FISCAL DECENTRALIZATION IMPLEMENTATION ON QUALITY REGIONAL FINANCIAL REPORT IN DISTRIC/ CITY GOVERNMENT (CASE IN INDONESIA)

Transcription

1 International Journal of Civil Engineering and Technology (IJCIET) Volume 9, Issue 9, September 2018, pp , Article ID: IJCIET_09_09_057 Available online at ISSN Print: and ISSN Online: IAEME Publication Scopus Indexed FISCAL DECENTRALIZATION IMPLEMENTATION ON QUALITY REGIONAL FINANCIAL REPORT IN DISTRIC/ CITY GOVERNMENT (CASE IN INDONESIA) *Idhar Yahya, Erlina, Ade Fatma Lubis and Murni Daulay Universitas Sumatera Utara, Medan, Indonesia *Correspondence idhar@usu.ac.id ABSTRACT The purpose of this research is to examine the analytical of implementation of fiscal decentralization to the qualified of financial reporting in the government district or city in North Sumatera, Indonesia. This research had been done by giving some questioners to the respondends and small interview in the government district or city in North Sumatera. The type of this research is comparative causal. The method of this research used census sampling, whether the sample of this research is 804 respondends. Samples of the research is Local Government Unit (SKPD) in the seven district or city in North Sumatera. This research using SmartPLS application to analyse the data. The main problems is about how difficult government getting the qualified of financial reporting standard which sustainable with all the governmental accounting standards. Methods of data analysis used in this research is testing the quality of the data, outer model and inner model test. Outer model consists of convergent validity, discriminant validity and reliability test and inner model consists of adjusted R square, and predictive relevance (Q 2 ). The result of this research is partially budget planning, financial administration, and implementation of technology information have effect to the qualified of financial reporting in the government district or city in North Sumatera. The commitment of management can moderated the relationship of budget planning, financial administration, and implementation of technology information to qualified of financial reporting in the government district or city in North Sumatera. Key words: budget planning, financial administration, and implementation of technology information, the qualified of financial reporting. Cite this Article: Idhar Yahya, Erlina, Ade Fatma Lubis and Murni Daulay, Fiscal Decentralization Implementation on Quality Regional Financial Report in Distric/ City Government (Case in Indonesia). International Journal of Civil Engineering and Technology, 9(9), 2018, pp editor@iaeme.com

2 Idhar Yahya, Erlina, Ade Fatma Lubis and Murni Daulay 1. INTRODUCTION Decentralization, in general, is defined as the transfer of power, authority and resources from the central government to local governments, and has been a model in government in many countries over the past few decades (Bardhan, 2002). This condition is also caused by the pressure of poor government performance, such as increasing urbanization, democratic transitions, shifts in international donor strategies, and community demands (Hutchcroft, 2001). The international institutions even also contribute to putting pressure on the government for power distribution. Local governments must be transparent in serving the community, encouraging the formation of competitiveness, creativity and innovation by relying on regional peculiarities. Theoretically, welfare will increase if the government can accept the local aspirations to be used as guidelines in decision making. (Oates, 2008). In fact, decentralization includes the transfer of income and authority from the central government to lower governments (Hammond & Tosun, 2011). Fiscal decentralization can be applied when the local government is empowered and given greater authority over the financing of public goods and services in their area (Bjedov & Madies, 2010). In general, decentralization is divided into three forms: political decentralization, administrative decentralization, and fiscal decentralization (Litvack and Seddon, 1999). Planning and implementation of regional budgets as part of fiscal decentralization must be carried out, as well as financial administration support. It will provide transparency in financial accountability. Financial administration must be in line with the understanding of accounting so that it can improve the quality of financial report. In line with this, some experts argue that the preparation of good financial reporting is not solely due to regulations (Miller, 2001), but rather a credible accounting system and database management support. Thus, financial information can be sufficient for disclosure, which in turn can help the management in making decisions and serving interested parties. (Kara & Kiliç, 2011). The application of Information Technology (IT) in the Regional Government is one of the efforts to better utilize the information to the public, in order to support the implementation of development in their respective regions. Both internal and external changes in the organizational environment are believed to be one of the factors driving the use of IT. According to (Hand: 1992) the successful use of IT requires at least two characteristics, namely the adjustments in organizational strategy and leaders' commitment. This opinion is in line with (Beaumaster, 1999), who mentions the strategic planning as the coordination between departments with the level of executive expertise in the use of IT. However, (Gichoya: 2005) said the vision, mission, strategy and government support are considered important for the successful implementation of IT. The success of the preparation of financial report must also be supported by a shared commitment. The intended commitment is a commitment that can be an adhesive for the tasks that are carried out collectively in the organization so as to achieve success. Commitment management (Cooper, 2005) is a behavior to maintain and help people to achieve goals, with a commitment to make someone determined, laborious, sacrifice and responsible for achieving his own goals and agreed organizational goals. 2. LITERATURE REVIEW 2.1. Agency Theory Agency theory is the basis of the theory underlying the company's business practices used until now. The theory is rooted in the synergy of economic theory, decision theory, sociology, and organizational theory. The main principle of this theory lies in the existence of a working relationship between the party that gives authority (principal) or the investor, with the party who receives authority or the manager (agency) in the form of a contract of cooperation. Accounting information is supplied by the management and both the quantity and quality are editor@iaeme.com

