Financial Performance Analysis of Local Governments in North Sumatra based-on Independence Ratio, Regional Original Income Effectiveness, and Efficiency
Keywords:
Regional Financial Performance, PAD, General Allocation Fund (DAU), Special Allocation Fund (DAK), Independence Ratio, Effectiveness, Efficiency.Abstract
This study aims to analyze the financial performance of district/city governments in North Sumatra Province using the independence ratio approach, the effectiveness of Regional Original Revenue (PAD), and the efficiency of regional financial management. The study used a descriptive method with secondary data from the 2022–2023 fiscal year obtained from the official website of the North Sumatra Provincial Government. The analysis shows that the regional independence ratio is very low, averaging 5.51%, reflecting a pattern of instructive relationships and high dependence on central transfer funds. However, the PAD effectiveness ratio reached an average of 107.95%, which is considered very effective, while the PAD efficiency ratio averaged 9.2%, indicating highly efficient financial management. These findings confirm that despite the relatively good effectiveness and efficiency of PAD management, regional fiscal independence remains a major challenge in realizing strong regional autonomy. This study recommends optimizing PAD potential and strengthening regional fiscal capacity to reduce dependence on the central government.
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