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THE ROLE OF GOOD VILLAGE GOVERNANCE IMPLEMENTATION TOWARDS REDUCING FRAUD POTENTIAL AND ENSURING EFFECTIVE GOVERNMENT PERFORMANCE
Corresponding Author(s) : Agus Wahyudin
Humanities & Social Sciences Reviews,
Vol. 8 No. 2 (2020): March
Abstract
Purpose of the study: This research aimed to examine the effect of Good Village Governance (GVG), external supervision, and citizen participation on the fraud potential in village funds management and its consequent impact on village government performance.
Methodology: The population studied involved 60 respondents including village officials in Demak Regency, Central Java, Indonesia. The data was collected through the use of questionnaires and analyzed using Path analysis.
Main Findings: The results showed the implementation of GVG did not have a significant effect on the fraud potential in fund management while external supervision and citizen participation have a negative and significant effect. Furthermore, the GVG implementation and citizen participation were found not to have a significant influence on village government performance while external supervision and fraud have a negative and significant effect. Moreover, fraud has a very strong influence and it is the most dominant determinant of village government performance, therefore, it should be handled with serious attention.
Application of this study: External supervision of village fund management is needed to reduce fraud and improve performance. In addition, the implementation of GVG can also support improved village government performance.
Novelty/Originality of This study: This research builds a model and examines the GVG concept model that can be a solution to the problem of fraud and the low performance of local governments in Indonesia.
Keywords
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- Abidin, M. Z. (2015). Tinjauan Atas Pelaksanaan Keuangan Desa Dalam Mendukung Kebijakan Dana Desa. Jurnal Ekonomi & Kebijakan Publik, 6(1), 61–76.
- Aggarwal, P. (2013). Impact of Corporate Governance on Corporate Financial Performance. Journal of Business and Management, 13(3), 1–5. https://doi.org/10.9790/487X-1330105 DOI: https://doi.org/10.9790/487X-1330105
- Aziz, N. L. L. (2016). Otonomi Desa Dan Efektivitas Dana Desa. Jurnal Penelitian Politik, 13(2), 193–211.
- Baader, G., & Krcmar, H. (2018). Reducing false positives in fraud detection: Combining the red flag approach with process mining. International Journal of Accounting Information Systems, 31(July 2016), 1–16. https://doi.org/10.1016/j.accinf.2018.03.004 DOI: https://doi.org/10.1016/j.accinf.2018.03.004
- Cheema, K. U. R., & Din, M. S. (2013). Impact of Corporate Governance on Performance of Firm : A Case Study of Cement Industry in Pakistan. MPRA-Munich Personal RePEc Archieve, 53202(53202). https://doi.org/10.12691/jbms-1-4-1
- Chen, G., Firth, M., Gao, D. N., & Rui, O. M. (2006). Ownership structure, corporate governance, and fraud: Evidence from China. Journal of Corporate Finance, 12(3), 424–448. https://doi.org/10.1016/j.jcorpfin.2005.09.002 DOI: https://doi.org/10.1016/j.jcorpfin.2005.09.002
- Dalwai, T. A. R., Basiruddin, R., & Rasid, S. Z. A. (2015). A critical review of relationship between corporate governance and firm performance: GCC banking sector perspective. Corporate Governance (Bingley), 15(1), 18–30. https://doi.org/10.1108/CG-04-2013-0048 DOI: https://doi.org/10.1108/CG-04-2013-0048
- Dunn, P. (2004). The impact of insider power on fraudulent financial reporting. Journal of Management, 30(3), 397–412. https://doi.org/10.1016/j.jm.2003.02.004 DOI: https://doi.org/10.1016/j.jm.2003.02.004
- Eferakeya, I., Enaibre, I. F., & Offor, N. T. (2016). The relationship between corporate governance and fraud prevention in nigeria : a perceptual view. Journal Of Social and Management Sciences, 11(3), 1–18.
