WEEK 1: The Nature of Public Sector

• Public sector organization: an organization formed with the main purpose of providing services to
the community, not for profit.
• Types of public sector organizations:
◦ Government, NGO, Foundation, Political Parties, etc.
• The nature of public sectors:
◦ Goals - non profit.
◦ Source of funding - tax, retribution, business profits, bonds, debt, etc.
◦ Organizational structure: rigid, bureaucratic, and hierarchical.
◦ Accountability - to society.
◦ Budget characteristics - open to the public.
◦ Accounting system - cash accounting and/or accrual accounting.
• The nature of private sectors:
◦ Goals - profit.
◦ Source of funding -
‣ External finance: bonds, loans, and shares.
‣ Internal finance: retained earnings, equity, asset sales.
◦ Organizational structure - flexible, cross-functional.
◦ Accountability - to shareholders and creditors.
◦ Budget characteristics - private.
◦ Accounting system - accrual accounting.

WEEK 2: Regulations and Standards for Non-Government Public Sector Organization

• Accounting standards for NGO: Standar Akuntansi Keuangan (SAK) and Standar Professional
Akuntan Publik (SPAP).
◦ Also regulated in UU No 17 Year 2003 about Organisasi Masyarakat.
• Non-government organization: non profit organizations that are founded by a person or group
voluntarily to provide services and goods to society.
• Types of NGO:
◦ Foundation, political party, or an NGO.
• Financial sources of NGO:
◦ Membership fees, public donations, business efforts, foreign aids, etc.
• NGO are accountable to their donors and to society.
• Standards used:
 ◦ PSAK 45 replaced by ISAK 35 (per 1 January 2020).
◦ SAK ETAP.
◦ SPAP.
• Financial statements:
◦ Statement of financial position.
‣ Asset: current asset and non-current asset.
‣ Liability: short-term liability and long-term liability.
‣ Net asset: net asset without restriction from resource provider (asset may be used for
whatever purpose), with restriction from resource provider (the asset must be used for a
certain purpose as noted by the donor).
◦ Statement of comprehensive income.
‣ Without restriction from resource provider (revenue - expense = surplus/deficit).
‣ With restriction from resource provider (revenue - expense = surplus/deficit).
◦ Statement of comprehensive changes in net asset.
‣ Without restriction from resource provider (beginning balance + surplus + asset released
from restriction + other comprehensive revenue = ending balance).
‣ With restriction (beginning balance + surplus - asset released from restriction).
◦ Statement of cash flow.
‣ Operational activities, investment activities, and financing activities.

WEEK 3: Regulations and Standards for Government Public Sector Organization

• Law basis:
◦ UU No 17 Year 2003 about Keuangan Negara.
◦ UU No 1 Year 2004 about Perbendaharaan Negara.
◦ UU No 15 Year 2004 about Pemeriksaan Pengelolaan dan Tanggung Jawab Keuangan
Negara.
◦ PP No 12 Year 2019 about Pengelolaan Keuangan Daerah.
◦ PP No 71 Year 2010 about Standar Akuntansi Pemerintahan.
◦ Permendagri No 64 Year 2013 about Penerapan Standar Akutansi Pemerintahan Berbasis
Akrual pada Pemerintah Daerah.
◦ Permendagri No 77 Year 2020 about Pedoman Teknis Pengelolaan Keuangan Daerah.
• Accounting reform (2015 - current):
◦ Performance budgeting - system that uses performance information for the allocation,
spending, and management of a government's financial resources.
◦ Accrual accounting - accounting method that recognizes revenue and expense in the period
 in which it is recognized rather than when it is earned or paid in cash.
◦ Double entry recording.
• Accounting reform:
◦ 1981 - 2002: cash basis.
◦ 2002 - 2005: cash modification.
◦ 2005 - 2014: cash towards accrual.
◦ 2015 - now: accrual.
• Financial statements:
◦ Budget implementation statement (cash basis):
‣ Laporan realisasi anggaran (LRA).
• Pendapatan - belanja = surplus/deficit.
• Surplus/deficit - pembiayaan = sisa lebih/kurang pembiayaan anggaran (SILPA/
SIKPA).
• Revenue (tax revenue, non-tax revenue, grant revenue) - expense (operational
expense, capital expense) - transfer (balancing fund, other transfers) + financing
revenue (domestic financing, foreign financing) - financing expense (domestic
finance expense, foreign finance expense) = SILPA/SIKPA.
‣ Laporan perubahan saldo anggaran lebih (LPS).
• Beginning saldo anggaran lebih - saldo anggaran lebih expenditures + SILPA/SIKPA
+ correction towards last recording + others = ending saldo anggaran lebih.
◦ Financial statement (accrual basis):
‣ Laporan operasional (LO).
• Surplus and deficit.
• Revenue (tax revenue, non-tax revenue, grant revenue) - expense + non-operational
activities + unrealized posts = surplus/deficit.
‣ Neraca (N).
• Active: Current asset, long-term investments, non-current assets, reserved funds,
other assets.
• Passive: Short-term liability, long-term liability, equity.
‣ Laporan perubahan ekuitas (LPE).
• Beginning equity + surplus/deficit LO + cumulative changes in regulation or error =
ending equity.
‣ Laporan arus kas (LAK).
• Operational activities, investment activities, financing activities, transitory activities
(third party calculation).
 ◦ Notes to financial statements.
‣ General information about the entity reporting and accounting.
‣ Fiscal policies and macroeconomics.
‣ Financial targets.
‣ Important accounting policies.
‣ Explanation about financial statement posts.

