Budget Process and Budget Performance of Local Government of Indonesia

Harryanto

Abstract

It has been a decade since Indonesia starting to reform the budget system in line with
implementation of local autonomy, but it still failed to satisfy financial information
needed by the majority voters. Legislations related government financial systems are
always changed before the systems is really established that make the systems lack of
reliability and vulnerable.
This financial information is worst since the characteristic of local government, which is
varied in terms of fiscal need and capacity, and the need for fulfill their obligation to
provide public services.
This study attempts to explain the local government budget in Indonesia in the three
perspective: managerial, politic, and public interest. Used the multiple regression
analysis, six hypothesizes have been tested.
The finding of this research shows that budget discipline, budget approval and
accountability are the mediating variables to produce budget performance. The
independent variables that are local fiscal capacity, budget ceiling and priority, and
national priority, in the managerial perspective only have an impact on the budget
performance since existence of the budget discipline. From the political perspective, the
approval process should be considered as a crucial process to mediate,
intergovernmental transfer, local government prerogative and the role of local politician
toward the budget performance. In the perspective of public interest, the accountability
becomes a crucial factor that able to mediate financial reporting system, audit system
and budget oversight toward the budget performance.
The regulations that are always changing very frequently causes the application system
was not reliable and cannot be subject to the regulation, especially for budgeting and
accounting standards. While the behavior of the government budget in which revenues
tend to be very dependent on central government, and the pattern of spending more
heavily on spending for administration led to constraint the ability of increasing the
fiscal capacity of local governments.

Based on these findings, it can be implied that how the local autonomy, which has a long
history, is still considered not yet succeeded. This is because violations still occur, and
inconsistent with the commitment to implement a reliable accounting system, and
accountability has not come to pass.