DEVELOPING A FRAUD-RESISTANT PERFORMANCE-BASED BUDGETING MODEL FOR THE INDONESIAN NAVY: AN APPLICATION OF ACFE AND COSO FRAMEWORKS
DOI:
https://doi.org/10.18623/rvd.v23.n4.4876Keywords:
Fraud Prevention, Performance-Based Budgeting, Indonesian Navy, ACFE, COSO, Public Financial ManagementAbstract
This study develops a fraud-resistant performance-based budgeting (PBK) model for the Indonesian Navy (TNI AL) by integrating the Association of Certified Fraud Examiners (ACFE) standards and the COSO internal control framework. Recent regulatory reforms in Indonesia (Minister of Finance Regulation No. 62/2023 and PMK 107/2024) emphasize performance alignment and accountability in public budgeting, yet implementation in defense institutions remains uneven and vulnerable to irregularities. Using a qualitative case study design, the research draws on semi-structured interviews with planning, finance, and internal audit personnel at TNI AL Headquarters (Srena, Diskual, and Itjenal), document review, and NVivo-assisted thematic analysis. Findings indicate that while the TNI AL has adopted performance-based planning mechanisms, gaps remain in risk assessment, monitoring, and detailed activity costing—factors associated with repeated budget revisions and reported overpayments. The study identifies multiple fraud drivers consistent with the ACFE Fraud Hexagon (pressure, opportunity, rationalization, capability, ego, collusion), compounded by organizational factors (limited accounting capacity, cultural constraints on whistleblowing, and budget shortfalls). Based on these findings, we propose a revised PBK model that (1) applies SMART criteria to planning; (2) strengthens separation of duties and monitoring through COSO components; (3) enhances transparency and expenditure analysis via detailed RKA-K/L and e-reporting integration; and (4) embeds ACFE-aligned anti-fraud controls (whistleblowing, continuous audit, and anti-bribery measures). The proposed model is intended to improve the integrity and efficiency of defense budgeting and to inform policymakers and auditors designing controls in high-risk public sectors. The paper concludes with policy recommendations and directions for empirical validation across other defense branches.
References
Abbasov, R. (2025). The Effectiveness of Performance-Based Budgeting in the Public Sector: An Empirical Analysis and Policy Implications. IBusiness, 17(01), 56–76. https://doi.org/10.4236/ib.2025.171003
Achumie, G. O., Bakare, O. A., & Njideka Ihuoma Okeke. (2024). Post-project financial auditing as a continuous improvement tool for SMEs. Open Access Research Journal of Multidisciplinary Studies, 8(1), 115–125. https://doi.org/10.53022/oarjms.2024.8.1.0053
Ahmar, N., Berliana Simbolon, M., & Prastowo Darminto, D. (2024). Training, attitudes, segregation of duties and internal control of church finances: an empirical study in Indonesia. Investment Management and Financial Innovations, 21(3), 28–39. https://doi.org/10.21511/imfi.21(3).2024.03
Anggraini, A., Djefris, D., & Haryadi, A. D. (2023). Pengaruh Persepsi Akuntabilitas, Kompetensi, Profesionalisme, Integritas dan Objektivitas Terhadap Persepsi Kualitas Audit. Jurnal Akuntansi, Bisnis Dan Ekonomi Indonesia (JABEI), 2(1), 39–53. https://doi.org/10.30630/jabei.v2i1.92
Biswan, A. T., & Grafitanti, I. D. (2021). Memaknai Kembali Penganggaran Berbasis Kinerja Berdasarkan Studi Implementasi Penganggaran Sektor Publik. Jurnal Manajemen Perbendaharaan, 2(1), 35–56. https://doi.org/10.33105/jmp.v2i1.368
Bracci, E., Bruno, A., D’Amore, G., & Ievoli, R. (2024). The integration of performance management and risk management in the public sector: an empirical case. Journal of Management Control, 35(1), 137–163. https://doi.org/10.1007/s00187-024-00369-2