3 Fiscal Decentralization Implementation on Quality Regional Financial Report in Distric/ City Government (Case in Indonesia) determined by the management. (Radebaugh and Gray 1997). According to agency theory (Watson, Shrives and Marston 2002), the main purpose of financial report is to monitor the manager efficiency; managers can use disclosures to convince shareholders that they are acting optimally. Agency theory clearly analyzes the contractual arrangement between two or more individuals, groups, or organizations. The principal party makes a contract, either implicitly or explicitly, with another party (agent) in the hope that the agent will take an action in accordance with what is desired by the principal. Agency theory is the basic theory used in the government. The government is regarded as an agent, who gets the mandate from the owner of wealth (principal) or the people. The creation and implementation of public policies related to contractual issues which are asymmetric information, moral hazard, and adverse selection (Halim & Abdullah, 2006) Fiscal Decentralization Decentralization has now become a global issue. In many countries, local governments are responsible for the majority of public services that allocate a large portion of funds for this purpose (ADB, 2007). From the political side, fiscal decentralization aims to prosper the people in terms of socio-economic, political and security aspects. However, research by (Pose and Krøijer, 2009) concludes that fiscal decentralization, the spending and transfers to regional governments are negatively correlated with the national economic growth in the Central and Eastern Europe (CEE) countries Management Commitment (Z) Management commitment is an urgency in a company and in a local government system. Management commitment is expected to improve the quality of local government performance. Allen and Meyer in Silvia (2013), mention organizational commitment is as an effectiveness or emotional attachment to the organization and the feeling of happy to be the part of the organization. Shields (1995) in Cavalluzo and Ittner (2003) states that management commitment can be reflected by allocating resources, goals, and strategies to various plans that are considered valuable, rejecting resources that hinder innovation and providing the political support needed to motivate or pressure the individuals or other parties who reject the existence of innovation. Thus, commitment will always maintain and create stabilization in the work environment Financial Report Quality (Y) Financial report is the final process of accounting that becomes information material for the users in the decision-making process. Financial report is prepared to provide relevant information regarding the financial position and all transactions carried out by accounting entities and reporting entities for a time period. Financial report is mainly used to determine the value of economic resources that are used to carry out government operational activities, assess financial conditions, evaluate the effectiveness and efficiency of a reporting entity, and help determine its compliance with legislation (PP No ). In realizing transparency and accountability in financial management in the environment, local governments are obliged to submit accountability reports on regional income and expenditure budget implementation in the form of LKPD within 12 (twelve) months from the implementation of the budget. LKPD is submitted to the House of Representatives no later than 6 (six) months after the end of the fiscal year, after being examined by the Supreme Audit Agency (BPK). Good quality financial report has various indicators, which are in line with Government Accounting Standards (SAP) that apply in Indonesia editor@iaeme.com

4 Idhar Yahya, Erlina, Ade Fatma Lubis and Murni Daulay 2.5. Budget Planning (X 1 ) A budget is a financial plan that is made in a detailed and systematic manner that includes a revenue plan and expenditure plan. In an organization, the budget plays a very important role because the budget directs the use of resources owned by the organization in order to achieve the organization's stated goals (Sihombing et al., 2017; Sadalia et al., 2017; Muda et al., 2017 and Sirojuzilam et al., 2018). The budget is a statement about the estimated performance that will be achieved by an organization in a certain period of time expressed in monetary terms. While budgeting itself is a process or method for preparing a budget (Mardiasmo, 2004). This understanding reveals the strategic role of the budget in the wealth management of a public organization. In the public organization, budget is an instrument of accountability for the management and implementation of programs and activities financed by public funds. Musgrave (1980) states that budget is a financial plan about what is done or what to do. The budget plays an important role in public management. Wildavsky (1961) mentions that the public budget is a source of life for the government. That is, the budget is very important for government financial management activities. Variations in the government budgeting system are developed to serve various objectives including financial control, management plans, priorities of the use of funds and accountability to the public Financial Administration (X 2 ) Regional Treasury Administration Systems and Procedures are systems and procedures related to the implementation of duties and authority of the Regional Treasurer in the framework of administration and accountability of the Local Government Budget implementation. The Regional Head (Ministry of Finance: 2013) as the holder of the power of regional financial management delegates the authority to the SKPD for a particular governmental sector. For the authority, it is allocated funds for the implementation of this authority which is called the Chief Operational Officer (COO). Whereas the financial management is delegated to the Head of SKPKD who is referred to as the Chief Financial Officer (CFO) who is authorized and responsible for managing regional assets and liabilities. SKPD as the administration of administrative authority has the authority to make commitments or other actions that result in the occurrence of regional revenues or expenditures, carry out testing and charging bills that are submitted to budget users/heads of SKPD, while the administration of treasury authority is given to PPKD/BUD. In the framework of implementing the activity program in the SKPD, budget users are assisted by the Treasurer in carrying out the treasury function in the SKPD. Management of state (regional) finance needs to be carried out in accordance with general principles of the state financial management to support the realization of good governance, namely the annual principles, principles of universality, principles of unity, principles of specialty, accountability, orientation to results, proportionality, openness in the management of state finance (Government Regulation Number 58 of 2005, Minister of Home Affairs Regulation Number 13 of 2006) Information Technology Implementation (X 3 ) The implementation of information technology is a new challenge in the government environment, especially in the Regional Government. In reality, it is almost impossible for an organization to operate without information technology. Its presence is considered to be able to improve organizational performance, so that the information produced is more corresponding, reliable, complete, systematic, timely and easily understood. Apart from various IT utilization initiatives by government agencies, its development is still inadequate and has not succeeded in improving the quality of public services to the level coveted by the editor@iaeme.com

