This study aimed to analyze the effect of the follow-up of financial investigation results on the financial reporting accountability and to examine the influence of follow-up of financial investigation on the level of financial losses. This research was conducted in all the municipalities and cities in Indonesia by purposive sampling method from the period of 2011-2014, with the number of observations as much as in 1152. Data analysis was performed with the Structural Equation Model (SEM) with Warp-PLS Program 5.0 and Sobel test method to test the mediating variable. The results showed that follow-up of financial investigation reduces the level of financial losses, thereby increasing the accountability of local government financial reporting.

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Introduction:The Village Fund is a form of trust from the central government to plan and implement programs and activities in its village. The increasing number of village funds disbursed by the government is not in line with good management. Research Objectives:To analyze the effectiveness of the internal control system as a tool for detection early in preventing fraud in the management of village funds.Methods: This research is qualitative. The object of this research is eight districts and 30 sub-districts as research samples in Central Java Province. This study's data analysis techniques were done through data reduction, presentation, and conclusion drawing. Conclusion:From the results of data analysis in the field, it can be concluded that fraud in the management of village funds is generally caused by the non-functioning role of village assistants in managing village funds. Weak guidance and supervision from various parties that should be the duties and responsibilities of the agency, including the Subdistrict head, the Government Guard and Security Team and the Development of the Semarang District Attorney, the Body Consultative Village, which seems to be just a formality and most importantly the weak community participation, which is caused by lack of understanding of the community towards village development budgets and plans and incompetence of human resources (HR) managing village funds and village heads.