Political economy of accounting (PEA) perspectives on sustainable development goals (SDGs) toward local government’s budgeting in Indonesia

Abstract

This study explores how the conflicts of interest involving actors in the process and decision-making of local government budget planning that impacts the implementation of the SDGs from the perspective of the Political Economy of Accounting. The study uses a qualitative methodology grounded in critical analysis. It gathered information through in-depth interviews and document analysis. The interviews followed a semi-structured format. Data analysis involved collecting information from fieldwork and existing literature, interpreting primary and secondary data, and drawing conclusions. The findings suggest that actors involved in budget planning often face conflicts of interest. Resource allocation and patron-client relationships also influence budgetary decisions. Addressing these conflicts requires collective decision-making to achieve policy and economic goals. The implications of this research show that PEA theory can be used as an analytical tool that can describe the discourse on the relationship of an international idea that is localised into a local government budget, which is full of elements of political economy. The implications of this research for management in local government are as input and critical considerations that can be used as considerations in making further budget policies.

Keywords:

• Political economy of accounting (PEA)
• sustainable development goals (SDGs)
• local government
• budgeting
• public sector accounting

SUBJECTS:

• Government & Non-Profit Accounting
• Budgetary & Economic Policy
• Political Economy
• Sustainable Development

JEL CLASSIFICATION CODE:

• P48
• Q01
• H76
• H61
• H83

1. Introduction

The Sustainable Development Goals (SDGs), endorsed by countries worldwide in 2015 at the United Nations, did more than establish a shared agenda for 2030. Surprisingly, the SDGs are quickly becoming a common language among sectors involving conventional development circles and the public sector, including local government. Modern interpretations of sustainable development are examined within the framework of the United Nations (UN) Millennium Development Goals, which address a range of global challenges including population expansion, food insecurity, poverty, conflict, political instability and environmental degradation (Klarin, 2018).

SDGs emphasised the significant role of local government (UN, 2016). Notably, it is acknowledged that local governments are in a crucial position to employ intermediation approaches to localise the SDGs (Gustafsson & Mignon, 2019; Palermo et al., 2020). Local governments have been given the authority to assess local circumstances, needs, and resources, form alliances with relevant parties and carry out policies and programmes that align with the SDGs (Lucci, 2015; Reddy, 2016; Satterthwaite, 2017). Furthermore, local governments are also relied on to reform the institutional system regarding ideas and plans that align with the SDGs (Oosterhof, 2018).

The SDGs introduce 17 goals, including a vision of sustainable development for the world community. However, social scientists have revealed that using such quantitative targets and indicators can change power dynamics, resource allocation, and national and local priorities, as well as generate narratives that influence thinking and communication patterns and potentially exacerbate performance (Fisher & Fukuda-Parr, 2019). Furthermore, Fisher and Fukuda-Parr (2019) said that global goals impact human capabilities growth and development, particularly regarding how they reinforce or undermine existing power structures.

Biermann et al. (2022) said SDGs have some political repercussions on institutions and regulations at all levels of governance, from local to international. This discursive impact has substantially impacted how actors perceive and discuss sustainable development. In the framework of local government, each leader has their political pledge, which is poured into a medium-term plan that will eventually serve as the foundation for generating the annual budget. The question arises about how the local government implements the SDGs in its budgeting from the political economy perspective, whether they align with the leader’s political pledge or, on the contrary, trade-off each other. Classical political economy provides a foundation of analysis that includes certain aspects, notably the importance of historical context, the necessity of interdisciplinary methodologies, and the primacy of social strata analysis, all of which have the potential to enhance the discourse surrounding sustainable development studies (Manioudis & Meramveliotakis, 2022).

The political economy theory of accounting (PEA) posits that the field of accounting operates as an important mechanism designed to uphold and validate the prevailing social, economic, and political structures in a given societal context. This theoretical perspective argues that accounting, far from being a neutral and objective discipline, serves as a strategic tool that is inextricably intertwined with the maintenance and justification of existing social, economic, and political frameworks. At its core, PEA theory underscores the dynamic role of accounting as an instrumental force in perpetuating and legitimising the established structures and power relations inherent to contemporary society. In the context of SDGs and local governments, PEA theory will be a tool to analyse the phenomenon of political economy of accounting (PEA) perspectives on sustainable development goals (SDGs) towards local governments’ budgeting in Indonesia.

