DETERMINANT OF FRAUD IN GOVERNMENT AGENCY: EMPIRICAL STUDY AT THE FINANCE AND DEVELOPMENT SUPERVISORY AGENCY (BPKP) OF JAKARTA REPRESENTATIVE OFFICE

DOI: 10.21532/apfj.001.17.02.01.08 ABSTRACT The purpose of this study is to examine the influence of the appropriateness of compensation, the effectiveness of internal control systems and the organizational ethical culture on fraud in government agency. The dependent variable used in this study is fraud in government agency, while the independent variables used are the appropriateness of compensation, the effectiveness of internal control systems, and the organizational ethical culture. This study uses a sample of 105 respondents at BPKP Jakarta Representative Office. Sampling technique is conducted using convenience sampling method. Data analysis method used is multiple linear regression statistical analysis. Results of regression analysis show that the appropriateness of compensation has positive effect on the occurrence of fraud in government agency, the effectiveness of internal control system has negative effect on fraud in government agency, and the organizational ethical culture has no significant effect on fraud in government agency.


INTRODUCTION
This study aims to examine and analyze the negative influence of the appropriateness of compensation, the effectiveness of internal control system (SPIP) and the ethical culture of organization on fraud in government agency.The differences of this research from the previous research conducted by Pramudita (2013), among others, are: 1) the object of this study is the employees of BPKP of Jakarta Representative Office, while the object of the previous research is conducted on 111 government employees in Salatiga; 2) the independent variables of this research are the appropriateness of compensation, the effectiveness of internal control systems (SPIP) and the ethical culture of the organization, while the independent variables of the previous research are the appropriateness of compensation, the effectiveness of internal control systems, the ethical culture of the Volume 2, No.1 st Edition (January-June 2017) This research is expected to be useful as an input in an effort to prevent fraud in the BPKP by creating policies that can reduce the determinants of fraud.

Fraud Theory
Fraud is a legal concept that has a wide

Types and Classification of Fraud
Association of Certified Fraud Examinations (ACFE), as one of the associations in the USA that have major activities in the prevention and eradication of fraud, classifies fraud in three groups as follows.

Fraudulent Statement
Fraudulent statement includes actions taken by an officer or executive of a company or government agency to cover the actual financial condition by performing financial engineering in the presentation of its financial statements to gain an advantage or perhaps it can be analogized with the term window dressing.Cressey (1953) in Tuanakotta (2007), fraud is caused by three factors: (1) pressure, (2) opportunity,

Asset Misappropriation
(3) rationalization.This study uses the fraud triangle theory as the main theoretical basis.
Pressure is the motivation of individual employee to commit fraud due to the both financial and non-financial pressure, personal and organizational pressure (leadership, too heavy task, and others).Pressure is proxied by the variable of the appropriateness of compensation.
Opportunity is the possibility of fraud as a result of weak or ineffective control so as to open up the possibility of fraud.The

Causal Factors of Fraud
The appropriateness of compensation Compensation or salary is important for every employee of an organization as it is the reciprocal of effort / contribution he has done for the organization and used to meet daily needs.According to Handoko (1993) in Pramudita (2013), compensation is the provision of financial payments to employee as remuneration for the work he has carried out and as a motivation for the implementation of activities in the future.In addition, according to Hariandja (2002) in Pramudita (2013), compensation is one of the important elements Page 93-108 that can affect the performance of employees, because compensation is a tool to meet the various needs of employees, so with the compensation provided the employees will be motivated to work harder.
According to the theory of Wexley and Yuki (2003: 133), an unfair or inadequate compensation and drudgery can support incidents of theft by workers, in this case is the theft of assets of the company or organization.
Based on the above description, compensation can be summed up as a reward for the services provided by the employee for his efforts to increase the productivity of the companies that affect the increase in corporate profits.In the current development, the compensation given by the company is linked to the performance so that the amount of compensation is adjusted to the performance provided by the employee.If the compensation awarded is unfairly, this will cause employees to perform acts of fraud that have and adverse impact on the company.It can be assumed that the higher the appropriateness of the compensation awarded, the lower the occurrence of fraud in government agencies.

The effectiveness of internal control system
There are some opinions regarding the definition of internal control systems, among Therefore, a good internal control system in government agencies will reduce the level of fraud that can be done, otherwise if the quality of the internal control system is bad, it can be an opportunity for employees to commit fraud.The more effective the internal control in government agency, the lower the level of fraud.

