STRATEGIC PLANNING IN STATE FINANCIAL AUDITS PJAEE, 17 (4) (2020)

STRATEGIC PLANNING IN STATE FINANCIAL AUDITS

Achmad Djazuli1 Bahrullah Akbar 2 Galih Kurniawan Sidik 3

1
[email protected] [email protected] [email protected]

Achmad Djazuli Bahrullah Akbar Galih Kurniawan Sidik. Strategic Planning In State
Financial Audits-- Palarch’s Journal Of Archaeology Of Egypt/Egyptology 17(4), 674-683.
ISSN 1567-214x

Key Word: State Finance, Strategic Management, Audit, Input Process Output Approach

ABSTRACT
This paper aims to determine the Indonesia Supreme Audit Institution (BPK) strategic planning
process which is authorized to carry out audits of governance and state financial responsibility.
Through input process output approach, this paper also introduces a strategic thinking framework
in strategic audit planning design. The input consists of the basic values of the BPK and the
relationship model for management, organization and administration. NPG, SWOT and audit
standards compliance are the process approaches used. The resulting output is a quality audit or
good strategic planning which ultimately results in the achievement of the accountability
organization maturity model and the impact on the achievement of the goals of the state.

INTRODUCTION

Background

Strategic planning is a management tool in carrying out organizational activities

and functions so that the organization can achieve its goals. Strategic planning has
a long and medium term time frame in process. However, in practice many
organizations are weak in their strategic planning so that the stated organizational
goals cannot be achieved. There are many problems that cause the weakness of
organizational strategic planning, including the fault of the organization in
analyzing the development of its internal and external environment and the wrong
organization using analytical tools so as to produce a false analysis. To overcome
these problems, it is necessary to take appropriate steps for each organization so

1 Tazkia Islamic Institute

2 Indonesia Supreme Audit Institution (Badan Pemeriksa Keuangan Republik Indonesia/BPK RI)
3 Institute of Governance of Home Affairs)

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that its strategic planning becomes an effective management tool in achieving

organizational goals.

Each country all around the world also has its own objectives. Likewise, Indonesia
has also the objectives of a state are set forth in the Preamble to the Constitution
(UUD 1945), which consists of:
1. protect the entire Indonesian nation and all Indonesian bloodshed;
2. promote the general welfare;
3. to educate the nation's life, and
4. participate in implementing world order based on freedom, eternal peace
and social justice
To achieve this goal of a state, every government institution needs to carry out its
respective duties and roles. BPK needs to take a role in accordance with its authority
to carry out audits of governance and accountability of state finances in accordance
with Law Number 15 of 2004 concerning Audit of State Financial Management
and Accountability. To optimize the role of the BPK, one of which is that the BPK
must have a good strategic audit plan.

The International Supreme Audit Institution (INTOSAI) identifies that many

Supreme Audit Institutions (SAI) as INTOSAI members in the world are weak in
formulating their strategic plans, and some SAIs do not even have a strategic plan
at all. To solve this problem, INTOSAI issued guidelines for strategic planning for
SAI. As a member of INTOSAI, BPK needs to formulate and determine strategic
planning in state financial audits. State finances are a source of funds in carrying
out of national development program so that the management and accountability of
state finance must be carried out in an accountable and transparent manner in order
to create good governance and achieve the goals of the state. The strategic audit
planning of state finance is formally stated in the BPK's strategic plan. It is hoped
that the strategic planning for auditing state finance can help achieve the
implemented state objectives.

In the global achievement, the BPK must achieve maturity in accountability model
which developed by INTOSAI. The model consists of six layer (1) combating
corruption; (2) enhancing transparency; (3) assuring accountability; (4) enhancing
economy, efficiency, ethics, equity, and effectiveness; (5) increasing insight; and
(6) facilitating foresight.

First to fourth levels is the implementation of the oversight function of BPK, the
fifth level of insight and the sixth level of the foresight function. The complete
accountability organization maturity model can be seen in figure 1:

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Figure 1: Maturity Accountability Model of INTOSAI

Problem

As an institution that has the authority to carry out management audits and
accountability for state finances, BPK must have good business and management
processes, including the BPK must formulate and determine strategic planning that
can be used to support the achievement of state goals and BPK itself. The problem
formulation of this paper is how the process of formulating strategic audit planning
for state finance.

THEORY

State Finance

State finance is an inseparable part of public finance or some even argue that state
finance is equal to public finance. This view is based on the theory of public finance
that has been developed by Musgrave4 (1959) which defines public finance as a
science that studies government economic activities. This is reinforced by the
opinion of Plehn5 (1929) which states that public finance is the study of the use of
government funds to meet government payment needs. From these two opinions, it
can be seen that there is a closeness between public finances and government
activities, which are the main managers of state finances. Arsjad 6 (1992) argues that
the identification of the public sector with the government comes from Anglo
Saxon. This can be traced back to existing libraries in the Anglo Saxon country.

