THE EFFECT OF FISCAL DECENTRALIZATION, FISCAL STRESS AND INTERGOVERNMENTAL REVENUE ON THE FINANCIAL PERFORMANCE OF LOCAL GOVERNMENT

Abstract

Assessment of Financial Performance for Local Government is an important thing to do to help improve the performance of government in the management of the Regional Budget (APBD) in a sustainable manner and to achieve the public accountability that is transparent and accountable. Local Government Financial performance is the ability of an area to explore and manage financial resources native to the area to meet their needs in order to support the passage of the government system, service to the community and regional development. Local government still relies on the transfer of funds than local revenue to finance government activities. Any delays in disbursement of funds transfers by the central government as a barrier to finance programs and activities that have been set in the budget. This study aimed to examine the effect of fiscal decentralization, fiscal stress and intergovernmental revenue on the financial performance of local governments in the province of West Nusa Tenggara (NTB). This study uses panel data from 9 regencies / cities and one province for 10 years (2006-2015). Analysis using panel data regression with Fixed Effect Model estimation method (FEM). The results showed that the decentralization of expenditure and fiscal stress has positive and significant effect on the financial performance of local governments while decentralization of revenue and intergovernmental revenue has significant and negative effect on the financial performance of local governments. This research is expected to provide input and benefit to the Local Government as policy makers in order to increase the potential of revenue derived from taxes, charges and the availability of natural resources are adequate to serve as a source of income and more attention to the allocation of sources of income into spending that oriented to the fulfillment of public service