This study aims to investigate the effectiveness of local governments in the use of their revenue budgets to achieve human quality development goals. This effectiveness will be reflected in the role of capital expenditures as mediating the influence of local revenue and income from the central government balancing fund on the human development index (HDI). Using the SEM-PLS method, it was found evidence that local government capital expenditures were successful in mediating the effect of local revenue and special allocation funds on HDI. However, it failed to mediate the effect of the general allocation fund on HDI. It can be concluded that local governments have not been effective in using general allocation funds through capital expenditures in achieving human quality development targets in the regions. These transfer funds are more likely to be used as operational expenditures that do not support human quality development.

Keywords : Local Original Revenue, Special Allocation Fund, General Allocation Fund, Capital Expenditure, Human Development Quality