Consolidation of Good Governance and Economic Management Collaboration for International Standards Alignment and Education Building Capacity and Capability in Indonesian Public Sector
Rationale and Strategy for Developing and Implementing Good Governance Consolidation and Collaborative Management for Education Certification Programs and Accountability in Indonesia
AUTHOR: Prof. Vivienne Tobassa Eggers MA Int. Rel. Human Rights & Intl Law, M Arts, Post Grad Dip. Commerce, Com. Law Master Commerce Management & Sustainability INSTITUTION: STIE Widya Wiwaha, Yogyakarta Indonesia
Email: Vivienne.Tobassa@icloud.com
Abstract: This paper provides background and rationale for designing and implementing consolidated education certification programs in Indonesia as a critical action of Good Governance. The discussion describes a strategic management context that brings macroeconomic factors into perspective to demonstrate the reasons and need to develop governance frameworks of accountability through collaboration of stakeholders and consolidating education strategies. A method of approach and recommendations for next actions is then described. The purpose of implementing good governance framework is to raise the quality and standards required of an internationally aligned certification and education development program – results that meet the needs of Indonesian economic and financial management and accountability commitments.
Keywords: good governance / economic reform / interdisciplinary governance / organization change management design / economic management / transformation management / social development / uniform education standards / governance strategy / collaboration / integrated governance /Education development /education managerial accounting / financial risk accountability performance/ sustainability management / accountability frameworks /Education certification
Introduction: Background to Strategy for Consolidated Good Governance Accountability Framework
Governance Frameworks for Accountability, 2015 – Vivienne Tobassa Eggers – Stie Widya Wiwaha
Republic of Indonesia introduced new laws toward financial reform by the state. These were primarily Law No. 17 Year 2003 on State Finance, Law no. 1 Year 2004 State Treasury, Law No. 15 Year 2004 on Audit of State Financial Management and Accountability and Law No. 32 Year 2004 on Local Government. These and other related laws set out the obligations of central and local government agents to transparently prepare and present financial statements in accordance with a new suite of Governing Accounting Standards (GAS). These standards are prepared under presidential decree by the independent Indonesian Accounting Standards Committee (KSAP).1 They have been drafted in alignment with the International Public Sector Accounting Standards (IPSAS) and adapted to specific Indonesian transitional needs as a ‘cash towards accrual’ (CTA) implementation. The GAS are enacted under Government Regulation No. 24 year 2005 and published in Indonesian and English language translation. The standards prescribe the presentation requirements of general purpose financial statements to improve comparative analysis of budget periods and against entities. As an IPSAS adaptation, GAS holds specific reporting anomalies. Financial statements are prepared applying cash basis for recognition of revenues, expenditures and financing accounts. Financial statements are prepared on accrual basis to recognize assets, liabilities and equity accounts. Reporting entities may present financial statements using full accrual basis but should also present Statement of Budget Realization by using cash basis as appropriate. These are described in Government Accounting Standards Statement No. 1 2005.2 Other GAS prescribe recognitions, measurements, specific transactions and event disclosures. Financial statements include those that are presented in other public accounting disclosure, such as Annual Reports.
1 KSAP (Independent Standards Board Appointed by President to oversee accounting standards Indonesia) http://www.ksap.org
2 Source: http://www.ksap.org/English_Version/1.Foreword_dari_pak_triharta.pdf ATTACHMENT III GOVERNMENT REGULATION OF THE REPUBLIC OF INDONESIA NUMBER 24 YEAR 2005 DATE 13 JUNE 2005
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An IPSAS Model of Governance Project Transformation3
The standards are mandatory use by all public organizations, legislative bodies, auditor and supervisory institutions; stakeholders providing or having a role in the process of donations, investments, loans and the government. The standards apply to reporting entities that prepare financial statements for central and local government, but currently exclude central and local government enterprises. The overall purpose of furnishing financial statements underpins United Nations (UN) endorsed international economic measures of accountability.4 Financial statements disclose information on the financial position, budget realization, cash flow and financial performance of public entities that are stakeholders in governance. They also facilitate a validation measure for financial management performance and support decision making process for allocation and monitoring of public funded resources. The drivers for Indonesia’s adoption of public financial sector reform naturally stem from economic development. Presidential efforts have focused on government financial growth and stability through adoption of UN driven International Monetary Fund (IMF) and World Bank guidelines, financial principles and practices that move toward accountability, integration and enactment of unified global standards and corporate governance models such as European Economic Common Market OECD guidelines. Indonesia is also strengthening regional membership of Association of the Southeast Asian Nations (ASEAN) and UN G22 group. The primary incentive for overall Indonesian economic growth is perceived its 3 http://www.ey.com/GL/en/Industries/Government---Public-Sector/IPSAS-Our-services-offerings 4 http://www.oecd-ilibrary.org
Governance Frameworks for Accountability, 2015 – Vivienne Tobassa Eggers – Stie Widya Wiwaha
transitional emergence from a third world developing nation into a robust, prospering member of global governance society. The highest risk to Indonesia succeeding this drive is the need for extensive and continued social development. 5 Indonesia’s enormous poor population requires uplifting to a higher minimum standard before the nation is physically able to realize the objective and enjoy full benefits of economic prosperity in international society.6 This transition goal is very much championed, and the impetus of all economic endeavours as described within the Long Term Development Plan target for 2025.7 Eighty five percent of Indonesia’s population comprises Small to Medium Enterprise (SME) and local village or rural cultural society. In current status it is deemed physically impossible for Indonesia to align to first world counterparts, implement and maintain global economic relations of unified financial liberal management. 8 Indonesia suffers frequent exposure to natural disaster and debt burden in carrying its significant poor population. This condition ensures that a wealth distribution of an elite minority - without an established ‘middle class’ - will be unable to sustain a long term resilience outside the ‘underdeveloped nation’ status it currently holds. The citizens now building prosperity as a ‘middle class’ socio economic sector, will be subjected to carrying the tax-social burden of the economy and the millions designated as poor. Without poverty alleviation, raising social services and improving governance infrastructure, the internal economic drain by the poor populations of Indonesia will continue to drag the nation as a third world economy. Major factors contributing to this hindrance is deficiency in education, health, infrastructure and general social services – including their impact on human resourcing for trade and economic development in local and international markets.9 This conundrum has long been recognized and reported by international economic 5 http://www.worldbank.org/en/country/indonesia/overview#2 6 http://www.indonesia-investments.com/projects/government-development-plans/national-long-termdevelopment-plan-rpjpn-2005-2025/item308 7 ibid 8 http://www.undp.org 9 World Economic Forum http://www3.weforum.org/docs/WEF_GCR_Indonesia_Report_2011.pdf
