How Strong is the Influence of Utilizing External Audit Reports on Improving Primary Educational Performance through the Quality of Education Sector Spending in Indonesia? (Survey of Local Governments in Java and Sumatra)

Abstract

The quality of education develops competent human resources that can improve people's welfare within a nation. In Indonesia, one effort to improve the quality of education is through increasing the allocation of education expenditure in local governments’ budgets. Nevertheless, such policy has not been able to improve educational performance in the regions optimally. This study aims to provide empirical evidence on whether the utilization of external audit reports influences educational performance through the quality of education sector spending. The research data were collected through a questionnaire carried out in 111 local governments in Java and Sumatra, involving 222 respondents. Data were analyzed using structural equation modeling. This study empirically proves that the use of external audit reports has a significant and positive effect on improving the quality of education sector spending. Utilization of external audit reports also has a significant and positive impact on the improvement of educational performance indirectly through the quality of education sector spending. In addition, it is shown that improving the quality of education sector spending can improve educational performance.