ANALYSIS OF THE DEGREE OF FISCAL DECENTRALISATION, INDEPENDENCE, REVENUE EFFECTIVENESS, AND FINANCIAL EFFICIENCY IN MEASURING FINANCIAL PERFORMANCE

Abstract

This research aims to analyze the factors causing the Degree of Fiscal Decentralization Ratio to remain at an adequate level, the Independence Ratio to be relatively high, the Regional Budget Revenue Effectiveness Ratio to be high, and the Regional Financial Efficiency Ratio to also be high. Additionally, the study seeks to improve the financial performance of the Riau Islands Provincial Government based on these ratios. This field research uses a quantitative descriptive approach, collecting data from the Riau Islands Provincial Financial and Asset Management Agency’s Budget Realization Report with a saturated sampling technique. The results show that the Degree of Decentralization Ratio remains within sufficient criteria, the Independence Ratio is at a medium level, the Regional Budget Revenue Effectiveness Ratio is already very effective, while the Regional Financial Efficiency Ratio is inefficient. To improve financial performance concerning the Independence Ratio, it is recommended to provide public education on natural resource management. For the Decentralization Ratio, efforts are needed to develop trade and manufacturing sectors and optimize existing Regional Budget Revenues. To enhance the Effectiveness Ratio, it is important to continue optimizing regional income utilization, and for the Efficiency Ratio, preparing regional workers according to their fields is essential to reduce the relatively high regional expenditures.