Inequality in development between regions in Indonesia is still a challenge for the government. The facts prove that there are still provinces, districts and villages that are categorized as underdeveloped. Therefore, the importance of using village funds in reducing development inequality is an important concern of the government. In addition, the inconsistency of prior research findings suggests the importance of this study. This study aims to examine the effect of the utilization of village funds on village development expenditures moderated by village budget stress. The research sample was all provincial governments using a purposive sampling method that reported village fund data, village fund allocations, village development expenditures, revenue, and expenditures for 2017-2019. This study uses Partial Least Square (PLS) to test the research hypothesis. The results suggests that the utilization of village funds has a positive and significant effect on village development expenditures, village budget stress has a negative and significant effect on village development expenditures. However, village budget stress cannot moderate the effect of the utilization of village funds on village development expenditures. The results of the sensitivity test support the main test results of this study. The implication of this research is important for the village government to utilize village funds and village fund allocations to reduce the village budget stress, so that it can increase village development expenditures in achieving the level of prosperity of all village residents.

Keywords : Village Budget Stress, Village Development Expenditures, Utilization of Village Funds.