Cultural Perspectives on Financial Accountability in a Balinese Traditional Village

2.1 Critique of Agency Theory in Accountability Practice

Agency theory, as proposed by Eisenhardt (1989) and Jensen and dan Meckling (1976), defines accountability as the obligation of one party to provide information and justification to another. The two parties in an accountability framework are usually described as principals and agents. The principal is the party that must be held accountable, and the agent carries the responsibility (Gray et al., 1987). This definition implies that accountability is an agency contract relationship with a form of delegation of authority in decision-making given by the owner to the company or organization (Rahayu, 2018). On the other hand, according to Scott (1997), the agency theory is a contract design that balances the interests of the principal and agent when a conflict occurs. As an agent, management should work based on the company’s or shareholders’ interests. However, the reality that often happens today is that management is concerned with itself by maximizing its utility through deviant actions that do not benefit the company in the long term or are detrimental to its interests (Rahayu, 2018). This condition gives rise to an imbalance of information and causes problems caused by the principal’s difficulty in controlling the actions carried out by the agent (Jensen & dan Meckling, 1976). Problems that can occur from this condition are (Eisenhardt, 1989) moral hazard, where the agent does not carry out things that have been mutually agreed upon in the employment contract, and adverse selection, a situation in which the principal does not know whether the decision taken by the agent is based on the information obtained or dereliction of duty.

This problem also occurs in the reality of public sector accountability practices in Indonesia. Based on data from Indonesia Corruption Watch, from 2015 to 2020, there were 676 defendants in village officials’ corruption cases, which continued to increase until 2021 and 2022, occupying the top ranking of corruption cases (Indonesia Corruption Watch, 2022, 2023, 2024; Purwanti et al., 2024; Wiguna et al., 2022). Moreover, corruption cases arise in traditional villages with the lowest regional government structure. This is because local governments’ lack of understanding of modern financial management mechanisms can cause the implementation of accountability to become less professional and increase the risk of fraudulent behavior in local governments (Atmadja & Saputra, 2018; Chang et al., 2019; Saputra et al., 2022). On the other hand, the modernization of financial management mechanisms and the development of accountability practices will certainly influence cultural values and local genius in regional government, especially when this practice is dominated by the values of materialism, egoism, and utilitarianism, which conflict with the local values that exist in regional government (Thalib, 2022). Materialism also has become integral to economic rationality (Lehman, 2005). The main characteristic of the philosophy of materialism is the emphasis on the material dimension, and a similar characteristic is also present in economic rationality. Economic rationality possesses competition, egoism, and excessive rationalism (Kusdewanti & Hatimah, 2016). The implications of these values ultimately influence real-world practices, including the concept of conventional accountability (Riyanti, 2020). This materialism also leads humans to obey, comply, and submit to a combination of egoistic and materialistic values that merge into the adhesive of utilitarianism (Triyuwono, 2012). The egoistic traits brought by modernism will form individualistic values in the organization, thus providing a logical consequence on the economic reality that is always seen as revolving around material reality, not touching the realm of spirituality, nature, the environment, and God. Eventually, slowly but surely, humans will come to believe that the form and meaning of accountability are only the accountability that focuses on the interests of those in power and is materialistic (Djamhuri, 2011). This is the result of the concept of accountability that has developed so far focuses on accountability and is only limited to giving responsibility for human actions to other humans (Bovens, 2007; Ebrahim, 2003; Jurana et al., 2022). This phenomenon has given rise to criticism that accountability mechanisms should not only be limited to preparing financial reports using accounting media but should also emphasize preparing ethical and moral action mechanisms (Joannides, 2012; Overduin & Moore, 2017; Sullivan & dan Dwyer, 2009). The separation between physical and ethical relations, ultimately bringing misery to society, is an advantage for power holders. This is one of the weaknesses of the form of accountability derived from two relationships, which considers an organization only as a set of contractual relationships. The concept of accountability should not only be a formal linear responsibility process, such as in the principal-agent relationship, which is only dominated by quantitative matters, but can also be understood as an individual’s life experience and can go beyond the technicalities of financial accountability (Kusdewanti & dan Hatimah, 2016; Miller, 2002; Roberts, 1996). Accountability should not only be limited to physical relationships but also moral and spiritual relationships (Purwanti et al., 2024; Triyuwono & Roekhuddin, 2000). This means the current accountability mechanism cannot resolve problems in the local genius culture that arise in accountability practices if it only makes material things the center of interest.