5 Fiscal Decentralization Implementation on Quality Regional Financial Report in Distric/ City Government (Case in Indonesia) community. There have been many evidences or many complaints that were conveyed by the community both directly and through the mass media (Firdaus, 2007; Muda et al., 2017; Muda, 2017 and Dalimunthe et al., 2017; Nurlina & Muda, 2017; Hutagalung et al., 2017; Erlina et al., 2017 & 2017 & Pohan et al., 2018). The implementation of technology greatly influences the operation of an organization. Therefore, organizations must understand the role of technology that influences the process. 3. CONCEPTUAL FRAMEWORK This conceptual framework describes the relationship between the independent variables and the dependent variables, and the influence of the moderating variable. Figure 1 Conceptual Framework 4. RESEARCH METHOD 4.1. Population and Sample The population in this study is the District/City and Province Government in North Sumatra. While the sample in this study were seven districts/cities consisting of Binjai City, Langkat Regency, Humbang Hasudutan Regency, Medan City, North Tapanuli Regency, Pematang Siantar City, and Batu Bara Regency, Indonesia which had accounting functions with accounting entities and reporting entities both PPK-SKPD, treasurer of expenditure and financial staff. The number of samples in this study were 201 SKPD. Each SKPD consists of 1 treasurer, 1 PPK, 1 PPKA, and 1 PA. Thus, the number of samples being observed were (201 sub SKPD x 4 people) 804 people. The sampling technique used in this study was convenience sampling, which was based on the ease of obtaining data Data Analysis Technique This study used SmartPLS version 3.0 software to analyze the data. It was run by using computer media. PLS (Partial Least Square) is a structural equation analysis (SEM) based on variants that can simultaneously test measurement models while testing structural models. The measurement model is used to test validity and reliability, while the structural model is used to test causality (testing hypotheses with prediction models) Analysis of Inferential Statistic The hypothesis in this study was tested by using Partial Least Square (PLS) analysis tools. PLS is a structural equation analysis (SEM). The PLS used by researchers is PLS with software version 3.0. SEM (Structural Equation Modeling) is an integrated approach between factor analysis, structural models and path analysis. In the SEM model, 3 activities can be done simultaneously, namely checking validity and reliability instruments, testing the editor@iaeme.com

6 Idhar Yahya, Erlina, Ade Fatma Lubis and Murni Daulay relationship model between latent variables, and obtaining a model that is useful for estimation (equivalent to structural models or regression analysis) Measurement Model Test (Outer Model) Convergent Validity Test It is a test to measure the accuracy of indicators or dimensions through measuring the magnitude of the correlation between constructs and latent variables reliable (Muda and Dharsuky, 2015; Azlina et al., 2017; Dalimunthe et al., 2017; Ferine et al., 2017; Hasan et al., 2017; Handoko et al., 2017; Hutagalung et al., 2017; Sirojuzilam et al., 2017; Sihombing et al., 2017; Nurlina & Muda, 2017; Sadalia et al., 2017; Muda and Erlina, 2018 & Pohan et al., 2018). To measure the convergent validity, standardized loading factor is used which describes the magnitude of the correlation between each indicator and its construct. The value of loading factor which is above 0.7 is stated as an ideal or valid measure as an indicator in measuring constructs. While if the value is above 0.5, it can still be accepted but if the value is below 0.5, it must be excluded from the model Discriminant Validity Test It is a test to find out whether the indicators of a construct do not highly correlate with the indicators of other constructs. Discriminant validity from the outer model of this research is a reflective model, which is a model that shows a causal relationship derived from the latent variable to the indicator, which is evaluated through cross loading (Lubis et al., 2016; Handoko et al., 2107; Hasan et al., 2107; Erlina et al., 2107; Muda et al., 2017; Hutagalung et al., 2017; Erlina and Muda, 2018; Eriadi et al., 2018; Sari et al., 2018; Muda, & Nurlina, 2018 and Muda & Naibaho, 2018).. The size of cross loading is by comparing the correlation of indicators with other constructs. In addition to the loading comparison with cross loading, discriminant validity testing needs to be strengthened by checking AVE and AVE root comparisons with correlations between latent variables. Convergent validity of the measurement model can be seen from the correlation between indicator scores with variable scores Reliability Test Reliability testing is a tool to measure the consistency of instruments in sequence. Reliability shows the accuracy, consistency and accuracy of a measuring instrument (Azlina et al., 2017; Sadalia et al., 2017; Dalimunthe et al., 2017; Situmorang et al., 2017; Tarmizi et al., 2017; Marhayanie et al., 2017; Muda et al., 2018; Muda & Hasibuan, 2018 & Muda, and Windari, 2018). Reliability testing in PLS can use two methods, namely Cronbach's Alpha and composite reliability. Cronbach`s Alpha is a reliability coefficient that shows how well items in a collection are positively correlated with each other. The closer Cronbach's Alpha to 1, the higher the consistency Structural Model Test (Inner Model) Determinant Coefficient (R 2 ) The structural model (inner model) is a model to predict causality relationships between latent variables. Through the bootstrapping process, statistical t test parameters are obtained to predict the relationship of causality (Lutfie et al., 2016; Gusnardi et al. 2017; Achmad et al., 2017; Badaruddin et al., 2017; Syahyunan et al., 2017; Muda, 2017 & Erwin et al., 2018).. The structural model (inner model) is evaluated by looking at the percentage of variance explained by the R 2 value for the dependent variable using measurement. The structural model (inner model) is a model to predict causality relationships between latent variables editor@iaeme.com

