Application and Development of Public Sector Accounting

Application and Development of Public Sector Accounting

One form of the application of accounting techniques in the public sector is state-owned organizations. In 1959 the government of the old order began to policies such as the nationalization of foreign companies be transformed into state-owned enterprises (SOEs). But because it is not managed by professional managers and the number of 'politicization' or government intervention, resulting in the company is only used as 'cash cows' by the bureaucrats. So that history does not show the presence and the good results are not encouraging.
This condition persisted in the new order. More contrast again at the issuance of Government Regulation No. 3 Year 1983 on the functioning of the state. By considering some of these functions, the consequences must be borne by the state as a public company is the highlight of its existence as an agent of development rather than as a business entity. In spite of it all, the existence of public sector accounting practices in Indonesia with a clear legal status has been there since many years rolling of legitimate government.

Definition of Public Sector Accounting

Definition of Public Sector AccountingPublic Sector Accounting and accounting analysis mechanism is applied to the management of public funds in the high state institutions and below-ministerial departments, local governments, state enterprises, enterprises, NGOs and charities as well as the projects of public and private sector cooperation (Bastian , 2001).Public sector accounting related to the recording and reporting of transactions that occur in the central and local government agencies. Public sector accounting is closely linked with the application and the accounting treatment in the public domain which had a wider and more complex than the private sector or business. Breadth public areas is not only due to the breadth of the types and forms of organization that are in it, but also the complexity of the environment that affect the public institutions.Public sector accounting purposes, are as follows:1. Provide the information necessary to manage properly, efficiently and economically over the operations and allocation of resources entrusted to the organization.2. Provide information that makes it possible for managers to report on the implementation of management responsibilities in a timely and effective programs and use of resources under its control, and makes it possible for government officials to report to the public on the results of government operations and the use of public funds.There are 3 parts of the Public Sector Accounting, namely:

Public Sector Management AccountingThe main role of management accounting in public sector organizations is to provide information that is relevant and reliable accounting manager to carry out the functions of planning and management control. Planning functions include strategic planning, information costs, investment valuation, and budgeting, while control functions include measurement of performance. The information provided includes the cost of the investment required and the identification, assessment taking into account investment costs with the benefits gained (cost-benefit analysis), and assessment of cost-effectiveness (cost-effectiveness analysis), as well as the amount of budget required.

Public Sector AccountingPublic sector financial accounting purposes related to the production of external financial reports. The purpose financial statements is to provide information used in decision-making, accountability and management of evidence, and evaluating managerial and organizational performance (IFAC, 2000; GaSb, 1999).Some financial accounting techniques that can be adopted by the public sector is accounting budget, commitment accounting, fund accounting, cash accounting and accrual accounting. Basically fifth technique is not mutually exclusive. That is, use one of the techniques of accounting does not reject the use of other techniques. Thus, an organization can use accounting techniques vary, and using the five techniques together (Jones and Pendlebury, 2000).Financial Statements generated public organizations, as a form of public accountability, it should portray the condition of a comprehensive operations, financial position, cash flow, and an explanation (disclosure) for items that exist in the financial statements. Financial Statements requires that the form of government accounting standards and accounting system that uses a recording system pairs.


Public Sector AuditingDuring this public sector / government did not escape the accusation as a hotbed of corruption, collusion, nepotism, inefficiency and waste of state resources, whereas the public sector is that the wheels of government are derived from the source of its legitimacy. Therefore, the trust given by the people to the government administrators must be balanced with the clean government.Along with a demand from the public to public sector organizations to maintain the quality, professionalism and accountability in carrying out its activities, required audits of the public sector organizations.Ability accountable (accountability) of the government's public sector is highly dependent on the quality of public sector audit. Without the audit quality is good, then there will be problems, such as the emergence of fraud, corruption, collusion, and various irregularities in government. Audit quality is affected by the public sector auditor's technical capabilities as well as the independence of the auditor, both personally and institutionally. To improve the attitude of the public sector auditor independence, the position of the public sector auditor must be free from the influence and interference, and apart from the government, eitherpersonal and institutional.Granting autonomy means giving authority and freedom to the region to manage and utilize resources optimally area. In order to prevent irregularities and fraud, granting authority and discretion must be followed by a strong monitoring and control, as well aseffective inspection.

