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Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 15268

IMPLEMENTATION COMPLETION REPORT

INDONESIA

ACCOUNTANCY DEVELOPMENT PROJECT(LOAN 2940-IND)

JANUARY 4, 1996

Human Resources Operations DivisionCountry Department IIIEast Asia and Pacific Region

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

Name of Currency = Indonesian Rupiah (Rp)Appraisal Report US$1 = Rp 1,650ICR (July 1995) US$1 = Rp 2,220

FISCAL YEAR

April 1 - March 31

PRINCIPAL ABBREVIATIONS AND ACRONYMS USED

ADC - Accountancy Development CenterBAKUN - Badan Akuntansi Negara (Central Accounting Office), formerly PPKNBAPEPAM - Capital Market Executive AgencyBAPPENAS - National Developmeent Planning AgencyBEPEKA - Supreme Audit BoardBPKP - Financial and Development Supervisory BoardCAAD - Coordinating Agency for Accountancy DevelopmentDGHE - MOEC's Directorate General of Higher EducationDLIKMAS - MOEC's Directorate of Community EducationDJLK - MOF's Directorate General for Financial InstitutionsLAI - Indonesian Institute of AccountantsMENPAN - State Minister for Civil Servants ReformsMOEC - Ministry of Education and CultureMOF - Ministry of FinancePPA - Accounting Education ComponentPPSA - Accounting Practice ComponentPIU - Project Implementation UnitPPKN - Pusat Pembukuan Keuangan Negara. Predecessor of BAKUNSMA - Upper Secondary General SchoolsSMEA - Upper Secondary Commercial SchoolsSTAN - Sekolah Tinggi Akuntansi Negara (State School of Government Accounting)TKPA - CAAD managed component in the ProjectUAW - Unit Akuntansi Wilayah (Agency Regional Accounting Office)

FOR OFFICIAL USE ONLY

Table of Contents

Preface

Evaluation Summary.................

Part I: Project Objective ............................................. 4Achievement of Project Objectives .............................................. 4Implementation Record and Major Factors Affecting the ProJect ............................ 5Project Sustainability ...... 8.......................................8Bank Perform.ance .. 9Borrower Perfornance ................ 9Assessment of Outcome ................ 9Future Operation ............... 10Key Lessons Learned ............... 11

Part II: Statistical Tables ................ 12Table 1: Summary of Assessments ............... ............................. 12Table 2: Related Bank Loans/Credits ................... ......................... 13Table 3: Project Timetable ............................................ 13Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual ........ 14Table 5: Key Indicators for Project Implementation ....................................... 14Table 6: Key Indicators for Project Operation ............................................ 16Table 7: Studies Included in Project ................. ........................... 17Table 8A: Project Costs ............................................ 21Table 8B: Project Financing ............................................ 21Table 9: Economic Costs and Benefits ..................... ....................... 21Table 10: Status of Legal Covenants ............................................ 22Table 11: Compliance with Operational Manual Statements ................ ............ 22Table 12: Bank Resources: Staff Inputs ............................................ 23Table 13: Bank Resources: Missions ................ ............................ 23

Aide Memoire .24

Government Contribution to ICR .49

This document has a restricted distribution and may be used by recipients only in the performance of their officialduties. It contents may not otherwise be disclosed without World Bank authorization.

EMPLEMENTATION COMPLETION REPORT

INDONESIA

ACCOUNTANCYDEVELOPMENTPROJECT[LOAN. 2940-INDI

Preface

This is the Implementation Completion Report (ICR) for the Accountancy DevelopmentProject in Indonesia, for which loan 2940-IND in the amount of US$ 113 million equivalent wasapproved on May 17, 1988 and made effective on July 28, 1988.

The loan was closed on June 30, 1995, after a one-year extension of the original closing dateof June 30, 1994. Final disbursement took place on December 4, 1995, at which time a balance ofUS$ 9,558,296.88 was canceled. No cofinancing for the project was provided.

The ICR was prepared by Kunrat Wirasubrata, Operation Officer/Task Manager, andBasilius Bengoteku, Operations Officer, both of Project Management and Implementation Unit,Resident Staff in Indonesia, Country Department m of the East Asia and Pacific Region andreviewed by Himelda Martinez, Chief, Human Resource Operations Division, EA3PH, and RichardA. Calkins, Project Adviser, EA3DR.

Preparation of this ICR, which began during the Bank's final supervision/completion missionin July 1995, was based on materials in the project file. The borrower contributed to the ICR bypreparing an evaluation of the project's execution and by commenting on the draft ICR.


INDONESIA

ACCOUNTANCY DEVELOPMENT PROJECT(Loan 2940-IND)

Evaluation Summary

Introduction

i. The Bank has been involved in accountancy development in two previous projects in Indonesia(Credit 869-IND, effective May 11, 1979 and closed June 30, 1985 and Loan 2290-IND, effectiveSeptember 1983 and closed December 31, 1990). These were the first and second polytechnicdevelopment projects, each with a small accountancy development component, which led to this project.One of the lessons learned from the accountancy component of the First Polytechnic Project was the needfor separate project management with clearly identified responsibility and funds allocated to it. The lessonwas incorporated in the Accountancy Development Project loan agreement.

Proiect Obiectives

ii. The project's primary objectives were: (a) to improve accounting practices: (i) in the publicsector, by supporting the introduction of modernized government accounting practices, initially in theBorrower's Ministry of Finance and three other agencies, and eventually in all agencies; (ii) in the privatesector by supporting the development of technical standards and a code of ethics for the accountingprofession; and (b) to support the Government's program to raise the quality of accounting faculty andteaching staff, and to prepare for future expansion of accounting education and training. The project hada number of secondary objectives, each of which was aligned with one of the main objectives. Of thesecondary objectives, the most important were: (a) developing the quality of government auditing agenciesand government auditors; (b) strengthening the organization of the profession of accountancy; (c)increasing the scope and efficiency of the capital market; (d) increasing the supply of qualified accountingprofessionals; and (e) improving the management of accounting education.

iii. To promote the achievement of project objectives, the Loan Agreement stipulated that theBorrower should maintain separate subproject management units for the Accounting Practice andAccounting Education subprojects which had. already been working since project preparation. TheCoordinating Agency for Accountancy Development (CAAD), an agency established jointly by MOF andMOEC in 1985 to coordinate development of accountancy in Indonesia, should also be maintained tomonitor and evaluate the implementation of the various activities under the project and the achievement ofthe project objectives.

iv. Given the size and scope of the project which required involvement of nine implementing agenciesand covered the 27 provinces of Indonesia, the objectives were complex and risky.

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Implementation ExDerience and Results

v. The loan was approved by the Board on May 17, 1988, became effective on July 28, 1988 andwas closed on June 30, 1995 after a one-year extension of the closing date. The Accounting Practice(PPSA) and the Accountancy Planning and Monitoring (MKPA) Sub-projects were restructured in late1990. The Accounting Education and Training Sub-project (PPA) showed satisfactory implementationrecord since its inception.

vi. Despite difficulties in the early stages of implementation, the project has achieved most of itsstated objectives (para 2.1). Under the Accounting Practice Sub-project, computerized governmentaccounting systems have been introduced, effectiveness and efficiency of government audit operationshave increased, accounting and auditing training have been provided to more than ten thousandgovernment and state-owned enterprise staff, the capacity of government to supervise the capital markethas expanded, and financial accounting and auditing principles and standards have been made effective.Under the Accounting Education and Training Sub-project, new accounting development centers havebeen established and the quality and quantity of high school and university accounting teachers and thequality of teaching have improved. Under both sub-projects, more than one thousand government staffwere awarded foreign fellowships, more than 300 of which were for master's and doctorate studies.During project implementation, the demand for accounting education as well as for accounting educationproviders in the community has increased considerably.

vii. A few qualifications, however, are to be noted. At its final stage of implementation, the quantityand quality of reports produced by the government accounting systems were still inadequate for them tobe used as the basis for sound economic decision making. Also, the objective to strengthen the associationof accounting professionals could not be fully attained. The performance of the institutional and students'loan program also was not satisfactory.

viii. Negative factors affecting achievement of major objectives include, inter alia, delayedestablishment of the Central Accounting Office (BAKUN) to lead implementation of modemization ofgovernment accounting (para 3.4) and inadequate assessment of institutional capability during appraisal(paras 3.4 and 3.13). Positive factors include the restructuring measures taken in 1990 and establishmentof provincial PIUs to implement accounting education activities in the provinces.

ix. The loan closing date was extended by one year to June 30, 1995 to accommodate majoractivities that would not be completed by June 30, 1994 (e.g. overseas fellowships, procurement ofequipment and in-country training) and to provide support to the preparation of the Second AccountancyDevelopment Project.

x. Total project costs at closing date was estimated at US$131.7 million, about 80 percent ofappraisal estimate. This lower cost can be explained by the lower incremental operating costs as a resultof project restructuring in 1990, unrealized civil works in STAN component (PPSA subproject), and thedevaluation of the Rupiah by more than 30 percent during the period.

xi. The Bank's and the Borrower's overall performances have been satisfactory (paras 5.1 and 6.1).Project outcome has been rated satisfactory as the project achieved most of its stated objectives (para7.1).

Summary of Findings. Future Operations. and Key Lessons Learned

xii. Inadequate institutional arrangement and lack of assessment of institutional capability causedconsiderable implementation setback as reflected in slow implementation of the Accounting Practice(PPSA) and Monitoring, Planning and Evaluation (TKPA) Sub-projects in the first two years. This alsoresulted in slow acceptance of the new uniform chart of account and the failure of DIKMAS tosatisfactorily implement the students loan component.

xiii. Sustainability of a number of components such as BEPEKA and BPKP in-country training (para4.2), the activities of the State School of Accountancy (para 4.3), and continuous teaching qualityimprovement (paTa 4.6) will be largely dependent on Government commitmnent to implement the proposedOperational Plan. Sustainability of the students loan program is questionable (para 4.8) while that ofaccountancy development coordination may be likely but not necessarily following the practice duringproject implementation. Key lessons learned include:

a) in performing a major task such as implementation of government accounting systems thatencompasses all independent cabinet-level Government agencies, high-level intervention andleadership is required;

b) pilot implementation of the Government accounting modernization component should have beendone in a selected province, with participation of all Govemment agencies which have operationsin the province; in this way, comprehensive province-level results would have been obtained andimmediate implementation benefits could have been realized;

c) thorough institutional arrangements, including assessment of institutional capability, should havebeen completed very early in the implementation period;

d) separate implementation units and management are required to allow more freedom toimplementing agencies in handling their components in accordance with their priorities;

e) exposing a studies and/or research center to a more commercial environment would give greaterassurance for future sustainability;

f) assurance on availability of Govemment funds to finance activities which have high probabilityto extend beyond closing date should be obtained before issuance of Bank's procurementapproval (e.g. no-objection letter); and

g) budgetary allocations should be driven more by future targets than by past performances.

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INDONESIA

ACCOUNTANCY DEVELOPMENT PROJECT(Loan 2940-IND)

PART I: PROJECT IMPLEMENTATION ASSESSMENT

1. Project Objectives

1.1. The objectives of the project were to improve accounting practices in the public and privatesectors and to support the Government's program to raise the quality of accounting education as well asexpand accounting education and training. The project provided funds for the following major sub-projects:

Accounting Practice (PPSA). This included: (a) implementation of modernized governmentaccounting systems, (b) improving the efficiency and effectiveness of the overall government auditfunction, (c) improving the quality of course delivery and of management of MOF's School ofAccountancy, (d) assistance to the capital market authority to arrest the declining volume of businesson the exchange and to promote the capital market as an effective vehicle of resource mobilization,and (e) assistance to the Indonesian Institute of Accountants in its evolution towards leadership ofthe accounting profession in Indonesia;

Accounting Education (PPA). This included: (a) improving the quality of accounting education inuniversities particularly at the undergraduate level, (b) staff and curriculum development for SMA(general high school) and SMEA (business vocational high school) as well as provision of equipmentand materials to these schools, and (c) assistance to further extend and reinforce the accountingtraining provided under employment-oriented community education programs of the Ministry ofEducation;

Accountancy Planning. Monitoring and Evaluation (TKPAM. This included support to theCoordinating Agency for Accountancy Development (CAAD) as the overall planning, monitoringand evaluation unit of the project.

1.2. The objectives were broad and complex as well as demanding and required involvement of sevendirectorates general in two major ministries, one non-ministerial government agency, and the SupremeAudit Council. The project objectives had responded appropriately to Indonesia's economic developmentduring the last decade where a number of economic/trade deregulation measures were taken and the roleof the private sector was enhanced.

2. Achievement of Project Objectives

2.1. Despite project management problems that led to delays in the first two years of PPSA andTKPA, the project has achieved most of its stated objectives. From the institutional development point ofview, it has successfully introduced modernized government accounting systems in 13 Governmentdepartments and increased the efficiency and effectiveness of government audit operations; it has providedaccounting and auditing training to more than ten thousand government staff; also, it has supportedformulation and issuance of the financial accounting and auditing principles and standards which are very

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important in supporting a well functioning capital market and in guiding the private sector financialreporting practices. It also has increased the capacity of the capital market authority to supervise thecapital market effectively. It has supported improvement of accounting curricula in high schools anduniversities and introduced computers and computerized accounting as well as provided accountingtextbooks and other related teaching materials to these educational institutions. By supporting overseasfellowship programs both for university lecturers and government employees, the project wasinstrumental in building the necessary human capital for further development of the accounting professionin Indonesia. The project also supported activities that were not originally identified in the SAR includinga major tax accounting program at DG Tax and introduction of corporate law reforms by the Office ofthe Coordinating Minister for Economy, Finance and Industry.

