Purpose: This research will discuss about whether human capital and cultural capital affect the financial condition of a region and whether cultural capital has a mediating effect (mediator) on the effect of human capital on the financial condition of a region. Moreover, this research also refines previous research by combining the simultaneous effect of the variables Human Capital and Cultural Capital on the Financial Condition of a Region and examining the mediating effect of the variable Cultural Capital. Methodology: Research was conducted at the Regional Apparatus Work Unit (SKPD) in the Area of South Sulawesi Province with a total population of up to 630. The inferential statistical analysis using the method of variance-based Structural Equation Modeling (SEM) known as Partial Least Squares Structural Equation Modeling (PLS-SEM). Finding: Human capital has positive influence on cultural capital. The higher the human capital, primarily reflected in the work experience, will result in increasing the capital of culture in the working environment of local government in the province of South Sulawesi. Originality: Originality of this paper shows: (1) an inferential method used in this research is a Structural Equation Modeling (SEM) (2) the location of the research located in of the Regional Apparatus Work Unit (SKPD) in the Area of South Sulawesi Province, Indonesia, Indonesia which there hasn’t been research by the methods and the same location.

INTRODUCTION

The regional autonomy policy is essentially aimed at promoting the capacity of local governments to provide public services in a more effective and efficient manner. Closeness with government organizations at the regional level is expected to help collect real aspirations of the public with regard to what services they need. Therefore, it is expected that input will be obtained in an attempt to plan development in order to eliminate the gap between the development planning carried out by the government, including both the program and the budget, and the real needs of the public. Among the keys to a successful regional autonomy policy as reflected from the successful administration or regional government organizations is inseparable from the quality of services these regional governments give to the public. Public services can be delivered on an effective and efficient basis by regional governments if their financial condition is good or healthy. The term financial condition according to Dinapoli (2011: 2) refers to a financial condition defined based on the ability of regional governments to balance between revenues and expenditures by still maintaining the quality of services provided to the public. While according to Kamnikar (2006), the financial condition of a government is defined as the ability of the government to fulfill its obligation to serve its constituency in a sustainable manner. Furthermore, the Public Sector Accounting Board (2007) defines it based on the government’s ability to meet its financial obligations and commitment to serve the public, creditors, employees, and others. Based on several definitions of the term financial condition above, it can be concluded that a financial condition refers to the ability of regional or regency/city governments to balance between necessary expenditures and sources of revenues, while providing services in a sustainable manner. According to Dinapoli (2011), a group of people with a good financial condition is always served pretty well if such a financial condition is comprised of three factors, namely environmental factors, institutional factors, and financial factors. The financial condition of a region is reflected in the dependence level of the regional government on the central government, which is still fairly high in South Sulawesi. This is indicated by a number of regions, namely Makassar City, Bone Regency, Gowa Regency, and Wajo Regency, in which their revenues were fairly high despite their relatively low RegionallyGenerated Revenue (PAD) , i.e. by 6.17%, 10.09%, and 6.90% for Bone Regency, Gowa Regency, and Wajo Regency, respectively. Regional Expenditures at the national level in the Fiscal Year of 2013 reached IDR707.083 trillion. Personnel Expenditures still took up al dominant portion, i.e. up to 41.9% or by IDR296.540 trillion. Capital Expenditures reached IDR175.578 trillion or 24.8%. Expenditures on Goods and Services reached IDR148.012 trillion or 20.9% and Miscellaneous Expenditures reached IDR86.952 trillion or 12.2%.