Empowering auditors: Indonesia uses data-driven oversight to clean up its corruption-prone procurement sector
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Challenge: Indonesia’s public procurement sector is highly vulnerable to corruption. Fragmented and inconsistent auditing practices across the decentralized government system have impeded effective oversight.
Open contracting approach: The open contracting risk monitoring platform Opentender.net empowers auditors to prioritize which procedures to investigate, gather evidence and respond to public complaints more effectively. Data-driven monitoring enables citizens to submit high-quality complaints to authorities. Formal guidelines have been introduced in several regions to ensure data-driven audits are conducted to a high standard.
Results: The reform has led to significant improvements, particularly in audits triggered by public complaints. Between 2021 and 2022, the rejection rate of complaints submitted by citizens has halved from 78% in 2021 to 39% in 2022, cases resolved by auditing authorities have increased from 53% to 63%, and response times are faster, taking 262 days down from 338 days in 2021. The approach is being institutionalized in several regions, with data-driven monitoring becoming a routine part of their preventative and reactive auditing processes.
Public procurement stands out as the most vulnerable sector to corruption in Indonesia. According to a monitoring report by Indonesia Corruption Watch (ICW), there were 1,586 cases of corruption in procurement detected between 2016 and 2022, amounting to total losses to the state of around US$2.7 billion.
In 2022, OCP published an impact story about how Indonesia’s authorities have been working with civil society to curb corruption by improving timely oversight of the public procurement system, which spans over 600 decentralized government agencies.
The collaboration revolves around the corruption risk monitoring platform, Opentender.net, developed by ICW and the national public procurement agency LKPP. As a publicly available resource, Opentender has been a valuable tool for empowering citizens to monitor procurement using the LKPP’s official data to detect potential irregularities in real time. One of its most innovative applications has been to assist government auditors, helping them to prioritize which procurement procedures to investigate, to gather evidence for their investigations, and to act on reports of suspicious contracts from the public.
Since our last story, ICW alongside their local partners on the ground, YASMIB, Bengkel APPeK and Pattiro Semarang, and government reformers have been working to professionalize auditing through groundbreaking partnerships with authorities in two metropolitan cities and one small island municipality, as well as regulators at the national level.
After a two-year campaign that saw ICW train inspectors across the country in data-driven auditing, the governments of Maros Regency and Kupang City formally committed to a more intensive collaboration with ICW to institutionalize an open contracting approach in their procurement audits in 2022. Semarang City made a similar agreement in 2023.
Data-driven monitoring is now being embedded in the auditing processes of these regions so that it will become ‘business-as-usual’, with formal guidelines being introduced to ensure audits are conducted objectively and to a high standard.
“After working together with ICW, we gained more clarity regarding the duties and responsibilities of personnel within the inspectorate, especially in handling public complaints,” said Henry Sede, Secretary of Kupang City Inspectorate.
In a country where procurement auditing has largely been ad-hoc (if conducted at all), these partnerships are an experiment that aims not only to benefit the authorities involved, but to reveal best practices to inform the adoption of open, data-informed auditing on a larger scale.
“CSOs often collaborate in social services, but this is now collaboration with law enforcement to improve their regulation process. It’s the first time this is happening in Indonesia,” says ICW’s Kes Tuturoong.
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Gallery: Photos taken while monitoring a road maintenance project in Maros Regency in October 2023 (Source: ICW)
Their efforts have focused on using open contracting approaches to improve the efficiency and effectiveness of three kinds of auditing processes: post-procurement audits (carried out on past contracts as part of the annual financial audit), probity audits (conducted on active procedures), and public complaint audits (triggered when citizens report concerns).
Public complaints audits
The most significant progress has been made in the public complaints audits, which are triggered when a member of the public flags an issue. In 2021, ICW worked with LKPP to map out the complex process for handling public complaints and determine how it could be improved. At the time, few complaints were submitted through the LKPP’s official procurement complaints handling mechanisms, e-pengaduan, due in part to the high burden of proof required before complaints were “approved” or progressed for follow-up. Delays were inevitable as the systems and processes for vetting, investigating, and responding to public complaints were fragmented, involving about 600 decentralized government agencies at the local and national level. There was also a lack of data on the volume and outcome of audits. All these factors undermined trust in the complaints process.
ICW worked with citizen monitors and local NGOs in up to 16 provinces to prepare complaints for high-risk procurement procedures. Leveraging their extensive experience of monitoring procurement for over a decade, ICW built local capacities to use the data available on Opentender to investigate public contracts and identify issues, and report their findings through LKPP’s official complaints channel e-pengaduan. They measured several improvements in the public complaints handling process. The latest available data shows:
- Improved quality of complaints: Rejection rate decreased from 78% in 2021 to 39% in 2022
- Increased number of complaints resolved by the internal auditing authority, APIP: up from 53% in 2021 to 63% in 2022
- Increased speed in resolving complaints: Average response time for APIP dropped from 338 days in 2021 to 262 days in 2022 (76 days faster)
But reporting a suspicious procurement is only half the battle. Authorities receiving the complaints must also know what to do with them. That’s why ICW has worked with government agencies to create guidance known as Standard Operating Procedures (SOPs), so it’s clear when LKPP officers who receive the complaints need to involve auditors (if it’s an administrative issue) or law enforcement (if it’s a criminal one), and how the matter should be handled through to completion. These guidelines include details such as recommended time frames, people responsible for certain tasks, and the end-to-end process for resolving complaints.