WEEK 4: Budgetary Policies, Processes, and Controls

• Every organization has a purpose that becomes the focus.
◦ Qualitative and quantitative purpose.
• Rational approach: in terms of what services to provide (risk and uncertainty), they must
analytically plan in advance.
◦ For projects that are capital extensive.
◦ Certain predictable conditions.
• Departments apply rational focus on their primary focus.
◦ Social service department must provide rational focus for social services.
• Elements of rational approach:
◦ Natural and reflects a certain degree of uncertainty.
◦ Varies from broadly expressed to greatly detailed or largely qualitative to largely quantitative.
• Budgeting: rational tools of control and focuses on the use of monetary resources (within a period).
◦ Government begin with requests of money.
◦ Process of controlling money.
◦ Started with strategy planning.
• Strategic planning - operational planning - budget process - controlling and measuring -
reporting analysis.
• Scope of planning -
◦ Long-term (strategic, outcome).
◦ Intermediate-term (operational, outcome).
◦ Short-term (program).
• Public sector.
◦ Complex process.
◦ Open process.
◦ Two way process.
◦ Compulsary.
• Private sector.
 ◦ Non-complex process.
◦ Closed process.
◦ One way process.
◦ Optional.
• Budgeting cannot be released from development targets.
• Why budgeting is important?
◦ Important instrument in reflecting development priority and it is used to fulfill target needs, but
resources are limited.
◦ Budget is the main tool in fiscal policy:
‣ Fiscal policy is a government policy that emphasizes government's revenue and
expenses.
‣ Financial stream that is related to government activities will affect price, employment,
economic growth, and tax revenue.
◦ Used to gain public trust by providing public accountability.
• Budget functions:
◦ Planning, controlling, fiscal policy, coordination, motivation, public area.
• Types of budgets:
◦ Operational and capital.
• Characteristics of budget:
◦ Explained in currency and non-currency values.
◦ Periodic.
◦ Commitment to become target oriented.
◦ Budget planning is approved by those with higher authorities.
◦ Budget can be changed in certain conditions.
• Budget principles:
◦ Democratic.
◦ Fairness.
◦ Transparent.
◦ High moral.
◦ Carefulness.
◦ Accountable.
• Budget purpose:
◦ Help government in reaching their goals.
◦ Help create an efficient and fair process in providing public goods and services through a
prioritization process.
 ◦ Allow government to prioritize expenses.
◦ Increases transparency and accountability of the government to DPR and public.
• Important factors that affect budget:
◦ Goals.
◦ Resources.
◦ Time to achieve the goal.
◦ Other factors (regulation, market fluctuation, natural disasters, etc.).
• Budget cycles:
◦ Preparation - anticipating uncertainty.
◦ Ratification - politics.
◦ Implementation - controlling.
◦ Reporting - accountability.

WEEK 5: Form and Content of Budgets

• Budget needs to be arranged well.
◦ Target Vs limited resources.
◦ Avoid resource leakage.
◦ Achieves goals with limited resources.
◦ Economic effective, efficient.
◦ Transparent, accountable, participative.
• Traditional approach (does not provide enough information to assess the efficiency and
effectivity of a program in achieving its goal; pushes expenditures than savings; and only focuses
on the obedience of budget use.
◦ List item budgeting.
‣ Presentation of revenue and expense (revenue has to equal expense).
◦ Incremental budgeting.
‣ Budgeting that is based on the increase or decrease of last year's budget.
• New public management (budgeting based on program; and has a unit cost for each activity).
However, it is hard to connect output in currency value.
◦ Planning programming budgeting system.
‣ Planning process based on activity.
◦ Zero based budgeting.
‣ Budget that allocates funding based on program efficiency than budget history.
◦ Medium term budgeting framework.
‣ Budget allocates to each department and each department may decide on how to use
 the resources.
◦ Performance budgeting.
‣ Uses performance information for the allocation, spending, and management of a
government's financial resources.
‣ Focuses on the results of budgeting to provide the budgeting.

