Working Paper No.

2
2010
Fiscal Decentralization after Implementation of
Regional Autonomy in Indonesia
The authors:
Harryanto Nyoto
(PhD student of College of Business, Universiti Utara Malaysia. Email address:
endhyfe@yahoo.co.id)
Faudziah Hanim Fadzil
(Associate Professor of College of Business, Universiti Utara Malaysia. Email address:
fhanim@uum.edu.my)
Abstract
This research aims to explain the relationship between local fiscal capacities,
intergovernmental transfers with the realization of the local government budget. Using
the sample budget of 190 districts in Indonesia, three hypotheses have been tested.
The results of this study indicate that the independent variable of local own revenue and
grants and revenue sharing have significant and positive relation to dependent variable
budget performance. The grants and revenue sharing is the mediating variable of the
relationship of the local own revenue to the budget performance. Although there are
close links between local fiscal capacities with performance budgeting,
intergovernmental transfers are not fully mediating the relationship.
Mediating effect of the grants and revenue sharing will bring a high dependency of the
local governments to the central government in order to improving their local fiscal
capacity. This high dependency leads to the local governments to raise local revenue
sources in the form of taxes and user charges. These tax efforts could interfere to the
local economy.
This research is expected to contribute to discipline of government accounting especially
for the public budget. This research is expected to contribute as well to the policy
implementation of regional autonomy in Indonesia.
Keyword: Local own revenue, grants and revenue sharing, local government budget