An Investigation of Financial Statement Disclosure in Local Government Financial Statements

Abstract

This study aims to examine the level of mandatory disclosures in the local government’s financial statements with the factors which influence them, which are financial conditions, transfer and funds, political competition, and income level in the municipality. The population in this research was the district/city government in Sumatra Island. Sampling was conducted by cluster sampling method, which produced 151 samples of district/city governments on Sumatra Island. Testing the hypothesis in this research was through multiple linear regression using SPSS. The test results obtained that the transfer of funds and political competition did not affect the disclosure of financial statements. While financial conditions negatively affect the disclosure of financial statements. Furthermore, the income level in the municipality has a positive and significant relationship with the financial statement disclosure. The contribution to the local government is expected to be able to give useful input in improving the quality of their external communication, governmental accounting standards, and improving public governance. Furthermore, the Indonesian government is to formulate public policy by considering potential factors which can enhance pressure for the government to conduct financial statement disclosure. A strategy for local governments to promote the disclosure of financial statements is the use of information technology to meet social demands which are more efficient and effective.