Unveiling the Impact: How Legislature Size Moderates Budget Forecast Errors

Abstract

The Province of Aceh has recently gained attention as one of the poorest provinces in Indonesia. This situation is partly attributed to the failure to maximize the utilization of budget allocations, resulting in the loss of the intended benefits of the Regional Budget (APBD) for the public. Therefore, this research aims to investigate and analyze the influence of local revenue growth and expenditure growth on budget forecast errors, as well as the role of legislature size in moderating the relationship between local revenue growth and expenditure growth on budget forecast errors. The research employed a census method, covering the entire population, which consists of 23 regencies and cities in the Province of Aceh from 2018 to 2022. The study utilized Structural Equation Model-Partial Least Square (SEM-PLS) analysis with WarpPLS version 7.0. The findings indicate that local revenue growth has a positive impact on budget forecast errors, while expenditure growth has a negative impact. Furthermore, legislative size moderates the relationship between local revenue growth and expenditure growth concerning budget forecast errors. The study suggests that local governments should create clear and proportionate plans for regional revenue and expenditure budgets based on the region’s capacity. They should also optimize and expedite budget realization to ensure the implementation of all government programs and activities. Both local government leaders and the Regional People’s Representative Council (DPRD) also should establish comprehensive and transparent regional regulations regarding the DPRD’s Pokir proposal mechanism, from the planning process to accountability.