The definition of state finance according to Law Number 17 of 2003 concerning

State Finance is all the rights and obligations of the state that can be valued in

4 Musgrave, Richard A., Theory of Public Finance., 1959., New York McGraw Hill., p.7
5 Plehn, Carl C., Introduction of Public Finance., 1929
6 Arsjad, Nurdjaman., Keuangan Negara., 1992., Intermedia

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money, as well as everything in the form of money or goods that can be used as
state property in connection with the implementation of these rights and
obligations. From this understanding it is explicitly clear that the scope of state
finance is very broad because it does not only concern cash but also includes goods
that can be valued for money.

Basic Value of BPK

Article 1 number 8 BPK Regulation Number 4 of 2018 concerning the BPK Code
of Ethics defines basic values as moral crystallization inherent in every member of
the BPK and auditors and becomes the benchmark and ideal ideals in implementing
audit. BPK has three basic values which consist of independence, integrity and
professionalism (IIP). Independence is an attitude and action in carrying out an
audit to be impartial to anyone and not to be influenced by anyone. Integrity is a
quality, character or condition that shows complete unity, honesty, hard work and
adequate competence. Professionalism is the ability, expertise and commitment of
the profession in carrying out tasks.

Management, Organization and Administration Relation

The management, organization and administration relationship model was first

developed by Coase7 (1937) who used economics to measure costs in a company.
Coase attempted to connect the elements of the company which consists of
management, organization and administration. This theory was further adopted by
Arif8 (1990) to develop a relation model of management, organization and
administration. This model reveals that organization and management are tools for
administration. The complete model can be seen in figure 2:

Figure 2: Relation Model of Management, Organization and Administration

7 Coase, R.H., The Nature of The Firm., 1937., Economica, New Series, Vol. 4 No. 16, (Nov. 1937)., pp 386 - 405
8 Arif, Mirrian Sjofjan., Hubungan Antara Administrasi, Organisasi dan Manajemen., 1990., Modul 1

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According to Malinowski (1961), James D. Mooney (1937), Chester I. Bernard

(1938) and Henry L. Sick (1999) organization defines as a collection of people who
interact and have the same purpose. Pfiffner and Prethus (1953) defines
administration as a process of direction and coordination.

International Standard Supreme Audit Institution (ISSAI) and State Finance

Audit Standard/Standar Pemeriksaan Keuangan Negara (SPKN)

Paragraph (1) Article 33 of Law Number 15 of 2006 concerning the Supreme Audit
Institution states that "to ensure the quality of audits of state financial management
and accountability conducted by BPK in accordance with standards, the BPK
quality control system is reviewed by other Countries Supreme Audit Agency that
are members of INTOSAI”. ISSAI is an international standard that is used as a
guideline for SAI in the world such as the BPK. ISSAI is officially authorized by
INTOSAI. The ISSAI Framework consists of the official INTOSAI principles,
standards and guidelines. It is organized into four levels and INTOSAI GOV.,
Which consists of:
1. Founding Principles - organized into one document: base on Lima
Declarations.
2. Prerequisites for the proper functioning of the SAI. The basic prerequisites
for the proper functioning and professional conduct of the SAI.
3. Fundamental auditing principles - contains the basic principles for
conducting an audit of public entities
4. Audit guidelines - translating the basic principles of auditing into more
specific, detailed and operational guidelines that can be used on a daily basis for
audit tasks.

SPKN is a standard for conducting audits of the management and accountability of

state finances. SPKN is stipulated by BPK Regulation Number 1 of 2017
concerning State Finance Audit Standard. SPKN stated in the form of an Audit
Standard Statement/Pernyataan Standar Pemeriksaan (PSP).

Strategy and Strategic Planning

According to Milkovich in Youndt 9 et. al. (1996) strategic is something that has an
impact or influence on a specific goal in the long term period. Kerzner 10 (2002)
defines strategic planning as a management tool used to manage current conditions
in order to project future conditions, so that strategic plans are a guide for
organizations to achieve goals in the next five to ten years.

