Abstract
Corruption in government organizations is an important and relevant topic to study because of its impact on the state in terms of financial losses and a decrease in the quality of human development. This study is also relevant because previous analyses are still limited in their modeling and measuring comprehensive fiscal decentralization variables. This study aims to examine the effect of fiscal decentralization and quality of government on the level of corruption and the impact of corruption on the human development index. The sample of this paper comprises 113 local governments on the island of Java, Indonesia, for the period 2015–2018. Statistical testing was carried out using Partial Least Squares-Structural Equation Modeling (PLS-SEM). The test results show that fiscal decentralization has a positive effect on corruption with a path coefficient of 0.100 and is significant at 5% alpha. Likewise, poor governance (proxied by internal control weaknesses) has a positive effect on the level of corruption with a coefficient of 0.062 and is significant at an alpha of 10%. The results of the PLS-SEM test also show that corruption has a negative impact on the human development index with a coefficient of –0.206 and is significant at 1% alpha. The practical significance of this study is the importance of the internal control system reliability as a complementary variable for fiscal decentralization to prevent corruption.
Highlights
The problem of corruption in government organizations nowadays is widely recognized as a major ailment that threatens economic development and the foundations of society
The activities carried out by agents hypothesis testing which are presented in Table 4. cannot always be observed by the community so there is in
Seen from the that fiscal decentralization has a positive effect on fraud triangle theory point of view, fiscal decenthe level of corruption with a path coefficient of tralization allows local governments to have more
Summary
The problem of corruption in government organizations nowadays is widely recognized as a major ailment that threatens economic development and the foundations of society. The quality of governance needed previous studies provide empirical evidence that to reduce corruption, among others, is in the form the higher the fiscal decentralization, the greater of an adequate internal control system. The results provide tralization is (along with the implementation of a evidence that fiscal decentralization will increase good internal control system), the less opportunity the occurrence of corruption: that is to say, there for corruption to occur in local governments. Ment in Middle Eastern and North African countries with data from 1996 to 2012 It was found Fiscal decentralization is an unobserved variable that there is a negative relationship between cor- measured by several proxies, namely from the ruption and human development; the higher the revenue side seen from the amount of Regional level of corruption, the lower the quality of human Revenue (RR) and from the expenditure side it development. Findings of internal control weaknesses according to the results of the audit by the Supreme Audit
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