p-ISSN: 2723-6609 e-ISSN: 2745-5254

Vol. 5, No. 12 Desember 2024 http://jist.publikasiindonesia.id/

Jurnal Indonesia Sosial Teknologi, Vol. 5, No. 12, Desember 2024 5964

The Influence of Local Government Integrity on Local

Government Budget and its Implications for Development

Indra Jaya

Institut Pertanian Bogor, Indonesia

Email:

indra56jaya@apps.ipb.ac.id

*Correspondence

ABSTRACT

Keywords: APBD;

Integrity; Local

Government; GRDP;

Regional Development

This research aims to analyze the influence of local government

integrity on APBD management and its implications for the

quality of regional development in Indonesia. Secondary data

from BPS, SPI, and APBD records for cities and regencies in

Indonesia in 2022 were used. Data were analyzed using the

Structural Equation Modeling-Partial Least Squares (SEM-PLS)

method. This method integrates measurement models to validate

indicators and structural models to assess relationships between

latent variables. Key evaluation criteria, including reliability,

validity, and hypothesis testing, were employed to ensure

robustness. The results indicate that higher local government

integrity improves APBD management, albeit with a relatively

modest effect. Integrity plays a crucial role in preventing

corruption and enhancing the sustainability of regional

development, highlighting its importance in public financial

management. These findings underscore the necessity of

promoting high-integrity practices in local governance to achieve

sustainable development goals.

Introduction

The concept of regional autonomy encompasses the prerogative, responsibility,

and capacity of autonomous regions to regulate and manage community interests in

accordance with their own initiatives, grounded in community aspirations and within the

confines of statutory regulations (Widjaja, 2019). Quoted from Law Number 23 of 2014,

the implementation of regional government is directed at accelerating the realization of

community welfare through improved services, empowerment, and community

participation, as well as increasing regional competitiveness by taking into account the

principles of democracy, equity, justice, and the distinctiveness of a region within the

system of the Unitary State of the Republic of Indonesia. The existence of regional

autonomy encourages local governments to be independent in political and financial

aspects. This delegation of responsibility and authority is expected to increase the

capacity of local governments in carrying out development in their regions so that they

are able to compete with other regions in the context of regional development

(Setianingsih, 2015).

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The concept of regional development entails the strategic allocation of available

resources to enhance the overall well-being of a community. A significant aspect of this

endeavor pertains to the augmentation of income, a critical component of the financial

well-being of the community. The efficacy of regional development initiatives can be

gauged by the Gross Regional Domestic Product (GRDP) data of each respective region.

The GRDP signifies the total value of goods and services generated within a specific

region by all economic entities, representing the sum of the value of final (net) goods and

services produced by these economic units. It serves as an indicator of economic growth

trends on an annual basis, providing insights into the region's economic resources and

capabilities (BPS, 2023).

The Regional Budget (APBD) plays a pivotal role in measuring regional

development based on GRDP, serving as the primary instrument in planning and

implementing development programs. As from Sukirno (2006), explains, the theory of

government spending posits that government expenditure on various development

activities will increase aggregate spending and stimulate economic activity within the

country. When considered in the context of local government spending in the execution

of APBD expenditures, which is a reflection of GRDP, it can be inferred that an increase

in local government spending will have a corresponding increase in the impact on the

regional economy (Darise, 2006).

As delineated above, the APBD emerges as a pivotal instrument in the pursuit of

regional development in Indonesia. The financial resources allocated within the APBD

are allocated toward the financing of infrastructure projects, public services, and other

developmental programs that are foundational to economic growth and community

welfare. The utilization of the APBD is to be supported by documentation in the form of

a budget realization report, balance sheet, cash flow statement, and notes to the financial

statements, in accordance with the provisions stipulated in Government Regulation

Number 8 of 2006.The government's internal control system is entrusted with the

responsibility of overseeing the accountability of state finances, inclusive of the

utilization of the APBD (Ayem & Kusumasari, 2020). The effectiveness of the

government's internal control system is influenced by various factors, both internal and

external to the APBD. Internal factors include the size of the APBD budget, while

external factors may include government complexity, size, and economic growth.

