Analysis Of The Effect Of Regional Original Revenue (PAD), Balancing Funds And The Remaining Budget Financing On The Allocation Of Capital Expenditures Case Study In Regencies/Cities In North Sumatra Province For The 2009-2013 Period

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Analysis of the Effect of Regional Original Revenue (PAD), Balancing Funds, and the Remaining Budget Financing on the Allocation of Capital Expenditures in the Regency/City of North Sumatra Province (Period 2009-2013)

Introduction

The allocation of capital expenditures in regencies/cities in North Sumatra Province is a crucial aspect of regional development. The availability of funds for infrastructure development and public services can significantly impact the welfare of the community and regional competitiveness. This study aims to analyze the effect of Regional Original Revenue (PAD), Balancing Funds, and the remaining budget financing on the allocation of capital expenditure in districts/cities in North Sumatra Province in the period 2009 to 2013.

Methodology

This study employed a causal research design, which is a replication of previous research. The sample taken came from 33 districts/cities in North Sumatra Province, with 22 regencies/cities selected using the Purposive Sampling method. The data used in this study was obtained from the Regional Revenue and Expenditure Budget Report (APBD) taken from the website of the Directorate General of Finance, the Ministry of Finance of the Republic of Indonesia.

Statistical analysis was carried out using multiple linear regression to test classic assumptions, which include testing normality, multicollinearity, heteroscedasticity, and autocorrelation. Furthermore, the coefficient of determination and hypothesis testing using the T test and test F with the help of the SPSS program.

Results

The results of this study showed that partially, PAD had a significant positive influence on capital expenditure, while the balance fund had a significant negative effect. On the other hand, the General Allocation Fund (DAU) has a significant positive influence, but the Special Allocation Fund (DAK) has no significant effect on capital expenditure. Meanwhile, the remaining budget financing shows a significant positive effect on capital expenditure.

Simultaneously, PAD, Balancing Funds, DAU, DAK, and the remaining budget financing has a significant influence on the allocation of capital expenditure in regencies/cities in North Sumatra Province in the period studied. The Adjusted R Square value of 0.871 shows that 87.1% of the dependent variable (capital expenditure) can be explained by independent variables, namely PAD, Balancing Funds, DAU, DAK, and the remaining budget financing. While the remaining 12.9% can be explained by other variables that are not included in this study.

In-Depth Analysis and Additional Explanation

The results of this study indicate the importance of the role of PAD in the allocation of capital expenditure. With the high PAD, the region has the freedom to develop better infrastructure and public services. This is very important because optimal capital expenditure can improve regional competitiveness and improve the welfare of the community.

Conversely, the negative influence of the Balancing Fund shows that regional dependence on these funds can limit regional fiscal independence. When the region relies on transfer funds from the center, this can result in lack of innovation and initiative in regional financial management.

The significant positive influence of DAU indicates that the allocation of these funds can be used well to support regional development needs. While DAK which does not have a significant effect can be caused by the lack of knowledge or regional capacity in planning and implementing projects funded by DAK.

Conclusion

Therefore, it is important for local governments to improve PAD management, as well as increasing the capacity to utilize the balance funds effectively. In addition, guidance by the central government of the regions in terms of planning and implementing development projects also needs to be increased to ensure that the funds allocated can have a maximum impact on the development of infrastructure and community welfare.

By utilizing the results of this study, it is hoped that stakeholders, both from local and central governments, can better understand the factors that influence the allocation of capital expenditure and take strategic steps in regional finance management to increase regional development in a sustainable manner.

Recommendations

Based on the findings of this study, the following recommendations are made:

  1. Improvement of PAD management: Local governments should improve PAD management to increase the region's fiscal independence and ability to develop better infrastructure and public services.
  2. Capacity building: Local governments should increase their capacity to utilize balance funds effectively, including improving knowledge and skills in planning and implementing projects funded by these funds.
  3. Guidance from central government: The central government should provide guidance to local governments in terms of planning and implementing development projects to ensure that the funds allocated can have a maximum impact on the development of infrastructure and community welfare.

Limitations of the Study

This study has several limitations, including:

  1. Sample size: The sample size of 22 regencies/cities may not be representative of all regencies/cities in North Sumatra Province.
  2. Data availability: The data used in this study was obtained from the Regional Revenue and Expenditure Budget Report (APBD), which may not be comprehensive or accurate.
  3. Methodology: The use of multiple linear regression may not be the most appropriate methodology for this study, given the complexity of the relationships between the variables.

