Intergovernmental Transfers, Regional Revenue and Local Government Expenditure Impact on Financial Performance

This study examines the impact of regional revenue, intergovernmental revenue, regional expenditure, and the Audit Board's opinion on the financial performance of local governments in underdeveloped regions of Asia in 2017. These variables are part of the budget realization report and financial performance evaluation, with opinions reflecting an assessment of the financial statement's reasonableness. The study uses a sample of 135 district governments classified as underdeveloped. Employing multiple linear regression for statistical analysis, the study finds that regional expenditure positively affects the financial performance of local governments. However, local revenue, intergovernmental revenue, and opinion show no significant impact on financial performance. The findings suggest that increased regional expenditure could improve financial outcomes for disadvantaged areas by enhancing infrastructure, accessibility, and human resource capabilities. Investing in essential services and facilities may foster these regions' economic development and financial resilience. Overall, the study highlights the critical role of government spending in addressing the needs of underdeveloped districts, even when other revenue sources and audit assessments do not directly influence financial performance.