“We want to hold government accountable. But before we can do that, we need to help them understand what the rules and procedures are. These SOPs will not only serve as guidance for the auditors on how to carry out their work effectively but also for citizens on how to hold government accountable,” said Wana Alamsyah from ICW.
To improve coordination among agencies, the reform team successfully advocated for auditors to be given direct access to the LKPP’s e-pengaduan database to review or respond to complaints for the first time. This provided transparency for all involved in managing the process in a way that wasn’t possible previously when complaints were transferred manually between agencies by email. As of April 2024, 120 inspectorate offices nationwide have access to the system, up from 35 in 2023.
“We assisted internal auditors in testing the complaint system and enabled them to follow-up with complainants about their submissions,” said a spokesperson for the LKPP’s Directorate for Handling Legal Issues.
In Maros and Kupang, 34 representatives of civil society groups and other citizens have been trained in using Opentender to collect evidence and submit complaints via e-pengaduan.
In 2023, they reported four cases worth around US$800,000 (IDR13 billion) for further investigation by authorities. These procedures were selected based on their ranking in the top 10 riskiest contracts for the region, according to Opentender, and additional evidence gathered from open sources and field research. Three of these cases were related to road works, repairs and upgrades. In the first case, the winning supplier had a poor track record on previous contracts in other regions. In the second case, the road to be repaired had only been built in 2016 and was still in good condition. In the third, poor quality materials had been used. The last case was related to a series of irregularities in a popular home renovation scheme.
“I’m proud of the quality of reports done by civil society last year because they were escalated by the procurement agency to the auditing authorities. This is a big change from the past, when there were a number of reports that couldn’t be passed on,” says Wana Alamsyah from ICW.
Eventually the reporting process will be further streamlined to allow public complaints submitted via Opentender to link up automatically to the e-pengaduan system. The integration – expected to happen later in 2024 once an upgrade to e-pengaduan is completed by the government – will allow ICW to monitor the complaints submitted and resolved by the Indonesian government, and in turn, assess the performance of internal auditors in responding to public complaints.
Probity audits
Probity audits target active procurement processes with the aim of preventing corruption before it happens instead of merely punishing corruption after the fact. Introduced in Indonesia for the first time in 2022, these audits monitor the entire procurement cycle from planning through to handover. It takes extensive time, resources, and skill to conduct probity audits, so few governments conduct them regularly and some don’t do them at all. Only a few projects, usually high-value ones, are selected for scrutiny and chosen at the mayor/regent’s discretion. The quality of audit reports varies significantly in terms of format, structure, and quality.
Using a data-driven approach with a platform like Opentender offers a more objective method for determining which procedures to audit, since the tool’s powerful red flag indicators allow users to quickly identify which active procurements pose the highest fraud risk.
In Maros, a satellite region near the capital with a US$90-billion economy and an international airport, auditors don’t just have access to Opentender – a new probity audit selection process is being trialed, one that gives civil society a say in recommending which projects to investigate. First, ICW presents a quantitative analysis of high risk tenders based on Opentender to the Maros’ Inspector (chief auditor). ICW and the Inspector work together to prioritize which tenders will be audited, taking a variety of factors into consideration such as the value of the deal and whether it’s a high-profile public case. Then ICW shares the shortlisted high-risk tenders and rationale with the mayor for their approval. In 2024, Maros’ mayor ordered probity audits to be conducted on 10 projects with a total value of around US$8 million (IDR 126.64 billion).
“We hope that this collaboration with external stakeholders can increase the capacity of auditors and support their performance in the national anti-corruption framework to realize good governance and good government,” said Rahman Pangerang, Secretary of Maros Regency Inspectorate.
Kupang, a very small port city on the island of Timor, will conduct probity audits for the first time in 2024, after ICW and the Inspectorate successfully advocated for an increase to the procurement oversight budget – to about US$80,000 up from $18,000 previously (equivalent to 0.02% of the Kupang government’s total spending).
Technical guidance on probity audits – including activities to be carried out, risk-based approaches and quantitative indicators – as well as templates to standardize the format of audit reports have been adopted in Maros and are awaiting approval in Kupang.
Post-procurement audits
Post-procurement audits are generally carried out once a year on past contracts as part of the annual financial audit, but with no regulation or requirement to conduct them in auditors’ annual work plans, they happen irregularly. Sometimes post-procurement audits are prompted by a request from other local agencies or in cases of suspected corruption. Most governments are not using open data to inform audits or the audit sampling process, and there is no transparency or visibility on findings, making it difficult to assess the quality or results.
ICW developed a new, binding Standard Operating Procedure (SOP) that has been approved in Maros and Kupang. Of the 68 auditors they trained on using contracting data to conduct post-procurement audits, 58 said Opentender was helpful. For the first time, auditors in these regions are using Opentender data to conduct their post-procurement audits and have checked 19 projects worth US$8.6 million, for purchases related to bridge and road construction, upgrades to schools, hospitals and sports facilities, emergency vehicles, and more.
Opentender currently features data on more than 4.6 million procurement procedures (for all types of procurement including tender, non-tender, emergency, self-managed (Swakelola), e-catalogue, and e-purchasing) with a contract value exceeding US$193 billion, and ICW is continuously expanding the scope of the data to allow more in-depth analysis.
OCP is proud to be supporting this reform since 2021, in particular, working with ICW to build on their red flag tools and analytics, based on OCP’s Red Flag indicators.