Measuring the Financial Performance of Local Governments: A Ratio-Based Analysis

Abstrak

DIY is classified as a region with low fiscal capacity because the region has consistently recorded the lowest local revenue realization on Java Island and remains heavily reliant on central government transfers. Financial ratio analysis serves as a crucial tool for identifying trends in the financial performance of regional governments over time. It provides a foundation for evaluating the effectiveness of their financial management. This study uses secondary data. The data were collected from financial reports for the period 2020-2024 to calculate eight core financial ratios, including the Effectiveness Ratio, Efficiency Ratio, Growth Ratio, Compatibility Ratio (for Both Operating and Capital Expenditures), Regional Financial Independence Ratio, Regional Financial Dependency Ratio, and Degree of Decentralization Ratio. The study shows high revenue effectiveness, but low spending efficiency, and financial independence is weak. The pandemic led to negative growth in 2020, followed by an uneven recovery. These results underscore the importance of enhancing local revenue, improving efficiency, and reducing reliance on central transfers for achieving sustainable fiscal healthy