Assessing Of Local Government Financial Performance with Self-Reliance Ratio, Fiscal Decentralization Degree Ratio, PAD Effectiveness Ratio, Regional Financial Efficiency Ratio, Direct and Indirect Expenditure Ratio & Growth Ratio

Zebua FP, Febrianti J, Nur SA and Muda I

Published on: 2024-02-26

Abstract

Regional financial management has changed since Law No.9 of 2015 which stipulates regional autonomy. Autonomous regions have the authority in accordance with applicable laws, to regulate and manage their communities in accordance with the wishes of the community. Another change is the issuance of Law No.1 of 2022 concerning Financial Relations between Central and Regional Governments (HKPD). Financial ratio analysis on local government financial statements is one way to assess the performance of local governments in managing their local finances. The results of this analysis are used as a benchmark to assess independence, efficiency, effectiveness, harmony, and growth. The purpose of this study was to determine the level of disclosure of financial statements of the local government of Gunung Sitoli city in North Sumatra from 2015 to 2022. The data used is secondary data in the form of data and information on the financial statements of the local government of Gunung Sitoli city in North Sumatra. This study uses financial ratios including effectiveness, efficiency, revenue growth and expenditure growth ratios. The results showed that the value of the financial ratios of the city government of Gunung Sitoli North Sumatra was still low. The Gunung Sitoli City Government is expected to optimize resource management and expand sectors that can increase Regional Original Revenue (PAD). By doing so, Gunung Sitoli City's revenue dependence on the central government can be further reduced. The Gunung Sitoli City Government should use a more proportional budget, by reducing the operational budget and increasing the capital expenditure budget.