Asia Pasific Fraud Journal
Volume 2, No.1 st Edition (January-June 2017)  Subramaniam (2008) shows that in a more ethical environment, an employee will be more likely to perform or execute the rules of the company, and avoid acts of fraud within the agency.
This ethical environment can be assessed with the existence of ethical organizational culture and organizational commitment, so it can be said that if an institution has a low ethical organizational culture, it will encourage its employees to commit fraud.
Based on the above theory, it can be concluded that the better the organizational ethical culture in an agency, the lower the tendency of employees to commit fraud.
And the worse the ethical culture prevailing in an institution, the higher the tendency of employees to commit fraud.

HYPOTHESIS FORMULATION The appropriateness of compensation
Based on the research conducted by Pramudita (2013), the appropriateness of compensation has negative effect on the occurrence of fraud in the government sector.
A more appropriate compensation received by employees of government agencies will be able to suppress the occurrence of fraud in the institution.Based on the description of the appropriateness of compensation and its effect on the occurrence of fraud in the government sector, the hypothesis can be formulated as follows: H 1 : Appropriateness of compensation has negative effect on the occurrence of fraud in government sector.

The effectiveness of internal control system
According to the results of the research conducted by Pramudita (2013), the effectiveness of internal control system has negative effect on the occurrence of fraud in the government sector.The better the internal control of a government, the lower the tendency of fraud occurring, similarly, the lower the level of compliance with internal controls, the higher the level of fraud in the government sector.
Based on the description of the effectiveness of internal control system and its influence on the occurrence of fraud in the government sector, the hypothesis can be formulated as follows.
H 2 : Effectiveness of internal control system has negative effect on the occurrence of fraud in government sector.

Organizational ethical culture
According to the results of the research conducted by Pramudita (2013), organizational ethical culture has negative effect on the occurrence of fraud in government sector.The better the organizational ethical culture of an agency, the lower the level of fraud occurring, similarly, the worse the organizational ethical culture of an agency, the higher the tendency of fraud occurring.Based on the description of the organizational ethical culture and its influence on the occurrence of fraud in the government sector, the hypothesis can be formulated as follows.
H 3 : Organizational ethical culture has negative effect on the occurance of fraud in government sector.

Research Approach
This research is classified as a quantitative research that aims to test a theory and shows the relationship between variables.The data used in this study are primary data.Data collection methods used is through questionnaire.The questionnaire contains about employees' perceptions of the factors that influence the occurrence of fraud in government sector.The questionnaires are distributed directly to the civil servants at BPKP of Jakarta Representative office in 2016.

Population and Sample
The population in this study is all civil servants at the BPKP Representative Office Jakarta Province.The method applied in the sampling is convenience sampling method.
Convenience sampling is the gathering of information from the members of population who gladly give it (Sekaran, 2013).The rationale for this method is because it is easier and simpler, in addition to the limited number of employees who could be encountered to be the respondent due to the bustle of these employees.
The samples taken are civil servants at BPKP Representative Office of Jakarta who could be encountered by researchers and are willing to provide information / answer the questionnaire given by the researchers.The number of samples in this study is 105.The number is considered sufficiently representative because it has the required number of samples of 30 to 500 (Sekaran, 2003).105 is the number of all the functional position of the existing auditors of a total of 152 employees at BPKP Representative Office of Jakarta.

Conceptual and Operational Definition of Variables
The conceptual and operational definitions of variables are summarized in the following The statistical tool is used to find out the relationship between the independent variables and the dependent variable.The number of independent variables used is three (more than one).The model in this study can be described as follows.
The model in this study can be formulated  for the variable of fraud in government agency, the majority of respondents 51% stated strongly disagree, followed by 42% who stated disagree.
This means that the majority of respondents consider that the level of occurrence of fraud at BPKP Representative Office of Jakarta is low or seldom with an average value of 1.62 (scale 1-5).
For the variable of appropriateness of compensation, the respondents are divided into three equal categories.35% of respondents agreed, 29% disagreed and 23% neutral.This may reflect that 35% of respondents feel that the compensation is appropriate, 29% not appropriate, and 23% neutral.Therefore, in general, respondents consider that the appropriateness of compensation at BPKP of Jakarta Representative Office is quite good, with an average value of 2.83 (scale 1-5).
For the variable of effectiveness of internal control system, 69% of respondents agree, 14% neutral, and 10% strongly agree.This means that the majority of respondents consider that the internal control system at BPKP of Jakarta Representative office is quite effective, with an average value of 3.82 (scale 1-5).
For the variable of organizational ethical culture, 62% of participants agree, 18% neutral and 13% disagreed.This means that the majority of respondents consider that the organizational ethical culture at BPKP of Jakarta Representative office is quite good or ethical, with an average value of 3.55 (scale 1-5).