7 Fiscal Decentralization Implementation on Quality Regional Financial Report in Distric/ City Government (Case in Indonesia) Predictive Relevance (Q 2 ) The PLS R-square model can be evaluated by looking at the Q-square predictive relevance for the variable model. The Q-square measures how well the observation value is generated by the model and also the parameter estimation. Q-square value which is greater than 0 (zero) shows that the model has a predictive relevance value, while the Q-square value which is less than 0 (zero) shows that the model lacks predictive relevance Hypothesis Test Hartono (2004) explains that a measure of the significance of the hypothesis can use the comparison of the values of t-table and t-statistics. If the value of t-statistic is higher than the value of t-table, it means that the hypothesis is supported or accepted (Dalimunthe et al., 2016; Nurzaimah et al., 2016; Nasir et al.,2017; Yahya et al., 2107; Muda et al., 2017; Nurlina & Muda, 2017; Sadalia et al., 2018; Erlina and Muda, 2018 and Muda et al., 2018). In this study, for a 95 percent confidence level (alpha of 95 percent), the value of the t-table for one-tailed hypothesis is> The PLS (Partial Least Square) analysis used in this study was conducted by using the SmartPLS version 3.0 program which was run by using computer media Moderation Test (Two-Stage Approach) However, if there is an exogenous or moderator construct in the form of format, the Product Indicator Approach is not the right method to test the interaction effect. This is because formative indicators do not assume the same influence on the construct. Hansler and Fassot (2010) developed a method for testing moderation effects by using a formative construct called Two-Stage Approach. This approach is considered to have an advantage because it uses a latent variable score. 5. RESULT AND DISCUSSION 5.1. Result Measurement Model Test Result (Outer Model)/Convergent Validity Test Result Based on the testing of convergent validity that has been done in this study, the following research results were obtained. This validity indicates that all questions in the questionnaire did have value and were worthy of being tested (Yahya et al., 2017; Sari et al., 2018 & Muda et al., 2018). Based on the results of the convergent validity test which was seen through the outer loading value, it can be concluded that all the questions in each indicator in each variable of this study were valid. The lowest value of outer loading was which was found in the fourth financial administration question indicator while the range of values used to see the value of convergent validity was to Thus, all the questions in each indicator were valid. The higher the value of the outer loading that was generated, the more valid the questions that would be used Discriminant Validity Test Result Based on the table, it can be understood that the correlation between the constructs of each variable and the indicator was higher when compared to the correlation of each variable indicator with other constructs. Thus, it indicates that all variables were in good condition and appropriate in their use and measurement. It can be seen that each variable in this study had a cross loading value which was always higher for each indicator compared to other variable indicators that also influenced in this study Reliability Test Result Based on the results of the reliability test, it can be seen through the table that displays the value of cronbach alpha and composite reliability.all cronbach alpha values and composite editor@iaeme.com

