THE INFLUENCE OF LOCAL GOVERNMENT FINANCIAL CHARACTERISTICS AND BPK AUDIT RESULTS ON GOVERNMENT FINANCIAL PERFORMANCE

Abstract

Transfer revenues dominate the revenue budget in 38 regencies / cities in East Java Province . In 2021, the degree of fiscal autonomy of regencies / cities in East Java on average only reached 19.21%, indicating low local government independence . This study aims to analyze the effect of local government financial characteristics and BPK audit results on the financial performance of Regency/City local governments in East Java using quantitative descriptive methods . Local government financial characteristics utilize the proxies of the size of the local government , the regional prosperity , and the regional dependence ; and the results of the BPK audit utilizes the proxies of audit opinion and audit findings . This study applies agency theory and stewardship theory . The population includes 38 local governments in East Java in 2019-2021, from which the samples of 114 regencies / cities in East Java are selected through purposive sampling, and analyzed by the ordinal logistic regression processed by SPSS software . The results of this study exhibit that the regional prosperity , regional dependence , and audit findings affect financial performance while local government size and audit opinion​ do not affect the financial performance of regency / city governments in East Java.