2.2. In spite of the success in introducing modern and computerized government accounting systemsto government agencies and capturing financial data in 12 provinces, reports produced by the systems arestill inadequate both in terms of quantity and quality in order for them to be used as the basis for soundeconomic decision making (para 7.6). The final result of this sub-project component can be evaluatedonly when the systems have been implemented in all government agencies in all the 27 provinces which isnot expected to happen before the year 2000.

2.3. The institutional and students' loan component managed by the Ministry of Education, can not befully evaluated as the project administration at DIKMAS cannot generate reliable information oncollection and redistribution of funds. In terms of distribution, 85 percent of the originally allocated fundhas been absorbed by the private course providers and students which represents about three percent ofthe loan. According to the preliminary information gathered by DIKMAS, the students' loan program wasnot successful as the repayment ratio has remained low.

2.4. Difficulties in finding qualified participants for doctorate programs in accounting caused delaysin sending doctorate fellows to overseas universities. Because of this ten fellows (nine from MOEC andone from BPKP) were unable to complete their studies by the closing date. GOI is committed to continuefunding the programs. Areas of study also shifted from accounting to more general subjects.

3. Implementation Record and Major Factors Affecting the Project

General

3.1. The loan was approved by the Board on May 17, 1988, became effective on July 28, 1988 andwas closed on June 30, 1995 after a one-year extension of the closing date. The Accounting Practice(PPSA) and the Accountancy Planning and Monitoring (TKPA) Sub-projects were restructured in late1990. The Accounting Education and Training Sub-project (PPA) showed satisfactory implementationrecord since its inception.

3.2. The extensive process, underway since 1979, of formulating the plans of Government accountingmodernization was considered to have reduced the related implementation risk. Nevertheless, the broadscope and complex technical characteristics of the project as well as the structure of management duringearly implementation period were major contributors to unsatisfactory performance during the first twoyears of implementation and led to restructuring of TKPA and PPSA Sub-projects.

3.3. The main features of the restructuring of TKPA and PPSA included establishment of separatemanagement for each subproject, reallocation of loan funds among expenditure categories to allow for

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more overseas training, purchase of computers to be installed in agency field offices, and inclusion of DGTax and EKUIN to implement a major program in tax accounting and to initiate a corporate law reform.

3.4. As a number of activities could not be completed by June 30, 1994, the loan closing date wasextended by a year to June 30, 1995. The activities included, among others, overseas masters and Ph.Dfellowships, procurement of educational equipment, and agency staff training on the new governmentaccounting system (GAS Release 1.0). The extension was also necessary to provide support forpreparation of re-engineering of GAS R 1.0 to a Release 2.0 which would be supported by the SecondAccountancy Development Project. As no major activities were taking place under TKPA, the Sub-project was not included in the extension and further support to it was provided by MOF.

3.5. Critical problems were encountered in the early stages of implementation but were successfullyovercome by the Government and project management. There are three sets of factors affectingimplementation performance. First, the performance of Bank's appraisal and supervision teams (para5.1). Second factors generally subject to govemment control including: a) delayed establishment of theCentral Accounting Office (BAKUN) as an echelon I unit, b) failure to establish separate management forPPSA and TKPA during the first two years of implementation; c) budget allocation system which wasmore past performance driven rather than project target driven. And third, specific factors subject toimplementing agencies' control including: a) failure during preparation to identify the need for a high-level implementing agency to lead implementation of the government accounting modernizationcomponent, b) inadequate assessment of CAAD's institutional capability to assume dual functions asaccountancy development coordinator and as project implementing agency, c) insufficient monitoring andevaluation capacity particularly in the early stage of implementation, d) inadequate assessment of DG ofCommunity Education (DIKMAS) capability to manage institutional and students loan program; e) lackof quality control in computer and calculator delivery to high schools, f) insufficient planning in sendingPh.D fellows to foreign universities; and g) the well functioning regional project units for implementationof the Accounting Education Sub-project.

TKPA Sub-nroiect

3.6. Implementation coordination was a key task which was not satisfactorily performed by theCAAD. This was due both to the Bank's and the Eorrower's over-confidence in the CAAD's institutionalcapability to implement its original function, i.e., to coordinate accountancy development, and at thesame time to implement the TKPA and PPSA Sub-projects without realizing CAAD'S lack of previousexperience in managing a complcx project. Slow implementation was the most noticeable result of thisorganizational arrangement. The restructuring of project management in late 1990 could effectivelyarrested this problem by releasing CAAD from PPSA implementation responsibilities and creating aseparate PPSA project management.

3.7. After project restructuring TKPA continued to assume the responsibility for the development of anational coordinating agency. It also conducted research and development activities with computerdatabases, set up a research network, arranged research grants to students and university staff, providedresearch seminars, and maintained a library facility. With a well-defined scope of responsibility, TKPAended up with satisfactory results.

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PPSA Sub-Droiect

3.8. Delays were most noticeable in the implementation of the Governnent accounting component.This was particularly due to difficulties in staffing and the complicated interfacing problems between DGBudget's chart of budgetary items and the newly introduced uniform chart of accounts.

3.9. To effectively liaise with DG Budget and Bank Indonesia authorities to achieve consistency inaccounting through the establishment of a uniforn chart of account, it was deemed necessary to elevatethe status the State Accounting Office (PPKN) from an echelon II to an echelon I office within theMinistry of Finance. It took almost three years for the Office of The Minister of Civil Service Reforms(MENPAN) to approve the change of status. In July 1992 BAKUN (the Central Accounting Office) wasofficiated and MOF approval of the new uniform chart of account was issued a month later. The nation-wide implementation of the new chart of account in development budget was begun in Pelita VI budgetyear of 1994/95.

3.10. After a long learning period, implementation of PPSA (including BAKUN, BAPEPAM,BEPEKA, BPKP, STAN and IAI/DJLK) improved. However, delays in the first two years had led toslow absorption of government funds which later led Bappenas to reduce budget allocation to projectactivities to match past actual performances. Low utilization of government funds continued until theproject closed.

3.11. After two years without sufficient monitoring and evaluation capacity, a project advisor todevelop PPSA and TKPA project management and monitoring system was recruited in 1990. The advisorpresented a clearer picture of the status of the project that provided a firm base on which decisions couldbe made on revisions and subsequent implementation of the Sub-project.

3.12. The Government accounting component was substantially modified after appraisal. The originalsystem design was changed from a manual to a computerized system (called GAS Release 1.0). This ledto major changes in the timing of design development and programming. More extensive computerization,particularly at the (field level) agencies, was deemed necessary. This resulted in the project providingmore than 100 sets of PCs and peripheral equipment (including high speed dot matrix printers) to morethan 100 field-level agency accounting offices (UAW). During implementation, hardware utilization wasvery low (only 2-3 hours per month) and many of the computers were of low quality due to weakspecification. In a number of cases, computer skills of the UAW staff were also deficient.

3.13. During project restructuring the Bank agreed to finance a major program in tax accountingimplemented by DG Tax and to support the introduction of corporate law reforms organized by the Officeof the Coordinating Minister for Economy, Finance and Industry.

PPA Sub-Dro*ect

3.14. DIKMAS capacity to administer a very large number of small loans (10,752 student and 752institutional loans) was not adequately assessed. While the agency had been successful in implementingother community-oriented learning activities, it did not have an edge on loan management. This was madeworse by the absence of an operational budget in the early stages of implementation, the lack of clearimplementation guidance, and the unavailability of monitoring support.

3.15. Nine Ph.D fellows could not complete their studies by the project's closing date. When the ICRmission was in the field there were worries that DG of Higher Education would not be able to securefunding sources to finance the remaining portion of the study programs.

3.16. The establishment of provincial project implementation units in seven provinces has beeneffective in facilitating local training and delivery of equipment to beneficiary schools.

3.17. Many computers and calculators were delivered to the beneficiary high schools in defectivecondition and many of these were not replaced. The electric calculators delivered under the second batchprocurement required installation of electric plugs in many schools; this created a burden particularly forschools in small towns with limited budgets. Calculators from the first batch procurement used drybatteries as their power source.

4. Project Sustainability

4.1. There is an apparent Government commitment to continue to nurture a functioning centralgovernment accounting office to provide government decision makers with reliable financial informationon which sound economic decision making can be based. This, among others, is indicated by the follow-on Second Accountancy Development Project (Loan 3801-IND) which supports improvement of GASRelease 1.0 to a Release 2.0 and implementation to full scale by the year 2000. While some operationalissues, such as low operational budget support to BAKUN Central and Regional Offices, may remain inthe near future, sustainability of the achievement is likely.

4.2. Sustainability of BEPEKA and BPKP activities supported under the loan will largely depend onthe ability of the agencies to optimally utilize fellowship graduates by providing better organizational andcareer development plans and on further investment to maintain and expand their achievement. Bothagencies continue to issue audit guidelines and refine ones produced during project implementation. Sincethey are not included in the Second Accountancy Development Project, the two agencies are now seekingalternative sources of external financing.

4.3. As the capacity of public and private higher education institutions to produce qualifiedaccountants have increased considerably in the last several years, STAN's function as a degree grantinginstitution may not be sustained. Its function as in-service training providers for MOF agencies may besustained by its mother organization, i.e, BPLK.

4.4. The increasing importance of private sector investment provides the basis for increasing the roleof the capital market as an effective instrument of resource mobilization. In this regard, a strong capitalmarket regulatory body which effectively oversees compliance of public companies with the variouscapital market regulations is very important to maintain investor confidence. The government has clearlyshown its strong commitment to maintaining the regulatory body -- this is indicated by inclusion of theCapital Market Authority (BAPEPAM) in the Second Accountancy Development Project. Thesustainability of BAPEPAM's achievement is, therefore, likely.

4.5. IAI continues to enjoy significant support from the Government by being included in the SecondAccountancy Development Project. Given this support, for the next five years, sustainability of theInstitute's achievement is likely. However, ways need to be sought to make the Institute more self-reliant.

4.6. As the demand for accounting professionals remains high, undergraduate accounting departmentsin major public and private universities have found strong interest among students to study accounting.Qualified accounting graduates of public universities are quickly absorbed by leading industries whichoffer more attractive remunerations than universities. Those who decided to become university teachersusually have a part-time job either as a teacher in a private university or as an accountant in industries.This has raised concern among public universities' accounting departments particularly with respect tothe quality of teaching and research work. On a limited basis these concerns are being addressed by someof the Accountancy Development Centers (ADCs) which are embarking on more commercial activities byproviding studies, research and consulting services to industries as well as government institutions.

4.7. The target to upgrade accounting teachers and to improve teaching quality including curricula'and management improvement in SMAs, SMEAs and public universities has been achieved substantially.Still, limited government resources to continue these activities and to provide support for maintenance ofcomputer hardware and software make sustainability of these activities questionable. With respect toprovision of computers and peripheral equipment, however, many private enterprises, particularly inmajor cities, are ready to take over Government responsibility at reasonable prices.

4.8. Unless the recovery factor of past loans is high and better organizational and administrativearrangements are in place, sustainability of the student loans program is unlikely.

4.9. While the need for national accountancy development coordination continues, CAAD will notnecessarily be the executing agency in this effort. Government's willingness to exclude CAAD from theSecond Accountancy Development Project indicates the low level of Government commitment to sustainthis agency.

5. Bank Performance

5.1. T'he overll performance of the Bank during project implementation has been satisfactory.Inadequate assessment of institutional capability during project preparation and appraisal wassatisfactorily addressed during supervision. Bank supervision teams provided the necessary facilitation sothat the project could be implemented fairly smoothly. This was due, in part, to the previousimplementation experience in the first and second polytechnic projects.

6. Borrower Performance

6.1. The Borrower's performance in preparation, appraisal and implementation of the project has alsobeen satisfactory. Despite the long learning period needed by the PPSA Sub-project and CAAD's failureto effectively coordinate implementation, after restructuring, the TKPA and PPSA Sub-projects managedto improve and realized most of their stated objectives. As regards the PPA Sub-project, except for theunsatisfactory performance of the student loans and the incomplete Ph.D fellowship programs,implementation performance has been satisfactory since the inception of the project.

7. Assessment of Outcome

7.1. Overall, the project had satisfactorily achieved and, in some cases, exceeded the expectedoutcome without major shortcomings (paras 3.1-3.17).

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7.2. Given its long-term objective, the impact of the major fellowship program cannot be fullyevaluated at project completion. A recent tracer study", however, indicates that graduates are contributingto beneficiary institutions' performance including improvement in delivery of public services (particularlyBAPEPAM), decision making process, task completion, and in disseminating new knowledge and skills totheir colleagues. There is no brain drain due mainly to post-training service obligations, and beneficiaryinstitutions are expected to further optimize the role of these graduates through better organizational andcareer planning. This way, they are expected to generate a long lasting effect on the development of theaccounting profession both in public and private sectors, and in accounting education.

7.3. Overseas and domestic fellowship graduates contributed to the enhancement of the effectivenessand efficiency of government audit operations. In the financial sector, the project contributed to the betterworking of the capital market. In the education sector, the project provided a firm base for furtherdevelopment of accounting and computerized accounting in high school and university education.

