Determinants of Local Government Financial Performance in Financial Agencies and Regional Assets of North Sumatera Province

Aulia Paradilla (Universitas Pembangunan Panca Budi)
Maya Macia Sari (Universitas Pembangunan Panca Budi)
Noni Ardian (Universitas Pembangunan Panca Budi)

Journal of Management, Economic, and Accounting
Vol. 5 No. 4 (2026): Oktober

This study aims to evaluate the financial performance of the North Sumatra Provincial Government through the Regional Finance and Assets Agency for five years, from 2020 to 2024. The location of this study is the Regional Finance and Assets Agency in North Sumatra Province. This study uses a descriptive method with a qualitative approach. The data used are secondary data derived from the North Sumatra Provincial Government Budget Realization Report, obtained from the Regional Finance and Assets Agency. The analysis technique used is regional financial ratio analysis, which includes several ratios such as the fiscal decentralization degree ratio, regional financial independence ratio, Regional Original Revenue (PAD) effectiveness ratio, regional financial efficiency ratio, and expenditure harmony ratio. The study shows that the level of fiscal decentralization is in the good to very good category, which means the contribution of regional original revenue to total regional income is quite large. The regional financial independence ratio shows a working method that involves participation and assignments, meaning the level of regional financial independence is quite high. The PAD effectiveness ratio shows conditions that sometimes fluctuate, where in some years PAD succeeds in exceeding the specified target, but in other years it still falls short of the target. The regional financial efficiency ratio indicates that regional financial management is still relatively inefficient, even suboptimal, as the majority of regional revenue is used to finance regional expenditures. Meanwhile, the expenditure harmony ratio indicates that operating expenditures still account for the largest portion of regional expenditure compared to capital expenditures. Based on these research findings, it can be concluded that the financial performance of the North Sumatra Provincial Government demonstrates a fairly good level of financial independence. However, efficiency improvements in financial management and increased allocation of capital expenditures are still needed to better support regional development.