- Farber, D. B. (2005). Does after Fraud : Corporate Governance. The Accounting Review, 80(2), 539–561. https://doi.org/10.2308/accr.2005.80.2.539 DOI: https://doi.org/10.2308/accr.2005.80.2.539
- Halbouni, S. S., Obeid, N., & Garbou, A. (2016). Corporate governance and information technology in fraud prevention and detection: Evidence from the UAE. Managerial Auditing Journal, 31(6–7), 589–628. https://doi.org/10.1108/MAJ-02-2015-1163 DOI: https://doi.org/10.1108/MAJ-02-2015-1163
- In’airat, M. (2015). The Role of Corporate Governance in Fraud Reduction - A Perception Study in the Saudi Arabia Business Environment. Journal of Accounting and Finance, 15(2005), 119–128.
- Jan, C. (2018). An Effective Financial Statements Fraud Detection Model for the Sustainable Development of Financial Markets : Evidence from Taiwan. Sustainability. https://doi.org/10.3390/su10020513 DOI: https://doi.org/10.3390/su10020513
- Kadir, A., Kiswanto, Widarini, N., Gunawan, D. I., & Puspitasari, D. (2017). The Indonesian Perspectives On Village Financial Management Accountability. International Journal of Economics, Business and Management Research, 1(05), 269–286.
- Kamardin, H., & Haron, H. (2011). Board performance and firm performance of Malaysian listed companies. International Journal Economics and Accounting, 2(3), 282–306. https://doi.org/10.1504/IJEA.2011.041897 DOI: https://doi.org/10.1504/IJEA.2011.041897
- Larelle Chapple, Ferguson, C., & Kang, D. (2005). Corporate Governance and Misappropriation. Journal of Forensic & Investigative Accounting Corporate, 1(2), 1–26.
- Lutui, R., & ’Ahokovi, T. (2017). Financial fraud risk management and corporate governance. Conference, 5–13. https://doi.org/10.4225/75/5a84f10795b47
- Mangala, D., & Kumari, P. (2017). Auditors’ perceptions of the effectiveness of fraud prevention and detection methods. Indian Journal of Corporate Governance, 10(2), 118–142. https://doi.org/10.1177/0974686217738683 DOI: https://doi.org/10.1177/0974686217738683
- Matoussi, H., & Gharbi, I. (2011). Board Independence and Corporate Fraud: The case of Tunisian firms. Economic Research Forum, 1–27.
- Merdeka, S. (2017, September). Jangan Lagi Terjerat Dana Desa. Suara Merdeka.Com, p. 1.
- Mondale, T. F., Fahlevi, H., & Aliaman. (2017). Analisis Problematika Pengelolaan Keuangan Desa ( Studi Perbandingan pada Desa Blang Kolak I dan Desa Blang Kolak II , Kabupaten Aceh Tengah ). Jurnal Perspektif Ekonomi Darussalam, 3(2), 196–212. https://doi.org/10.24815/jped.v3i2.8231 DOI: https://doi.org/10.24815/jped.v3i2.8231
- Pathan, S., & Faff, R. (2013). Does board structure in banks really affect their performance? Journal of Banking and Finance, 37(5), 1573–1589. https://doi.org/10.1016/j.jbankfin.2012.12.016 DOI: https://doi.org/10.1016/j.jbankfin.2012.12.016
- Prabowo, H. Y., Cooper, K., Sriyana, J., & Syamsudin, M. (2017). De-normalizing corruption in the Indonesian public sector through behavioral re-engineering. Journal of Financial Crime, 24(4), 552–573. https://doi.org/10.1108/JFC-10-2015-0057 DOI: https://doi.org/10.1108/JFC-10-2015-0057
- Rahman, K. M., & Bremer, M. (2016). Effective Corporate Governance and Financial Reporting in Japan. Asian Academy of Management Journal of Accounting and Finance, 12(December), 93–122. https://doi.org/10.21315/aamjaf2016.12.S1.5 DOI: https://doi.org/10.21315/aamjaf2016.12.S1.5
- Rezaee, Z., & Tuo, L. (2017). Advances in Accounting Voluntary disclosure of non- fi nancial information and its association with sustainability performance. 39(May 2016), 47–59. https://doi.org/10.1016/j.adiac.2017.08.001 DOI: https://doi.org/10.1016/j.adiac.2017.08.001
- Shi, W., Connelly, B. L., & Hoskisson, R. E. (2017). External corporate governance and financial fraud: cognitive evaluation theory insights on agency theory prescriptions. In Strategic Management Journal (Vol. 38). https://doi.org/10.1002/smj.2560 DOI: https://doi.org/10.1002/smj.2560
- Sohuturon, M. (2017). Polri Temukan 214 Kasus Penyalahgunaan Dana Desa.
