THE INFLUENCE OF ORIGINAL LOCAL GOVERNMENT REVENUES, GENERAL ALLOCATION FUNDS AND SPECIAL ALLOCATION FUNDS TO LOCAL GOVERNMENT EXPENDITURES Written by : Maharani Sinta Dewi ID. 1111082100002 INTERNATIONAL PROGRAM ACCOUNTING DEPARTMENT FACULTY OF ECONOMIC AND BUSINESS SYARIF HIDAYATULLAH ISLAMIC STATE UNIVERSITY JAKARTA 2015 M / 1437 H
ii
iii
iv
v
CURRICULUM VITAE Personal Identities Name : Maharani Sinta Dewi Gender : Female Place of Birth : Prabumulih Date of Birth : August 7 th 1993 Address : Jl. Taman Murni No. 9 RT. 01 RW. 03 Kec. Prabumulih Timur Kel. Gunung Ibul Barat, Sumatera Selatan. Indonesia Phone/Mobile : 085286439900 E-mail Address : maharanisintadewi@ymail.com Formal Education College : UIN Syarif Hidayatullah Jakarta Senior High School : SMAN 2 Prabumulih Junior High School : SMPN 8 Prabumulih Elementary School : SDN 50 Prabumulih Kindergarten : TK Santa Maria Prabumulih vi
ABSTRAK The Influence of The Original Local Government Revenues, General Allocation Funds, and Special Allocation Funds to The Local Government Expenditures Penelitian ini bertujuan untuk mengetahui pengaruh Pendapatan Asli Daerah (PAD), Dana Alokasi Umum (DAU), dan Dana Alokasi Khusus (DAK) terhadap Belanja Pemerintah Daerah (BD) pada kabupaten/kota di Provinsi Sumatera Selatan. Penelitian ini menggunakan metode purposive sampling dengan krtiteria yang telah ditetapkan, maka diperoleh 10 kabupaten dan 4 kota yang dijadikan sebagai sampel penelitian pada tahun 2008-2013. Metode yang digunakan dalam penelitian ini adalah Kuantitatif dan Regresi berganda. Laporan keuangan kabupaten/kota Sumatera Selatan tahun 2008-2013 diunduh di laci.bps.go.id. Hasil penelitian menunjukkan bahwa secara parsial, Pemerintah Asli Daerah (PAD) dan Dana Alokasi Khusus (DAK) memiliki pengaruh yang signifikan terhadap Belanja Pemerintah Daerah (BD) pada kabupaten/kota di Sumatera Selatan. Sementara Dana Alokasi Umum (DAU) tidak memiliki pengaruh signifikan terhadap Belanja Pemerintah Daerah (BD) pada kabupaten/kota di Provinsi Sumatera Selatan. Secara bersamaan, Pendapatan Asli Daerah (PAD), Dana Alokasi Umum (DAU) dan Dana Alokasi Khusus (DAK) berpengaruh signifikan terhadap Belanja Pemerintah Daerah (BD). Kata Kunci: Pendapatan Asli Daerah (PAD), Dana Alokasi Umum (DAU), Dana Alokasi Khusus (DAK), dan Belanja Daerah (BD) vii
ABSTRACT The Influence of The Original Local Government Revenues, General Allocation Funds, and Special Allocation Funds to The Local Government Expenditures This research aimed to find out the influence of the Original Local Government Revenue (PAD), General Allocation Fund (DAU), and Special Allocation Fund (DAK) to the Local Govenment Expenditure (BD) on districts/cities in South Sumatera Province. According to the purposive sampling method with the sample criteria which is settled, obtained 10 districts and 4 cities which serve as the research sample from 2008-2013. Quantitative and Multiple Regressions method are used in this research.the financial statements on district/city of South Sumatra from 2008-2013 downloaded at laci.bps.go.id. The results showed that partially, Original Local Government (PAD) and Special Allocation Fund (DAK) have influence significantly to the Local Government Expenditure (BD) on districts/cities in South Sumatera. While General Allocation Fund (DAU) had no influence significantly to the Local Governement Expenditure (BD) on districts/cities in South Sumatera Province. Silmutanneously, Original Local Governemnt Revenue (PAD), General Allocation Fund (DAU), Special Allocation Fund (DAK) influence significantly to the Local Government Expenditure (BD). Key Words: Original Local Government Revenue (PAD), General Allocation Fund (DAU), Special Allocation Fund (DAK), and Local Government Expenditure (BD) viii
FOREWORD Assalamu alaikum Wr.Wb All praise to Allah SWT and Shalawat always gives to our Prophet Muhammad SAW. With the strength, intelligence, patience, and passion from Allah SWT, I can to finish this my thesis as one of requirements to achieve bachelor degree. I believe there is an invisible hand (God) which have helped me going through this proces. My special thank for my Mom, Diah Kusumawati, who has been helping and support to finish the thesis. You are my angels in human form. So, I want to make you always smile and proud of me at any situations. Thank you for taking care of me since I was a kid until today, preparing my meal every morning, remind me to pray, and everything I could not mention one by one. Because my gratitude for what you have done in my life would not enough to be written on a piece of paper, I love you more than you know. You are the best mother in this whole world, and thanks to allah because i have chance became your son. My Beloved Father, Bambang Setiawan, who always give me lot of spirits and motivations when i felt hopeless to finish my thesis. You always belived that I can do everything on my own. Thank you for working so hard to support your family and to support me education.you are the first man that I want to say thanks in the world when I finish this thesis. I love you more than you know and thanks for everything. ix
I believe I am nothing without each one of you who has helped me to finish this thesis. Thus, in this very special moment, let me say thanks to all of them who were helped me through the process of this thesis, including: 1. Prof. Dr. Abdul Hamid, MS as Dean of Economic Faculty of UIN Syarif Hidayatullah Jakarta. And as my thesis supervisor I. You are my mentor who has provided direction and guided me, shared your knowledge to me, and thank you for your time that you gave.so, I able to finish this thesis. 2. Hepi Prayudiawan,SE,Ak,MM as Head of International Program. 3. Soliyah Wulandari, SE, M.Sc as a my thesis supervisor II. Who has provided direction, guidance, and thank you for your time and your patience that you gave to me, so i can finish this thesis. But i m sorry if i sometime annoying your time. 4. All Lecturers who have taught me patiently, may what they have given to me useful in future and all staff UIN Jakarta, special thanks to: Mr. Bonyx thanks you have taught me and given explanation about the thesis and also for provided any information. Mr. Chairul Anwar who had gave motivations and change my mindset do not ever say IMPOSSIBLE but say I M POSSIBLE. Mr. Bambang Triwibagyo thanks for your experience and knowledge which you had shared to me. Mr.Herni Ali, HT,. MM thanks for your directions, suggestions and help so I can finish my study at university. x