WEEK 6: Costing
• Direct cost: costs that are directly associated with the fundamental purpose of the organization.
• Indirect cost: costs that are incurred in other departments and do not relate directly to the
products made.
• In comparison to for-profits, costing in government:
◦ Do not deal with outcomes (harder to interpret from measurable outputs).
◦ Variable costs are much smaller proportions.
◦ No revenue from the measurable outputs to match with variable costs.
• Costing is used for:
◦ Allocating costs to organizational units, programs, reimbursements, incremental changes, etc.
• Costing in government:
◦ Organizational units - the direct costs are allocated to line departments and indirect costs
are allocated to full costing.
◦ Programs - the direct costs of each program and allocates the remaining indirect costs.
• Accounting basis for costing:
◦ Cannot be sensibly in a cash basis (has to be an accrual basis that extracts the operating
costs from the total costs).
◦ Essential costing issue:
‣ Indirect costs (office costs) are allocated to line departments.
‣ Full costs of the line departments are allocated to the products.
• Stages for indirect cost allocation:
◦ Allocates it to the support units of a production unit.
◦ Absorbs the indirect costs that have been allocated to the production department plus the
production department's own indirect costs.
• Pricing and reimbursements:
◦ For the sake of additional revenues (services are needed, lenders will not lend, and taxpayers
will not pay more).
◦ It is used to improve the management because input and output are clearer and the outputs
provide a signal of demand.
 ‣ To regulate the demand for services that would otherwise be in the private sector, by
creating a government monopoly.
‣ Pricing lead to managerial and political decisions.
• Incremental changes in output:
◦ Costs vary with output within manageable increases or decreases.
• Outsourcing:
◦ Reduce expenditures.

WEEK 7: Fundamentals of Public Sector Accounting

• Fund accounting:
◦ Funding in public sector accounting is limited to the purpose set by external parties.
◦ Business accounting:
‣ Asset = liability + equity.
‣ Asset = liability + fund balance (net asset).
◦ Expendable funds (governmental):
‣ Funds from taxes, duty, and other sources for non-business activities.
‣ Non-reimbursable (e.g. natural disaster funds).
◦ Nonexpendable funds (proprietary):
‣ Funds from and used for business activities.
‣ Funds will be cycled through customer payments (e.g. PDAM).
◦ Types of resources:
‣ Unrestricted (resources where its users are not limited to certain outcome by the
resource provider).
‣ Restricted (resource where the funds are restricted for certain outcomes):
• Permanently restricted (restrictions are permanent).
• Temporarily restricted (restrictions are for a certain period of time).
◦ Accounting basis determines when transactions and events are recognized.
‣ Cash basis (recognition of transaction once there is a change in cash).
‣ Accrual basis (recognition of revenue when the performance has been fulfilled and
recognition of expense when it has been incurred).
‣ Modified cash basis (recognition of transaction using cash basis and is adjusted at the
end of the year using accrual basis).
• Used by the government.
‣ Modified accrual basis (using cash basis for some transactions and accrual basis for
 most transactions).
◦ Measurement focus determines what kinds of assets and liabilities will be reported and
recognized.
• Budget accounting:
◦ Budget and realization must always be compared so that it can be corrected if there is a
variance.
‣ To further emphasize the role of budget in planning cycles and controlling.
◦ Doubly entry in terms of:
‣ Revenue.
‣ Expenditures.
‣ Encumbrances (costs of committed expenditures).
◦ General ledger budgetary accounts.
‣ Do not affect actual asset and liability.
‣ Used as a means of control.
◦ Subsidiary ledgers.
‣ Separate ledger for estimated revenue and expenditures.
‣ Used for control over particular elements.
• Commitment accounting
◦ Subsystem from the main accounting.
◦ Can be used in accrual or cash basis.
◦ Recognizing transaction when the organization has a commitment to provide that transaction.
‣ Transactions are recognized once the government has been committed.
◦ Main purpose is to control budget.
◦ Invoice can be different from the order, though.
◦ In practice, accounts that are committed but have not received its invoice are not reported.
‣ Its use can be limited.