- Suparman, Kusnadi, D., & Harono, D. (2014). Implementasi Program Alokasi Dana Desa Di Kecamatan Sukadana Kabupaten Kayong Utara. Tesis PMIS-UNTAN-PSIAN, 1–20.
- Supriyadin, J. (2017). Jokowi Sebut 900 Kades Tersangkut Penyalahgunaan Dana Desa.
- Tan, D. T., Chapple, L., & Walsh, K. D. (2017). Corporate fraud culture: Re-examining the corporate governance and performance relation. Accounting and Finance, 57(2), 597–620. https://doi.org/10.1111/acfi.12156 DOI: https://doi.org/10.1111/acfi.12156
- Viva. (2017). KPK Ungkap Modus-modus Penyimpangan Dana Desa.
- Wibisono, N. (2017). Mengungkap Fenomena Pengawasan Publik Terhadap Dana Desa Di Kabupaten Madiun. Jurnal AKSI (Akuntansi Dan Sistem Informasi), 1(2), 8–19. https://doi.org/10.32486/aksi.v1i2.115 DOI: https://doi.org/10.32486/aksi.v1i2.115
- Wibisono, N., & Purnomo, H. (2017). Mengungkap Fenomena Pengawas Publik Terhadap Dana Desa di Kabupaten Madiun. Akuntansi Dan Sistem Informasi, 2(1), 8–19. https://doi.org/10.32486/aksi.v1i2.115 DOI: https://doi.org/10.32486/aksi.v1i2.115
- Widarnawati, B. W., Santoso, B., & Suparman, L. (2018). Factors Affecting Of Village Financial Management And Its Implications For Stakeholders Trust ( Study On Villages In Central Lombok, Indonesia). International Journal of Economics, Commerce and Management, VI(3), 534–548.
- Wilhelm, P. A. F., Communications, A., & Bilbao, B. (2016). Contingent Corporate Governance : A Reflection On Global Fraud And Power Configurations Fraud : A Worldwide Control Problem. Journal of Global Business and Technology 40, 1(1), 40–48.
References
Abidin, M. Z. (2015). Tinjauan Atas Pelaksanaan Keuangan Desa Dalam Mendukung Kebijakan Dana Desa. Jurnal Ekonomi & Kebijakan Publik, 6(1), 61–76.
Aggarwal, P. (2013). Impact of Corporate Governance on Corporate Financial Performance. Journal of Business and Management, 13(3), 1–5. https://doi.org/10.9790/487X-1330105 DOI: https://doi.org/10.9790/487X-1330105
Aziz, N. L. L. (2016). Otonomi Desa Dan Efektivitas Dana Desa. Jurnal Penelitian Politik, 13(2), 193–211.