8 Idhar Yahya, Erlina, Ade Fatma Lubis and Murni Daulay reliability in the table of the reliability test results are ranging from to even for moderating variables showing the value of 1,000. Thus, through the table, it can be concluded that all the variables in this study are reliable, so does all the indicators in this study which are measured by the questions so that it can be said that all indicators in this study are also reliable. The meaning is that the results of the data quality test in this study which consists of validity and reliability are already fulfilled so that all the questions in this study are valuable and reliable. Cronbach alpha which has the lowest value in this study was which was located in the financial reporting quality variables. However, it can be understood that each question item that represented each indicator of the dependent variable was reliable Structural Model Test Result (Inner Model) Determinant Coefficient Test Result (R 2 ) The determinant coefficient test is the test to see the accuracy in the selection of independent variables as an indication of the representation of the independent variables on the dependent variable which is the main objective of the implementation of the research. Table 1 Determinant Coefficient Test Result R Square R Square Adjusted Financial Report Quality (Y) 0,418 0,413 Based on the results of the coefficient of determination, it is seen that the value of R Square is and the value of Adjusted R Square is Thus, the value of R Square illustrates that all the independent variables in this study are able to represent the dependent variable, which is the financial report quality of 41.8%, while the remaining 59.2% is influenced by other variables which are not mentioned in this study Hypothesis Test Result Hypothesis test result shows whether the hypothesis that has been designed in the previous chapter is in accordance with the results of the study after data processing. Thus, conclusions can be drawn related to the hypothesis. Table 2 Hypothesis Test Result Original Sample Standard Sample (O) Mean (M) Deviation t Statistics p Values KM (Z) -> KPK (Y) 0,493 0,492 0,063 7,789 0,000 ME 1 -> KPK (Y) 0,026 0,026 0,031 6,835 0,004 ME 2 -> KPK (Y) 0,006 0,005 0,039 4,164 0,010 ME 3 -> KPK (Y) 0,013 0,010 0,036 6,360 0,219 PK (X2) -> KM (Z) 0,159 0,163 0,030 5,344 0,000 PK (X2) -> KPK (Y) 0,110 0,113 0,063 5,743 0,022 PTI (X3) -> KM (Z) 0,523 0,519 0,031 16,980 0,000 PTI (X3) -> KPK (Y) 0,200 0,200 0,048 4,147 0,000 PA (X1) -> KM (Z) 0,109 0,117 0,032 3,417 0,001 PA (X1) -> KPK (Y) 0,190 0,189 0,052 3,646 0,000 Sources : SmartPLS Result (2018). Based on the hypothesis test tesult above, it can be concluded that: Budget planning is the first independent variable in this study which has a positive and significant effect partially on the quality of financial report. This can be seen through the statistical t value of 3.646> from the t table value of and this can be proven by the original sample value of and editor@iaeme.com

9 Fiscal Decentralization Implementation on Quality Regional Financial Report in Distric/ City Government (Case in Indonesia) significance of <0.05, which means that budget planning has a positive and significant effect on the quality of financial report. Financial administration is the second independent variable in this study which does not have a partial effect on the quality of financial report. This can be seen through the statistical t value of which is higher than the t table value of and this can be proved by the original value of the sample which is and the significance of <0.05, which means that the financial administration in this study has a positive and significant effect on the quality of financial report. The application of information technology is the third independent variable in this study which has a positive and partially significant effect on the financial report quality. It can be seen from the statistical T value of which is higher than the t table value of and this can be proven by the original value of the sample amounting to and a significance of <0.05, which means that the application of information technology has a positive and significant effect on the quality of financial report of local governments in North Sumatra Province Moderation Test Result (Two-Stage Approach) The moderation test used in this study is a two-stage approach test which is a moderation test for explanatory research. This test was done based on the comparison of values between R Square before moderation and R Square after moderation. Table 3 After the Addition of Moderating Variable R Square R Square Adjusted Management Commitment (Z) 0,438 0,436 Financial Report Quality (Y) 0,418 0,413 Sources : SmartPLS Result (2018). The table presents the value of R Square after the addition of a moderating variable. In the table, it can be seen that the value of R Square after the moderating variable was added is which means that there is an increase in the value of R Square after the addition of a moderating variable even though the increase is not significant, that is only Similarly, the value of Adjusted R Square also increased by Thus, the management commitment in this study is indeed very influential in improving the quality of financial report. Management commitment is a very large measure to constantly increase the enthusiasm of employees in maximizing their efforts to produce quality financial report Discussion Budget Planning Influences the Quality of Financial Report Preparation of a good budget work plan is one of the reform efforts undertaken by the government in the field of State financial management which is done by budget users from the lower levels, namely the work unit and the department, to the ministry/ institution. Budget work plan is a planning and budgeting document containing programs and activities in 1 (one) fiscal year which is done with appropriate budget classification. Budget planning will describe a readiness that is owned by government agencies in doing various activities within the next period of time. If budget planning goes well, it can be trusted that the preparation of financial report will be good and quality. The quality of the financial statements of the work unit consists of: 1. Relevant, which means the information contained in it influences user decisions and helps them evaluate past or present events, and predicts the future, and confirms or corrects the results of their evaluations in the past, 2. Reliable, which means that information in financial statements is free from misleading understanding and material errors, presents every fact honestly, and can be verified, 3. Comparable, which means the information contained can be useful when compared to the previous period or the reporting entity's editor@iaeme.com