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experts, including analysts and financial specialists of World Bank and IMF. 10 A critical issue underlining this major risk is that as an international member, Indonesia offers cheap labour prospects to external trade investors but not at the same level of competitive advantage that other mass population economies supply, such as China, India, Pakistan and Mexico. Noted; in 2011 World Economic Forum reported Indonesia as ranking 44th out of 139 countries in the Global Competitive Index and in 2015 ranking 34th – a promising factor in economic growth.11 With maximising efficiency, production and goods manufactured are able to be supplied effectively, but Indonesia does not offer adequate challenge to China as the international leader in many consumer markets. As with other nations, it therefore must carve its own ‘niche’ and currently focuses its strength on natural resources and commodities industries. Despite macroeconomic improvement, economists have advised it not necessarily a superior strategy for Indonesia to emulate or comparatively benchmark against mass labour countries purely for bulk market manufacturing and international trade - due to unique anomalies in its economic village culture that favours local and SME industry. 12
10 "The Indonesian Economy - Entering A New Era" (eds Aris Ananta, Muliana Soekarni, Sjamsul Arifin, 2011) 11 http://www3.weforum.org/docs/WEF_GCR_Indonesia_Report_2011.pdf 12 http://www.bls.gov/fls/chartbook/2012/chartbook2012.pdf
Governance Frameworks for Accountability, 2015 – Vivienne Tobassa Eggers – Stie Widya Wiwaha
GCI Ranking First 76 Countries 2015 Fortunately for the people, Indonesia has built its latest phase of economic growth on establishing a robust internal market towards self sustainability. Yet this benefit alone does not facilitate and foster external participatory trade and economic relations. Associated requirements are ever increasing as Indonesia rapidly uses up natural resources and is also subjected to the impacts of climate change and sustainability needs. In this extent Indonesia - without regeneration strategy - faces a rapid downturn of natural resources industries with resultant impact on jobs and livelihoods in areas such as timber and fisheries. The effect further exacerbates Indonesia’s ability to internally produce and supply food – already in the face of a world crisis in rice production.13 If Indonesia follows in the footsteps of development carried out by India and China, the country is likely to witness a rapid increase of severity in development security risk, despite its lower consumerism of oil, metals and minerals. 14 In the latter two countries, industrialization has acquired vast tracts of land formerly allocated to village and agricultural use. India is now grappling with the problem of water salinity 13 http://www.un-documents.net/ocf-05 14
http://www.tos.camcom.it/Portals/_UTC/Studi/ScenariEconomici/39746563551035393/ChinaIndiaCommo dityImpact.pdf
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as its former prosperous rice production dwindles.15 Water management has also become critical for economic strategy in Indonesia. Even with the geographical nature of an island archipelago, much of the land is at sea level. As development expends and diverts the underground water table, natural inclination is for sea water to replace deficit ground water – even in monsoon periods. In Bali already salinity in drinking and agricultural water supply is becoming a serious problem.16 Indonesia must also consider other factors in water supply such as sewerage and waste, or sulphur poisoning and mud flow due to number of active volcanoes.
SE Asian Region Macroeconomic Snapshot17
It is the impacts of environment, development, conflict and the need for sustainability that is driving UN G8 and General Assembly toward enforcing existing measures and establishing strategic goals of IPSAS in financial management via World Bank consultancy. Climate Change disasters, peace issues, the diminishment of oil resources and the phenomena of Globalization has resulted in raising the inter-dependency profile of international society.18 The OECD guidelines of accountability were 15 http://bwl.univie.ac.at/fileadmin/user_upload/lehrstuhl_ind_en_uw/lehre/ss11/Sem_Yuri/Water-food.pdf 16 http://www.itb-kongress.de/media/itbk/itbk_archive_2013/ITB_CSR_Day_1/Water_Shortages.pdf 17 http://www.bworldonline.com/content.php?section=TopStory&title=phl-growth-outlook-cut-faster-thanmost&id=103466 18
Governance Frameworks for Accountability, 2015 – Vivienne Tobassa Eggers – Stie Widya Wiwaha
established by collective states that had endured the experiences and issues of multilateral economic relations and integration.19 These nations had the benefit of mature hindsight and knowledge gained when developing and founding the model of international accountability and financial management framework as a UN protocol.
Managerial Accounting Framework, 201520 The likely future forecast is that Indonesia will need to join and participate with global economy in rapidly increasing scale and capacity. This factor renders any economic strategy for the longer benefit of Indonesian citizens essentially needs to span towards sustainability measures and to seek ways that will bridge any current deficit in equity when merging economic practices with international community. Due to the global interdependency identified, no longer can fiscal trade and financial management serve alone as the ultimate heuristic for economic well being. Since global economic crisis in 2008, first world and developing nations stand side by side in establishing new accountable validation matrices for economic prosperity and most importantly, http://www.undp.org 19 http://www.usfca.edu/fac-staff/boaz/pol357/jan27.htm 20 http://www.irdiworld.com/managerial_accounting_services/en/
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strategic adaptive resilience.21 This was reported by OECD: 'Measuring government performance has long been recognised as necessary for improving the effectiveness and efficiency of the public sector. Following the fiscal and economic crisis that began in 2008, however, accurate and timely data are needed more than ever to help governments make informed decisions about how and where to prioritise spending, reduce costs and promote innovation in public administration.' OECD, 201122 The ability to build and work toward longer range strategic goals of sustainability is now the focus of G8 and the UN Security Council. Financial economic management is critical to the sustainable performance of governments and the business sector. Yet performance results are tightly coupled and dependent upon meeting local and global environmental and social sustainability needs. Due to the impact of development upon human survival and social environment – the ‘how’ of generating financial affluence its ability to regenerate prosperity into local communities and build national economy with minimal environmental footprint - is now called for by UN as essential to future survival of human civilisation. It was this realization in 2008 that out of necessity brought world economy to unite, collaborate and commit to a new era of accountability in economic management and as a practice of ’good governance’. In global good governance, traditional financial accounting principles and measures are rapidly being replaced by Management Accounting practice – a performance/results based and accountability framework – also known as Sustainability Management Accounting. The major features are strategy, risk and performance. In addition to the raised validation measures of accounting and financial results, the recent evolution of Management Accounting extends the context of that economic accountability and recognition of wealth value, into sustainability paradigm with indicators such as Triple Bottom Line. These are measures of organization performance in the context of its overall functioning and health – or robust resilience and adaptability in its service, production and environment impacts through interactive operation. 21 http://indonesien.um.dk/en/~/media/Indonesien/Growth_Strategy_Indonesia.pdf
22 Organisation for Economic Co-operation and Development (OECD), Directorate for Public Governance and Territorial Development, Government at a Glance, 2011.