Good regional financial management is a concrete step in realizing government

administration with the principles of good governance (Muhyarsyah, 2008). Good

governance can be said to be effective if it has good coordination and integrity,

professionalism, and high work ethic and morals in carrying out its functions through

formal and informal institutions (Nazsir, 2003). Therefore, it is important to ensure that

the APBD is managed properly, efficiently, and transparently, so as to achieve sustainable

development goals with a commitment to government integrity.

Integrity as a form of self unity that is consistent with the commitments that have

been determined in the regulations (Ardiani, 2019). Integrity in government agencies has

a significant impact on APBD management. The Corruption Eradication Commission

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(KPK) annually conducts an Integrity Assessment Survey (SPI) to map the risk of

corruption and the progress of corruption eradication efforts carried out by Ministries /

Institutions / Local Governments (M / I / RG). This survey is expected to be the basis for

KPK to develop recommendations for improvement as an effort to prevent corruption.

Government agencies with a high level of integrity will have regional financial

management apparatus that avoids irregularities or misuse of regional finances managed

(Suryani, 2019). On the other hand, agencies with a low level of integrity will be more

vulnerable to corrupt practices and actions that harm regional development. In the context

of government agencies, integrity is very important because the government is

responsible for the public interest and the management of public resources. Strong

integrity in government agencies ensures that decisions and actions taken are based on

the interests of society as a whole, not the interests of certain individuals or groups.

In practice, integrity is closely related to ethics because with good ethics, high

integrity will be created. The government in maintaining its integrity needs to pay

attention to the elements and functions of ethical infrastructure. According to the

Organization for Economic Cooperation and Development (OECD) (2000), there are

three points that become ethical infrastructure, namely guidance, management, and

control. Guidance is provided by a strong commitment from the leadership, strongly held

values such as a code of ethics, and through regular education and training to increase

public employees' awareness and understanding of the importance of integrity in carrying

out their duties. Management can be implemented through coordination by an existing

central management body, taking into account the conditions of public services, policies

and management practices. Controls are ensured by a legal framework that allows for

independent investigation and prosecution, accountability and control mechanisms that

are effective, transparent, and involve public participation and oversight.

The integrity of someone who adheres to anti-corruption principles should be

unwavering and will not be tempted by the temptation of bribes and gratuities. However,

sometimes there is an integrity dilemma condition that makes a person in the middle of

an indecision. If the integrity dilemma is not resolved immediately, the individual may be

caught in a corruption case (Aksi-informasi, 2023).

Corruption is a pervasive problem that many countries, including Indonesia, are

grappling with. The 2022 Corruption Perception Index (CPI) reveals that Indonesia is still

struggling to combat corruption, with a 7th-place ranking out of 11 Southeast Asian

countries and an 110th-place ranking out of 180 countries in the 2022 Corruption

Perception Survey (Transparency International, 2023). The dissemination of corruption

corruption propagates both horizontally and vertically within the governmental structure.

Horizontal corruption, defined as the spread of corruption among equal powers,

disseminates in nearly all representative institutions, including the executive, legislative,

and judicial branches. Conversely, vertical corruption, characterized as the propagation

of corruption from the highest power holders to the lowest level, is a phenomenon that

occurs within hierarchical structures.

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Corruption exerts a detrimental influence on various levels of society, including

the younger generation, politics, the nation's economy, and bureaucracy (Setiadi, 2018).

Within Indonesia, instances of corruption frequently manifest at the local government

level, encompassing local financial management. According to the "Overview of Audit

Results for Semester II of 2022," a report by the Supreme Audit Agency, the local

government sector recorded the highest number of findings, with a total of 1,818. Notably,

local governments identified 2,775 issues, leading to state losses amounting to Rp369.24

billion. This figure represented the most significant loss among various budget managers,

accounting for 69% of the total losses. In addition to the substantial losses, the findings

related to inefficiency, inefficiency, and ineffectiveness of local governments numbered

828, although the total value of these findings was not the largest at Rp38.43 billion..

