Innovation of Accounting systems and Practices in Local Government: The case of Cities in Indonesia

DOI: 10.5176/2251-1997_AF19.275

Authors: Dr. Nitri Mirosea and Dr. Pran Krishansing Boolaky

Abstract: This paper investigates accounting systems and practices in the local government of Indonesia with focus on cities. For more than three centuries, the Dutch Accounting System (DAS) was practised in both private and public sector. Following the adoption of the New Public Management (NPM) reform, the government embarked on a decentralisation programme by empowering cities and villages. In a bid to enhance transparency, policy makers pushed for innovative accounting systems and practices in local government. In 1998, the Indonesian government decided to reform public sector financial management to modernise and align public sector accounting with international best practice. One aim of this reform was to review local government (including cities) accounting system. Between 1999 and 2004, there has been remarkable change in the accounting system backed by new laws. In 2005, the Government issued the Accounting Standards for public sector including local government. Using political-economy theory and NPM as part of neoliberalism, we provide insights on the innovation of accounting systems and practices among cities in Indonesia.

Keywords: Indonesia, Local Government, Accounting, IPSAS, NPM