Hypothesis Test
To determine the effect of the appropriateness of compensation, the effectiveness of internal

The Appropriateness of Compensation
The results of data processing show that the appropriateness of compensation has a positive influence on the occurrence of fraud in government agency.Thus, the first hypothesis (H1) is rejected.It can be seen that the variable of appropriateness of compensation has a probability of significance value of 0.021 which is under α = 5%.However, the value of the regression coefficient is 0.215, which means that each increase of one unit of appropriateness of compensation will increase the occurrence of fraud in government agency of 0.215.
This contrasts with the results of the research conducted by Pramudita (2013) in which the more appropriate the compensation received by the employees of government agency will be able to suppress the occurrence of fraud in the government sector.But it is also not in line with the research conducted by Faisal (2013) that the appropriateness of compensation does not affect the fraud in the government sector.
In addition to basic salary, employees at the BPKP also get performance benefits.Based on the conditions described above, it can be concluded that the compensation received by the employees of BPKP in the form of salary and performance benefits not only take into account the position class and length of service but also take into account the weight of the workload, making it more fair and reasonable.
However, most cases of fraud occurring in the government sector are committed by officials or employees who have a high salary.
Based on the causes of fraud in Bologna (1993) in Soepardi (2010), it is described using GONE Theory, where there are four factors why people perform deviation: 1) Greed.It is associated with the greedy behavior which is potential in a person; 2) Opportunity.It is associated with the chance of authority that one has to make a deviation; 3) Need.It is associated with the desire to meet the lifestyle that he things reasonable; 4) Exposure.It is associated with the actions or the consequences faced by perpetrators of fraud when they are found to have committed fraud.
Based on the distribution of the respondents' answers, the compensation received has been satisfactory, but others find it unsatisfactory.
The average dissatisfaction is shown by X1_1 Page 93-108 and X1_2 indicators that show the absence of compensation or bonuses on the work performance and success in implementing job well.However, the occurrence of fraud in BPKP of Jakarta Representative Office remains small, because there have been systems that oversee so that the chance of fraud is getting smaller.