7.4. The objective of strengthening the IAI could not be fully attained under this project as it remainsdependent on government support for further development and continues to be run by executive memberson a time-available basis. A full-time executive secretary is being recruited under the SecondAccountancy Development Project.

7.5. Secondary, higher and non-formal accounting education has expanded rapidly during projectimplementation. While no in-depth study has been conducted to measure the extent of the project'scontribution to the development, improvement of curricula and provision of training for instructors andmanagers of private accounting courses conducted under the project has, undoubtedly, had a positiveimpact.

7.6. Implementation of government accounting systems was based on a full scale plan whereby theactual benefit will be realized only when the operations of all central government agencies in the 27provinces are covered by the systems. This is not expected to happen before the year 2000. As thesystems were only partially implemented, the reports produced are not yet usable as the basis foreconomic decision making. In this case, a pilot implementation in a key province where all (field level)agencies are covered would have been preferred so that comprehensive results at the province level couldhave been obtained and used as the basis for comprehensive evaluation. Lack of timeliness in generatingreports is another major factor which renders reports unusable.

8. Future Operation

8.1. The ICR mission of July 1995 received the Operational Plan of the PPSA Sub-projectcomponents. The plan clearly indicates the need for further investment support in the five implementingagencies. BPKP still needs more funds to implement its management information systems and to providefor the related training and to evaluate the effectiveness of audit guidelines prepared during projectimplementation. BEPEKA needs to continue with in-country training for their auditors and to evaluate theimpact of the guidelines and standards prepared during project implementation. Through Bappenas, thesetwo agencies are now looking into the possibility of obtaining external financial support. BAKUN,BAPEPAM and IW are supported by the follow-on loan (Second Accountancy Development Project,Loan 3801-IND).

/ Center for Economic and Social Studies, Evaluation of Overseas Fellowship Returnees (IBRD Ln. 2940-IND - MOF), Jakarta, 1995.

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8.2. A similar situation is observed in MOEC. An operational budget to maintain the projectachievements is available only on a limited basis. MOEC's operational plans indicate that fellowshipgraduates and ADCs could be further deployed to become lecturers or consultants in developingaccounting departments in other public and private universities. There are also plans to allow beneficiarySMAs and SMEAs to use the computer facilities for commercial computer classes in the aftemoonwhose proceeds can be used to cover maintenance costs. MOEC also decided to set up a better monitoringand redistribution mechanism for the institutional and students loan starting budget year 1996/97.

8.3. The rapid expansion of accounting education by private providers may be expected to absorb asignificant part of government responsibility although concerns are raised with regard to the quality ofteaching.

8.4. Bank follow-up support to BAKUN, BAPEPAM and LAI will be geared toward full scaleimplementation of the computerized govermment accounting system by the year 2000 and enhancement ofthe credibility and usefulness of financial information in the private and public sectors. The second loanalso supports implementation of rigorous qualifying examinations for public accountants, acomprehensive set of accounting standards, and the enforcement of such standards through capital marketregulatory activities.

9. Key Lessons Learned

(a) In executing a major effort such as implementation of government accounting systems thatinvolves the whole set of cabinet ministries, high-level intervention is required; and the need for ahigh-level agency to lead in the implementation should have been identified during projectpreparation;

(b) In implementing government accounting modernization, the project would have achieved more ifthe pilot implementation had been undertaken in one key province, with participation from all(field level) agencies operating in the province rather than in a number of agencies;

(c) To facilitate a smooth implementation coordination, thorough institutional arrangements, includingappropriate staffing, should have been put in place early in the implementation period; this shouldhave included obtaining assurance of the capability and capacity of the proposed projectleadership;

(d) It is important that distinct subprojects be managed separately on a functional basis to avoidconfusion in allocation of resources and to allow more freedom for implementing agencies toimplement their components in accordance with their priorities;

(e) Exposing studies and/or research units such as the Accountancy Development Centers to morecommercial activities would provide greater assurance for their sustainability;

(f) Unless there is an adequate assurance of availability of government funds to cover expendituresafter closing date, project needs to be strictly monitored and approval should not be given foractivities that have high probability to extend beyond the closing date; and

(g) Budgetary allocation should be driven by project targets rather than by past performances

- 12 -

Table 1: Summary of Assessments

A. Achievement of objectives Substantial Partial Negligible Not applicable

Macro policies ED F] F Sector policies ] F] F] Financial objectives E] 7] E ]Institutional development 73- F0 F] lPhysical objectives F] F1 F]Poverty reduction F] F] E[

Gender issues F] F] ] FOther social objectives F] F] E3iI E]Environmental objectives F] F F] [&]Public sector management F] X| EDPrivate sector development FF F]Other (specify) F] F] F] [

B. Proiect sustainability Likely Unlikely Uncertain

rm-~ E] F]

C. Bank performance Hi!hgv Satisfactory Deficientsatisfactory

Identification F | F[]Preparation assistance Ea F cAppraisal F E ESupervision F ] F]

D. Borrower performance Higi Satisfactory Deficientsatisfactory

Preparation F] F] Implementation F] F]Covenant compliance ] F ]Operation (if applicable) FF] F]

E. Assessment of outcome Satisfactory Deficientsatisfactory

F F]

- 13-

Table 2: Related Bank Loans/Credits1

Loan/credit title Purpose Year of approval Status

Preceding operations

1. Accountancy Training To upgrade the accountancy training FY1 979 ClosedComponent in First Poly- both in universities and the Ministry oftechnic Project Finance

2. Accountancy Training To develop practical accountancy training FY1984 ClosedComponent in Second in polytechnic educationPolytechnic educationproject

Following operations

1. Second Accountancy Further support for the implementation FY1995 On-goingDevelopment Project of the Governments Strategy to

modernize Government AccountancySystem. Support for enhancement of thecredibility and usefulness of financialinformation in the private and publicsector

Table 3: Project Timetable

Steps in project cycle Date planned Date actual/latest estimate

Identification (Concept Review) 11/86

Preparation (Executive Project Summary) 9/87

Appraisal 10/87 10/87

Negotiations 2/88 3/88

Letter of development policy (if applicable) NA NA

Board presentation 4/88 5/88

Signing 10/88 6/88

Effectiveness 9/7/88 7/28/88

First tranche release (if applicable) NA NA

Midterm review (if applicable) NA NA

Second (and third) tranche release (if applicable) NA NA

Project completion 6/94 6/95

Loan closing 10/94 12/95

- 14 -

Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual(US$ million)

FY 89 FY 90 FY 91 FY 92 FY 93 FY 94 FY 95 FY 96

Appraisal estimate 4.0 13.0 36.0 67.6 99.0 113.0 113.0 113.0Actual 2.7 12.9 29.1 50.2 70.8 87.1 100.3 103.4Actual as % of estimate 67.5 99.2 80.8 74.3 71.5 77.1 88.8 91.5Date of final disbursement December 4, 1995

Table 5: Key Indicators for Project Implementation

I. Key implementation indicators Estimated Actual

in SAR/President's Report (End of Project Target) (June 1995)

II. Modified indicators (if Not applicable

applicable)

Ill. Other indicators (if applicable)

1. Accounting Practice SubprojectGovernment accounting implementation Computerized governmentin a number of agencies according to a accounting systems installedprogram to be determined after in 105 accounting offices insimulation 13 agencies in 12 provinces

2. Government Auditing

BEPEKAAuditors 1,600 with comprehensive 2,499 with comprehensive

training training

Development of audit Audit manuals developedmanuals

BPKP 35 projects on modern audit 36 projects on modern auditResearch and development met,iodologies and manage- methodologies and manage-

ment of control system ment control system

20 guidelines on the applica- 20 guidelines of the applica-tion of government auditing tion of government auditingstandards standards

The development of audit Audit manuals developedmanuals for each auditorganization

3. STANNumber of instructors holding doctoral 5 or more 2degrees

Number of instructors holding foreign 40 or more (25) 20master degrees

Number of diploma trainees 3,000 a/ 2,800

a/ Subject to government requirements .

- 15 -

Table 5: Key Indicators for Project Implementation (Cont'd)

4. Capital MarketNumber of companies with securities Over 50 261in the market

Daily transaction (securities traded) Over 20,000 Over 2,889 securities and4 million shares

Guidelines/circulars re financial 4 revised plus over 30 new 65 advisory notes, guidelines,reporting and securities issuance drafts circulars

Staff trained overseas in accounting, 50 48issuance, law and economics

Computerized data base of company In operation In operationreports

5. Private SectorNumber of IAI members Over 4,000 About 4,900

Additional Indonesian accounting 17 15principles

Additional Indonesian auditing standards 12 11

Compilation of code of ethics Completed Completed

Accounting Education Subproject

6. Higher EducationNumber of doctoral degree holders Over 30 19teaching in university accountingprograms

Number of foreign master degree Over 100 141holders teaching in university accountingprograms

Number of students enrolled in Over 8,500 225,701a)university S-1 accounting programs

Number of S-2 programs in accounting 2 3 b)

7. Secondary EducationProportion of SMA and SMEA accounting Over 90% 7,864 (total number notteachers trained in modern subject available)content

Number of students enrolled in SMEAaccounting stream: Public Over 100,000 81,268

Private Over 100,000 177,409Total Over 200,000 258,677

Number of schools using computers inaccounting institution: SMA Over 100 Over 100

SMEA Over 100 Over 150

- 16 -

Table 5: Key Indicators for Project Implementation (Cont'd)

8. Nonformal EducationNumber of institutions offering About 1,200 1,863accounting training

Number of participants in accounting Over 120,000 205,720training

Proportion of instructors in accounting Over 80% 18,950 (total number notwho have been trained in modern available)technique

a) The total number of SI accountancy students in 1993/94 is 69,599 students at public universities and156,103 at private universities.

b) These are University of Gajah Mada and University of Indonesia. There are two S2 programs at UGM(S2 regular and S2 for Maiiagement Accounting) and one S2 program at Ul in Management Accounting.

Table 6: Key Indicators for Project Operation

I. Key implementation indicators Estimated Actualin SAR/President's Report X

|1.2. Not applicable3.

II. Modified indicators (ifapplicable)

1.2. Not applicable3.

III. Other indicators (if applicable)

1.2. See Operational Plan3. attached

- 17 -

Table 7: Studies Included in Project

Study Purpose as defined Status Impact of studyat appraisal/redefined

Year`1989

1. The perception of top Management To assess the perception of Completed Increasing attention of organiza-towards internal auditing function organizations' top management tion towards the importance of

towards internal auditing internal audit functions

2. The implementation study of non To assess the management of Completed The availability of informationformal accounting education non-formal education related to non-formal education,conducted by society; A case study especially on managerial sidein the East Java Province

3. An evaluation of accounting educa- To evaluate the effectiveness of Completed Information on effectiveness oftion effectiveness at the Upper accounting education at the upper accounting education manage-Secondary Commercial Education; secondary commercial education ment in SMEAA case study in the East Java Prov. Completed Efforts to enhance accounting

education management in SMEA

4. The accounting approach for effi- To measure the efficiency rate of Completed Increasing understandingciency measurement; A case study the Government-Owned Company towards the accountingat the Government-Owned Compa- using the accounting approach approach in companiesnies (BUMN) in the East Java relating to efficiency

Year 1991

5. The experimental studies of finan- To know the impact of accounting Completed Information on the effects ofcial accounting practice toward the practice toward the students accounting practices onstudents understanding of the understanding of the financial students' level of understandingfinancial accounting materials accounting materials on financial accounting subjects

6. The importance of non accounting To assess the importance of Completed Information on the importance ofsubjects for the accounting non-accounting knowledge on non-accounting subjects that aregraduates on the job in Surabaya alumni's job as accountants important in job environment of(A Preliminary Study) accountants

7. Financial statements and the To assess the relationship of Completed Information about the existenceagency models agency theory on the formation of agency theory on the forma-

of financial statements tion of financial statement inIndonesia

8. Measument of accounting perform- To assess various performance Completed Information on various negativeance and negative impacts on the measurement at village unit impacts on management beha-behavior of village unit cooperative cooperatives and its negative viour as the result of accountingmanagement impact on management behaviour performance measureement

9. Qualification of accounting To assess users' opinion on the Completed Information on the needs ofpractitioners quality of accounting graduates users of accounting manpower

and users-percieved qualifica- that could be used as guidancetions in formulating and developing

accounting curricula

10. Perception of faculty members on To know the perception of Completed Information about opinions thatcurriculum aspects of accounting faculty memberes on accounting could be used as inputs fordepartments in Faculty of curricula formulating accounting curriculaEconomics: A Survey in Jakarta

- 18-

Table 7: Studies Included in Project (Cont'd)


11. Perception of accounting educators To assess perception of Completed Information on perception oftowards the quality accounting accounting educators on the qua- accounting educators on S-1higher education curricula lity of S-1 accounting education accounting education useful

for decision making

12. The effects of accounting education To assess the relationship Completed Information of relationshipat SLTA on the success of univer- pattern between accounting pattern of education at SLTAsity accounting students education at SLTA with the with education system at univer-

success of accounting students sity

13. Comparative study on the quality of To assess the comparative qua- Completed Information about the differencesaccounting students in State and lity of accounting students in or similarities in the quality ofPrivate Universities state and private universities students in state and private

universities

Year 1992

14. Organization and strategy for Completed Leading to study of organizationInstitute of Accountants of and structure for STAN.Indonesia for years 1990 to 1994 Recommendations under consi-

deration by MOF.

