Docnut of

T he World Bank

FORK OWKI1AL USE ONLY

* ~~~~~~~~~~~~~~~~~~~~Repot N. 7073-IND

STAFF APPRAISAL REPORT

INDONESIA

ACCOUNTANCY DEVELOPMENT PROJECT

April 8, 1988

Country Department VAsia Regional Office

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CURRENCY EQUIVALENTS(as-of February 1988)

Currency Unit - Indonesian Rupiah (Rp)US$1.00 - Rp 1,650Rp 1 million US$606

FISCAL YEAR

April 1 - March 31

ACADEMIC YEAR

July 1 - June 30

PRINCIPAL ABBREVIATIONS AND ACRONYMS USED

ADC - Accountancy Development CenterBAPEPAM - Capital Market Executive AgencyBAPPENAS - National Development Planning AgencyBPK - Supreme Audit BoardBPKP - Financial and Development Supervisory BoardCAAD - Coordinating Agency for Accountancy JevelopmentCAPA - Confederation of Asian and Pacific AccountantsDGHE - MOEC Directorate General of Higher EducationDIKHAS - MOEC Directorate of Community EducationIAI - Indonesian Institute of AccountantsICB - International Competitive BiddingIFAC - International Federation of AccountantsKKN - Regional State Cash OfficeKPN - Regional State Treasury OfficeMOEC - Ministry of Education and CultureMOF - Ministry of FinancePAN - Annual Budget Realization ReportPIU - Project Implementation UnitPKG - Pemantapan Kerja Guru (In-service and on-service teacher

training program)REPELITA - National Five-Year Development Plan (Repelita IV, 1984-89)SGV - Sycip, Gorres, Velayo & Co (Consulting Company)SMA - Upper Secondary General SchoolsSMEA - Upper Secondary Commercial SchoolsSOE - Statement of ExpenditureSTAN - Sekolah Tingi Akuntansi Negara (State School of Government

Accounting)UGM - University of Gadjah MadaUI - University of IndonesiaUSU - University of North Sumatra

FOR OFFICIAL USE ONLIINDONESIA

ACCOUNTANCY DEVELOPMENT PROJECT

Table of Contents

Page No.

LOAN AND PROJECT SUMMARY ................... ......... *... iii

I. ACCOUNTANCY DEVELOPMENT: ISSUES AND STRATEGY .................. 1

Introduction o.o.o..*9. .................................. 1

Issues* ... ... .................................. 2

Government Accounting and Auditing .......................... 2

Private-Sector Accounting and Auditing...................... 5

Capital Market. ..................................... 6

Accountancy Manpower Supply and Demand........................ 7

Accountancy Education and Training Programs.... .............. 8

Accountancy Development Strategy ..... 11

Government Strategy............................ *. ..........*. 11

Bank Strategy,,*.oo*o...................................... 13

II. THE PROJECT ...........9 . ...... 15

Project Objectives ........... 9999s999e......................... 15

Project Decito ....................................15

Accounting Practice....9999999999 *............. 16

Accounting Edcto ....................................21

Project Management, Monitoring and Evaluation.................. 25

III. PROJECT IMPLEMENTATION .................... 27

Implementation ............ - ~~~27Procurement .............................................. 99........9 28

Disbursements ...... ................................. 31

Project Accounts, Audits and Reporting........................ 32

IV. PROJECT COSTS AND FINANCING ................ 33

Cost Estimates ... ................................. 33

Financing Plan ....... 3....................................... 36

V.BNFTS, IS................................... 37

VI. AGREEMENTS REACHED AND RECOMMENDATION.....o ..............o.o.. 37

This report is based on the findings of an appraisal mission to Indonesia in

October 1987. Mission members included F. Farner (mission leader), M.

Mertaugh (economist), K. Thomas (financial analyst), C. Escudero (lawyer),

M. Masuda (operations assistant) and R. Osterlund (consultant).

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

- ii -

LIST OF TABLES IN MAIN REPORT

Table 3.1: Project Expenditures by Procurement CategoryTable 3.2: Sumary of Procurement of Services by PIUTable 4.1: Summary of Project Costs by ComponentTable 4.2: Summary of Project Costs by Category of ExpenditureTable 4.3: Proposed Financing Plan

CHART

Chart A: Organizational Structure for Project Implementation

ANNEXES

1. Structure for Accounting Development in Higher Education2. Staff Development Program in Higher Education3. Composition of 1984 Curriculum for Business and Commercial High

Schools Accountancy Program (Finance Cluster)4. Breakdown of SMA Enrollment by Stream and by Public/Private

Schools5. Outline of Accounting Study Program, SMA6. Project Outcome Indicators7. Staff Development Program

A: Sutimmary of Local Staff Development/Training Activities,by Component and Year

B: Summary of Overseas Fellowship/Training Program, by Componentand Year

8. Technical Assistance Program:Summary of Local and Foreign Specialist Services, byComponent and Year

9. Estimated Schedule of Disbursements10. Implementation Schedule

A: Implementation Schedule, Accounting Practice SubprojectB: Implementation Schedule, Accounting Education SubprojectC: Implementation Schedule, Accounting Planning, Monitoring

and Evaiuation Subproject11. Project Costs by Category of Expenditure and Component12. Selected Documents and Data in the Project File

Map No. IBRD 20514

- iii -

INDONESIA

ACCOUNTANCY DEVELOPMENT PROJECT

Loan and Project Summary

Borrower: Republic of Indonesia

Amount: US$113 million equivalent

Terms: Repayable in 20 years, including 5 years of grace, at the

standard variable rate.

ProjectDescription: The objectives of the project are to: (a) assist the

Government improve accounting practices in both the public

a.d private sectors; and (b) support the Government's pro-

gram to improve the quality of accounting education and

prepare for future demand for accountancy manpower. The

proposed project would finance specialist services, train-

ing, equipment, books, development of instructional mate-

rials and operating costs. Specifically, support would be

given to: (i) the first phase of implementation of a mod-

ernized government accounting system which has been

designed and tested under previous projects; (ii) improving

government auditing services; (iii) raising the quality of

accounting staff; (iv) increasing the scope and efficiency

of the capital market; (v) strengthening the role of the

professional association of accountants and introducing a

series of accounting standards; (vi) improving the quality

and management of accounting education in the secondary,

tertiary and nonformal subsectors; and (vii) expanding

accountancy training capacity in higher education and non-

formal education. Significant long-term benefits are

expected in the form of improved public stewardship, more

effective control over national revenue and expenditure,improved-auditing, capital market expansion and a strength-

ened accountancy profession.

Risks: The size and scope of the project and extent of its

coverage inevitably entail risks that some participants

will resist the changes which are to be introduced, and

that overall implementation could suffer from delays in a

few key components. Risks of the first type have been

minimized by the phased design of reform implementation;

risks of the second type have been addressed through the

establishment of adequately staffed implementation units,

and the special supervision and monitoring designed to help

ensure that satisfactory progress is achieved.

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Estimated Costs: Local Forei n Total…-…-UuS$ million --

Accounting PracticeCovernment accounting 5.7 7.6 13.3Government auditing 7.8 7.9 15.7Government education and training 11.4 8.7 20.1Capital ma-:et 1.3 1.9 3.2Private sector 1.7 0.4 2.1Subproject management 1.5 2.0 3.5

Subtotal 29.4 28.5 57.9

Accounting EducationHigher education 8.8 15.6 24.4Secondary education 12.5 15.6 28.1Nonformal education 14.3 5.7 20.0Subproject management 6.9 1.7 8.6

SubtotaL 42.5 38.6 81.1

Planning, Monitoring and EvaluationCAAD 4.3 2.7 7.0

Base Cost (February 1988) 76.2 69.8 146.0

Physical contingencies 4.0 4l 8.1Price contingencies 7.8 2.6 10.4

Total Project Cost /a 88.0 76.5 164.5

Financing Plan:

Government 45.9 5.6 51.5Bank 42.1 70.9 113.0

Total 88.0 76.5 164.5

Estimated Disbursements:

Bank FY 1989 1990 1991 1992 1993 1994

Annual 4.0 9.0 23.0 31.6 31.4 14.0Cumulative 4.0 13.0 36.0 67.6 99.0 113.0

Rate of Retarn: Not applicable.

Map No. IBRD 20514

/a Includen identifiable taxes estimated at US$3 million equivalent.

I. ACCOUNTANCY DEVELOPMENT: ISSUES AND STRATEGY

Introduction

1.1 Archaic accounting practices limit the effectiveness and efficiency

of accounting and auditing activities throughout the public and private

sectors in Indonesia. To some extent, this situation reflects the deficien-

cies of inherited accounting conventiono. More fundamentally, it results from

the scarcity of professional and technical staff who are adequately trained in

modern methods of accountancy.

1.2 The most conspicuous problem occurs in the public sector. Deficien-

cies in government accounting hamper public administration in two key

respects: they compromise public stewardship by limiting the Government's

ability to ensure that public funds are used for their intended purposes; and

they obstruct budget p.Lanning by not providing accurate and timely information

on public resource availability and cost of program options. Improvements in

government accounting practices and parallel efforts in staff training in

Indonesia are urgently needed to close the serious gaps in timeliness and

accuracy of existing government accounts. One indication of the problem is

the long delay--currently two years--between the time that central government

expenditures are made and the time those expenditures are reported to Parlia-

ment. Another is the existence of major and irreconcilable differences

between different data series on the same transactions, resulting from

fragmented accounting systems and from the absence of a uniform chart of

accounts.

1.3 Further deficiencies in government accountancy arise from short-

comings of the budget process, including excessively short-term and fragmented

budget allocations, incomplete coverage of public enterprise transactions, and

blurring of distinctions between capital and revenue items._/ Improvements in

the timeliness, completeness, and accuracy of government accounts would

contribute both to better planning of public expenditures and to improved

implementation of investments and routine government activities.

1.4 The scarcity of competent government accountants and auditors also

limits the scope for improving tax audits as a means of increasing revenues

through better compliance with corporate and personal income and value added

taxes. There is major potential for improved yield under existing tax codes:

Filing ratios are estimated at 55Z for the corporate income tax, 85t f52

personal income taxes, and 39Z for the value added tax on enterprises.-

Planned improvements in government auditing are expected to lead to better tax

1/ For a fuller description of these issues, see Indonesia, Public Invest-

ment in Repelita IV, World Bank Report Number 5849-IND (December 27,

1985 ), paras. 1.39-1.41.

2/ Indonesia, Strategy for Economic Recovery, World Bank Report No.

6694-IND, May 5, 1987.

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compliance, but significant improvements in compliance with corporate incometaxes and value added taxes will also require the introduction of consistentaccounting standards and the enforcement of statutory audits. This in turnimplies an expanded role for the professionrl association of accountants indevelopment oi accounting standards, certification of accountancv skills, andprovision of auditing services.

1.5 The private sector is also hampered by a shortage of professionaland technical staff with up-to-date skills in accountancy. Managementaccounting as a tool of managerial efficiency is virtually nonexistent.Financial disclosure requirements for private firms are very limited.

1.6 Development of improved and uniform reporting on enterprise perfor-mance is a prerequisite to the further expansion of the nascent market forprivate securities. Under Repelita. IV, the Governnent aims to increase theshare of private savings in total domestic savings. The goal of expandedprivate sector savings is more likely to be met if the stock market can bemade to assume a more active role in capital mobilization. Currently, theshares of only 24 companiZs are listed on the Jakarta stock exchange. As aprerequisite for improved investor confidence in the private securitiesmarket, appropriate standards for reporting the financial performance ofenterprises need to be developed and put into practice. More generally, astudy of the existing market's operation needs to be carried out with a viewto identifying appropriate changes to invigorate the market as a source ofinvestment capital.

1.7 This chapter presents issues relating to accountancy development infive broad areas: (a) government accounting and auditing, (b) private-sectoraccounting, (c) capital market, (d) accountancy manpower supply and demand,and (e) accountancy education. For topical areas (a) and (e), issues arepresented in the context of a description of the structure of implementing andtraining entities. Because of the importance of accountancy education to anyresolution of current problems in accountancy, this topic is treated in gre.t-est detail. The chapter concludes with a description of the Government'sstrategy and the Bank's strategy for accountancy development.

Issues

1.8 Government Accounting and Auditing. An array of accounting andauditing activities are carried out in the public sector to enable the Govern-ment to comply with constitutional and legal requirements governing collectionand use of public fumds. All government departments and agencies maintainaccounts of their receipt and use of funds, accounts which are routinelyaudited by their internal audit staff under the supervision of each depart-ment's or agency's Inspector General. External audits of government depart-ments' and agencies' accounts are carried out by the Supreme Audit Board(BPK), which reports directly tv, Parliament. BPK emplo-s about 1,700 staff,including about 1,100 professional audit staff, but of whom only 42 are regis-tered accountants. A parallel audit agency for the executive branch of Gov-ernment, the Financial and Development Supervisory Board (BPKP), functions asthe Government's internal auditor. Created initially as a Ministry of Finance(MOF) Directorate General, BPKP in 1983 was separated from the MOF and made an

I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~_________

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independent agency reporting directly to the President. BPKP has a mandate to

conduct both financial compliance audits and value-for-money (or cost/benefit)

audits of all government accounts. In practice, BPKP audits consist predomi-

nantly of financial compliance audits, which overlap somewhat with the exter-

nal audits conducted by BPK. In view of the separate lines of respansibility

of the two audit agencies, improved efficiency of government audit operations

will require informal cooperation between the two agencies. BPKP also func-

tions as the external auditor for 220 public enterprises, as well as for Bank-

group projects. BPKP currently employs about 6,000 auditors in its Jakarta

headquarters and its 27 regional offices.

1.9 Central control of government expenditures is vested in the Ministry

of Finance's Directorate General for Budgetary Affairs. The Directorate

General for Budgetary Affairs is responsible for ensuring that cumulative

expenditures of government departments and agencies under each budget category

are consistent with budget allocations in the annual budget law. Through its

Regional State Treasury Offices (KPN), it reviews payment requests, certifies

their conformity with budget allocations, and issues payment authorization.

Payment is made by the MOF's Regional State Cash Offices (KKN), which are

under the Directorate General for Budgetary Affairs.

1.10 The MOF's State Financial Accounting Center is responsible for main-

taining consolidated accounts of all central government expenditures and reve-

nues and for reporting them to Parliament in the form of the Annual Budget

Realization Report (PAN). It does so on the basis of reports generated by

various offices within MOF (in particular, offices within the Directorates

General of Budget and Taxes), and supplemented by analyses provided by

accounting offices in the other ministries.

1.11 In addition to central government ministries and agencies, public-

sector accounting functions are carried out by other le.els of government, and

by public enterprises. There are four levels of government below the central

government: (a) provinces (27 in number), (b) regencies and municipalities

(294), (c) subdistricts (3,500), and (d) villages (58,000). All have their

own budgets, most can levy taxes and charges; and most have their own secre-

tariats, including ac:ounting staff. There is a complex flow of budgetary

transfers within this government hierarchy--typically, from top to bottom.

And there is an equally complex flow of accounting and auditing information in

the reverse direction, principally for the purpose of documenting and justify-

ing budget authorization and paymewnts. At least 400,000 civil seyants are

employed in regional government administration at various levels._ It is

logical to presume that about half this number is engaged in accounting func-

tions of some description, but no firm statistics are available.

3/ Indonesia Management Development, World Bank Report No. 4965-IND (May 20,

1985), p. II, 65.

-4-

1.12 There are over 220 public enterprises at the national level, ad amuch larger number of small enterprises managed by regional governments._Together, they constitute an important part of the productive sector, account-ing for about 25% of national fixed capital formation and a roughly similarshare of national value added. The total number of managerias,and supervisorystaff in the public enterprises has been estimated at 96,00C.-_ The number ofclerical staff who perform some accounting functions is undoubtedly muchlarger.

1.13 Government accounting practices in Indonesia h&ve changed littlesince the 1864 Dutch Financial Administration Act on which they are based.Although an Indonesian translation of the Act was eventually prepared andminor changes were introduced when this became the Financial AdministrationAct of 1968, government accounting practices have failed to keep pace with theincreasing size and complexity of the Government's financial transactionssince Independence. They have also fallen behind the private sector, wheremore modern accounting practices are being adopted. Moreover, governmentaccounting practices have not developed beyond their historical role ofmeasuring compliance with mandated budget allocations (a role which is in anyevent only incompletely discharged because of system deficiencies and delays).In particular, they have not evolved to reflect the newer functions ofaccounting as an instrument of performance efficiency and effectiveness,widely adopted elsewhere both in public administration and in the privatesector.

1.14 The most conspicuous deficiencies of existing government accountingpractices are the following:

(a) Single-Entry Accounts. Revenue and expenditure accounts are main-tained as a simple listing of revenue and expenditure entries,without the double-entry system of offsetting debits and creditswhich is conventional practice in modern accounting systems, andwhich allows some verification of the accuracy and completeness ofaccounting records, and hence of information derived from them.