10 Idhar Yahya, Erlina, Ade Fatma Lubis and Murni Daulay financial statements in general, 4. Understandable, means that the information presented can be understood by users and expressed in terms that are adjusted to the limits of the understanding of the users (Government Regulation No.71 of 2010) Financial Administration Influences the Quality of The Financial Report Financial administration is part of the bureaucracy within an institution and the employees in it are expected to be always smart and careful in dealing with various possibilities and various conditions. Financial administration must be able to divide the main duties and functions for each employee who is in fact responsible for seeking financial management of the agency. Thus, the better the quality of financial administration within an agency, the better the quality of report. In this study, several regional government agencies in North Sumatra Province and Regency/City have run well, although there are still many shortcomings such as completeness of documents with original evidence, administration of assets and some estimates of adjustments. Financial administration in some Local Governments has been integrated with financial reporting. Therefore, the financial administration department must always be given training or knowledge sharing to improve skills which will further improve the quality of the financial report The Implementation of IT Influences the Quality of Financial Report Information technology is defined as a technology used to process data, including processing, obtaining, compiling, storing, and manipulating data in various ways to produce quality information. By using information technology, it is expected that there will be an increase in the process of producing quality financial report. Quality financial reports are very possible to be produced through an integrated information technology system. This technology uses a set of computers to process data and a network system to connect one computer to another computer according to the needs. Then, Telecommunications technology is used so that the data can be distributed and accessed globally (Roviyantie, 11). Information technology includes computers, software, databases, networks, and other types related to technology. Information technology. Apart from processing and storing information, a computer technology also functions as a communication technology for information dissemination. Computers as a component of technology are tools that can multiply the capabilities of humans. (Yuliani, 2010). Thus, through the use of good information technology, it will be able to produce quality financial report Management Commitment Can Moderate the Relationship Between the Budget Planning, Financial Administration, IT Implementation and the Quality of Financial Report Management commitment is a strong conviction and support that he management will do and implement a policy that is set together so that the objectives of the implementation of the policy can be achieved. Organizations with strong management commitments will find it easier to achieve the desired results to produce better performance, compared to the organizations that lack commitment. Thus, the existence of a strong management commitment is needed by the organization in order to improve the accountability of the performance and the better use of the information of performance that is resulted. Indicator of management commitment according to Nurkhamid (2008) is a commitment to allocate resources, assign the staff and divisions/departments within the organization to evaluate the performance of a program, collect relevant and reliable data so that it can be used to assess organizational performance and use the benchmarks to evaluate organizational performance. Thus, management commitment is able to moderate the relationship between budget planning, financial administration, the implementation of information technology and the financial report quality. Management commitment will be able to strengthen the budget planning variables editor@iaeme.com

11 Fiscal Decentralization Implementation on Quality Regional Financial Report in Distric/ City Government (Case in Indonesia) 6. CONCLUSIONS AND SUGGESTIONS 6.1. Conclusions Budget planning, financial administration and Information Technology implementation have partial effect on the quality of regional financial report in the governments of North Sumatera Province. Management commitment can moderate the relationship between the budget planning, financial administration, IT implementation and the quality of regional financial report in the governments of North Sumatera Province Researcher s Suggestions The next research is expected to be able to increase the coverage of the area to be studied, meaning that there must be an increase in the number of Regencies and Cities in North Sumatra Province to be studied. More than seven Regencies and Cities are needed to be studied so that the results will be able to represent all Regencies and Cities in North Sumatra Province. The next research is expected to be able to add a longer interview or interview method so that even though it uses a questionnaire instrument, it can also add and improve the results of the existing research. Therefore, this research will be more useful. REFERENCES [1] Achmad, N & Muda, I. (2017). Economic Activities of Karo Older Adults. International Journal of Economic Research. 14(16) [2] Asian Development Bank (2007). Critical Issues of Fiscal Decentralization.Erd Technical Note No. 21. [3] Azlina, N. A.Hasan, Desmiyawati & Muda, I. (2017). The Effectiveness of Village Fund Management. International Journal of Economic Research. 14(12) [4] Badaruddin; Revida, E; Ermansyah & Muda, I. (2017). Village Governance With Implementation of Law Number 6 of 2014 On The Village and Village Administration. International Journal of Economic Research.14(16) [5] Bardhan, Prana, (2002). Decentralization of Governance and Development. Journal of Economic Perspectives. 16(4) [6] Beaumaster, Suzanne, (1999). Information Technology Implementation Issues: An Analysis. Dissertation. Faculty of Virginia Polytechnic Institute and State University, [7] Bjedov, T., & Madies, T. (2010). Corruption and decentralization: What economists have to say. Urban Public Economic Review, 13(2) [8] Blacksburg,Virginia.Bird, R.and Vaillancourt.F,(1998). Fiscal Decentralization in Developing Countries. Cambridge University Press, UK. [9] Cooper, M.D. (2005). Exploratory analysis of managerial commitment and feedback consequences on behavioral safety maintenance. Journal of Organizational Behavior Management. 19(2) [10] Dalimunthe, D.M.J.,& Muda, I.(2017).The Empirical Effect of Education and Training to The Performance of Employees. International Journal of Applied Business and Economic Research. 15(24) [11] Dalimunthe, D.M.J.,Fadli, and Muda, I. (2016). The application of performance measurement system model using Malcolm Baldrige Model (MBM) to support Civil State Apparatus Law (ASN) number 5 of 2014 in Indonesia. International Journal of Applied Business and Economic Research. 14(11) editor@iaeme.com