The local government’s medium-term development, which compounded the leader’s political pledge, is the basis and guideline for the local government in carrying out the 5 (five) year development. Based on Presidential Decree No. 111/2022 concerning the Implementation of Achieving Sustainable Development Goals requires the role of the Governor to prepare SDG Regional Action Plans together with Regents/Mayors in their respective regions by involving CSOs, Philanthropists, Business Actors, Academics, and other related parties. Furthermore, the Governor must also submit an annual achievement report on implementing the Regional SDG targets to the Minister of Home Affairs and the Minister of National Development Planning/Head of the National Development Planning Agency. Those regulations and procedures indicate political influence from the national to the local government, which can further impact budget policies and structures.

United Nations Project Office on Governance (UNPOG) in 2019 claims to support local government action to speed up implementation as they said: ‘We commit to empowering and assisting communities, local governments, and cities in pursuing the SDGs, we are aware of how important they are to achieving the SDGs’. In this context, UN Secretary-General Ban Ki-moon gave a strong message, acknowledging that ‘our struggle for global sustainability will be won or lost in cities’ (UN, 2016). The 2030 Agenda may be effectively transformed into a concrete plan by cities and regions since they are uniquely positioned to do so. They can take a practical approach to goals and targets, incorporate them into their unique contexts, and educate their inhabitants on the role of local action in achieving them. According to Indonesia’s SDG Roadmap, the national government must provide more leadership and technical assistance for local implementation through clear regulations and guidelines (Bappenas RI, 2021).

In line with SDGs at the global level, Indonesia has also prepared the 2015-2019 and 2020-2024 National Medium-Term Development Plans (RPJMN) so that the substance contained in the SDGs are aligned with the RPJMN, which is the elaboration of the President’s Vision and Mission. The number of SDGs targets that have been integrated into the 2020-2024 RPJMN is 124 targets (Bappenas RI, 2020).

Research conducted by scholars is now starting to accentuate the role played by local governments in putting the SDGs into practise at the local level (Reddy, 2016; Satterthwaite, 2017). However, the implementation practise still requires further study to understand how the localising of SDGs affects the budgeting in local government through the political economy of accounting within local government medium-term development planning, which will lead to an impact on the budget.

The implementation of the SDGs in Indonesia has entered the ‘decade of action’ phase, which requires accelerating the achievement of targets. Still, it seems that what has been realised has not met expectations. Research by Alfa (2019) in Rokan Hulu, Sastryawanto (2017) in Bojonegoro, Patiung (2019) in Mojokerto, Sofianto (2019) and Noor and Jayus (2021) in Central Java indicates the integration of SDGs indicators into planning and budgeting has not been carried out optimally, resulting in the target not being met as expected.

This research contributes to providing a comprehensive view of conflicts of interest involving actors in the process and decision-making of local government budget planning that impacts the implementation of the SDGs from the perspective of the Political Economy of Accounting. This research’s contribution also comprehensively describes the existing theory, which develops and grounds well-defined notions in novel circumstances. This research is urgent since only a few scholars expose the occurrences described in this study, as this remains a significant research gap in the literature. This strong phenomenon and still limited research conducted by academics is why the authors are interested in researching the Political Economy of Accounting (PEA) Perspectives on Sustainable Development Goals (SDGs) Toward Local Government’s Budgeting in Indonesia.

This study explores the conflicts of interest inherent in multi-stakeholder involvement in local government budget planning processes, and how these conflicts impact the realisation of the Sustainable Development Goals (SDGs) through the lens of the Political Economy of Accounting (PEA). Using a qualitative approach rooted in critical analysis, this study conducted in-depth interviews and document reviews using a semi-structured interview format. Data analysis involved synthesising insights from field research and existing literature, interpreting primary and secondary data, and drawing conclusions. The findings underscore the prevalence of conflicts of interest among actors involved in budget planning, with resource allocation and patron-client dynamics shaping budget decisions. Resolving these conflicts requires collaborative decision-making to align with policy objectives and economic imperatives. This research demonstrates that PEA theory serves as a valuable analytical framework for explaining the interactions between global initiatives, local budgeting processes, and underlying political economy dynamics. The managerial implications of this research underscore the importance of integrating these insights into local government budget policymaking processes, which provide important inputs for informed decision-making.