Local financial management includes the management of local revenues and

expenditures, as well as the supervision of the use of public funds. If corrupt practices

such as bribery, nepotism, embezzlement, etc. are implemented in an economic project,

the projected economic growth of the project will not be achieved (Meier & Baldwin,

1957). The Corruption Eradication Commission (KPK) handled a total of 120 corruption

cases throughout 2022. Of the total cases, 100 of them were cases of corruption

committed in local government areas (outside the central government) (KPK, 2023).

Corruption cases involving local leaders and questionable practices in the use of APBD

have been a major highlight in the history of the Indonesian government. Quoted from

several news published by detik.com, some examples of APBD corruption cases by local

governments are described in Table 1.

Table 1. Examples of APBD corruption cases by local governments

No.

Name of convicted person

Position

Source

Raharjo Minulyo

District Head of

Purbalingga, Central

Java

Romadhon (2022)

Darmili

Regent of Simeulue,

Aceh

Detikcom (2019)

Ahmad Yantenglie

Katingan Regent,

Central Kalimantan

Saputra (2019a)

Herman Felani and Jornal Effendi

Actor and Head of

Legal Bureau of DKI

Jakarta Regional

Secretariat

Saputra (2019b)

Khairil Anwar Mahdi

Tourism Office of

East Lombok, NTB

Detik.com (2019)

The Indonesian government faces significant challenges in combating corruption

and enhancing local financial management. The implementation of measures to prevent

corruption, coupled with the augmentation of transparency in local financial management,

has the potential to address these issues. Policy reforms, stringent law enforcement, and

the active involvement of the public in local financial oversight can contribute to the

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establishment of a more transparent and efficient environment for public financial

management at the local level.

Based on the research background, this research was carried out with the following

objectives: Analyzing the effect of local government integrity level on APBD

management and its implications on the quality of regional development in Indonesia.

Analyzing the extent to which local government integrity can minimize the risk of

corruption and irregularities in the implementation of the APBD. Develop

recommendations that can be implemented by local governments and other stakeholders

to increase integrity in APBD management and improve regional development in

Indonesia.

Method

Data

In Indonesia, instances of corruption frequently manifest at the local government

level, encompassing local financial management.According to the "Overview of Audit

Results for Semester II of 2022," a report by the Supreme Audit Agency, the local

government sector recorded the highest number of findings, with a total of 1,818. Notably,

local governments identified 2,775 issues, leading to state losses amounting to Rp369.24

billion. This figure represented the most significant loss among various budget managers,

accounting for 69% of the total losses.In addition to the substantial losses, the findings

related to inefficiency, inefficiency, and ineffectiveness of local governments numbered

828, although the total value of these findings was not the largest at Rp38.43 billion.

Structural Equation Model - Partial Least Square (SEM-PLS)

The relationship or influence between variables can simply be measured using the

simple regression method. If the variables measured are more numerous and more

complex, a more capable model needs to be used to handle this. Structural Equation

Modeling (SEM) is a multivariate analysis that combines models between regression

analysis and factor analysis (Santoso, 2018). SEM is able to simultaneously estimate the

complex relationship between several independent variables (indicators) and dependent

variables (latent variables) (Hair et al., 2011, 2019). SEM has the ability to estimate the

relationship between variables that are multiple relationships with output in the form of a

measurement model (outer model) from a number of indicators and a structural model

(inner model) composed of a number of constructs (latent variables) (Anggita et al.,

2019). In its use, SEM requires several assumptions, including normal data distribution,

linearity, indirect measurement, multiple indicators, recursivity, interval data, high

accuracy, random and small residuals, uncorrelated error terms, uncorrelated residual

errors, complete multicollinearity, and a minimum sample size of 100 (Sarwono, 2010).

Data Analysis Procedure

1. To find out whether the integrity of local governments at the city / district level in

Indonesia affects the APBD which has implications for regional development, the

following data analysis procedures are carried out. Perform descriptive analysis on each

variable.

