Performance-Based Budgeting and Regional Financial Performance: The Role of Productive Expenditure and Accountability

Rischa Inung Fauziah; Fandi Galang Wicaksana; Desiana Rachmawati; Richatul Jannah; Kurniana Sandra Lungit

doi:10.32939/dhb.v7i1.5870

Authors

Rischa Inung Fauziah Universitas Tidar
Fandi Galang Wicaksana Universitas Tidar
Desiana Rachmawati Universitas Tidar
Richatul Jannah Universitas Negeri Semarang
Kurniana Sandra Lungit Universitas Tidar

DOI:

https://doi.org/10.32939/dhb.v7i1.5870

Keywords:

Performance-Based Budgeting, Regional Financial Performance, Productive Expenditure, Accountability, Local Government

Abstract

Purpose: This study examines the relationship between Performance-Based Budgeting (PBB) and regional financial performance, with a particular focus on the role of productive expenditure and accountability.

Design/Methodology/Approach: This research adopts a quantitative approach using panel data from 33 local governments in Central Java Province over the period 2022–2024, resulting in 99 observations. Productive expenditure is used as a proxy for outcome-oriented budget allocation, while accountability is measured using the Government Institution Performance Accountability System (SAKIP) score. Data were analyzed using panel regression techniques.

Findings: The results reveal that productive expenditure has a significant negative effect on regional financial performance, indicating that increased allocation toward capital or outcome-based spending does not necessarily improve financial outcomes due to inefficiencies in budget execution, particularly in procurement processes. In contrast, accountability, as proxied by SAKIP scores, does not show a significant effect, suggesting that accountability practices remain largely procedural rather than performance-driven. Additionally, government size as a control variable has a significant positive impact on financial performance.

Research Implications: These findings highlight the need for local governments to strengthen managerial capacity, improve budget execution mechanisms, and enhance substantive accountability practices to ensure that performance-based budgeting achieves its intended outcomes.

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