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Bulletin of Indonesian Economic Studies

ISSN: 0007-4918 (Print) 1472-7234 (Online) Journal homepage: http://www.tandfonline.com/loi/cbie20

OBSTACLES TO PUBLIC SECTOR ACCOUNTING

REFORM IN INDONESIA

Harun

To cite this article: Harun (2007) OBSTACLES TO PUBLIC SECTOR ACCOUNTING REFORM IN INDONESIA, Bulletin of Indonesian Economic Studies, 43:3, 365-376, DOI: 10.1080/00074910701727613

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Published online: 18 Apr 2008.

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OBSTACLES TO PUBLIC SECTOR ACCOUNTING REFORM

IN INDONESIA

Harun*

Tadulako University, Central Sulawesi

This paper draws attention to the importance of improving the quality of public sector accounting in Indonesia, in line with the aims of reformasi (reform) and

demokratisasi (democratisation), and in the context of decentralisation. It highlights a continuing lack of progress in reform of government accounting. This is attribut-able partly to a lack of interest in and understanding of the issues among newly empowered electors. Successive governments have been reluctant to push hard for accounting reform, not least because improved accountability poses a signiﬁ_cant threat to politicians’ and bureaucrats’ overall income levels. In addition, current hu-man resource hu-management practices in the public sector have resulted in a shortage of accounting skills, and without these there is little prospect of successful reform in this area. A possible solution may be to establish a parallel civil service speciﬁ_cally to undertake the accounting functions of government.

INTRODUCTION

Ball (2005) suggests three reasons why high-quality ﬁ_{nancial reporting by}

govern-ment agencies, institutions and enterprises is desirable. The ﬁ_{rst relates to}

moni-toring and managing their own performance: government organisations, just like large private enterprises, need timely and accurate ﬁ_{nancial information for this}

purpose. They shift large amounts of resources from the private to the public sec-tor with the objective of improving the well-being of society, and if they do not operate efﬁ_{ciently and effectively, or invest funds wisely, this can represent a huge}

drain on the economy.

The second reason is that electors entrust governments with the management of assets and liabilities that have been accumulated over decades, and will affect the welfare of citizens for many more decades to come. They are entitled to infor-mation that allows them to hold governments accountable for their use of public resources, including information on the extent to which revenues are sufﬁ_{cient to}

pay for services being provided, and on the capacity of governments to meet their

ﬁ_{nancial obligations and to withstand potential shocks.}

*_{I am grateful to Ross H. McLeod and Peter McCawley of the Australian National} Univer-sity, Peter Robinson of the University of Western Australia Business School, Hal Hill and other participants at the Indonesia Council Open Conference (Canberra, 29–30 September 2003) and four anonymous referees for their valuable comments.

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The third reason, closely related to the second, is that a properly functioning democracy requires its constituents to have conﬁ_{dence in politicians and to be}

willing to take an interest in politics. This conﬁ_{dence is enhanced when}

govern-ments fully inform their constituents, enabling them to exercise their votes on the basis of reliable ﬁ_{nancial information. Transparent}ﬁ_{nancial reporting is one}

means by which politicians can engage constituents in the democratic process and engender conﬁ_dence.

Other studies have pointed to deﬁ_{ciencies in accounting systems as a}

signif-icant weakness in public sector management, particularly in developing coun-tries. Guthrie, Olson and Humphrey (1998) argue that accounting reforms are an important part of ‘new public management’ ways of governing, pointing to the introduction of business-like forms of accounting as an important recent reform in the public sector. This change involves a shift from cash-based or budgetary accounting to accrual accounting as part of a broader public sector reform process (Robinson 1998).