2. Literature review

2.1. Political economy of accounting (PEA) perspectives

Political Economy of Accounting (PEA) Perspectives confirms that accounting is used to justify and legitimate social, economic, and political policies. Accounting data is utilised to aid individuals in positions of power in society (Cooper, 1980; Cooper & Sherer, 1984). According to PEA views, two conflicting forces or principles cause tension in the arrangement’s connection with constituents (Buhr, 1998). In addition, the PEA perspective underscores the complicated power dynamics inherent in the formulation of accounting standards. This perspective often studies the concept of regulatory capture, where regulatory bodies, ostensibly set up to protect the public interest, can be subject to the influence or control exerted by the industry they are mandated to regulate. PEA frameworks also study the consequences of globalisation (such as SDGs) on national accounting systems, explaining its impact on the distribution of economic benefits (such as local government budgets). In a broader context, PEA engages in the analysis of social and economic impacts stemming from accounting policies. In addition, the PEA viewpoint underlines the importance of historical context in shaping accounting standards, recognising the important role it plays in influencing the evolution of accounting practices over time. In essence, the Political Economy of Accounting perspectives collectively provide a comprehensive lens for scrutinising the multifaceted dynamics that underscore the role and impact of accounting in the broader socio-economic and political landscape.

Based on the characteristics above, PEA theory is relevant to the local government’s medium-term development plans and budget because PEA perceives accounting reports, including local government income and expenditure budget, as social, political, and economic documents. They have been used to construct, maintain, and legitimise economic and political systems, institutions, and ideological concepts. Based on current legislation, those accounting documents have been purposefully constructed to adhere to the SDGs objective, which is included as an indicator in the mainstream. A number of important studies conducted by researchers in different countries contribute interesting findings to the very broad domain of Political Economy of Accounting (PEA). Mukhlisin and Hudaib (2014) conducted research in Indonesia, investigating the intriguing question, ‘Is there an accounting political economy in financial reporting standardisation for Islamic financial institutions?’ This research highlights the complex interplay between political and economic factors that influence accounting standards in the context of Islamic financial institutions. Similarly, Haryadi et al. (2023) delved into the PEA theme with their research entitled ‘A Political Economy Study of Accounting on Profit, Selling Price, Cost of Goods, and Import: Lessons from Salt Farmers in Indonesia’. This research offers valuable insights into the political and economic dynamics that shape accounting practices regarding profits, selling prices, cost of goods, and imports, drawing lessons from the experiences of salt farmers in Indonesia. In a broader geopolitical context, Fattah (2017) conducted a study titled ‘The Political Economy of Accounting and the 2003 Iraq War’. This research explores the relationship between accounting principles and political economy in the context of significant geopolitical events, specifically examining the 2003 Iraq War. Furthermore, Sokarina et al. (2019) contributed to the literature with their research entitled ‘A New Methodology for Initiating the Political Economy of Islamic Accounting’. This research introduces a new methodology, offering insights into the initiation of the Political Economy of Islamic Accounting, thus contributing to the evolution of thinking within this particular field. From previous research, it appears that research on PEA is still very limited, and more specifically when it comes to local government budgets, so this is the research gap that the author wants to fill.

2.2. SDGs implementation and localisation

The United Nations established the integrated development and environmental SDGs goals in 2015 to substitute for the Millennium Development Goals (MDGs) established in 2000. While the MDGs were set to measure progress achieved by 2015, the global community reached a forward milestone when the UN member states adopted 17 SDGs and 169 objectives, and a deadline of 2030 was set (Sarkar et al., 2022).