Year 1993

15. Study of legislation/regulations Framework for the Regula- Completed Study completed and distributedtion of Corporate Financial to EKKU. Law passed by Palia-Reporting ment. EKKU is preparing regu-

lation.

16. Study of Practice of old and new Draft Bill of New Indonesian Completed Study complete and distributedsystems Accountants Act to replace Act to MOF and IAI. Draft Bill requires

of 1954 proposal for draft legislation

17. Study of computerized Govern- Completed Leading to study of Informationment Accounting System Technology for MOF. Included in

BAKUN and BAPEKSTA compo-nents in Secound AccountancyDevelopment Project.

Year 1994

18. Tracer study of SMEA accounting To get information whether the Completed Information whether graduatesgraduates in the East Indonesia graduates have been working have been working in the job

relevant with their field of study relevant to their education

19. Tracer study of SMEA accounting To get information whether the Completed Information whether graduatesgraduates in the Central Indonesia graduates have been working have been working in the job


20. Tracer study of SMEA accounting To get information whether the Completed Information whether graduatesgraduates in the West Indonesia graduates have been working have been working in the job


- 19-



21. Tracer study of S1 accounting To get information whether the Completed Information whether graduatesgraduates in the East Indonesia graduates have been working have been working in the job

relevant with their field of study relevant to their education andTo assess the position of their positionsgraduates

22. Tracer study of D3 accounting To get information whether the Completed Information whether graduatesgraduates in the West Indonesia graduates have been working have been working in the job


23. Tracer study of S1 accounting To get information whether the Completed Information whether graduatesgraduates in the West Indonesi. graduates have been working have been working in the job


24. Tracer study of D2/D3 accounting To get information whether the Completed Information whether graduatesgraduates in the East Indonesia graduates have been working have been working in the job


25. Tracer study of S1 accounting To get information whether the Completed Information whether graduatesgraduates in the Central Indonesia graduates have been working have been working in the job


26. Tracer study of D2/D3 accounting To get information whether the Completed Information whether graduatesgraduates in the Central Indonesia graduates have been working have been working in the job


27. Study on Communication Skills of To asses the level of communi- Completed Information of level of communi-the accounting graduates cation sikils of accounting cation

graduates and the relevancy oftheir field of study

28. Study of CAAD logistics CAAD strategic study for years Completed Two strategic studies completed1990 to 1994 for years 1990 to 1994 and

years 1994 to 2000

29. Manpower study Manpower Study of Supply and Completed Study complete and distributedDemand of Accountants to MOF, MOEC and private

sector (IAI)

30. Organization and strategy for Completed Two comprehensive strategicInstitute of Accountants of studies completed for yearsIndonesia for years 1990 to 1994 1990 to 1994 and years 1994 to

2000 and distributed to IAI

- 20 -



31. MIS Feasibility Study Development of Audit Manage- Completedment Information System forBPKP

32. Standardization of Accounting To issue a manual for securities CompletedPractices and Operation Proce- companies operations in Indonesiadures

33. Investment Funds Operations To issue a manual for investment Completedfund management in Indonesia

34. Study of Taxation in relation to Development of regulations for Completedfinancial statements income tax in securities exchange

transaction

35. Study of provisions related to Preparation and modification of Completedsecurities issues provisions for securities issues

and accounting

36. Studies of proposed structure and To propose alternative organi- Completedactivities for STAN zational structures for STAN

1995

37. Evaluation of Impact of Government To measure the inpact of project CompletedAudit Component of the Account- implementation on effectivenessancy Development Project on Gov- and efficiency of Governmenternment Audit Function audit operation

38. Evaluation of Impact of Government To measure the effectiveness of CompletedAccounting Modernization Government accounting moderni-

zation component

39. Evaluation of Overseas Fellowship To evaluate the impact of overseas CompletedReturnees fellowship graduates to partici-

pating agencies

40. Evaluation of Overseas Graduate To know the effectiveness of Completedand Short-Term Programs Returnees overseas fellowship program, to

compile a masterlist and evaluatethe effects of overseas degreeand short-term programs

- 21 -

Table SA: Project Costs

|___________________________________ Appraisal estimate (US$M) ActuaV/latest estimate (US$M)

Item Local Foreign Total Local Foreign Totalcosts costs costs costs

1. Civil works 3.3 0.8 4.1 - - -

2. Equipment & Furniture 1.8 12.4 14.2 2.4 16.5 18.93. Books & instructional materials 5.4 6.3 11.7 8.7 10.1 18.84. Specialist services 12.3 16.2 28.5 11.1 14.6 25.65. Overseas fellowships and training 1.0 18.5 19.5 1.4 26.3 27.76. In-country training 25.7 8.4 34.1 24.2 7.9 32.17. Institutional/students loans 1.6 2.4 4.0 1.1 1.7 2.88. Incremental operating costs 25.1 4.8 29.9 4.9 0.9 5.89. Physical contingencies 4.0 4.1 8.1 - - -

10. Price contingencies 7.8 2.6 10.4 - - -

Total project costs 88.0 76.5 164.5 53.8 77.9 131.7

Table BB: Project Financing

Appraisal estimate (US$M) ActualAlates estirmate (US$M)

Source Local Foreign Total Local Foreign Totalcosts costs costs costs

1. IBRD/lDA 60.4 52.6 113.0 39.7 63.7 103.42. Domestic contribution: Govemment 27.6 23.9 51.5 14.1 14.2 28.3

Total 88.0 76.5 164.5 53.8 77.9 131.7

Table 9: Economic Costs and Benefits

An economic rate of return was neither estimated for the Accountancy Development Project at the time ofappraisal nor calculated after its close. Estimates of the ERR to investments in the retraining of civil servants(represents more than 45 percent of project costs), for instance, would be very difficult to make.

However, as most of project targets have been achieved, and in some cases even exceeded appraisal targets,there is a strong indication that the project has been implemented in a cost-effective manner.

- 22 -

Table 10: Status of Legal Covenants

Agreement Section Covenant Present Original Revised Description Commentstype status fulfillment fulfillment of covenant

date date

Loan Sch.5, Para. 1(a) 5 c 12131188 Prepare and submit for Bankreview by Dec. 31, 1988.A detailed proposed programfor implementation of Govt.Accountancy Modemization

Sch.5, Para. 1(b) 5 c 12/23/88 Maintain CAAD with appro-priate staffing

Sch.5, Para. 1(c) 5 c 12/31/88 Maintain MOF, MOEC PlUs

Sch.5, Para 1(d) 10 c 04/01/89 Monitor Project Implementation

Sch.5, Para 1(e) 9 c 06/30189 Provide semi-annual progressreports

Sch.5, Para. 1(f) 9 c 10/31/88 Prepare and submit for Bank N.A. for 1995/review by Oct. 31st each year 96.a proposed plan for project Loan closingactivities and associated June 30,1995budget requirements for thenext fiscal year

Covenant Full Text of General Covenant ClassificationType

i. Accounts/audit2. Financial performance/generate revenue from beneficiaries3. Flow and utilization of Project funds4. Counterpart funding5. Management aspects of the Project or of its executing agency6. Environmental convenants7. Involuntary resettlement8. Indigenous people9. Monitoring, review and reporting10. Implementation11. Sectoral or cross-sectoral budgetary or other resoIrce allocation12. Sectoral or cross-sectoral regulatory/institutional action13. Other

Status: C - Complied withCD - Compliance after DelayNC - Not Complied withSOON - Compliance Expected in Reasonably Short TimeCP - Complied with PartiallyNYD - Not Yet Due

Table 11: Compliance with Operational Manual Statements

Statement number and title Describe and comment on lack of compliance1.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

2. NONE

3.

- 23 -

Table 12: Bank Resources: Staff Inputs

Stage of project cycle Planned Revised Actual

Weeks US$000 Weeks US$000 Weeks US$000

Preparation to appraisal NA NA NA NA 99.3 271.4

Appraisal NA NA NA NA 22.1 60.1

Negotiations through NA NA NA NA 11.5 30.9

Board approval _ _

Supervision NA NA NA NA 134.8 379.4

Completion 11 8 11 8 3.4 1.5

TOTAL NA NA NA NA 271.1 743.3

NA: Not Available Source: COSPCR

Table 13: Bank Resources: Missions

Performance ratingStage of Month/year Number of Days in Specialized Implementation Development Types of

project cycle persons field staff skills status objectives problemsrepresented

Through appraisal

Appraisal throughBoard approval

Supervision Nov-88 2 15 - Economist 1- Operations

Jul-89 2 25 - Economist 2 1 Project- Operations management

Nov-89 3 17 - Economist 2 1 Implementation- Operations delay- Public Acctg.System Spec.

Mar-90 3 12 - Operation 3 2 Project- Operation management- Accountancy

Nov-90 3 15 - Operations 3 2 Project- Proj. Econ. management- Training Spec.

Mar-91 2 25 - Proj. Econ. 3 2 Project- Operation management

Nov-Dec-91 3 25 - Proj. Econ. 2 2 Project-Accountancy management-Training Spec.

Jul-Aug-92 1 23 - Proj. Econ. 1 2

Apr-93 2 13 - Training Spec. 1 2- Accountancy

Feb-Mar-94 1 16 - Training Spec. 2 2 Implementationdelay

Feb-95 2 3 -Training Spec. S S- Operation

Completion Jul-95 2 13 - Operation S S- Training Spec.

- 24 -

REPUBLIC OF INDONESIAWORLD BANK

FINAL SUPERVISION AND PREPARATION OFIMPLEMENTATION COMPLETION REPORT

ACCOUNTANCY DEVELOPMENT PROJECT (LOAN 2940-IND)JULY 1995

AIDE MEMOIRE

1 Introduction

A World Bank Team consisting of Messrs. Kunrat Wirasubrata (Operations Officer/TeamLeader) and Basilius Bengoteku (Operations Officer/Training Specialist) conducted the final supervisionand preparation of Implementation Completion Report (ICR) of the Accountancy Development Project(Loan 2940-IND) from July 3 to 19, 1995. The Team held discussions with officials of the Ministry ofEducation (DG Higher Education, DG Basic and Secondary Education and DG Non-Formal Education,Accounting Development Centers of the Universities of Airlangga, Brawijaja, Indonesia, and SumateraUtara), Ministry of Finance (BAKUN, BAPEPAM, DG Financial Institutions, DG Budget, BPLK/STAN), BEPEKA, BPKP, and the Chairman of the Indonesian Institute of Accountants. The Teamacknowledges with thanks the courtesies and co-operation extended to it by the Government of Indonesiaand its agencies. A list of people met by the Team is given in Annex 1. This aide memoire summarizesthese discussions and the Team's findings which were discussed with the implementing agencies in awrap-up meeting held on July 28, 1995.2'

2 2he Project

The project comprises three components, each with its own Project Implementation Unit; theAccounting Practice Subproject, under the Ministry of Finance (MOF), the Accounting Education andTraining Subproject, under the Ministry of Education and Culture (MOEC), and the AccountingPlanning, Monitoring and Evaluation Subproject, under the Coordinating Agency for AccountingDevelopment (IKPA). The objectives of the project are to improve accounting practices in the public andprivate sectors and to support government program to raise the quality of accounting education as well asto expand accounting education and training.

3 General Status of Implementation as of Closing Date

All subprojects have largely completed implementation. Ten doctorate degree fellows (nineMOEC and one MOF) remain to complete their studies in overseas universities and other sources offunding are being sought by respective implementing agency. The implementing agencies have also beeninformed that no further commitments under the loan agreement can be made after June 30, 1995.Disbursements will continue into the 4-month grace period, i.e. up to October 31, 1995. Total amountwithdrawn from the loan account after all disbursements are made will be $106.45 million leavingunutilized balance of $6.55 million to be canceled. Annex 2 provides a financing summary of each

2/ Views expressed in this aide-memoire are those of the Team and do not necessarily reflect the views of theWorld Bank, and are subject to review by the World Bank management.

- 25 -

subproject. No audit report outstanding but the project is still required to submit audit report for theperiod of April 1994 - March 1995 (now being audited) and April 1995 - October 1995. Finalimplementation progress reports of the three subprojects which contain detail quantitative information onproject performance are available in the project file.

4 Preparation of Implementation Completion Report (ICR)

The Team received the necessary data and reviewed the project implementation covering, interalia, the aspects of project design, implementation planning, organization and costs, loan disbursement;project development impact, economic benefits, and sustainability. The Team also provided advice as topreparation of Government contribution to the ICR and establishment of operational plan. The Teampaid special attention to: the functioning of the accounting systems, efficiency of audit operations inBEPEKA and BPKP, quality of course delivery in and management of STAN, and the role of LAI as aprofessional association; expansion of accountancy education and training, supply of qualified accountingprofessionals, and improvement of the management of accountancy education. A summary of projectperformance is attached as Annex 3 of this aide memoire. MOF, MOEC and TKPA have been apprisedof the preliminary findings of this review which, in summary, are:

4.1 AccountingPractice Subproject

Tlere are no remaining activities as of June 30, 1995. All procurement have been completed.Disbursement up to the amount of $0.5 million will extend into the 4-month grace period for paymentstoward purchase of miscellaneous softwares, specialist services, and overseas fellowship. Whendisbursement is completed, total withdrawn amount will reach $43.83 million and will leave a balance of$0.68 million to be canceled. One doctorate degree fellow cannot complete his study in the UK before theclosing date; alternative sources of financing is being sought by BPKP but no positive result has beenidentified.

