http://ijfr.sciedupress.com International Journal of Financial Research Vol. 10, No. 6; 2019 Published by Sciedu Press 211 ISSN 1923-4023 E-ISSN 1923-4031 Whistleblowing System and Fraud Early Warning System on Village Fund Fraud: The Indonesian Experience Sugeng Wahyudi 1 , Tarmizi Achmad 1 & Imang Dapit Pamungkas 2 1 Business and Economics Faculty, Universitas Diponegoro, Semarang, Indonesia 2 Business and Economics Faculty, Universitas Dian Nuswantoro, Semarang, Indonesia Correspondence: Imang Dapit Pamungkas, Business and Economics Faculty, Dian Nuswantoro University, Semarang, Indonesia. Tel: 62-8564-020-5628. Received: July 31, 2019 Accepted: August 28, 2019 Online Published: September 8, 2019 doi:10.5430/ijfr.v10n6p211 URL: https://doi.org/10.5430/ijfr.v10n6p211 Abstract This research aims to investigate the effectiveness of village fund fraud prevention models by analyzing the implementation of the Fraud Early Warning System (FEWS) and whistleblowing system to good village governance towards clean government. This study used a descriptive qualitative research method by conducting interviews to explore more information about the problems of preventing village fund fraud. The paradigm used is the interpretive and methodology paradigm used to express meaning is phenomenology to describe and explain how behavior in the implementation of FEWS and the whistleblowing system against village fund fraud. Determination of informants was carried out with a sequential technique, namely all village officials and communities involved in managing the process of allocating village funds in Sumowono Subdistrict, Central Java Province, Indonesia as research informants. The population of this study was 105 village officials and community members from 16 villages in Sumowono District. This study shows that in managing village fund fraud, complaints about village fund fraud were mainly driven by courage from the local community in their respective villages. The strategy to reduce fraud is to provide opportunities for the community to implement FEWS and the whistleblowing system as a preventive strategy to prevent village fund fraud. FEWS and wshistleblowing system activities in village funds also face various challenges. The implementation of the FEWS and the effective whistleblowing system, the fraudsters will think again whether to continue fraud or cancel the behavior. Keywords: fraud early warning system, whistleblowing system, village fund fraud 1. Introduction The phenomenon of village fund fraud has caused anxiety for the community and the government in general. According to CNN Indonesia (2018) the Indonesian National Police found around 214 cases of village fund fraud involving a budget of up to 3 million USD, from 2015 to 2017 and there were around 900 villages that had problems, the village head was arrested, due to misappropriating village funds. Indonesia Corruption Watch released 110 cases of village fund fraud and village fund allocation throughout 2016-2017, of the 110 cases, most were carried out by the village head. The government has established various regulations and guidelines related to village funds in the hope of facilitating the implementation of village fund management so that it does not create potential fraud in its implementation. Regulation of the Minister of Home Affairs of the Republic of Indonesia No. 37 year 2007 concerning Guidelines for Village Financial Management is expected to be able to realize effective and efficient financial management governance by having transparency, accountability and participation. Village funds that have been issued by the government since 2015 amounting to 8,4 billion USD, in 2015 amounting to 1,4 billion USD, 2016 amounting to 3,5 billion USD, 2017 amounting to 4,2 billion USD (Setkab, 2019). The total allocation of funds of 74,910 villages has made the Corruption Eradication Commission have a considerable task in its supervision, the greater the funds provided the greater the likelihood of fraud occurring. According to the State Development Audit Agency (2015), the first few risks of village fund fraud are the use of the theft of cash on hand. Second, mark up and or kick back on the procurement of goods or services. This certainly can cause losses to village finance and reduce the ability of the government by carrying out its duties and functions. Third, the use of village assets for the personal benefit of village officials illegally, misuse or disappear. An in-depth study needs to be done regarding the potential for fraud in village financial management so that later anti-fraud