The Effect of Financial Conditions and Audit Opinions on Local Government Performance

Abstract

This study aims to determine the effect of financial conditions and audit opinion on the performance of local governments in Indonesia. Financial condition is proxied by financial flexibility and audit opinion is measured using the opinion issued by the Supreme Audit Agency (BPK). The Regional Government Performance Variable is measured by the performance evaluation score of regional government administration made by the Ministry of Home Affairs of the Republic of Indonesia in 2018. Thirty-three provincial governments whose financial reports have been audited in 2018 will be used as samples. The method for testing the effect uses multiple linear regression with a probability value of 5%. The test results show that financial conditions have a positive effect on local government performance with a p-value of 0.0853 (significant at the 10% level). Audit opinion also has a positive effect on local government performance with a p-value of 0.0090 (significant at the 5% level). This proves that a good financial condition accompanied by good financial management will be able to improve the performance of local governments.