(b) Incompatible Reporting Systems. The State Financial AccountingCenter in MOF is responsible for preparing consolidated reports ofall central government revenues and expenditures, and reporting themto Parliament in the PAN. The reports from which the PAN isprepared are incompatible in a number of respects: for example,(i) they ao not share a common chart of accounts; (ii) they do notall recognize revenue and expenditure items at the same point in thetransaction cycle; and (iii) some items (in particular, taxrevenues) are classified as to type on the basis of analysesreported by one source applied to totals rLported by another,without any reconciliation being possible between the two. The PAN

4/ Ibid, p. II, 73.

5/ Ibid, p. II, 79.

-5-

report therefare lacks a consistent basis and contains, at best, a

number of significant approximations.

(c) Delayed Reporting. The shortage of qualified accounting staff and

bottlenecks in recording, transmitting and consolidating accounts

lead to unaccaptably long delays in reporting to Parliament on

actual government expenditures. The PAN has typically reached

Parliament two to three years after the close of the fiscal year inquestion. These delays seriously compromise the nation's control of

its financial affairs.

(d) Classification of Accounts. Classifications of government accounts

are designed exclusively for monitoring and reporting of actual cen-

tral government revenues and expenditures. They are not designed

for analysis of the cost effectiveness of programs or program compo-

nents, or to provide adequate information to control expenditures on

development projects. Agency accounts are thus not as useful as

they could be to guide the decisions of directors general and other

managers of agency programs and projects.

(e) Asset Accounting. Because the budget does not adequately

distinguish capital from revenue items, and because the recording of

fixed asset inventories is not the responsibility of accounting

offices, such inventories cannot be reconciled to the financial

accounts and may accordingly be unreliable in both physical and

value terms.

1.15 Private-Sector Accounting and Auditing The private sector com-

prises Indonesian public and private companies (including about 300 public

accounting firms), cooperatives, partnership. and sole traders. The quality

of accounting in the private sector varies widely, tending to be better in

those companies which have foreign investors or are listed on the local stock

exchange (which imposes certain reporting standards-para. 1.18); but in

general the development of accounting has fallen behind that of other skills

required in industry and commerce. Accounting systems frequently do not pro-

vide adequate financial control, and few accountants and managers are trained

to produce or use accounting information as a management tool.

1.16 To some extent this situation can be attributed to a general absence

in Indonesian law of regulations of the type which in other countries fre-

quently enforce the maintenance of basic standards of accounting. The

Indonesian Companies' Act and Commercial Code are anachronisms dating back to

colonial times and are silent on accounting matters; there are no statutory

reporting requirements for companies; and there are no audit requirements

(apart from listed companies). The tax law does require companies to file a

profit-and-loss account and balance sheet along with their tax computation,

but the level of compliance is low (para. 1.4).

1.17 A second factor which in other countries frequently contributes to

the maintenance of accounting standards is the presence of a strong profess-

ional body of accountants. In Indonesia, the professional body--the

Indonesian Institute of Accountants (IAI)--is relatively young and has not yet

6

developed the stature to comaand wide respect among businessmen and otherpotential users of accounting and auditing services. Of the 5,0O0 registeredaccountants in Indonesia, 3,500 are nominally mmbers of IAI but only about1,000 are paid-up. The Institute's only full-time staff is a small secre-tariat; all the officers contribute their services part-time. In thesecircumstances the Institute's capacity to lead the profession--let alonepromote it in the eyes of the public--is clearly limited. A basic statementof accounting principles has been issued, a program of continuing professionaleducation for members has been initiated, and relations are maintained withinternational organizations such as the International Federation of Accoun-tants (IFAC) and the Confederation of Asia and Pacific Accountants (CAPA).But the IAI lacks a body of detailed accounting and auditing standards toguide the profession and a code of ethics and disciplinary processes toregulate it.

1.18 Capital Market. The Indonesian capital market was established inits present form in 1977. It operates under the overall authority of theMinister of Finance and comprises three principal institutions: a CapitalMarket Policy Council, a Capital Market Executive Agency and an investmenttrust, PT. Danareksa. The Policy Council formulates guidelines and policyalternatives for the operation of the Capital Market and the management of PT.Danareksa. The Capital Market Executive Agency (BAPEPAM) controls and managesthe Capital Market in accordance with the policy outlined by the Government,and is directly responsible to the Minister of Finance. The agency has threemain functions. It evaluates whether companies which sell their gharesthrough the Capital Market have met all listing requirements and are sound andwell managed; it operates the stock exchange; and it monitors the progress ofcompanies which are listed on the stock exchange. Members of the exchangeinclude state and private banks, financial institutions and brokerage firms.Listed companies are required to submit to BAPEPAM their financial Fta&teents(profit and loss, balance sheet, and statement of changes in financialposition) and the audit report of a Registered Accountant thereon, and suchother reports as BAPEPAM may from time to time require. In recent year* thebusiness of the exchange has been declining. New issues (stocks and bonds)amounted to only Rp 50 billion in 1986 compared to Rp 144 billion in 1984; thevolume of shares traded fell to 1.4 million from a peak of 5 million in 1982;and the number of listed companies has remained static at 24 for three years.

1.19 It is clear that measures to revitalize the market are nowrequired. These measures would have three main objectives:

(a) to broaden investor familiarity with, and interest in, the market;

(b) to offer a wider range of investment vehicles, including possiblymutual funds and further investment trusts; and

(c) to strengthen confidence in the market by consolidating the associa-ted legislation (some of which is out of date), and codifying theregulations concerning company listing, stock issuance, reportingand related matters and tightening their enforcement.

1.20 Accountancy Manpower Supply and Demand. There is a large unmet

demand for professional accountants. There are currently only about 5,000

registered accountants working in Indonesia, out of a total nonagricultural

labor force of 25 million. Of these, about 3,000 work for Government (chiefly

as auditors for BPKP, SPK and the larger government enterprises), 1,600 workfor private industry, and 400 work for public accounting iirms. This propor-

tion of professional accountants in the labor force (0.02X) is small by compa-

rison with other countries in the region, and extremely small by comparison

with the industrialized countries. The scarcity of professional accountants

is largely attributable to the limited capacity of existing accountancy pro-

grams (para. 1.27). The large unmet demand for accountants resultg in a

sizable salary premium for registered accountants. A 1982 survey -/ of 680

medium and large enterprises, carried out under the First Polytechnic Project,

reports more than a six-fold earnings differential between registered accoun-

tants and accounting staff with secondary-level training. This differential

is almost twice as large as the average ,,rnings differential between masters-

level graduates and secondary graduates.-

1.21 A large proportion of accountancy manpower at subprofessional levels

also neeas upgrading of technical qualifications. Over a third of the 300,000

bookkeepers and cashiers in the labor force have received no formal schooling

in accountancy. Of the 250,000 managers and proprietors working in industry

and service-sector activities, fewer than 10Z have any training in accounting

techniques.

1.22 Small-scale industries are planned under Repelita IV and Repelita V

to provide an important source of private-sector industrial growth. If these

enterprises are to play the dynamic role envisaged for them, it will be reces-

sary to provide more of their managers with training in basic accountancy

practices. These skills will also improve the capacity of small enterprises

to comply with the recently enacted reporting requirements for corporate and

personal income taxes (para. 1.4).

1.23 Although accountancy is traditionally a male-dominated profession,

women are well represented in accountancy employment in Indonesia. Women cur-

rently comprise 20 to 302 of the members of IAI, the professional association,

and female membership has grown more rapidly than male membership during the

past two years. The proportion of female accountants in many professione.l

jobs has remained at a level somewhat lower than this largely because of self

selection ef job applicants. The proportion of females in the professional

audit staff of the central government audit agencies (152 in BPKP and 191 in

BPK), for example, results from the scarcity of past female applicants, which

6/ Reported in "Final Report: Study on Demand of Accounting Manpower in

Indonesia," prepared by the Management Institute of the Faculty of

Economics, the University of Indonesia; November, 1983.

7/ As reported in Chapter 2 ("Economic and Financial Analysis") of the 1986

Education and Human Resources Sector Review carried out by the MOEC and

USAID.

in turn reflects the reluctance of qualified women and their families toaccept the travel and other work requirements of the job of state auditor.There is evidence, however, that the traditional reluctance of wom. to acceptsuch jobs is decreasing. A recent article in BPK's staff journal - exploresthe reasons which discourage women from taking jobs as state auditors, andconcludes that they are likely to be less of a deterrent to female job appli-cants in the future. Indeed, the proportion of women aong the state auditorsrecruited during the past year is above the average proportion of female stateauditors.

1.24 Available evidence suggests that female participation in accountingemployment at the sub-professional level is higher than at the professionallevel. The 1985 intercensal survey reports that 232 of urban employment inthe finance, real estate, insurance and business services sector is female.Moreover, fully 80% of SMEA enrollments and a similar proportion of graduatesare female. This very high percentage implies that female employment as P.

proportion of total accountancy employment at the sub-professional level islikely to increase in the future.

1.25 Accountancy Education and Training Programs. Prior to Independencein 1945 and to the nationalization of Dutch enterprises in 1957, most account-ing practices in government and in the private sector followed Dutch account-ing conventions. Because most senior positions involving accounting were heldby expatriate staff, in-country accountancy training was initially limited tobookkeeping courses offered in trade and comerce institutions. These lower-level training programs have evolved into two main categories of accountancyinstruction: the accountancy courses offered in the Hinistry of Education andCulture's (MOEC) general secondary schools (SMAs) and secondary commercialschools (SMEAs), and the nonformal courses in accountancy administered byvarious goverrment and private agencies, often through short-term, in-servicetraining.

1.26 Higher-level training in accountancy was introduced in 1952, whenthe University of Indonesia's Faculty of Economics began to offer accountancycourses at the bachelor's level. By the time the first graduates of this newprogram graduated (1954), legislation was introduced which enabled mastersdegree graduates of accredited university accountancy programs to be certifiedby the MOF to practice as professional accountants (Registered Accountants) inIndonesia. Currently, there are 8 public universities with accredited pro-grams in accountancy. Graduatea of accountancy programs in private universi-ties and non-accredited public universities may be certified as RegisteredAccountants only by passing a rigorous, two-stage State Accountancy Examina-tion, jointly administered by MOF and MOEC.

1.27 In order to help meet the growing demand for qualified accountantsin government service, new legislation was enacted in 1961 to require that allqualified applicants for professional certification as accountants must

8/ "Joys and Tribulations of a Female Auditor of the State Audit Bureau(BPK)," available in the project file.

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complete at least three years of government service before certification would

be granted. This measure, however, proved insufficient to meet government

needs, and in 1975 the MOEC approved the establishment by the MOF of its own

accountancy training institute, the State School of Government Accounting

(STAN). The STAN pre-service accountancy courses are offered at two levels:

a three-year adjunct accountant course (called the Diploma III level), and a

five-year accountant course (called the Diploma IV level), which also requires

a thesis and working experience as an adjunct accountant. Diploma IV

graduates are eligible for certification by MOF as Registered Accountants.

STAN trains about 400 graduates per year in its pre-service diploma III and

diploma IV programs of accountancy, all of whom are required to serve at least

15 years in government employment. In addition, STAN offers an extensive

program of in-service training for government accountants and auditors--

usually in the form of two-week training courses on specific topics of

accounting or auditing practice.

1.28 There are currently a total of 85 universities, institutes, and

academies which offer post-secondary courses of accountancy, but there are

important differences among these programs in terms of their size and quality.

The vast majority of Registered Accountants in Indonesia are graduates of STAN

and the eight state universities with accredited accountancy programs.

Together, these programs graduate about 420 students per year at the regis-

tered accountant level. By 1978, private institutes had trained over 2,500

students of accounting at the bachelors level. However, by 1987 only 90

master's level graduates had registered for the certification exam, and of

these only 24 had passed. In part, this weak performance by the private

institutes of accountancy, and more generally, by the non-accredited accoun-

tancy programs reflects the difference in certification requirements for

graduates of non-accredited accountancy programs--who must pass the profes-

sional certification exam--versus graduates of accredited programs--who are

not required to take the exam. But, more basically, it reflects the weakness

of their programs and staff: A general problem with accountancy training

programs of all kinds is the shortage of qualified teaching staff and teaching

materials for the new methods of accountancy which are now widely adopted in

the private sector and which are about to be introduced in the public sector.

1.29 This problem results from the dualism which has characterized

accountancy training programs for most of the past three decades. Following

the nationalization of Dutch companies in 1957, private-sector companies

progressively replaced the former, inherited accounting practices with more

modern accounting practices--particularly, of North American origin. At the

same time, government accounting has continued to follow the earlier prac-

tices. There had thus been a need for accountancy training at all levels to

provide instruction in both the old and new systems of accounting. As the

Government has progressively become committed to modernization of government

accountancy and as the private sector's adoption of new accounting practices

has become widespread, however, the need for maintaining a dual system of

accountancy education no longer exists. Recognizing this fact, the MOEC moved

early in the 1980's to prepare new curricula for accountancy education at all

levels. These curricula are now complete and in operation, but their effec-

tiveness is impaired by teachers' unfamiliarity with the new techniques and

with the lack of suitable Indonesian language textbooks, teachers' manuals,

and other teaching materials.

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1.30 Accounting education at the secondary level is included in two ofthe upper secondary (grades 10-12) education programs: Upper SecondaryCommercial Schools (SMEAs) and Upper Secondary General Schools (SMAs). Ofthese, the SMEAs offer the more extensive training in accountancy. The SMEAsalso constitute by far the largest vocational school system in Indonesia,covering about one-third of all students enrolled in the more than 25 differ-ent types of vocational programs. There are currently about 1,200 SMEAs, ofwhich 300 are public and 900 are private. Although more numerous, the privateSMEAs tend to be much smaller than the public SMEAs: Total enrollments in theprivate SMEAs are 250,000, versus about 200,000 in the public SMEAs. The cur-ricula are the same in the public and the private SHEAs. Both provide three-year specializations in administration, accounting, business and commerce,cooperatives and tourism. Each of these specializations contains a set ofaccounting courses ranging from basic tourism-related accounting in thetourism specialization to more advanced financial and cost accounting, audit-ing, finance and taxation in the accounting program. (An outline of theaccounting curriculum is included in Annex 3.) About 30X of SMEA students areenrolled in the accounting specialization. Annual graduates from this stream(from both public and private SMEAs) number about 40,000 per year. Most ofthese graduates enter the workforce as accounting technicians. About one-third of the 2,500 teachers of accountancy in the public and private SMEAsreceived upgrading training in accountancy under the First Polytechnic Project(paras. 1.33 and 1.39).

1.31 A less intensive program of basic accounting training is offered inupper secondary general schools (SMAs). Currently, the SMAs consist of asingle, 3-year academic stream with 4 options: physical science, biologicalscience, social science and culture. Two hours a week of instruction in basicaccounting is taught in the second and third year of the social sciencestream, which enrolls the majority (55%) of SMA students. Since over half ofSMA students choose the social science stream, approximately one third of the2.2 million SMA students in 1986 received this basic accounting training inabout 1,400 public and 4,500 private SMAs (Annex 4). Of about 140,000 SMAteachers, approximately 2,500 are teachers of accounting. Most of theseaccounting teachers have been trained in outdated bookkeeping procedures, anda limited upgrading program conducted by the Accountancy Development Centers(ADCs) has not proved adequate as a basis for improving the quality ofinstruction.

1.32 Under the authority of the MOEC's Directorate General for NonformalEducation, Youth and Sports, nonformal education programs are conducted inmore than 13,400 (mainly private) institutions in Indonesia, with a total ofabout 1.4 million students enrolled in 1986. Two different types of nonfoirmaleducation programs are offered under this system. The largest is a generaleducation program with main emphasis on literacy courses. The other is anoccupational program designed to foster specific employable skills. Studentscompleting the program are eligible to take an examination certifying comple-tion of training equivalent to upper secondary vocational schooling (grade12). The largest of the nonformal programs is in bookkeeping and accounting.Courses in these subjects are offered by 752 institutions at 4 differentlevels of training, ranging from 156 lessons of basic accounting to 459lessons of more advanced accounting. In 1986, these courses enrolled a total