The order in the social system of Indonesian society, especially in the regional government, cannot be separated from the existence of the local genius wrapped in spiritual elements – for example, the traditional village government of Bali. The traditional village government system is formed based on religious and cultural concepts, namely, Hinduism, which is evidenced by the establishment of traditional villages that must have the holy temple of Kahyangan Tiga and become a village that is managed religiously, in the sense that the application and practice of the traditional and culture of the community are wrapped in elements of spirituality that animate and influence its implementation (Arimbawa & Santhyasa, 2010). Traditional villages’ financial transparency and accountability are also closely associated with spiritual elements, which should make the traditional village government aware and believe in a power beyond themselves that always oversees the financial management they carry out, namely, the power of God (Kurniawan, 2016). Therefore, it can be conceptualized that the traditional village government must carry out financial reports and spiritual-based accountability as an ethical and moral responsibility to God. This is because the traditional village government is run with the philosophy of Tri Hita Karana, where the form of accountability is accountability to God, accountability to humans, and accountability to the universe.

However, the phenomenon of corruption cases in traditional villages (as described in Section 1) provides an awareness that the traditional village government only emphasizes accountability as a medium to fellow humans and eliminates the aspect of accountability to God. The loss of accountability to God can lead to a loss of moral awareness and a tendency to engage in actions that benefit oneself without considering the impact on the community (Almutawallid & Santalia, 2024). This also gives rise to the assumption that Western government mechanisms cannot be fully implemented in regional government. Supposedly, the concept of accountability in the regional government system must synergize with local social and cultural elements (Djamhuri, 2011). This leads to the following question: If an entity is considered accountable for the goals of the entity itself (which is material in nature), what about human, social, and even metaphysical accountability?

Accountability mechanisms, especially in Indonesian regional governments, must be based on cultural values that not only prioritize human interests but also internalize individual dimensions with spiritual dimensions and the surrounding environment. An area’s local culture can trigger the emergence of moral legitimacy, manifested in actual moral actions. The existence of local values can encourage regional governments to realize ethical and moral social changes (Lehman & dan Kuruppu, 2017; Toms & Shepherd, 2017). The critical view of the erosion of local culture and even spiritual dimensions has caused academics to begin to explore the concept of accountability based on local culture and spirituality in Indonesia: Zulfikar (2016) who revealed the accountability behind the veil of Awa cultural wisdom values, namely, Obah-Mamah-Sana; Randa and Daromes (2014) researched the transformation of local Kombongan’s cultural values in building accountability of public sector organizations in the Tana Toraja regional government; Salle (2015) regarding the concept of accountability based on the values of Pasang Ammatora; Tanasal et al. (2019) regarding Metta and Kamma-based accountability; Hanisa (2023) researched fraud prevention with accountability in managing Tarra Tallu Village funds based on the local culture of Siri’ Na Pacce; and Maulana and Bakri (2023) explored the meaning of Bugis organizational accountability based on the interpretation of Bugis Sufism, namely, “Dua Temmassarang Retaillue Temmallaiseng.”

2.2 The Catur Marga Culture Perspective

The era of globalization is accused of causing Indonesian people to “lose” territorial boundaries and integrate themselves into the wave of mass culture produced by international materialism. The development of a culture of materialism is evident when the cultural values of the original Indonesian nation begin to erode, which can be seen from the decline of the national spirit and the fading of the culture of tolerance built on spirituality. This loss causes division because of the loss of a sense of humanity, the emergence of competition in the economic sector, and the emergence of egoistic traits built upon rationality that override local culture and spiritual teachings. Spiritual culture can be built by holding tightly to the local culture in Indonesia, wrapped by elements of spirituality (Nova, 2022). Indonesia still has regions with a local culture closely tied to spiritual values, including Bali.

Nevertheless, the Balinese people, the majority of whom have a faith culture, still consistently carry out their local culture, proven by frequent religious ceremonies and enforced traditional rules. The faith upheld by Balinese culture is a universal teaching that is easy to understand and implement in everyday life is Catur Marga, which contains a divine philosophy (tattva) directly related to universal educational patterns (Jayendra, 2017; Segara, 2018). The word Catur means four, and Marga represents the path or method for humans to get closer to God and lead them to achieve moksartham jagathitaya ca iti dharmah, perfection in physical life, and spiritual life (Sirtha, 2016). The four paths or methods are Bhakti, Karma, Jnana, and Raja (Sukartha et al., 2003). Bhakti Marga is sincere in upholding and maintaining goodness for humanity through noble behavior as a form of devotion to God (Jayendra, 2017). Karma Marga is a sincere work and a noble deed. Jnana Marga is the study of knowledge and devoting oneself to para vidya (spiritual knowledge) and apara vidya (worldly knowledge). Raja Marga has self-control over egoism, thoughts, and actions.