Baader, G., & Krcmar, H. (2018). Reducing false positives in fraud detection: Combining the red flag approach with process mining. International Journal of Accounting Information Systems, 31(July 2016), 1–16. https://doi.org/10.1016/j.accinf.2018.03.004 DOI: https://doi.org/10.1016/j.accinf.2018.03.004
Cheema, K. U. R., & Din, M. S. (2013). Impact of Corporate Governance on Performance of Firm : A Case Study of Cement Industry in Pakistan. MPRA-Munich Personal RePEc Archieve, 53202(53202). https://doi.org/10.12691/jbms-1-4-1
Chen, G., Firth, M., Gao, D. N., & Rui, O. M. (2006). Ownership structure, corporate governance, and fraud: Evidence from China. Journal of Corporate Finance, 12(3), 424–448. https://doi.org/10.1016/j.jcorpfin.2005.09.002 DOI: https://doi.org/10.1016/j.jcorpfin.2005.09.002
Dalwai, T. A. R., Basiruddin, R., & Rasid, S. Z. A. (2015). A critical review of relationship between corporate governance and firm performance: GCC banking sector perspective. Corporate Governance (Bingley), 15(1), 18–30. https://doi.org/10.1108/CG-04-2013-0048 DOI: https://doi.org/10.1108/CG-04-2013-0048
Dunn, P. (2004). The impact of insider power on fraudulent financial reporting. Journal of Management, 30(3), 397–412. https://doi.org/10.1016/j.jm.2003.02.004 DOI: https://doi.org/10.1016/j.jm.2003.02.004
Eferakeya, I., Enaibre, I. F., & Offor, N. T. (2016). The relationship between corporate governance and fraud prevention in nigeria : a perceptual view. Journal Of Social and Management Sciences, 11(3), 1–18.
Farber, D. B. (2005). Does after Fraud : Corporate Governance. The Accounting Review, 80(2), 539–561. https://doi.org/10.2308/accr.2005.80.2.539 DOI: https://doi.org/10.2308/accr.2005.80.2.539
Halbouni, S. S., Obeid, N., & Garbou, A. (2016). Corporate governance and information technology in fraud prevention and detection: Evidence from the UAE. Managerial Auditing Journal, 31(6–7), 589–628. https://doi.org/10.1108/MAJ-02-2015-1163 DOI: https://doi.org/10.1108/MAJ-02-2015-1163
In’airat, M. (2015). The Role of Corporate Governance in Fraud Reduction - A Perception Study in the Saudi Arabia Business Environment. Journal of Accounting and Finance, 15(2005), 119–128.
Jan, C. (2018). An Effective Financial Statements Fraud Detection Model for the Sustainable Development of Financial Markets : Evidence from Taiwan. Sustainability. https://doi.org/10.3390/su10020513 DOI: https://doi.org/10.3390/su10020513
Kadir, A., Kiswanto, Widarini, N., Gunawan, D. I., & Puspitasari, D. (2017). The Indonesian Perspectives On Village Financial Management Accountability. International Journal of Economics, Business and Management Research, 1(05), 269–286.
Kamardin, H., & Haron, H. (2011). Board performance and firm performance of Malaysian listed companies. International Journal Economics and Accounting, 2(3), 282–306. https://doi.org/10.1504/IJEA.2011.041897 DOI: https://doi.org/10.1504/IJEA.2011.041897
Larelle Chapple, Ferguson, C., & Kang, D. (2005). Corporate Governance and Misappropriation. Journal of Forensic & Investigative Accounting Corporate, 1(2), 1–26.
Lutui, R., & ’Ahokovi, T. (2017). Financial fraud risk management and corporate governance. Conference, 5–13. https://doi.org/10.4225/75/5a84f10795b47
Mangala, D., & Kumari, P. (2017). Auditors’ perceptions of the effectiveness of fraud prevention and detection methods. Indian Journal of Corporate Governance, 10(2), 118–142. https://doi.org/10.1177/0974686217738683 DOI: https://doi.org/10.1177/0974686217738683
Matoussi, H., & Gharbi, I. (2011). Board Independence and Corporate Fraud: The case of Tunisian firms. Economic Research Forum, 1–27.
Merdeka, S. (2017, September). Jangan Lagi Terjerat Dana Desa. Suara Merdeka.Com, p. 1.