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of about 100,000 students, of whom 59Z took the secondary-level equivalency

examination in accounting. Surveys undertaken by the Directorate General

indicate that the popularity of the accounting specialization among the

students taking the nonformal occupational courses reflects the successful

record of job placement of former graduates, particularly in small and medium-

sized enterprises. Until recently, the former Dutch-based system of account-

ing was the preferred method of instruction, and only very few of the 750 full

time and 2,900 part-time instructors are trained in modern accounting. By

1993, the total number of accounting instructors is expected to reach 3,600

employed at about 1,200 institutions. Beginning in 1988, the national exami-

nation will test only modern accounting, which will add to the severe need for

revision of the programs and retraining of the teachers.

Accountancy Development Strategy

1.33 Government Strategy. The Government's awareness of the issues

described above and its concern about their consequences has grown progres-

sively over the past decade. Under the recently completed Polytechnic Project

(Cr. 869-IND 1979), it established ADCs at three leading state universities

and at STAN. It also expanded enrollments at the secondary level and in non-

formal education. The Government now recognizes that there are limits to how

effectively it can address the recognized accountancy deficiencies through

such training expansion alone. More basic changes are clearly called for--

particularly in government accounting practices. If such changes are

eventually to be made, there is merit in deciding on those changes sooner

rather than later so that ongoing training programs can prepare for them.

Moreover, efforts to modernize accountancy now are timely in that they would

complement the Government's ongoing macroeconamic adjustment program, which,

among its major goals, emphasizes economic efficiency.

1.34 Also under the Polytechnic Project, MOF commissioned an exsensive

study of needs for modernization in government accounting practices._ That

study developed a detailed program of proposed meaures to modernize government

accountancy. After MOF's evaluation of the study and consultation with the

other ministries involved (as well as with the Bank), the Government has made

the decision to incorporate the preposed changes into its systev of central

government accounts and to reflect those changes in its various accountancy

training programs.

9/ The full findings of the study, which occupy more than 20 volumes, are

summarized in an October 1984 consultant's report entitled "Study on

Government Accounting and Auditing Modernization in Indonesia: Major

Findings on the Existing Budgeting, Accounting, and Reporting Systems."

The sumary report is available in the project file.

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1.35 The most important changes to be introduced in 8, the modernizedsystem of central government accounts are the following:_

(a) Double-Entry Accounts. To improve accuracy and completeness ofgovernment accounts (para. 1.14(a)], all revenue and expenditureaccounts are to be kept on a double-entry basis, with offsettingdebits and credits.

(b) Consolidation of Central Accounting. To improve the timeliness,accuracy, consistency and completeness of reports on overall govern-ment revenues and expenditures (para. 1.14(b)], responsiblAity formaintaining government-wide accounts of revenues and expenditures isto be fully centralized within the State Financial Accounting Centerof the MOF. The main immediate effect of this measure will be tointegrate into the MOF's consolj4qted accounts the formerly separateaccounts of Bagian Anggaran 16 and the Central State TreasurySystem. At the same time, the MOF State Financial Accounting Centeris to be given responsibility for introducing and maintainingaccountancy standards throughout the Government.

(c) Improved Agency Accounting. To provide better support to agencyprogram and project managers, the responsibility for maintainingbasic agency accounts is to be decentralized. Expenditures will beclassified in agency accounts by program/project and category ofexpenditure--introducing detail on program-level components which isnot generally available under current classifications of agencyaccounts. At the same time, controls are to be applied by theagencies in extracting and reporting information for the consoli-dated budget report; this will strengthen financial control of theaccuracy and completeness of reports on government revenues andexpenditures.

(d) Introduction of Balance-Sheet Accounting. To support enhancedaccountability for state investments, the notion of governmentequity [para. 1.14(e)] is to be introduced into government accountsby distinguishing capital items in government revenue and

10/ The objectives, rationale, and thrust of the modernization program weredescribed in a September 1986 presentation by the Minister of Finance,Mr. Radius Prowiro, to the International Financial Management Conferencein Washington, D.C. The presentation is reproduced as "Reforming Finan-cial Management in Government: The Indonesian Agenda," in InternationalJournal of Government Auditing, January 1987 (available in the projectfile).

11/ "Bagian Anggaran 16" designates the special fund managed by the Ministerof Finance, which is not for the exclusive use of any specific depart-ment, and which includes the budget allocated for such items as pensionpayments, subsidies to locail governments, investments in stateenterprises, and amortization of foreign loans.

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expenditure accounts, and carrying them in separate asset andliability accounts.

(e) Uniform Chart of Accounts. To assure consistency of recording andreporting, a uniform chart of accounts (or schedule of budgetheadings) [para. 1.14(b)(i)] is to be developed and introduced.

1.36 This program of changes to modernize government accountancy is vast.

It would eventually affect the work of hundreds of thousands of civil ser-vants, and for some of them it would mean a fundamental change in how theyconceive their work. The Government is aware of the ambitiousness of theprogram. To minimize the inevitable disruption involved and to preclude the(unacceptable) risk of a lapse in coverage by either the old system or the new

system of accounts, the Government has decided to implement the changes inti-ally on a pilot basis in selected directorates general of four ministries,with subsequent, progressive extension to other directorates general and then

to other ministries. The existing system of accounts would be maintained and

would run in parallel with the new system in each directorate general untilstaff training had been completed and the new system had been successfullypiloted. At that point, the changeover to the new system would occur. Imple-

mentation of the government accounting modernization, then, would progress in

stepwise fashion across the various units of central government. Followingsuccessful implementation at this level, it is envisioned that similarimprovements in accounting practices would be adodpted by public enterprisesand by lower levels of Government. In preparation for implementation of the

accountancy modernization program, the Government established in 1985 aninterministerial Coordinating Agency for Accountancy Development (CAAD), whichincludes representation from the IAI. Support for this activity was providedunder the Second Polytechnic Project (Ln. 2290-IND, 1984). CAAD's objectives

are to develop new accounting standards for the public and private sectors, to

coordinate implementation of those standards, and to ensure that trainingprograms are consistent with them.

1.37 In addition to the modernization of government accountancy, the

Government's strategy for accountancy development includes a number of comple-mentary actions to strengthen accountancy training at all levels, to expand

the role of the professional association of accountants, and to promote the

development of a private securities market. Although the Government expectsto continue to expand accountancy training capacity, its current trainingefforts will focus on improving the qualifications of existing accountingmanpower. This qualitative emphasis in the Government's accountancy develop-ment strategy is appropriate in view if the urgency of existing needs.

1.38 Bank Strategy. The Bank Group has been engaged in a dialogue with

the Government on needs in accountancy development since the preparation of

the 1979 Polytechnic Project. The accountancy component of that projectincluded a study of government accounting practices and proposed changes which

are the basis of the Government's current accountancy modernization program.The Bank worked closely with the Government in reviewing the specificproposals which emerged from the study, and advised the Government on the

creation of CAAD as a key element to assure successful implementation of theprogram. The Bank fully endorses the Government's accountancy modernization

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program, as well as its plan for phased implementation of the program(para. 1.36). It views these efforts as an appropriate response to the majorissues described above (paras. 1.8-1.32), and as a timely complement to theGovernment's ongoing macroeconomic adjustment efforts. The proposed Accoun-tancy Deylopment Project would support the initial implementation of theprogram.-

1.39 In addition to supporting the development of the current accountancymodernization program, the 1979 Polytechnic Project also financed theestablishment of three new ADCs within the faculties of economics of theUniversity of Indonesia (UI) University of Gajah Mada (UGM), and theUniversity of North Sumatra (USU) as well as a new ADC at STAN, the MOF'straining institute. Together, these centers have trained more than 5,000accountants and accounting teachers to date (December 1987). The PolytechnicProject was the first Bank-group education project in Indonesia to providesupport for specialized programs of accountancy training. The project closedin June 1985, and is being followed up under the Second Polytechnic Project(Ln. 2290-IND, 1984). This ongoing project includes support for the creationof 770 training places in accounting under a new commercial stream which isbeing introduced in the national polytechnic system.

1.40 In addition to the two polytechnic projects, the Bank Group hassupported a total of 17 education and training projects in Indonesia, amount-ing to total commitments of US$948 million, net of cancellations. Most ofthese projects have been or are being implemented by MOEC. The implementationexperience with those projects indicates the importance of as simple anadministrative structure as possible and the early appointment of full-timestaff to manage implementation units. The design of the current projectreflects these concerns: Managers of all project units have been designated,including the key staff of the accounting practice (MOF) component who arealready at work. Moreover, two consolidated PIUs will manage implementationin the various departments of the two ministries involved (para. 2.38)--asignificant innovation in light of past experience in the MOEC.

1.41 A question of concern in past Bank-sponsored projects in all sectorsis the timeliness of submission of project audit reports. The Bank hasaddressed the problem of late audit reports on a project-by-project basisthrough several actions, including financing assistance for preparing finan-cial statements and special supervision efforts by Bank staff with PIU and

12/ Prior Bank Group experience with support of system-wide accountancyreform is limited to two recent projects in Madagascar (Credits 1155-MAGand 1661-MAG), whose implementation has been generally satisfactory. Theaccountancy modernization program whose implementation the proposed loanwould support differs from the Madagascar operations in that: (a) itinvolves a more extensive set of changes in accountancy practices; (b) itincludes more complementary actions--including training, capital marketdevelopment, and strengthening the professional association ofaccountants; and (c) it was preceded by much more intensive preparations--including development of detailed plans for phased implementation.

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audit agency staff. These efforts, which have led to improved audit perfor-mance, vill continue. In the meantime, the proposed project, by supportingactions to strengthen BPKP and ministry staff capabilities in accountancy andauditing, is expected to contribute to further improvements in governmentaudit performance in the mediun term.

II. THE PROJECT

Project Objectives

2.1 The objectives of the proposed project are:

(a) to improve accounting practices: (i) in the public sector, bysupporting the introduction of modernized government accountingpractices, initially in MOF and three other agencies, and eventuallyin all agencies; and (ii) in the private sector by supporting thedevelopment of technical standards and a code of ethics for theaccountancy profession; and

(b) to support the Government's program to raise the quality ofaccounting faculty and teaching staff, and to prepare for futureexpansion of accountancy education and training.

2.2 The project has a number of secondary objectives, each of which isaligned with one of the main objectives. Of the secondary objectives, themost important are: (a) developing the quality of government auditingagencies and government auditors; (b) strengthening the organization of theprofession of accountancy; (c) increasing the scope and efficiency of thecapital market; (d) increasing the supply of qualified accountingprofessionals; and (e) improving the management of accounting education.

2.3 A single project can only be viewed as a small part of a reform asfar-reaching as that outlined in para. 1.35. The entire process may well callfor successive projects involving further policy, structural and proceduralchanges over the next two decades. To give continuity of direction to thisprocess, the project provides for the guidance of special consultants ofeminence in the international profession of accountancy to be available to theGovernment (para. 2.40).

Project Description

2.4 Project components have been designed and grouped into two subproj-ects: Accounting Practice and Accounting Education. This grouping reflectsthe division of primary responsibility for project implementation within theGovernment of Indonesia, between MOF on the one hand and MOEC on the other(para. 2.38). Linking these two subprojects is a third (CAAD), which isconcerned with the administrative and logistical arrangements for maintainingcoordination between various project activities, and for planning anddesigning future stages of accounting development.

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Accounting Practice

(US$57.9 million excluding contingencies)

2.5 Government Accounting Modernization (US$13.3 million, net ofcontingencies. In this component of the Accounting Practice subproject, astart would be made in implementing the modernized government accountingsystem which has been designed with the help of consultants (SGV-Utomo) fundedunder the Polytechnic Project (Cr. 869-IND) and the Polytechnic II Project(Ln. 2290-IND). The main changes to be introduced under the modernized systemare described in para. 1.35, above. The principal improvements to be effectedby this system are in control (through the introduction of double-entry book-keeping), consistency (by the establishment of a uniform chart of accounts andconsolidation of central accounting), and utility (by extending the financialreporting system to balance-sheet items as well as revenue and expenditureitems, and by introducing a functional classification of expenditures). Thenew government accountancy program involves four main accounting subsystems:

(a) the Central Accounting System for MOF. This system provides MOFwith the capability to produce reports of budget realization andstatements of assets, liabilities and fund equity in an accurate andtimely manner and without dependence on the prior completion ofreports by the agencies;

(b) the Central State Treasury Accounting System. This system willprovide MOF for the first time with centralized accounting for thewhole of government's cash resources;

(c) the Agency Accounting System. This system will provide agencymanagement with better information to monitor and control budgetimplementation, and in particular offers the capability to generateinformation at the program and project level; and

(d) the "Bagian Anggaran 16" System, which provides an accounting systemto cover the diverse activities of this set of budgets. (Seefootnote 11.)

2.6 A system test of the modernized government accountancy program (alsofunded under the Polytechnic II Project) was carried out in parallel with thepresent system during the period December 1987 through March 1988, followingwhich finxal refinements are being made to the system design and detailedimplementation plans are being drawn up. It is intended that implementationshould begin as soon as possible after the conclusion of the system test sothat that momentum will be maintained and the expertise of the staff trainedin the new system will not be lost. Implementation will begin in MOF and inthe agencies selected for the system test, which include certain directorates-general in the Ministries of Public Works, Trade and Social Affairs. Eachsucceeding year, implementation will begin in a further four agencies. Imple-mentation in each agency is expected to take 4-5 years to be fully effec-tive. The major tasks involved, and funded in this component of the project,are the preparation of the books and forms required, development of systemsoperation manuals, and training the staff in the new procedures. Consultants,

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to be appointed at the conclusion of the system test, will undertake most of

the technical work under the direction of the Accounting Practice PIU

(para. 2.38). STA1 will be extensively involved in the training program; its

instructors will first be fully briefed on the new system, and will then

participate in training succeeding groups of staff as implementation

proceeds. Implementation of the new government accounting system requires the

authority of Instructions from the Minister of Finance. The implementation of

the modernized government accounting system will also involve organizational

changes in both the MOF and other agencies. The main features of these

changes have already been determined and comprise:

(a) the consolidation of central government accounting operations under

a Central Accounting Office;

(b) the consolidation of treasury operations under a Central State

Treasury and their separation from accounting; and

(c) the decentralization of agencies' basic bookkeeping.

Following the system test, the details of the revised organizational

arrangements will be finalized for implementation along with the new system.

At the same time, the extent of feasible and desirable computerization of the

new system will be evaluated; however, the system has been designed for, and

would be introduced with, lOOZ manual operation.

2.7 Assurances were obtained at negotiations that, on the basis of the

results of the systems test, the Government would prepare and submit to the