In modern life, Catur Marga has the ideological potential to help people build a work ethic and compete through a holistic understanding of its values. This is why the Catur marga is also needed to manage traditional villages. Traditional village governments must adhere to Catur marga as one of the four paths to success in managing traditional villages according to Hindu religious philosophy (Berita Bali, 2018). Traditional village governments should uphold ethics and morality in carrying out accountability practices in managing traditional village finances and remain always attached to traditional and cultural concepts to lead themselves to successful management in traditional villages. The application of the Catur Marga cultural concept in traditional village accountability practices is: Bhakti, where traditional village officials show sincere dedication and devotion in carrying out their duties and responsibilities for the welfare of the traditional village and interpret this as a form of devotion to God (Budiadnya, 2019; Dharmawan, 2020). Apart from that, the decision-making process, in both the planning and budgeting process and responsibilities, involves the active participation of Indigenous communities, reflecting dedication and concern for the community’s aspirations. Karma financial management is based on sincere motivation without worldly personal interests. Village funds are managed well and can be accounted for by following customary rules and carrying out duties and responsibilities consistently, on time, and responsibly (Parta & Kusuma, 2018). Jnana, traditional village officials have in-depth knowledge and understanding of traditional spiritual culture and accountability in the planning, budgeting, implementation, and financial accountability processes carried out carefully and in detail. Raja, the traditional village government, shows exemplary actions and decision-making strategies that involve deliberation and considering the community’s aspirations, as well as belief in the existence of God as a power to control all their actions at work.

Thus, including Catur Marga in the concept of accountability practices can reduce individuals’ “worldly” nature, so that they return to synergy with the characteristics of spiritual culture (Ningsih & Yudi Prastiwi, 2019; Triguna & Mayuni, 2022; Widana, 2019). The concept of Catur Marga, when linked to accountability in traditional village financial management, emphasizes the spiritual meaning of financial management and the preparation of financial reports. The elements of Catur Marga form the financial management accountability practice, which focuses more on the meaning of human self-control and is layered with spiritual power as the final form, namely, spiritual accountability.

3.1 Type of Study and Data Sampling

This qualitative research uses an ethnomethodological approach to explore daily accountability practices in traditional village financial management (Garfinkel, 1967). However, because this research also aims to create change by presenting spiritual elements in traditional villages (Freund & dan Abrams, 1976), a critical paradigm is applied to overcome and transform fundamental problems that integrate spiritual elements into accountability practices. The critical paradigm in this research uses a spiritual values perspective from Catur Marga, which will be later used to form a practice model for accountability in traditional village financial management by examining the daily lives of traditional village government officials. This dual approach allows for a comprehensive understanding and establishes accountability in the context of the spiritual culture of Balinese traditional villages.

The research site is the Jimbaran Traditional Village. Jimbaran traditional village is one of the largest and richest traditional villages in Badung Bali, with an area of 20.50 km² and many tourist attractions, such as Jimbaran Beach, Muaya Beach, and Tegal Wangi Beach. However, the traditional village of Jimbaran was previously embroiled in a corruption case involving the village government’s traditional village misuse of funds for personal interests during the 2010–2015 period (Wiguna et al., 2022). Currently, the Jimbaran traditional village is still in the process of improving its financial management practices. Therefore, this research aims to examine the ongoing improvements and to help provide an ideal model of accountability practices. Apart from that, the results of improvements in the Jimbaran traditional village can later be used as a consideration for making decisions on enhancements that will be carried out in traditional villages with similar cases, for example, fraud and misappropriation of funds.

Research informants were selected based on purposive sampling. They were people who had experienced injustice in previous fraud cases and were currently trying to improve financial management accountability practices in the Jimbaran traditional village. The informants chosen were the traditional village government for the current period (2020–2025). The research informants are listed in Table 1. Informants asked researchers to abbreviate their names.

3.2 Informant Consent

Jimbaran traditional village, including all informants, has given researchers verbal permission to participate in all activities, including observation, interviews, and documentation. Interview, observation, and documentation data obtained at the research location can be used as appropriate.

3.3 Data Analysis

The data analysis in this study modifies the data analysis stage of the interactive model in qualitative research by Miles and Huberman (1992). The interactive model has four stages of data analysis, carried out continuously and repeatedly and can be carried out simultaneously with data collection (Damayanti, 2017). Researchers added two analysis stages to this interactive model. The six stages of data analysis are shown in Figure 1.

Figure 1

Data analysis stages (prepared by the author, 2024).

