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THE EFFECT EQUALIZATION FUNDS, CAPITAL EXPENDITURES,

AUDIT FINDINGS, AND LOCAL ORIGINAL REVENUES ON THE

FINANCIAL PERFORMANCE OF DISTRICT OR CITY LOCAL

cutrmahfuza@gmail.com

interests of the nation and the State in a system or law that is planned in detail so that it can be

carried out by local governments as implementation guidelines. Before the birth of the Local

Government Law (local government), according to (Aprisyah & Yuliati, 2021) in one period

local governments also made an assessment of the good and bad of financial management

reports. Local governments do not have the right and authority to manage and manage their

own finances. The centralization of financial management in a centralized government raises

polemics in the central government and the inability to manage regional finances so that fiscal

decentralization from the center to the local government is born, especially in local government

financial management that must be carried out in its own regions.

According to (Fajri, 2021) welfare is the main focus in every government. Fiscal

company to interested parties, especially creditors, investors and the management of the

company it self (Aminatuzzahra, 2010) Financial performance is an important factor in any

business or business organization. According to (Litamahuputty, 2021) good financial

performance can be assessed from the survey results that include parts that are in accordance

with predetermined standards, so that the results of this survey can help companies or

organizations to create the right programs and policies to achieve the organization's vision and

mission. According to (Cho, Chung, & Young, 2019) correlation analysis between CSR

The Effect Equalization Funds, Capital Expenditures, Audit Findings, And Local Original Revenues On The

Financial Performance Of District Or City Local Governments In Aceh Province

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performance indicators and financial performance shows a positive relationship between the

important issue for the local government itself and external parties. Financial capacity is a stau

metric used to determine a district's ability to properly implement regulations governing the

use of funds and to properly protect necessary jobs when there is a high level of demand to

entice foreigners to decide on investments in the quarter. Financial performance measurement

data obtained from financial information versus the resulting budget can be a further

improvement plan to create more quality public services.

Success measurement is an important part because it can provide feedback on the plan

implemented. According to (Ramandita, Utami, & Lutfi, 2019) performance measurement

features can clearly explain (1) how the program runs; (2) opportunities to compare services

provided; (3) means of communication with the community. In addition, it is necessary to

would not be achieved before the end of 2019. According to him, the weak absorption of the

2019 budget was due to the non-achievement of financial performance. This is also related to

previous news that in November 2019 the Acting Governor of Aceh, Nova Iriansyah, began to

report to the Head of the Aceh Government Office or Work Unit (SKPA) the capacity or

financial realization in 2019 to issue a warning letter Payment for the APBA project package

was not on target. Of the 57 SKPAs, 24 SKPA leaders received warning letters to improve

project performance and activities this November. The total absorption of APBA 2019 funding

until November 4 is only 54.9 percent while the target is 58.5 percent. While the physical level

has reached 60 percent, the target is 65 percent (Zairi, 2019).

Based on data from the APBA Realization Report ended on November 6, 2019, obtained

Not only in 2019, but also in 2018, DPRA Members Bardan Sahidi and Asrizal H Asnawi

highlighted the performance of the Aceh government. This is related to the problem of the high

amount of Remaining Over Budget Financing (Silpa) in 2018 which reached Rp 1.6 trillion

(Zairi, 2019) The excess of Silpa in recent years indicates a deficiency in terms of financial

performance carried out by the local government.

Also in 2019, the Aceh People's Advocacy Foundation (YARA) wrote to the Audit Board

(BPK) in Jakarta asking the agency to review Aceh government expenditures and operations

because the 2019 APBA was limited to Rp. 17.104 trillion. President YARA Safaruddin said

the BPK study was needed to determine whether the implementation of APBA in 2019 had

achieved the economy, efficiency and performance required by Law Number 15 of 2004

The Effect Equalization Funds, Capital Expenditures, Audit Findings, And Local Original Revenues On The

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2020 itself, the realization of the 2020 APBA budget as of April 29 shows 10.0% financial and

variables that affect the financial performance of local governments. In studies conducted to

examine variables that affect the financial performance of local governments , varying results

have been found. Factors that allegedly influence the financial performance of local

governments are balancing funds, capital expenditures, audit findings, and local original

revenues.

The balancing fund is one of the variables that affect the financial performance of the local

government. In research conducted by (Awwaliyah, Noor Farieda., Agriyanto, Ratno., &

Farida, 2019) stated that the balance fund has a positive effect on financial performance.

Meanwhile, research conducted by (Prastiwi, Nada Dipa., & Aji, 2020) states that balanced

funds negatively affect financial performance. For the Aceh region itself, according to

early and more mature planning must be made for the future (Badan Pusat Statistik, 2020).

In addition to the balancing fund, capital expenditure is also one of the factors that affect

the financial performance of the local government. In research (Asnidar., & Hardi, 2019) stated

that capital expenditure has a positive effect on the financial performance of local governments.

The results of this study are inversely proportional to research conducted by (Thalib,

Firmansyah., & Ekaningtias, 2019) which states that capital expenditure has no influence on

the financial performance of local governments. Another result with research conducted by

(Anggreni, Ni K. Ayu., & Artini, 2019) which states that capital expenditure negatively affects

the financial performance of local governments

For the Aceh region itself, according to data sliced by (Badan Pusat Statistik, 2020) states

expenditure only plays an important role of 18.84% of total regional expenditure, this is a fairly

minimal figure.

Another variable that also affects the financial performance of local governments is audit

findings. In a study conducted by (Ara, 2016) found that audit findings have a positive effect

on local government financial performance. While the results of other studies found that audit

findings negatively affect financial performance and also the results of research (Thalib,

Firmansyah., & Ekaningtias, 2019) stated that audit findings have no effect on financial

performance.