Bank for comment by December 31, 1988, a detailed program for implementation

of government accountancy modernization, including the organizational arrange-

ments and government Instructions necessary for implementaion. Following

consultation with the Bank, the Government would subsequently implement the

program in a manner satiefactory to the Bank.

2.8 The completion of implementation throughout all government agencies

will clearly require a time span much longer than that of the proposed proj-

ect. However, at the end of the first phase implementation covered by the

project, the groundwork will have been laid for a smooth extension of the

modernized accounting system. The Central Accounting Office will be directing

the installation and development of the system; the Central State Treasury

will be managing the Government's cash; key systems of budgetary and financial

reporting will be in place in MOF; and a number of other agencies will have

begun to use the new systems. The participating staff of these agencies will

constitute a core of trained and experienced staff for the succeeding phases

of implementation. It is intended that the State budget should be compiled on

the basis of the new chart of accounts for the year 1990/91, and that the

consolidated budget realization reports for that year and subsequent years

should be produced by MOF using the new system.

2.9 Government Auditing (US$15.7 million, net of contingencies). This

component is directed to improving the efficiency and effectiveness of the

overall government audit function. Improved efficiency implies less time

spent on the audit by both auditor and client, without loas of quality;

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improved effectiveness calls for sharpening the focus of the audit process onvalue-for-money aspects such as reduction of waste, saving of cost, improvedmanagement of resources and more effective reporting. To this end, the big-gest part of this component (US$5.5 million excluding contingencies) comprisesin-country training for audit staff of BPK and BPKP; for this purpose BPKPwill also cater to the needs of Inspectorate-General and other central andregional audit agency staff. Almost 100 courses will be prepared anddelivered by BPK, BPKP and STAN lecturers; it is estimated that about 75Z ofthe agencies' 23,000 auditors will be reached. The courses will cover thedesign and conduct of audits in general and for -ific situations, as wellas modern tBchniques of auditing for both accountaoility and value-for-money.

2.10 Besides training at the staff level, this component also includes:

(a) for BPK and BPKP senior staff, attendance at short courses overseas;and

(b) for BPK, 13 masters and 2 doctoral programs overseas, and attendanceby selected senior staff at seminars and conferences sponeared bythe International and Asian Organizations of Supreme Audit Institu-tions (INTOSAI and ASOSAI).

Funding will be included in this component for the provision of specialistservices, enhanced training facilities and equipment in BPK and BPKP premises,including computers, visual aids, library equipment and textbooks.

2.11 Government Education and Training (US$20.1 million, net of contin-gencies). The project would provide assistance for the following fouractivities being undertaken by STAN:

(a) the provision of equipment, books, and materials for STAN's newsuburban Jakarta campus now being readied for full scaleoperation;

(b) the regular STAN preservice accountancy diploma programs (Dip. IIIand Dip. IV);

(c) the ongoing inservice educational programs for internal auditors ingovernment and state corporations and for government auditors in BPKand BPKP, managed by the ADC located in STAN. These c yses wouldbe expanded to cover about 21,000 course participants - during thefive-year period, as compared with a total of about 3,350 courseparticipants from 1980 through November 1986; in preparation forthis training, 154 instructors (64 from STAN, 60 from BPKP, and 30from BPK) would be trained for a period of 22 days; and

13/ The figure covers approximately 3,250 employees, most of whom wouldparticipate in several courses.

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(d) a planned comprehensive inservice training program for government

accountants and auditors covering the new government accountingpractices. During the project period, this program would cover

about half of an estimated 36,000 accounting personnel Icentral,regional and local government offices needing training._

Regarding the diploma programs, the component would emphasize quality improve-

ment through procurement of teaching and administration equipment, personnel

development programs, technical assistance, revision of syllabi, production

and procurement of teaching materials, books and journals, and three research

activities covering needs assessment. The quality of the programs mentioned

under (b) and (c) would also benefit from the input of equipment, staff devel-

opment activities, technical assistance, library materials, and the research

activities mentioned above.

2.12 The procurement of equipment would provide STAN with computers

including peripherals and furniture for teaching, administration and library,

audiovisual teaching equipment and reproduction facilities. The staff devel-

opment programs would include a series of 60 seminars, short domestic courses

(1,100 staff-days in total), short overseas courses and study visits (about 95

staff-months) and fellowships for overseas advanced degrees (115 staff-years

covering 45 fellowships for master's-degree programs, including 15 fellowships

for BPKP, and 5 fellows for doctorate programs). Upon completion of overseas

studies, the graduates would return to teach and supervise other teachers at

the STA ,which at present employs only 10 full-time teachers out of a total

of 155, Foreign technical assistance would total about 11 person-years,

including 5 person-years of general assistance within management and educa-

tional development activities, and 6 person-years of more specialized assist-

ance in syllabus and course revision within computer auditing and value-for-

money auditing. Local experts would be employed in the field of development,

management and administration of computer systems. Implementation of programs

would be carried out within a framework of the minimum curriculum prescribed

by MOEC.

2.13 Capital Markets (US$3.2 million, net of contingencies). This compo-

nent will assist the Capital Market Executive Agency (BAPEPAM) and the Stock-

brokers' Association in arresting the declining volume of business on the

exchange, and in promoting the capital market as an effective instrument of

resource mobilization. The services of a specialist advisor (about 10 consul-

tant person-months) would be retained to examine the present structure and

operations of the market and advise on legislative and administrative measures

necessary to secure a high level of confidence in the integrity and efficiency

of the exchange on the part of investors (including potential foreign inves-

tors), and to broaden its utility to Indonesian companies as a source of

finance. The specialist advisor would also monitor the implementation of

14/ The figures are exclusive of information sessions for management and

users.

15/ The long-term target is 45 full-time teachers.

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specific subcomponents designed to: (a) consolidate and clarify the law andregulations governing the conduct of the capital markets; and (b) establishreporting standards for prospectuses and annual reports of listed companies.The project provides the technical assistance required by BAPEPAM's own staffto research and complete these tasks. Finally, the project provides for staffof BAPEPAN (and of PT Danareksa and of the Money and Securities Traders' Asso-ciation members where appropriate) to be trained by foreign experts in modernstock exchange practices.

2.14 Private Sector (US$2.1 million, net of contingencies). This compo-nent is designed principally to assist the Indonesian Institute of Accountants(IAI) in its evolution towards leadership of the accountancy profession inIndonesia. Apart from a small secretariat, the IAI is dependent on the part-time service of its officers. This component will provide technical assis-tance (about 150 consultant person-months) to support the ongoing efforts ofvarious committees of IAI to: (a) formulate and promulgate a number ofaccounting and auditing standards; (b) develop a program of continuing profes-sional education for accounting practitioners; and (c) establish a code ofethics and a quality control mechanism for accountants in public practice. Tohelp establish the IAI as a source of assistance to the business community,packages will be developed to meet the needs of small businesses for account-ing, costing, banking and taxation systems.

2.15 The accounting standards [para. 2.14(a)J will form the basis formore consistent financial reporting by private sector businesses, and will beharmonized to the extent possible with International Accounting Standards. Ameans of enforcing compliance with these standards is clearly desirable, andfor the time being this can be found in the Indonesian tax law. By article28(4) of the General Provisions and Procedure on Taxes (1983), the Minister ofFinance is empowered to issue regulations as to the accounts to be filed bycompanies for tax purposes.

2.16 In the longer term, the Government is considering strengthening theregulation of companies and improving the statistical base on industrialactivities in Indonesia by instituting some form of companies' registry andrequiring certain information to be reported to the registry on a regularbasis by all Indonesian companies. A feasibility study for this purpose isincluded in the private sector component of the project. This will includethe review of similar arrangements in other countries, and the development ofspecifications for the information systems necessary to support statutoryreporting.

2.17 As with government accounting modernization (para. 2.8), the devel-opment and strengthening of accountancy standards and practices in the privatesector clearly requires a timeframe longer than that of the proposed project.The project is designed to provide a sound basis for future development byestablishing certain fundamental accounting principles for all financialreporting, and a mechanism for their enforcement; by preparing for the intro-duction of more systematic business reporting and monitoring; and by assistingIAI to equip itself to direct the practice of accountancy in Indonesia withthe authority and independence required of a professional institution.

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2.18 Subproject Management (US$3.5 million, net of contingencies). This

component includes various activities to facilitate implementation of the five

components under the Accounting Practice subproject. Activities include

(a) coordination of overseas degree and nondegree fellowship programs includ-

ing selection of fellows, arrangements for pre-departure training, placement

and reintegration of the fellows upon completion of the programs; (b) coordi-

nation of procurement of equipment and technical assistance, including prep-

aration of bidding documents, tendering, evaluation, contract administration;

(c) financial management and administration including preparation of annual

plans of activities and budget, maintenance of subproject accounts and loan

disbursement accounts; and (d) monitoring, evaluation and reporting. To

support these activities, the project would provide for specialist services

(13 local consultant person-years and 11 foreign consultant person-years), and

related equipment and incremental operating cost!

Accounting Education

(US$81.1 million excluding contingencies)

2.19 This subproject would assist the Government to improve the quality

of accounting manpower by the provision of assistance to accounting education

in the following subsectors of public and private education: (a) Higher Edu-

cation, (b) Upper Secondary Commercial Education, (c) Upper Secondary General

Education, and (d) Nonformal (Adult) Education. The assistance would include

technical assistance, personnel development, procurement of teaching equipment

and materials, research, establishment of capacity for teacher training and

long-term development of accounting education, fellowships to train accounting

teachers and loan programs for institutions and students in nonformal educa-

tion. The improved quality of the training programs would eventually permit

expansion of accountancy enrollments.

2.20 Accounting Education in Higher Education (US$24.4 million, net of

contingencies). Assistance to accountancy education in the higher education

subsector will emphasize efforts to improve quality rather than to expand

undergraduate capacity, but a limited enrollment increase will result from a

general system expansion. The structure for accountancy development in higher

education comprises 18 institutions arrayed in three groups (Annex 1). A

cascade approach will be employed with more mature universities assisting less

developed institutions. The top group comprises three institutions, UGM, UI,

and USU. They are classed as "assisting" universities because they are

expected to provide staff and curriculum development programs for the

others. These q7tain three of the four existing Accountancy DevelopmentCenters (ADCs).- The only ex.sting S-2 (master's degree) program is located

at UGH and the proposed second S-2 program is to be established at UI. A

second group of three universities, Padjadjarah, Airlangga and Brawijaya,

comprises the next level. These will be the location of the three new ADCs to

be launched under the project. They will also assist less-mature universities

of level three.

16/ The remaining existing ADC is located at STAN (para. 2.11).

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2.21 Since the quality of higher education is dependent upon facultyperformance more than any other factor, an extensive p:agram of staff develop-ment is the cornerstone of this subcomponent. Overall 725 individuals will beprovided various forms of education and training ranging from the doctorateabroad to two-month local nondegree upgrading courses (Annex 2). In order toincrease the future supply of potential faculty in accounting, 100 local fel-lowships will be made available to outstanding undergraduate students. Fel-lows will be selected on the basis of thei' performance in their first orsecond year of study and their financial support will continue for the remain-der of their university period, about 3 years in most cases. A bondingarrangement will be used which will assure a reasonable period of universityteaching after graduation. Efforts will be made to have fellows serve in thenewly developed accountancy departments. Expatriate and local specialistswill be employed in the higher education program. Expatriate professors willbe engaged to teach in and render advice to the accountancy departments of UIand UGM where graduate level instruction is planned. Local consultants willbe used in the university affiliation program (para. 2.20). Local computermanagers will be engaged to serve in the 18 universities which will receivecomputers under the project (para 2.23).

2.22 The higher education subcomponent will include several programsdesigned to improve curricula and instruction: importing of textbooks andjournals, writing new textbooks, establishing a scholarly journal in account-ing, and expanded access to the state examination used to certify accountancygraduates of unaccredited universities. The three existing and three new ADCswill receive project assistance in the form of staff honoraria and supply andequipment financing. In the monitoring of project outcomes, the followingthree topics will have emphasis: (a) supply and distribution of accountingmanpower; (b) the content of accounting curricula; and (c) unification ofaccounting education (articulation of the curricula at secondary, tertiary andother levels).

2.23 As part of the institutional quality improvement theme of the proj-ect, 18 participating universities and 10 Teacher Training Colleges (IKIPs)would be provided with appropriate numbers of microcomputers, printers,copiers and related audiovisual operations. Participating universities willalso receive assistance for the rental of office and institutional space forADCs and to house computers; however, there would be no need for new construc-tion.

2.24 Accounting Education in Secondary Education. The project wouldassist accounting education in two secondary education programs: Upper Secon-dary Commercial Education (SHEA) and Upper Secondary General Education (SMA).

2.25 SMEAs (US$15.5 million, net of contingencies). The project wouldprovide assistance in the form of staff and curriculum development and

- 23 -

equipment to about 300 public and 200 private SMEAs.L71 Based on quality,size and relevance, 100 of the 300 public SMEAs have been targeted to receive

special, more advanced assistance in the form of microcomputers includingperipherals and furniture. To ensure that the equipment is in workingcondition and to assist teachers and students in operating the equipment,training courses of 2-month duration for selected teachers would be provided.

2.26 Staff development will be a critical factor in the implementation of

this component. A modernization of the curriculum for the accountancy streamshas been completed (Annex 3) and the project would continue the teacher

upgrading program began under the Polytechnic Project (Cr. 869-IND) by finan-cing four-month, in-country courses for 1,100 accounting teachers selectedfrom 300 public and 200 private SMEAs. Furthermore, a total of 10 staff-yearsof overseas training for 25-30 accounting supervisors and 10-15 staff fromcentral offices would be established, covering accounting and administrativeskills. Upon completion of the training the supervisors would conduct semi-nars and training courses for fellow supervisors in their province. Finally,200 outstanding SMEA graduates in accounting would be identified and offered

fellowships covering a 3-year Diploma III program at the Vocational Education

and Development Center, a specialized training center for teachers of voca-tional and technical programs. These fellows would be recruited mainlyoutside Java under training contracts which would ensure that upon graduationthe fellows would serve as SMEA teachers in areas with limited ability to

attract teachers.

2.27 The project would assist in three complementary ways with thecontinuation of the acquisition and development of teaching materials started

by the ADCa under the Polytechnic Project. Student manuals in the form of

textbooks and exercise books would be developed, printed and distributed toeach of the 500 SMEAs targeted to receive assistance under the project. Fur-

thermore, teachers' manuals covering accounting-related subjects and teaching

and evaluation methodology would be written, printed and distributed to the

same SMEAs. Finally, acquisition and distribution of a limited number oflocal and foreign reference books and textbooks for the SMEA school librarieswould be included in the project.

2.28 SMAs (US$12.6 million, net of contingencies). The project wouldprovide a program of 8-month in-service upgrading courses for about 2,350teachers of accounting or related fields. The program, called PemantapanKerja Guru (PKG), is an extension of the PKG-programs already establishedunder the ongoing Bank-financed Secondary Education and Management TrainingProject (Ln. 2472-IND). About 100 accounting teachers would be trained for 8

months to become qualified PKG instructors. Furthermore, the project wouldinclude a 3-month overseas training course for 54 supervising teachers and 4

staff members from central office responsible for developing and implementing

