Round 1

Reviewer 1 Report

Review of the Manuscripts  ID -economies- 1451841  „Prevention Village Fund Fraud in Indonesia: Moral Sensitivity as a Moderating Variable” for the Journal Economies.

General Comments

From my point of view, it is a very interesting topic and simultaneously it seems that to the best of my knowledge is the first empirical research examine the effectiveness of the internal control system, appropriate compensation, the competency of village apparatus to prevention village fund fraud with moral sensitivity as a moderating variable. The paper consists of the following sections: Introduction, Literature Review, Methodology and Conclusions.

However, I find some recommendations:

1. The abstract must contain the main purpose of the paper, the research method used in the research and the main contributions.
2. It would be very useful to add in the "Introduction" section the purpose, objectives and hypothesis of the research.
3. We consider that the introduction should specify the novelty of the paper compared to other papers published in this area.
4. The paper can be substantially improved if in the authors will introduce the working hypotheses in the Methodology section.
5. At the same time it is not clear why Adj.R-Squared in Table 4 is larger than R-Squared (0.579> 0.343 for VFF and 0.898> 0.545 for MS).
6. Also, we consider the literature is not enough and that is why, we recommend the authors to refer to other recent works indexed in Web of Science, Scopus, Emerald, Cambrige, and of course MDPI Journals. We suggest that the authors cite papers published in MDPI journals and Web of Science Journals, such as:
7.  Nichita, A., Batrancea, L., Pop, C.M., Batrancea, I., Morar, I.D., Masca, E., Cesar, A.M.R., Forte, D.,  Formigoni, H.,  da Silva, A.A. (2019). We learn not for school but for life: Empirical evidence of the impact of tax literacy on tax compliance. Eastern European Economics 57: 397–429.

Author Response

Dear Reviewer,

thanks for the opportunity and attention to review our article.

We present the improvements that we have completed as follows:

In the Abstract section we add the main objective of the paper, the research method used in the study and the main contribution, namely The results showed that the village apparatus's internal control system, appropriate compensation, and competency prevented village fund fraud. Furthermore, the novelty of this research is to add a moderating variable moral sensitivity which can strengthen the relationship between internal control system, appropriate compensation, competency of village apparatus to prevention village fund fraud.

Furthermore, it has been added in the "Introduction" section the aims, objectives, and hypotheses of the research.

We consider that the introduction should determine the novelty of the paper in comparison to other papers published in this field. The novelty of this research, when compared to previous research, is placing moral sensitivity as a moderating variable. Previous studies were only limited to examining the relationship between factors that influence village fund fraud, such as the internal control

Thank you for the review for Adj. R-Squared in Table 4 is greater than R-Squared (0.579> 0.343 for VFF and 0.898> 0.545 for MS) is wrong or reversed due to error. Then the correct ones are R-Squared = 0.579 and Adj.R-Squared . then R-Squared 0.898 and Adj.R-Squared 0.545

We have included this article for references and citations, namely Nichita, A., Batrancea, L., Pop, CM, Batrancea, I., Morar, ID, Masca, E., Cesar, AMR, Forte, D., Formigoni, H ., da Silva, AA (2019). We learn not for school but for life: Empirical evidence on the impact of tax literacy on tax compliance. Eastern European Economy 57:397–429.

Thanks You

Best Regard

Reviewer 2 Report

The paper under title “Prevention Village Fund Fraud in Indonesia: Moral Sensitivity as a Moderating Variable” deals with the motivates of corporate fraud within the public sphere focusing on an Indonesian region. The paper utilizes a quantitative method of analysis using questionnaires. Potentially it could provide some information on the issue of public management fraud within developing countries, but the paper has many deficiencies in terms of theoretical background, analysis and results which make it unsuitable for publication in its current form. Especially, the paper I believe is within its initial draft and requires further work from the author(s) in order to reach its publishable form. Nevertheless, I urge author(s) to consider the following comments and improve the paper for future potential endeavors and other research outlets.