Governance Frameworks for Accountability, 2015 – Vivienne Tobassa Eggers – Stie Widya Wiwaha
Triple Bottom Line or similar sustainability accountability frameworks are now raising prominence as GRI, OECD and United Nations Commission on Sustainable Development (UNCSD) become major actors in integrating a public economic accountability framework inclusive of these additional dimensions of economic value and prosperity. The OECD major focus in this regard is analytical and accounting frameworks that integrate economic, environmental and social conditions; and measure wealth based approaches that are inclusive of environmental, economic and social inter-relationships.23 Aside from the obvious needs of uniformity in financial management and relations, the preparation of Indonesian citizens for the future phases of economic growth and national economic resilience are now critical. The most significant attainment that can be brought toward restoring any deficit - and to achieving the steps of building social capacity and capability to bring global relations on a more equal footing - is through 23 Mathews, M. R. (1997). "Twenty-five years of social and environmental accounting research. Is there a silver jubilee to celebrate?". Accounting, Auditing & Accountability Journal 10 (4): 481–531. doi:10.1108/EUM0000000004417
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education and local governance infrastructure support. Education raises awareness and understanding of why governance practices are in force. Education establishes pathways for the building of human resource skill and competency in areas that are useful and prosperous to local, national and global economy. Health care is greatly improved through education and awareness. Education opens doors for opportunities and future prospects of economic benefits and sharing with other nations. 24 The presidential recognition of these critical factors in the Country Long Term Development Report is now being brought into driving focus with implementation of Phase III of the Medium Term Development Plan.25 While Indonesia has been recovering and rebuilding its economy from financial collapse, conflict and natural disaster in the past two decades, mature developed economies have been embracing risk management and issues in economic and business sector - arising from endured capitalist markets and liberal financial practices.26 The primary facet has been the rise of the trans-national and multi-national corporation (MNC) as a feature of driving global economy.27 Although within the domain of private sector, the prevalence of MNC has become a critical leader of international society and financial practice. Now purported to be a form of quasi-governance as individual right, the MNC ability to influence the state and drive national and international financial economy is notable. Even the hegemonic political power of the United States was able to be defeated in court battle by the financial might of the world’s largest MNC, Microsoft. The MNC taxable interest is often outside the legal jurisdiction of governance where it bases operations. This renders a model that does not always prevail regeneration into local economies. The MNC has to a great extent in first world economies also replaced a large proportion of SME sector and developed nations are now seeking remedial measures to deal with the knock-on effect to local communities and deficit administration of taxation as social services and infrastructure. In other perspectives, the role of the MNC has become integral to shaping the direction of first world social and commercial progress, education, resourcing and infrastructure 24 http://indonesien.um.dk/en/~/media/Indonesien/Growth_Strategy_Indonesia.pdf 25 http://www.bappenas.go.id/MP3EI 26 http://www.ifac.org/news-events/2015-05/governance-risk-management-and-internal-control 27 http://www.ips.org.pk/globalization/1007-mncs-and-tncs-their-role-and-socioeconomic-impact-on-host-societies
Governance Frameworks for Accountability, 2015 – Vivienne Tobassa Eggers – Stie Widya Wiwaha
development through direct contribution and/or needs development drivers. 28 In education, the lack of strategic foresight to fostering the development of relevant skills and competencies needed in the evolving market across industry sectors has resulted in gaps and critical world shortages in specific skill-sets of human resources. Remedial actions of vocational training and education are in various phases of implementation worldwide. The relevance of the MNC to Indonesia’s emerging economy is the knowledge from impacts, experiences and influences that have been brought with the advent of MNC as a stylised influencer of economy.29 In first world communities, the power of the state has been redistributed through the capitalist model of corporation since the advent of reinvention by UK, Thatcher government and the adoption of New Public Management – the basis for development of common public and private accounting practices upheld by OECD and standardised as IPSAS.30 The NPM model brought devolution of centralised public owned enterprise into public, private partnerships (PPP) and decentralised private enterprise or agent interests. As Indonesia meets current merging obligations with international economy, it will be a natural progression to follow in the wake of the NPM privatisation model adopted into the first world economies Indonesia now interacts with to develop suitable financial management and accountability frameworks. Where the unique nature of Indonesia’s social democratic constitution and SME sector development does not incline to the same extent of MNC domination, the advent and increase of international investment participation and PPP is a major drive of the evolving Indonesia economic strategy and formal development plan.31 In the “Masterplan for Acceleration and Expansion of Indonesia Economic Development, 2015” the President announces a focus on trade and industry increase through pursuance of PPP with national and international investors. The Public Organization or a PPP demonstrates need for raised transparent 28 http://www.mgimo.ru/fileserver/2004/kafedry/mirec/konf_2-12-05/TNC_globaliz.pdf 29 http://www.emeraldinsight.com/doi/abs/10.1108/eb059253 30 Barzelay (2001). The New Public Management: Improving Research and Policy Dialogue. Russell Sage Foundation. 31 http://www.indonesia-investments.com/projects/government-development-plans/masterplan-for-acceleration-andexpansion-of-indonesias-economic-development-mp3ei/item306
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accountability to multi-stakeholders who are operating budgets inclusive of public funding or with process, procedures and deliverables that are critical or in some way accountable to general society. The transfer of governing agent operations shifts from a culture of skilled public servant producers (e.g. engineers, medical practitioners) into a culture of skilled administrators who monitor the deliverables and accountability of private enterprise agents who deliver the public service requirements. The more the responsibility of governance is shared across multiple public and/or private stakeholders, the higher the need for shared framework of visible performance results, accountability and compliance measures.32 To a great extent the role of NGO and IGO organizations in development play a similar role of shared governance responsibility and funding as those described by MNC and PPP. As Indonesia’s economic wellbeing continues to rise out of under developed status, the roles and funding from many of these contributory governance stakeholders will be replaced by other public and private agents of government enterprise who fulfil the economic need currently filled by the sustainable development and aid sector. It is for this reason any progressive economic resilience model can never truly separate governance into disparate paradigms of ‘public and private’. Instead, recognition must be given