Based on Figure 1, the critical analysis process uses instruments derived from the meanings contained in the Catur Marga culture. In addition, to ensure the validity and credibility of the data, this research uses indexicality, contextualizing responses within the cultural environment, and reflexivity, which involves continuous reflection on the research process. Triangulation is used to cross-verify data from interviews, observations, and documents to ensure comprehensive and reliable results.

4.1 Jimbaran Traditional Village Accountability Practices

Based on the researchers’ observations, the village’s financial management was divided into two types. The first is funds from government grants, the entire management and distribution flow of which must follow the PERGUB number 55 of 2022 and are controlled by DPMA (the Service for the Advancement of Indigenous Peoples) and MDA (Traditional Village Assembly). Second, traditional village cash funds are generated from managing traditional village heritage assets. The village’s financial governance follows the flow of the rules related to accountability practices. It consists of accountability during activity planning, budgeting, and implementing activities. Accountability must always be achieved because every activity carried out by the village must be informed of the krama (community). Figure 2 shows the flow of the financial management accountability practices of the traditional Jimbaran village.

Figure 2

Flow of the financial management accountability practices of the Jimbaran traditional village. (Source: prepared by Authors, 2024).

Based on Figure 2, responsibility in the traditional villages was carried out by making financial accountability reports (LPJ) using the village’s treasury, which were presented at monthly meetings. Following the amendment and agreement, accountability reports (LPJ) were signed, stamped, and socialized to the public through monthly Banjar meetings. Meanwhile, the use of grant funds has been regulated in PERGUB number 55 of 2022, which is reported in the SiKuat Traditional Village Financial System (SiKuat) application. This study formulates a mechanism for accountability financial management in the Jimbaran traditional village as shows in Figure 3.

Figure 3

The mechanism for accountability in the Jimbaran traditional village’s financial management. (Source: prepared by Authors, 2024).

Figure 3 shows that accountability practices in the financial management of the Jimbaran traditional village are still limited to financial accountability practices, marked by the availability of financial reports, vertical accountability to the government, and horizontal accountability to the community. In other words, the Jimbaran traditional village carries out conventional accountability (agency theory), namely, that the traditional village government, as an agent, is accountable for its financial management to the principals, which are the community and the government. Figure 3 also shows that traditional village governments only use apparatus knowledge to manage village finances during planning, budgeting, and making LPJ. Accountability practices based on Jnana Marga aparawidya knowledge direct traditional village government officials to seek scientific knowledge (accounting and management) to implement accountability. They will continue to learn and improve their understanding of effective financial management and accountability. However, aparavidya knowledge must be integrated with paravidya (spiritual) knowledge. A person’s success is not only determined by brain ability and thinking power but also by emotional and spiritual intelligence (Sihombing, 2019). Education based on morality and spirituality will develop other potentials so that future generations will always believe in the existence of God, be closer to God, and be more aware of their responsibilities as bearers of mandates and missions (Wahyuni, 2022). Spiritual knowledge is important because physical and material knowledge cannot add value to life (Agung et al., 2018). Thus, paravidya should also be applied to help traditional village government officials develop holistically, gain a deeper understanding of the purpose of life, strengthen moral values, and build integrity.

4.2 The Dilemma of Implementing Parahyangan Aspects and Delays in Submission of Accountability Reports (LPJ)

Accountability practices in Balinese Adat Villages should closely relate to traditional and spiritual culture. However, observations show that the parahyangan element is often carried out merely as a formality, creating a dilemma for traditional village governments. In addition, during traditional village government accountability meetings, debates arise due to implementing officials’ delays in the LPJ submission. This delay is caused by a lack of support from the officials responsible, who view the traditional village as operating on the concept of ngayah (selfless work without worldly motivation), where they are not paid as professional workers. Table 2 summarizes the key points from the interview transcript.

Based on Table 2, the first topic is that the program of religious ceremony activities in the Parahyangan culture is carried out merely to fulfill the implementation of these activities according to the existing rules, without any appreciation of the meaning and values contained in the ceremony. Parahyangan is a medium through religious ceremonies in traditional villages that humans use to create a harmonious relationship between humans and God, ultimately creating peace and prosperity for humans themselves (Surpha, 2004). Religious ceremonies should contain vital elements of faith and belief as a form of human spiritual devotion to God. However, this is only done in formality because traditional villages prioritize Sakala (appearance/physical) over Niskala (transcendent/metaphysical). Parahyangan, which is only considered a formality, will erode the spiritual values contained in its aspects (Karmini, 2022; Sukma et al., 2020). The shift in the meaning of Parahyangan can be seen as part of the commodification of religious spirituality, which has given rise to different meanings of religious (spiritual) fervor. What was once the domain of the divine has now shifted to the realm of reason or cognition and even toward the realm of human desire or will (Atmadja & Atmadja, 2008; Juniartha, 2020). This also raises a critical view because parahyangan should be done with Bhakti (devotion). When parahyangan is only done formally without heart and belief, it will erode the true meaning of Bhakti because formality in parahyangan activities can separate individuals from deep spiritual experiences and a deep relationship with God (Karmini, 2022; Sukma et al., 2020).

