Proactive Fraud Audit, Whistleblowing and Cultural Implementation of Tri Hita Karana for Fraud Prevention

By Atmadja, Anantawikrama Tungga; Saputra, Komang Adi Kurniawan et al. | European Research Studies, July 2019 | Go to article overview

Proactive Fraud Audit, Whistleblowing and Cultural Implementation of Tri Hita Karana for Fraud Prevention


Atmadja, Anantawikrama Tungga, Saputra, Komang Adi Kurniawan, Manurung, Daniel T. H., European Research Studies


1. Introduction

Based on the regulation of the Minister of villages, the development of disadvantaged regions, and transmigration of the Republic of Indonesia number 21 of 2015 concerning determination of priority for the use of village funds in 2016, village funds are funds sourced from the state revenues and expenditure budget allocated to villages transferred through the regional budget. District and city are used to fund governance, development implementation, community development, and community empowerment. The government plans to disburse village funds from the central government to the provincial and district/city levels amounts to Rp 20,76 trillion in 2016.

With the distribution of village funds that have a large nominal value to each village, there is a need for strict competency and supervision of each village's management by the government. This is needed to avoid fraud that has been feared by the government and the society. Fraud usually occurs if the existing control system is very weak and lack of supervision in financial management. Problems that have been found in the remaining funds are facilitator recruitment systems and weak accountability or financial reporting in village funds. Some of the problems found by the Corruption Eradication Commission (KPK) in managing village funds are that the regulatory aspect is still considered weak and some of them are overlapping authority between the Ministry of Rural Development and the Ministry of Home Affairs.

Moreover, based on a study of the anti-food commission last year, the formula for distributing village funds in Government Regulation Number 22 of 2015 was not transparent. Meanwhile, related to management, there is no standardization for the reference of village officials to design the village budget and expenditures. The accountability report was also considered prone to falsification. Alleged project play by the mafia who infiltrated the villages and on behalf of the villagers. This may occur because the work of the Regional Inspectorate has not been effective. For the KPK and other relevant institutions such as the Ministry of Home Affairs, the PDT Ministry, and the Financial and Development Supervisory Agency are formulating an action plan to address this problem. The expected results will be in the form of a solution and action plan in accordance with the authority of each agency, as well as the Regional Government, in this case the Regional Inspectorate, and the relevant agencies related to the village funds, need to proactive fraud audit so that every step and program carried out by the village's government can perform well without any indication of fraud.

Tuanakotta (2012, p. 24) states that proactive fraud audit is an audit activity that is outside the forensic accounting component. Various terms are used for proactive fraud audits such as system studies because in this fraud audit a system review is conducted which aims to identify potential or risk of fraud. So, it needs to be implemented in order to guard the success of village fund management in each village. This can be done by the Inspectorate, the Village Consultative Body (BPD), the internal village government, or the village observer community or NGO. In addition to a strict and proactive supervision system, the internal control system of the village's government also needs to be improved, and it is very necessary to be supported by the courage of the village apparatus, the community or other parties in the village to report fraud committed by specific individuals by utilizing all the concessions in the distribution and management of village funds. Such a system is often referred to as a whistleblowing system. According to Bagustiando and Nurkolis (2015) and Suryanto and Thalassinos (2017) the act of whistleblowing is a form of action prosocial members of the organization to deliver directives, procedures, or policies that might be unethical, illegal or bring disaster to the long-term goal of the organization to individuals or other entities in a position to take corrective action. …

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