to the vital contribution provided by multi-governance stakeholders who mutually operate within economy and support its effective administration. This is also a major impetus for the international drive to align IFRS and IPSAS standards, public and private economic management principles within utilisation of a unified global financial management framework.33 Aside from areas often reported by government specialists that denote issues of ‘power, control and corruption’ there are far greater benefits in pursuing a contextual strategy of consolidation and collaboration among all public and private stakeholders in economic governance. In the words of Overseas Development Institute (ODI) OECD results oriented budget working paper: “We agree with the taxonomy of the institutional architecture. However, we would like to re-emphasise that many of the problems with public financial management cut across both the public and private sectors. Therefore, it is important to recognise that a diverse range of financial skills are needed to address them which only a combination of accountancy bodies can provide” 32 http://www.unece.org/ceci/publications/ppp.pdf 33 http://www.ey.com/Publication/vwLUAssets/GAAP_differences_between_IPSAS_and_IFRS/ $FILE/IPSAS_vs_IFRS_AU1506.pdf
Governance Frameworks for Accountability, 2015 – Vivienne Tobassa Eggers – Stie Widya Wiwaha
ODI, Results-orientated budget practice in OECD countries, working paper 209, 2003 34 Indonesian reports on government, voice upgraded concerns of neo-democratic power silos, devolution of augmented responsibility for accountable public administration. Highlighted is prevalence of non-government social cultural activities and those in business and community who independently attempt to fill perceived gaps in governance support and infrastructure.35 As a remedy for global governance deficit, consolidation and collaboration has been upheld by many economic experts worldwide as the most desirable achievement of any nation and international society. 36 This is reflected in the Whole Systems Approach to public sector financial management.37
The cultural transformation required has been described as ‘impossible’ to achieve due to the prevalence of incongruent operating entities with disparate interests, lack of 34 http://www.accaglobal.com/zm/en/technical-activities/policy-submissions/technical-policy/archivepolicy/public-sector/cdr895.html 35 http://csis.org/publication/corruption-indonesia-and-2014-elections 36 http://www.jcie.or.jp/insights/3-4.pdf 37 http://www.accaglobal.com/ PUBLIC FINANCIAL MANAGEMENT AND THE PFM INTERNATIONAL ARCHITECTURE - A WHOLE SYSTEM APPROACH
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shared vision, cultural attitudinal issues of mistrust and resistance to change. 38 Yet the severity of humanity’s need for sustainability and equity change strategy identified by UN Security Council and publicly debated under UNDP since 2012, is rated so extreme as to be crucial to human survival in the not too distant future.39 With this knowledge, it stands to reason that any nation attempting to evolve and deliver good governance accountability measures should emphatically proceed in this strategic direction – an action asserted by President Widodo of Indonesia when announcing the roadmap for economic progress in 2015. It was within those considerations and in response to the requirement for managerial accounting frameworks that the author presented a transformation strategy for consolidated and collaborative governance to Indonesia in Jakarta 2013 at international conference. Since 2013, the author has developed and initiated a regional pilot for this contextual model and its knowledge, communications and technology enablement with governance partners in Bali. From a strategic change management perspective, the ability to attain the described nature of good governance transformation can be achieved through identifying and mitigating risks and impacts foreseen from multiple perspectives of various stakeholder groups. When there is a requirement for consolidation to enable and strengthen a governance venture, consideration is given to both the primary driver and also the influences that will elicit stakeholder responsiveness and complicity due to the meeting of cultural needs and goals. This activity includes the identification of any common goals or areas of similar interests held by governance stakeholders, which may provide incentive to unite and facilitate grounds for collaboration. In grass roots or local democratic society, these cultural phenomena are often mechanisms that outweigh even the toughest resistance to change. They also serve to counteract resistance to hard drivers or those governing authoritative directions that are often perceived in community as controlling rather than ‘beneficial’ to local community practices. It is with this knowledge and experience in transformation strategy that education is promoted as both a utility and a result of successful change implementation toward governance consolidation and collaboration. According to the World Economic Forum (WEF) 2015 report released 16 May 2015, education is also an area where Indonesia is experiencing critical issues and barriers to the success of economic strategies.40 Out of 124 countries, Indonesia ranks only 69th in human capital development and holds the lowest rank in its governance region. This 38 "The Indonesian Economy - Entering A New Era" (eds Aris Ananta, Muliana Soekarni, Sjamsul Arifin, 2011) 39 https://sustainabledevelopment.un.org/futurewewant.html
Governance Frameworks for Accountability, 2015 – Vivienne Tobassa Eggers – Stie Widya Wiwaha
low grade demonstrates a failure to develop and deploy the country’s human capital potential and represents a high risk to the endured success of any economic initiatives implemented – such as IPSAS GAS. The failing also serves to draw attention to the urgency and critical need for remedial solutions toward medium and long term drivers of economy and human resource development requirements. This need is also compounded in the high unemployment rate of Indonesians aged between 15-24 years – considered to be the most upwardly mobile demographic of the nation workforce. This is also the primary demographic of students entering into areas of vocation where they require competency skill or to acquire more extensive tertiary qualification. The report also advises that students in this age bracket who graduate are experiencing difficulty in finding and meeting requirements for vocational job roles. WEF advises that with approximately 125 million Indonesians under the age of thirty, the current failure to find jobs poses a major disaster risk to the poverty scale in Indonesia: 41 “Enhancing the quality of basic education in Indonesia remains a key challenge for the government. However, it is a vital issue as without good quality basic education, Indonesian children will fail to acquire the skills required to lead full and productive lives. This also has major consequences for long-term economic growth of the country. Moreover, given that at the end of 2015 the ASEAN Economic Community (AEC) is set to be launched (which aims to make this region a single market and production base) it is important that Indonesian workers can compete with other ASEAN workers. A few days ago, it was reported that Indonesia ranks in the bottom ten of a school rankings compiled by the Organization for Economic Cooperation and Development, on par with (or slightly above) countries such as Botswana, Peru and Oman. …Indonesia has an unemployment rate of 6.2 percent (February 2015), which translates to 7.2 million unemployed people. …It is often stated that Indonesia has a demographic bonus as its population is relatively young. However, this bonus can turn into a disaster if this young population fails to find jobs and instead fall into poverty. In 2014, Indonesia had a poverty rate of 11 percent of the population, roughly 28 million people.”
