Does Increasing Central Government Transfer Improve Local Government Performance? A Case of Aceh Provincial Government

The objective of this study is to evaluate the financial performance of Aceh after receiving a series of significant transfer fund under Special Autonomy Fund (SAF) since 2008. The data were collected from secondary sources i. e. 2009 to 2016 financial reports of Aceh provincial government and news from electronic media. A descriptive quantitative analysis was carried out to analyze the performance of Aceh government before and after the SAF implementation. This study demonstrates that having more money does not necessarily lead to a higher financial performance of local government. Based on the financial ratio analysis, the performance after the SAF implementation has increased slightly compared to that before SAF. Additionally, the expenditures have raised gradually particularly in regards to operational expenditures. This situation is problematic particularly after the end of SAF period as the portion of locally-generated revenue (LGR) compared the total revenue is smaller than the portion of the operational expenditures. Thus, it is imperative for the Aceh government to expand its LGR through investment and creating more revenue centers.