Jones and Puglisi (1997: 13) highlight potential problems in adopting accrual accounting in the public sector context: the complexity and cost of designing and implementing the new accounting systems; difﬁ_{culties in applying}

economics-based deﬁ_{nitions of assets, liabilities, expenses and revenues; and, importantly,}

managerial and political factors related to change management and resistance to change. Likewise, Guthrie argues that although the implementation of accrual accounting has tended to be seen as a ‘good thing’ in public administration, gov-ernment bodies must consider many issues when adopting it, especially in devel-oping countries (Guthrie 1998: 5). The purpose of this paper is to identify, and suggest solutions to, problems encountered by the Indonesian government since the early 1990s in the adoption of accrual accounting as the basis for public sector

ﬁ_{nancial management and reporting.}1

PUBLIC SECTOR ACCOUNTING

DURING AND AFTER THE SOEHARTO ERA

Public sector ﬁ_{nancial accounting was never given high priority during the}

Soe-harto era. The general public had no real prospect of voting the government out of ofﬁ_{ce because of Soeharto’s effective monopoly of political power. There was}

little point, therefore, in the public taking an interest in politics, and the govern-ment itself had no incentive to promote such interest. Since the collapse of the Soeharto regime in 1998, Indonesia’s political, economic and social institutions have experienced signiﬁ_{cant change. The electoral and political processes have}

been greatly reformed, and more autonomy has been granted to local govern-ments in macro-level planning, service delivery, public administration, economic institutions, human resource development, natural resource utilisation and con-servation. Political reform and decentralisation have been accompanied by moves to adopt a more sophisticated accounting approach in the public sector. These

1 Indonesian public sector accounting covers three areas: the central government; local government; and non-proﬁ_{t organisations owned by the government, such as schools} and hospitals. State owned-companies use the private sector’s Statement of Financial Accounting Standards to prepare and present their ﬁ_{nancial statements.}

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moves ﬂ_{ow from a recognition that the proper functioning of democracy at both}

central and local levels requires detailed evaluation of the efﬁ_{ciency, effectiveness}

and integrity of government’s use of scarce resources.

In the post-Soeharto era, successive governments have paid lip-service, at least, to the importance of reform in this area. There have been calls for a switch from the existing system—in which ﬁ_{nancial accountability amounts to nothing more}

than the basic book-keeping function of recording cash inﬂ_{ows and out}ﬂ_ows—to

a more complex system of accounting on an accrual basis, in which statements of budget realisations are complemented by balance sheets and cash ﬂ_ow

state-ments, and by explanatory notes on all of these.

A move from traditional cash-based accounting to accrual accounting involves a shift in the recording of revenues and costs from the time they are received or paid to the time they are incurred. Depreciation expense is charged over the life of an asset, and is matched with either the original purchase cost or the replacement cost. These features allow the accrual accounting model to show, as cash-based accounting cannot, the true cost of providing services to the community. Knowl-edge of this is key to ensuring sound decision making, as well as accountability to parliaments, taxpayers and voters.

The global trend toward adoption of accrual accounting for the public sector was stimulated by the Organisation for Economic Co-operation and Develop-ment (OECD), which noted in 1993 that ‘while the advantages of [a cash-based system] are acknowledged in terms of assessing short-term economic impact and compliance with spending limits, the ability of cash information to enable informed decisions on the stewardship and ﬁ_{nancial position is constrained}

because it excludes physical and ﬁ_{nancial assets and liabilities’ (OECD 1993).}

The shift to accrual accounting has been relatively limited internationally, but there is a gradual move in that direction. Australia, New Zealand and the United Kingdom are among the countries that appear to have made the most far-reach-ing changes (Pollit and Bouckaert 2000; Lye, Perera and Rahman 2005; Mack and Ryan 2006).

