Public Budget Quality and Rural Development Performance: The Moderating Role of Fiscal Capacity in Village and Sub-District Governments of Deli Serdang Regency
Keywords:
Public Budget Quality, Fiscal Capacity, Rural Development Performance, Public Value, Fiscal Federalism, SEM-PLS.Abstract
Public budget quality and fiscal capacity are important factors in supporting effective rural development. However, large budget allocations and high budget realization rates do not necessarily translate into optimal development outcomes and tangible benefits for communities. This study aims to analyze the effect of Public Budget Quality on Rural Development Performance, examine the direct effect of Fiscal Capacity on rural development performance, and evaluate the moderating role of fiscal capacity in the relationship between public budget quality and rural development performance. The study is situated within the context of village and subdistrict governance in Deli Serdang Regency, North Sumatra, Indonesia, and integrates Public Value Theory and Fiscal Federalism Theory as its conceptual foundations. This research adopts an explanatory quantitative approach with a cross-sectional survey design. Primary data are intended to be collected through a five-point Likert-scale questionnaire administered to local government officials involved in development planning, budgeting, implementation, and evaluation. Data analysis is designed to employ Structural Equation Modeling–Partial Least Squares (SEM-PLS) using SmartPLS 4 to examine direct relationships and the interaction effect of the moderating variable. The contextual analysis highlights the importance of evaluating budget quality by considering the alignment between development priorities, resource allocation, accountability, program outputs, and public benefits. This study is expected to contribute conceptually to public-sector accounting research and provide a foundation for formulating budgeting policies that are more effective, transparent, accountable, and responsive to community needs. Empirical conclusions regarding the proposed hypotheses and the moderating effect of fiscal capacity require complete statistical estimation results.
References
Azam, M., & Bouckaert, G. (2025). How does performance-based budgeting reform affect the extent of performance information use? An empirical study of Indonesia. International Review of Administrative Sciences, 91(2). https://doi.org/10.1177/00208523251313921
Firzada, A. F., Akbar, B., Ilham, M., & Kawuryan, M. W. (2024). Impact analysis of the influence of institutional capacity and the use of performance-based budgeting on original regional revenue receipts in the Tangerang Regency area. PERSPEKTIF, 13(2), 552–559. https://doi.org/10.31289/perspektif.v13i2.11452
Heriwibowo, D., Juanda, B., Hadi, S., & Supono, S. (2016). The measurement of local government spending quality with indicators of sustainable local development in Indonesia. Journal of Economics and Sustainable Development, 7(4). https://iiste.org/Journals/index.php/JEDS/article/view/28997
Ho, A. T.-K. (2011). PBB in American local governments: It's more than a management tool. Public Administration Review, 71(3), 391–401. https://doi.org/10.1111/j.1540-6210.2011.02359.x
Kurniawan, Y. R., Wiguna, G. E., & Khoirunurrofik. (2021). Reformulasi Dana Desa untuk mewujudkan transfer berbasis kinerja: Momentum peningkatan peran di masa pandemi. Indonesian Treasury Review: Jurnal Perbendaharaan, Keuangan Negara dan Kebijakan Publik, 6(1). https://doi.org/10.33105/itrev.v6i1.278
Mauro, S. G. (2021). Budgeting and performance management in the public sector. Routledge.
Masduki, U., Rindayati, W., & Mulatsih, S. (2021). Spending quality of less development region and the impact on development performance: Evidence from less developed regions. Jurnal Ekonomi dan Pembangunan, 29(2), 167–182. https://doi.org/10.14203/JEP.29.2.2021.167-182
Rakhman, F., & Saudagaran, S. (2023). The effect of political budget cycle on local governments’ financial statements in a young democracy. Public Money & Management, 43(5), 512–520. https://doi.org/10.1080/09540962.2023.2173369
Robinson, M., & Brumby, J. (2005). Does performance budgeting work? An analytical review of the empirical literature (IMF Working Paper No. 05/210). International Monetary Fund. https://doi.org/10.5089/9781451862294.001
Situmorang, D. D. P., Erlina, Sirojuzilam, & Rujiman. (2023). Assessing the impact of performance-based budgeting on regional development and environmental outcomes mediated by government agency accountability in Dairi District. International Journal of Sustainable Development and Planning. https://doi.org/10.18280/ijsdp.180933
Wiguna, G. E., & Khoirunurrofik. (2021). Political budget cycle patterns and the role of coalition parties in shaping Indonesian local government spending. Asia-Pacific Journal of Regional Science, 5(1), 41–64. https://doi.org/10.1007/s41685-020-00186-0