2. The subsequent step involves the design of a structural model (inner model) based on the

aforementioned hypothesis.

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3. The design of the measurement model, otherwise known as the outer model, is contingent

upon the nature of the indicator, whether it is reflective or formative.

4. The construction of a path diagram constitutes a sophisticated phase in the design process

of the inner and outer models.

5. The evaluation of the measurement model (also known as the "outer model") is essential

for ascertaining the validity and reliability of an indicator when utilized as a

measurement tool. The evaluation of the outer model is conducted through a meticulous

analysis of convergent validity and discriminant validity. This analysis involves the

comparison of the square root of the average variance extracted (AVE), composite

reliability, and Cronbach's alpha.

6. The structural model, also known as the inner model, is evaluated to ascertain the

relationship between latent variables in the model. This evaluation employs two criteria:

the coefficient of determination (

) and the predictive relevance (

7. The objective of hypothesis testing is to ascertain the effect between endogenous and

exogenous latent variables. In essence, this process involves determining the significance

of the observed relationship. The criteria employed for evaluating the statistical

significance of a hypothesis test include the t-statistic value and the p-value. Specifically,

if the t-statistic value exceeds 1.96 or if the p-value is less than 0.05, with α set at 5%,

then the effect is deemed to be significant.

8. Model interpretation.

Results and Discussion

Data Analysis Using SEM-PLS Method

1. Outer Model

Figure 1. Path diagram of outer model testing

a) Outer Loading

Table 2. Outer loading value of each indicator

No.

Indicator

Outer Loading

Description

APBD1

0,966

Valid

APBD2

0,988

Valid

APBD 3

0,733

Valid

PBRB1

0,954

Valid

PBRB2

0,849

Valid

PBRB3

0,853

Valid

PBRB4

0,909

Valid

PBRB5

0,963

Valid

PBRB6

0,782

Valid

SPI1

0,927

Valid

SPI2

0,988

Valid

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SPI3

0,934

Valid

Table 7 shows that the outer loading value of each indicator shows a value

>0.7. Therefore, all indicators can be included in the research and do not need to be

excluded from the research process.

b) Construct Validity and Reliability

Cronbach alpha

Table 3. Cronbach's alpha reliability value of each variable

Variables

Cronbach's alpha

Regional Revenue and Expenditure Budget

0,883

Local Government Integrity

0,910

Regional Development

0,945

As illustrated in the above table, all variables displayed values greater than

0.7, indicating that all variables employed in this study exhibited a satisfactory

degree of consistency in each measurement. Consequently, all indicators can be

incorporated into the research framework without the necessity of exclusion from

the research process.

Composite Reliability

Table 4. Composite reliability value of each variable

Variables

Composite Reliability

Regional Revenue and Expenditure Budget

0,929

Local Government Integrity

0,943

Regional Development

0,957

Based on the composite reliability value, all variables have a value above

0.700, this indicates that each variable used in this study meets the standard. Thus,

all indicators can be included in the research and do not need to be excluded from

the research process.

Average Variance Extracted (AVE)

Table 5. Average variance extracted (AVE) test value

Variables

average variance extracted (AVE)

Regional Revenue and Expenditure Budget

0,815

Local Government Integrity

0,847

Regional Development

0,788

The table above shows that each variable has an AVE value that exceeds

0.5. Therefore, each variable used in this study has the ability to reflect the latent

variable they represent. Thus, all indicators can be included in the study and do

not need to be excluded from the research process.

c) Discriminant Validity

Fornell-Lacker Criterion

Table 6. Fornell-Lacker Criterion Test

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Variables

Regional Revenue and

Expenditure Budget

Local

Government

Integrity

Regional

Development

Regional Revenue and

Expenditure Budget

0,903

Local Government

Integrity

0,167

0,920

Regional Development

0,732

0,241

0,887

Heterotrait-Monotrait (HTMT)

Table 7. Heterotrait-Monotrait Test (HTMT)

Variables

Regional Revenue and

Expenditure Budget

Local

Government

Integrity

Regional

Development

Regional Revenue and

Expenditure Budget

Local Government

Integrity

0,184

Regional Development

0,775

0,259

Based on the table above, the HTMT value for each variable is less than 0.9,

so each variable meets the HTMT pre-conditions and meets discriminant validity.