Government efforts to adopt accrual accounting began in the early 1990s in Indonesia, but its use remains much less advanced in the public than in the pri-vate sector. Most government institutions at central and regional levels still rely on the single-entry system based on the Indonesische Comptabiliteitswet (Indo-nesian Government Accounts Law) introduced by the Dutch colonial government to assess the performance of government bodies, but this is signiﬁ_{cantly inferior}

to more modern approaches. Guthrie, Parker and Shand (1990), Sugianto, Dunadi and Loho (1995), Guthrie, Olson and Humphrey (1998) and Harun (2005) high-light the main deﬁ_{ciencies of the Indonesian cash-based system:}

• there is no standard way of recording transactions, either for budgeting purposes or for realised expenditures;

• the grouping of accounts is not in a form that affords proper analysis and control of activities and programs supporting public sector provision of services;

• there is no distinction between capital and operational expenditures;

• such reporting is only for the purpose of fulﬁ_{lling the statutory requirements}

of each government institution;

• ﬁ_{nancial reporting does not satisfy the audit requirements set out in Law}

17/2003 on State Finance;

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• there is a failure to represent the amount of resource usage accurately: for instance, a large capital acquisition will distort expenditure upwards in the

ﬁ_{rst year, and the usage of that asset will not be recognised in subsequent}

years;

• there is a failure to take account of future commitments, guarantees or other contingent liabilities: these will not be recognised until cash is paid to discharge the obligation in question;

• concentration on cash payments alone will sometimes mean that any deterioration in the condition and value of ﬁ_{xed assets remains unnoticed.}

In short, the old governmental accounting system cannot provide a satisfactory basis for planning, controlling and decision making by government ofﬁ_cials.

THE 1992 ACCOUNTING REFORM

Perhaps in recognition of this, the government attempted to switch from cash-based to accrual accounting within the Indonesian public sector as long ago as 1992, when it stipulated that accrual accounting was to become the basis for development of a new central government accounting system. Presidential Decree 35/1992 on the Central Government Accounting System (Sistem Akuntansi Pemerintah Pusat) aimed to develop a new governmental accounting system, to devise new accounting standards and principles for the public sector, and to bring about the formation of an Accounting Development Board within the Ministry of Finance. On the basis of the new decree the ministry established the State Finan-cial Accounting Agency (Badan Akuntansi Keuangan Negara, or Bakun), which was assigned responsibility for effecting the public sector transition from cash-based accounting to the new, more informative system, using World Bank fund-ing (Dewi 2001).

However, by 2000, progress with implementation had been so slow that Presi-dent Abdurrahman Wahid issued PresiPresi-dential Decree 17/2000 on Government Financial Accountability (Pertanggungjawaban Keuangan Negara), requiring gov-ernment institutions at central and local levels to submit not only realised budget reports but also balance sheets as part of their annual ﬁ_{nancial statements. These}

two reports are compulsory within an accrual regime, along with reports on cash

ﬂ_{ow, changes in government equity, and performance indicators.}

In 2001 the then ﬁ_{nance minister gave three main reasons for the failed}

imple-mentation of Presidential Decree 35/1992 (Ministry of Finance 2001). First, the nation’s lack of qualiﬁ_{ed accounting and information technology personnel}

meant that the Indonesian public sector lacked the staff to implement the reforms successfully (although this begged the question of why the private sector was able to implement much more sophisticated accounting practices). Second, since senior government ofﬁ_{cials were familiar with the old accounting system, and}

held a widely shared opinion that what worked before would continue to work in the future, political support from the top was insufﬁ_{cient to advance the central}

accounting initiative within the public sector. (In turn, this begged the question of whether the old system had in fact served Indonesia as well as a modernised sys-tem could.) And ﬁ_{nally, since the government had yet of}ﬁ_{cially to adopt a set of}

‘Generally Accepted Government Accounting Standards’ for Indonesia, there was

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no instrument that could serve as a basis for the uniform treatment of economic transactions and standardisation of government reporting.