Internal and external environment analysis should be conducted firstly in

formulating strategic planning. The most popular approach in analyzing strategic

9 Youndt, Mark A., Snell, Scott A., Dean, James W., Levak, David P., Human Resource Management Manufacturing
Strategy and Firm Performance., 1996., Academy and Management Journal 1996 Vol. 39 836-866
10 Krzner, Harold., Strategic Planningfor Project Management Using a Project Management Maturity Model., 2002.,
Wiley

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environments is to use the SWOT method (strength, weakness, opportunity and

threat). The SWOT approach was first introduced by Albert Humprey is basically
used to identify internal and external factors that support or deter to achieve
organization goals.

SWOT analysis is applied by analyzing and classifying various things that affect
the four factors, then describing them in a SWOT matrix image, where the
application is how strengths are able to take advantage of existing opportunities and
overcome weaknesses that reduce the potential advantages of the existing
opportunities. Then how the strengths are able to deal with existing threats and
overcome the weaknesses that can make threats become real or create a new threat.

Identification of the organization's external environment is necessary to consider

appropriate analytical tools, one of which is the model developed by Tom Peters
and Robert Waterman11 in the late 1970s. This model is called the McKinsey 7S
Framework, which consists of seven elements for organizations to achieve their
goals. The seven elements are divided into two categories in the form of hard
elements consisting of (1) strategy; (2) structure and (3) system and soft elements
consisting of (4) share values; (5) skills; (6) style and (7) staff. With these seven
elements, management analysis tools to classify organizational strengths and
weaknesses can be done through value chain analysis, organization culture analysis,
workload analysis, competency analysis, IT evaluation analysis and financial
analysis. Further analysis can also be done using a Balance Scorecard (BSC) which
consists of four perspectives, namely finance, customers, internal processes, and
learning and growth.

Identification of the organization's external environment in the form of

opportunities and thread can be done by involving seven aspects which consists of
political, economic, social, technological, environmental, legal and competitive
aspects. Analytical tools that can be used to identify opportunities and challenges
are PESTLE analysis, five forces model and supply demand analysis.

New Public Governance (NPG)

Internal and external factors identifications in public sector organizations can be

equipped by new public governance (NPG) approach. NPG is formulated by
Rhodes12 (1996) amidst the debate in governance theory. Rhodes identified six
terms of governance which consists of: (1) the minimal state; (2) corporate
governance; (3) the new public management; (4) good governance; (5) socio-
cybernetic system; and (6) self-organizing and inter-organizational networks.
Rhodes establishes that governance is self-organizing and inter-organizational
networks. This argument is based on the increasing importance of the role of
networks that complement markets and hierarchies so that Rhodes defines

11https://www.mindtools.com/pages/article/newSTR_91.htm
12Rhodes, R. A. W., The New Governance: Governing without Government'., 1996., Political Studies (1996), XLIV, 652-
667., p.653

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governance as a change in the meaning of government, referring to a new process

of governance, or changing conditions of good governance, or a new method used
to organize society.

NPG is a new paradigm in public administration. NPG is complemented by

pluralism, the relationship between internal and external organizations. Other
theories put forward by experts on NPG relate more to changes in the relationship
between government and society as other organizations that may also provide
public services, as expressed by Runya 13 et. al. (2015) argue that after the
development of New Public Management (NPM), NPG is a theoretical paradigm
that is now widely used in contemporary government public administration. These
developments led to profound changes in the role of government and its relationship
with society. Meanwhile, Bovaird and Loeffler 14 (2003) argues that public
governance is the interaction between parties who have interests that can influence
public policy.

National Development Planning Systems and Sustainable Development Goals

(SDG)

In order to achieve the goals of the state as stipulated in the Preamble to the 1945
Constitution, a national development planning system is formally set out in Law
Number 25 of 2004 Concerning the National Development Planning System. In the
national development planning system, strategic plans are outlined in a long-term
development plan (RPJP) with a period of twenty years and a medium-term
development plan (RPJM). The RPJP and RPJM are also stipulated by each region
at the Provinces, Regencies, Cities and Villages level. The national development
planning system is aimed at:
1. Supporting coordination among development actors;
2. Guaranteeing the creation of integration, synchronization and synergy
between regions, spaces, time, government functions and between the Central and
Regional Governments;
3. Ensuring linkages and consistency between planning, budgeting,
implementation and supervision;
4. Optimizing community participation; and
5. Ensuring the achievement of efficiently, effectively, equitably and
sustainably use of resources
Sustainable development goals (SDG) are a set of development programs and
targets for and by all UN member states, including Indonesia. The SDGs are valid
from 2016 to 2030. The SDGs is the next step of Millennium Development Goals
(MDGs), which ended in 2015. The SDGs contain 17 goals with 169 measurable

13 Runya, Xu., Qigui, Sun., Wei, Si., The Third Wave of Public Administration: New Public Governance., Canadian
Social Science Vol. 11 No. 7 2015., p.11
14 Bovaird, Tony., Loeffler, Elke., Public Management and Governance., Second Edition., 2003., Routledge

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achievements and deadlines set by the United Nations as a world development

agenda for the benefit of humans and the planet.