5. All my friends in Accounting International Program 6 th Batch (2009), who helped me in finishing this thesis. Bunch of love for you guys Didit, Topik, Erwin,Maya,Siti, and Yusuf thanks for every support and motivation that you have gave to finish my thesis. And especially to Dian, Ilma and Depe thanks for every foolish things and jokes that you have done, and you made my day full of laugh. You guys are my inpiration. And Senior, Junior, and management class thanks all who couldn t mention one by one Thanks for your pray. 6. My family, Special thanks to my brother Rian and Dimas for moral and material supports my sister Titin. And also my special thanks to my boyfriend Lerry which always beside me. And alwyas give a support to me. But I have two word support very remember from him Spirit and Patient to finished this thesis. Authors realize that this thesis is still far from perfection, the suggestions and constructive criticism from all parties are expected to improve further. Finally, only Allah SWT will return all and writer hope this skripsi will be useful to all parties, especially for writers and readers in general, may Allah bless us. Amin. Wassalammualaikum Wr.Wb. Author Jakarta, December 12 nd 2014 (Maharani Sinta Dewi) xi
TABLE OF CONTENTS Information Page Curriculum Vitae... vi Abstract... vii Abstrak... viii Foreword... ix Table of Content... xii List of Tables... xvi List of Figures... xvii List of Appendix... xviii Chapter I INTRODUCTION A. Background Issues... 1 B. Problem Formulation... 7 C. Research Objectives... 8 D. Research Benefits... 8 Chapter II LITERATURE REVIEW A. Agency Theory... 10 1. Definition of Local Government Expenditures (BD)... 11 a. General Administration Expenditures... 12 b. Operating Expenditures... 13 xii
c. Capital Expenditures... 14 d. Transfer Expenditures... 15 e. Unexpected Expenditures... 15 2. Original Local Government Revenue (PAD)... 16 a. Local Taxes... 16 b. Local Retribution... 17 c. Results of Regional Owned-Enterprises and Separated Local Wealth Management... 18 d. Other Legal Revenue... 19 3. General Allocation Fund (DAU)... 20 4. Special Allocation Fund (DAU)... 22 B. Previous Research... 24 C. Theoritical Framework... 29 D. Hypothesis... 31 Chapter III RESEARCH METHODOLOGY A. Scope of Research... 33 B. Population and Sample... 33 C. Data Collection Method... 34 D. Data Analyze Method... 35 1. Descriptive Statistics... 35 2. Classical Assumption... 35 a. Normality Test... 35 xiii
b. Multicollinearity Test... 37 c. Autocorrelation Test... 37 d. Heteroscedasticity Test... 38 3. The Result of Multiple Regression Testing... 39 a. Multiple Regression... 39 b. Coefficient of Determination... 39 4. Hypothesis Testing... 40 a. Simultaneous Significance Test (F-Test)... 40 b. Partial Significance Test (t-test)... 41 E. Operational Variable... 41 1. Local Government Expenditure (BD)... 41 2. Original Local Government Revenue (PAD)... 43 3. General Allocation Fund (DAU)... 44 4. Special Allocation Fund (DAK)... 44 Chapter IV RESULT AND ANALYSIS A. General Description... 45 B. Descriptive Statistics... 46 1. Original Local Government Revenue (PAD)... 47 2. General Allocation Funds (DAU)... 48 3. Special Allocation Fund (DAK)... 49 4. Local Government Expenditures (BD)... 49 C. Analysis and Discussion... 50 xiv
1. Classic Assumption Test... 50 a. Normality Test... 50 b. Multicollinearity Test... 53 c. Autocorrelation Test... 54 d. Heterocedasticity Test... 55 2. The Result of Multiple Regression Testing... 56 a. Multiple Linear Regression... 56 b. Coefficient of Determination... 59 3. Hypothesis Testing... 61 a. Simultaneous Significant Test (F-Test)... 61 b. Significant Partial Test (t-test)... 62 c. Hypothesis test result... 64 Chapter V CONCLUSIONS AND RECOMMENDATIONS A. Conclusion... 65 B. Recomendation... 66 REFERENCE... 68 APPENDIX I... 72 APPENDIX II... 77 xv
LIST OF TABLE No Descriptions Page 2.1 Previous Research Table... 27 4.1 Name of Districts/Cities in South Sumatera... 45 4.2 Sampling Criteria... 46 4.3 Descriptive Statistics Test... 47 4.4 Kolmogorov-Smirnov Test... 51 4.5 Multicollinearity Test... 54 4.6 Autocorrelation Test... 55 4.7 Multiple Regression... 57 4.8 Criteria of Correlation Coefficient... 59 4.9 Model Summary... 60 4.10 Simultaneous Significant Test (F-Test)... 61 4.11 Significant Partial Test (T-Test)... 62 xvi
LIST OF FIGURE No Descriptions Page 2.1 Theoritical Framework... 31 4.1 Normal P-Plot Graph... 52 4.2 Histogram Graph... 53 4.3 Heterocedasticity Graph... 56 xvii
LIST OF APPENDIXES NO DESCRIPTIONS PAGE Appendix 1 Research Data... 77 Appendix 2 Output SPSS That Used for the Result of the Research... 81 xviii
CHAPTER I INTRODUCTION A. Background Issues In January 2001, Indonesia began a new round of nation organizing system on all government levels and is known as the regional autonomy. Nearly all the authorities of the Central Government devolved on the area, except for five the field; Foreign policy, Security, Defense, Justice, Finance and Religion. Since then the budget of the Local Government from year to year had shown significant improvements, both in terms of coverage of the types of funds allocated, as well as the quantity of allocation. Local Government Expenditures are prioritized to execute government affairs, which consist of the mandatory affairs and the option affairs that are set on the basis statutory. The Reformation brought many changes in the life of nation and the state, one of the many reforms that led to a change is the reform of Central Government relations with Local Governments better known as the "Regional Autonomy." The term Regional Autonomy is not new, it is already mentioned within the laws of the Constitution of 1945. The current Regional Autonomy associated with UU No. 32 of 2004, which concerns on local governments and has been revised in UU No. 22 of 1999 and UU No. 33 of 2004 about of Local Government and Fiscal Balance between the Central Government and Local Government. The enforcement of both statuary Laws made an impact on changing patterns of 1
