Efficiency and Effectiveness of Financial Management System

In a country with vast areas requires a system of good governance. The system is highly required at least by two things: one as a tool to implement a variety of public service in various areas, both as a tool for local communities to participate actively in determine the direction and how to develop their own standard of living in harmony with the opportunities and challenges faced in the corridors of national interest.


In order to run the administration, community service and development, the government is essentially carries three main unctions, namely:

-  Allocation functions, including economic resources in the form 

   of goods and services for the community;

-  Distribution function of development;

-  Stabilization function which includes, defense and monetary 

   economics.

One important aspect of the implementation of regional autonomy and decentralization must be carefully regulated is a matter of financial management and the local budget (Budget). Where budget is an annual financial discretion of local government which is based on statutory provisions in force, and various other considerations with a view to the preparation, monitoring, control and evaluation of regional revenue budget expenditure is easy to do. On the other hand the local budget may also be a means for certain parties to see or know the local capacity both in terms of revenue and the expenditure side while from the regular budget is one alternative that can stimulate continuity and consistency in the overall development towards achieving the mutually agreed goals. Therefore, a routine activity to be carried out is one aspect that determines the success of the development.

Development of the budget, especially in the area of ​​income can be a basis for planning short-term (one year) with the assumption that growth will happen in the next year is relatively equally. Revenue is a reflection of the economic potential of the region, for it is no exaggeration when the central government made ​​the PAD as a major criterion in granting autonomy.

In order to achieve local autonomy and decentralization wide, real and responsible financial management areas needed economic, efficient, effective, transparent and accountable. Elements of local financial management is required to control the financial policy area covers
-  Accountability;
-  Value for money;

-  Honesty in managing public finances;

-  Transparency;

-  Control;

In the framework of public accountability, local governments to optimize budgets done efficiently and effectively to improve the welfare of the community. Experience shows that during the financial management area is still alarming. Budget spending areas especially areas not able to act as an incentive to push the pace of development in the area. In addition, are common complaints relating to the allocation of the budget that does not comply with the requirements and reflect the priorities as well as less economic aspects, efficiency and effectiveness.

Viewed from the aspect of the community with an increase in public welfare services and the better it can increase people's demands for good government, it is a challenge for the government to work more efficiently and effectively, especially in providing service to the entire community. In support of excellent service improvement should be supported by the funding of the apparatus, where it should be supported by the original receipt acceptance especially areas.

According to Jones and Pendlebury (1996: 53) is the local budgets of local government plans are realized in cash during the period (one year). The budget is used as a tool to determine the amount of spending, aid decision-making and development planning, authorizing expenditure in times to come, resource development of standard measures to evaluate performance and as a tool to motivate employees and equipment coordination for all activities of the various units.

According to Baridzwan, (1998: 3), understanding the system is a framework of procedures interconnected prepared in accordance with a comprehensive scheme, to carry out an activity or a major function of an organization, while procedures that are interconnected prepared in accordance with the overall scheme is a sequence of clerical work, usually involve multiple people in one or more sections, designed to ensure uniform treatment of the transactions that occur in an organization.

Local financial management means taking care of and managing the area itself is based on the principles according to Devas, et al (1989: 279-280) are as follows;

-  Accountability

-  Able to meet financial obligations

-  Honesty

-  Effectiveness and efficiency

-  Control

Author: Supratman 

        Graduates Master in Development 

        Economics at Gadjah Mada University

        (1999)