This study is to examine the impact of supervision on corruption in procurement activities of local governments in Indonesia. Procurement in this study is classified into 2 activities based on the source of expenditure. The procurement using (1) capital expenditure and (2) goods and services expenditure. Thus, this study will also identify which sources of expenditure are affecting corruption. This study also examines the moderation effect of government oversight on the relationship between procurement on corruption. Using panel data analysis for all provinces in Indonesia from 2010 to 2013, we find that Capital Expenditure has a positive impact on corruption case meanwhile Goods and Service Expenditures have an impact on state financial loss. But, this study doesn’t find the impact of government oversight on the relation between procurement and corruption.

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