The SDGs enhanced national commitment while emphasising responsibility-sharing and non-state engagement (Bexell & Jönsson, 2017). Governmental and private sectors and civil society participants must be engaged in SDG action and initiative decision-making, implementation, and monitoring (Griggs et al., 2013). Because of the complexities and interdependence of the 17 SDGs, policies must be comprehensive, holistic, and coherent. To maximise SDG implementation, the goals must be included in each government’s national development strategy and programmes (UN, 2016).

No one will be left behind due to the SDGs, which are a people-centered agenda. The development of the SDGs has concentrated more on localisation because those goals are intrinsically linked to the responsibilities of local governments (Lucci, 2015; Jones & Comfort, 2019). Encourage the implementation of SDG targets, the localisation approach creating SDG translations to the local level, enabling more reciprocity at the global and local levels (Immler & Sakkers, 2022). The 2030 global sustainable development target must be given local consideration and effort (Patel et al., 2017; Morén-Alegret et al., 2018). The SDGs’ localisation might speed up the accomplishment of local objectives and, therefore, be essential for speeding up the SDGs’ local implementation to meet the 2030 timeframe.

2.3. Local government budgeting

Following Article 3 of Law No. 25 of 2004 concerning the national development planning system. It is necessary to have a medium-term development plan planning document that supports coordination between development actors, optimises community participation, ensures the achievement of resources efficiently and fairly, and ensures the creation of integration, synchronisation, and synergy.

In preparing the local government medium-term development plan (RPJMD), the primary reference used is the formulation of the vision, mission, policy directions, and indicative programme plans from the Regent/Mayor, which are presented at the Plenary Session of the Regional People’s Representative Council (DPRD) in the election process. In addition, the preparation of the RPJMD also refers to national and provincial planning documents to ensure policy synergies and programme synchronisation vertically between different levels of government.

Presidential Regulation Number 111 of 2022 concerning the implementation of SDGs has become the legal basis that local governments use to implement the SDG targets into the RPMJD they develop. The RPJMD is the formulation of the regional head’s vision, mission, and programmes, which is directed by the local government’s long-term development plan (RPJPD) and considered by the national medium-term development plan (RPJMN). The RPJMD includes local financial policies, development strategies, general policies, local and cross-local government unit programmes, and local programme work plans with regulatory and indicative finance frameworks.

The RPJMD document will be used to prepare the local government work plan (RKPD) for 1 (one) year. Based on the RKPD, the regional head and DPRD agree on the regional revenues and expenditures budget (APBD) General Policy. Furthermore, the regional leader will issue a work plan and budget (RKA) document for further discussion and produce regional regulations regarding the APBD.

Efforts to achieve SDGs targets are considered a strategic issue for local governments related to its integration into local government’s budgeting. Local governments consider this integration a necessity that must be followed even though there is a potential issue that SDG goals and local government policies have different directions that need to be addressed.

3. Methodology

This study is based on the paradigm of criticism with a qualitative approach. The critical theory seeks meaning behind the empirical and opposes the idea of a value-free concept. Critical theory is deeply committed to establishing a fairer social order. The essential assumption is that social science tries to generate comfort and freedom in life rather than just understanding unfairness in allocating power and resources. This critical philosophy is morally committed to criticising the current quo and creating a more just society (Muhajir, 2000).

The critical theory aims to promote freedom, justice, and equality by eliminating various types of dominance. This theory employs a reflective approach in which it constantly criticises current social, political, or economic orders or institutions that are not favourable to accomplishing freedom, justice, and equality (Dougherty & Pfaltzgraff, 1981). Political Economy of Accounting (PEA) is one of the critical theoretical approaches. PEA was first introduced by Tinker (1980).

PEA attempts to provide research integrating economic and political viewpoints to analyse reality. PEA tries to comprehend and analyse accounting’s role in the economic, social, and political environment it uses (Hopwood, 1978; Burchell et al., 1980; Neimark & Tinker, 1986).