40 http://www.indonesia-investments.com/upload/documents/World-Economic-Forum-WEF-Human-CapitalReport-2015-Indonesia-Investments.pdf 41 http://www.indonesia-investments.com/news/todays-headlines/human-capital-report-2015-indonesialags-behind-regional-peers/item5564
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WEF, 2015 Report Highlights, Indonesia Investments
In global governance it is commonly known economic emergence and growth of nation prosperity are intrinsically linked to education. In Asia region Singapore demonstrates a prime example of a developing nation that was able to transform into a leading world industrial economy and sustain that position through utilising and supporting a top ranking education sector.42 The key to Singapore’s endured economic success was to focus education in driving economic growth through human capital development. Accompanying the success status is a formidable offering of international standards recognized education and certification programs. A pivotal strategy to this success was to consolidate, collaborate and where appropriate centralise vision for the macro education strategy and inter-linked components. Recognition of citizens as potential human resource assets paved the way forward for strategies and policies that commenced with raising tertiary and vocational standards, international PPP and relationships programs in education and learning; and the subsequent evolvement of junior education to form adequate bridging to internationally accredited standards of vocational training and tertiary education. New Zealand, Australia and Canada provide similar models of progressing economic development through human capital drivers and education into talent management and succession planning for sustainability workforce and economic wellbeing. As this paper has outlined, the rationale and relevance of education to economic prosperity is multi-faceted, serves many levels and purposes in global, national and regional local governance. In serving the needs of the authority (‘hard’) driver for implementation of IPSAS aligned GAS as promulgated by KSAP, education played the critical role in adoption of all new standards and associated practices by end-users. In 2015 the Minister of Finance, Bambang P.S. Brodjonegoro reports the successful implementation of GAS to all prescriptive users as public stakeholders of the KSAP defined standards and accountability measures.43 This accomplishment marks the beginning of a new era established in the mandatory conduct of Indonesian public service accounting and financial information management culture. The event also 42 http://www.oecd.org/countries/singapore/46581101.pdf
43 http://www.ey.com/Publication/vwLUAssets/IPSAS_Outlook_March_2015/$FILE/EY-ipsas-outlook-mar2015.pdf
Governance Frameworks for Accountability, 2015 – Vivienne Tobassa Eggers – Stie Widya Wiwaha
marks a significant shift in the requirement for education and competency development of current and future employees who will be directly involved in administering all or aspects of financial performance and accountability as related to the newly imposed blanket of standards. As a cultural or ‘soft’ driver, education plays a far greater and indeed pivotal role in economic transformation and establishing prosperity resilience, frameworks of accountability and overall good governance that serves as exemplar to global society. And where the impact of standards implementation has reached across the entire public sector, an ongoing need is immediately identified to maintain the knowledge and skill level of those who are interacting with the legally mandated financial administration and reporting requirements – i.e., those imposed under IPSAS GAS.
Establishing governance indicators of prosperity resilience in performance accounting 44
As Indonesia embraces its new commitment to meet international financial obligations, a need ensues to develop and foster an ongoing governance culture that will continue the level and quality of performance and accountability the new standards impose. In response to this need, it is good governance practice and timely to consolidate specific standards accreditation through education development and certification programs collaboratively managed and deployed by universities and the tertiary training sector of Indonesia. 44 http://www.resorgs.org.nz/Content/what-is-organisational-resilience.html
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Methods and approaches for creating good governance accountability The implications of bringing to fruition an education strategy that involves formal frameworks, curriculum establishment and ongoing cultural development denote a significant strategic management and transformation activity is required. The context of good governance and accountability validation parameters depict a macrogovernance framework is necessary – one that reaches whole system.