regional accountability over funds allocated. The pattern in use is the Horizontal Accountability pattern through the Parliament (DPR). Through the Regional Autonomy Act, the authority of regional autonomy has been set up and is administrating the interests of the local communities according to their own initiatives based on the aspirations of the community. Regional Autonomy demanded local governments to be able to providing excellent service as well as good news to the community, one of the forms the service is to provide information that is transparent and accountable. The concept of Regional Autonomy requires. 1) Community empowerment 2) Democratization in the sense of giving responsibility to all communities 3) Opportunities To accelerate the equally society welfare 4) The improvement quality of bureaucracy service. 5) Improved quality of supervision by the legislature. Public sector reforms that accompanied the demands of democratization become a global phenomenon, including in Indonesia. The demands of democratization led to transparency and accountability aspect. Both aspects are important parts in Governance, especially in the field of financial management of the State or regions. The economy observers, political observers, investors and the community members begin to pay attention to any policies in financial management. This current era of fiscal decentralization, expected an increase in service in various sectors particularly the public sector, with an increase in services in the 2
public sector can increase the attractiveness for investors to invest in the area. Therefore, the shift in the composition of expenditure is the logical effort conducted local government in order to improve the level of public trust can be done by increasing capital investment in fixed assets, namely equipment, buildings, infrastructure and other fixed assets. With the increase in capital expenditure is expected to increase the public service as a result of capital expenditure is increasing fixed asset areas is a prerequisite in providing public services by local government. Overcome the problem of fiscal imbalance and the need for large areas of funding, the government give equalization fund and one of the most component these funds provide the greatest contribution is the General Allocation Fund (DAU). Fund balance is the funding coming from the state budget consists of revenue-sharing (DBH), the General Allocation Fund (DAU), the Special Allocation Fund (DAK). Fund balance in addition intended to assist local authorities in the fund, also aims to reduce the gap of local government funding. Within a few years running, the proportion of the general allocation of funds to regions still the highest compared with other regions including the receipt of other areas including the Original Local Government Revenue (PAD). This shows the high dependence of local governments on central government funding supply. There is one news that includes about General Allocation Fund (DAU) and Special Allocation Funds (DAK). Aman (2014) explained the 2013 budget, tax revenue-sharing target of Rp363 billion, Rp386 billion realized for more. Non-tax revenue target of Rp478 billion, Rp439 billion more realized over the target while 3
DAU 678 billion realized over 100 percent, DAK allocated Rp46 billion for the nine fields with the realization more Rp45 billion, will be used in 2014 in accordance with the applicable technical guidelines. While for 2014, the target funds for the overall results of Rp753 billion, but until last March has not been realized. Then in 2014, DAK allocated Rp59 billion more for eight areas: elementary-high school education, infrastructure roads, irrigation infrastructure, sanitation infrastructure, infrastructure and infrastructure regency, the field of family planning, forestry and trade fields. The central government in order to prioritize the Muara Enim regency in revenue-sharing provision and DAK propagated field obtained. So the Muara Enim Regency could grow more rapidly and can ease the burden of development costs through the budget, especially in realizing the Muara Enim SMAS. (Platmerah.co.id) The Original Local Government Revenues (PAD) each region are different. For regions, which have advanced in the field of industry and have natural resources it is likely to have greater Original Local Government Revenues (PAD) than the other regions. Because of that an inequality of the Original Local Government Revenues might occur. On one side, there are very rich regions with a high PAD and on the other side, there are regions that are lagging behind with a low PAD. Each area has the same ability not to fund the operations of each of its region, which creates a fiscal imbalance between regions. To overcome these imbalances, the central government transferred funds balance for each region. One of the fund balance of the General Allocation Fund (DAU), General Allocation 4
Fund is a fund from the central government which is taken from the state budget that is allocated for the purpose of financial equalization among regions to finance the expenditure needs of local governments in the implementation of decentralization. In connection with the financial balance between central and local government, it is a consequence of the transfer of power from central government to local governments. Distribution of funds to the region through the results tend to cause imbalance between the regions, the role of the General Allocation Fund (DAU) lies in its ability to create equity based on consideration of the potential fiscal and needs of each specified. In fact, the General Allocation Fund (DAU) still to be excellent compared with Original Local Government (PAD) and regional financing because the loan can not be relied upon. PAD when it should be used to build a lot of areas in order to invest in the area, so revenue can be used to finance regional and local spending. Independence for the region still has not been fully implemented due to funding from the central government. The transfer of funds realized in the form of fund balance that is the Special Allocation Fund (DAK). Based on UU No. 33 In 2004, the Special Allocation Fund (DAK) is a fund of the state budget allocated to certain areas with the purpose to help fund special activities of regional affairs and in accordance with national priorities. Utilization Special Allocation Fund (DAK) investment activities directed at the development, procurement, improvement, and repair of physical infrastructure with long economic life, including the provision of physical infrastructure support, and does not include capital investments. With the Special Allocation Fund (DAK) is expected to influence the Local 5