This research focuses on the political economy of accounting (PEA) perspectives on sustainable development goals (SDGs) toward local government’s budgeting in Indonesia. This study relies on original data gathered through in-depth interviews and documentation. Secondary data is used as additional data to describe primary data, this document is in the form of regulations and other written sources that the author uses in the data triangulation process to validate interview data. An employee (Informant A) of the Development Planning Agency at the Sub-National Level and a member of the SDGs Center (Informant B) were employed in the interview process as informants. The author employed two types of informants to accommodate the subjectivity and intersubjectivity of the primary data gathered. Informants from the Development Planning Agency at the Sub-National Level (Bappeda) are the key actors involved in the local government’s budgeting process, possessing excellent accounting knowledge and having an exceptional understanding of the SDGs. Informants from the SDGs Center are expert in SDGs implementation in Indonesia. The author employs a systematic method to identify key informants by initiating an official request directed towards the pertinent institution. This method involves the author sending a formal letter to the relevant authority, presenting a comprehensive explanation of the research to be undertaken and delineating the specific criteria for potential informants. Through this formal communication, the author seeks to elicit cooperation from the institution and, in turn, garner recommendations on individuals who are deemed suitable to serve as key informants for the research.

Regarding ethical clearance, the author ensured that the informants consented to be interviewed and permitted this research to utilise the interview data. Consent from all informants was carefully obtained before they were involved in the study. The informants were verbally informed about the nature of the research, including its purpose, procedures, potential risks, and benefits. They were assured of their right to withdraw from the study at any time without penalty. The informants’ consent was recorded using the Zoom Meeting application, and the research interviews were also recorded using the same application. The interviews were conducted in a semi-structured manner according to the topics to be asked of the informants. The interview process with informants was conducted by the author during the first and second weeks of March 2023. The data analysis techniques used in this study were Collecting data from field findings and existing literature in the form of primary and secondary data. Then, the interpretation of the primary and secondary data is associated with the theoretical basis, and finally, the meaning of the existing data is concluded. In data analysis, the author conducted a coding process by writing interview transcriptions, then the author tabulated the data to reduce and condense the data relevant to the research focus. Furthermore, the author categorised the data to answer the research questions and made a narrative as a discussion.

4. Findings and discussion

Local government planning is essential to direct local government goals by considering their potential and resources. Law Number 25 of 2004 concerning the National Development Planning System defines planning as determining appropriate future actions through a sequence of choices, considering available resources. At the same time, the Government Regulation No. 17 of 2017 about the synchronisation of the national development planning and budgeting process establishes the need for budgeting and development planning to be carried out concurrently.

Local government planning and budgeting are integral parts of the management role in terms of strategic management. Effective financial management is built on a solid foundation of reliable data and information by considering the pertinent indications. Apart from planning, budgeting also plays an essential role in implementing regional development. Planning and budgeting are necessary for government administration because it relates to public welfare goals. Planning and budgeting are integrated processes. Therefore, the output of planning is budgeting. The relationship between planning and budgeting above is aligned with what was conveyed by informant A as follows:

…To achieve budget effectiveness, the planning process is fundamental to ensure that each programme can be implemented and its level of success can be evaluated…

4.1. Budgeting and central government regulation

Law No. 1 of 2022 states that the financial relationship between the central government and local governments is a financial administration system regulating financial rights and obligations between the central government and local governments. Following this regulation, local governments are positioned as administrators at the local level with the authority to regulate and manage government affairs and the local community’s interests according to their initiatives based on the people’s aspirations in the system of the Unitary State of the Republic of Indonesia.

In accordance with the philosophy of regional planning, which is a cascade down from national planning, regional planning and budgeting will also be heavily influenced by regulations from the central government. The regulations used as the primary reference in planning and budgeting are as follows: 1) Law No. 17 of 2003, 2) Law No. 25 of 2004, 3) Law No. 23 of 2014, and 4) Minister of Home Affairs Regulation No. 86 of 2017. The relationship between local government budgeting and central government regulation above is aligned with what was conveyed by informant A as follows:

…in the planning and budgeting process, we refer to regulations from the central government which provide scope and boundaries that cannot be violated. From a planning perspective, we follow the RPJMN, which must be aligned with the RPJMD to be cascaded for budgeting…

…The local government must follow instructions from the national and provincial governments when developing its budget. The local government’s RPJMD planning must wait until the provincial RPJMD is finished, and the provincial government must wait until the national RPJMN is finished. This is carried out to align with regional and national priorities. Our planning must cascade with national priorities and then again with provincial priorities. All of these cascades must occur concurrently. Provincial priorities must support a national priority, and local government priorities must support these national and provincial priorities….

