This paper attempts to answer some questions about the financial capacity of local governments to implement regional autonomy. In the early stages of the implementation of autonomy, financial aspects have been crucial for every kabupaten and kota administration1. According to Laws No.22, 1999 and No.25, 1999, financial management is an important indicator of local government performance in determining whether they can continue as autonomous entities or should be merged with other neighboring kabupaten or kota.