Key Focus Areas of Good Governance45 After formulating a framework, it is ideal to subsequently design and position strategies for components of consolidated knowledge and competency standards accreditation that meet specific needs and drivers. Where this paper describes the initial scope from a generic needs analysis, it also identifies that the success of fulfilling the various facets of this holistic requirement is highly dependent upon the design and development of a scalable, complexity stakeholder management schema; by 45 http://www.anao.gov.au/html/Files/BPG %20HTML/2013%202014/PublicSectorGovernanceBPG/part_2.html
Governance Frameworks for Accountability, 2015 – Vivienne Tobassa Eggers – Stie Widya Wiwaha
establishing visible development, implementation, validation planning and operations.46
The EU has adopted a Sustainability Management (Managerial Accounting) approach by combining Social Innovation with Governance Accountability as an Enterprise Strategy from 202047
The first step in assessing environmental conditions aligning with economic factors outlined in this paper is to scope the highest level requirements – the strategic direction toward implementing, measuring and validating economic capacity and capability - to 46 http://www.iimahd.ernet.in/assets/snippets/workingpaperpdf/11026921042013-05-10.pdf Rai, R, May 10, 2013 - Stakeholder Management in Complex Settings 47 http://www.csreurope.org/our-strategy
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facilitate the international standards of ongoing culture and operations needed. It is the strategic contextual model that will determine the ultimate verification heuristics to establish worthwhile and measurable accountability governance that meet the goals and drivers of Indonesia. The primary reasons for defining a macro or holistic paradigm for context and measures towards a whole system approach at the outset are effectiveness and cost efficiency. Developing a localised model without considering global trends and evolving strategic direction holds the highest risk to failure. Unless future costly restructure is undertaken, the schematic tends not to survive with adaptive resilience and suffers stakeholder management issues in strategic drivers. Indonesia’s conditions highlight need for the local framework to have international integration and long term status benefits – as with the Singapore education development example. After prescribing an umbrella contextual scope, components that require any form of governance accountability and management will utilise the macroeconomic accountability framework with minimal tailoring towards sector requirements. The contextual strategy will identify and measure subsequent performance, risk and sustainability - as formalised by Indonesia’s goals and drivers accounted to citizens and international society. Traditional theoretical disciplines heavily reliant on stringent accountability and verification frameworks have often referred measured accountable verification under the V Method.48
48 http://istqbexamcertification.com/what-is-v-model-advantages-disadvantages-and-when-to-use-it/
Governance Frameworks for Accountability, 2015 – Vivienne Tobassa Eggers – Stie Widya Wiwaha
The V Methodology of test and defect management was initially developed for the purpose of design, development and measure of systematic applications that require scientific rigidity and accuracy in engineering functional validation measures, yet also meet more generic cultural requirements of organization and end-user domains. With the introduction and increase in trends toward consolidated organization development and corporate good governance, the nature and scope of this model has proved ideal to adapt for social cultural and environmental paradigms in addition to rigid factors in governance. Architectural adaptation into a V Governance Framework enables formal test or validation heuristics to be set for culturally valued attributes or indicators that cannot be implemented and operated adequately with reductionist methods – for example, solely of business process engineering. After defining the highest or most aspirational aligned indicators of performance results to be economically achieved, the V method for measure is then able to scale down into micro level of accountability for projects and activity that is ultimately aligned with the entire governance goals and drivers. Adapting the V Methodology for governance accountability does not define the framework itself. The actual framework will be multi-dimensional, subsisting vertical, horizontal and even diagonal accountability. Architecture and indicators for measure should not take place prior to conducting the intitial phases of context and strategic assessment to scope parameters and requirements for its definition. At this point any number of existing accountability frameworks may be adapted, merged or newly invented as specific to the Indonesia macroeconomic and governance environment, drivers and relevant factors shaping its formation. Significant research and comparative analysis of political and economic accountability models has been conducted by World Bank.49 A framework of governance accountability will also provide optimum transparency of delivery, enabling implementation of effectiveness and efficiency measures. It succeeds in raising visibility and presenting opportunities for streamlining of procedures, processes and budget expenditure via collaborative approaches to governance activity - where deliverable outputs or desired goals are mutually shared amongst stakeholders. Dynamic nature and flexibility of adaptive design is critical – enabling rapid change of requirements to align with governance trends and edicts. Development is derived from the contextual strategy assessment, through stakeholder management, impacts, risk, contingency and other scoping activities. 49
http://siteresources.worldbank.org/PUBLICSECTORANDGOVERNANCE/Resources/AccountabilityGovernance. pdf (see also, bibliography)
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Sector development issues such as finance and education are able to align vertical and horizontal strategies within the governance framework, in accordance with unique goals, drivers and issues. The prominent benefits of architecting this generic matrix is that its scope and design enables and supports consolidation and collaboration in purpose oriented projects that may overlap or share resources and budgets for common endeavours. The term to describe this feature is heterarchic concilience. An example of utilising the framework in this manner would be the collaboration and sharing of mutual aspects of the IPSAS GAS implementation by Finance and Education Ministerial portfolios. Where a collaborative framework is already in place, the planning, budget expenditure and implementation may be shared as a collaborative initiative. It will by necessity interact with many common stakeholders but will result in developing separate products or deliverables, often with variant strategies and diverse governance cultures. It is not appropriate to fully consolidate many government initiatives as one project activity due to the divergent drivers and goals delivered by each government portfolio. Yet concomitantly, there are many benefits in combining and collaborating relevant aspects of a government initiative – hence the drive for consolidation.
Phases of Collaboration in Consolidated Projects of Governance (India Model) 50 50
Governance Frameworks for Accountability, 2015 – Vivienne Tobassa Eggers – Stie Widya Wiwaha
To be effective even within economic sector, consolidation enables consistent quality, standards and approaches to be implemented. After establishing the high level drivers of economic goals and the measures of their objectives, sector oriented implementation of initiatives is able to utilise the accountability framework for each strategy adopted. When the macroeconomic transformation strategy is new and innovative, an optimum approach to implement and verify effectiveness is to pilot an activity of consolidated governance. The inherent needs and issues in education sector, coupled with the financial sector implementation of IPSAS GAS, provide an opportunity to bring major development benefits to education sector management. Stakeholders collaborate a uniform implementation of internationally recognized quality standards development and accreditation that fulfils requirements in a critical area of public sector and economic development. Consolidation and collaboration underpins the need identified and discussed in this paper to promote, engage, build and foster education development. The key requirement is a knowledge culture that continues the learning and skills competency employees in public organizations require - to operate within the newly KSAP implemented GAS and to demonstrate transparent accountability performance. The education sector holds the responsibility and task of ensuring the ongoing ability of Indonesia’s human capital to adequately meet the needs of governance. These conditions identify the time is optimum to commence a program of consolidated governance through education sector strategic delivery of an Indonesian unified standards learning and accreditation initiative - within a good governance accountability framework. Financial Managerial Accounting at international standards level now provides the hard driver and paves a path forward to bring collaboration and consilience in an area that is essential to government, while contributing to and piloting a macroeconomic strategic example of education good governance accountability framework. Without management collaboration and a consolidated stakeholder approach, the international calibre requirement for uniform standards application in financial management and governance accountability cannot be adequately implemented within the existing context of disparate, non standardised delivery of education that is currently proclaimed by Indonesia’s tertiary sector. The incumbent Minister of Education has called for internet technology enablement progression towards consolidated practices, as a major drive toward rectifying issues and risks such as those outlined in WEF Human Capital Report, 2015.51 This rectification needs a macro and http://india.gov.in/e-governance/mission-mode-projects/integrated-mmps 51 http://www.thejakartapost.com/news/2015/01/08/ministry-turns-internet-improve-education.html
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microeconomic strategy of development to achieve Indonesian goals and drivers. The impact of the financial management accountability standards reaches across all economic sectors, governing organizations and Ministerial portfolios through cultural change assimilation, education of human resources and administrative oversight of ongoing delivery and performance. Not only is ‘certification in government, good governance and managerial accounting’ essential, criticality provides the binding elements necessary to establish context, planning and management for economic strategic transformation.