Surveillance conducted by an outside party executive (in this case the Parliament and the public); controls, in the form of internal control and management control, under the control of the executive (government) and to ensure the strategy is executed so well that the goals are reached, while the examination (audit ) carried out by entities who have the competence and independence to gauge whether executive performance is in accordance with the criteria established (Mardiasmo, 2001).Strengthening oversight functions can be performed through the optimization of the role of Parliament as a balancing power between the executive and the public, either directly or indirectly, and through NGOs and social organizations in the area. It should be understood by the members of parliament that the oversight of the executive is monitoring the implementation of policies that have been outlined, not examination (audit). Examination remains to be done by the agency or agencies that have the authority and professional expertise, such as the BPK, BPKP, or Public Accounting Firm (KAP), which is carrying out its functions over to the private sector so that its functions in the public sector needs to be improved.There are some weaknesses in auditing government in Indonesia. The first weakness is inherent, the unavailability of adequate performance indicators as the basis for measuring the performance of government. While both are structural weaknesses of the issue of institutional audit and Regional Governments are overlapping each other, so that the auditing is inefficient and ineffective.Audit of the financial management responsibilities should not be limited to compliance audits, financial audits but also (in order to give an opinion on the fairness of financial statements) and expanded again with the performance audit.

Organizing accounting classes

Organizing accounting classesOrganizing a class-4 relating to the accountability of the revenue, cost, profit and investment in terms of public sector accounting.1. RevenueIn government, the income obtained repeatedly (reflective) to finance expenditure in a particular financial year, while for the following year, a similar income can be obtained again. Revenue revolusing here is not that the point can not be played again for spending the years to come. This is very different from the company with a profit motive, where revenues this year can be saved for use in future years.Revenue in the government largely derived from tax revenues that are forced (compulsory) in which the revenue, the government has no obligation to provide a direct payoff to the tax payers. While the company's business, revenues derived from those who voluntarily require goods or services, and there is a direct obligation of the company to the buyer of goods or services.Understanding governmental accounting income in the most common sense prevailing in financial accounting, that "as a result of operations". But in government accounting as well as acceptance of long-term loans and the sale of fixed assets. In financial accounting, these two things can not be digolongan as revenue (income). Revenues are inflows or other improvement on the property of an entity or settlement of its obligations during the period of delivery or production of goods, provision of services, or other activities that constitute the principal or major surgery sustained from the force.Revenue recognized under the cash basis when received on account of the public treasury countries / regions or by the reporting entity. Revenues are recognized according to the accrual basis at the time of onset of the rights to that income. Recognition of local government revenues can be determined without regard to whether the money has been received in cash or not. So the public sector or government accounting is adopted accrual basis.2. LoadIn accounting terms are expense (expense), while the government does not use the term accounting expense but expenditure (roughly translated expenditure or expenditure).Expenditure has a broad sense compared ith expense, which in addition to having the same meaning as expense, also included are all government payments in exchange for goods and services, both in the form of wages and salaries to employees, purchases of goods and services and repayment installments or long-term debt.Cost accounting in the public sector can be categorized into three groups, namely:1) Input Costs2) Cost of Output3) Cost of process3. Profit4. InvestmentGovernment invests substantial funds in assets that do not directly generate revenue, such as office buildings, bridges, roads, parks and reservation areas. In addition, most of these assets have a long useful life and require maintenance and rehabilitation program to maintain the benefits to be achieved. Thus, the function of these assets to the government is very different from the function for commercial organizations.Assessment of investment in the public sector is substantially more complicated than those in the private sector. Investment appraisal techniques used in the private sector designed for profit-oriented organizations. While public organization is an organization that is not profit-oriented, so sometimes these techniques can not be applied to the public sector. In addition it is difficult to measure the resulting output, so as to determine future gains in financial measures (expected return) can not (difficult) done.Assessment of investment in public organizations is done using cost-benefit analysis (cost-benefit analysis). In practice, there are difficulties in determining the costs and benefits of the investments made. This is because the costs and benefits should be analyzed not only in terms of financial alone but should include social costs (social costs) and benefits (social benefits) that will result from the proposed investment. Determining the social costs and social benefits in monetary units is very hard to do. Therefore, investment appraisal using cost-benefit analysis in the public sector difficult. For convenience, it can be used cost-effectiveness analysis (cost-effectiveness analysis).