The existence of priority shopping obligations

Oct 13, 2025 by magicalceylontours.com 115 views

The Influence of Government Budget Factors on the Allocation of Capital Expenditure in North Sumatra Province 2016-2019

Introduction

The allocation of capital expenditure is a crucial aspect of local government finance, as it determines the availability of funds for infrastructure development and other fixed assets. In North Sumatra Province, the government budget factors, such as the General Allocation Fund (DAU), Special Allocation Funds (DAK), and Regional Original Revenue (PAD), play a significant role in determining the allocation of capital expenditure. This study aims to examine the effect of these government budget factors on the allocation of capital expenditure in North Sumatra Province during the 2016-2019 period.

Literature Review

The allocation of capital expenditure is influenced by various factors, including the government budget factors. DAU is a general allocation fund provided by the central government to local governments, while DAK is a special allocation fund provided for specific purposes. PAD, on the other hand, is the original revenue generated by local governments from various sources, such as taxes and levies. The allocation of capital expenditure is also influenced by the planning and budgeting system, human resources, and the priority of expenses.

Methodology

This study uses a fixed effect model (Fixed Effect Model) with data panel analysis that is processed through the EViews program. The sample used includes 25 districts and 8 cities in North Sumatra Province registered at the North Sumatra Province Financial and Development Supervisory Agency (BPKP) in the 2016-2019 period.

Results

The results of this study show that DAU and DAK have no positive and significant influence on capital expenditure. This means that the increase in DAU and DAK does not directly have an impact on increasing capital expenditure in North Sumatra Province. This may be caused by several factors, such as:

The existence of priority shopping obligations: DAU and DAK generally have predetermined priority shopping obligations, such as education, health, and basic infrastructure. This can limit the space for local governments in allocating these funds for capital expenditure.
Planning and Budgeting System: Under effective planning and budgeting systems can cause obstacles in the use of DAU and DAK funds for capital expenditure. Lack of coordination and transparency in the budgeting process can hamper the optimal allocation of funds.
Limited Human Resources: Limited Human Resources in the Region in Managing DAU Funds and DAK can also be an inhibiting factor. Lack of experts in the field of planning and budgeting can cause difficulties in optimizing the use of these funds.

On the other hand, the results show that PAD has a positive and significant influence on capital expenditure. That is, the increase in PAD in North Sumatra Province directly contributes to increasing capital expenditure. This can be explained by several factors, such as:

Freedom in allocation: PAD provides greater freedom for local governments in determining the priority of expenses. Local governments can allocate PAD for infrastructure development and fixed assets that are considered more important for regional economic growth.
Motivation to increase income: Increasing PAD can be a motivation for local governments to improve the quality of infrastructure and public services, so as to attract investment and improve the regional economy.
Increased efficiency: PAD obtained from regional sources, such as taxes and levies, encourage local governments to improve the efficiency of financial management and minimize budget leakage.

The results of this study also show that DAU, DAK, and PAD simultaneously have a positive and significant influence on capital expenditure. That is, the three budget factors have a complementary influence in encouraging increased capital expenditure in North Sumatra Province.

Implications

This study has several implications for local government policies in North Sumatra Province. First, local governments need to increase efforts in optimizing the use of DAU and DAK for capital expenditure. This can be done through more effective planning and budgeting, increasing transparency and accountability, and developing the capacity of human resources in the regions. Second, local governments need to continue to encourage PAD increase through innovative and creative strategies, so as to improve the ability to finance regional development and infrastructure. Third, local governments need to pay attention to the synergy and the relationship between the three budget factors in increasing capital expenditure.

Limitations

This research has several limitations, such as a relatively short research period and focus on North Sumatra Province. Further research with a longer period and broader area coverage is needed to obtain a more comprehensive understanding of the effect of government budget factors on the allocation of capital expenditure.

Conclusion

In conclusion, this study provides evidence that government budget factors, such as DAU, DAK, and PAD, have a significant influence on the allocation of capital expenditure in North Sumatra Province. The results of this study have implications for local government policies in North Sumatra Province, and highlight the need for more effective planning and budgeting, increasing transparency and accountability, and developing the capacity of human resources in the regions. Further research is needed to obtain a more comprehensive understanding of the effect of government budget factors on the allocation of capital expenditure.
Frequently Asked Questions (FAQs) about the Influence of Government Budget Factors on the Allocation of Capital Expenditure in North Sumatra Province 2016-2019

Q: What are the government budget factors that influence the allocation of capital expenditure in North Sumatra Province?

A: The government budget factors that influence the allocation of capital expenditure in North Sumatra Province are the General Allocation Fund (DAU), Special Allocation Funds (DAK), and Regional Original Revenue (PAD).

Q: What is the role of DAU in the allocation of capital expenditure?

A: DAU is a general allocation fund provided by the central government to local governments. However, the results of this study show that DAU has no positive and significant influence on capital expenditure in North Sumatra Province.

Q: What is the role of DAK in the allocation of capital expenditure?

A: DAK is a special allocation fund provided for specific purposes. However, the results of this study show that DAK has no positive and significant influence on capital expenditure in North Sumatra Province.

Q: What is the role of PAD in the allocation of capital expenditure?

A: PAD is the original revenue generated by local governments from various sources, such as taxes and levies. The results of this study show that PAD has a positive and significant influence on capital expenditure in North Sumatra Province.

Q: What are the implications of this study for local government policies in North Sumatra Province?

A: The results of this study have several implications for local government policies in North Sumatra Province. First, local governments need to increase efforts in optimizing the use of DAU and DAK for capital expenditure. Second, local governments need to continue to encourage PAD increase through innovative and creative strategies. Third, local governments need to pay attention to the synergy and the relationship between the three budget factors in increasing capital expenditure.

Q: What are the limitations of this study?

A: This research has several limitations, such as a relatively short research period and focus on North Sumatra Province. Further research with a longer period and broader area coverage is needed to obtain a more comprehensive understanding of the effect of government budget factors on the allocation of capital expenditure.

Q: What are the recommendations for future research?

A: Future research should focus on a longer period and broader area coverage to obtain a more comprehensive understanding of the effect of government budget factors on the allocation of capital expenditure. Additionally, research should be conducted to identify the factors that influence the effectiveness of DAU and DAK in the allocation of capital expenditure.

Q: What are the practical implications of this study for local governments in North Sumatra Province?

A: The results of this study have practical implications for local governments in North Sumatra Province. Local governments should prioritize the use of PAD for capital expenditure and continue to encourage PAD increase through innovative and creative strategies. Additionally, local governments should pay attention to the synergy and the relationship between the three budget factors in increasing capital expenditure.

Q: What are the policy implications of this study for the central government?

A: The results of this study have policy implications for the central government. The central government should review and revise the allocation of DAU and DAK to local governments to ensure that they are used effectively for capital expenditure. Additionally, the central government should provide support and guidance to local governments to improve their capacity in managing PAD.

Q: What are the implications of this study for the development of local governments in North Sumatra Province?

A: The results of this study have implications for the development of local governments in North Sumatra Province. Local governments should prioritize the use of PAD for capital expenditure and continue to encourage PAD increase through innovative and creative strategies. Additionally, local governments should pay attention to the synergy and the relationship between the three budget factors in increasing capital expenditure.