The budget planning process is closely linked to power dynamics, with the central government emerging as an important stakeholder with considerable influence over decision-making. An important aspect of this influence lies in the central government’s authority to distribute resources to local governments through balancing funds. This is particularly important in the Indonesian context, where regions often struggle with low fiscal capacity. The allocation of balancing funds to local governments gives the central government a powerful tool to regulate the budget planning process. The issuance of various regulations by the central government further entrenches its role in shaping and controlling fiscal decisions at the local level. This power dynamic is in line with the perspective articulated by Buhr (1998) in the Political Economy of Accounting (PEA) paradigm, which states that there are two conflicting forces or principles that create tension in the relationship between accounting arrangements and their constituents.

In this context, tensions arise from the interaction between the central government, with its regulatory powers and resource distribution capabilities, and local governments that seek to navigate budget planning within the constraints imposed by fiscal constraints. Recognition of these conflicting forces underscores the complex nature of the relationship between central and local governments in the budgetary sphere. As a result, the role of central government goes beyond resource allocation; it permeates the regulatory landscape, exerting a formative influence on local government accounting arrangements and decision-making processes. In essence, the power dynamics stemming from the central government’s role in distributing balancing funds epitomise the broader dynamics explored in the Political Economy of Accounting framework. This lens recognises and analyses the tensions arising from conflicting forces, explaining the complex interactions between political, economic and accounting elements in the realm of budget planning in the context of local fiscal management.

The disparities in local governments, low local revenue, and many other financial problems make local governments depend on the continuity of their budgets from balancing funds provided by the central government. PEA views there as a patron-client relationship between the central and local governments, which makes the relationship between the two more vital than just the relationship between capital owners and agents. Regardless of regulations related to the implementation of the SDGs, this does not necessarily mean that this can be easily synchronised with budget planning, not to mention that budget planning regulations already have their own standards. With a lack of available resources, local governments are encouraged to find alternative sources of financing to implement the SDGs, which, of course, is not easy to obtain.

4.2. Budgeting and local government’s leader political pledge

The inauguration of a local government leader is the starting point for implementing the political pledges offered during the campaign. Fulfillment of the local government leader’s political pledges will normatively be translated into programmes in the APBD. The programmes listed in the APBD are then executed by the Technical Implementation Unit (UPT) in the local government concerned. Although the programmes offered are common, sometimes there are obstacles to fulfilling them. Budget availability is the dominant cause of why political pledges are often slow to fulfill. Meanwhile, the standardised budgeting mechanism following central government regulations is another factor that influences why the local government leader’s vision and mission cannot meet people’s expectations at the implementation stage. The relationship between budgeting and the local government’s leader’s political pledge above is aligned with what was conveyed by informant A as follows:

…Regarding local government leader’s political pledges, the Development Planning Agency at the Sub-National Level (Bappeda) must describe and select programmes, activities, and sub-activities based on synchronisation between the cascading RPJMD and the cascading to local government leader’s political pledges…

…Explicitly, finding local government leaders’ political pledges in the RPJMD isn’t easy because its document structure refers to the Minister of Home Affairs regulations. However, a particular chapter with the local government leader’s priority title can still be made in this regard. In addition, another document produced by Bappeda includes mapping all these pledges into programmes, events, and sub-activities, showing how these commitments are fulfilled…

…Principally, the local government leader’s political pledges should be realised. Bappeda has the critical task of cascading it to measure the level of realisation of these pledges. When mapping and cascading are not carried out with prudence, the risk of these promises not being fulfilled will be very high…

The critical role that local government leaders play in steering the direction of local government budgets cannot be understated. As the primary leaders overseeing budgetary matters, these leaders emerge as influential stakeholders who are empowered to shape and set the policy direction embodied in local government budgets. Utilising their political prowess, these leaders actively seek to embed their political commitments and promises into the fiscal framework. The inclusion of political promises into the budgeting process is in line with Hege and Brimont (2018) research that emphasises the complex dynamics of Sustainable Development Goals (SDGs) integration. Hege and Brimont emphasise that SDG integration requires a translation process that establishes a link between the SDG framework and the goals described at the national level. Crucially, this translation process will achieve optimal results when there is strong high-level political support for the SDGs.

