Evaluation of Budgeting Policy of the Ministry of Industry in Order to Improve the Performance of the Small and Medium Industrial Sector

Abstract

Reform in the field of budgeting is characterized by a paradigm shift in the field of budgeting planning set out in law No. 17 of 2003 which is indicated by 3 (three) approaches, namely the implementation of integrated budgeting, the implementation of medium-term spending frameworks and the implementation of performance-based budgeting. But there are some problems encountered such as there are revisions to activities in the current budget year, performance-based budgets are so detailed in the planning stage but when accountability becomes administrative, the pattern of budget absorption that accumulates at the end of the year and the distribution of budgets that are not appropriate are part of the obstacles in improving the industrial sector. This research has the aim (1) of evaluating the suitability of budgeting of the Ministry of Industry with a budgeting approach; (2) Analyze spending activities at the Ministry of Industry that significantly affect the SMEs sector. The results showed that all the principles and components that make up the concept of integrated budgeting, performance-based budgeting and medium-term spending framework have basically been implemented by the Ministry of Industry in the preparation of work plans and budgets. The results of the double linear regression analysis showed that the realization of the Ministry of Industry's spending on HR development spending and technology spending significantly negatively affected the productivity shown performance in the SMEs sector. Managerial implications that can be given, namely the need for increased awareness and high commitment from all ranks in the Ministry of Industry in the implementation of performance-based budgeting systems through the provision of rewards and punishments at the internal level of the Ministry of SMEs. Keywords: Budget, Ministry of Industry, Multiple Linear Regression, Small and Medium Industries.