12 Idhar Yahya, Erlina, Ade Fatma Lubis and Murni Daulay [12] Eriadi, Muda, I, and S.Abdullah, (2018). Determinant Analysis of the Quality of Local Government Financial Statements in North Sumatra with the Effectiveness of Management of Regional Property as a Mediator, International Journal of Civil Engineering and Technology.9(5) [13] Erlina and Muda, I, (2018). Determinants of The Implementation Of Risk-Based Internal Auditing In Regencies/Cities In North Sumatera Province. International Journal of Civil Engineering and Technology, 9(5) [14] Erlina & Muda,I,(2018).The Effect of Self Efficacy and Professional Development on the Work Quality of Internal Auditor. International Journal of Civil Engineering and Technology. 9(5) [15] Erlina, A.Saputra & Muda, I.(2017). Antecedents of Budget Quality Empirical Evidence from Provincial Government In Indonesia. International Journal of Economic Research. 14(12) [16] Erlina. A.Saputra & Muda, I.(2017). The Analysis of the Influencing Factors of Budget Absorption. International Journal of Economic Research. 14(12) [17] Erwin, K., Abubakar, E., Muda, I. (2018).The relationship of lending, funding, capital, human resource, asset liability management to non-financial sustainability of rural banks (BPRs) in Indonesia. Journal of Applied Economic Sciences, 2(56) [18] Ferine, K.F; Ermiaty, C. & Muda, I. (2017). The Impact of Entrepreneurship And Competence On Small Medium Enterprises Tangan Di Atas Medan Entrepreneurs Work Performance. International Journal of Economic Research. 14(16) [19] Firdaus, Muhammad. (2007). Utilization of Information Technology in the Public Sector Opportunities, Challenges and Solutions, College of Administrative Sciences Institute of State Administration, Jl. A. P. Pettarani Number 61 Makassar, Acceses on download [20] Gichoya, David (2005). Factors Affecting the Successful Implementation of ICT Projects in Government, Research Schools of Informatics, Loughborough University, UK, The Electronic Journal of e-government. 3(4) [21] Gusnardi, Riadi, R.M.,and Muda, I. (2016). Competency mapping and analysis of students competency based on economics subject national examination and its alternative solutions in state high schools at Pekanbaru. International Journal of Economic Research. 3(5) [22] Halim, Abdul and A., Syukriy. (2006). Research on Relationships and Agency Problems in Local Government. Government Accounting Journal. 2(4) [23] Hammond, W. G., & Tosun, S. M. (2011). The impact of local decentralization on economic growth: Evidence from U.S. counties. Journal of Regional Science, 51(1) [24] Hand, M. (1992). Managing strategic investment in information systems. In R. Dixon and R. Franks (Eds.), IT Management Handbook. (7-27). Oxford: Butterworth-Heinemann. [25] Handoko, B. Sunaryo & Muda, I. (2017). Difference Analysis of Consumer Perception of Motorcycle Product Quality.International Journal of Economic Research. 14(12) [26] Hartono, J. (2004). The Recency Effect of accounting information.international Journal of Business, 6(1) [27] Hasan, A, Gusnardi & Muda, I. (2017). Analysis of Taxpayers and Understanding Awareness Increase in Compliance with Taxpayers Individual Taxpayers. International Journal of Economic Research. 14(12) [28] Hutagalung, B.; Dalimunthe, D.M.J, R., Pambudi, A.Q. Hutagalung & Muda, I. (2017). The Effect of Enterpreneurship Education and Family Environment Towards Students editor@iaeme.com

13 Fiscal Decentralization Implementation on Quality Regional Financial Report in Distric/ City Government (Case in Indonesia) Entrepreneurial Motivation. International Journal of Economic Research. 14(20) [29] Hutchcroft, P. D. (2001). Centralization and decentralization in administration and politics: Assessing territorial dimensions of authority and power. Governance. 14(1) [30] Kara, E., & Kiliç, Y. (2011). Accounting recording system on accrual basis at local authorities in Turkey: An application in Gaziantep local municipality. International Journal of Business and Social Science, 2(15) [31] Litvack, J., & J. Seddon. (1999). Decentralization Briefing Notes. Working Paper. Washington, World Bank Institute, [32] Lubis, A., Rustam and Muda, I. (2016). Factors Affecting The Cost of Agency of Village Owned Enterprise (BUMDES). International Journal of Economic Research.14(16) [33] Lubis, A.,Torong, Z.B., & Muda, I. (2016). The urgency of implementing balanced scorecard system on local government. International Journal of Applied Business and Economic Research. 14(11) [34] Lubis, A.F.,Lubis,T.A.and Muda, I. (2016). The role of Enterprise Resource Plan (ERP) configuration to the timeliness of the financial statement presentation. International Journal of Applied Business and Economic Research. 14(11) [35] Lutfi, M.,Nazwar, C., and Muda, I (2016). Effects of investment opportunity set, company size and real activity manipulation of issuers in Indonesia Stock Exchange on stock price in Indonesia. International Journal of Economic Research. 13(5) [36] Marhayanie, M. Ismail and Muda, I, (2017). Impact of The Online Car Rental Service Order System on Sales Turnover with Financial Literacy Customer as Intervening Variables. International Journal of Economic Perspectives. 14(16) [37] Miller, P. B. W. (2001). Will you adopt quality financial reporting? Strategic Finance. 82(7) [38] Muda, I & A.Dharsuky. (2015). Impact of Region Financial Information System Quality, Role Ambiguity and Training on Precision of Financial Statement of Local Government Presentation. International Journal of Applied Business and Economic Research, 13(6) [39] Muda, I and A. A. F. Hutapea. (2018). Influence of capital expenditure and income original region to the income per capita in Indonesia. IOP Conference Series: Earth and Environmental Science doi: / /126/1/ [40] Muda, I and A.Dharsuky, (2016). Impact of Capital Investments and Cash Dividend Policy on Regional Development Bank PT. Bank Sumut to the District Own Source Revenue and Economic Growth. International Journal of Applied Business and Economic Research, 14(11) [41] Muda, I, and Erlina, (2018). Performance Appraisal of Government Internal Supervisory Apparatus in Implementation of Compliance Audit. International Journal of Civil Engineering and Technology. 9(5) [42] Muda, I, D.Y.Wardani, Erlina, A.Maksum, A. F.Lubis & R. Bukit. (2017). The Influence of Human Resources Competency & The Use of Information Technology on The Quality of Local Government Financial Report with Regional Accounting System as an Intervening. Journal of Theoretical & Applied Information Technology. 95(19) [43] Muda, I, Dharsuky. A., Siregar, H.S., & Sadalia, I. (2017). Combined loading and Crossdimensional loadings timeliness of presentation of financial statements of local government. IOP Conference Series : doi: / X/180/1/ editor@iaeme.com

