Assessing Fiscal Performance in Indonesian Local Governments through Public Sector Accounting Indicators: A K-Means Clustering Approach (2005–2023)

Abstract

This study analyzes the fiscal performance of Indonesian local governments after fiscal decentralization using a K-Means clustering approach. Drawing on time-series data from regional budgets (APBD) of all districts and cities between 2005 and 2023, the study classifies fiscal performance based on four public sector accounting indicators: the fiscal decentralization ratio, financial independence, local revenue effectiveness, and spending efficiency. The analysis identifies four distinct clusters with different characteristics. Most regions (87.53%) fall into clusters with average to problematic performance, marked by high dependence on central government transfers and efficiency challenges. Only 2.28% of regions belong to the elite cluster with exceptional fiscal independence, while 10.19% are in the self-sufficient cluster that still needs to improve efficiency. The findings confirm significant fiscal disparities across regions and highlight the need for differentiated policy approaches tailored to each cluster’s characteristics. The study recommends targeted interventions focusing on underperforming clusters and the replication of best practices from the elite cluster.