1. At first the paper requires and extensive English editing since there are numerous syntax mistakes, words missing, incomplete sentences, word repetitions and grammatical errors, which make the paper very difficult to understand in some parts of the text.
2. More details are required for the reader to understand the Indonesian governance system (the village system), its specific characteristics and how this motivates fraudulent behavior. The reader is left wondering about the way local governments are managed and why this creates opportunities for fraud, thus the motivation for the current study.
3. Following this comment, author(s) on the first five lines of the introduction need to explain what is the “village household sector”, what do they mean by “96 points in village funds”. All this paragraph is confusing without the reader to understand what exactly author(s) mean.
4. Also, at the end of the first paragraph of the introduction author(s) need to be precise on the currency units they refer too. What is Rp? Author(s) need to be consistent with the currency units. Also, it is also useful to translate the local currency to US dollar since it is easier for the reader to compare the relevant amounts.
5. The introduction needs a clear discussion on the specific merits that this study is contributing to existing literature. What is the novelty of the study? This is unclear.
6. Also, a sound theoretical framework is absent from the introduction. Author(s) need to elaborate more on the theory behind fraudulent behavior and local governments or states. For example, the following works (which are only indicative) could help author(s) towards improving the theoretical background of the study:

-Maulidi, A., Ansell, J. Corruption as distinct crime: the need to reconceptualise internal control on controlling bureaucratic occupational fraud (2021) Journal of Financial Crime, DOI: 10.1108/JFC-04-2021-0100

-Ikbala, M., Irwansyaha, I., Pamintob, A., Ulfaha, Y., Darma, D.C. Financial intelligence: Financial statement fraud in Indonesia (2020) Journal of Intelligence Studies in Business, 10 (3), pp. 80-95.

DOI: 10.37380/JISIB.V10I3.640

-Shonhadji, N., Maulidi, A. Is it suitable for your local governments?: A contingency theory-based analysis on the use of internal control in thwarting white-collar crime (2020) Journal of Financial Crime, DOI: 10.1108/JFC-10-2019-0128

-Yusuf, Z., Nawawi, A., Salin, A.S.A.P. The effectiveness of payroll system in the public sector to prevent fraud (2020) Journal of Financial Crime, DOI: 10.1108/JFC-08-2017-0075

-Abdullahi, R., Mansor, N. Fraud prevention initiatives in the Nigerian public sector: Understanding the relationship of fraud incidences and the elements of fraud triangle theory

(2018) Journal of Financial Crime, 25 (2), pp. 527-544. DOI: 10.1108/JFC-02-2015-0008

-Hyvärinen, H., Risius, M., Friis, G. A Blockchain-Based Approach Towards Overcoming Financial Fraud in Public Sector Services (2017) Business and Information Systems Engineering, 59 (6), pp. 441-456. DOI: 10.1007/s12599-017-0502-4

-Jackson, P.M. Debate: Fraud risk management in the public sector (2013) Public Money and Management, 33 (1), pp. 6-8. DOI: 10.1080/09540962.2013.744866

7. Furthermore, the moral sensitivity considered as a moderating variable needs to be also based on a sound theoretical framework. Why this variable is important and why it is expected to moderate the fraud motives within the LGOs?
8. Sub-section 2.1 to 2.5 should be included on the respective hypotheses’ development subsections, since it is easier for the reader to understand the theoretical connection to the research hypothesis.
9. Especially, hypotheses 2 and 4 require further justification. The discussion on those section is very brief, and a sound theoretical framework is required on both cases. Moreover, the argument at the end of page 4 that “fair compensation can reduce accounting fraud” requires support by existing literature or relevant theories.
10. Another important problem is on the data selection procedure. Author(s) on section 3.1 mention that they collected data from the village head, secretary, treasurer and assistant. Since in each village there are 4 people multiplied by 16 regions it sums up to 64 responses. So how the 289 questionnaires summed up? Please provide more details on the sample selection procedure.
11. On tables 6 and 7 author(s) need to explain what the initials mean (ICS, AC, CVA etc.).
12. Also, author(s) need to explain more the empirical results on the tables. There is no discussion and the reader without any knowledge on SEM could have a comprehension problem.
13. The means on Table 3 are referring to the average of all indicators on each variable? Please clarify.
14. At the beginning of page 9 author(s) refer to the fraud triangle theory, but there is no such discussion on the literature review section. How is this theory related to the topic of the study?
15. The reference list is not accurate and complete. There are several citations that do not include details on the journal name, volume etc. Please check the reference list for its completeness and consistency.

Author Response

Dear Reviewer,

thanks for the opportunity and attention to review our article.