Local revenue is also a variable that affects the financial performance of local

governments. The results of the positive correlation of research between local original income

The Effect Equalization Funds, Capital Expenditures, Audit Findings, And Local Original Revenues On The

Financial Performance Of District Or City Local Governments In Aceh Province

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Nada Dipa., & Aji, 2020) In contrast to the results of the research above, research conducted

is assessed in 4 scales of regional financial independence (Badan Pusat Statistik, 2020)

Of all the previous studies that have been described above, there are several differenes

between previous research and this study, one of which is that the research was conducted in

different places, this study is also different because there has been no research that jointly

examines four variables, differences also exist in the results of research because previous

studies have not had simultaneous results on financial performance variables, and the last

difference can be seen from the different study locations, namely Aceh Province. This study

took data from 2015-2019 (5 years) for variables of financial performance, balanced funds,

capital expenditure, and local original income, while specifically the audit findings variables

used data from 2014 -2018 data collection for 5 years for the reason that in 2015 the financial

expenditure on the financial performance of the District/City Government in Aceh Province,

Know and analyze whether there is an effect of audit findings on the financial performance of

the District/City Government in Aceh Province and Know and analyze whether there is an

effect of local original income on the financial performance of the District/City Government in

Aceh Province.

METHOD

Casual study is the type of research used. The definition of casual stdui itself is a way to

find out the cause of a problem (Sekaran, Uma & Bougie, 2016). The data needed for this

study is the Report on the Results of BPK Examination of the Financial Statements of the

districts and 5 cities. Starting from 2015 to 2019 because this research requires financial

statements that have been verified by BPK. Data analysis and multiple liner regression analysis

are the two analyses used.

The Effect Equalization Funds, Capital Expenditures, Audit Findings, And Local Original Revenues On The

Financial Performance Of District Or City Local Governments In Aceh Province

182 Return: Study of Management, Economic and Bussines, Vol 2 No (2), Feb 2023

RESULTS AND DISCUSSION

.003

Based on the results of the SPSS test in the table, it can be seen that silmultan all variables

affect the dependent variable, namely financial performance , which means that all variables

have a role in improving performance Finance in districts or cities in Aceh. According to

research conducted by (Busch, Bassen, Lewandowski, & Sump, 2022) negtive financial

performance of companies, highlihting the clear need for more policy intervention to pave the

then financial performance also increases. There are three existing compensation funds, namely

DAU, DAK and DBH. To manage the region well, the government provides a balanced fund

to the regions that are intended to be used as well as possible. .

The results of this study are in line with the results of previous research conducted by

(Awwaliyah, Noor Farieda., Agriyanto, Ratno., & Farida, 2019) research convey that it has a

positive effect on the financial performance of a lemba, but there are also those who do not

say so the results of his research as stated by (Annisa, Andi Nur., Abdullah M. Ikbal., Iqbal,

Muhammad ., &; Yamin, 2020)(Annisa, Andi Nur., Abdullah M. Ikbal., Iqbal, Muhammad .,

& Yamin, 2020) which stated that the Balancing Fund has no effect on Financial Performance.

According to (Oncioiu et al., 2020) Corporate performance is approached from a

The Effect Equalization Funds, Capital Expenditures, Audit Findings, And Local Original Revenues On The

Financial Performance Of District Or City Local Governments In Aceh Province

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The positive direction of the Capital Expenditure variable shows that with the increasing

which states that Capital Expenditure affects the Financial Performance of Local Governments.

But. The results of this study are not in line with research conducted by (Prastiwi, Nada Dipa., &

Aji, 2020) which shows that Capital Expenditure does not affect the Financial Performance of

Local Governments. As research from (Mielcarz, Osiichuk, & Behr, 2018) For financially

constrained companies, capital spending was found to be more likely to have a negative impact

on working capital investment.

4. Fourth is the effect of Audit Findings on the Financial Performance of District or City

Governments in Aceh Province.

Based on the partial test results, it is known that the Audit Findings affect the financial

performance of local governments and the direction is known to be positive. Audit findings are

performance. BPK provides recommendations or suggestions for the findings it gets. The

recommendation is addressed to the relevant local government to make improvements or

follow up as described in Law Number 15 of 2004, Law Number 15 of 2006(Republik

Indonesia, 2004)and (Republik Indonesia, 2006).

The results of this study are not in line with research conducted by ((Noviyanti, Nur Ade.,

2016) and (Parwanto & Harto, 2017) which stated that the findings of the BPK audit did not affect

the financial performance of local governments. However, the results of this study are in line

with research conducted by (Ara, 2016) which shows the results that the findings of BPK audits

affect the performance of local governments. Research from(Alzeban, 2021) The results show

that IIAR drives higher business performance. Furthermore, the characteristics of some audit

local government's financial performance, with each increase in local original revenue also

resulting in an increase in local government's financial performance. Each region should

develop its region to more freely regulate the autonomy of its territory and make the community

more prosperous.

All regional revenue proceeds can affect regional income and have an impact on

community welfare. This is in line with the results of research conducted by(Awwaliyah, Noor

Farieda., Agriyanto, Ratno., & Farida, 2019) The results of this study are not in line with

research conducted by (Andirfa, Mulia., Basri, Hasan., & Majid, 2016) which states that Local

Original Revenue has no influence on the financial performance of local governments

The Effect Equalization Funds, Capital Expenditures, Audit Findings, And Local Original Revenues On The

Financial Performance Of District Or City Local Governments In Aceh Province

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CONCLUSION

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