17/ There are 300 public and 900 private SMEAs (para. 1.30). All publicSMEAs will participate in the project. The 200 (of 900) private SMEAswere selected on the basis of quality of program and staff and proximityto commercial enterprises.

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accounting curricula. A total of 28 supervisors (27 from the provinces and Ifrom central office) would participate in a one-month overseas program, cover-ing alternative teaching methodologies in accounting education.

2.29 Based on educational quality, sixe and proximity to commerce, 100public SHAs would be selected and each would receive 10 microcomputers withperipherals and furniture. Training of teachers to use the computers would bepart of the training package to be carried out in the PKG program. To meetthe demand for accounting teaching materials, the project would includewriting, printing and distribution of two accounting textbooks, one for eachof grade 11 and 12, and two workbooks, covering the same grades. Fourteacher's manuals to accompany the texts and workbooks would also be written,printed and distributed. (Faculty members from the ADCs will be requested towrite these teaching materials). Finally, two accounting reference bookswould be purchased and distributed to about 1,400 public SMAs (6 copies each)and about 4,500 private schools (2 copies each).

2.30 Nonformal Accountancy Training (US$20.0 million, net of contingen-cies). The project would support the further extension and reinforcement ofthe accountancy training now being provided under the employment-orientedtraining program of MOEC's Directorate of Comm!unity Education (DIKKAS). Thisprogram, which provides practical job-oriented training in numerous cccupa-tions to out-of-school youths and adults, was developed under the First Non-Formal Education Project (Ln. 1486-IND), and is being supported under theongoing Second Nonformal Education Project (Ln. 2355-IND). Implementation ofthe program to date has been very satisfactory.

2.31 Under this component of the proposed project, DIKKAS would assist inthe improvement of training courses in bookkeeping and accountancy subjectsoffered at more than 750 private training institutes. Content of accountingcourses would be revised through the development of two models, one being anupdated and relevant version of the current program and the other incorporat-ing contemporary computer assisted accounting into each of the updated fourlevels of skills. Learning materials and instructor manuals would be devel-oped and distributed together with supplementary textbook materials. Theproject would include a review of each of the 4 levels of the national book-keeping examination, and 20 sets of new test questions would be generated,printed and distributed.

2.32 A personnel development subcomponent would include selection andtraining of 35 DIKKAS instructors from seven provinces to become master train-ers. In turn, these master trainers would train approximately 3,600 account-ing instructors from private institutes in 23 provinces. The latter wouldrequire about 125,000 staff-days of training. Furthermore, following asimilar model, 740 course operators and program managers would receiveadministration and management training. A total of about 1,350 supervisorsfrom central, provincial, district and subdistrict offices would receivesupervisor development training, including examination management training.Finally, about 1,800 instructors would attend sessions to improve theirability to develop and evaluate examinations. One of the outcomes would bethe establishment of a National Test Bank. The project would include thedevelopment of training manuals for the various courses.

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2.33 Local experts would be engaged to assist the project implementation

staff design, manage and implement the various project activities. The assis-

tance would total 280 person-months and include assistance in planning and

development of curriculum, course modules and materials, information systems,

management practices, and studies.

2.34 The project would create two revolving funds making financial assis-

tance available to the private nonformal institutions and to their students,

similar to the institutional and learning funds which are operating success-

fully in the Second Nonformal Education Project. Under the "Institutional

Fund," a total of US$2.4 million in loans for acquisition of equipment and

materials of up to Rp 5 million at a time would be made to the existing train-

ing institutions according to agreed criteria. Repayments of the loans would

assist in the establishment and development of new nonformal institutions.

The "Learning Fund" would provide student loans ranging from about US$50

equivalent to about US$160 equivalent for approximately 30,000 students at the

basic levels. The loans would be transferred to the institutions to cover

tuition and books. Selection of the students would be based on a means test.

The repayment period would be 12-24 months, following a 3-month grace period

upon completion of the course. The institutions would be instrumental in

obtaining employment for the graduates, and in these cases repayments would be

withheld as 10% of the salaries. Repayments of the loans would permit future

loans to other students. The administration of funds and loan repayments and

an evaluation of the program would be included in the project.

2.35 Subproject Management (US$8.6 million, net of contingencies). This

component is designed to aid the implementation of all four components of the

Accounting Education subproject by the PIUs concerned (one central unit under

the MOEC's Directorate General of Higher Education (DGHE) and 27 regional

units; seven each for SMEA, SMA, and nonformal education and six for ADCs).

Each regional unit will be responsible to the central unit for the implementa-

tion of its component activities.

2.36 The central unit consists of a project manager and four divisions,

which will have the following primary functions: (a) financial management

including preparation of annual plans of activities and budget, maintenance of

subproject accounts and loan disbursements; (b) academic development, consis-

ting of development of standards and criteria for books and course materials,

coordination of overseas degree and nondegree fellowship programs including

selection of fellows, arrangements for pre-departure training, placement and

reintegration of the fellows upon completion of the programs, and of in-

country fellowship and upgrading training programs; (c) coordination of pro-

curement of equipment, books and technical assistance, including preparation

of bidding documents, tendering, evaluation, and contract administration; and

(d) project administration, monitoring, evaluation and reporting. To support

these activities, the project would provide for 27 consultant person-years of

local specialist services, related equipment, and incremental operating costs.

Project Management, Monitoring and Evaluation

2.37 Project Organization and Management. General oversight of the proj-

ect, including broad project policy and monitoring and evaluation of project

- 26 -

outcomes, would be vested in the Steering Committee of CAAD, which includessenior representatives of MOF and MOEC as well as BAPPENAS. This body hasfunctioned in this role during project preparation and would continuethroughout the five and one-half year project period and thereafter. Assur-ances were obtained at negotiations that the Government would maintain CAADwith appropriate functions, staffing, and resources throughout the proposedproject.

2.38 Under this canopy, direct project management would be performed bythree project implementation units (PIUs), one for each subproject: Account-ing Practice in the MOF, Accounting Education in the DGHE of the MOEC, andProject Planning, Monitoring and Evaluation in CAAD. These units have beenestablished, and assurances were obtained at negotiations that the Governmentwould maintain these units with appropriate functions- staffing, and resourcesthroughout the proposed project. The two ministerial PIUs have representationfrom the agencies within the Ministry which have responsibility for the compo-nents of the project (Chart A). Each ministerial PIU is headed by a seniorofficial with direct access to the top management of the Ministry. Day-to-dayproject management is to be accomplished by the PIU staff of full-time spe-cialists in such fields as finance, personnel, procurement, training andevaluation. Many staff members of the two large PIUs will be locally engagedconsultants. Each ministry will also form subordinate PIUs in each provinceto handle decentralized project activities such as local training and deliveryof equipment to schools and offices. About 400 persons will be engaged inproject implementation at the national and provincial levels. Honoraria forPIU staff who are government employees will be financed under the project foractivities additional to their routine responsibilities.

2.39 Accounting Planning, Monitoring and Evaluation (US$7.0 million,excluding contingencies). The CAAD will serve as the overall planning, moni-toring and evaluation unit for the project and will directly manage severalactivities which straddle the two major ministries involved in the project.Among these activities are: (a) continuation of the important contribution ofthe Steering Committee of CAAD which has overseen the preparation of the proj-ect; (b) consolidation of progress reporting to the Government and to theBank; (c) conduct of project monitoring and evaluation; (d) preparation ofplans for accreditation in Indonesian accounting education; (e) liaison withthe Special Consultants (para. 2.40); (f) planning for the future role, activ-ities and facilities of CAAD and IAI; and (g) preparation of future projects.In connection with (c), CAAD will continue to have available the services ofthe consultant advisors (one Indonesian and one foreign) who have guided thedevelopment of the project thus far. The project would provide for specialistservices (10 foreign and 25 local consultant person-years), related equipmentand incremental operating costs including facility rental.

2.40 With this project, the Government of Indonesia and the Bank confirmtheir commitment to the strengthening of the practice of accountancy as an in-strument of development in both the public and the private sectors. This com-mitment and the fulfillment of its purpose are likely to involve a broadeningscope of activities. There will be an ongoing need to review the progress ofaccountancy development with reference to the evolving requirements ofIndonesian society on the one hand and the international financial community

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on the other. Special Consultants (about 20 person-months) are to beappointed under the project to oversee the needs and direction of accountancydevelopment in Indonesia and counsel the Government accordingly. The group islikely to comprise five distinguished authorities (two Indonesian and threeforeign) selected for their eminence in accountancy and could perhaps be con-vened under the aegis of one of the international accounting bodies such asIFAC or CAPA. It is envisioned that the special consultants would visitIndonesia twice annually to review ongoing programs of accountancy developmentand advise on the direction of further initiatives.

2.41 Project Evaluation. The Government would establish an evaluationsystem covering the project implementation process as well as overall projectimpact in relation to its immediate and long-term objectives. A set of mea-surable project outcome indicators has been developed and confirmed(Annex 6). Semiannual progress and evaluation reports would be prepared byeach of the two ministerial PIUs responsible for implementation in MOF andMOEC, respectively. The MOF subteam would be assisted by a local evaluationexpert. The reports would be submitted to the CAAD Steering Committee forreview, assessment, and transmission to the Bank. Following this review, thereports would be consolidated by CAAD and used as the basis for the agenda ofmeetings with the Special Consultants (para. 2.40). Assurances were obtainedat negotiations that CAAD would monitor all aspects of implementation of theproposed project throughout its implementation, and would furnish promptly tothe Bank semi-annual reports on project implementation. Throughout theproject period, CAAD would be supported by an expatriate monitoring andevaluation expert. Monitoring outcomes under the higher education subcom-ponent (para. 2.22) would also constitute important project-evaluation data.Implementation would be monitored by the Bank through:

(a) close collaboration with the CAAD Steering Committee in overallproject monitoring; and

(b) semiannual supervision missions including annual review of detailedplans for all project activities and budgets in coordination withthe annual government budget process.

III. PROJECT IMPLZMENTATION

Implementation

3.1 The project would be implemented over a period of five and one-halfyears (Annex 10). To allow sufficient time for submission of final withdrawalapplications following the scheduled completion date of December 31, 1993, theClosing Date would be June 30, 1994. While this period is sufficient toaccomplish specific project objectives, it is expected that the Governmentwill subsequently request project support for extension of the accountingreform throughout the country, a process that may take more than 20 years.

3.2 Status of Project Preparation. The proposed project was preparedwith technical assistance to CAAD under financing by the Bank (paras. 1.38,

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1.39, 2.5, and 2.6) and the Canadian International Development Agency. Sepa-

rate subproject management units for the Accounting Practice and the Account-

ing Education subprojects have been established; the managers and other key

personnel for each of the components are already at work. Schedules and plans

for packaging specialist services, bidding documents including terms of refer-

ence, short lists of consultant firms, schedules and management plans for

fellowship programs have been discussed in detail and confirmed. During nego-

tiations, the Government provided draft tender documents for equipment pro-

curement, master lists of book titles for about half of the total book orders,

expanded lists of fellowship candidates, terms of reference for technical

assistance/fellowship management contracts, and draft letter of invitation for

proposals and draft short lists of firms to be invited. Construction of the

new STAN campus has been completed except for access roads. The system test

of the government accountancy modernization program has been completed

(para. 2.6).

Procurement

3.3 As part of project preparation, equipment lists and arrangements for

consultant, fellowship and training services have been developed and found

acceptable to the Bank. Each of the three PIUs will procure in each category.

Both international and local competitive bidding will be employed for equip-

ment procurement. Procurement of technical assistance services and fellowship

and training management will, when possible, be consolidated within each PIU,

but the particular needs of each component may well cause separate arrange-

ments to be more effective. A breakdown of project expenditures by procure-

ment category is given in Table 3.1.

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Table 3.1: PROJECT EXPENDITURE BY PROCUREHIW? CATEGORY(US$ -aillion)

Total costincluding all

contin-Category of expenditure ICB LCB Other/a NA gencies /b

Civil works - 4.2 - - 4.2(0.0) (0.0)

Equipment and furniture 12.5 1.7 1.0 - 15.2(11.3) (1.1) (0.6) (13.0)

Books and instructional - - 4.7 - 4.7materials (4.1) (4.1)

Development of instructional - 6.5 1.8 - 8.3materials (6.5) (1.8) (8.3)

Specialist services - - 33.4 - 33.4(31.0) (31.0)

Overseas fellowship & training - - 21.4 - 21.4(21.4) (21.4)

In-country training - - 39.1 - 39.1(31.0) (31.0)

Institutional/students loans - - - 4.2 4.2(4.2) (4.2)

Project-related operating costs - - - 34.0 34.0(0.0) (0.0)

Total 12.5 12.4 101.4 38.2 164.5(11.3) T7-6) (89.9) (4.2) (113.0)

/a Other procurement includes: (i) specialist services, training anddevelopment of instructional materials; and (ii) small equipment items,books and materials expected to be purchased through prudent shopping.

/b Values in parentheses are estimated disbursements from loan including priceand physical contingencies. The inclusion of physical contingenciesaccounts for the discrepancy between these values and the amounts shown inTable 4.3.

3.4 Equipment would be grouped to the extent possible in packages tofacilitate bulk procurement and packages valued at US$200,000 or more(estimated total value US$12.5 million) would be awarded on the basis ofInternational Competitive Bidding (ICB) in accordance with Bank procurementguidelines. In comparison of bids for equipment, local manufacturers would begiven a margin of preference of 15% of the c.i.f. price of competing importsor the actual customs duty, whichever is lower. Equipment packages valued atless than US$200,000 up to an aggregate of US$1.2 million and furniture (esti-mated totall. value US$0.5 million) would be procured through Local CompetitiveBidding (LCB) in accordance with Government procurement procedures acceptable

- 30 -

to the Bank. However, equipment and furniture arranged in packages notexceeding US$30,000 equivalent for each package and aggregating to a maximumof US$1 million equivalent could be purchased through prudent shopping on thebasis of quotations from at least three suppliers eligible under Bank procure-ment guidelines. Prior Bank review of bidding documents and proposed contractawards would be required for all contracts for equipment awarded on the basisof ICB, i.e. above US$200,000, estimated to cost about US$12.5 million (82% ofthe value).

3.5 Books and instructional materials (estimated value US$4.7 million)may be procured under contracts awarded on the basis of comparison of quota-tions, including price discounts and conditions of services, solicited from alist of at least two suppliers eligible under Bank procurement guidelines.Development of instructional materials. Selection of the authors and editorsfor development of instructional materials would be done through a process ofpeer review by faculty consortia from the relevant subject departments. Inorder to reduce costs of delivery to schools and institutions in dispersedareas, instructional materials will be printed in regions and each contract isestimated to be relatively small (less than US$200,000 each). Printing ofinstructional materials and their delivery (estimated value US$6.5 million)may be procured through LCB, the procedure being used under the Textbook IIProject (Ln. 2102-IND) and the Nonformal II Project (Ln. 2355-IND), in accord-ance with Government procurement procedures acceptable to the Bank. PriorBank review of proposed contract awards would be required for contractsexceeding US$200,000 for development of instructional materials.

3.6 Technical Assistance and Staff Development (estimated valueUS$93.9 million). The project would provide substantial programs of staff andteacher training and of specialist services. In sum, there would be about710 staff-years of overseas training and about 6,900 staff-years of trainingin Indonesia. By component, there would be about 200 staff-years of overseastraining and about 2,600 staff-years of in-country training for accountancypractice, and about 510 staff-years of overseas training and 4,300 staff-yearsof in-country training for accountancy education (Annex 7A and 7B). Inrespect of specialist services, there would be, in total, about 230 person-years of local specialist services and about 100 person-years of foreignspecialist services for both accounting practice and accounting education. Byfield of assistance, there would be about 125 person-years of local, and about70 person-years of foreign, specialist services for accounting practice, about80 local, and about 20 foreign, person-years of specialist services foraccounting education and about 25 local and 10 foreign consultant person-yearsof specialist services for project monitoring and evaluation (Annex 8). Theseare considered to be the minimum necessary requirements for implementing thisinitial phase of the planned government accountancy modernization program andrelated training.