4.1.1 GovernmentAccounting Modernization

The four main accounting subsystems, known as GAS R. 1, have been introduced and are partlyimplemented. BAKUN has established 7 regional offices (KARs) to capture accounting data of 13government departments in 12 provinces (5 others were added when this report was being prepared).Complete balance sheet reporting has not been implemented since the necessary supporting modules(fixed assets, investments and liabilities) are still to be developed under the second loan (GAS R.2).

The Team observed that lack of timeliness in reporting is a major constraint in implementing thesystems3'. Also, under the present implementation plan the systems will not be able to generate accountingreports that can be used as a basis for sound economic decision making until they are installed in all the27 provinces and in all government departments which is expected to happen in year 2000. The Teamrecommends that an alternative approach be considered whereby all the 31 budget units (Bagian

3/ A consultant report mentions that average time needed for document prooessing in 4 KARs in 1994 was 171days.

- 26 -

Anggaran)4' are covered in implementation in the existing provinces so that KARs can generate aconsolidated province-level report as an immediate benefit of the project.

With regard to systems maintenance, BAKUN and its KARs need to strengthen their technicalcapability so that reliance on consultants can be minimized and quick-response capacity increased. Also,the Team noticed insufficient operational/routine budget in BAKUN regional offices that may lead tosubstandard performance.

One-hundred-and-five agencies' regional accounting units (UAWs) of 13 governmentdepartments have been established in 12 provinces. Each unit is equipped with project-supplied PC andhigh speed dot matrix printer. The Team observed that the equipment is used 2-3 hours per month onlyfor printing BAKUN-generated ledgers. It is recommended that alternative methods be devised to bringthe equipment to full utilization. The Team also noted that establishment of UAW is a low cost activityand requires less than one staff-month per month to operate; on this basis, it is recommended thatBAKUN launch more promotion to encourage participation of the remaining government departments.

4.1.2 Government Auditing

The implementation of BEPEKA and BPKP components proceeded as planned and no remainingactivities as of June 30, 1995. BEPEKA, through self-managed activities, has developed 47 auditguidelines and a government audit standard. The standard, which is modeled after the US GeneralAccounting Office Audit Standards of 1994, is to be distributed during 1995/96 budget year and isexpected to be in effect as soon as possible. As regards BPKP, 20 audit guidelines have been developedand are ready for distribution to all BPKP offices, Inspectorates General, and Functional SupervisoryUnits of regional governments (APF). In-country and overseas staff training have a significantcontribution to enhancement of efficiency and effectiveness of audit operations in both agencies. Theagencies have also developed own training manuals and BPKP is actively engaged in provision of trainingof auditors both for internal as well as external clients.

4.1.3 Government Education and Training (STAN)

MOF's school of accounting (STAN) has substantially achieved the project targets and noremaining activities were in progress at the closing date. Number of overseas degree holders in STANfaculties (20) is still short of targeted (25) but this is due to administrative arrangement between STANand BPKP. Under the project, the school has also provided accounting and auditing training to more thanten thousand employees of government agencies and state-owned enterprises. Based on the argument thatthe capacity of accounting education in public and private universities has expanded, the Team wasinformed that STAN's present role as degree-granting institution may shift to become purely in-servicetraining agency of the MOF.

4/ Bagian Anggaran (BA) is central level government department which has budget authority. There are 31BAs each of which does not necessarily have an operation in every province. A consolidated provincial-level accounting report is expected to capture accounting data of all BAs so that actual flow of financialresources from central government to the provinces can be accurately reported. The Team was informed,however, that a special computer program needs to be added to GAS R. 1 to enable it to generate suchreports and that GAS R 1 is not yet able to capture foreign-funded portion of government expenditure. Inany case, changes and additions should only be made with GAS R2 in mind.

- 27 -

4.1.4 Capital Market

BAPEPAM achieved and exceeded all project targets. The capital market authority is representedin the IAI's committee of standards and contributed to the formulation of the Indonesian FinancialAccounting Standards which were put in effect in October 1994. Given the favorable economic conditionin the early 1990s, market confidence in the capital market has been strengthened as indicated by numberof companies listed, 261 compared to the targeted 50. Two employees have returned from overseasmaster's degree education and have received internal promotion. Forty-eight employees have attendedvarious capital market related courses/training in foreign countries (mainly in the US) and have added toBAPEPAM's capacity to supervise the capital market, enforce capital market regulations, carry outresearches, and evaluate disclosure documents of listed companies.

4.1.5 Private Sector

The component has substantially achieved all the targeted project outcomes. It has developed 15accounting principles, 11 auditing standards, I accounting/auditing research, 4 accounting/auditingtraining materials, and 1 accountants code of ethics. A total of 35 financial accounting standards havebeen issued and made effective in October 1994. A codification of auditing standards has also beenissued. However, as a professional association, IAI still needs to strengthen its presence among membersand to reduce reliance on Government support. Currently, less than 10 percent of members paysmembership due regularly. Further works in the sector, including recruitment of a permanent executivedirector and preparation of professional qualifying examination, will be financed by the second loan.

4.2 Accounting Education and Training Subproject

The implementation of this subproject has been largely completed except for nine doctoratedegree fellows who cannot complete their studies before June 30, 1995. Other funding sources are beingsought to finance the cost of study; if alternative sources cannot be identified DGHE, together with thehome universities, has agreed to take over the responsibility for providing sufficient financial support tothese fellows. Disbursement will extend into the 4-month grace period and when completed will leave anunutilized balance of $4.03 million to be canceled.

4.2.1 Accounting Education in Higher Education

As targeted three new accounting development centers (ADC) have been established at the Universitiesof Padjadjaran, Airlangga and Brawijaya. Utilizing overseas degree program returnees in respective ficulty ofeconomics, the centers are in high demand by outside institutions, public as well as private, for consultingservices, studies/research, and degree and non-degree accounting training including training of SMA andSMEA accounting teachers under the project. Centers at universities of Indonesia, Gajah Mada and Airlanggaare embarking on to more commercial activities.

Overseas degree program returnees (141 compared to the targeted 100) also contribute to thedevelopment of accounting departments in other public universities (through cascade approach) as well as inprivate ones. However, due to difficulties in finding qualified candidates, the component has been unable tomeet the target for doctorate degree program participants. Fifteen Ph.D. candidates, compared to the targeted30, have finally been sent to US and Austalian universities. Eight of these are fromn Gadjahmada Universityand are projected to join the teaching faculty in the university's Ph.D. programn in accounting to be started in

- 28 -

1996. In addition to overseas taining, domestic master's degree training was also provided to 100 accoutnglecturers from public and pnvate universiftes. Data as of closig date indicate that about one-fifth of mastrsdegree graduates, both overseas and domestic, originated from private universities.

In terms of student enrollment, all six leading public universites note very high aspirton among thestudents to study accounting. This has led the universities (except University of Indonesia) to limit accouingstudent enrllment in their faculties of econonucs to a third of total student body. The Team considers thispolicy needs revisiting to ensure that it does not imply a negatve effect on supply of qualified accountant.

During implementation, the subproject took over administion of the national accountig examiation(UNA) from the Economics Consortium and held 24 UNAs for 8,017 accounting graduates of unaccrediteduniversities. The subproject provided 15,750 copies of textbooks and 720 copies of journals to 18 faculties ofeconomics and distributed more than 1,000 computers and their allied equipment to the same ficulties ofeconomics and 10 IKIPs.

4.2.2 Accoundng Educcion in Secondary Education

The project provided 2,000 computers and their peripherals, 32,000 calculators, and furniture for useby 140 SMEAs. Three months overseas training for 64 accounting teacher supervisors were also provided and45,000 teacher manuals have been distributed. Through in-country training, more than 4,500 SMEAaccounting teachers have now been trained in computer accounting. Also, in meeting the need for accouningteachers of SMEA in off-Java areas, 250 IKI graduates have been recruited.

Another 2,000 computers and their peripherals have been distributed to 100 selected public SMAs. Athe-month overseas training in accounting teaching and curriculum development has been provided for 58SMA accountig teacher supervisors. In-country teachers training were given to more than 2,300 teachers. Theproject also distributed 300,000 copies of student book and developed 200 accounting books.

Quality control in delivery of computers to beneficiary schools, however, appears to beinadequate. There are schools which received defective computers and were unable to get replacements.

While teachers and teaching improvement targets have been achieved very substantially during projectimplementation, time allocation for accounting class in SMA has been minimal. The new SMA and SMEAcurrcula which accommodate sustainability of the achievements, and allow more time for SMA accountingclass, will be effective only in academic year 1995/96 and, therefore, the project missed the opportunity toassess the real classroom impact.

4.2.3 NonformalAccounting Training

The project trained more than 18,000 accounting instructors. Training for trainers was alsoprovided to 175 trainers who are expected to train course managers/owners; the same number of trainingfor exam writer trainers and 105 training for exam grader trainers were also provided under the project.Through cascade approach the graduate of these training trained 741 course owners, 9,000 exam writersand 5,400 exan graders. The project also supported development of 179 accounting modules, 5 technicalguidance books, and 25 teacher modules.

Under the category of institutional and student loans the project allocated $ 2.8 million to supportstudents and private training institutions. As of closing date, the whole fund has been channeled to 10,645students and 752 institutions. However, administration arrangement in DIKMAS appears inadequate and

-29 -

does not allow appropnate monitoring of performance; no accurate information on collection rate, forinstance, was available. The Team was informed that dunng initial stage of implementation DIKMASwas not supported by operational budget to manage the activity. The Team recommends that MOECinvestigate the actual results of this activity.

5 Accounting Planning, Monitoring and Evaluation Subproject (CAAD/I'XPA)

This subproject was not included in the June 1994 extension and no further activities weresupported by the loan after June 30, 1994. About $1.3 million will be canceled from this subproject.CAADITKPA managed to produce studies, seninars and conferences on the supply of accountingmanpower, organization of IAI, strategy for STAN development, new accountants act, framework for theregulation of corporate financial reporting, and computerized government accounting system.CAAD/TKPA continues to function under the support of MOF particularly in maintaining a libraryprocured under the project. In this regard, the Team would like to reiterate the previous supervisionmissions recommndation that the books and equipment be donated or lent to another institution forwhich operating a library would be more appropriate and where access could be increased. BPLK(MOF's Training Institute) and BPKP's Training Center have expressed their interest in obtaining suchbooks and equipment.

6 Operational Plan and Borrower's Contribution to ICR

A plan was reviewed with MOF for the operational phase of the Accounting DevelopmentProject. The plan indicates that all subprojects are dependent on external financing for the sustainabilityof their achievements. Of the implementing agencies, only BAKUN, BAPEPAM and the private sector(through MOF) are supported by the Second Accounting Development Project (Loan 3801-IND). In allimplementing agencies, the Team also sees a clear indication of limited funding to finance operations andmaintenance of facilities that were built up during project implementation. A copy of the plan is attachedunedited as Annex 4 to this aide memoire. MOEC expects to complete its operational plan by end ofAugust.

The Team has given the Borrower a one-page guidance for preparation of Borrower'scontribution to the ICR. The guidance is attached as Annex 5 to this aide memoire.

7 Schedules for ICR Preparation

The Bank will send the draft ICR to the Borrower by October 27, 1995. Comments from theBorrower is expected to be received by October 30, 1995 and Borrower's contribution to the ICR isexpected to be received by October 30, 1995. The Bank will incorporate the Borrower's comment andissue the ICR by December 31, 1995. Earlier dates will be preferable both to the Bank and the Borrower.

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Distribution:

Messrs./Mmes.: CheeTbam, Kohli (EAPVP); Messenger (ASTDR); Piccioto (D)GO); Kopp (OED);Amoako (HRODR); Iskandar (PSDDR); El-Ashry (ENVDR); Nordlaner (LEGEA);Yu (LOAAS); Verspoor (ESP) Haug, Calkdns (EA3DR); Chhibber, Iqbal,Ramaswami (EA3CO); Kennefick (ASTTP) Mardnez, Masuda, Sayed, Clark(EA3PH); de Tray, Raza, Bengoteku, Prasta (EA3RS)

- 31 -

AnexlACCOUNTANCY DEVELOPMENT PROJECTPROJECT EXPENDITURE BY CATEGORY

Appraisal Estimates (as revised) Actual/Latest EstimatesNo. Category GOI Fin. 1lBRD Fin. Total |GOI Fin. lIBRD Fin. |Total GOI Fin. [lBRD Fin. |Total GOI Fin. |IBRD Fin. Total

Rupiah billion US$ million Rupiah billion US$ million

1 Equipment and Furniture 6.83 27.13 33.96 3.54 16.51 20.05 6.42 21.25 27.67 3.23 15.69 18.92

2a Development Instruction Material 6.91 11.38 18.29 3.54 6.93 10.47 6.91 14.15 21.06 3.54 7.43 10.97

2b Book and Instruction Materials 13.61 13.61 - 8.17 8.17 - 14.27 14.27 - 7.86 7.86

3 Specialist Services 6.59 39.72 46.31 3.38 23.22 26.60 6.67 7.60 14.27 3.43 22.20 25.63

4 Overseas Fellowship and Training 0.50 46.46 46.96 0.30 27.87 28.17 - 24.61 24.61 - 27.70 27.70

5 In-countly Training 15.58 40.50 56.08 8.21 25.03 33.24 18.15 34.98 53.13 9.20 22.87 32.07

6 Institutional and Student Loans - 4.62 4.62 - 3.00 3.00 - 5.46 5.46 - 2.80 2.80

Project Operating Costs 27.80 - 27.80 16.90 - 16.90 8.20 . 8.20 4.16 - 4.16

Unallocated 2.10 2.51 4.61 - 2.28 2.28 - - - - - -

66.31 185.93 252.24 35.88 113.00 148.88 46.35 122.32 168.67 23.56 106.45 130.11

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Annex 1

ACCOUNTANCY DEVELOPMENT PROJECTPROJECT EXPENDITURE BY CATEGORY

SUBPROJECT: GOVERNMENT ACCOUNTING PRACTICE

Appraisal Edtimates Actual/latest Estimates

No. Categoiy Ga IBRD Total GOI IBRD Total GOM IBRD Total GOI Fin. IBRD otalFin Fin. Fin. Fin. Fin. Fin. _Fin.