Similarly, in the context of local government budgets, the active engagement of local government leaders reflects this translation process. Their commitment to embedding political promises in the budget reflects the alignment of local goals with broader national and international frameworks such as the SDGs. The success of this integration is inherently linked to the level of political support provided by these leaders, thus reinforcing Hege and Brimont’s assertion. Therefore, the actions of local government leaders in directing budget policies not only reflect their political power, but also contribute to the broader goals outlined in national and international frameworks. The interplay between political power, budgetary decisions, and the integration of strategic goals highlights the complex nature of local governance and its linkages with global initiatives such as the SDGs.

In situations of conflict of interest in determining budgetary decisions that are influenced by the power of regional leaders, PEA can be seen in the realisation of actual policies, which often differ from ideal policies. The actual changing budget policies often face various obstacles, including political constraints. In this case, political constraints refer to conflicts of interest and the need to make collective choices to deal with these conflicts, which ultimately result in policy choices and economic outcomes. Actual policy choices and outcomes that are not necessarily economically optimal surround the PEA discussion because not all local government leaders understand the SDGs’ indicators, and not all local government leaders’ political pledges align with SDGs’ indicators.

4.3. Budgeting and sustainable development goals indicators

The implementation of SDGs in Indonesia is based on inclusive principles involving many parties, including the central and local governments, whose roles are establishing policies and regulations, formulating plans and budget allocations, and implementing, monitoring, evaluating, and reporting achievement results. As the spearhead of implementing the SDGs, local governments are mandated to obtain SDGs financing sources with several alternatives, including 1) Optimising Regional Revenues; 2) Non-Governmental Sources of Funding from the Community; 3) Corporate Social Responsibility (CSR) from the private sector; and 4) Other Lawful and Non-Binding Sources. Funding is often an obstacle to implementing the SDGs in local government. Apart from low financial resources, local governments also have difficulty finding alternative sources of non-government donations from the public, the private sector, and other legal and non-binding sources.

In the local government budgeting planning process, SDGs are not a top priority when dealing with low financial resources. Local governments must first prioritise minimum service standards (SPM) to be budgeted. After that, the government must also prioritise operational costs such as employee salaries to be budgeted. After that, there are still programmes in the RPJMD that must be budgeted for. Only after all those priorities are addressed can the SDGs programme be mapped to include in the budget. Bappeda is faced with many priorities that must be planned with limited financial resources, so the process of mapping and cascading national/provincial priorities, the local government leader’s political pledges, and SDG indicators often encounter obstacles in the process. The relationship between budgeting and the SDGs indicators above is aligned with what was conveyed by informant B as follows:

…SDGs are a mandate from Presidential Decree 111/2022 and Bappenas directives, so cascading must be carried out to the budget. Each SDG’s goal has indicators such as poverty, and these poverty indicators must be cascaded to activities and sub-activities by synchronizing. In the planning process, there are priority scales that we must pay attention to, such as: 1) minimum service standards (SPM), including operational costs such as salaries; 2) local government leader’s political pledges; 3) priority themes (for example Covid19 in 2020); and 4) SDGs indicators…

The implementation of the SDGs has many actors involved. As an international organisation, the United Nations plays its role by initiating international commitments that are applied at the national to local levels. The political economy of accounting relationships played by the UN with central and local governments are bound by many commitment documents, sometimes including financial assistance.

The SDGs commitment, which has been commonly adopted in various countries, soon became a legitimate tool for a country to demonstrate its commitment to sustainable development. Countries that are slow in implementing the SDGs seem to question their commitment. However, with the equality targets promoted by the SDGs dealing with disparities in many countries and regions, implementation issues will soon arise. Research by Alfa (2019) in Rokan Hulu, Sastryawanto (2017) in Bojonegoro, Patiung (2019) in Mojokerto, Sofianto (2019) and Noor and Jayus (2021) in Central Java indicates that the integration of SDG indicators into planning and budgeting has not been done optimally so that the targets are not achieved as expected.

