Budgeting Process in Local Government

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CHAPTER II LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT

A. Literature Review

1. Budgeting Process in Local Government

Budget is a tool of accountability, management and economic policy. As an instrument of economic policy, the budget function is created growth and economic stability, also for even distribution of income, in order to achieve government goals Law No.172004. Local government budget APBD which presented yearly by executive, give the detail information for legislative and society about what programs that government planned to improve the quality of life of the people, and how those programs will be funded. According to Mardiasmo 2005, budgeting arrangement process has four purposes, such as: a. Help government to achieve the fiscal goal and improve coordination inter sectionunits in government surroundings. b. Help to create the efficiency and fairness in providing public goods and public service trough the priority making. c. To make possible for government to fulfill the expenditure priority. d. Improve the government responsibility and transparency to legislative and societypublic. commit to user 8 The appearance of local government autonomy system, since the declared of Law no.322004 about local government and also Law no. 332004 about financial balancing between central government and local government, brought the fundamental change in the governance government and financial relationship, also important change in local budgeting management. Local government budget APBD arranged based on performance approach, that is a budgeting system which give priority to the effort for performance achievement or output of the fund allocation that was planned Government Regulation No.58 2005. Based on performance approach, APBD was arranged relied on a certain target that will be achieved in one budget year. Preparing the local government budget draft RAPBD, local government and legislative DPRD arrange the general policy of local government budget APBD, which included guidance and general determinations that will be agreed as guideline for local government budget arrangement. The arrangement of general policy of APBD constitute the effort for the achievement of vision, mission, goal, and target were determined in Local government middle term development planning Rencana Pembangunan Jangka Menengah DaerahRPJMD for 5 five year period, and mayor program which is arranged based on local government long term development planning Rencana pembangunan Jangka Panjang DaerahRPJPD that consider with the national middle term development planning Rencana Pembangunan Jangka Menengah NasionalRPJMN, and also the minimal service standard that established by government. commit to user 9 In addition, based on Minister of Domestic Affair’s Regulation No.132006 about the standard of local government budget management, for local government budgeting APBD arrangement, after there is agreement MoU about general policy of budgeting KUA PPAS between the chief of local government and legislative, every institution unit SKPD of local government will arrange program planning and budget of institution unit RKA-SKPD with use local government middle term expenditure frame-approach, harmony budgeting, and performance-based budgeting. RKA-SKPD will be used by local government budgeting team Tim Anggaran Pemerintah DaerahTAPD as material for arrange the local government budgeting draft RAPBD. Finally, RAPBD will be discussed together by TAPD and legislative budgeting team Tim Anggaran DPRDBadan Anggaran DPRD, and after evaluated by governor, those RAPBD will be established as APBD. The cycle of Local Government Budgeting Arrangement APBD Arrangement can be shown in figure 1: commit to user 10 Figure 1 Local Government Budgeting Arrangement Cycle source: Kawedar, Rohman Handayani 2008

2. Budgetary participation