Governemnt Expenditure (BD), because Special Allocation Fund (DAK) tend to increase the fixed assets owned by the government to improve public services. Previous researchers have analyzed the influence of the General Allocation Funds (DAU), and Original Local Government Revenues (PAD) to the Local Government Expenditures. According to Mulyadi et al (2010) the result showed Original Local Government Revenue (PAD) and General Allocation Fund (DAU) has a influence significantly to the Local Government Expenditure (BD) in the Bengkulu province. Sorongan (2013), analyzing the relationship of Original Local Government Revenue (PAD) and General Allocation Fund (DAU) to local expenditure in South Minahasa. Research results of Original Local Government Revenue (PAD) and General Allocation Fund (DAU) given less contribute to Local Government Expenditure (BD). Adam, et al (2013) the influence Original Local Government does not have influence on Direct expenditure Allocation in Southeast Sulawesi. It is defined that Original Local Government Revenue (PAD) has not contributed on Direct Expenditure in Southeast Sulawesi. And General Allocation Fund (DAU) shows influence on direct expenditure allocation in Southeast Sulawesi. Almost all research conducted a study that examined the influence of General Allocation Fund (DAU) and Original Local Government Revenue (PAD) to the Local Government Expenditure area (BD). Research Adam, et al (2013) using an independent variable Original Local Government Revenue (PAD) and General Allocation Fund (DAU), and the period of this 2007-2011 in Southeast 6
Sulawesi. There are some differences in this study compared with previous studies, in this study the author added the independent variable is the Special Allocation Fund (DAK). This research is the development of research Adam, et al.(2013). Author used the study period 2008-2013 in 15 districts/cities South Sumatera, using data for the last six years of preparation of research is expected to provide information relevant to the current condition of the Local Government Expenditure area. Based on the explanation above, the author is interested in conducting research on: The Influence Of Original Local Government Revenues, General Allocation Funds And Special Allocation Funds To Local Government Expenditures B. Problem Formulation Based on the background described above, the subject is considered to find answers on the following questions: 1. Does the Original Local Government (PAD) influence on the Local Government Expenditure (BD)? 2. Does the General Allocation Fund (DAU) influence on the Local Government Expenditure (BD)? 3. Does the Special Allocation Fund (DAK) influence on the Local Government Expenditure (BD)? 4. Do The Original Local Government (PAD), General Allocation Fund (DAU), and Special Allocation Fund (DAK) simultaneously influence on the Local Government Expenditure (BD)? 7
C. Research Objective The purposes of this research are: 1. To analyze the influence of Original Local Government Revenues (PAD) to the Local Government Expenditures (BD). 2. To analyze the influence of General Allocation Fund (DAU) to the Local Government Expenditures (BD). 3. To analyze the influence of Special Allocaliton Fund (DAK) to the Local Government Expenditures (BD). 4. To analyze the simultaneously influence of Original Local Government Revenues (PAD), General Allocation Fund (DAU), and Special Allocation Fund (DAK) to the Local Government Expenditures (BD). D. Research Benefits This research is expected to be beneficial for: 1. Benefit for Local Government Provide advises to the Central Government and the Regions in terms of future policy formulation. 2. Benefit for Researchers a. Add science and insights from the information gathered, as well as add to the experience of researchers in the field of research. b. Increase knowledge and understanding of the influence of the Original Local Government Revenues (PAD), General Allocation Funds (DAU) 8
and Special Allocation Fund (DAK) towards the Local Government Expenditures (BD). 3. Benefit for The World of Education. a. Provide input for academics to develop science in the Government Accounting field, in particular, on the influence of Original Local Government Revenues (PAD), the General Allocation Funds (DAU) and Special Allocation Fund (DAK) to Local Government Expenditures (BD). b. Open the research subject to similar studies. 9
CHAPTER II LITERATURE REVIEW A. Agency Theory The elements contained in the Local Government Revenue and Expenditure Budgets (APBD) are the income and the expenditures, where the income in question is the source of acceptance for the area known by the Original Local Government Revenues (PAD). While expenditures are equal to the expenditures incurred by local governments in carrying out the tasks and functions. In accordance with Act No. 32 of 2004 concerning Local Governments, local governments have the right to set up and take care of their own Government Affairs according to the principles of the regional autonomy of the region, geared to accelerate the achievement of well-being communities through improving the services, empowerment and participation of all communities, as well as the increase the competitiveness of the area having regard to the principles of democracy, equity, justice and the specificities of an area in a unitary state system of the Republic of Indonesia. In order to fulfill the rights and obligations, the Government elaborates a plan to achieve the purpose, which is aspired to. This plan is used as a guide in each step of the execution of the duties of the State. (Ghozali, 1997:37). 10