Rupiah billion USS million Rupiah billion USS millionI Equipment and Fumiture 0.90 8.00 8.90 0.50 4.90 5.40 0.39 0.39 0.19 4.74 4.932a Development Instruction Material 0.30 0.30 0.20 0.20 - 0.17 0.17

2b Book and Instruction Mdertals 0.80 0.80 0.50 0.50 - - - 0.54 0.54

3 Specialht Services - 30.20 30.20 - 18.00 18.00 0.08 0.08 0.05 18.35 18.404 Oversees Fellwhip and Training 0.50 25.20 25.70 0.30 15.30 15.60 - - - 15.03 15.035 hn-country Training 2.30 7.80 10.10 1.40 4.70 6.10 4.77 4.77 2.39 4.94 7.33

Project Operating Codt 21.10 - 21.10 12.80 - 12.80 4.50 4.50 2.26 - 2.26

Unallocated 2.10 1.40 3.50 - 0.90 2.20 - - - - - I

26.90 73.70 100.60 16.30 44.50 60.80 9.74 - 9.74 4.89 43.77 48.66


SUBPROJECT: ACCOUNTING EDUCATION AND TRAINING

Appraisal Estimates ActualLatest Estimates

No. Category GOI IBRD Total GOI IBRD ITotal GOI |IBRD Ttal GOI IBRO I TotalFin. Fin. _ Fin. Fin. Fin. Fin. Fin. Fin.

Rupiah billion USS million Rupiah billion USS millionI Equipment and Fumiture 5.93 18.93 24.86 3.04 11.47 14.51 5.93 21.15 27.08 3.04 10.85 13.892a Development lnstnrction Material 6.91 11.08 17.99 3.54 6.72 10.26 6.91 14.15 21.06 3.54 7.26 10.802b Book and Instruction Materiais - 12.51 12.51 - 7.58 7.58 - 14.07 14.07 7.22 7.223 SpecIalid ServIes 6.59 5.42 12.01 3.38 3.29 6.67 6.59 4.00 10.59 3.38 2.05 5.434 Overseas Flkwship and Training - 20.76 20.76 - 12.58 12.58 13.28 24.51 24.51 - 12.57 12.575 In-countryTraining 13.28 32.50 45.78 6.81 19.70 26.51 13.28 34.58 47.86 6.81 17.73 24.546 Insitutional & Student Loans - 4.62 4.62 2.80 2.80 - 5.46 5.46 - 2.80 2.80

Unallocated - 0.61 | 0.61 - | 0.371 0.37 - |- - - |

32.711 106.431 139.14 16.771 64.511 81.28 32.711 117.921 150.63 16.771 60.481 77.25


SUBPROJECT: ACCOUNTING PLANNING, MONITORING AND EVALUATION

Appraisal Estimates ActuaLaest Estimates

No. Category GOI IBRD Total GOI IBRD Total GOI IBRD Total GOI IBRD I TotalFin. Fin. Fi . Fin. Fin. Fin. Fin. Fin.

Rupiah billion USS million Rupiah billion USS million

I Equipment and Fumikure - 0.20 0.20 - 0.10 0.10 0.10 0.10 0.20 - 0.10 0.102a Development Instruction Material - - - - - - - -

2b Book and Instruction Materials 0.30 0.30 - 0.20 0.20 - 0.20 0.20 - 0.10 0.103 Specialist Serces - 4.10 4.10 - 2.50 2.50 - 3.60 3.W6 - 1.80 1.804 Overseas Felblwhip and Training - 0.50 0.50 - 0.30 0.30 - 0.10 0.10 - 0.10 0.10

5 In-country Training - 0.20 0.20 - 0.10 0.10 0.10 0.40 0.50 0.20 0.20Project Operating Codse 6.70 0- 670 4.10 - 4.10 3.70 - - 1.90 - 1.90Unallocated - 0.50s 0.50s -| 0.301 0.301 - | I | | -

6.70 5.80 12.50 4.10 3.50 7.60 3.90 4.40 8.30 1.90 2.20 4.20

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Annex 2

INDONESIAACCOUNTANCY DEVELOPMENT PROJECT

Project Outcome Indicators

Outcomes as ofBase 1987 SAR Target June 1995

Accounting Praadice SubDroie

220 Government accounting implementation in a Computerizednumber of agencies according to a program to be governmentdetermined after simulation accounting

systems installedin 105accountingoffices in 13agencies in 12provinces

240 Government Auditine

BPKAuditors 1,100 with 1,600 with 2,499 with

modest training comprehensive comprehensivetraining training

Development of audit manualsaudit manuals developed

BPKPResearch and Development Less than 10 35 projects on 36 projects on

projects modern audit modern auditmethodologies methodologiesand manage- and managementment of control control systemssystem

S modest 20 guidelines on 20 guidelines onguidelines the application the application of

of government governmentauditing auditingstandards standards

Modest audit the development Audit manualsmanuals of audit manuals developed

for each auditorganization

STANNumber of instructors holding doctoral degrees None 5 or more 2

Number of instructors holding foreign master Less than 55 40 or more (25) 20degrees

Number of diploma trainees About 600 3,000 2,800

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/a Subiect to govermnent requirementsOutcomes as

Base 1987 SAR Target of June 1995

270 Capital Market

Number of companies with securities in the Less than 30 Over 50 261marketDaily transactions (securities traded) Less than 5,000 Over 20,000 Over 2,889

securities andver 4 millionshares

Guidelines/circulars re financial reporting and 4 4 revised plus 42 advisorysecurities issuance over 30 new notes,

drafts guidelines,circulars

Staff trained overseas in accounting, issuance, 11 50 48law and economicsComputerized data base of company reports None In operation In operation

280 Private Sector

Number of LAI members About 2,000 Over 4,000 About 4,900

Additional Indonesian accounting principles 17 15

Additional Indonesian auditing standards 12 11

Compilation of code of ethics Completed Completed

Accounting Education SubDroject

320 Hieher Education

Number of doctoral degree holders teaching in Under 10 Over 30 19university accounting programs

Number of foreign master degree holders About 30 Over 100 141teaching in university accounting programs

Number of students enrolled in university S-1 About 6,000 Over 8,500 225,701s)accounting programs

Number of S-2 programs in accounting 1 2 3 b)

Number of institutions offering S-2 program 1 2 2 b)

330 Secondary Education

Proportion of SMA and SMEA accounting Under 20% Over 90% 7,864 (totalteachers trained in modem subject content number not

available)Number of students enrolled in SMEAaccounting stream: Public Under 80,000 Over 100,000 81,268

Private Under 70,000 Over 100,000 177,409Total Under 150,000 Over 200,000 258,677

Number of schools using computers inaccounting institutions: SMA Less than 20 Over 100 Over 100

SMEA Less than 20 Over 100 Over 150

- 35 -

Outcomes asBase 1987 SAR Target of June 1995

340 Non-Formal Education

Number of institutions offering accounting About 750 About 1,200 1,863trainingNumber of participants in accounting training About 100,000 Over 120,000 205,720Proportion of instructors in accounting who Less than 10% Over 80% 18,950 (totalhave been trained in modem techniques number not

I____________________________ _ I__ I__ available)

a) The total number of Si accountancy students in 1993/94 is 69,599 students at public universities and156,103 at private universities.

b) These are UGM and Ul. There are two S2 programs at UGM (S2 regular and S2 for ManagementAccounting) and one S2 program at UI in Management Accounting.

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Annex 3

OPERATIONAL PLANS: ACCOUNTING PRACTICE

GOVERNiMENT ACCOUNTINGGOVERNMENT AUDITING

CAPITAL MARKETPRIVATE SECTOR

GOVERNMENT EDUCATION AND TRAINING

As requested by the World Bank ICR mission on June 30, 1995, this report describes plans forgovernment accounting, capital market, private sector, government auditing, government education and trainingafter completion of the Accountancy Development Project.

The recommendations arising from an extensive organizational study of STAN in 1993, and a detailedfeasibility study of a management information system for BPKP are reflected in this report.

In 1994, in response to the World Bank request for a strategic plan, each component prepared astrategy which is included in "The Comprehensive Strategy for Accountancy Development in Indonesia 1994 to2000" and reflected in this report.

In 1995, in line with the World Bank request for evaluation of selected project components, impactevaluations were conducted for Government Accounting, Government Auditing, and overseas degree and shortcourse programs with respect to BAPEPAM, BEPEKA, BPKP and STAN. Recommendations arising fromthese evaluations are reflected in this report.

Government Accounting

The Second Accountancy Development Project which commenced in December 1994 includes thecomponent for goveniment accounting which will be implemented by Badan Akuntansi Keuangan Negara(BAKUN). The GAS will operate in 27 regions in 31 agencies, 9 new RCAFOs and 653 agency accountingoffices will be established and 1200 agencies personnel will be trained. Attached are performance indicators intwo subcomponents for (1) overseas training, and (2) technical assistance for BAKUN.

Government Auditing - BEPEKA

An evaluation of the impact of government auditing was conducted and recommendations describedbelow were made with respect to Badan Pemeriksa Keuangan (BEPEKA).

* BEPEKA should continue with in-country training for auditors and should give consideration toseeking funding through BAPPENAS for a Professional Human Resources Development Projectfor further training for auditors, both in Indonesia and overseas.

* BEPEKA should give consideration to performing an internal evaluation of the impact on the auditfunction within one year of distribution of the guidelines and standards which were preparedduring the first project.

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GovenmnAuditng - BPKP

The evaluation of the impact of government auditing was conducted and reonmendations describedbelow were made with respect to Badan Pengawasan Keuangan dan Pembangunan (BPKP).

* BPKP should continue to seek the fimding necessary for the implementation of managementinformation system and its relevant training.

BPKP should consider seeking funding for in-country training particularly for courses in StateFinancial Auditing and Computer Audit.

* BPKP should give consideration to performing an intenal evaluation of the impact of guidelinesthat were prepared and printed during the first project.

* BPKP should give consideration to the follow up on the findings from the Evaluation Report onthe Training Program to ensure continuing quality of training and training naterials.

Capital Market

The Second Accountancy Development Project which commenced in December 1994 includes thecomponent for capital market rule making and supervision which will be implemented by Badan PengawasPasar Modal (BAPEPAM). Attached are performance indicators in two subcomponents for (1) overseastraining, and (2) technical assistance for BAPEPAM.

Private Sector

The Second Accontancy Development Project which conuneced in December 1994 includes thecomponent for standard setting and accountant development which will be implemented by Direktorat JenderalLembaga Keuangan (DJLK). Attached are performance indicators in two subcomponents for (1) overseastaining, and (2) technical assistance for DJLK.