Cross Loading

Table 8. Cross loading value of each indicator

Indicator

Regional Revenue

and Expenditure

Budget

Local Government

Integrity

Regional

Development

APBD1

0,966

0,149

0,744

APBD2

0,988

0,158

0,745

APBD 3

0,733

0,138

0,440

PBRB1

0,954

0,243

0,954

PBRB2

0,849

0,260

0,849

PBRB3

0,853

0,189

0,853

PBRB4

0,909

0,179

0,909

PBRB5

0,963

0,232

0,963

PBRB6

0,782

0,173

0,782

SPI1

0,927

0,226

SPI2

0,988

0,899

0,210

SPI3

0,934

0,228

The cross-loading value of each indicator employed in this study has been

determined, and the results indicate that all indicators have a cross-loading value

above 0.700. This finding suggests that these indicators have the highest

correlation with their latent variables. Therefore, it can be concluded that no

indicators require removal.

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2. Inner Model

Figure 2. Testing the inner model

a) R Square

Table 9. R Square Test Results

Variables

R Square

R Square Adjusted

Regional Revenue and

Expenditure Budget

0,027

0,025

Regional Development

0,536

0,535

The results of the R-squared test demonstrate that the dependent variable,

Regional Development, is influenced by the independent variable to the greatest

extent of 0.536, or 53.6%. The residual 46.4% is influenced by extraneous factors

not included in the study's scope. The Regional Budget variable demonstrates a

0.027, or 2.7%, influence from the independent variable. The remaining 97.3%

of the variance is attributable to factors not encompassed within the purview of

this study.

b) F Square

Table 10. F Square Test Results

Variables

Effect Size

Local Government Integrity -> Local

Revenue and Expenditure Budget

0,027

Regional Budget -> Regional

Development

1,156

The results of the F-square test demonstrate that the Local Government Integrity

variable has an F Square (f²) value on the Regional Budget variable of 0.027, indicating

a negligible effect. Additionally, the Regional Revenue and Expenditure Budget variable

on Regional Development has an F Square (f²) value of 1.156, suggesting a substantial

effect.

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c) Model Fit

Table 11. Model Fit Output

Indicator

Saturated Model

Estimated Model

SRMR

0,054

0,072

d_ULS

0,224

0,399

d_G

1,704

1,712

Chi-Square

2212,283

222,180

NFI

0,741

0,739

As illustrated in the above table, the SRMR value in the saturated model is

0.054 <0.08, and the estimated model is 0.072 <0.08. Therefore, the model

formed is declared to meet the feasibility of the model.

3. Hypothesis Test

Table 12. Hypothesis Test Results

Construct

Original

Simple

(O)

T-statistics

(|O/STDEV|)

p-Value

Description

Local Government

Integrity - > Local

Revenue and

Expenditure Budget

0,163

2,693

Accepted

Regional Budget ->

Regional Development

0,732

10,498

0,000

Accepted

Local Government

Integrity - > Local

Budget -> Local

Development

0,119

2,241

0,025

Accepted

A series of empirical tests have been executed and subsequently analyzed. The

ensuing conclusions, derived from these empirical tests, are as follows:

1) The impact of local government integrity on the regional budget is statistically

significant, as evidenced by the original sample value of 0.163, the t-statistic of

2.693, and p-values less than 0.05. This indicates that local government integrity

exerts a substantial positive influence on the regional budget. Consequently, the

initial hypothesis is substantiated.

2) The impact of the Regional Budget on Regional Development has an original

sample value of 0.732, with a t-statistic of 10.498 > 1.960 and p-values of 0.000

< 0.05. Consequently, it can be concluded that the Regional Budget exerts a

significant positive effect on Regional Development. Consequently, the initial

hypothesis is endorsed.