In other words, the implementation of the parahyangan aspect, which was initially seen as a sacred activity, has now shifted to become a manifestation of the desire or desire of the traditional village government to demonstrate changes in the governance of traditional villages so that spiritual practices are assessed based on economic and financial measures. The reason is that the Jimbaran traditional village government currently prioritizes physical (visible) appearance elements because tangible actions are prioritized to show the changes made. For example, the implementation of the ceremony went according to what was planned, budgeted, and accountable. This is also a form of implementing modern financial management in traditional villages, which only focuses on accountability, namely, emphasizing strict financial recording, reporting, and accountability, but on the other hand, ignores the meaning and spiritual values of religious activities, which are the foundation of the life of the Indigenous community. Modern financial management that is too pragmatic can cause the erosion of cultural and traditional elements in implementing ceremonies. If left unchecked, it will gradually have implications for the erosion of culture and religious traditions and can threaten the preservation of cultural heritage and community spirituality.

Besides that, it is important to remember the case of the previous government, where fraud in the management of traditional village cash occurred by presenting fictitious financial accountability. This gives rise to the assumption that fraud can still be committed even though the accountability report has been prepared according to a modern financial management system. Similar to the phenomenon of conventional (non-traditional) government in Indonesia today, corruption is still rampant even though a standard system has been implemented. So, where is the problem? This does not lie in the system but in the individuals who run it (Osborne & Gaebler, 1992). A shift in spirituality causes individuals to lose morality. Therefore, spiritual strength is the most important factor in shaping an individual’s mentality and behavior according to spiritual teachings.

The second topic is implementing officials’ delay in the delay in submission of LPJ. This has led to criticism that the current meaning of ngayah is working as they please or according to the capabilities of the traditional village government because they are not paid as professional workers. This has resulted in a lack of motivation to work on time. Delays in the submission of LPJ will have a negative impact on the quality of financial reporting, for example, causing recording errors in the process of making financial reports and hampering the budget design process in the following period (Cao et al., 2016; Hembarwati, 2017; Rafsanjani & Cheisviyanny, 2021). Fraud in the previous administration also occurred due to opportunities arising from the fact that the implementing officials were often late in the submission of LPJ, supported by the abuse of authority and the weak personal integrity of the village government. The reason for this delay is that there are too many activities in the traditional village, and the implementing officials work based on ngayah, so the LPJ is not completed on time and is not recorded in the financial statements for the relevant period. The unrecorded LPJs lead to the preparation of fictitious monthly accountability reports, as cash inflows and outflows are not correctly recorded. This proves that good financial management and accurate presentation of accountability reports do not guarantee that the village government is free from fraud, as this is a matter of honesty.

It needs to be emphasized that the management system mechanism of the Balinese Traditional Village is indeed carried out using the ngayah system because ngayah is an ancestral customary order that prioritizes the religious work and must be carried out with sincerity (Putri & Candra, 2018). Ngayah is an obligation that humans must carry out. Implementing Karma Marga means dedication and sincere intention to carry out tasks responsibly, including respecting time and reporting well (Suharta & Parwati, 2022). The meaning of ngayah is not limited to human relationships; it is also related to vertical relationships with God (Dharmawan, 2020; Pradheksa et al., 2023). Karma Marga also means that every human being does not work for his benefit and is not tied to the results of his work; work is a form of devotion to God (David, 2018; Pudja, 2010). Karma Marga will lead traditional village governments not to be fixated on payment for doing professional work (such as making LPJ on time and providing good accountability) in traditional villages. The traditional village government does not yet understand that ngayah means professionalization in work, where ngayah is devotion and a sincere intention to be responsible by doing work well, including respecting time and delivering good quality work (Suharta & Parwati, 2022). Professionalism can also be measured not only by providing appropriate payments (salaries) but also by quality in financial management and good accountability practices. This is because professionalism in traditional villages differs from professionalism in the private sector, which is always related to material things. Professionalism in traditional villages is more concerned with spiritual and cultural aspects and devotion to Tri Hita Karana (Ardana et al., 2020; Gede et al., 2016). Therefore, the meaning of ngayah, which has shifted towards materialism, must return to the true meaning of ngayah, namely, working as a sincere dedication to fixing the problem of delays in the submission of LPJ.