Mondale, T. F., Fahlevi, H., & Aliaman. (2017). Analisis Problematika Pengelolaan Keuangan Desa ( Studi Perbandingan pada Desa Blang Kolak I dan Desa Blang Kolak II , Kabupaten Aceh Tengah ). Jurnal Perspektif Ekonomi Darussalam, 3(2), 196–212. https://doi.org/10.24815/jped.v3i2.8231 DOI: https://doi.org/10.24815/jped.v3i2.8231
Pathan, S., & Faff, R. (2013). Does board structure in banks really affect their performance? Journal of Banking and Finance, 37(5), 1573–1589. https://doi.org/10.1016/j.jbankfin.2012.12.016 DOI: https://doi.org/10.1016/j.jbankfin.2012.12.016
Prabowo, H. Y., Cooper, K., Sriyana, J., & Syamsudin, M. (2017). De-normalizing corruption in the Indonesian public sector through behavioral re-engineering. Journal of Financial Crime, 24(4), 552–573. https://doi.org/10.1108/JFC-10-2015-0057 DOI: https://doi.org/10.1108/JFC-10-2015-0057
Rahman, K. M., & Bremer, M. (2016). Effective Corporate Governance and Financial Reporting in Japan. Asian Academy of Management Journal of Accounting and Finance, 12(December), 93–122. https://doi.org/10.21315/aamjaf2016.12.S1.5 DOI: https://doi.org/10.21315/aamjaf2016.12.S1.5
Rezaee, Z., & Tuo, L. (2017). Advances in Accounting Voluntary disclosure of non- fi nancial information and its association with sustainability performance. 39(May 2016), 47–59. https://doi.org/10.1016/j.adiac.2017.08.001 DOI: https://doi.org/10.1016/j.adiac.2017.08.001
Shi, W., Connelly, B. L., & Hoskisson, R. E. (2017). External corporate governance and financial fraud: cognitive evaluation theory insights on agency theory prescriptions. In Strategic Management Journal (Vol. 38). https://doi.org/10.1002/smj.2560 DOI: https://doi.org/10.1002/smj.2560
Sohuturon, M. (2017). Polri Temukan 214 Kasus Penyalahgunaan Dana Desa.
Suparman, Kusnadi, D., & Harono, D. (2014). Implementasi Program Alokasi Dana Desa Di Kecamatan Sukadana Kabupaten Kayong Utara. Tesis PMIS-UNTAN-PSIAN, 1–20.
Supriyadin, J. (2017). Jokowi Sebut 900 Kades Tersangkut Penyalahgunaan Dana Desa.
Tan, D. T., Chapple, L., & Walsh, K. D. (2017). Corporate fraud culture: Re-examining the corporate governance and performance relation. Accounting and Finance, 57(2), 597–620. https://doi.org/10.1111/acfi.12156 DOI: https://doi.org/10.1111/acfi.12156
Viva. (2017). KPK Ungkap Modus-modus Penyimpangan Dana Desa.
Wibisono, N. (2017). Mengungkap Fenomena Pengawasan Publik Terhadap Dana Desa Di Kabupaten Madiun. Jurnal AKSI (Akuntansi Dan Sistem Informasi), 1(2), 8–19. https://doi.org/10.32486/aksi.v1i2.115 DOI: https://doi.org/10.32486/aksi.v1i2.115
Wibisono, N., & Purnomo, H. (2017). Mengungkap Fenomena Pengawas Publik Terhadap Dana Desa di Kabupaten Madiun. Akuntansi Dan Sistem Informasi, 2(1), 8–19. https://doi.org/10.32486/aksi.v1i2.115 DOI: https://doi.org/10.32486/aksi.v1i2.115
Widarnawati, B. W., Santoso, B., & Suparman, L. (2018). Factors Affecting Of Village Financial Management And Its Implications For Stakeholders Trust ( Study On Villages In Central Lombok, Indonesia). International Journal of Economics, Commerce and Management, VI(3), 534–548.
Wilhelm, P. A. F., Communications, A., & Bilbao, B. (2016). Contingent Corporate Governance : A Reflection On Global Fraud And Power Configurations Fraud : A Worldwide Control Problem. Journal of Global Business and Technology 40, 1(1), 40–48.