We present the improvements that we have completed as follows:

We have fixed in the manuscripts regarding missing words, incomplete sentences, word repetitions and grammatical errors. Next we explain the Indonesian government system (village system), how fraudulent behavior can occur. In the background, we have explained the motivation and reasons for this research.

In the first five lines of the introduction, it is necessary to explain what is meant by "village household sector", sorry for the typo, the truth is village fund fraud. Meanwhile, what is meant by "96 village fund points" is that there are 96 cases of village funds that have been disclosed in the manuscript. We revised from rupiah currency to US dollar.

On the background, we explain about novelty, namely This study aims to examine moral sensitivity as a moderating variable on the relationship between the internal control system, proper compensation, and the Competence of village officials to prevent village funds fraud.

Reference results have been added to strengthen the manuscript and according to recommended references.

Furthermore, moral sensitivity is considered a moderating variable based on previous research GAP research. Why is this variable important? Because the apparatus has good moral sensitivity and is equipped with good competence, it can prevent fraud. The stronger the moral sensitivity of the village government apparatus, the Competence possessed by the device itself to prevent fraud.

Sub-chapters 2.1 to 2.5 have been edited and included in their respective hypothesis development sub-chapters, Thank you for the recommendation

We have developed and strengthened hypotheses 2 and 4 with supporting arguments.

The authors in section 3.1 mentioned that they collected data from the village head, secretary, treasurer and assistant. Because in each village there are 4 people multiplied by 16 regions, the total number of responses is 64. So what is the summary of the 289 questionnaires?

The village officials, namely the village head (1), village (1), and village assistants (3), because they have the main task, the function of managing village finances such as the Head of the Government & Public Service Section ( 1), Head of the Peace, Order & Environment Section (1), Head of the Community Empowerment Section (1), and all members of the Village Consultative Body (12). So, Total 20.

In tables 6 and 7 the author needs to explain what the initials of ICS (internal control system), AC (appropriate compensation), CVA (competency of village apparatus) mean VFF (village fund fraud).

The author needs to explain more empirical results in the table. No discussion and readers without knowledge of SEM can run into comprehension problems?

We have explained in the method section, namely “PLS is a powerful analysis method (sort modeling) because it eliminates Ordinary Least Square (OLS) regression assumptions, such as requiring the data to be generally distributed in a multivariate manner, and there are no problems. related to multicollinearity between exogenous variables. PLS-SEM has the consequence that the test can be carried out even without a strong theoretical basis and various assumptions (non-parametric) and the parameters of the accuracy of the prediction model if one sees a value of the coefficient of determination (R- squares). The stages of analysis using PLS-SEM are through a six-stage process such as Conceptualization of the model, determining the analysis algorithm, determining the resampling method, and Drawing the path diagram. Results of Latent Variable Coefficients Output. Next, will carry out in two stages Evaluation of the model in PLS-SEM. First, the outer model or Evaluation of the measurement model. Second, the inner model or Evaluation of the structural model. Model Fit and Quality Indices, Output Path Coefficients Model Direct Effect, and Output Path Coefficients Model Indirect Effect. The outer model was conducted to assess the reliability and validity of the latent construct forming indicators. In comparison, the inner model aims to predict the relationship between latent variables by seeing how can explain much variance and determine the significance of the p-value. After the model has been estimated and evaluated, the last step is to report and communicate the results of the analysis that has been carried out.”

The mean in Table 3 refers to the average of all indicators on each variable? Yes that's right. Thank you

In the literature review, we have explained using the Fraud Diamond Theory as reinforcement.

We have updated and complete the reference list.

Thank You

Best Regard

Reviewer 3 Report

Dear Authors,

I believe you have touched a very interesting issue by focusing on the effectiveness of the internal control system, appropriate compensation, the competency of village apparatus to prevention village fund fraud with moral sensitivity as a moderating variable. The manuscript needs revisions in terms of content, in accordance with the academic standards of the journal. Please find these comments in the following paragraphs.

General comments:

The manuscript “Prevention Village Fund Fraud in Indonesia: Moral Sensitivity as a Moderating Variable” needs careful English proofreading because there are some shortcomings. For instance, the article “the” is sometimes missing in front of nouns, the message in some paragraphs is not clear enough.       

Regarding the abstract, I suggest the authors to focus more on emphasizing the results of the study and their importance.  The authors must show the novelty of the research compared to other research in this field.