The Effectiveness of Intern Control System
Based on the results of data processing, the effectiveness of internal control systems has an effect on the occurrence of fraud in government agency.Thus, the second hypothesis (H2) is received.This can be seen in the table of multiple linear regression where the p-value of 0.000 is much smaller than 0.05.This is consistent with the research conducted by Pramudita (2013)  This can be seen in Table 3 where the p-value of 0.910 is much greater than 0.05.This contrasts with the research conducted by Pramudita 2. The sampling method used in this study is a convenience sampling method due to the limited number of employees who could be met to be the respondent.The weakness of the use of this method is that the results may be biased, the generalizability is low, the reliability of the data obtained is doubtful.Suggestion 1.In the subsequent studies, survey respondents can be applied for all employees working across representative offices in 33 provinces so that the research data will be more varied.
Government agency, according to Indonesian Government Regulation No. 60 of 2008 on Government Internal Control System, is an element of the central government or an element of the local government.Government agency is an executive tool in achieving government objectives.Therefore, the entire apparatus of government agency have the main duties and functions that must be supported by ethical behavior.But in reality, there neighboring countries such as Singapore, Malaysia and Thailand.The factors that inhibit the increased ratings are high levels of corruption in the sectors of law enforcement and politics.Financial and Development Supervisory Agency (hereinafter referred to as BPKP) is a non-ministerial government institution.The role of BPKP is explicitly stipulated in Presidential Decree No. 192 of 2014 on the BPKP.In accordance with the Presidential Decree, BPKP is the Government Internal Control Apparatus (hereinafter referred to as APIP), which is subordinate and accountable to the President.Based on Government Regulation No. 60 of 2008, Article 59, on Government Internal Control System (hereinafter referred to as SPIP), BPKP serves as a builder of the implementation of SPIP.Therefore, BPKP as one of the agencies that play a role in preventing and finding fraud must first be clean and free from possible fraudulent actions committed by employees.
Barry Aditya P., Halim Dedy P., Lulus K. : Determinant of fraud in government agency: empirical study ..... Page 93-108 organization, leadership style, the influence of organizational commitment, and law enforcement.The results of previous research show that leadership style, the effectiveness of internal control systems, the appropriateness of compensation and the ethical culture of the organization have negative effect on fraud in the government sector in Salatiga and organizational commitment and law enforcement have no effect on fraud in the government sector.
causal factors of fraud due to weaknesses in an organization, among others, are the weaknesses of systems, policies, procedures, processes, and others which result in an employee has the authority or ability to exploit the weaknesses, so he can commit fraud.Opportunity is proxied by the variable of the effectiveness of the internal control system.Rationalization is the attitude or thinking process by moral considerations of individual employees to rationalize the fraudulent action (Rae and Subramaniam, 2008).Fraud occurs due to the condition of local ethical values that drive or allow the occurrence of fraud.The consideration of fraudulent behavior is a consequence of the employee's personal integrity gaps or other moral reasoning.Rationalization occurs when a person or group of people build a justification for fraud.The perpetrators of fraud are usually searching for reasons to rationalize that what they do is theft or fraud.Rationalization is proxied by the variable of ethical culture of the organization.
According to the Indonesian Accountants Association (hereinafter referred to as IAI) as stated in the PSA No. 69 (IAI, 2001: 319.2), internal control is a process that is run by a board of directors, management and other personnel of entities that are designed to provide reasonable assurance about the achievement of the three objective groups: (a) the reliability of financial reporting, (b) the effectiveness and efficiency of operations, and (c) the compliance with applicable laws and regulations.b.According to Government Regulation No. 60 of 2008 concerning Government Internal Control System (chapter 1), internal control system is an integrated process of the actions and activities which are carried out continuously by the management and all employees to provide reasonable assurance on the achievement of organizational goals through effective and efficient activities, reliability of financial reporting, the safeguarding of state assets, and compliance with regulations and legislation.The existence of effective internal control system can create reliable and accountable financial report and performance, improve compliance with regulations and legislation, and implement good asset security.Moreover, it can also avoid the potential for fraud in government agencies.
the frequency and variety of respondents' answers to the variable items or the question items in the questionnaire.Before analyzing and discussing the results of the study, the first is to present the distribution of respondents' answers for each item of variables in the study.The summary of the distribution of respondents' answers for each item of variables can be seen in the following table.
Performance benefits are granted by taking into account the achievements of employee's performance each month based on their position class.Position class is a class grouping as a result from a weighted vote of work consisting of class 1 (one) up to class 18 (eighteen) as one of the basis for the provision of the amount of the employee performance benefit.
that the high effectiveness of the internal control system of employees can prevent the occurrence of fraud in the government sector.To achieve effective, efficient, transparent, and accountable state financial management, the ministers / leaders of institutions, governors and regents / mayors shall exercise control over the implementation of the activities of government.The control over government activity is guided by the government regulation on the government internal control systems (SPIP) as stipulated in Government Regulation (PP) No. 60 of 2008.Article 47, paragraph 1 of Government Regulation No. 60 of 2008, states that ministers / leaders of institutions, governors and regents / mayors are responsible for the effectiveness of the implementation of the internal control system in each environment.As a government agency, BPKP are obliged to implement the internal control system as a builder in addition to the implementation of SPIP.The effectiveness of internal control system at BPKP of Jakarta Representative Office is included in the category of "effective".That is because BPKP of Jakarta Representative Office has an effective control environment, such as clear division of powers and responsibilities, good risk assessment in the form of the completeness of supporting evidence of transactions, good control activities in the form of institutional regulation and policy, good information and communication in the form of Accounting Information Systems accounting (SIA), and monitoring and evaluation of operational activities to assess the implementation of the internal control system of the agency.The objective of the implementation of Government Regulation (PP) No. 60 of 2008 at BPKP Jakarta Representative office is to provide reasonable assurance on the achievement of the effectiveness and efficiency of achieving the objective of the activities, the reliability of financial reporting, the safeguarding of state assets, and the compliance with laws and regulations.Organizational Ethical Culture Based on the results of data processing, the organizational ethical culture has no effect on the occurrence of fraud in government agency.Thus, the third hypothesis (H3) is rejected.Volume 2, No.1 st Edition (January-June 2017) Barry Aditya P., Halim Dedy P., Lulus K. : Determinant of fraud in government agency: empirical study ..... Page 93-108