Future Research Directions

Future research should aim to:

  1. Increase sample size: Increase the sample size to include more regencies/cities in North Sumatra Province.
  2. Improve data quality: Improve the quality of the data used in this study, including collecting more comprehensive and accurate data.
  3. Use more advanced methodologies: Use more advanced methodologies, such as structural equation modeling, to analyze the relationships between the variables.

By addressing these limitations and future research directions, this study can provide a more comprehensive understanding of the factors that influence the allocation of capital expenditure in regencies/cities in North Sumatra Province.
Frequently Asked Questions (FAQs) about the Analysis of the Effect of Regional Original Revenue (PAD), Balancing Funds, and the Remaining Budget Financing on the Allocation of Capital Expenditures in the Regency/City of North Sumatra Province (Period 2009-2013)

Q: What is the main objective of this study?

A: The main objective of this study is to analyze the effect of Regional Original Revenue (PAD), Balancing Funds, and the remaining budget financing on the allocation of capital expenditure in districts/cities in North Sumatra Province in the period 2009 to 2013.

Q: What methodology was used in this study?

A: This study employed a causal research design, which is a replication of previous research. The sample taken came from 33 districts/cities in North Sumatra Province, with 22 regencies/cities selected using the Purposive Sampling method. The data used in this study was obtained from the Regional Revenue and Expenditure Budget Report (APBD) taken from the website of the Directorate General of Finance, the Ministry of Finance of the Republic of Indonesia.

Q: What were the results of this study?

A: The results of this study showed that partially, PAD had a significant positive influence on capital expenditure, while the balance fund had a significant negative effect. On the other hand, the General Allocation Fund (DAU) has a significant positive influence, but the Special Allocation Fund (DAK) has no significant effect on capital expenditure. Meanwhile, the remaining budget financing shows a significant positive effect on capital expenditure.

Q: What does the Adjusted R Square value of 0.871 mean?

A: The Adjusted R Square value of 0.871 means that 87.1% of the dependent variable (capital expenditure) can be explained by independent variables, namely PAD, Balancing Funds, DAU, DAK, and the remaining budget financing. While the remaining 12.9% can be explained by other variables that are not included in this study.

Q: What are the implications of this study?

A: The implications of this study are that local governments should improve PAD management, as well as increasing the capacity to utilize the balance funds effectively. In addition, guidance by the central government of the regions in terms of planning and implementing development projects also needs to be increased to ensure that the funds allocated can have a maximum impact on the development of infrastructure and community welfare.

Q: What are the limitations of this study?

A: This study has several limitations, including:

  1. Sample size: The sample size of 22 regencies/cities may not be representative of all regencies/cities in North Sumatra Province.
  2. Data availability: The data used in this study was obtained from the Regional Revenue and Expenditure Budget Report (APBD), which may not be comprehensive or accurate.
  3. Methodology: The use of multiple linear regression may not be the most appropriate methodology for this study, given the complexity of the relationships between the variables.

Q: What are the future research directions?

A: Future research should aim to:

  1. Increase sample size: Increase the sample size to include more regencies/cities in North Sumatra Province.
  2. Improve data quality: Improve the quality of the data used in this study, including collecting more comprehensive and accurate data.
  3. Use more advanced methodologies: Use more advanced methodologies, such as structural equation modeling, to analyze the relationships between the variables.

Q: What are the practical implications of this study?

A: The practical implications of this study are that local governments should prioritize the improvement of PAD management and the utilization of balance funds effectively. Additionally, the central government should provide guidance to local governments in terms of planning and implementing development projects to ensure that the funds allocated can have a maximum impact on the development of infrastructure and community welfare.

Q: What are the policy implications of this study?

A: The policy implications of this study are that the government should consider revising the current budgeting system to prioritize the allocation of funds for capital expenditure. Additionally, the government should provide more support and guidance to local governments in terms of planning and implementing development projects.

Q: What are the future research directions in terms of policy implications?

A: Future research should aim to:

  1. Develop a more comprehensive budgeting system: Develop a more comprehensive budgeting system that prioritizes the allocation of funds for capital expenditure.
  2. Provide more support and guidance to local governments: Provide more support and guidance to local governments in terms of planning and implementing development projects.
  3. Monitor and evaluate the effectiveness of the budgeting system: Monitor and evaluate the effectiveness of the budgeting system to ensure that it is meeting its intended goals.