Regulation Number 71 of 2010. Since the issuance of PP Number 71 of 2010 concerning Government Accounting Standards, the basis of accounting is used is to use an accrual basis. Based on PP No. 71 of 2010 concerning SAP, the government implements Accrual-based SAP which is stated in the form of PSAP listed in attachment I PP No. 71/2010. Appendix I refers to Accrual-Based SAP which consists of a Conceptual Framework and PSAP Number 01 to PSAP Number 12.
With the implementation of this regulation, the Central and Regional Government Financial Reports are gradually encouraged to apply accrual-based accounting. In 2015, all regional financial reports have implemented the accrual-based SAP of the University of North Sumatra 16. Based on several previous studies that examined the effect of SAP application on the quality of local government financial reports, SAP has a positive effect on the quality of financial reports (Roni et al., 2015), (Evicahyani & Setiawina, 2016), (Karsana & Suaryana, 2017), ( Manullang, 2016).
This study used qualitative research methods. Qualitative research is conducted to explore an issue or problem that requires a complete and detailed understanding of the problem (Creswell 2013, 63–64). Qualitative research also allows identification of problems from the perspectives of research participants, as well as understanding the meaning and interpretations given by participants to behaviors, events, and objects (Hennink et al. 2014, 9).
Result and Discussion
Consolidated Regional Government Data Financial Data
Government Accounting Standards Statement (PSAP) Number 11 concerning Consolidated Financial Statements which is Attachment I of Government Regulation No.71 of 2010 concerning Government Accounting Standards, consolidation is carried out by combining and adding up the accounts held by the reporting entity with other reporting entities with or without eliminating reciprocal accounts. The reporting entity prepares financial statements by combining the financial statements of all the accounting entities that are under it organizationally.
The purpose of preparing consolidated data is to provide information to the public / stakeholders that can be used for evaluation and fiscal policy decision making, or as managerial data. The consolidation of financial data between the central government and regional governments is not an accountable tool for budget execution, so there is no audit of the report. The consolidated government financial data is prepared in the form of a Consolidated Government Financial Statement which describes the flow of income and expenditure from all levels of government in Indonesia, as well as information on the position of assets, liabilities and net assets (equity) of the Indonesian state as a financial entity of the Republic of Indonesia.
Constraints in the Implementation of Regional Government Financial Report Consolidation
The obstacles faced, among others, were related to difficulties in data collection, deadlines for preparing consolidated government financial reports, differences in accounting systems, and problems with Human Resources.
Difficulties in Data Collection
In the process of consolidating government financial reports at the regional level, data collection is carried out on financial data from all SKPDs in the region. Difficulties in data collection arise when collecting local government financial data. Local government financial data is not available as is central government financial data.
BPKAD must request data directly from each SKPD, both for quarterly financial data and annual data.
Deadline for Preparation of Consolidated Government Financial Statements
Preparation and submission of regional level consolidated government financial reports have been regulated based on Perdirjen Treasury number PER-41 / PB / 2011 and APK Director letter number S-1069 / PB.6 / 2017 dated January 26, 2017. The time limit as regulated in the Perdirjen is not in line with the schedule for the completion of regional government financial reports prepared by local governments. As a result, the regional government financial data required for the consolidation of financial statements cannot be obtained. The unsynchronization of the deadline for preparing the consolidated government financial statements with the completion of the preparation of the regional government financial statements has caused doubt the validity of the data used in the consolidated financial statements.
Compliance with Legislation
As an auditor of financial statements, the auditor must prepare an audit report stating whether the financial statements presented are in accordance with generally accepted accounting principles in Indonesia or generally accepted accounting principles comprehensively (SAP statement number 03). The laws and regulations that become the reference for the management of government finances include Law no. 17 of 2003 on State Finance, Law no. 1 of 2004 concerning the State Treasury, Law Number 15 of 2004 concerning Audit of the Management and Accountability of State Finances, and Government Regulation Number 71 of 2010. With regard to regional financial management, the main guidelines used are Permendagri No. 13 of 2006 concerning Guidelines for Regional Financial Management.
Human Resources Issues
Human Resources have a crucial role in implementing consolidated financial statements of local government governments. The ideal employee composition, especially the Municipal Treasury, is needed to support the completion of existing tasks. The deadline for reporting and the number of reports that must be completed requires adequate human resources in terms of numbers and competencies. Human resources involved in producing financial information are required to have an adequate level of expertise and continuously maintain the level of expertise so that financial information is of a high quality. Pilander's research (2018) concluded that human resource competence has a positive and significant effect on the quality of financial reports in Kotamobagu City.
Consolidated financial statements and all other accounting instruments have the aim to support the decision-making process, and this is also the reason why a consolidated financial statement is compiled by the Office for Planning and Control instead of the Office for Financial Reporting. Consolidated information are considered useful, because they refer to the municipal corporate group as a whole, considering it as a unitary system. In fact, consolidated financial statements offers an aggregate overview about the financial and economic situation, amount of assets and solidity of the group, cost and management of human resources. It is also very useful, for example, for the control and the choice of debt level. However, consolidated financial statements does not highlight possible inefficiencies or diseconomies that may occur in specific corporate areas, as the consolidation process tends to balance out results into a synthetic one.
The process of preparing the consolidated financial statements is actually a simple task logically, because basically it only adds up the accounts of the same nature in the financial statements of all SKPD plus the accounts in the PPKD financial statements. Especially for a consolidated balance sheet, there are accounts that must be eliminated, namely reciprocal accounts which only include two accounts, namely the RK-PPKD versus RK-SKPD accounts. The problem in preparing the consolidated financial statements is more related to the relatively large volume of work, so it requires extra energy, accuracy, thoroughness and of course patience in carrying out verification and reconciliation. This problem can be solved significantly by using accounting application software, but keep in mind that software is only a tool or tool that cannot completely replace the tasks of accounting personnel.
Efforts to produce optimal policies require the support of comprehensive data availability on all public financial management in Indonesia, especially the public financial sector which can be controlled by the government. Based on the aforementioned considerations, the authors assume that there is a need for consolidated government financial data to support decision makers so that they can produce more comprehensive and more comprehensive effective and efficient policies. And conclusions can be drawn in the implementation of the consolidation of government financial statements, several obstacles were found, including:
Data on financial reports of all local government SKPDs is difficult to obtain in a complete and timely manner, due to the large number of SKPDs who are not on time in preparing their respective SKPD financial reports.
Deadline for the preparation of financial statements
The unsynchronization of the deadline for preparing the consolidated government financial statements with the completion of the preparation of the regional government financial statements has caused doubts about the validity of the data used in the consolidated financial statements.
Compliance with laws and regulations
The existence of financial reforms in Indonesia from a cash basis to an accrual basis in a government environment that refers to international accounting developments has led to changes in regulations in financial management both at the central and regional levels which can lead to different perceptions and difficulties in its application.
Human Resources Problems
The deadline for reporting and the number of reports that must be completed requires the support of adequate human resources in terms of numbers and competencies. The regional treasury sector does not yet have an ideal composition of human resources, both in terms of age and competence.
SAP must be applied in the preparation of central and local government financial reports to improve the quality of government financial reports. The quality of state financial management will be better if the implementation of SAP has been carried out well.
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