3) The study's findings indicate that the Regional Budget plays a significant

mediating role in the relationship between Local Government Integrity and

Regional Development. The original sample value is 0.119, with a t-statistic of

2.241 > 1.960 and p-values of 0.025 < 0.05. These results support the hypothesis

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that the Regional Budget can mediate the influence of Local Government

Integrity on Regional Development. Therefore, the hypothesis is accepted.

The Effect of Local Government Integrity on APBD Management and its

Implications for Development Quality

The hypothesis test results obtained show that all research hypotheses can be

accepted. The effect between one variable and another is positively significant, meaning

that each one unit increase in variable 1 will increase the value of variable 2. The value

of the influence between variables is shown in Table 12 in the Original sample (O)

column. The effect of local government integrity on the APBD has an original sample

value of 0.163, which means that if the integrity of the local government increases by one

unit, the APBD can increase by 16.3%. The effect of APBD on regional development

(GRDP) has an original sample value of 0.732, which means that if the APBD of each

local government increases by one unit, regional development will increase by 73.2%. In

addition to direct influence, there is an indirect effect on this path analysis, namely the

role of the APBD in mediating the influence between local government integrity on

development which has an original sample value of 0.119. This means that if the integrity

of the local government increases by one unit, regional development will increase directly

or indirectly through the APBD by 11.9%.

The findings of the data analysis suggest a direct correlation between the integrity

of the local government and its capacity to enhance the management of the regional

budget. Conversely, a decline in the integrity of the government can adversely impact the

management of the local regional budget.The impact of local government integrity on

APBD is relatively modest, and the efficacy of APBD management is also influenced by

factors that extend beyond the purview of this research. Nevertheless, the management of

APBD necessitates a high degree of integrity on the part of the local government, as the

APBD management process can be utilized as a conduit for the disbursement of specific

funds to individuals or groups.Local governments that exhibit a high level of integrity

tend to be more transparent in their execution of APBD planning, budgeting,

implementation, and accountability processes. This can contribute to the prevention of

corrupt practices, abuse of authority, and misuse of public funds. Local governments that

maintain their integrity also tend to exercise greater caution and professionalism in the

management of regional finances.Stakeholders in this area prioritize the efficiency and

effectiveness of public funds, ensuring the successful implementation of programs funded

by the APBD and the maximization of benefits for the community's well-being.

High local government integrity towards APBD management will also have a direct

impact on public and investor confidence in regional economic and financial conditions.

Governments that are considered to have high integrity will get more support and trust

from the public and financial institutions, both in terms of investment and development

cooperation. Communities and / or institutions that will carry out cooperation or

investment will definitely pay attention to the risk management of the APBD

management. Governments that have a good level of integrity tend to be better able to

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control financial risks that may arise in managing the APBD. They conduct regular risk

evaluations, implement effective internal control mechanisms, and ensure compliance

with applicable financial regulations. The most important thing about a culture of integrity

in APBD management is its impact on the quality of development in the region. APBDs

managed with high integrity will focus more on development projects that are sustainable,

beneficial to the wider community, and oriented towards improving the welfare and

empowerment of the community.

The Effect of Local Government Integrity in Minimizing the Risk of Corruption in

the Implementation of the APBD

Integrity in government institutions has been demonstrated to reduce the risk of

corruption (Law Number 20 of 2001 amending Law Number 31 of 1999). When grouped,

the contents include state financial losses, bribery, embezzlement in office, extortion,

fraudulent acts, conflicts of interest in procurement, and gratuities. The correlation

between enhanced local government integrity and the augmentation of the APBD is a

salient finding, with higher levels of integrity being associated with more robust APBDs.

Consequently, the integrity of local government assumes a pivotal role in the preservation

of local financial prosperity and the promotion of community welfare.

