Determinants of Fraud Prevention in Village Fund Governance: Evidence from Village Governments in Motoling District, Indonesia

Abstract

This research investigates the factors influencing fraud prevention in village fund governance within Indonesia’s decentralized fiscal system, where increasing public fund allocations have heightened the risk of misuse and governance challenges. Although prior studies have widely examined fraud in the public sector, limited research has explored the integrated roles of internal control systems, whistleblowing mechanisms, and village apparatus competence within a unified framework at the village level. This study aims to assess how institutional control mechanisms and the competence of human resources influence fraud prevention in the management of village funds. The novelty of this study lies in the development of an integrated empirical model using a census-based approach that includes all village officials in one district, thereby providing a more contextually relevant and representative evaluation. A quantitative explanatory methodology was utilized through Partial Least Squares Structural Equation Modeling (PLS-SEM) using data gathered from 81 village government officials in the Motoling District. The findings indicate that village apparatus competence exerts the strongest positive influence on fraud prevention, followed by internal control systems and whistleblowing mechanisms. This study contributes to the village fund governance literature by integrating internal control systems, whistleblowing mechanisms, and village apparatus competence within a single explanatory framework to examine their relative roles in fraud prevention. The evidence is derived from a cross-sectional self-reported survey of village government officials in Motoling District, Indonesia; therefore, the findings should be interpreted within this specific context and should not be generalized beyond similar governance settings without further empirical validation.