Analysis of Management Efficiency and Effectiveness Regional Finance to the Medan City Government

Abstract

This study aims to measure, analyze, and evaluate the level of efficiency and effectiveness of regional financial management in the Medan City Government. The approach adopted in this study is descriptive quantitative using the Regional Original Revenue (PAD) Effectiveness Ratio (Ratio) and Regional Financial Efficiency Ratio (REKD) instruments calculated based on the official Budget Realization Report (LRA) of the Medan City Government for the 2021 to 2025 fiscal year. The results of empirical secondary data analysis indicate that the average performance of Medan City's PAD effectiveness ratio falls into the Very Effective category (achieving an average of above 100%). The success in achieving this target is driven by the acceleration of the local tax system digitalization program, the non-cash payment ecosystem, and the expansion of the new tax object base. On the other hand, Medan City's aggregate regional financial efficiency ratio falls into the Less Efficient category with an average figure above 90%. This figure reflects the large allocation of the operating budget—particularly for personnel expenses and routine bureaucratic operations—which dominates the expenditure realization posture when compared to total regional revenue absorption. This study provides strategic policy implications in the form of the need for restructuring and reform of regional expenditure allocations, periodic efficiency audits, and expansion of Capital Expenditures that are more oriented towards long-term economic productivity to support fiscal sustainability in medan city.