Analysis of the Role of General Allocation Funds (DAU) on Regional Government Financial Performance

Abstract

This study aims to analyze the role of General Allocation Funds (DAU) in influencing the financial performance of regional governments. As one of the main sources of intergovernmental transfers in Indonesia, the DAU is designed to assist regional governments in financing their expenditures and achieving fiscal balance. The research adopts a quantitative approach using secondary data from regional budget reports over a five-year period. Financial performance is measured through indicators such as expenditure realization, budget efficiency, and fiscal independence. The results of the analysis indicate that the DAU has a significant impact on financial performance, particularly in regions with limited local revenue sources. However, an overreliance on DAU may hinder the motivation of regional governments to optimize their own-source revenues. The study suggests that while DAU is crucial in supporting fiscal needs, local governments should also focus on strengthening local revenue management to achieve sustainable fiscal performance.