More clarity is needed in presenting the research questions and the hypotheses because too many notations are used in this section. In my view, the research questions do not need a specific notation, they can simply be enumerated. In order to make hypotheses more visible to the reader, each of the hypotheses could be presented on a different row.  

In the introduction and the theoretical discussions sections, authors should stress more how increasing their proposal the economic theory.

The following titles are suggested to be included in the introduction and literature review sections, regarding this subject:

1. Nichita R.A., Batrancea L.M. (2012) The Implications of Tax Morale on Tax Compliance Behavior, Annals of Faculty of Economics, 1(1), pp.739-744.

The authors should present to descriptive statistics all the information related to the variables in the study: Kurtosis Values; Jarque Bera test etc.

It is very important to present the correlation matrix in order to highlight the shape and size of the connection between the variables chosen in this study.

In my opinion, an econometric analysis between a dependent variable and the independent variables would considerably improve the quality of the paper, especially since the authors formulated 4 working hypotheses.

The conclusions must be explained in terms of the results obtained from the processing of the sample data.

Author Response

Dear Reviewer,

Thanks for the opportunity and attention to review our article.

We present the improvements that we have completed as follows:

We have tried to fix some bugs. For example, the article “the” is sometimes lost in front of the noun, the message in some paragraphs is not clear enough in our article. Thanks You.

Regarding abstracts, this article has focused more on emphasizing research results and their importance. Thanks. Here is what we wrote in the article “The novelty of this research, when compared to previous research, is placing moral sensitivity as a moderating variable. Previous studies were only limited to examining the relationship between factors that influence village fund fraud, such as the internal control system, appropriate compensation, and the competency of the village apparatus. The weakness of previous research is that the variables included are pretty small, so additional variables must be developed or further explored to check the consistency of these variables. Based on the gap between the survey results and falsified village funds, the reason for this research is to identify the factors that can prevent the misappropriation of village funds by placing moral sensitivity as a moderating variable. Furthermore, The urgency of this research is given the increasing prevalence of village fund fraud. So it is necessary to know what factors influence the prevention of misappropriation of village funds. Morality can be seen from a person's personality and mindset in upholding honesty and justice. This mindset can reduce an individual's desire to commit fraud”

More clarity is needed in presenting research questions and hypotheses because too much notation is used in this section. In my opinion, research questions do not require special notation, just enumeration is enough. To make the hypotheses more visible to the reader, each hypothesis can be presented on a different line.

In the introduction and theoretical discussion sections, authors should place more emphasis on how to improve their proposals on economic theory.

The following titles have been included in the introduction and literature review on this subject: namely Nichita R.A., Batrancea L.M. (2012) Implications of Tax Morals on Tax Compliance Behavior, History of the Faculty of Economics, 1(1), pp.739-744.

The author has added and presented descriptive statistics, namely the skeness value and the kurtosis value in the descriptive table.

It is very important to present a correlation matrix to highlight the shape and size of the relationship between the variables selected in this study. We have added it to table 4.

The conclusion has been explained by explaining based on the processing of sample data.

Thanks You

Best Regards

Round 2

Reviewer 2 Report

I would like to thank the authors for their effort to incorporate all comments raised. I believe the paper has improved materially compared to its first draft. I think the study could make a novel contribution to the literature and for this reason I propose an acceptance decision. Nevertheless, it would be useful to check the paper again for any remaining errors and for the completeness of the reference list.

Author Response

Dear Reviewers.
Thank you for your time and attention for the review that has been given and for giving us the opportunity to revise our manuscript again.
We have fixed writing and language errors as optimally as possible. Thank you for the review that has been given so that the quality of our article is better and it is approved for publication.

Best regard

Author Response File: Author Response.pdf

Reviewer 3 Report

Dear Authors, 

The current version of the manuscript is considerably improved as compared to the previous one. Regarding the reference Nichita et al. (2019), please mention the name of all authors in the reference list. 

Kind regards, 

Author Response

Thanks you,

Nichita's reference has been mentioned by the name of all authors in the reference list, namely:

Nichita, A., Batrancea, L., Marcel Pop, C., Batrancea, I., Morar, I. D., Masca, E., ... & da Silva, A. A. (2019). We learn not for school but for life: Empirical evidence of the impact of tax literacy on tax compliance. Eastern European Economics, 57(5), 397-429.

Best Regard

Author Response File: Author Response.pdf