Chan, K. C., Chen, Y., & Liu, B. (2021). The Linear and Non-Linear Effects of Internal Control and Its Five Components on Corporate Innovation: Evidence from Chinese Firms Using the COSO Framework. European Accounting Review, 30(4), 733–765. https://doi.org/10.1080/09638180.2020.1776626
Çollaku, L., Ramushi, A. S., & Aliu, M. (2024). Fraud intention and the relationship with selfishness: the mediating role of moral justification in the accounting profession. International Journal of Ethics and Systems. https://doi.org/10.1108/IJOES-10-2023-0220
Dangi, M. R. M., Nawawi, A., & Salin, A. S. A. P. (2020). Application of COSO framework in whistle-blowing activities of public higher-learning institutions. International Journal of Law and Management, 62(2), 193–211. https://doi.org/10.1108/IJLMA-06-2017-0145
De Klerk, J. J. (2017). “The Devil Made Me Do It!” An Inquiry Into the Unconscious “Devils Within” of Rationalized Corruption. Journal of Management Inquiry, 26(3), 254–269. https://doi.org/10.1177/1056492617692101
Ellestad, A. I., & Winton, B. G. (2024). The push and pull between culture and integrity in the workplace: an ethical decision-making context. International Journal of Ethics and Systems. https://doi.org/10.1108/IJOES-02-2024-0042
Enworo, O. C. (2023). Application of Guba and Lincoln’s parallel criteria to assess trustworthiness of qualitative research on indigenous social protection systems. Qualitative Research Journal, 23(4), 372–384. https://doi.org/10.1108/QRJ-08-2022-0116
Ferreira, P., Samagaio, A., & Diogo, T. (2024). The role of the Internal audit’s role in the Armed Forces and its influence on organisational sustainability: a case study. Review of Business Management, 26(2), 1–31. https://doi.org/10.7819/rbgn.v26i02.4263
Friyani, R., & Hernando, R. (2019). Determinants of The Effectiveness Of Implementation Performance Based-Budgeting and Budget Absorption in Local Governments. SRIWIJAYA INTERNATIONAL JOURNAL OF DYNAMIC ECONOMICS AND BUSINESS, 213–226. https://doi.org/10.29259/sijdeb.v3i3.213-226
Gotelaere, S., & Paoli, L. (2025). Prevention and Control of Financial Fraud: a Scoping Review. European Journal on Criminal Policy and Research, 31(1), 1–21. https://doi.org/10.1007/s10610-022-09532-8
Hamza, M., Obeid, A., Jaradat, K., Kastiro, A., & Alrawashdeh, W. (2025). The Impact of the Internal Control System According to (COSO) Framework in Combating Tax Evasion in Jordan (pp. 1675–1687). https://doi.org/10.1007/978-3-031-76011-2_125
Islam, S. (2025). A SYSTEMATIC REVIEW OF PUBLIC BUDGETING STRATEGIES IN DEVELOPING ECONOMIES: TOOLS FOR TRANSPARENT FISCAL GOVERNANCE. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.5287137
Kagias, P., Cheliatsidou, A., Garefalakis, A., Azibi, J., & Sariannidis, N. (2022). The fraud triangle – an alternative approach. Journal of Financial Crime, 29(3), 908–924. https://doi.org/10.1108/JFC-07-2021-0159
Ladwig III, W. C., & Mukherjee, A. (2024). Institutions of democratic control and oversight. In Research Handbook on Civil–Military Relations (pp. 99–116). Edward Elgar Publishing. https://doi.org/10.4337/9781800889842.00015
Mangwanya, M. (2022). The performance based budgeting as a catalyst for effective delivery of primary health care. International Journal of Research in Business and Social Science (2147- 4478), 11(1), 170–177. https://doi.org/10.20525/ijrbs.v11i1.1568
Manta, A.-M. (2020). Performance – Based Budgeting – an option or a necessity. Proceedings of the International Conference on Business Excellence, 14(1), 915–924. https://doi.org/10.2478/picbe-2020-0087
Maulidi, A., & Ansell, J. (2021). Tackling practical issues in fraud control: a practice-based study. Journal of Financial Crime, 28(2), 493–512. https://doi.org/10.1108/JFC-07-2020-0150