DECENTRALISATION AND ACCOUNTING REFORM

In 1999 two laws were enacted (Law 22/1999 on Regional Governance and Law 25/1999 on Fiscal Balance between Central and Regional Governments) that were intended to strengthen the political and ﬁ_{nancial autonomy of regional}

govern-ments. The new laws sought to devolve greater responsibility for a wide range of governmental matters to the local level, and emphasised the need for local governments to accept greater responsibility for planning and implementing their programs. In addition, Government Regulation 105/2000, on the Finan-cial Accountability of Regional Governments (Pertanggungjawaban Keuangan Pemerintah Daerah), required regional governments to present annual reports comprising a realised budget report, a balance sheet and a statement of cash ﬂ_ows.

Thus local governments came under increasing pressure to adopt sound ﬁ_nancial

management and accounting systems.

Following decentralisation in 2001, some district and municipal governments participated in a pilot project to implement ﬁ_{nancial accountability procedures}

based on Government Regulation 105/2000. These included the city of Semarang (the capital of Central Java province) and the district of Sleman (in Yogyakarta Special Region). The pilot project was then followed by dissemination and rep-lication in nine other cities around the country: Sawahlunto, Sukabumi, Metro Lampung, Solo, Probolinggo, Sumbawa, Kendari, Gorontalo and Mataram, in col-laboration with the United Nations Development Programme (Bastian 2003).

In parallel with the implementation of decentralisation, the central govern-ment, through Minister of Finance Decree 308/2002, established the Committee on Accounting Standards for Central and Local Governments (Komite Standar Akuntansi Pemerintah Pusat dan Daerah), which was charged with drafting a set of accounting standards for the public sector. Members of the committee were drawn from the Ministry of Finance, the Supreme Audit Agency (Badan Pemeriksa Keuangan, or BPK), the Ministry of Home Affairs, the Finance and Develop-ment Supervisory Agency (Badan Pengawasan Keuangan dan Pembangunan, or BPKP), the Indonesian Institute of Accountants (Ikatan Akuntan Indonesia, or IAI) and various universities. The committee prepared a draft entitled ‘Standar Akuntansi Pemerintah Pusat dan Daerah’ (Accounting Standards for Central and Local Governments) in 2002.

The objective of the new standards was to provide information that would assist a wide range of users in making and evaluating government decisions about resource allocation. This objective was to be achieved by providing infor-mation about all assets controlled by public sector agencies and about the alloca-tion and uses of ﬁ_{nancial resources within the government; information about}

how the entities in question ﬁ_{nanced their activities and met their cash}

require-ments; information that would be useful in evaluating entities’ ability to ﬁ_nance

their activities and to meet their liabilities and other commitments; and informa-tion about the ﬁ_{nancial condition of these entities and changes therein.}

After receiving comments on the draft standards from BPK, the Indonesian Insti-tute of Accountants, universities and elsewhere, the ﬁ_{nance ministry promulgated}

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Minister of Finance Decree 337/2003 on Accounting Standards for Central and Local Governments. Importantly, Law 17/2003 on State Finance, which required all government institutions to adopt accrual accounting within ﬁ_{ve years (that is, by}

2007), added signiﬁ_{cant support to the provisions of Decree 337/2003. The}

stand-ards were later revised to become the Government Accounting Standstand-ards (Standar Akuntansi Pemerintah, or SAP) and were supported by Government Regula-tion 24/2005 on Government Accounting Standards (Hari an Kompas, 7/7/2005). Although some technical terms differ from those used in business accounting prac-tice, the new system runs completely in parallel with the framework of standards for the preparation and presentation of ﬁ_{nancial statements of private sector}

enter-prises—setting out deﬁ_{nitions and describing recognition criteria and}

measure-ment concepts for assets, liabilities, revenue and expenses.