1. Local Government Expenditures (BD) The definition of expenditures by the UU No. 24 of 2005 is as follows: Expenditure is all expenditures from the account of the State / Regional equity funds reduce smoothly in the corresponding period of the fiscal year that will not be earned back by the government payment. Another definition of expenditure is as described in the Regulation of the Minister of Home Affairs Decree.UU No. 59 of 2007 as follows: "Expenditures are the obligation of the local government which is recognized as a deduction from net worth." Government UU No. 24 of 2005 states that the capital expenditure is the expenditure budget for the acquisition of fixed assets and other assets that benefit more than one accounting period. Both of these definitions make it clear that the deal will reduce the equity fund expenditures of local governments. Both the rules, which arrange the expenditures, classify expenditures by different classifications. The difference is simply because there is anything else you want covered by the Regulation of the Minister of Home Affairs Decree. UU No.59 of 2007. As it is defined by the Minister of Home Affairs Decree UU No. 59 in 2007 as a local financial management guideline, which includes the planning, budgeting, administration, accounting and accountability. As the required budgetary instrument the information control is indicated, which is considered the information associated with the concept of performance-based budgeting. According to UU No 58 article 26 of 2005 Expenditure matters concerning the implementation of priority referred to protect and improving the 11
quality of life of the community in an effort to meet local obligations are realized in the form of increased basic services, education, health, social facilities and public facilities and develop an appropriate social security system. The classification of expenditure by business shall include: education, health, public works, housing, spatial planning, transport, environment, land, population and civil, women's empowerment, family planning and family welfare, social, labor, cooperative and small and medium enterprises, investment, culture, youth and sports, national unity and domestic politics, public administration, employment, community development and rural, statistics, records and communications and informatics. The classification of expenditures by business choices includes: agriculture, forestry, energy and mineral resources, tourism, marine and fisheries, trade, industry, and transmigration. Expenditures in handling government affairs a particular part or midwife can be implemented jointly by the government and local governments established by the statutory provisions set out in the form of programs and activities that classified according to obligatory and matters of choice. In general, expenditures in the budget are grouped into five groups, namely: a. General administration expenditure Government expenditure is all that is not directly related to the activity or public service. General administration expenditure group consists of four types, namely: 12
1) Personnel expenditures are expenditures for the Local Government/Personnel (salaries, honorarium, and overtime) that is not directly related to the activities providing services to citizens. 2) Expenditures for goods are local government expenditures on goods and services not directly related to public services. 3) Expenditures for travel are expenditures on travel expenses and council employees who are not directly related to the public service. 4) Maintenance expenditures are expenditures for the maintenance of the Local Government of goods that are not directly related to the public service. b. Operating Expenditures Maintenance of public infrastructure is an all expenses associated with the Local Government or public service activities. Expenditure groups include: 1) Personnel expenditure (Operation and Maintenance Expenditure Group facilities and public infrastructure) are expenditures for the Local Government/Personal the effect directly to a specific activity or in other words, an expenditure that is variable. 2) Goods expenditures (Group Operations and Maintenance Expenditures infrastructure public) is local 13
government expenditure for the provision of goods and services directly related to the public service. 3) Travel expenditures (Group Operations and Maintenance Expenditures infrastructure public) are local government expenditures for employee travel expenses directly related to the public service. 4) Maintenance expenditures (Operation and Maintenance Expenditure Group facilities and public infrastructure) are government expenditures for the maintenance of assets from current areas that have a direct impact on the public service. c. Capital Expenditures Government Capital Expenditures refer to government spending on investment goods. This means spending on things that last for a certain period of time. This may include investment in hospitals, schools, equipment (furniture, IT-facilities, archive facilities) and roads. Capital Expenditures are divided into: 1) Public expenditures, these are expenditures those benefits can be enjoyed directly by the general public. 2) Apparatus expenditures, namely expenditures directly benefit not enjoyed by the public, but it is felt directly by the apparatus. 14
d. Transfer expenditures Transfer Expenditures are the expenditures for the transfer of money from the government to third parties without expecting reward or gain refunds of the money transferred. The group consists of expenditures for: 1) Installment of loans. 2) Grants. 3) Reserve funds. e. Unexpected Expenditures Unexpected expenditures are the expenses incurred by local governments to finance the activities of unexpected and extraordinary events. According to Nurlan (2008) states that unexpected expenditures are expenditures for activities are unusual or not expected to recur like natural disasters and social disasters unforeseen, including the refunds of excess revenues from previous years that have been closed. Classification of expenditures by function for alignment and integration of financial management consists of: 1) Public Service; 2) Order and Peace; 3) The Economy; 4) The Environment; 5) Housing and Public facilities; 6) Health; 15
