Jurnal Ekonomi Pembangunan, ISSN 1411-6081 176 Avalaible online at http://journals.ums.ac.id Jurnal Ekonomi Pembangunan, 17 (2), December 2016, 176-192 DETERMINANT OF LOCAL EXPENDITURE QUALITY MODEL AND RELATION WITH LOCAL DEVELOPMENT IN EAST JAVA Yufta Listiana, Bambang Juanda, Sri Mulatsih Graduate School of Rural Planning and Development Bogor Agricultural University Jl. Kamper Wing 2 Lv 5 Kampus IPB Dramaga Bogor 1660 Indonesia Corresponding E-mail: yufta.listiana92@gmail.com Recieved: July 2016; Accepted: December 2016 Abstract Keywords: Expenditure Quality, Local Development, Accountability, Transparency, Structural Equation Modelling JEL Classifcation: H54, H72, H75, O21 1. Introduction Development is a systematic effort and sustainable for create a condition that can provide a variety of alternatives for achieving the aspirations of every citizen (Rustiadi et al, 2011). Todaro (2006) explain that the development is seen as a multidimensional process that covers a wide range of fundamental changes on the social structure, the attitude of society and national institutions that pursue the acceleration of economic growth, overcome income inequality, and overcome poverty. Along with the implementation of regional autonomy and the change paradigms underlying development to the society, regional development requires a participatory approach, involving all of elements of society in the region. Implementation of regional autonomy, it means the region is given authority to manage the potential of the region in developing the potential its resources. Regional autonomy policy has been established that fscal decentralization is based on the consideration that region is more aware of the needs and standards public service in the region. Each region is given authority and obligation to arrange the local budget (APBD). Local budget can maximize their local revenue of existing potential, then spend those funds according the program and needs of the region has been set. Minister Regulation No. 13 of 2006 also have determined structure of expenditure consist of indirect and direct expenditures. Indirect expenditure is budgeted expenditure not directly related to the implementation of programs and activities that include: personnel expenditure, interest expenditure, subsidy, grant expenditures, social aid, proft sharing expenditure, fnancial aid, and unexpected expenditures.While direct expenditure is budgeted expenditure directly related to the implementation of programs and This research aim is to analyze local expenditure quality in East continuously Java based on fve construct variables. Each construct variables consist of 40 indicators. This research use secondary data is Local Government Management Evaluation Report each region in East Java. Data of local development use poverty, unemployment, Gini index, economic growth, GDP per capita, and Human Development Index. This research uses analysis Structural Equation Modeling. It uses to know appropriate indicators to improve spending quality. The result shows that from 40 indicators just there are 21 indicators which have reached criteria good expenditure quality. Effectively has infuence to expenditure quality more than 50% to describe model variation in local expenditure quality. It means that East Java has high fnancial effectively in increase public service because quality expenditure increasing each year.