3.7 The Government has learned from experience in previous projects thedesirability of contracting with agencies to acquire such important projectelements as visiting scholars, fellowship placement and management, predepar-ture language and other skills training, and study visits. Thereforecontracts are planned to procure such services. The three PIUs would enterinto large and small contracts for most, but not all of the services.

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Overseas fellowship and training programs would probably be separated fromlocal. Table 3.2 shows for each PIU the breakdown by five types of servicesand may serve as an indication of the size of contracts to be secured. Con-solidation of such contracts within the PIUs is a possibility and, if thiswere to be the choice, some resulting contracts could become quite large.However, the more likely outcome is separate contracts for components or sep-arate contracts for types of services to be procured. Consolidation should beattempted whenever possible to minimize the delays and expense inherent in theselection process. The contract for expert services related to the systemtest (para. 2.5) is a case where sole-source selection is clearly appropriatesince one firm has already had three contracts (for systems analysis, design,

* and training) under previous Bank loans in this program, and has performedsatisfactorily. Apart from this, procurement of services will employ competi-tive proposal methods in conformity with Bank guidelines.

Table 3.2: SUMMARY OF PROCUREMENT OF SERVICES BY PIU(US$ million) /a

Project PIUsAccounting Accounting Accountingpractice education evaluation(MOF) (MOEC) (CAAD) Total

Technical AssistanceForeign 11.5 2.6 1.8 15.9Local 4.7 7.2 0.7 12.6

Subtotal 16.2 9.8 2.5 28.5

Staff DevelopmentOverseas fellowships 3.3 7.3 - 10.6Overseas training 3.8 4.9 0.2 8.9In-country training 15.6 18.5 - 34.1

Subtotal 22.7 30.7 0.2 53.6

Total 38.9 40.5 2.7 82.1

/a Excluding contingencies.

Disbursen.ents

3.8 The proposed loan of US$113 million would be disbursed over a periodof six years. Disbursements would be made against the following categories ofexpenditures: (a) equipment and furniture--l00% of foreign expenditures fordirectly imported, 95% of local expenditures (ex-factory cost) for locallymanufactured and 65% of local expenditures for other items procured locally;(b) development of instructional materials--100Z of total expenditures; and

- 32 -

books and instructional materials other than development of instructionalmaterials--100l of foreign expenditures, lOOZ of local expenditures (ex-factory cost) and 75Z of local expenditures for other items procured locally;(c) specialist services-lO0Z of total expenditures; (d) overseas fellowshipsand training-d100Z of total expenditures; (e) in-country training--80% oftotal expenditures; and (f) institutional/students loans--l00Z of totalexpenditures. In-country training costs would be reimbursed on the basis ofagreed unit costs which would be reviewed annually.

3.9 The estimated schedule of disbursements (Annex 9) has been based onthe implementation schedule and the disbursement profiles of education andother projects in Indonesia, modified to reflect a six-year disbursementperiod instead of the average of nine years for past projects. The shorterimplementation and disbursement period is warranted by the fact that: (i)project preparation is at an advanced stage--particularly the establishment ofproject implementation units, designation of key personnel in the PIUs, sched-ules and arrangements for project activities (para. 3.2); (ii) the proposedproject is designed to support continuation and expansion of ongoing trainingprograms for accounting staff and teachers, which were developed by the pre-vious Bank-assisted projects; and (iii) the proposed project involves virtu-ally no further civil works since construction of the new STAN campus isnearing completion.

3.10 Withdrawal applications would be fully documented except for expen-ditures relating to in-country training, institutional/students' loans andcontracts for goods and services each valued at less than US$100,000 equiva-lent for which reimbursements may be made against certified statements ofexpenditure (SOE). Documentation supporting the SOEs would be retained by thePIUs and made available for review by visting Bank missions. To the extentpracticable, withdrawal applications would be aggregated in amounts ofUS$60,000 equivalent or more prior to submission to the Bank for reimbursementout of the proceeds of the Loan.

3.11 In order to avoid the necessity of prefinancing expenditures whichare reimbursable by the Bank and to simplify and expedite disbursement admin-istration, the Government would establish a Special Account in Bank Indonesiato be maintained by the Directorate General of Budget, MOF. The SpecialAccount would be used for all local currency payments made against all dis-bursement categories. The Bank would make an initial deposit equivalent to anestimated four-months' disbursements (US$2 million) for local expenditures tothe Special Account upon loan effectiveness and upon confirmation of theestablishment of the Special Account. The Account would be replenished everymonth or when payments reach one-half of the initial deposit,on the basis ofreplenishment requests with supporting documents satisfactory to the Bank. Amonthly statement on the Special Account would be submitted to the Bank by theDirectorate General of Budget, MOF.

Project Accounts, Audits, and Reporting

3.12 Project accounts would be kept in accordance with sound accountingpractice. During negotiations the Government provided assurances that(a) accounts and statements of expenditures for each fiscal year would be

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prepared and audited by independent auditors acceptable to the lank, aud

(b) would be furnished to the Bank, together with the auditor's report thereon

as soon as possible but not later than nine months after the end of sach

Government fiscal year. Cis months after the closing date, the Covernment

would submit to the Bank a project completion report covering all project

components.

IV* PROJECT COSTS AND FINANCINC

Cost Estimates

4.1 The total cost of the project is estimated at US$164.5 million

equivalent, with a foreign-exchange cost of US$76.5 million, 472 of total

costs. The estimated cost by project component is sumarized in Table 4.1 and

by category of expenditure in Table 4.2. Summary costs by component and

category are given in Annex 11.

4.2 Base costs are expressed at February 1988 prices. Training and

technical assistance costs are based on current actual unit costs of such

services in other education and training projects in Indonesia. Overseas fel-

lowship costs are estimated at an average of US$20,000 per year for degree

programs and US$15-25,000 for short-term (3-6 month) study programs. Unit

costs for local fellowships are estimated at Rupiah 6 million per year for the

S2 program and Rupiah 1.8 million per year for undergraduate courses for lec-

turer/teacher candidates. Estimates of equipment costs are based on master

equipment lists, which include primarily computers, audio-visual equipment,

calculators for training. Incremental operating costs (i.e. honoraria and

allowances, materials, administrative travel, facility rental) directly

attributable to project activities are included in the project and mount to

about 201 of project base costs. Also included in the project (but not

financed under the proposed Loan) are construction of the new STAN campus

which is nearing completion and the expenditures incurred during the past

three years for preparation of the project and not financed under earlier

projects. Duties and taxes on works, equipment and services are estimated at

about US$3 million equivalent.

4.3 The estimated foreign exchange cost of US$76.5 million representing

about 472 of the total estimated cost has been calculated on the basis of the

estimated foreign exchange percentages shown in Table 4.2. Total physical

contingencies are about 62 of base cost: 10X of base costs has been allowed

for specialist services and 5X for equipment, books, instructional materials,

training and operating costs. Price contingencies which are equivalent to

about 72 of base costs plus physical contingencies were calculated in

accordance with the implementation schedule and the following expected average

annual price increases: local-5Z for 1988 and 3.52 for subsequent years; and

foreign-lI% for 1988-90 and 3.52 for subsequent years.

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Table 4.1: SUMOARY OF PROJECT COSTS NY COWONENT

ForeignLocal Foreign Total Local Foreign Total as X of

- (Rp billion) - - (USs *illion) total

Accounting PracticeGovernment accounting 9.4 12.6 22.0 5.7 7.6 13.3 57Government auditing 12.8 13.1 25.9 7.8 7.9 15.7 51Government ed. & training (STAN) 18.8 14.3 33.1 11.4 8.7 20.1 43Capital sarket 2.1 3.1 5.2 1.3 1.9 3.2 60Private sector:Indonesian Institute ofAccountants (IAI) 2.3 0.5 2.8 1.4 0.3 1.7 19

Other private sector 0.5 0.1 0.6 0.3 0.1 0.4 15Subproject management 2.6 3.3 5.9 1.5 2.0 3.5 55

Subtotal 48.5 47.0 95.5 29.4 28.5 57.9 49

Accounting EducationHigher education 14.6 25.6 40.2 8.8 15.6 24.4 64Secondary education:Upper secondary commercial(SMEA) 10.4 15.3 25.7 6.3 9.2 15.5 60

Upper secondary general (SMA) 10.3 10.6 20.9 6.2 6.4 12.6 51Nonformal education 23.6 9.3 32.9 14.3 5.7 20.0 28Subproject management 11.3 2.8 14.1 6.9 1.7 8.6 20

Subtotal 70.2 63.6 133.8 42.5 38.6 81.1 48

Planning, Monitoring & EvaluationCAAD 7.0 4.6 11.6 4.3 2.7 7.0 39

Total Base Cost (Feb 1988) 125.7 115.2 240.9 76.2 69.8 146.0 48

Physical contingencies 6.7 6.7 13.4 4.0 4.1 8.1 50Price contingencies 12.8 4.3 17.1 7.8 2.6 10.4 25

Total Project Cost /a 145.2 126.2 271.4 88.0 76.5 164.5 47

/a Includes identifiable taxes estimated at-about US$3 sillion equivalent.

- 35 -

Table 4.2: SUMMARY OF PROJECT COSTS BY CATEGORY OF EXPENDITURE

ForeignLocal Foreign Total Local Foreign Total as X of

- (Rp billion) - - (US$ million) --- total

Civil works 5.4 1.4 6.8 3.3 0.8 4.1 20

Equipment 2.3 20.2 22.5 1.4 12.3 13.7 90

Furniture 0.6 0.2 0.8 0.4 0.1 0.5 30

Books & instructional materials:Books and journals 0.7 6.1 6.8 0.4 3.7 4.1 90

Instructional materials 0.2 0.2 0.4 0.1 0.1 0.2 50

Development of instructionalmaterials 8.0 4.2 12.2 4.9 2.5 7.4 35

Specialist services:Foreign specialists 2.7 23.5 26.2 1.6 14.3 15.9 90

Local specialists 17.8 3.1 20.9 10.7 1.9 12.6 15

Staff development:Overseas fellowships & training 1.6 30.5 32.1 1.0 18.5 19.5 95

In-country training 42.3 14.0 56.3 25.7 8.4 34.1 25

Institutional/students loans:Institutional fund 0.6 3.2 3.8 0.3 2.0 2.3 85

Learning fund 2.1 0.7 2.8 1.3 0.4 1.7 25

Incremental operating costs 41.4 7.9 49.3 25.1 4.8 29.9 16

Total Base Cost (Feb 1988) 125.7 115.2 240.9 76.2 69.8 146.0 48

Physical contingencies 6.7 6.7 13.4 4.0 4.1 8.1 50

Price contingencies 12.8 4.3 17.1 7.8 2.6 10.4 25

Total Project Cost /a 145.2 126.2 271.4 88.0 76.5 164.5 47

/a Includes identifiable taxes estimated at about US$3 million equivalent.

- 36 -

Financing Plan

4.4 The proposed Bank loan of US$113 million would finance 70Z of theproject costs net of duties and taxes (about US$3.0 million equivalent). Theremaining US$51.5 million including duties and taxes would be provided by theGoverrment. The proposed financing plan is shown in Table 4.3.

Table 4.3: PROPOSED FINANCING PLAN(US$ million)

IBRDshare (X)

Govern- (exclusiveCategory of expenditure ment /a IBRD Total /a of taxes)

Civil works 4.2 - 4.2 0(0.4) (0.4)

Equipment & furniture 1.8 12.7 14.5 90(0.3) (0.3)

Books & instructionalmaterials 0.5 4.0 4.5 90

Development of instructionalmaterials - 7.9 7.9 100

Specialists' services 2.2 28.1 30.3 100(2.2) (2.2)

Overseas fellowshipand training - 20.4 20.4 100

In-country training 7.5 29.7 37.2 80

Institutional/students loans:Institutional fund - 2.4 2.4 100Learning fund - 1.8 1.8 100

Incremental operatingcosts 32.6 - 32.6 0

Unallocated 2.7 6.0 8.7(0.1) (0.1)

Total 51.5 113.0 164.5 70(3.0) (3.0)

/a Figures in parentheses show estimated taxes included in totals.

4.5 Budget Allocations. Budget allocations would be made to the projectannually in accordance with an updated expenditure schedule based on theagreed annual plan of activities, which would be reviewed and updated annuallyby the Government in consultation with the Bank. During negotiations,

- 37 -

assurances were obtained that the Government would, throughout project imple-

mentation, prepare an annual plan and budget in consultation with the Bank and

carry out the project in accordance with such plan. The Covernment also

provided at negotiations preliminary budget allocations related to the

schedule of activities for the first year, 1988/89.

V. BENEFITS AND RISKS

5.1 Benefits. The benefits of the proposed project in the form of

improved public stewardship, improved planning, and capital market development

are sizable but diffuse. Significant benefits would result from each subproj-

ect. The accounting practice subproject would assist the Government to:

(a) refine and implement a first phase program of major actions to modernize

the entire government accounting system; (b) analyze and improve the opera-

tions of the several government agencies responsible for audit; (c) upgrade

the quality and increase the quantity of MOF staff training; (d) begin the

process of developing the nation's stock exchange as an important source of

investment capital; and (e) strengthen the professional organization of

accountants. The accounting education subproject would improve the quality

and quantity of accounting manpower, both through formal courses at the uni-

versity and secondary levels, and through nonformal instruction for persons

outside the regular educational structure. The evaluation and planning sub-

project would bring the results of the two operational subprojects into per-

spective and help map the Government's strategy for future actions in

accountancy and related fields. Few projects would have as broad an impact.

5.2 Risks. The principal risk of the proposed project is related to the

size and scope of the operation--10 components implemented in two ministries

under 5 directorates-general and affecting a broad spectrum of Government and

society. This risk is reduced by the long preparation process during which

the plans of the Government in accountancy modernization were widely dis-

cussed. It is further reduced by the resolve shown by both implementing

ministries in creating strongly staffed and well-designed implementation

units. The establishment and continuation of the vital work of CAAD assisted

by the Special Consultants provides additional reassurances that this risk

will be successfully addressed.

VI. AGREEMENTS REACHED AND RECOMMENDATION

6.1 Agreements Reached. During negotiations, the Government provided

assurances that:

(a) a detailed program for implementation of government accountancymodernization, including the organizational changes and government

Instructions necessary for successful implementation, would be

submitted to the Bank for comment by December 31, 1988, and would

subsequently be implemented in a manner satisfactory to the Bank

(para. 2.7);

- 38 -

(b) CAAD and the MOEC and MOF implementation units would be maintainedthroughout the project with appropriate functions, staffing, andresources (parar. 2.37 and 2.38);

(c) CAAD would monitor all aspects of project implementation throughoutthe project, and would furnish promptly to the Bank semi-annualprogress reports thereon (para. 2.41);

(d) project accounts would be maintained, audited and submitted for Bankreview yearly (para. 3.12); and

(e) annual plans and budgets would be prepared in consultation with theBank, and the project would be carried out in accordance with suchplans and budgets (para. 4.5).

Recomendation

6.2 Agreement having been reached on these matters, the project wouldconstitute a suitable basis for a Bank loan of US$113 million equivalent tothe Republic of Indonesia for a term of 20 years, including a grace period offive years at the standard variable interest rate.

INDONESIAAccoL!ntancy Devekopment Protect

Orgonlzaklon Structure d Protect Impb tentatbon Units

rMfsefd d Stdte r( Urid I

CAAD9S Ee~~~~~A*

C_. C _______. aAo ce ctrnnomnd

Subm&C ao& 800saalr (ChWWvCwdtwodn Wi h SocmtiWbl

Edu AN3

AClounWig Rodl 9bpxr

____ cotion ond LkMs Word B"- 4091

- 40 -*mnnE

INDONESIA

ACCOUNTANCY DEVELOPMENT PROJECT

The Structure for Accounting Development In Uigher Education

UndergraduateAccredi- Accounting accounting

Name of Location ADC tation faculty 1986/87 /a student sajorsuniversity (city) status status Total fjmn Outside 1I581986187

Indonesia Jakarta Existing Full 55 55 0 607 579

Gadjah Mada Jogyakarta " " 28 28 0 810 805

North Sumatra Medan " 32 32 0 659 597

Pajajaran Bandung To be " 38 38 0 770 812established

Airlangga Surabaya " " 32 32 0 312 387

Sriwijaya Palembang None " 29 15 14 292 322

Brawijaya Malang To be Partial 30 30 0 442 652established

Andalas Padang None None 20 15 5 563 650

Syiah Kuala Banda Aceh " Partial 24 20 4 350 424

Diponegoro Semarang " None 13 11 2 374 436

Riau Pekan Baru " " 11 8 5 100 125

Hasanuddin Ujung Pandang " " 13 10 3 305 282

Sedelas Maret Surakarta " " /b

Sam Raiulangi Menado b" b

Udayana Denpasar " 8 8 0 0 0

Mulawarman Samarinda " " /b

Sudirman Purwokerto " " 6 6 0 0 0

Lanbung Mangkurat Banjarmasin " " 13 5 8 48 46

Total 354 313 41 5.632 6,117

/a Faculty members holding accounting degree and teaching accounting. "Own" means principalassignment to the university shown. "Outside" means faculty drawn from other universitiesor agencies.

/b The universities are preparing to establish accounting facilities.

Source: Directorate General of Higher Education, MOEC.

- 41 - ANNEX 2

INDONESIA

ACCOUNTANCY DEVELOPMENT PROJECT

Staff Developemnt in Higher Education

Degree abroad Short course abroad In-country

Doe- Short-

Masters toral General Special Refreshing S-2 courses

Institution 2 yrs 5 yre - 6 months - -- 2 yr. 2 months

Indonesia 10 4 2 5 5 5 -

Gadjah Mada 10 5 2 5 5 5 -

North Sumatra 8 2 3 3 2 5 -

Pajadjarah 7 2 3 3 2 5 -

Airlangga 7 2 3 3 2 5 -

Sriwijaya 4 1 2 2 - 5 2

Brawijaya 7 2 3 3 2 5 -

Andalas 4 1 2 2 - 5 2

Syiah Kuala 4 1 2 2 - 5 2

Diponegoro 4 - 2 2 - 5 2

Riau 4 - 2 2 - 5 3

Hasanuddin 4 - 2 2 - 5 3

Sedelas Maret 4 - 2 2 - 5 3

Sam Raiulangi 4 - 2 2 - 5 3

Udayana 4 - 3 2 2 5 4

Other project universities - - 3 - 7 - 4

IKIPs - - 12 - 8 - 200/a

Polytechnics 15 - - - - 5 6

Subtotal Govt.Institutions 100 20 50 40 35 80 234

Private Unlv./SIE 25 5 15 15 - 10 10

Academies 10 - 10 - - 10 56

Grand Total Persons 135 25 75 55 35 100 300

Total Man-Years 270 125 38 28 18 200 57

/a Three-month training.

- 42- ANNEX 3Page 1 of 2

INDONESIA

ACCOUVTANCY DEVELOPHEIT PROJECT

COHHKCCIAL SECONDARY SCHOOLS (SHEA)

Co uosition of 1984 Curriculum for Business and Co _merical High SchoolsAccountancy Program Finance Cluster)

Grade/semester TotalII III credit

Program Subjects T-7 V--4 5- b hours

¢eneral program 1 Religion education 2 2 2 2 2 2 122 Pon" sila morale 2 2 2 2 2 2 123 Indonesian history education 2 - 2 - 2 - 64 N"tional and international history education - 2 - 2 - 2 65 Indonesian language 2 2 2 2 2 2 126 Health and sports education 2 2 2 2 2 - 10

Total 10 10 10 10 10 8 58

Vocational ProgramVocatiomal theory 7 Mathemtics 4 4 4 4 - - 16

8 English 3 3 4 4 4 4 22 /b9 Introduction of Kanagement 2 2 - - - - 4