The conflict of PEA interests between the UN’s SDGs, which are faced with national and local government priorities, along with the vision and mission of their respective leaders, will create obstacles in budget policymaking and lead to problems in budget realisation, potentially displeasing to all parties. The implications of this research show that PEA theory can be used as an analytical tool that can describe the discourse on the relationship of an international idea that is localised into a local government budget, which is full of elements of political economy. The implications of this research for management in local government are as input and critical considerations that can be used as considerations in making further budget policies.

5. Conclusion

The author has conducted research that explores how conflicts of interest involving actors in the process and decision-making of local government budget planning have an impact on the implementation of SDGs from an Accounting Political Economy perspective. The results show that in the implementation of SDGs in local governments, many conflicts of interest are played by the actors involved according to the perspective of accounting political economy. All actors’ interests converge in the budget planning process, and collective choices must be made to handle these conflicts to produce policy choices and economic outcomes.

The distribution of resources played by actors and patron-client attachments also play a role in making budgetary policy decisions. Bappeda is faced with a situation where it has to accommodate the interests of all actors in budget planning. Even though everything has been done with all the information and adequate technical resources, the result will not please everyone.

The implementation of the SDGs, in the end, is not a top priority when faced with the weak financial condition of local governments, which prioritises minimum service standards and operational costs, which take up a large part of the budget. Along with this situation, non-government financing options are urgently needed so local governments can stay on track to achieve the SDGs 2030 agenda.

Ethical approval

Ethical approval for this research was granted by the Faculty of Economics and Business Education, Universitas Pendidikan Indonesia, with reference number 1110/UN40.A7/PT.05/2023

Author contributions statement

Table

Authors Name	Contributions
Iqbal Lhutfi:	involved in the conception and design of the research, analysis and interpretation of the data, drafting of the paper and involved in revising it critically for intellectual content and the final approval of the published version and also accountable for all aspects of the work.
Unti Ludigdo:	involved in the conception and design of the research, analysis and interpretation of the data, drafting of the paper and involved in revising it critically for intellectual content and the final approval of the published version and also accountable for all aspects of the work.
Mohamad Khoiru Rusydi:	involved in the conception and design of the research, analysis and interpretation of the data, drafting of the paper and involved in revising it critically for intellectual content and the final approval of the published version and also accountable for all aspects of the work.
Zaki Baridwan:	involved in the conception and design of the research, analysis and interpretation of the data, drafting of the paper and involved in revising it critically for intellectual content and the final approval of the published version and also accountable for all aspects of the work..

Acknowledgement

The authors express their gratitude to Bappeda Kota Cimahi (Dede Azis) support that enabled the successful completion of this research.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

The data used in this research are original data gathered through in-depth interviews and documentation. The data are available upon request from the authors by contacting the corresponding author at [email protected]

Additional information

Funding

The authors express their gratitude to the LPDP-Ministry of Finance, Republic of Indonesia, for providing the necessary funding and support that enabled the successful completion of this research.

Notes on contributors

Iqbal Lhutfi

Iqbal Lhutfi is a lecturer at the Accounting Education Study Programme at Universitas Pendidikan Indonesia, currently he is pursuing his Doctoral degree at Universitas Brawijaya. Iqbal Lhutfi has expertise in Public Sector Accounting, Sustainability Accounting, Corporate Governance and Risk Management.

Unti Ludigdo

Unti Ludigdo is a professor of Business and Professional Ethics in the Accounting Department of Universitas Brawijaya, with expertise in Accounting Ethics, Business Ethics, Professional Ethics, and Qualitative Research.

Mohamad Khoiru Rusydi

Mohamad Khoiru Rusydi is an Associate Professor at the Accounting Department of Universitas Brawijaya, his areas of expertise include tax accounting, public sector accounting, and budgeting.

Zaki Baridwan

Zaki Baridwan is an Associate Professor at the Accounting Department of Universitas Brawijaya, where he specialises in Auditing, Accounting Information System and Public Sector Accounting.