OBSTACLES TO ACCOUNTING REFORM

As with the initiative of the early 1990s, President Wahid’s decree and subsequent efforts to formulate new standards for public sector accounting have resulted in very little change in actual accounting practices—especially at the level of the newly important regional governments. Various explanations can be suggested; they relate to standard setting, to attitudes to ﬁ_{nancial accountability, and to}

human resources in the ﬁ_{eld of accounting.}

Lack of independent standard setting

Although Law 17/2003 on State Finance supports the adoption of accrual accounting within the public sector, neither the Accounting Standards for Cen-tral and Local Governments based on Presidential Decree 35/1992 nor the Gov-ernment Accounting Standards based on GovGov-ernment Regulation 24/2005 were determined by an independent body. Although the Committee on Accounting Standards for Central and Local Government included members of the Indo-nesian Institute of Accountants and a number of academics, its work was backed and controlled by the president. Zaki Baridwan, professor of accounting at Gadjah Mada University, has criticised as improper the fact that the govern-ment effectively sets its own accounting standards for the public sector (Harun 2004). In similar vein, Dewi (2001) suggests that the government should allow an independent organisation such as the Indonesian Institute of Accountants to develop and promulgate appropriate government accounting standards, as is the practice in countries such as Australia, Sweden and the United Kingdom (Lundqvist 2003).

In Australia, accounting standards for the public sector are formulated and promulgated by the Australian Accounting Research Foundation (AARF) on behalf of the accounting profession. The Australian Accounting Standards Board and the AARF’s Public Sector Accounting Standards Board cooperate in this process, the former with responsibility for accounting standards for companies, the latter for public sector accounting standards (Shand 1990; Jones and Puglisi 1997; see also <http://www.aasb.com.au/>). The objective is to maintain credible standards for the presentation and disclosure of government agencies’ ﬁ_nancial

accounts and independence of standard setters in the eyes of auditors, parlia-ments, taxpayers and citizens in general, and to provide a standard setting body

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that can act independently in solving accounting problems within public sector institutions (Lundqvist 2003; Robinson and Harun 2004).

The absence of an independent standard setting body for public sector account-ing in Indonesia signals a reluctance on the part of the government and the bureaucracy to loosen their control of the process, and suggests a concern among some ofﬁ_{cials that reform might make it more dif}ﬁ_{cult to conceal practices on}

which they rely to supplement their relatively low civil service salaries. On this interpretation, it is unsurprising that progress in public sector accounting reform remains elusive.

Attitudes to ﬁ_{nancial accountability}

The public has yet to become used to the idea that it can elect a new government from time to time, and that it therefore needs to monitor incumbent governments’

ﬁ_{nancial operations (if not directly, then at least through NGOs and an}

inquisi-tive media). While it seems to have some interest in reforms intended to improve government accountability, the electorate is less conscious of the need for reform of public sector accounting practices. Kartomo Wiryobroto, former Director of Accounting Development and Evaluation at the Ministry of Finance, says that the public has shown little interest in responding to the draft standards issued by the public sector accounting division of the Indonesian Institute of Accountants, and that the parliament also lacks concern about accounting issues.2

It is widely believed that many members of parliament still view their posi-tions as providing scope for advancing personal interests, rather than as bestow-ing on them (especially those whose parties are not part of the government) the responsibility to monitor the executive and the bureaucracy on behalf of their con-stituents. There is little doubt that the lack of public and parliamentary pressure on bureaucrats to improve government ﬁ_{nancial accountability by switching to a}

more informative public sector accounting system reduces the likelihood of pub-lic sector accounting and managerial reform. This is consistent with the absence of an independent accounting standards body for the public sector. It reﬂ_{ects the}

absence of both a strong civil society and a substantial group of private and pub-lic professionals, as exists in other countries, to advocate for the establishment of such a body. A number of studies have pointed out that pressure from parlia-ments, professional organisations and other interest groups was important to the successful implementation of such reforms in Australia, New Zealand and the UK (Christensen 2002). In Indonesia, strong pressure from citizens, professionals and members of parliament is likewise needed to inﬂ_{uence the attitudes of}

govern-ment agencies to disclosure of information on ﬁ_{nancial management and to the}

need for a more informative accounting system.