Architecting and Implementing the Certification Program and Good Governance Accountability Framework To identify and scope the requirements of financial management and governance certification, review of economic goals and objectives against international comparative models is undertaken. Consideration is given to existing implemented KSAP standards and how these are planned to be evolved through ongoing operation. Although there is no formal prescribed implementation for accrual accounting practices, it is assumed an optimum methodology will have been considered to be effective, efficient and economic in the form of a basic requirements model. 52 Unique anomalies in economic strategy, will determine any specific localised tailoring of these fundamentals to curriculum design. Any curriculum requires identification of certifiable expertise defined as key areas of competence and standards of performance. Any suite of qualifications and learning modules developed will equip those newly qualified and provide continued development to ongoing good governance, accountability and financial management practitioners. This will comprise technical, procedural and managerial knowledge that fulfils capability of performance results in areas of expertise certified. Curriculum modules, qualifications, examinations and syllabus will be designed in accordance with learning needs assessment and delivered in appropriate format via collaborating senior education providers. In addition to developing curriculum and learning, the establishment of certification in good governance and accounting (CIGGA) requires establishment of an enabling framework that measures and validates management performance and accountability. The first phase of this activity is development of contextual management strategy as earlier discussed. Definition of the good governance context will deliberate critical 52 http://www.icgfm.org/digest/PFDFeb2004.pdf p 78; Hassan A. G. Ouda Basic Requirements Model for Successful Implementation of Accrual Accounting in the Public Sector
Governance Frameworks for Accountability, 2015 – Vivienne Tobassa Eggers – Stie Widya Wiwaha
factors of impact, risk, strategy and validation heuristics for performance and results to be achieved. Indicators utilised to measure and validate results will also be comparatively assessed and derived from international legal and governance models: relevant indexes, codes and standards in alignment with Indonesia specific economic environment. Out of this activity includes review of enabling infrastructure and technology; any deficit or requirement is also determined. An integrated progression from this assessment is to identify, model and manage stakeholder relationships – examining and defining strategies in alignment with entity interaction and management complexity.53 The environmental culture is also evaluated through competency needs analysis and strategic change management assessment – an endeavour that can couple learning needs assessment for certification program design activity in many areas.54 Needs assessment should provide a situation analysis, identify gaps and learning outcomes prioritised as essential or desirable. Cultural adoption drivers, resistance barriers and assimilation mechanisms will also be featured. All factors in change management are considered through integrated perspectives of human capital, process and best practice; technology, systems and support mechanisms required to bring successful implementation and sustainability of the good governance framework with its transformation initiative – in this case the CIGGA program.
53 http://www.emeraldinsight.com/doi/abs/10.1108/17554251211200428 Kevin Money, Carola Hillenbrand, Ian Hunter, Arthur G. Money, (2012) "Modelling bi‐directional research: a fresh approach to stakeholder theory", Journal of Strategy and Management, Vol. 5 Iss: 1, pp.5 - 24 54 https://www.london.gov.uk/sites/default/files/Competency-framework-guidelines.pdf
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IFAC International Framework
The outputs of strategic assessment activities culminate in architectural design and development of a suitable good governance and accountability framework. To define a good governance accountability framework, an implementation strategy and its project management planning is also scoped, subsequently enabling the identification of base level accountability and validation measures. Comparative assessment and benchmarking requirements against existing models of good governance such as International Federation of Accountants (IFAC) International Framework, is part of design activity.55 Organization and governance accountability consists of multidimensions, of macro and micro levels of accounting and performance results validation. For the purpose of CIGGA program implementation, accountability results will mirror and map to competence and capability demonstration of the expertise, technical, procedural and performance standards defined in learning curriculum. Accountability measures are also identified in accordance with the variant features of end-user stakeholders and their associated role specification or job tasks. The level of accountability intricacy is optimal when simplified into generic human resource role competence categories - when implementing a new transformation concept into a culture for the first time. Complexity and detailed measures can be evolved with 55 http://www.cipfa.org/policy-and-guidance/standards/international-framework-good-governance-in-thepublic-sector
Governance Frameworks for Accountability, 2015 – Vivienne Tobassa Eggers – Stie Widya Wiwaha
subsequent review and enhancement after the certification program and its governance framework has been in cultural use for a suitable period of time. This task will establish effectiveness and monitor the progress and development of end-user practitioners.