Currently, the integrity of local governments can be said to be quite high with an

average SPI value score of 70.92. When viewed from all districts / cities in Indonesia,

Boyolali Regency received the highest SPI value of 88.32, while Waropen Regency

obtained the lowest SPI value of 45.26 from a maximum value of 100. This is an

illustration of the existing conditions of integrity in regional governments. Local

governments need to strengthen their integrity because integrity is the main foundation

of good and sustainable governance. With good integrity in APBD management, it will

increase the GRDP value of the region. Effective and efficient, targeted, and transparent

APBD management can optimize the results of investments made, thus potentially

increasing the contribution to GRDP. APBD management that is clean from corrupt

practices and misuse of public funds is able to attract investors and private partners to

invest in the area. High trust in the integrity of regional financial management can open

up new investment opportunities, both in the form of direct investment and partnerships

in strategic projects. These opportunities can be an additional driver for GRDP growth.

This study reveals the fact that the integrity of local governments can significantly

affect the APBD which has implications for regional development represented by GRDP.

in line with research conducted by Kurniawan (2023) which states that the lower the

morality (which includes integrity) of the government apparatus, the fraud in the financial

statements of the Solok City government will increase. Ardiani's research (2019) also

produced a similar conclusion, namely integrity has a significant influence on the

accountability of village fund financial management.

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Recommendations to Improve Local Government Integrity

The integrity of local governments still varies widely with considerable variation.

Therefore, integrity needs to be strengthened in running the government. Efforts that can

be made include:

1. Increased awareness and anti-corruption education. Local governments need to

raise awareness of the importance of integrity and good governance at all levels of

the bureaucracy. Training programs, anti-corruption campaigns, and outreach to

government employees and the public can help build a strong culture of integrity.

2. Strengthening internal and external oversight. Strengthening internal and external

oversight systems can help detect, prevent and act against fraud and corruption.

Local governments need to have professional and independent internal oversight

units, and work with external oversight institutions such as the Supreme Audit

Agency (BPK) to ensure compliance with applicable rules and standards. The

government also needs to enforce penalties on those who commit fraud and

corruption.

3. Exemplary local government leaders who can be used as good examples in terms

of integrity. Leaders must model high integrity behavior in every action and

decision taken. This includes avoiding conflicts of interest, rejecting bribery, and

setting an example of transparency in the use of public funds.

4. Simplification of administrative processes and the use of information technology

can help improve transparency, efficiency, and control in APBD management. The

implementation of an integrated financial information system, the use of e-

procurement for internet-based procurement of goods and services with an auction

system, and the development of a financial transparency portal can be effective

steps.

5. Active participation of the public in monitoring and controlling the use of public

funds is also an important step. Local governments can open up spaces for social

scrutiny, involve NGOs and citizens in decision-making processes, and facilitate

grievance and whistleblower mechanisms to report violations.

With a commitment to implementing the suggestions that have been outlined

comprehensively and consistently, the government is expected to boost integrity in APBD

management, thus creating an environment that supports sustainable and quality regional

development.

Conclusion

The findings of this study, based on rigorous research and data analysis,

demonstrate that local government integrity exerts a substantial influence on the APBD,

thereby impacting regional development. This assertion is substantiated by the findings

of the SEM PLS analysis, which yielded the acceptance of all postulated hypotheses.

These hypotheses include the following: (1) the presence of local government integrity

exerts a substantial positive influence on APBD, (2) APBD exerts a substantial positive

influence on regional development, and (3) APBD is capable of mediating the impact of

The Influence of Local Government Integrity on Local Government Budget and its Implications for

Development

Jurnal Indonesia Sosial Teknologi, Vol. 5, No. 12, Desember 2024 5977

local government integrity on regional development.The enhancement of local

government integrity by a single unit is predicted to result in an increase in the value of

APBD by 16.3%. While the direct impact of local government integrity on APBD may

be modest, the necessity of high-integrity commitment from the local government in

APBD management is paramount. External factors, independent of integrity, play a

substantial role in determining the success of APBD management.Effective and efficient

APBD management, targeted and transparent, has the potential to optimize the returns on

investments, thereby contributing to an increase in the contribution to GRDP.

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