Since many members of the bureaucracy and the executive are heavily depend-ent on non-salary, quasi-legal or illegal forms of remuneration, these ofﬁ_{cials are}

2 Interview with author, 5 November 2003. Since the late 1990s the Indonesian Institute of Accountants has released several exposure drafts of accounting standards for the govern-ment, but these have received little attention from governgovern-ment, the public or the parlia-ment. Although Law 17/2003 on State Finance requires accounting standards to be de-veloped by an independent body, the Government Accounting Standards of 2005 were developed by a standard-setting body set up by the government (Harun 2004).

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directly threatened by accurate monitoring and reporting of the ﬁ_nancial

opera-tions of government. This factor strongly undermines attempts to improve public sector accountability. According to the former chair of BPK, Satrio B. Joedono, this problem led to the failure of public sector accounting reforms initiated dur-ing the Soeharto era.3_{And it helps to explain the assertion by Hekinus Manao,}

former head of the Centre of Accounting and Financial Reporting at the Ministry of Finance, that managers and ministers in all departments have a low commit-ment to accountability. Even though Indonesia has now entered a new economic, social and political phase of its history, the central government remains reluctant to commit strongly to reforming public sector accounting. Seno, former secretary general of BPK, claims, for example, that the government has failed to follow up the audit ﬁ_{ndings and recommendations of BPK.}

Skills shortages in accounting

It is widely recognised that the government has limited capacity to manage the functions of public sector institutions because of a lack of skilled staff in specialised

ﬁ_{elds. At the local level, following decentralisation, only a few districts have been}

able to absorb all of their new duties quickly and meet appropriate quality stand-ards in the public services provided (Robinson and Harun 2003). The adoption of more sophisticated accounting approaches requires skilled and experienced staff. The majority of government accounting staff are not accounting professionals, and have direct experience only of the cash-based single-entry system inherited from the Dutch. Although there are no precise data on the number of accountants within the government, previous studies have pointed to a lack of skilled account-ing staff within government agencies at the central and regional level (Soepomo 1999; Robinson and Harun 2004). The best prospect for stimulating accounting reform may therefore involve focusing on the accounting skills shortage.

THE ACCOUNTING SKILLS SHORTAGE: CAUSES AND REMEDIES Causes: civil service recruitment and remuneration

What is needed—if there is to be general reform of ﬁ_{nancial monitoring and}

reporting in the public sector—is large numbers of well-trained and experi-enced accountants able to take over this activity and transform it into some-thing considerably more than mere book-keeping. The general problem with the bureaucracy is not lack of personnel—on the contrary, under-employment of its personnel is common—but lack of relevant skills where they are needed. In turn, this is a reﬂ_{ection of dysfunctional human resource management practices}

in the civil service (Synnerstrom 2007). Even if governments genuinely desired accounting reform, the rules of the civil service prevent recruitment of well-trained and experienced accountants.

All civil service recruitment occurs at the base level of new secondary school or tertiary graduates. Since new staff are recruited only at base levels, high-level positions can be ﬁ_{lled only by people who have slowly been promoted from these}

3 Statements reported in this paragraph were made at interviews the author conducted with ofﬁ_{cials in November 2003.}

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lower levels, overwhelmingly on the basis of seniority. Moreover, there are very few job descriptions for positions in the civil service, so people are recruited on the basis of their educational attainment level (as undifferentiated secondary or tertiary graduates) rather than on the basis of their ﬁ_{eld of study (engineering,}

political and social studies, accountancy and so on). Training existing generalist personnel in accounting is not a feasible solution to the accounting skills short-age, because the process is drawn out, and the outcome for each individual is uncertain. And ﬁ_{nally, since salaries are not comparable with those paid for}

simi-lar qualiﬁ_{cations and experience in the private sector, it is dif}ﬁ_{cult to recruit and}

retain ofﬁ_{cers of high quality (and to discourage civil servants from involvement}

in corrupt activity).