7) Tourism and culture; 8) Education, and 9) Social protects. 2. Original Local Government Revenues (PAD) According Suparmoko (2012: 159) is a Original Local Government Revenue (PAD) of local government revenue sourced from the local taxes, levies results, and the results were separated areas of wealth management, as well as other legitimate revenue. Definition of original local government revenues (PAD) according to UU No. 28 of 2009 the financial resources of the excavated area of the region concerned region consisting of the results of local taxes, levies results, the results were separated areas of wealth management and other legitimate revenue. In the UU No.13 of 2006 the Ministry of Home Affairs explains the revenues will be divided according to the type of income : a. Local Taxes The presence of UU No. 18 of 1997 on local taxes and levies is the legal basis for local government passed a law in one of the sources of financing the implementation of the Government of the area. Prior to the enactment of UU No. 18 of 1997 changes, provincial taxes include three types of taxes, namely: 1) Motor vehicle tax 2) Customs behind the name of the motor vehicle 16
3) Motor vehicle fuel tax While tax district / city consists of : 1) Hotel and restaurant tax 2) Tax street lighting 3) Tax billboard 4) Tax entertainment 5) Tax collection and management of excavated material class C Tax utilization of ground water and surface water Furthermore, regulations governing the new order is the post-tax UU No. 34 of 2000 on amendments to the UU No. 18 of 1997 on regional taxes and levies. Taxes and levies are the sources of revenue. b. Local Retribution Collection of retribution paid directly by those who enjoy the service, and are usually intended to cover all the costs or the ministry. Retribution according to UU No. 28 of 2009 is taxation as a payment for certain services or special permits provided and/or administered by the local government for Personal or Entities. The amount of retribution should be (more or less) equal to the value of the services provided. In the new budget structure with performance approach, the kind of income that comes from local tax and 17
retribution areas under UU No. 34 of 2000 on the Amendment Of UU No. 18 of 1997, Retribution broken down into : Retribution is broken down into: 1) General Retribution That is, a levy on services provided or provided by local governments for general interest and can be enjoyed by private persons or entities. 2) Business Retribution i.e.: fees for services provided by the government to adhere to commercial principles because basically provided by the private sector. c. Income of Local Government Corporate Management of Regional Government Separated Wealth As UU No. 34 of 2004, the kind of results that separated the area of wealth management can be broken down by revenue object that covers the return on capital investment in locally-owned companies/enterprises. Part return on capital investment in stateowned enterprises/state and the return on equity investment in privately-owned company or a group of business people. 1) Regional Company In an effort to explore the sources of revenue can be done in various ways, as long as not contrary to the Laws and 18
regulations. One source of revenue is very important and needs special attention is the company area. 2) The company is a unit of production area that is: (a) Providing services (b) Conducting general use (c) Cultivate revenue 3) The regional company's goal to participate in implementing regional development, in particular, and the development needs of the people with industrialization and peace and tranquility of working towards a just and prosperous society. 4) Regional company engaged in the field according to household affairs under the Laws governing local government subjects. 5) Branches of production which are important for the region and to lord lives of many people in the area, the capital is entirely separated regional assets. d. Other Legal Revenues Other types of PAD (Revenue) are constituted under UU No. 33 of 2004. Other legal revenues are revenues gained from outside taxes, retribution, and income, which have been described above. Other legal revenues include: 1) The sale of regional assets that are not separated by cash or installment / mortgage, current account. 19
2) Interest income. 3) Receipt of compensation claims area. 4) Receipt of commissions. 5) Discounts or other forms achieved as a result of sales or procurement of goods and services by a region. 6) Revenue gains from the differences in the exchange rate against foreign currencies. 3. General Allocation Funds (DAU) According to the UU No.33 of 2004, the General Allocation Funds are sourced from the State Revenues and Expenditure Budget (APBN) to be allocated for local government in balancing the financial capacities among regions and to fulfill local government needs in terms of decentralization. According to Aziz (2014), General Allocation Fund (DAU) is a fund that is derived from the receipt of State Budget (budget) allocated to the region in the form of a block grant utilization is left entirely to the area. General Allocation Fund (DAU) is "Block Grant" which means that its use be submitted to the area in accordance with the priorities and needs of the region to improve services to the community in the implementation of regional autonomy. (http://abdoelazys.blogspot.com) General Allocation of Fund (DAU) for a new autonomous region allocated after the formation of legislation legalized. Counting DAU for new autonomous regions performed as data is available, the calculation is done by 20
dividing the DAU porposional with the parent. This calculation uses the data of population, land area, and personnel expenses, Djalil (2014: 143). Scale of national general allocation based on the mandate of UU No. 33 of 2004 set at least 26% of income in the country (PDN). Income in the country (PDN) is the net revenue derived from the tax and non-tax revenues after deducting shared out to the area (DBH). Proportion for provincial DAU is set at 10% and for the district / city is set 90% of the amount DAU nationally. In UU No.32 of 2004 mentions that for the implementation of the local government authority, the central government will transfer the Balanced Budget consisting of the General Allocation Funds (DAU), Special Allocation Funds (DAK), and Tax Share (DBH) consisting of taxes and income from natural resources. Besides the Balanced Budget (DAU, DAK.etc), Local Governments have their own sources of funding in the form of Original Local Government Revenues (PAD) and Local Government Financing. According to the UU No.33 of 2004 about Central Balanced Budget and local government stated that DAU in a Region (Provincial, District and City) is determined by using a fiscal gap approach, which is indicated by local needs and the potential of a region (Natural and Human Resources). The General Allocation Funds (DAU) are used to cover the fiscal gap. Fiscal gap happened when the Local Government Expenditures exceed the Original Local Government Revenues (PAD). 21
