Guarding Village Funds : Audit's Role in Realizing Accountability and Transparency

Law No. 6/2014 on villages marks a turning point in the village financial matters. Decentralization related to village autonomy policies which related to the management of village funds. Village funds are a form of fiscal budget from the government to each village’s autonomy aimed at stimulating local growth to improve the welfare of its communities and alleviate the poverty issues that occur. In its implementation, village funds turn out to have a counterproductive effect against the initial goals. The numerous cases of corruption in various forms, such as budget manipulation, falsification of financial reports, and bribery overshadow the implementation of village fund autonomy. The weak accountability and transparency of each relevant civil servant are the main factors causing cases related to village funds.

Factors Behind the Misuse of Village Fund

The main causes of this "absence of morality" phenomenon can be explained in three main factors:

1. Internal Factor

   The presence of “personal desire" motives as an abuse of power form by the village officials. (Buchan & Hill, 2014).

2. External factors

   The low or even non-existent salaries for related village officials (Atmadja et.al., 2019). This factor can create a personal incentive to find loopholes in committing a brazen act of corruption. Furthermore, the lack of community participation is due to the lack of knowledge and availability of relevant information (Triyono, 2020).

3. Institutional factors

   The absence of the Audit Board of the Republic of Indonesia (BPK) role as an audit body for all levels of government, weak regulations regarding the use of village funds, and the low accountability of every official involved in village autonomy policies.

These factors overlook each other, creating a structural problem related to the implementation of village autonomy policy particularly in the management of village funds.

The Role of Audits in Overseeing Village Funds

Consistent audit practices need to be implemented through strong internal controls and the enforcement of external audits. (Budiyono, et al., 2023) stated that the audit conducted by the State Audit Board (BPK) successfully improved village management in terms of administration and finance. The audit implementation effectively proved to identify potential fraud in several villages in West Sumatra. In addition, the financial management of the village government must be transparent and participative by involving all stakeholders, such as the Village Consultative Council (BPD), the district government, and the village community. (Rifai, R., et al., 2024) in their research also emphasizes the important use of technology as a means of digitizing village finances and consequently the budget allocations can be tracked. Through this process, community involvement in overseeing the village budget can increase.

Problems Faced by Auditors

Bureaucratic issues often become the main obstacles to the audit process. There have been various views of interpretations regarding the role of BPK in conducting a comprehensive audit of village budget management. The Village Law No. 72 summarizes several sources of village budgets besides village funds. However, according to the State Finance Law No. 2, the parts mentioned in the clause before are not within the audit authority of the BPK. Meanwhile, according to the BPK, all sources of the budget obtained using state facilities, regardless of village budget sources outside village funds, should also be audited. This confusion arises because there is no further explanation in the related law.

Audit Implementation Practice in Another Country

In States, the audit system is implemented at various levels with each of its local legal guidelines that are still aligned with the General Accepted Accounting Principles (GAAP). At the village level, audit officials are elected by the local community who will then form a board of auditors. This situation already reflects the active participation of the community in upholding the integrity of local financial management. The selected auditor is not required to have a certification by Certified Public Accountant (CPA) certification but still needs to meet certain standards set by the United States Government Accountability Office (GAO). The selected auditor must also maintain a level of integrity, objectivity, and independence. Auditors at the village level conduct examinations that are generally divided into three areas namely government funds, proprietary funds, and fiduciary funds. There are also regulations requiring an external auditor certified by CPA to conduct an audit if the assets owned exceed the stipulated limits, with

each region having its specific thresholds. This system can demonstrate the importance of a structured and regulated audit role in maintaining the integrity of village autonomy to achieve policy goals to the fullest extent.

Conclusion

The implementation of village autonomy, which initially had the positive goal of stimulating development and growth according to the characteristics of each region, can lead to the opposite effect if there is a lack of integrity among local officials. One of the preventive measures is to maximize the role of audits in the management of village funds. However, in Indonesia, various obstacles related to the implementation of audits in the village region remain an unresolved issue. This problem is such a catastrophe since we all know that an audit system is essential to maintain the integrity and morality of policy implementers.