These circumstances are very different from those in countries such as Australia, New Zealand, the UK, the US and Canada, where large numbers of accounting specialists with private sector experience work in the public sector (Christensen 2002; Lundqvist 2003).

Remedies: accounting reform requires civil service reform

Reforming human resource management in Indonesia’s civil service is such an overwhelming task that it makes sense to approach it in phases. Accounting reform is particularly urgent and could best be achieved if the government were to establish a parallel professional civil service for accountants; that is, along-side the existing civil service, a hierarchy of positions would be created, to be

ﬁ_{lled exclusively by individuals with professional quali}ﬁ_{cations in accountancy.}

These people would be responsible for carrying out all of the present and desired accounting functions of the bureaucracy. Each such position would have a full job description. The associated salary (including retirement and other beneﬁ_ts)

would be comparable with remuneration in the private sector for work of similar complexity and responsibility. Any individual could compete for such positions, including the incumbent (if there is one), other ofﬁ_{cials within the mainstream}

civil service, new graduates, and experienced professionals from the private sec-tor, academia and elsewhere.

To a certain extent this approach would build on current practice within the existing civil service for a limited range of professionals, such as medical doc-tors. Positions in this category are available only to fully qualiﬁ_{ed professionals,}

and remuneration is somewhat closer to that in the private sector. However, posi-tions of this kind are at present ﬁ_{lled only by promotion from within. Allowing}

appointments from outside the civil service is the only practical way of obtaining the necessary skills in the quantities needed if genuine reform of the public sector accounting function is to be achieved within a reasonable time frame.

CONCLUSIONS

The proper functioning of democracy depends, among other things, on ﬁ_nancial

accountability of governments to elected representatives of the people, and to the people themselves. In turn, this relies on the determination of a set of meaningful and useful standards for the preparation and presentation of public sector ﬁ

nan-cial accounts, and on the availability of sufﬁ_{ciently skilled and well-motivated}

practitioners within the civil service to implement these standards.

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A process of reform of public sector accounting, involving a transition from the Dutch era cash-based, single-entry book-keeping system to accrual-based, double-entry accounting, was initiated in the early 1990s, but little progress was made. More recently, legislation has been enacted that requires all levels of government to engage in much more informative ﬁ_{nancial reporting, based on the}

Govern-ment Accounting Standards of 2005. The new standards, perceived to represent a more sound ﬁ_{nancial reporting system, are intended to facilitate greater}

transpar-ency in public sector agtranspar-ency activities, to strengthen the accountability of govern-ment and to improve the quality of decision making within the Indonesian public sector. But despite all the new legislative provisions, government regulations and ministerial decrees, the adoption of more sophisticated accounting approaches in the Indonesian public sector is still encountering signiﬁ_{cant obstacles.}

It might be possible to arrive at a superior set of public sector accounting standards if the government were to delegate this task to a genuinely independent body of professional accountants. But the most signiﬁ_{cant barrier to reform is}

actually outside the realm of accountancy, and concerns the broader issue of civil service human resource management. Within governments at all levels, the management of staff resources does not permit the recruitment and retention of appropriate numbers of adequately trained and experienced professionals in most specialist ﬁ_{elds, including accountancy. It is of little use to call for the adoption of}

sophisticated accounting approaches if the civil service does not have sufﬁ_cient

staff with the skills and experience necessary to implement such a reform. Therefore it may be worthwhile to consider the establishment of a parallel professional civil service for accountants, with remuneration closer to private sector levels—a system somewhat similar to that for employing medical professionals, but with recruitment at all levels permitted from outside the civil service.

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Guthrie, J., Parker, L.D. and Shand, D. (eds) (1990) The Public Sector: Contemporary Readings in Accounting and Auditing, Harcourt Brace Jovanovich, Sydney.

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Harun (2004) ‘Reforming the Indonesian Public Sector: The Introduction of Accrual Accounting’, Unpublished Masters thesis, School of Economics and Commerce, Uni-versity of Western Australia, Perth WA.

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