4. Special Allocation Fund (DAK) According to Djalil (2014: 152) Spesial Allocation Fund (DAK) is intended to assist specific activities in certain areas which is a regional affairs and in accordance with national priorities, specifically to fund infrastructure and basic public services that have not reached a certain standard or to accelerate development areas. Based on UU No. 33 of 2004, the Special Allocation Fund is a fund of the state budget allocated to certain areas with the purpose to help fund special activities of regional affairs and in accordance with national priorities. In www.depkeu.djpk.go.id website DAK policy aims: 1) Priority areas to assist with the financial capacity below the national average, in order to fund activities rovision of physical infrastructure as basic public services which have a regional affairs. 2) Supporting the accelerated development of infrastructure in coastal areas and small islands, border areas with other countries, backward / remote, areas prone to flooding / landslides, as well as including the category of food security and tourism area. 3) Encouraging productivity improvements and expansion of employment opportunities, especially in rural economic diversification, through specific activities in agriculture, marine and fisheries, as well as infrastructure. 22
4) Improving access of the poor to basic services and basic infrastructure through specific activities in the field of education, health, and infrastructure. 5) Maintain and improve the quality of life, and prevent environmental damage, and reduce disaster risk through specific activities in the field of environment, accelerate the provision and increase the coverage and reliability of basic infrastructure services in a single integrated system through specific activities in the field of infrastructure. 6) Support the provision of infrastructure in the affected area expansion districts, cities, and provinces through specific activities in the field of governance infrastructure. 7) Improve the integration and synchronization of activities funded from DAK with activities funded from the budget of the Ministry / Agency and activities funded from the budget. 8) Shifting gradual deconcentration and assistance funds are used to fund activities that have become regional affairs to DAK. Funds were diverted from the budget of Ministry of Public Works, the Ministry of National Education and the Ministry of Health. Utilization DAK investment activities directed at the development, procurement, improvement, and repair of physical infrastructure with long economic life, including the provision of supporting infrastructure. With the DAK 23
allocation is expected to affect the allocation of capital expenditures, as DAK tend to increase the fixed assets owned by the government to improve public services. B. Previous Research 1. The Influence of Original Local Government Revenue (PAD) to the Local Government Expenditure The influence Study on the influence of Original Local Government Revenue (PAD) in Local Government Expenditure has been done. Rivai (2013) showed the Original Local Government Revenue (PAD) influence an increasing number of Local Government Expenditure (BD) in Gorontalo province. Mulyadi et al (2010) the result showed Original Local Government Revenue influence significant to Local Government Expenditure (BD) in Bengkulu province. Djalil (2014: 286) argues with this requires the Original Local Government Revenue (PAD) to optimize the resources area in order to increase revenue, especially revenue and local tax levies. This indicates a strong indication, that if the PAD an area increases, the region's ability to perform Local Government Expenditure (BD) will also experience an increase. 24
2. The Influence of General Allocation Fund (DAU) to the Local Government Expenditure According to Adam,et al (2013) the General Allocation Fund (DAU) shows influence on direct expenditure allocation in Southeast Sulawesi. And Mulyadi et al (2010) the result showed General Allocation Fund (DAU) influence significant to the Local Government Expenditure in Bengkulu province. Rinzani et al (2011) the result showed General Allocation Fund influence to the Local Government Expenditure in South Kalimantan. Djalil (2014: 145) suggests the lower the life expectancy index, education index, and a decent standard of living index, the declining DAU obtained an area. Given the current fiscal needs to perform a public service in local government getting bigger, then the local government should optimize local revenue sources as embodiments of fiscal independence. Because if the General Allocation Fund (DAU) has decreased, it can cause a decrease in Local Government Expenditure (BD). This indicates that the local government expenditure behavior primarily of Local Government Expenditure (BD) influenced by the DAU. 3. The Influence of Special Allocation Fund (DAK) to the Local Government Expenditure Research conducted by Rivai (2013) showed that the Special Allocation Fund (DAK) influence an increasing number of Local 25
Governemnt Expenditure (BD) in Gorontalo province. And according to Rizani et al (2013), the result showed Special Allocation Fund significantly influence to the Local Government Expenditure on districts/cities in South Kalimantan. And according to Siregar (2013) the result showed Special Allocation Fund influence significantly on the Local Government Expenditure (BD) in Jambi Province. Fund balance is the embodiment of a financial relationship between central and local government. One of the fund balance is the Special Allocation Fund, DAK is sourced from the state budget funds allocated to local governments to finance specific activities is a matter of local and national priorities. DAK goal to reduce the burden of the cost of specific activities that must be borne by the local government. Utilization DAK investment activities directed to the development, procurement, improvement, improvement of physical infrastructure of public services with long economic lives. With the use of DAK should be directed to these activities are expected to improve public service realized in Local Government Expenditure (BD). This indicates that the local government expenditure behavior primarily of Local Government Expenditure (BD) influenced by the DAK. 26