10 tconomics 2 2 - - - - 411 Cooperative 2 2 2 2 - - 8_2 Typing 4 4 3 3 - - 1413 Introduction of Business 4 4 - - - - 814 Elementary Accounting * 4 4 - - - - 815 Trade and Civil Law 2 2 2 2 - - 816 Indonesian Correspondence 3 3 - - - - 6

Total 30 30 15 15 4 4 98

Optiomal 1 Financing Accounting * - - 7 7 5 5 242 Cost Accounting * - - 4 4 5 5 183 Financial Report Analysis * - - - - 2 4 64 Internal Auditing * - - - - 2 2 45 Data Processing Technology - - 2 2 2 2 86 Tases * 4 4 87 Statistics * ---- 44 88 Enterprise Economics * - - 2 2 2 2 89 Co _ rce and Trade Experience - - - - -/a - -

Total - - 15 15 26 28 84

Grand Total 40 40 40 40 40 40 240

Ia Comsrce and Trade Experience is conducted semester 5.

/b The 22 credit hours of English language is divided: 10 in general English and 12 in businessend correspondence English.

* Detailed curricula are provided in working papers.

Sources Directorate Ceneral of Secondary Education, HOEC.

- 43 - ANN 3Page 2 of 2

I. Objectives of the Program

To give the graduates sufficient skills and professional attitudes

to work as junior assistants of accounting at the middle competencylevel.

II. Competencies of the Graduates

Upon graduation the students should be able to:

1. record all business transactions into key documents;

2. transfer records of all business transactions into balance sheets

and main balance books;

3. create report/balance sheet;

4. prepare and arrange financial reports;

5. analyze financial reports;

6. carry out data processing for all business transactions, manually or

mechanically, for consultant services, trade and industries(included in para. 1 to 6); and

7. communicate in English, written end orally, within accountingsubjects.

III. Job Positions

Upon graduation, the students would be assigned within the followingfields: (1) bookkeeper, cashier or other accounting relevant jobs;

(2) general bookkeeper; (3) bookkeeping administration; (4) financialadministration and similar offices; (5) office cashier, bank cashier,trades and other business fields; (6) money changing; (7) cashbookkeeping and similar accounting related fields; (8) budget provision;(9) wage/salary administration; and (10) operator of accounting machines,

calculators and computers, and other data processing.

ANNEX 4- 44 -

INDONESIA

ACCOUNTANCY DEVELOPHENT PROJECT

GENERAL SECONDARY SCHOOLS (SKA)

Distribution of Enrollment Among Classesand Academic Streams, 1986/87

Public Private TotalClass Grade Number Hors Ver Number Horz Ver Number Horz Ver

2 Z 2 2 X %

Class I 10 345,691 46 38 409,966 54 37 755,657 100 37Class II 11 283,580 47 31 316,434 53 28 600,019 100 30Class III 12 277,303 42 31 388,606 58 35 665,909 100 33

Total - 906,514 45 100 1,115,006 55 100 2,025,585 100 100

Class II (Grade 11)Physical science 51,391 53 18 44,798 47 14 96,189 100 16Bialogical science 85,641 48 30 92,034 52 29 177,675 iol1 29Social science 136,168 44 48 174,323 56 55 310,491 100 52Culture 10,380 66 4 5,279 34 2 15,659 100 3

Class III (Crade 12)Physical science 51,157 46 19 60,291 54 15 111,448 100 17Biological science 78,269 44 28 100,306 56 26 178,575 100 27Social science 136,803 38 49 221,825 62 57 358,628 100 54Culture 11,074 64 4 6,184 36 2 17,258 100 2

Notes: Horz - Percentage of total public and private enrollments.Ver - Percentage of total enrollment by grade level.

Source: Directorate General of Secondary Education, MOEC.

- 45 -ANNEX 5

INDONESIA

ACCOUNTANCY DEVELOPMENT PROJECT

Upper Secondary General Schools (SMA)

Study Program Outline

Social Science Stream: ECONOMY/ACCOUNTING

Semes- Study

Grade ter Subject hrs/a

II 3 INTRODUCTION TO ACCOUNTING. History, concept and appli- 4cations; internal and external uses

ACCOUNTANCY STAGES. Drafting accounting cycle outline 6including entry proofs, summarizing and reporting

ACCOUNTANCY TYPES. Financial and management accounting; 2

public, internal and government accountingTRIAL BALANCE. Assets, liabilities, capital, 6

expenses and revenuesBALANCING THE BALANCE SHEET. Comprehension of assets, 12

debts and capital adjustments through accounting compa-rison analysis

CODING. Numerical, decimal, mnemonic and combined 2

codingFINANCIAL STATEMENT. Uses of the financial statement; 4

balance sheet; profit/loss statement

Subtotal, study hours, semester 3 36

II 4 APPLIED ACCOUNTING (Service Company). Entry proofs, 12

journal and ledgerTRIAL BALANCE. Adjustment, worksheet 14

CLOSING OF THE GENERAL LEDGER. Booking over expenditures 6

balance to income trial statement, income balance toprofit/loss statement, private balance to capital, andprofit/loss to capital

FINAL BALANCE SHEET. Drafting of final balance sheet 2

Subtotal, study hours, semester 4 34

III 5 INCOME STATEMENT. Report form, account form, balance 10

sheet presentation, capital statement, net incomeTRADING COMPANY ACCOUNTING. Definition of trading com- 26

pany, special journal transfer to ledger, service ledger

Subtotal, study hours, semester 5 36

III 6 WORK SHEET FOR TRADING COMPANY. 8

SALES & COSTS. Opening stock, closing stock, gross 8profit, net profit

Subtotal, study hours, semester 6 16

TOTAL STUDY HOURS, ACCOUNTING 122

/a One Semester Credit Hour is equivalent to about 18 study hours.

Source: Directorate General of Secondary Education, MOEC.

-46 -ANNEX 6Page 1 of 3

INDONESIA

ACCOUNTANCY DEVELOPMENT PROJECT

Project Outcome Indicators

End of projectBase 1987 target 1993

Accounting Practice Subproject

220 Government accounting implementation ina number of agencies according to a pro-gram to be determined after simulation

240 Goverment AuditingBPKAuditors 1,100 with modest 1,600 with

training comprehensivetraining

Research and development Less than 10 35 projects onprojects modern audit

methodologiesand managementof controlsystem

5 modest 20 guidelinesguidelines on the appli-

cation ofgovernmentauditingstandards

Modest audit the devel-manuals opment of

audit manualsfor each auditorganization

260 STANNumber of instructors holding doc- None 5 or moretoral degrees

Number of instructors holding for- Less than 5 40 or moreeign master degrees

Number of diploma trainees About 600 3,000 /a

/a Subject to government requirements.

-47 - ANIU 6va go 2 ot 3

End of projectBase 1987 target 1993

270 Capital MarketNumber of companies with securities in Less than 30 Over 50the market

Daily transactions (securities traded) Less than 5,000 Over 20,000

Guidelines/circuLars re financial 4 4 revised plusreporting and securities issuance over 30 new

draft*

Staff trained overseas in accounting, 11 S0issuance, law and economics

Computerized data base of company None In operationreports

280 Private SectorNumber of IAI members About 2,000 Over 4,000

Additional Indonesian accounting - 17principles

Additional Indonesian auditing - 12standards

Compilation of code of ethics Completed

Accounting Education Subproject

320 Higher EducationNumber of doctoral degree holders Under 10 Over 30teaching in university accounting pro-grams

Number of foreign master degree hold- About 30 Over 100ers teaching in university accountingprograms

Number of students enrolled in univer- About 6,000 Over 8,500sity S-1 accounting programs

Number of S-2 programs in accounting 1 2

-48 - ANNEX 6

Pag 3 of 3

End of projectBase 1987 target 1993

330 Secondary bduc! tlonPrIportion of SiA and SMEA accounting Under 202 Over 902teachers trained In modern subjectcontent

Nluber of students enrolled In SHEAaccounting stream: Public Under 80,000 Over 100,000

Private Under 70,000 Over 100,000Total About 150,000 Over 200,000

Number of schools using computers Inaccounting institution: Sik Less than 20 Over 100

SMEA Less than 20 Over 100

340 Nonforul EducatlonN3mber of lnstitutions offering About 750 About 1,200accounting trainlng

Number of participants in accounting About 100,000 Over 120,000training

Proportion of Instructors In account- Less than 102 Over 802ing who have been trained in moderntechniques

AM=E 7- 49- ANNIE 7

_ 49 _ li~~~~~~~~~Tble APage 1 of 2

INDOKISIA

ACCOUNTANCY DEVEWPFHUt PROJECT

Staff Development Program

Summary of Local Staff Dewslopu ;t Trainin Activities

(ctaft-y r)

No. ofComponent participants 1986/89 1989/90 1990/91 1991/92 1992/93 1993/94 Total

Accountins Practice

Government AuditingUf:4-day courses 3,000 - 10.0 10.0 10.0 10.0 - 40.0

aPm:Short courses 10,643 - 286.5 286.5 286.5 286.5 - 1,146.0

Subtotal government auditing 13.643 0.0 296.5 296.5 296.5 296.5 0.0 1,186.0

Government Education & TrainingADC-based courses:Seminars for internal auditors 600 1.6 1.6 1.6 1.6 1.6 - 8.0

Basic auditing 1,500 10.0 10.0 10.0 10.0 10.0 - 50.0

Internal control 150 0.8 0.8 0.8 0.8 0.8 - 4.0

Advanced auditing 750 4.0 4.0 4.0 4.0 4.0 - 20.0

Co mamnication 2,250 7.5 7.5 7.5 7.5 7.5 - 37.5

Cov. law & regulation 2,250 12.0 12.0 12.0 12.0 12.0 - 60.0

Accounting 1,R00 9.6 9.6 9.6 9.6 9.6 - 48.0

ludgetting 150 0.8 0.8 0.8 0.8 0.8 - 4.0

General business 1,650 19.8 19.8 19.8 19.8 19.8 - 99.0

Statistical sanpling 750 4.0 4.0 4.0 4.0 4.0 - 20.0

Intro. to computers 3,090 10.3 10.3 10.3 10.3 10.3 - 51.5

Intro. to computer audit 2,700 9.0 9.0 9.0 9.0 9.0 - 45.0

Computer audit 390 2.6 2.6 2.6 2.6 2.6 - 13.0

Advanced computer audit 1,210 8.1 8.1 8.1 8.0 8.0 - 40.3

Value for money audit 1,210 11.3 11.3 11.3 11.3 11.3 - 56.5

Mlgt. of audit work 480 2.2 2.2 2.2 2.2 2.2 - 11.2

Mget. of nudit office 480 0.9 0.9 1.0 1.0 1.0 - 4.8

Govt. policies In audit 480 1.2 1.3 1.3 1.3 1.3 - 6.4

Course for instructors 150 2.2 2.2 2.2 2.2 2.2 - 11.0

Computer training, STAN-staff& instructors 110 0.7 0.7 0.7 0.8 0.8 - 3.7

Seminars 6 prof. conferencesin Indonesia 40 0.1 0.1 0.2 0.2 0.1 - 0.7

Upgrading courses:Training of instructors 25 1.3 2.0 - - - - 3.3

Upgrading: New accounting stand. 16,700 - 194.8 194.8 194.8 194.9 - 779.3

Subtotal Government education& training 38.915 120.2 315.7 313.7 313.7 313.7 0.0 1,377.2

Total Accountinz Practices 52.558 120.2 612.2 610.2 610.2 610.2 0.0 2,563.2

_-SO-_ Tbla A

Page 2 of 2

No. ofComponent participants 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 Total

Accounting Education

RiOher du4cationS2 triining, instructors (2 yr..)State universities 80 20.0 40.0 40.0 40.0 20.0 - 160.0Private inetitutions 20 5.0 10.0 ;0.0 10.0 5.0 - 40.0

Teacher upgradingState universities (2 months) 34 1.9 1.8 1.8 - - - 5.5Private institutions (2 months) 66 3.8 3.7 3.7 _- - 11.1IKIPs (3 months) 200 10.0 10.0 10.0 10.0 10.0 - 50.0

Teaching career fellowships (3 yr..) 200 100.0 200.0 200.0 100.0 - - 600.0Seminars/workshopsDoenstic speakers 625 1.3 1.3 1.3 1.3 1.3 - 6.3Overseas speakers 250 0.5 0.5 0.5 0.5 0.5 - 2.5

Subtotal higher education 1.475 142.4 267.3 267.3 161.8 36.8 0.0 875.4

SHEATeacher upgrading coursesPublic SNEAs (4 months) 900 60.0 60.0 60.0 60.0 60.0 - 300.0Private SHEAa (4 months) 200 13.4 13.3 13.4 13.3 13.3 - 66.7

Training, computer ad-. (2 months) 100 8.3 - 8.3 - - - 16.6Local fellowships (3 years) 200 100.0 100.0 200.0 100.0 100.0 - 600.0

Subtotal SEA 1.400 181.7 173.3 281.7 173.3 173.3 0.0 983.3

SNATeacher upgrading programPKG-instructor training (8 moe.) 104 21.3 21.3 26.7 - - - 69.3PKG (8 months) 2,352 - 210.7 386.0 542.0 429.3 - 1,568.0

Training, computer adadn. (2 moa.) 100 8.4 - 8.3 - - - 16.7

Subtotal SMA 2.556 29.7 232.0 421.0 542.0 429.3 - 1.654.0

Nonformal EducationTraining of mater trainer.:Master trainers (35 days) 35 0.8 0.8 0.8 0.8 0.8 - 4.1Instructors (35 days) 3,610 84.2 84.2 84.2 84.2 84.2 - 421.2

Training of owners/managera:Master trainers (25 days) 35 0.6 0.6 0.6 0.6 0.5 - 2.9Owners/mnagers (25 days) 706 11.7 11.8 11.7 11.8 11.8 - 58.8

Training of Examin. writers:Master trainers (25 days) 35 0.6 0.6 0.6 0.6 0.6 - 2.9Examination writers (25 days) 1,800 30.0 30.0 30.0 30.0 30.0 - 150.0

Training of Examin. graders:Master trainers (15 days) 35 0.6 - 0.6 - 0.6 - 1.8Examination graders (15 days) 1,800 30.0 - 80.0 - 30.0 - 90.0

Training of supervisors:Master trainers (25 days) 142 2.4 2.4 2.4 2.4 2.4 - 11.8Supervisors (25 days) 885 14.7 14.8 14.8 14.7 14.8 - 73.8Subdistr. supervisors (25 days) 295 4.9 4.9 4.9 4.9 4.9 - 24.6

Subtotal nonformal education 9.378 180.6 150.0 180.6 150.0 180.6 0.0 841.8

Total Accounting Education 14.809 534.3 822.6 1.150.5 1.027.1 820.0 0.0 4,354.6

Total Local Training 67.367 654.6 1.434.8 1.760.8 1,637.3 1,430.3 0.0 6.917.8

Note: Some totals do not add up due to rounding.

-51- ANNEX 7Table aPage I of 2

INDONESIA

ACCOUNTANCY DEVELOPMENT PROJECT

Staff Development Progras

Summary of Overseas Fellowship/Training Progras - by Component and Year(staff-year)

No. ofpartici-

Component pants 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 Total

Accounting Practice

Government Auditing /aMaster degree program (2 years) BPK 13 - 5.0 9.0 8.0 4.0 - 26.0

Doctoral degree program (5 years) BPK 2 2.0 2.0 2.0 2.0 2.0 - 10.0

Short-term study (6 months) BPK 10 1.0 1.0 1.0 1.0 1.0 - 5.0

Short-term study (3 months)BPK 20 1.0 1.0 1.0 1.0 1.0 - 5.0BPKP 50 2.5 2.5 2.5 2.5 2.5 - 12.5

Practical training - BPKP (1-2 months) 10 0.3 0.3 0.3 0.3 0.3 - 1.3Practical training - BPK (1-2 months) 3 0.1 0.1 0.1 - - - 0.4

Study visits - BPK (2 weeks) 40 0.3 0.3 0.3 0.3 0.3 - 1.5

Subtotal 148 7.2 12.2 16.2 15.1 11.1 - 61.7

Government Education & TrainingMaster degree program (2 years) 45 - 15.0 30.0 30.0 15.0 - 90.0

Doctoral degree program (5 years) 5 2.0 5.0 5.0 5.0 5.0 3.0 25.0Refresher course (6 months) 10 1.0 1.0 1.0 1.0 1.0 - 5.0Short-term study (3 months) 10 0.5 0.5 0.5 0.5 0.5 - 2.5Short-term seminars (2 weeks) 20 0.3 0.3 0.3 0.3 0.3 - 1.5Practical training (1-2 months) 3 - 0.1 0.1 0.1 - - 0.4

Subtotal 93 3.8 21.9 36.9 36.9 21.8 3.0 124.4

Capital MarketShort-term study - practical trainingon capital market guidelines and

legislation 120 2.9 3.8 3.6 3.3 2.0 - 15.6

Total Accounting Pract!ceMaster degree 58 - 20.0 39.0 38.0 19.0 - 116.0Doctoral degree 7 4.0 7.0 7.0 7.0 7.0 3.0 35.0Short courses 296 9.9 10.9 10.7 10.3 8.9 - 50.7

Total Accounting Practice 361 13.9 37.9 56.7 55.3 34.9 3.0 201.7

ANNEX 7

-32 - Table EPage 2 of 2

No. ofpartici-

Component pants 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 Total

Accounting Education

Higher EducationNaster degree program (2 years)State universitiea 100 ) - 35.0 85.0 100.0 50.0 - 270.0Private universities 35 )

Doctoral degree prograe (5 years)State universities 20 ) 10.0 25.0 25.0 25.0 25.0 15.0 125.0Private untversities 5 )

Short-term study (General 6-_onths)State universities 50 ) 75 75 7.5 7.5 75 - 37.5Private universities 25 )

Short-term study (Specialized 6-months)State universities 40 ) 5.0 7.5 5.0 5.0 5.0 - 27.5Private universities 15 )

Advance course (6 months)State universities 35 2.5 5.0 5.0 2.5 2.5 - 17.5

Subtotal 325 25.0 80.0 127.5 140.0 90.0 15.0 477.5

SMEAShort-term study (3 months) 40 2.0 2.0 2.0 2.0 2.0 - 10.0

SNAShort-term study (3 months) 58 - - 7.3 7.3 - - 14.5

3-month study tour for supervisors 28 7.0 - - - - - 7.0

Subtotal 86 7.0 - 7.3 7.3 - - 21.5

Total Accounting EducationMaster degree 135 - 35.0 85.0 100.0 50.0 - 270.0

Doctoral degree 25 10.0 25.0 25.0 25.0 25.0 15.0 125.0Short courses 291 24.0 22.0 26.8 24.3 17.0 - 114.0

Total Accounting Education 451 34.0 82.0 136.8 149.3 92.0 15.0 509.0

Planning. Monttoring & Evaluation (CAAD)Overseas study tours I month

(8 times/yr for 5 years) 40 0.7 0.7 0.7 0.7 0.6 - 3.4

Total Overseas trainingMaster degree 193 - 55.0 124.0 138.0 69.0 - 386.0

Doetoral degree 32 14.0 32.0 32.0 32.0 32.0 18.0 160.0Short courses 627 34.6 33.6 38.1 35.2 26.4 - 168.0

Total Overseas Fellowship/Trainins 852 48.6 120.6 194.1 205.2 127.4 18.0 714.0

/a Overseas degree program for RFKP are included under the Government Education and Training component.

Note: Some totals do not add up due to rounding.

D CN:r

MIECAL ASSS:U PEXM*9uqnzy of lTal sd Foreign %w4aliut Sepia - by Ccmnet Id Year

T.ccal :,eia1Ast SerVind Foreign Oia1ist Smric

Field of Auistamce 1988/89 1989/90 1990/9iO19942M 992/93 1993/94 tal 98/89 1989/90 1990/9¶99r17 992/93 W3/94 ToalA. ~ ,CIV P_LC

1. Gam hacm

mt accmtyir 0.2 12.2 14.2 12.2 12.2 50.8 0.7 9.2 8.4 8.2 8.2 34.6-elustio of _ucamemw for 0.6 0.6 0.6 0.6 0.6 2.9fiealyutem dip……-

su*total Gmeuit tccamtitg 0.2 12.2 14.2 12.2 12.2 0.0 50.8 1.3 9.8 9.0 8.8 8.8 0.0 37.5

2. Govmnt Auditim

Ds_mdaicat of saud k11ad suaditotudazda.policim. _ _,tklokiau. oto * 0.5 1.0 0.5 - - - 2.ShDrt t 0.3 0.3 0.2 0.2 0.2 - 1.0

GLUM e (15 wja:t) 2.0 2.0 2.0 2.0 2.0 - 10.0

- JLdayt udsith ( 'nitiw (8)-Stay. tuw=b, embdi, sdmr

oo m G _t 1Auit - 1.0 l.0 - - - 2.0 WIh, d _ ~~~~~~~~~~~~~~~ ~~~~~~~~~~- 1.0 1.0 - - - 2.0

9mrt tm t~a ina. M.1ml - - - 1.0 1.0 - 2.0pls~.d _ 1~of axlituiar. * ,of sadie tuu3i_ . pzIaa

ktota G-n t Auiftivg 2.0 2.0 2.0 2.0 2.0 0.0 10.0 0.8 3.3 2.7 1.2 1.2 0.0 - 9.0

3. _ _Matle aid !"la W1E~~.I. mnmues my ,r~ i4n.wzd2d p_~z aylih

jgg tama 1.0 1.0 1.0 1.0 1.0 - 5.0~4~zahdz~ pr=rm 3wi.stan aziti4 0.5 0.5 1.0 0.5 0.5 - 3.0

_pr la. wnri- 0.5 0.5 1.0 0.5 0.5 - 3.0

abtotal tGa't lestim and Trinfh 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.0 2.0 3.0 2.0 2.0 0.0 11.0

4.

0.5 0.5 0.5 0.5 0.5 0.0 2.5 0.1 0.1 0.1 0.1 - - 0.30s4 -_ - 14t _ - 04 0.2 0.2 0.2 0.2 0.2 - 0.8

ditto lue0.4 - - - - 0.4ditto Iznuae - 0.4 _- - 0.4ditto Tofl Hiahusy - 0.4 - - - - 0.4ditto Tolec. Svice. - 0.0 0.4 - - - 0.4ditto Otlir IrA ntr - 0.0 0.4 0.4 0.4 - 1.3

Guidelirm (r) *Aw: gDit *

4islati S / 0.2 0.2 0.2 0.2 - - 0.7

sitotal Cqpital Mbiket 1.5 1.5 1.5 1.1 0.9 0.0 6.5 0.3 0.3 0.3 0.3 0.2 0.0 1.2

Nbte: 9 totals do not add u dtue to r -dig. * not espresas in perm-yw|r.. _ . .. . . . . .~~~~~~~~~~~~~~~~~~~~~~~~~~~~

AOLM MMMM Pro

ULL ASI PKIHM92auy of lcal ad Foreign Seeialist Servieu - by lcpoist aId Yenr

To=al Spe4Ia Services Fozeip cw4I41it Servi5

Field of Anuitmtre 1988/89 1989/90 1990/9U'199li1992/93 1993/94 Total 198/8J9 1989/90 1990/9IM/991992/93 1993/94 Total

5. Private Ssetor-uee t or ml

DeueloIm.of kccut&kulit Stbmle 3.1 1.4 1.6 1.9 1.1 - 9.1ftmitori ofqyLicatia of - 0.1 0.1 0.1 0.1 - 0.4StmsDelp.of P g B 3.5 3.5 1.7 - - - 8.6

ditto cw~t~mnrt 1&i~atixn PrcnrEiu 1.4 0.9 - 1.3 1.9 - 5.5ditto Profinukmal m4port eaterlala 0.1 0.6 0.6 0.1 0.1 - 1.6ditto Q.ulity Cx*mto polikiea - 0.0 - 0.1 - - 0.1ditto Code of Etbice 0.2 - - 0.6 0.5 - 1.3ditto P4torting for &011 BU1iMNG - 1.3 1.9 - - - 3.2

-Other Private S torDeurelopi. of Izutitutimuizati of 1.3 1.3 1.3 1.3 1.3 - 6.5

Business RPmo. Deamopuof btr.InfomitiiZ System - - 6.5 - - - 6.5

sttotal Private Swtor 9.6 9.1 13.8 5.4 5.0 0.0 42.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0

6. Mgtof ACo==talR Prwtce -mu anB,N!R=2% 1.0 1.0 1.0 1.0 1.0 - 5.0 1.5 1.5 1.5 1.5 1.5 1.5 9.0

oodin. of DeAme's Fe1aUubp ad 1.0 1.0 1.0 1.0 1.0 - 5.0 0.4 0.4 0.3 0.3 0.3 0.2 2.0

1.0 1.0 1.0 - - - 3.0

subtotal M et of Acourtixg Practice 3.0 3.0 3.0 2.0 2.0 0.0 13.0 1.9 1.9 1.8 1.8 1.P 1.7 11.0

SLBUiiL . 'JNr1? PRA1(C 16.3 27.7 34.4 22.6 22.0 0.0 123.2 6.2 17.2 16.8 14.0 13.9 1.7 69.7

B. A0fJIT?C EDUGATICN

1. IiiRhr BhxwatimaccuneYorestors ro assist S2 progran

UT - 2.0 2.0 2.0 - - 6.0tflm 2.0 2.0 2.0 2.0 2.0 - 10.0

-Plaement of FeUlaships 1.0 1.0 1.0 1.0 1.0 - 5.0-Lal Visiting Professorr

Teachig Assistance 0.2 0.2 0.3 0.3 0.3 - 1.47hosis Spn and hnitatior. - - - 0.1 - - 0.1

-Cc3xuter Assisatce 0.3 0.3 0.3 0.3 0.3 - 1.3-asesarh al Studies

Tetocks *UlA huinaticw *9wly and Distribution of 0.2 0.2 - - - - 0.4

accounimt Mmnc.erupdating of Qzrnculun 1.6 1.7 - - - - 3.3Account. Edm. Design at Diplei. 2.5 6.7 1.2 - - - 10.4

N'br-fomanlkcconting Sysa 2.5 2.5 - - - - 5.0Auditing - 2.5 2.5 - - - 5.0Accounting Mmunemt - - 2.5 2.5 - - 5.0 _ _ -

sittotal Rigber Eucation 7.3 14.1 6.8 3.2 0.6 0.0 31.9 3.0 5.0 5.0 5.0 3.0 0.0 21.0

_bte: ocan totals do not odd tq di~ to r~an1ing. * not expressed in pezsoc-yeerc

Nbte: Sce totalB do ncot add up due to roundirg. *nDt expresse in persa-rw. F

LHWAL ASISM PROIW9_nz of TL and Fo eiW 4a1I4t Servi - by (xim et l Y

Loca oaist Serview Yollip SpsmIalit Servinm

Field of Aasateme 1988/89 2989/90 1990M i?199192/93 1993/94 Total 1988/89 1989/90 1990/9fliA992/93 1993/94

2. NmfDfou1 3kcatig-urvl p.oz FEW-for ?mz1 Ammint1n *