Conclusion Summary and Recommendations This paper has attempted to discuss rationale, provide guidelines and insight into the facets of architecting good governance frameworks that measure accountability of economic management through adopting leading international movements in economy - the practice of Managerial Accounting or Sustainability Management. The discussion has highlighted the need for Indonesia to progress economic prosperity with a strategic management transformation that interacts and aligns with global governance trends and provides visible accountability responses from macroeconomic drivers. Due to the implementation of legally mandated financial management standards into the country’s entire public sector, a model of good governance accountability must also reach into all government tiers and organizations of society. This action is also perceived essential to build capacity and capability in citizen culture. Currently UN, WEF and international governance experts agree with Indonesian presidential reports that the disparate and low quality standards persisting in the nation’s education sector pose a major threat to the continued progress of Indonesian economic prosperity and development emergence. The severity of this risk denotes a timely opportunity for stakeholders in governance and education sector to take the necessary actions to architect and implement a framework of good governance accountability. The prerequisite of collaboration in management and consolidation of recognised standards education and knowledge certification provides an ideal and essential initiative to form a basis of good governance concilience – a common purpose project to pilot and demonstrate the benefits and effectiveness of governance accountability framework utility. The consolidated and collaborative approach to implementing CIGGA can succeed in championing the economic strategic transformation Indonesia is upheld as needing, by making inroads towards evolving an international standards level of education and human capital development. The success of the certification and good governance framework activity requires high visibility and clarity of strategic planning across multiple stakeholder groups. To achieve the optimum conditions for engagement, implementation and cultural assimilation the following actions are recommended: The first critical condition is to establish the leading authority and high level driver or ‘change sponsor’ of this initiative. Due to its globally integrated macroeconomic
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obligations the Change Sponsor in this instance is perceived as President Jokowi Widodo, who will ideally provide formal authoritative direction – potentially under presidential decree. The leading authority and ‘Program Owner’ is apparent as the Minister of Education Anies Baswedan who is requested to endorse and delegate the strategy proposed after deliberation and further input from members of his cabinet ministry. A ‘Partner Owner’ may additionally be the Minister of Finance, Bambang P.S. Brodjonegoro or in lieu of shared program ownership, authority, endorsement and driver will be sought as a critical Steering Group member. Additional representation for Steering Group membership of the program governance is recommended and sought from Ministerial sectors of Communications, Research, Science and Technology, Engineering Infrastructure and any other Ministerial portfolios that may perceive a pivotal interest in the governance program oversight. It is proposed that out of presidential decree and steering group authority, a managerial taskforce be formally appointed to conduct the activities described for CIGGA certification, architectural development and implementation of the good governance accountability framework; and its strategic transformation. The managerial taskforce will serve the purpose of planning, interacting, managing and delivering the program, in consultation and under advisory from the Steering Group. As a venture with macroeconomic reach, critical stakeholders (but not necessarily key drivers) across all ministerial portfolios of government will be engaged. The framework reaches into the domains of decentralised government authority and requires an extensive activity of stakeholder engagement and management at region level. Initial approaches to identifying and eliciting the high-level engagement of critical stakeholders and generic government stakeholder input may best be undertaken through a Consultation Program for Governance Accountability and Education. This activity will identify and initiate the stakeholder and relationships management context. Expressions of interest and participatory input will be invited from members of government and those involved in governance. Of specific relevance to this action is the engagement of universities and senior tertiary organizations that may consolidate to agree the program and give collaborative input to its oversight. A consultant team appointed by the managerial taskforce may also undertake further stakeholder entity analysis and prioritisation of involvement. A minimum of three to four months (dependent on resources allocated for the relevant activities) for the critical period of consultative program, reporting, strategy, learning and framework architecture is to be presented, with ongoing review and evolvement for at least a period of eight months as the program is developed, prototyped and implemented. A concurrent communications and public relations strategy should peak promotions and awareness raising after sign-off around eight months after
Governance Frameworks for Accountability, 2015 – Vivienne Tobassa Eggers – Stie Widya Wiwaha
commencement, for the two month preparation period preceding go-live with the CIGGA program. The change management activity for this two month period will also comprise enabling the certification program learning delivery and administration (e.g. student administration, enrolment, fee processing and other curriculum managerial functions). A business readiness checklist for accountability management by the public organization practitioners will also be conducted. Following a four to six month operational period, the effectiveness of the CIGGA program, its context and governance accountability framework should subsequently be reviewed and validated. Any enhancements or evolved requirements identified may be incorporated with the development of strategies for future consolidation initiatives to be delivered within the good governance accountability framework. This action paper has been deliberated at the request of senior economic members of Indonesian Education, Financial Management and Government for the purpose of sharing knowledge and expertise of the transformation obligation, to scope the requirement and propose the strategy for managing the successful governance initiative. In concluding observation, the time consraints of the target ‘live’ date for CIGGA to support IPSAS GAS already implemented, calls for urgent consideration and direction from Sponsor, Program Owners and Steering stakeholders to commence the requisite activities outlined. Author: Vivienne Tobassa Eggers Tobaworld International Consulting
Associate: MOU Stie Widya Wiwaha Yogyakarta, University of Management and Economics Vivienne Tobassa Eggers has seventeen years immersion in community and economic governance development internationally and in Indonesia – with over twenty years concurrent strategic management consulting to design and implement multi-government and corporate restructure and reform. Her successful track record includes governance, architecture, human resource, communications, information management, technologies, systems and functional process. Her career competencies include education, organization design and learning knowledge development, triple bottom line and sustainability management (managerial accountability), strategic change, corporate, public sector good governance and general management. In addition to creative economy, web and SME business mentoring, she holds a significant background in strategic transformation and program management within financial services, communications technology and governance infrastructure sectors. Vivienne holds five post-graduate commercial and international law, global governance, management and Arts qualifications. As a public figure she is a keynote speaker, author, designer, spiritual emissary, patron and performer in Arts-Music culture, transformation and
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leadership coach. Over the past five years, Vivienne has developed and enhanced strategic management and governance expertise in Indonesia while researching and progressing a PHD in global governance, international law, collaborative sustainability management and accountability frameworks for governance transformation in environmental, cultural harmony. Vivienne is a company managing director, an advisor and co-founding board member of International Center for Public Sector Governance (ICPSG).
Additional Reading Arroyo, D. & K. Sirker. 2005. Stocktaking of Social Accountability Initiatives in the Asia and Pacific Region. Washington DC: WBI Working Paper Bovens, M. 2005. “Public Accountability.” In Ferlie, Ewan. Laurence E. Lynn, Jr. & Christopher Pollitt (eds). The Oxford Handbook of Public Management. Oxford: Oxford University Press. Bovens, M. 2006. Analysing and Assessing Public Accountability: A Conceptual Framework. European Governance Papers No. C-06-01 Cavill, S. & M. Sohail. 2004. “Strengthening Accountability for Urban Services.” Environment and Urbanization: 16(1). Goetz, A.M. & J. Gaventa. 2001. Bringing Citizen V oice and Client Focus into Service Delivery. Brighton, Sussex: IDS Working Paper No.138 Goetz, A.M. & R. Jenkins. 2001. “Hybrid Forms of Accountability: Citizen Engagement in Institutions of Public- Sector Oversight in India.” Public Management Review: 3(3). Malena, C; R. Forster & J. Singh. 2004. Social Accountability: An Introduction to the Concept and Emerging Practice. Washington DC: World Bank Social Development Papers: Participation and Civic Engagement No.76. McNeil, M. & T. Mumvuma. 2006. Demanding Good Governance: A Stocktaking of Social Accountability Initiatives by Civil Society in Anglophone Africa. Washington DC: WBI Working Paper No.37261. World Bank. 2004. State-Society Synergy for Accountability: Lessons for the World Bank. Washington DC: World Bank Working Paper No.30. World Bank Institute, 2005. Social Accountability in the Public Sector. Washington DC: WBI Working Paper No.33641.
Governance Frameworks for Accountability, 2015 – Vivienne Tobassa Eggers – Stie Widya Wiwaha