Government Education and Traming

Appropriate plan for Sekolah Tinggi Akuntansi Negara (STAN) are attached.STAN will continue to conduct programs in:

Diploma IV in accouningDiploma m in accountingTraining for assistant accountantTraining in accounting for staff of BUMN and BUMD (Government/Rural Government StatedOwned Enterprises)Seminar in accounting practices and theorySeminar in auditing practices and theoryResearch in accutng, auditing and finance

-38 -

SECOND ACCOUNTANCY DEVELOPMENT PROJECTGOVERNMENT ACCOUNTING SYSTEM

Degree programs

Government accounting 0Infonnation technology/System 4

Short course programsGovernment accounting 8Information technology 4

Total number programs 16

Progress IndicatorsSelf managed short coursepragram starts July 95

Degree program starts July 95

Number of degree graduates 4

Number of short course programscompleted 12

Number of training progressreports completed 10

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SECOND ACCOUNTANCY DEVELOPMENT PROJECTGOVERNMENT ACCOUNTING SYSTEM

Foreign consultantsGAS R. 1.0 Maintenance 89 mmGAS Enhancements 190 mmGAS Functional _GAS Enhancement Quality Assurance --

Local ColsultantsGAS Enhancements 338 mm

Total man months 617 mm

Proaress Indicators

Comprehensive strategy developed _Loan agreement effective Dec 94Release 1.0 consultant starts July 95Release 2.0 work plan delivered July 95Release 2.0 IT plan completed Dec 95Release 2.0 requirements completed July 96Release 2.0 prototypes completed Dec 96Release 2.0 acceptance completed Nov 97Release 2.0 implementation starts Dec 97Release 1.0 operation end Dec 97

Monthly progress reports completed

. GAS R.1.0 36

. GAS R.2.0 36

- 40 -

SECOND ACCOUNTANCY DEVELOPMENT PROJECTCAPITAL MARKET RULE MAKING AND SUPERVISION

Degzree Programns

Management Information System IBusiness administration 7Accounting 12Law 4Statistics 1

Short course programs

Securities companies 10Supporting institutions 14Derivatives 10Market surveillance 14Investigations 12

Total programs 85

Progress Indicators

Short course programs start Juli 95Degree program start Juli 95

Number of overseas degreecandidates enrolled by at leastSeptember 30, 1997 18

Number of participantscompleted short term overseas at leasttraining by September 30, 1997 36

Number of overseas degreeprogram graduates 25

Number of short course programscompleted 60

Number of training progressreports completed 10

- 41 -

SECOND ACCOUNTANCY DEVELOPMENT PROJECTCAPITAL MARKET RULE-MAKING AND SUPERVISION

Foreig Consultants

Technical and training 190 mm

Local ConsultantsTechnical and training 197 mm


Progress IndicatorsComprehensive strategy

Loan agreement effective Dec 1994Consultants work plan start up July 1995Review of old rules completed Oct 1995

Rules issued by October 31,1997. new rules 30. new disclosure guidelines 10

Rules issued by October 31,1999. additional new rules 15. additional guidelines 10. deratives & new instruments

Total number of rules issued by end of project 200

Number of monthly progress reports completed 60

-42 -

SECOND ACCOUNTANCY DEVELOPMENT PROJECTSTANDARD SETTING & ACCOUNTANT DEVELOPMENT

Local Consultants

Accounfing & auditing standards 260 mmProfessional examination 270 mmCPE 144 mmLAI Executive Director 48 mmWI Standards Director 48 mmLAI accounting magazine 22 mm

Foreign ConsultantsAccounting & auditing standards 4 mmIAI institusional development 3 mm


Progress IndicatorsComprehensive strategy developed --

Loan agreement effective Dec 1994Accounting/audit standards start July 1995Professional examinations designdocumented July 1996LIA directors hired & trained Dec 1996

Aproved by May 31, 1997:| accounting principles 15. auditing standards 6

Completed by July 31, 1999:| accounting principles 40| auditing standards 16

Monthly progress reports:| standards 48| examination 48| CPE 48

- 43 -

SECOND ACCOUNTANCY DEVELOPMENT PROJECTSTANDARD SETTING & ACCOUNTANT DEVELOPMENT

Comparative study

Professional exsamination 10

Short course programs

Infornation management 4Standards setting 4Institution management 4

Total short course programs 22

Progress Indicators

Short course programs start July 1995First 4 month program conducted July 1997

Number of short course programs conducted 12by end of project

Number of training progress reports completed 10

- 44 -

The Accountancy Development Project

Sub Project: The Accountancy Education Development Project

Operational Plans

A. Background Information:

1. In general, the Accountancy Education Development Sub-project has been successfullyadministered and has contributed major results as expected by the government in improvingaccounting education in the country.

Basic revision and development in accounting education such as curricula, teaching materials,human resource2 and supporting teaching facilities have been successfully achieved by theproject at all level of education, that is: the Secondary Education (SA4 and SMEA),Nonformal Education and Higher Education.

2. When the project started, there was dualism in accounting education in Indonesia (Continentaland Anglosaxon systems).The project has significantly reduced and eliminated the dualism by directing the accountingeducation at all levels to the Anglosaxon system.

At present, accounting education has a common "language" which is also crucial in accountingpractices in Indonesia in providing reliable financial information for decision makers.

3. At secondary and nonformal education levels, the project has been successful in building astrong foundation for accounting education development by enhancing the quality of humanresources and education facilities such as:

a. deternining the minimum standard of capability that SMA/SMEA graduates must have inorder to meet the requirements of the society and in order to be able to revise and developbetter curricula, syllabi and course materials.

b. upgrading accounting teachers with modern accounting techniques (SMA, SMEA,Nonformal Education), approximately 80 accounting teachers from SMA and SMEA havebeen trained abroad (Australia) for three months.

c. providing supporting teaching facilities, such as: computers, calculators, books, practicesets, modules, etc.

d. providing institution and student loans, for non-formal education

4. At higher education, the project has been successful in strengthening accounting departments atthe faculty of economics, in terms of quality of human resources, facilities, curricula, syllabi,teaching units, etc.

- 45 -

The establishment of six Accounting Development Centers (ADCs) at the University ofIndonesia, Gadjah Mada University, University of North Sumatera, Padjadjaran University,Airlangga University, and Brawijaya University by the project is an important milestone ofdeveloping accounting education nationwide, because ADCs serve as information clearinghouse to provide accounting expertise for department development.

The establishment of new accounting departments such as at Hasanuddin University andAndalas University is also important in widely spreading accounting education throughout thecountry. By the cascade approach, the project has increased the number of accountingdepartments exempted from the National Accounting Examination.

B. Post Project Activities:

1. Higher Education

a. At higher education, the focus of the project was only accounting departments at thefaculty of economics. IKIP and FKIP that supply teachers for SMA and SMEA wereincluded in the project on a limited scope. Polytechnic and diploma level (D3) ofaccounting education that supply middle-skilled accounting manpower have not beenincluded in the project. Therefore, further activities are needed to develop IKIPs, FKIPs,Polytechnic and Diploma level (D3) at accounting education.

Important basic facilities to develop accounting education in 10 public IKIP have beenprovided by the project during the project life, such as:

(a) in-country training for accounting IKIP and FKIP lecturers (600 man-months).

(b) short-course for 20 IKIP lecturers, for 3 months in Australia.

(c) 40 computers for each iIKP (totally 10 IKIP).

(d) The existence of 6 Accounting Development Centers which serve as informationclearing house could be used by IKIP and FKIP.

The fund to be used to develop accounting education at IKIPs is expected from the routinebudget.

b. 246 master and 15 PhDs which were produced during the project life, should be utilizedeffectively in order to produce qualified accounting manpower in Indonesia as their maintasks. For the future those manpower should be used to develop accounting educationthrough research and practices.

c. The distribution of computers to 18 Faculty of Economics and 10 IKIPs (40 computerseach is a great assistance to develop accounting education in the future). The maintenancebudget for the computers shall be taken from the routine budget.

d. The existence of 6 ADCs is expected to strengthen other accounting departments at otherfaculty of economics, public as well as private, including the new accounting departmentsin other universities. Several activities could be done as follows:

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1) several lecturers from a certain ADC could become accounting lecturers in someprivate universities; the budget in the forms of salary is from the private universities.They are welcome to the other university

2) an ADC could become local consultant to another new public faculty of economics.The budget shall be from the new public faculty of economics.

3) strong ADC could established a tailor-made short course for accounting lecturersfrom other private universities. They are easily able to collect some budget for thisactivity.

e. The existence of 246 Master and 15 PhDs spread out in 18 Faculties of Economics meansreally something for the development of accounting education, by becoming accountingconsultants, accounting lecturers in other private universities, by establishing tailor madeshort accounting courses for accounting lecturers as well as accounting teachers fromSMA and SMEA.

2. Secondary Education (SMA and SMEA) and Non-formal Education

Although major results have been achieved during the project life, the project has just built afoundation or a preliminary step in the accounting development process. Important follow upactivities have to be done in the future, among others:

a. The accounting curricula in the first step should be developed into technical manuals forthe implementation of those curricula.

b. Course materials, practice sets, accounting modules produced during the project life needfurther revisions in order to adapt to the dynamic accounting education and practices.

The new curricula for SMA and SMEA was introduced in 1994. In each directorate, thedirectorate of vocational education and the directorate of general education, there is a relevantbudget prepared for curricula validation activities.

c. The maintenance of their computers, SMA as well as SMEA is from their routine budget.Many SMA and SMEA can maintain their computers effectively because of theiradditional budget received by conducting computer class in the afternoon time. For thefuture additional computers are needed in accordance with their needs.

d. Accounting teaching training of SMA accounting teachers through PKG (PemantapanKerja Guru) contracted to 8 (eight) BPGs (Balai Penataran Guru) since 1990, need to bedeveloped continuously, to strengthen the teacher's capability, especially new appointedaccounting teachers. The budget is from the routine budget.

e. Institutional and Student loan

- This is only for nonformal educationAfter the project life, the directorate of non-formal education should monitor theimplementation of those loan, the repayment in details, so that the directorate can havea clear picture of the condition of those loan. As a revolving fund it should beadministered soundly, so that it can be arranged with good system and procedure forrevolving. The budget for monitoring of the implementation of the loan decided that

-47 -

monitoring budget for Dikmas would be provided in 1996/1997 routine budget as wellas in 1996/1997 development budget, even though the project has ceased to exist onMarch 31, 1996.

The existence of 6 Accounting Development Centers which serve as informationclearing house could be also used by accounting courses through the Directorate ofNon-fonnal Education.

The development of accounting curricula, modules, especially for Non-formalEducation could be prepared by establishing a special task force consisting of somepeople from some strong accounting courses led by the Directorate of Non-fonralEducation. The budget will be from the existing strong accounting courses.

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Annex 4

Guidance on Government's Contribution to the ICR

Government's own final evaluation of the project implementation is an important part of an ICR.It is attached, unedited, to the ICR sent to the World Bank Board. It can be selective in its coverage andshould address issues and lessons learned in project implementation, from the borrower's perspective.Topics covered can be the same as in the ICR, namely, project design, appraisal, implementation andproject results. At each stage of the project contribution should conmment on both World Bank and theimplementing agencies performances, with the observations, where possible, supported by evidence orreasoned argument.

For project design the contribution could address such question as the appropriateness of theproject's objectives, the size of the project and scope of the investments proposed, aspects of designleading to easy (or difficult) implementation and the effect on government institutions.

For project appraisal comments should concentrate on any significant changes in the objectives,size and scope of the project and whether these were appropriate.

Project implementation experience should be divided into assessment of World Bankperformance in supporting and supervising the project and the performance of the implementing agencies.

Project results include an assessment of the direct physical benefits leading to financial andeconomic benefits. Since financial and economic re-analysis of the project may be undertaken as part ofthe ICR, it is suggested, if GOI so wishes, that the contribution could most usefully comment on the effectof the project from the Government's perspective. Such an analysis would be a most useful contributionto the ICR.

Based on the foregoing sections the contribution should list the main lessons learned from theimplementation experience and arising from the above analysis.

WB suggests that if the contribution is more than ten pages it should include a summary. Thelatter is recommended for all but the shortest contributions.

The mission will be happy to provide any further elaboration or clarification required to assist inpreparation of the contribution.

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GOVERNMENT CONTRIBUTION TO IMPLEMENTATION COMPLETION REPORT

FOR THE ACCOUNTANCY DEVELOPMENT PROJECT (LOAN 2940-IND)

This report sunmmarzes the Government's contribution to the ICR and includes contnbutionsfrom the three subprojects comprising the Accountancy Development Project. The format is inconsonance with World Bank Guidance Annex 5 consisting of five topics concerning project design,appraisal, implementation, results and lessons learned.

Proiect Desien

The Project was designed as a single multidimensional project, comprising two majorministries and two state audit agencies, for purposes of accountancy development in the public,private and academic sectors. Both Ministries and all components were actively involved in theinitial design of the Project.

1.1 Accountinz Plannine. Monitorine and Evaluation (TKPA)

TKPA was established in 1985 by joint decree of the two Ministries tocoordinate accountancy planning including, but not limited to, the Project. Initially,TKPA was supported by CIDA with technical assistance to prepare a joint detailedproposal which resulted in World Bank staff appraisal and loan approval in 1988.

In accordance with the World Bank staff appraisal, TKPA was concerned withthe broad project policies, evaluation of project outcomes well as the administrative andlogistical arrangements for maintaining coordination between various activities, andplanning future stages of accounting development. These arrangements wereappropriately handled by a relatively smal secretariat with little previous experience inthe broad scope of activities in a multidimensional environment.

1.2 Accountine Practice (PPSA)

The objectives of the PPSA part of the Project were to improve accountingpractices in the public sector by supporting the introduction of modernized governmentaccounting practices, initially in MOF and three other agencies and eventually in allagencies, and in the private sector by supporting development of technical' standards anda code of ethics for the accounting profession. There were a number of secondaryobjectives each of which was aligned with a PPSA component.

The size of the Project and the scope of investment were considered tobe appropriate to government accounting modernization, accounting education andtraining, the capital market, private sector and two state audit agencies (BEPEKA andBPKP).

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1.3 Accounting Education (PPA)

From the point of view of the Accounting Education subproject, the projectobjectives were clear, they were: to support the Govermnent's program to raise thequality of accounting faculty and teaching staff, and to prepare for future expansion ofaccounting education and training; to increase the supply of qualified accountingprofessionals; and improve management of accounting education.

Within the Accounting Education subproject, the general objectives were toimprove accounting education at all levels, including higher and secondary education asformal education, and public education as nonformal. Due to this broad spectrum,problems in coordination emerged regarding the involvement of several directoratesgeneral to prepare project plans in the interests of each party.

From the point of view of size and scope of the Accounting Educationsubproject, all areas in the Republic of Indonesia were included. It was complex in thatproject targets covered all schools, higher education and public education, in the regions.The Ministry of Education and Culture had stated that the assistance would bechannelled to schools, higher education and nonfonnal institutions; whether in the formof equipment such as calculators, computers, textbooks and accounting practice sets, orin the form of advanced education by sending teaching staff and faculty members toparticular education institutions in-country and overseas.