(
2013) who found that better organizational ethical culture will suppress the occurrence of fraud in the government sector.On the contrary, it is in line with the research conducted by Najahningrum (2013) who found that there is no influence between organizational ethical culture and the tendency of fraud.In addition, the research conducted byFaisal (2013) also states the same thing that there is no influence between the organizational culture and the tendency of fraud.BPKP has already had employee behavior rules in accordance with the Decision of the Head of BPKP No. KEP-1446 / K / SU / 2008 dated December 23, 2008 of the Code of Conduct of the Employee of BPKP.BPKP's Employee Code of Conduct is the guidelines of attitudes, behaviors, and actions of the employees of BPKP, in carrying out the tasks and relationships of everyday life.This rule of behavior governs the obligations and prohibitions as individuals and community members, as citizens, as state officials and as state apparatus.Related to the implementation of the rule of behavior of the employees, BPKP has issued Regulation of the Head of BPKP No. 33 of 2013 dated October 31, 2013 about the Gratification Control System at BPKP environment.This rule describes types of gratification, duties and the rights of employees, gratuities object delivery, obligation of the Unit Chief, duties and rights of the Inspectorate, and the reporting of the implementation of gratification control systems.This regulation aims to: a. increasing the awareness of the employee to report gratuities; b. maintaining transparent and accountable environment to support the creation of a clean environment in providing services at BPKP; c. building the integrity of the employees who are clean and free from corruption, collusion and nepotism.According to Faisal (2013), there are two factors that can affect an individual to behave: internal factors and external factors.External factors are the factors which are derived from the stimulation or influence of environmental factors.Meanwhile, internal factors are the factors which are derived from the factors existing within the individual.The biggest influence within an individual comes from within the individual self (internal).It can affect an employee to commit fraud, such as greed, desire to have luxurious lifestyles, and more recognition for the work.Thus, no matter how well the organizational ethical culture built by a government agency, if the employee still has a greedy attitude and wants luxurious lifestyles, fraud will still occur.But it can be minimized by periodic supervision of the management and all elements of the agency.If they find unethical acts, they can report and follow up.CONCLUSION This study examines the factors that influence the occurrence of fraud in government agency.Page 93-108 These factors include the appropriateness of compensation, the effectiveness of internal control systems and the organizational ethical culture.Based on these results, it can be concluded that: a.The appropriateness of compensation has positive effect on the occurrence of fraud in government agency, because according to some respondents, the compensation obtained has been satisfactory, but others find it unsatisfactory.The average dissatisfaction is shown by X1_1 and X1_2 indicators that show the absence of the provision of compensation or bonuses on the achievement and success in implementing a good job.b.The effectiveness of internal control system has negative effect on the occurrence of fraud in government agency, because according to the respondents, the internal control system has been working effectively and can reduce the potential for fraud in government agency.c.The organizational ethical culture has no effect on the occurrence of fraud in government agency, because no matter how well the organizational ethical culture that is built by the government agency, but if the employees still have a greedy attitude, want luxurious lifestyles, the potential fraud will still occur.Research Limitation 1.The number of respondents in this study is only 105 respondents, and the data collected are based on the perception of employees at BPKP Jakarta Representative only, so there is still possibility that the results are biased.

2.
In the subsequent studies, the research object can be replaced by other BPKP representatives or other agencies besides BPKP so that the research results obtained will be more varied.3. The subsequent studies can use or add more variables or factors other than those used in this study, such as leadership style, law enforcement, organizational commitment, information asymmetry and others.4. For the subsequent studies, it is better to use purposive sampling method, a sampling technique which is based on characteristics defined on the target population which were adapted to the purpose or research problems 5. BPKP Jakarta Representative Office should be able to prevent the occurrence of fraud in the government sector by pressing the cause of the occurrence of fraud in the public sector among others, Volume 2, No.1 st Edition (January-June 2017) Barry Aditya P., Halim Dedy P., Lulus K. : Determinant of fraud in government agency: empirical study ..... Page 93-108 by: a) creating a system of appropriate, fair and reasonable compensation / bonus for employees by considering the workload and performance, and better job performance; b) evaluating, monitoring and improving the implementation of internal control system continuously at BPKP Jakarta Representative Office; c) enforcing the rules of conduct of employees of BPKP and providing sanctions for any violations that occur according to applicable regulations.

Table 2 Distribution of Respondents' Answers
Source: Processed Data, 2016