METHODOLOGY
Qualitative descriptive research method is used in this research. By describing,
exploring and analyzing theories concerning strategic planning and auditing of the
state finance, this research is expected to generate a strategic planning model in
auditing state finance.

Research analysis consists of strategic environmental and standards or guidelines

analysis related to state finance. The value for money analysis conducted in order
to formulate the model. Identification of inputs, processes, outputs, outcomes and
impacts is carried out in order to obtain the strategic planning for auditing of state
finance model.

RESULT AND DISCUSSION

Strategic Environmental Audit Analysis

Strategic environmental analysis is carried out objectively and comprehensively by

considering conditions and events related to audits of state finances, including:
1. The development or condition of achieving the goals of the state through
the achievement of long and medium term national development planning
2. The development of governance
3. Updating regulation
4. The development or international supreme audit institution where BPK is
involved in it, such as INTOSAI, ASOSAI, ASEANSAI and SDGs
5. Environmental conditions and the existence of BPK as a state institution in
order to be supporting the achievement of national development
6. Improved performance and evaluation of the previous period's strategic
planning as well as strategic issues, the relevance of the examination with
stakeholder expectations.

Strategic Planning Design Guidelines

INTOSAI15 (2009) issued guidelines for strategic planning for SAIs who are
members of INTOSAI. The purpose of issuing these guidelines is for the SAI to
formulate strategic planning in easy steps. According to INTOSAI, strategic
planning is the first step in the strategic development of SAI.
Strategic development or capacity building is the development of the core
capabilities of the SAI in optimal use of its resources and the implementation of
more effective inspection tasks in order to produce the expected results. Initiatives
for strategic development can come in various forms, such as changes in legislation,

15INTOSAI DEVELOPMENT INITIATIVE (IDI)., Strategic Planning A Handbookfor Supreme Audit Institution.,
2009

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development of organizational structures, review of work processes, preparation of

work manuals and various influences affecting personnel within SAI.

Strategic Thinking Framework in State Finance Audit

Strategic thinking framework in state finance audit uses input process output (IPO)
approach. Input consist of individual and organizational elements. Individual
elements are the BPK's basic values (independent, integrity and professionalism).
Organizational elements which are built on the basis model of management,
organization and administration relationships. The two input elements are
processed using the NPG approach and are expected to produce useful and quality
audit outputs as stated in BPK vision and mission. Outcome of this process is
achieving the accountability organization maturity model. Finally, the impact is
successful of achievement of the goals of the state. The complete IPO approach
developed by Akbar can be seen in the following figure 3:

Strategic Planning Framework in State Finance Audit

Input Process Output Outcome Impact

Basic Value of BPK

Independent, Integrity,
Professionalism
(Individual Elements)
The Achievement of
SWOT, NPG, Audit The Achievement of State
Quality and Useful Audit Accountability Maturity
Standard and Guidelines Goals
Model

Relation of Management,
Organizaition and
Administration
(Organizational Elements)
Phase

Figure 3: Strategic Planning Framework in State Finance Audit

The basic value of the BPK is the initial capital from the use of BPK inputs, the
basic value is expected to be maintained by individuals within the BPK and become
the BPK code of ethics. If there is an individual BPK action that violates the basic
values, the BPK Code of Ethics Council (MKKE), which is mandated to maintain
the BPK's basic value, can take action to enforce the code of conduct in accordance
with the Supreme Audit Agency Regulation Number 5 of 2018 concerning the
Honorary Council for the Code of Ethics for the Supreme Audit Agency.

The management, organization and administration relationship model is the second

input in the model. This model is expected to identify the internal and external
strategic BPK environment. Inputs were processed using NPG developed by
Rhodes in the form of self-organizing and inter-organizational networks and SWOT
analysis. In addition, inputs are also managed in compliance with applicable
standards such as ISSAI and SPKN.

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The resulting output is a quality and useful audit. Output also can be in the form of
good strategic planning from the BPK because it follows the guidelines issued by
INTOSAI. A good output will result in an effective outcome in achieving an
accountability organization maturity model which also has an impact on the
achievement of the goals of the state.

CONCLUSION
Strategic planning is very important tools in organizations including SAI. Strategic
planning is expected to become a guideline for achieving organizational goals in
the long and medium term that are in line with the goals of the state. The steps for
preparing strategic planning start with the identification of the strategic
environment and strategic thinking framework and guidelines for strategic planning
design.

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683