2. Proiect ADpraisal

Early in the project, the coordiation, monitoring and evaluation of activities of twomajor ministries became limited along departmental lines, and the World Bank supervisionmissions reviewed and reported each subproject separately in lieu of a single project.

Accordingly, in 1991, with the Bank's concurrence, the Project was restructured as threeseparate subprojects, two subprojects in one ministry and one subproject in the other. Significantrevisions were made in the Ministry of Finance subprojects, TKPA and PPSA, but was notconsidered to be needed at that time in the Ministry of Education and Culture subproject, PPA.

2.1 Accountine Planning. Monitorine and Evaluation (TKPA)

The revised strategy for the years 1990 to 1994 and annual work plans involvedthe development of TKPA as a national coordinating body, as well as establishing anaccounting research and development facility with computer databases, universitynetworks, research grants, publishing, and a library. It also involved a reallocation ofloan and Government funding, all of which were submitted and acknowledged by theBank.

2.2 Accountine Practice (PPSA)

A detailed plan for PPSA consisting of revised annual work plans and budgetswas submitted to and acknowledged by the Bank in 1991. Revisions included increases inthe number of degree programs and short courses overseas for all components, plus

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equipment and consulting services for the Govermment accounting system. There wereoffsetting decreases in in-country training for all components, and consulting services forauditing and accounting education components.


The Government Accounting System was still under study at the time of WorldBank appraisal in 1985. Therefore, the extent to which the system would be implementedafter studies and simulated operations was not appraised. This condition lasted until theproject was restructured in 1991 and an implementation plan was proposed andacknowledged by the Bank. The plan included an increase in the level of effort ofconsultants to design and deliver the computerized system.

Government Auditing

Both BEPEKA and BPKP revised their work plans and budgets to include selfmanaged activities directed to the preparation and issuance of government auditingguidelines and training materials for in-country training programs. The targets listed inthe SAR were revised in the proposed plan and acknowledged by the Bank, howeverBank documents were not revised.

Capital Market

The initial project inputs to the Capital Market component were relativelymodest. With the growth of, and emphasis on the capital market, the inputs wereincreased appropriately, mainly to augment the USAID Financial Markets Project byproviding funds for two essential capital market and investment operating manuals andother studies. These were included in the Capital Market revised project work plan andbudget and acknowledged by the Bank.

Government Accounting Education (STAN)

Revisions to STAN's plans and budgets were based on a major relocation ofstudents and facilities to the new campus. The revisions included increases in computerhardware and software for training purposes, training materials, and library facilities. In-country training targets were adjusted based on the actual capacity of STAN, andacknowledged by the Bank.

In the final stages of the Project, the World Bank recommended that it would bepremature to continue loan funding for STAN, pending consideration of STAN's futurerole..

Private Sector

The project inputs were very modest for local consulting services related toaccounting and auditing standards, code of ethics and training materials for small scaleenterprises.

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When the Government was unable to accept a USAID proposal for technicalassistance in development of the private sector, the Government and the World Bankwere both supportive in funding the institutional development of IAI in a second project.

2.3 AccountinLf Education (PPA)

The broad objectives of enhancing the quality of accounting education at alllevels meant that the availability of hardware and software in education and the qualityof teachers and staff faculties had to be improved. For these reasons, the Ministrydetermined the priorities for implementation.

The priorities were chosen for programs that had the highest multiplier effect foraccountancy education development in the future. The programs of teacher and facultystaff quality improvement was the highest priority for project implementation.

3. Proiect Implementation

When equipment and resources were in place, all three subprojects improved physicaland budget realizations, and achieved significant progress. The Loan Closing date was extendedby one year to June 30, 1995 to accomrnmodate major activities that could not be completed by1994.

3.1 Accountina Planning. Monitorine and Evaluation (TKPA)

With revised strategies, plans, and budgets, TKPA was effective in coordinatingaccounting development in the Ministry of Finance.

During many World Bank supervision missions, it was necessary that thesubproject work in close harmony with the Bank in order to achieve mutually satisfyingresults. Without this harmony, results were less satisfying.

In the best interests of accountancy development, the Government continued toprovide funding during the project extension period when loan funding was not available.

3.2 AccountinE Practice (PPSA)

By mid-project, all components had gained experience in management andimplementation of activities to achieve results. The Loan Extension was directed nainlyto overseas fellowships, procurement of hardware, software, publishing standards, andin-country training in PPSA subprojects, and consulting services to implement andmaintain the Government accounting system.

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Noticeable progress in implementation was made after BAKUN had beenestablished in 1992 and staff had been recruited. By 1995, staff had increased fromvery few to over 600 accounting, administrative and technical personnel, howevershortages continued to exist, particularly in technical maintenance staff.

Government Auditing

The World Bank supported the auditing component during the implementationperiod, however in the final stages of the Project, further loan funding was not availablefor the Government Auditing component due to borrowing constraints in the Ministry ofFinance.

The Government supported the inclusion of the audit agencies in the Project, andalso supported their inclusion in future funding from sources outside of the Project.

Capital Market

The Government has strongly supported the capital market supervisory agencyin Indonesia, and placed a high priority on the drafting of the new Capital Market Lawwhich is essential to enforcing capital market rules issued by BAPEPAM.


The Government expanded the facilities of STAN and continued to support theschool in its role in accounting training and education, while considering therecommendations regarding the organization and structure of STAN.

Government support and financing will continue to be necessary in order toassist STAN to conduct training for the expected large numbers of participants in theGovernment accounting system.Private Sector

The Government supported the LAI in its role in the Project and as the standardsetting body for Indonesia. Through the Government, loan funds were provided forconsulting services utilized by LIA to prepare accounting and auditing standards, code ofethics, and training materials for small businesses. Senior officials of the Government aretaking active parts as Chairman and at the executive level in the management anddirection of LAI.

3.3 Accountine Education (PPA)

The Ministry of Education and Culture actively acted as the education projectimplementing agency. To manage the operation of the project, the AccountancyEducation Development Sub Project (AEDP) was formed which is under the DirectorateGeneral of Higher Education.

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The AEDP carried out project implementation by using contractors as agenciesbased on existing regulations. As owner of the project, the AEDP along with relatedinstitutions monitored the project. Monitoring and evaluating was also done by the WorldBank.

The contractor which carried out the project activities was concerned with eachjob specification. The job specifications were based on the program in the project plan,supported by the budget which was later used as the aggregate price between the AEDPand the contractor. The contractor was from a private company, especially for theeducation equipment procurement of the state institution for training activities.

The constraints in project implementation were:

(a) Coordination, related to delayed time and administration in the programimplementation as well as determining the related party managing the program.

(b) Due to the scattered locations and scope of the program, delays occurred in theequipment procurement realization.

The Loan Extension was directed to overseas fellowships, procurement ofequipment and in-country training in PPA subproject for those activities which could notbe completed by 1994.

4. Proiect Results

All three subprojects achieved their main objectives. A comprehensive strategy foraccountancy development of the two ministries and two state audit agencies for 1994 to 2000was prepared at the request of the World Bank.

4.1 Accountine Planning. Monitorine and Evaluation (TKPA)

The impact of TKPA has been most noticeable in meeting the continuing needfor accountancy development in Indonesia. The results obtained included: a number ofsteering committee meetings regarding project coordination; 7 accountancy studiesconcerning Draft Bill of New Indonesian Accountants Act, Framework for Regulation ofCorporate Financial Reporting, Draft Corporate Law, Accountancy Manpower Study,and strategic studies for LAI, STAN and GAS; 38 accountancy development seminarsconcerning the Accountants Law, Accounting Conceptual Framework, Standard Setting,Code of Ethics, Accountancy Manpower, and others; accounting research involving alibrary of 2,792 books and 1,570 journals; 2 database programs; 83 small grants touniversity students and staff, arrangng a major conference for South East AsiaUniversity Accounting Teachers.

4.2 Accountinu Practice (PPSA)

The imnpact on the PPSA subproject was effective over a range of essentialfunctions of the Ministry of Finance, BEPEKA and BPKP.

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For all components, coordinated training programs resulted in 125 masterdegrees, over 450 short course completions, approximately 26,700 participants in in-country training. Coordinated procurement of equipment and services resulted in 56contracts being let and administered.

The Project assisted DG Tax by procuring computers and printers, a site licencefor software and computer audit training. The Project also assisted MENKO EKUINWASBANG in conducting workshops as a bridging mechanism pending thecommencement of a larger USAID project.


The computerized Government accounting system was being used in 105 officesin 13 agencies in 12 regions by the end of the Project Extension. Accounting techniquesof double entry accounting and decentralized agency accounts had been implemented inthese agencies. The uniform chart of accounts has been implemented Government-wide in31 agencies.

Government Auditing

In the state audit agencies, there was extensive in-country training for a total ofabout 10,000 auditors, 119 overseas degree and over 400 participants in short courseprograms for both audit agencies. An audit standards manual, 47 audit guidelines, andaudit training materials were prepared by BEPEKA. An audit manual, 20 auditguidelines, and 36 projects using modem audit methodologies were prepared by BPKP.A technical feasibility study concerning an extensive management information systemfor BPKP was completed.

Capital Market

In the Capital Market component, over 260 companies issuing securities werelisted. 65 advisory notes, guidelines, and circular letters, a manual of StandardOperational Procedures, and an Investment Funds Operations Manual were issued for theuse of private sector companies. Studies on taxation were conducted in conjunction withDJP and LAI.

Govermment Accounting Education (STA

In the STAN component, there were 2 instructors holding doctoral degrees whohad not yet been posted to STAN; 20 foreign master degrees of which 9 had moved toDG Tax; and 20 participants on overseas courses. There were increases to 2,200 DIUand 665 DV trainees in 1995, and over 10,600 participants in courses conducted by thePPA. Training materials, practice sets, and research studies were prepared by the PPA.An accounting students reference library of over 2,200 books and journals wasestablished. A major study of the Proposed Structure and Activities for STAN resulted ina number of reconmmendations for the consideration of the Ministries of Finance, andEducation and Culture.

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Private Sector

In tbe Private Sector component, the IAI membership increased to over 4,900accountants, 573 licensed accountants, 15 accounting principles and 12 auditingstandards were issued, studies were undertaken concerning compliance with standardsand the code of ethics, training materials were prepared for small scale businesses,major seminars in accountancy were conducted for both the public and private sectors.


Generaly, the Accountancy Education Development Project (AEDP) achievedthe predetermined targets. However, due to the location and number of regions to bedeveloped in this country, the targets could not be totally achieved as expected.

The location of schools, higher education, and nonformal education which arescattered in the Republic of Indonesia are the constraints and problems for futuredevelopment of the AEDP programs.

5. Lessons Learned

Lessons learned will be useful for future projects, including the second project.

Experienced project management personnel, in both World Bank and Government, with afimdamental professional knowledge of the project's components are essential for both the Bankand the Government to obtain optimum benefits.

Agreed revisions to documentation, in both World Bank and Government, are essential toprogressive project implementation.

5.1 Accountine Plannine. Monitorine and Evaluation (TKPA)

Coordinated management of Government projects with multiple componentsrequires that project managers in all components have appropriate qualifications andexperience.

High level coordination at senior levels of Government and the private sector areessential to achieving the strategic objectives of accountancy development.

5.2 Accountin! Practice (PPSA)

Implementation of Government projects with multiple components is greatlyfacilitated by centralizing functions of training and procurement


Standards for information technology, quality assurance and financial reportingneed to be developed in order to provide consistent and useful reports throughout theMinistry of Finance.

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In-country training of agency accounting staff is essential to the governmentaccounting system. Large numbers of personnel continue to need training because of theexpansion of, and enhancements made, to the system.

Maintenance training is essential. Every effort should be made to providetraining in advanced new technologies. Consultants working under Government contractsshould be expected to train and transfer technology to Govenmment staffs.

Government Auditing

In-countiy training is vital to Government auditing agencies and auditors at atime when significant progress is being made in the formulation of Government auditstandards, expansion of the computerized Government accounting system, and newcomputer audit technology.

BEPEKA and BPKP will need to constantly up-grade and increase the numbersof training instructors and equipment, including computers and computer software.

Capital Market

Technical assistance is necessary to assist BAPEPAM in rule-making andenforcing rules. In this regard, a transfer of technology by the consultants who providethis technical assistance is essential to enable Government staff to continue its regulatorywork without reliance on consultants.

Advanced specialized training in capital market operations is vital to theincreased efficiency and effectiveness of Government staff.


Government support and financing is needed commensurate with STAN'scapacity to conduct training for the number of accountants needed.

The recommendations made in the Study of the Proposed Structure andActivities for STAN should be considered with a view to the future status of STAN.

Private Sector

The sustainability of the LAI as a standard setting body, and professionalaccounting institution with responsibilities for the development of its membership, willrequire financial resources beyond the current capabilities of the IAI. In order to achievea degree of financial stability as soon as possible, it is necessary that the IM startimmediately to meet its financial responsibilities.

It is necessary that the W should be staffed on a full time basis with at least twofull time Directors and support staff dedicated to the institutional development of IAI asan independent, professional, financially-capable institution.

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The Ministry of Education and Culture could form the project organization byinvolving manpower from each directorate general, even though, as a result, theorganization structure and communication of the project may become more complex, andthe project cost could be affected.

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