Budgetary Paradoxes and the Vital Role of Accountability as a Corrective Mechanism: An Empirical Mandatory Spending Study of the Achievements of the SDGs in Indonesia

Riza Afrianda; Heru  Fahlevi; Darwanis

doi:10.59890/ijaeam.v4i2.126

Authors

Riza Afrianda Syiah Kuala University
Heru Fahlevi Syiah Kuala University
Darwanis Syiah Kuala University

DOI:

https://doi.org/10.59890/ijaeam.v4i2.126

Keywords:

Mandatory Spending, SDGs, Financial Accountability, Budget Inefficiency, Budgetary Slack, Moderation

Abstract

This research aims to investigate the phenomenon of "budget paradoxes" in regional financial management in Indonesia, where the allocation of mandatory spending increases (mandatory spending) health and education functions are not yet in line with the acceleration of human development indicators. Specifically, the study examined the effectiveness of such spending on achievement Sustainable Development Goals (SDGs) as well as analyzing the role of financial accountability as a moderation mechanism. Using panel data from 85 regencies/cities in Indonesia during the 2019–2023 period with a total of 425 observations, this research applies Moderated Regression Analysis (MRA). Empirical results reveal significant budgetary inefficiencies. Health spending was found to have a significant negative effect on life expectancy, indicating allocative inefficiencies due to the dominance of physical capital spending which is prone to mark-ups. Meanwhile, education spending did not have a significant effect on the Pure Participation Rate, validating the budgetary slack phenomenon due to the rigidity of the employee spending structure. However, the key findings of this study suggest that financial accountability (projected through the CPC Opinion) acts as a vital corrective mechanism. In the health sector, accountability acts as Quasi Moderator which improves spending efficiency, while in the education sector it acts as Pure Moderator which is a sine qua non for budgetary effectiveness. The implications of this study suggest a shift in policy focus away from simply meeting budget percentages (spending compliance) towards strengthening governance (governance quality)

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