14 Idhar Yahya, Erlina, Ade Fatma Lubis and Murni Daulay [44] Muda, I, Erlina, I.Yahya and A.A.Nasution, (2018). Performance Audit and Balanced Scorecard Perspective. International Journal of Civil Engineering and Technology. 9(5) [45] Muda, I, F Roosmawati, H S Siregar, Ramli, H Manurung & T Banuas. (2018). Performance Measurement Analysis of Palm Cooperative Cooperation with Using Balanced Scorecard. IOP Conference Series.288. doi: / x/288/1/ [46] Muda, I, M. Ismail & Marhayanie. (2017). Impact Allocation Capital Expenditure on The Improvement of the Local Government Assets and Effect on Local Revenue Sustainability. International Journal of Economic Perspectives. 11(2) [47] Muda, I, M.Sihombing, E.Jumilawati and A. Dharsuky. (2016). Critical Success Factors Downstream Palm Oil Based Small And Medium Enterprises (SME) In Indonesia. International Journal of Economic Research. 13(8) [48] Muda, I, M.Sihombing, E.Jumilawati and A.Dharsuky. (2017). Factors Affecting The Success of Local Innovation Systems With Government Programs As Moderators. International Journal of Economic Research.14(16) [49] Muda, I, Rahmanta, S. Adi and Marhayanie. (2017). The Role of Working Capital, Productivity, Applied Technology and Selling Market Prices on Fisherman s Revenues. International Journal of Economic Research. 14(16) [50] Muda, I,, H S Siregar, S A Sembiring, Ramli, H.Manurung and Z.Zein. (2018). Economic Value of Palm Plantation in North Sumatera and Contribution to Product Domestic Regional Bruto. IOP Conference Series : Materials Science and Engineering.288. doi: / X/288/1/ [51] Muda, I., & R.Naibaho (2018). Variables influencing allocation of capital expenditure in Indonesia. IOP Conference Series: Earth and Environmental Science. 126.doi: / /126/1/ [52] Muda, I.,&Nurlina. (2018). Influence of Manufacture of Textiles, Clothing and Leather and Manufacture of Paper, Printing and Publishing to The Economic Growth. Emerald Reach Proceedings Series DOI / [53] Muda, I., (2017). The Effect of Allocation of Dividend of the Regional Government- Owned Enterprises and the Empowerment Efforts on the Revenue of Regional Government: The Case of Indonesia. European Research Studies Journal. XX(3A) [54] Muda, I., (2017). The Effect of Supervisory Board Cross-Membership and Supervisory Board Members' Expertise to The Disclosure of Supervisory Board s Report : Empirical Evidence From Indonesia. European Research Studies Journal. XX(3A) [55] Muda, I., and A. H. Harahap, Erlina, S.Ginting, A. Maksum & E.Abubakar (2018). Factors of quality of financial report of local government in Indonesia. IOP Conference Series: Earth and Environmental Science doi: / /126/1/ [56] Muda, I., and Windari. (2018). Dimension of an Islamic Model Value on the Existence of Syariah Waltmart. Emerald Reach Proceedings Series DOI / [57] Muda, I., Panjaitan, S.R, Erlina, S. Ginting, A. Maksum and E. Abubakar. (2018). Model application of Murabahah financing acknowledgement statement of Sharia accounting standard No 59 Year IOP Conference Series: Earth and Environmental Science. 126 doi: / /126/1/ [58] Muda, I., Sidauruk, S.H., Siregar, H.S., Nurzaimah.(2018).The effect of corporate social responsibility on company s value with common effects model, fixed effects model and random effects model approaches. QualityAccess to Success. 19(165) editor@iaeme.com