- ~~~ditto i.4-aaisS-UrA dssitto 3.3 6.7 5.0 3.3 1.7 - 20.0q|>e itudi& 0.2 2.0 0.4 0.0 0.0 - 2.5

-De. of Tranizg Desnign iNteral 0.3 0.0 0.3 0.0 0.0 - 0.6_-Veo1mt of Ibtiaal HiOW= *_

otal Nbifozml B&r.&t4oi 3.8 8.7 5.7 3.3 1.7 0.0 23.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0

3- Y_tM of 1&" FhWAt4L--- rFiim P rrq§i t8twtiX 2.5 1.7 1.7 1.7 0.8 - 8.3

-ewje t _~-mt 2.5 2.5 2.5 2.5 1.3 1.3 12.5-Pzcuntt wEtat 2.0 1.5 0.5 0.5 0.5 - 5.0Projet hxiti% - 0.2 0.2 0.2 0.2 0.2 0.8

mltotal 1 _t of k wCmtuS gtati 7.0 5.8 4.8 4.8 2.8 1.4 26.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0

SMCL AMitG MUM7N 18.0 28.6 17.3 11.4 5.0 1.4 81.7 3.0 5.0 5.0 5.0 3.0 0.0 21.0

C. E:rJB MIDInU AD W I (CAAD)C. cJoCt ~Di wITGI hM) 3JAUP2NCu C 0.5 0.5 0.5 0.5 0.5 - 2.5

tiplR_rtal 1.0 1.0 1.0 1.0 1.0 0.5 5.5 0.5 1.0 1.0 1.0 1.0 0.5 5.0-Sb* 1 lst 4 0 0.5 1.5 0.5 - - 2.5

y0.5 0.8 1.3 0 - - 2.5of tual^,/rtias 0.0 0.6 0.1 - - - 0.7

wStit of Fretice of o X z Syutm 0.0 0.6 0.1 - - - 0.7-SbmI ,to be desidi later 1.0 2.0 3.0 2.0 2.0 - 10.1-pertu forromimiw 0.1 0.1 0.1 0.1 0.1 - 0.7-~esia1 cuiltuntn 0. 2 0.3 0.2 0.3 0.3 0.3 1.7

U31UtL aYD 2.6 5.4 7.0 3.5 3.0 0.5 22.0 1.3 2.0 1.8 2.0 2.0 0.8 9.9

lML . W3IASLh 9I( 36.9 61.7 58.7 37.5 30.1 1.9 226.9 10.5 24.1 23.6 21.0 18.9 2.5 100.5

-S = -_ _ _ . _ _

Ibte2 Sml totals do est dd 1 due to zudi7. * mt _1na In pezwor.

e'lb

w

- 56 - ANEX 9

INDONESTA

ACCOUNTANCY DEVELOPMENT PROJECT

Estimated Schedule of Disbursements(in US$ sillion)

Indonesia disbursementIBRD fiscal year Disbursements profiles (x) /aand semester Semester Cumulative x Education All sectors

1989lst (Jul 1988-Dec 1988) 2.0 2.0 2 0 12nd (Jan 1989-Jun 1989) 2.0 4.0 4 1 2

1990lot (Jul 1989-Dec 1989) 4.5 8.5 8 3 62nd (Jan 1990-Jun 1990) 4.5 13.0 12 6 11

19911st (Jul 1990-Dec 1990) 11.5 24.5 22 10 182nd (Jan 1991-Jun 1991) 11.5 36.0 32 17 25

19921st (Jul 1991-Dec 1991) 15.8 51.8 46 25 342nd (Jan 1992-Jun 1992) 15.8 67.6 60 34 43

19931st (Jul 1992-Dec 1992) 15.7 83.3 74 45 522nd (Jan 1993-Jun 1993) 15.7 99.0 88 55 61

19941st (Jul 1993-Dec 1993) 10.0 109.0 96 63 692nd (Jan 1994-Jun 1994)/b 4.0 113.0 100 70 77

/a These profiles represent the initial six years of an average disbursementperiod of nine years.

/b The loan is expected to close on June 30, 1994.

- 57 -ARM 10

IHMNMA~~~~~~~~~~

Nr

hmntbmg Pzuwtfr SipojectesWM4 Smbsoule

BakFP 196 I 1s s 1990 I 1991 I 1992 I193 I 1994 11995

CalAarYsar 87 I 16 I 16 1 1990 1 1991 1 1992 I193 I 1994

GM Fiucal YTear /881 y988 I 19/90 I 1990/91 I 1991/ 1992/93 I I9934 1 1994/ 5

L.OW Procmuizg*4388T~ Bord presaBtim *(05/88)lzetd loan ffectivuum *(09/88)Project caloetir_

*(l1_ 3)

jPrect cus ig date *(06/I 4)

AMNMG PPACnE

t&qpojt l astaff-Ftlishut & q~mii* sultuati sicets

* . nwot:s ~~~~~~* * * * * * * * * ***

Gavent Acut:Prpar. for field tea*t-Syt omtett

- P m - t a t k mu iu l _ _ _ _ _ _ _ _ _ _

uslntatwn Of elst i *

Goverenxt hxAitmt:. ee at of UWAing I _____

-Staff tnU% *-Tulmkal. matasuxe *

Gvn t EAw (SEl:tP:~~~~~~~-Pid oa *_*w

DeliveryI *.lI-Staff Dmlut P_

Selecti of fllm _I

U 1talt 'eu A*. -

ADC c gs* A

Up coum I

I ~~~~~~*-* *_*A

l l l l l l I l I-TcliolAusistme re i1iSe1iz A *

^; ring & oda!fti I I I I

Private SectorJ-Develqpmt of acC.at. atandard-Dee of adit sta_a*d*

__ ~~ . * I I IlIidumtr. Inf tem-

of educ. p Pk for Mal __*___

- 58 -

AM 10B

ADOM DWJnMAW PW!MC

Accounting Mition uipject

>l^si ~Schedule

Bak iY 1988 19681 19901 19911 19921 199. 1 1994 11995

Calar Year 87 | 968 19W | 19901 1991 1992 1993 1994

Om Fimcal Year 1987/881 1988/68 I 6/90 1990/91 1991/92 1 199V93 I 1993/94 1994/A 5

lIm Processig

Lom neotiatiam *tO/88)Board prentatin *(5/88)Thcpted loan effectivem *(09/88) Project cc letimn I *(12/!3Pjoect closirg date *(06/! 4)

AOMUNC MNUrIQN

t &appoint key stff *(11/87 _______________

-Etlinhailt & apere,ticnm ..-vluatio reqorts * * * * * * * * * * *

Tenimca Assistace.Cmbined Fellowhip. specialistservices study tour magement:

I. srtlistAi% etc. *-k-letter of imvitatim*PreDartic of proposal

of prposal_-Berk reviaNgotiations

Contrat signi *-COtract ewuton *,Teacnical assistaire pr_grus I *not covered by coabined ccmtract

Phws4icaFarilities

-contract sivt:-Cotract er ,Aution

Estsblishd,nt of FundsInstitutional Ftnd:

Anuncemnsrt*-IIIIIIII-Invitation to apply *-* 7 *J ** *_*Balustiz _ _ * _ r

an pt | fr l~* * I * * *

:enrtt~*- *-* I III

App1icaticn __eriod *-*-n pa t/repyent

FEtablishnmt of 3 new ADCsSelect & appoint key staff aSpac ren,tal *}-blisbet & op e | - .

Egtablisenmt of Acc. fo. Ceters Ewwxge of materials *

Writing of bodrs & research.. I

- 59 -

mm 10

m - m

D.t n I an 1 1990 1 I 199 39 I 1 11995

,~~~a .m I.I9 11_1 I 39 I 199 Io 1992 I 393 I 99

am Fiml To 1911/"9 I 0I/9 1 191 I I3993 I 1993/9'1

tor lon

Eam ProcmiztatIm3

Pmect clam daO(w6

-MR for e *t 17_ > ,wliti of _ I.t

&meoidatim of p_-

;Ats camatwul llllllslect & pont __

F I I I I1*

Project coqAy | 4m bl*

A-MSW DEVffQRI1 PRPoisect Cts by and by Ocpb t

MU N UXA1Q RAKICh Es1G W WZ

P diwte Sator secway ___t___

S cdzy S--mOdmy A y scGlmvnlt ztitute Otbrr Ca 1rcal GAml @AEA

Grveut Goant :jati Cpital of Privte i apcjut ilier ScJwU S1rb1a 1Spmj. Dw________________________ hAccezit Aditft &Trad,i lifket A=mtwts Swtor VAtint FdUdiati (NW (SW Mtatkm FamD _ _n_t

Chdlwikn - 0.1 6.7 - - - - - - - - - 6.8

a 0.2 2.4 1.4 0.4 0.1 - 0.2 1.9 10.6 4.8 - 0.4 0.1 22.5

Yemi1tue - 0.1 0.1 - - - - 0.1 0.3 0.3 - - - 0.8

Bckis & instzizd mstei-IDO1w ad j um-a 0.1 1.1 1.6 0.2 0.9 1.3 0.6 0.9 0.2 6.8Izwtzi~tkau1 merials - - 0.3 - - - - _ 0.3Dmelop. of hwtnttwmu mteials - 0.1 0.9 - - - - 0.4 2.7 5.4 2.8 - 0.0 12.2

Sbtoul 0.1 1.2 2.8 0.2 - - - 1.3 4.0 6.0 3.7 - 0.2 19.3

ffr bliHxt VoiC"w:Posd q:iia3ata 10.9 2.4 2.7 0.4 - - 2.7 4.3 - - - - 2.9 26.2Iala qxk; 1; 3.5 0.5 0.1 1.1 2.0 0.6 0.1 4.4 - - 6.3 1.3 1.2 2D.8

Subtal 14.3 2.9 2.8 1.5 2.0 0.6 2.7 8.6 - - 6.3 1.3 4.1 47.1 1

Staff deel t 0ntimems fMlawbps - 1.3 4.2 - - - - 12.0 - - - - - 17.5

Oveu tmiS 0.4 3.0 0.9 1.8 - - - 5.5 1.0 1.6 - - 0.4 14.6IV- gm tr4t2imR 4.5 10.0 6.4 0.0 - - 2.4 /a 5.0 8.0 6.4 11.2 - 0.1 53.9Dew.of ait ill1 & stwAlds - 2.4 - - - - - - - - 2.4

Subtot 4.8 16.7 11.5 1.9 - - 2.4 22.5 9.0 8.0 11.2 - 0.5 885

Imtitutitdm fuAd - - - - - - 3.8 - - 3.8i fid - - - - - - - - - - 2.9 - - 2.9

aMotul - - - - - - - - - - 6.6 - - 6.6

Inmcd igti cats:_zx~rinita1 &is -3 mes 0.5 0.3 0.5 0.1 0.2 - 0.1 2.9 - - - 2.5 1.3 8.4Ikterials 0.7 1.3 1.0 0.4 0.1 - 0.1 1.8 1.8 1.8 - 3.5 0.4 12.7;nsixtztive tuvl 0.2 0.3 0.2 0.1 0.2 - 0.2 0.5 - - - 3.2 0.3 5.1nyIiUty rrita l 0.6 0.1 - - - - 0.7 - 0.3 1.7 3.4Oamkatiwq. *flity etc. 0.0 0.1 0.0 0.1 0.1 - 0.2 0.0 - - 2.9 0.1 3.5Tm-=:= perticipva caltriUutim - - 4.5 - -- - - - 5.2 -- 9.6Project preparati-L 1.1 - 1.6 0.7 0.2 - - - - - 3.0 6.5

Sbtotal 2.5 2.6 7.8 1.3 0.8 - 0.6 5.9 1.8 1.8 5.2 12.4 6.7 49.3

Ttnl bre coat OCusua 1988) 22.0 25.9 33.1 5.2 2.8 0.6 5.9 40.2 25.7 2D.9 32.9 14.1 11.6 240.9

kyndrAd coutl ¢wlciw 1.8 1.4 1.4 0.3 0.2 0.1 0.4 2.4 1.3 1.0 1.6 0.8 0.6 13.4Prlce ccuSti ienE 1.7 2.0 2.0 0.3 0.2 0.1 0.4 2.6 1.4 1.7 2.7 1.3 0.8 17.1

htl project coat 25.5 29.4 36.5 5.8 3.3 0.7 6.7 45.2 28.3 23.6 37.3 16.2 13.0 271.4

/a Puefqarture tn=nt for overs felloap/train* cwdidates iuder tih Aixa-t1g Prwatice mbproject. _

Note. Sce totUl do wot ad up due to mI;D4g.

- 61 -

ANNEX 12

INDONESIA

ACCOUNTANCY DEVELOPMENT PROJECT

Salected Documents and Data Available in the Project File

A. Selected Reports and Studies Related to the Subsector

A.1 Study on Government Accounting and Auditing Modernization inIndonesia: Maior Findings on the Existing Budgeting. Accounting.and ReRorting System, The SGV Group, October 1984

A.2 Radius Prowiro, Reforming Financial Management in Government: TheIndonesian Agenda in International Journal of Government Auditing,January 1987

A.3 Indonesia: Public Investment in Renelita IV, World Bank reportnumber S849-IND, December 27, 1985

A.4 Indonesia. Strategy for Economic Recovery, World Bank reportnumber 6694-IND, May 5, 1987

A.5 Joys and Tribulations of a Female Auditor of the State AuditBureau (BPIO, translation of article appearing in BPK's quarterlystaff journal for July/August 1987

A.6 Indonesian Accounting Principles, Indonesian Institute ofAccountants, December 22, 1984

A.7 Capital Markets Factbook, 1986

B. Selected Reports and Studies Related to the Project

B.1 Accountancy Development Project, Ministry of Finance, and Ministryof Education and Culture, November 1987

B.2 Accounting Education DeveloRment Program, Ministry of Educationand Culture, October 1987

C. Working Papers

C.1 Public SMEAs Selected for Upgrading under the Project

C.2 Accounting Education at the Upper Secondary Level

C.3 Project costs

I

MA SECTIONX

BRD 20514. lgs, \THAILAND' 1it 1i8 120 1381 1W l2C

SBanda Aeh" PHILIPPINES '

13 MALAYSIA r_/;a Sea BRUNEI /

(MeCian > ' g \ oJ qif r~~~~~~~~~~~~~._._ F._. , ,! ) ~~~~~~~~I N D O N E 5 I A

MALAYSIA ~ ~ ~ ~ ~ ~ ~ ~ ~ NDNEI7 I~~~~~~~~~~~1

12 / MALAYSIA /-/.; ,Priis. ,, >SINGAPORE 1\ 7 -/ -% P_w. ,d 20

vg:__nbarti_\ " - ] *_ > ,HALMAHERA ht0ii000I Ioo 0.

19

0', -d-:<- Ponl..'n.ku0SS;; a4n; 18

0 D~P K K A L I N

6 LAh1NGKA 14 ANA ' 4 . . ~- 1 3 5'25

-li- S SUMATERASELAT'A \ { > ' 2, liP'1, /u"

oat

D. K.I. JAKARA 'JN 0 SUA WEt 7 JAWA BARA UTAR0Nn

JAVV ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~IAN JAYA

t J ALiATNTAN TEGA 7asn 8 16 - 21 _ GEOAii A

6 DI. YOYANTAN ELTA 6Lmar)3 1

1 JA WATiM _ n b .. I- 26o6 LAMPUNG -- Bk.r - 26

,BE GKULU6

5' SU LA WE SI ASE L A T A N 4~.x>en

g IAU Java se UJen...d-ge II2 SAMWI TENGGARA 1 /_2S SUMATERA BARAT JA.!Rf Banda Sea1 2 UMATERAUTARA

D2 IRIACEH

2 KA7IUMANTAN wARAT 3 , ,AiLOA15KALIMZANTAN TENGAH Oel, 3M-R15KAIL IVA TAN SELATAN ). n I17KA.IMANTAN TIMUR I

S8 1,LAWESI TENGAH 2 ' SAUMBAWA

SULAWES UTARA Y.I k.ORES21 SULAWWESS SELDSATAND0 ~-~0 10 0 0 0 0

20' SULAWS TENGGARATIU( LS

25 MALUKU ~ 1MA 'A KeP.oo7 , 27 0 lo 200 S00 400 S00 b00 700 *0026 IRIAN JAYA S..d.m..o,ddBA 24oc.vB*thAee ~-

27 TIMOR TIMUR ecV 1 1ILOMETERS

,00- 105' 118' 1181 1201 120' 1 IIII 130' 1481

JANUARY 1988