IMPACT OF FISCAL TRANSFERS AND LOCAL REVENUE ACCOUNTABILITY ON COMMUNITY WELFARE IN INDONESIA

Community welfare is a national goal outlined in the Preamble of the 1945 Constitution. The Human Development Index (HDI) serves as a key indicator for measuring welfare across three dimensions: health, education, and a decent standard of living. This study examines the impact of fiscal transfers—General Allocation Fund (DAU), Special Allocation Fund (DAK), and Revenue Sharing Fund (DBH)—along with Local Own-Source Revenue (PAD) on HDI at the provincial level in Indonesia from 2019 to 2023. Using a Fixed Effect Model (FEM) regression, the findings reveal that PAD and DAK significantly improve HDI, while DAU has no significant effect. Fiscal accountability, measured through the Government Agency Performance Accountability System (SAKIP) and internal audit (APIP), strengthens the impact of fiscal transfers on community welfare. The moderation analysis indicates that regions with better accountability are more effective in managing fiscal transfers to enhance HDI. Additionally, the study finds that weak financial governance and lack of transparency can hinder the optimal use of fiscal transfers. These findings emphasize the importance of effective oversight, financial governance, and transparency to maximize the benefits of fiscal decentralization. Strengthening accountability mechanisms will enable fiscal policies to be more efficient, ensuring equitable resource distribution and sustainable development.