Mirzamani, A., Naderi–Beni, N., & Mohammadian, H. (2022). The sustainable development goals and policy capacity: a case study of performance-based budgeting implementation in Iran. International Journal of Environmental Science and Technology, 19(6), 5029–5038. https://doi.org/10.1007/s13762-021-03709-0
Onyango, G. (2021). Whistleblowing behaviours and anti-corruption approaches in public administration in Kenya. Economic and Political Studies, 9(2), 230–254. https://doi.org/10.1080/20954816.2020.1800263
Petlenko, Y., Tarnu, L., Shchehliuk, B., & Nate, S. (2023). Enhancing the Effectiveness of Defence Planning Through the Implementation of Capability-Based Budgeting and Civilian Control. Access to Justice in Eastern Europe, 6(4), 263–277. https://doi.org/10.33327/AJEE-18-6.4-n000477
Sapovadia, V. K. (2025). Forensic Accounting as a Strategic Defense against Accounting Frauds: Methods, Technologies, and Preventive Frameworks. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.5323953
Sukmadilaga, C., Winarningsih, S., Handayani, T., Herianti, E., & Ghani, E. K. (2022). Fraudulent Financial Reporting in Ministerial and Governmental Institutions in Indonesia: An Analysis Using Hexagon Theory. Economies, 10(4), 86. https://doi.org/10.3390/economies10040086
Taherdoost, H. (2021). A Review on Risk Management in Information Systems: Risk Policy, Control and Fraud Detection. Electronics, 10(24), 3065. https://doi.org/10.3390/electronics10243065
Tarjo, & Sakti, E. (2022). Fraud Risk Management : sebuah referensi riset dan praktik. PT Adab Indonesia.
Tetteh, L. A., Agyenim-Boateng, C., Simpson, S. N. Y., & Susuawu, D. (2021). Public sector financial management reforms in Ghana: insights from institutional theory. Journal of Accounting in Emerging Economies, 11(5), 691–713. https://doi.org/10.1108/JAEE-06-2020-0134
Thomann, E., Ioannidis, G., Zgaga, T., & Schwarz, F. (2025). Explaining Public Sector Corruption: The Hexagon Model. Governance, 38(2). https://doi.org/10.1111/gove.70000
Udeh, I. (2019). Observed effectiveness of the COSO 2013 framework. Journal of Accounting & Organizational Change, 16(1), 31–45. https://doi.org/10.1108/JAOC-07-2018-0064
Vallabhaneni, R. (2024). Enhancing Internal Controls with the COSO Framework: Addressing Deficiencies and Ensuring Regulatory Compliance. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.4944856
Yanti, L. D., & Wijaya, M. D. W. D. (2020). Influence Of Auditor Switching, Audit Fee, Tenure Audit and Company Size To Audit Quality. ECo-Fin, 2(1), 9–15. https://doi.org/10.32877/ef.v2i1.150
Yin, R. K. (2018). Case Study Research and Applications: Design and Methods (6th ed.). SAGE Publications.
Zhou, M., Chen, Y., Zhou, L., Zhan, J., & Chong, H.-Y. (2025). Strengthening power grid projects’ governance and sustainability through lifecycle auditing. Scientific Reports, 15(1), 36442. https://doi.org/10.1038/s41598-025-20389-9
Downloads
Published
How to Cite
Issue
Section
License
I (we) submit this article which is original and unpublished, of my (our) own authorship, to the evaluation of the Veredas do Direito Journal, and agree that the related copyrights will become exclusive property of the Journal, being prohibited any partial or total copy in any other part or other printed or online communication vehicle dissociated from the Veredas do Direito Journal, without the necessary and prior authorization that should be requested in writing to Editor in Chief. I (we) also declare that there is no conflict of interest between the articles theme, the author (s) and enterprises, institutions or individuals.
I (we) recognize that the Veredas do Direito Journal is licensed under a CREATIVE COMMONS LICENSE.
Licença Creative Commons Attribution 3.0