Table 2.1 Previous Research Table Author No. (Year) 1 Adam, Umar & Sosilo (2013) 2 Sorongan (2013) Thesis Title Variables Conclusions Influence of Original Local Government Revenue (PAD) and General Allocation Fund (DAU) on Local Government Expenditure in districts/cities of Southeast Sulawesi The influence of General Allocation Funds (DAU) and Original Local Government Revenues (PAD) On Local government expenditure Budget in South Minahasa 1. General Allocation Funds (DAU) 2. Original Local Government Revenues (PAD) 3. Local government expenditure Budget 1. General Allocation Funds (DAU) 2. Original Local Government Revenues (PAD) 3. Local government expenditure Budget The influence Original Local Government does not have influence on Direct expenditure Allocation in Southeast Sulawesi. It is defined that Original Local Government Revenue (PAD) has not contributed on Direct Expenditure in Southeast Sulawesi. And General Allocation Fund (DAU) shows influence on direct expenditure allocation in Southeast Sulawesi. The results show that the relationship of the DAU and Original Local Government Revenue has no influence to the local government expenditures. Besides Local Taxes and Levies asa major source of revenue corresponding analysis of the relationship of the Regional Tax on Expenditure PAD is very strong shows local taxes provide relationship to the PAD inregional local 27
No. Author (Year) Thesis Title Variables Conclusions 3 Rivai (2013) The influence of General Allocation Funds (DAU), Special Allocation Fund (DAK) and Original Local Government Revenues (PAD) On Local government expenditure Budget in Gorontalo Province 1. General Allocation Funds (DAU) 2. Special Allocation Fund (DAK) 3. Original Local Government Revenues (PAD) 4. Local government expenditure Budget local government expenditure activities Original Local Government Revenue (PAD), General Allocation Fund (DAU) and Special Allocation Fund (DAK) influence an increasing number of Local Governemnt Expenditure in Gorontalo province. Simultaneously Original Local Government Revenue, General Allocation Fund and Special Allocation Fund had a positive influence toward the Capital Expenditure Allocation. 4 Mulyadi, Alfansi and Benardin (2010) The analysis of effect General allocation Fund and Original Local Government Revenue to Local Government Expenditure in Bengkulu 1. General Allocation Fund 2. Original Local Government Revenue 3. Local Governemnt Expenditure The General Allocation Fund and Original Local Government Revenue influce signicicant to Local Government Expenditure in Bengkulu. 5 Rizani, Fatiah, Rasidah, Rawintan, and Utami (2011) The influence of Economic Growth, Original Local Government Revenue, General allocation Fund, Special allocation Fund in South 1. Economic Growth 2. Original Local Government Revenue 3. General Allocation Fund Partialy Economic Growth, Original Local Government Revenue, General Allocation Fund, and Special Allocation Fund significantly 28
No. Author (Year) Thesis Title Variables Conclusions Kalimantan Province 4. Special Allocation Fund 5. Local Government Expenditure influence to Local Government Expenditure on districts/cities in South Kalimantan Province 6 Siregar (2103) The influence of Original Local Government Revenue, General Allocation Fund and Special Allocation Fund to Local Government Expenditure in Jambi province 1. Original Local Government Revenue 2. General Allocation Fund 3. Special Allocation Fund 4. Local Government Expenditure Original Local Governement Revenue, General Allocation Fund and Special Allocation Fund significantly and simultaneously influence on the Local Government Expenditure in Jambi Province. And partially the variable of Original Local Government revenue, general allocation fund, special allocation fund influence Significantly to local governemnt expenditure. C. Theoritical Framework The Original Local Government Revenues (PAD) is local revenues consisting of the local taxes, Retribution, earnings from Regional Owned Enterprises (BUMD) and other legitimate incomes. In this research try to analyze the effect of The Original Local Government Revenues (PAD) to local government expenditure (BD) in South Sumatera province, whether the same to 29
the results of previous studies which can conclude that the larger PAD increases the local government expenditure activities. The General Allocation Funds (DAU) is the funding coming from the state budget (APBN) allocated for the purpose of inter-regional fiscal capacity equalization to finance the Expenditures in the context of decentralization. In this research try to analyze the influence of The General Allocation Funds (DAU) to local government expenditure (BD) in South Sumatera province whether the same to previous research which stated that DAU implicates the magnitude of local government expenditures. Specific Allocation Fund (DAK) is intended to help finance specific activities in certain areas which is a regional affairs and in accordance with national priorities, specifically to fund basic services, facilities and infrastructures of society who have not reached a certain standard to accelerate regional development. In this research try to analyze the influence of the Specific Allocation Fund (DAK) to local government expenditure (BD) in South Sumatera province whether the same to previous research which stated that DAK implicates the magnitude of local government expenditures. In this research also combine three independent variable The Original Local Government Revenues (PAD), The General Allocation Funds (DAU) ) and The Specific Allocation Fund (DAK) analyze simultaneously effect to the Local Government Expenditure (BD) whether the effect the both independent variable to local government expenditure same at the other districts/cities at the previous research. 30