Bureaucratic Reform and Regional Financial Management Quality in Relation to Audit Findings: The Moderating Role of Local Government Integrity

Raisa Maharani; Islahuddin Islahuddin; Fifi Yusmita; Darwanis Darwanis; Indayani Indayani

doi:10.59261/inkubis.v8i4.532

Authors

Raisa Maharani Universitas Syiah Kuala
Islahuddin Islahuddin Universitas Syiah Kuala
Fifi Yusmita Universitas Syiah Kuala
Darwanis Darwanis Universitas Syiah Kuala
Indayani Indayani Universitas Syiah Kuala

DOI:

https://doi.org/10.59261/inkubis.v8i4.532

Keywords:

Audit Findings, Bureaucratic Reform, Government Integrity, Moderating Effect, Regional Financial Management

Abstract

Background: Indonesian local governments reported rising numbers of audit findings in 2021–2023 despite ongoing bureaucratic reforms. It remains unclear whether formal reform and financial-management assessments are associated with fewer findings, and whether institutional integrity modifies these associations.

Objective: To examine the associations of bureaucratic reform and regional financial-management quality with audit findings and evaluate whether government integrity moderates either association.

Methods: This observational quantitative panel study analyzed 381 of 508 Indonesian regency/city governments during 2021–2023 (1,143 government-year observations), using official secondary data. Fixed-effects panel regression and moderated regression analysis (MRA) assessed the relationships.

Results: Bureaucratic reform was positively associated with the number of findings (β = 0.694747, p = 0.0012); financial-management quality showed no statistically significant association (β = 0.024320, p = 0.0967). The reform × integrity interaction was negative and significant (β = −0.082746, p = 0.0229), whereas the financial-management quality × integrity interaction was not significant (β = −0.001859, p = 0.4507).

Conclusion: Higher-rated bureaucratic reform and regional financial management quality have not been associated with a corresponding reduction in the number of audit findings at the observed reference level, while integrity attenuated this positive association. The results do not establish that reform causes findings or that integrity makes the overall reform effect negative. Stronger process-level evidence and longer panel coverage are needed.

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