scholarly journals The Performance of Local Public Enterprises and the Financial Condition of Local Governments

2012 ◽  
Vol 7 (2) ◽  
pp. 191-213 ◽  
Author(s):  
Inmyung Pai
Keyword(s):  
Local Governments ◽  
Public Enterprises ◽  
Financial Condition

Measuring the Financial Crisis in Local Governments through Data Mining

2010 ◽  
pp. 21-46
Author(s):  
José Luis Zafra-Gómez ◽  
Antonio Manuel Cortés-Romero
Keyword(s):  
Data Mining ◽  
Local Governments ◽  
Financial Analysis ◽  
Capital Expenditure ◽  
Data Mining Technique ◽  
Predictive Capacity ◽  
Financial Independence ◽  
Four Dimensions ◽  
Financial Condition ◽  
Explanatory Factors

In local government, the financial analysis is focused on evaluating the financial condition of municipalities, and this is normally accomplished via an analytic process examining four dimensions: sustainability (or budgetary stability), solvency, flexibility and financial independence. Accordingly, the first goal the authors set out to achieve in this chapter is to determine the principal explanatory factors for each of the above dimensions. This is done by examining a wide range of ratios and indicators normally available in published public accounts, with the aim of extracting the most significant explanatory variables for sustainability, solvency, flexibility and financial independence. They use a rule induction algorithm called CHAID, which provides a highly efficient data mining technique for segmentation, or tree growing. The research sample includes 877 Spanish local authorities with a population of 1000 inhabitants or more. The developed model presents a high degree of explanatory and predictive capacity. For the levels of budgetary sustainability the most significant variables are those related to the current margin, together with the importance of capital expenditure in the budgetary structure. On the other hand, the short-term solvency depends on the liquid funds possessed by the entity. The flexibility, however, depends mainly on the financial load per inhabitant of the municipality, on the total sum of fixed charges. Finally, financial independence depends fundamentally on the transfers that the entity receives and on the fiscal pressure, among other elements.

scholarly journals Assessment of Financial Conditions of South African Municipalities: A Unique Model for KwaZulu-Natal

2019 ◽  
Vol 23 ◽  
Author(s):  
Ewert P.J. Kleynhans ◽  
Clive Coetzee
Keyword(s):  
South African ◽  
Local Governments ◽  
Fixed Effects ◽  
Condition Index ◽  
Factors Affecting ◽  
Financial Position ◽  
Financial Condition ◽  
Financial Conditions ◽  
Measurement Framework ◽  
Kwazulu Natal

Most South African municipalities experience significant financial problems. This study investigates the financial conditions of municipalities in the province of KwaZulu-Natal (KZN). It was found that the most important factors which influence their financial position are unobservable municipally unique factors. The ratio of people of non-working age to the total population is also significant in influencing the financial position of municipalities. This article designed a unique financial conditions measurement framework to evaluate the financial status of local governments. Two independent instruments were developed, first to measure the financial quality of a municipality, and secondly, to identify and examine a number of socio-economic factors possibly affecting the financial condition of these municipalities. The study developed a composite financial condition index (CFCI) and a financial conditions management index (FCMI), and then tested the framework on 51 municipalities in the KZN province from 2009 to 2015. The study used a panel data approach with two financial condition indices as indicators. The findings suggest that, in the absence of individual effects, most of the selected socio-economic variables are relevant in terms of explaining some of the variations in municipal financial conditions. Cross-section fixed-effects do, however, significantly improve the overall performance of the model, suggesting that it is rather the unobservable municipally unique factors affecting municipal financial conditions. 

Modeling Fiscal Stress and Contracting Out in Local Government: The Influence of Time, Financial Condition, and the Great Recession

2017 ◽  
Vol 48 (6) ◽  
pp. 565-583 ◽  
Author(s):  
Antonio M. López-Hernández ◽  
José L. Zafra-Gómez ◽  
Ana M. Plata-Díaz ◽  
Emilio J. de la Higuera-Molina
Keyword(s):  
Great Recession ◽  
Local Governments ◽  
Fiscal Stress ◽  
Contracting Out ◽  
The Great Recession ◽  
Financial Condition ◽  
Precise Understanding ◽  
The Impact ◽  
The Relationship

Various studies have analyzed the relationship between fiscal stress and contracting out, but have failed to achieve conclusive results. In this article, we take a broad view of fiscal stress, addressed in terms of financial condition and studied over a lengthy period (2000-2010). The relationship between fiscal stress and contracting out is studied using a dynamic model, based on survival analysis, a methodology that enables us to take into account the effect of time on this relationship. As this study period includes the years of the Great Recession (2008-2010), we also highlight the impact of this event on the fiscal stress–contracting out relation. The results obtained suggest that taking into account the passage of time and conducting a long-term assessment of financial condition enable a more precise understanding of this relation. We also find that the Great Recession reduced the probability of local governments’ contracting out public services.

scholarly journals Corruption and Financial Management: Evidence from Korean Local Governments

2015 ◽  
Vol 30 (2) ◽  
pp. 177-192
Author(s):  
Kim Eun Ji ◽  
Kim Sang Heon
Keyword(s):  
Financial Management ◽  
Local Governments ◽  
Debt Ratio ◽  
Debt Level ◽  
Financial Condition ◽  
Academic Researchers ◽  
The Subject ◽  
The Rich

Academic researchers have paid lots of attention to corruption and there have been therefore numerous studies on the subject. Withal the rich literature on corruption, it is hard to find studies trying to investigate the effects of corruption on financial management of local governments. This article empirically tests the argument that corruption undermines local government's incentives for good financial management and increases the debt level with a unique Korean index of corruption, Integrity Scores published by Anti-Corruption & Civil Right Commission of Korea. According to OLS analyses, integrity has a negative and significant effect on the debt ratio. This supports the idea that the more local governments are corrupted, the less incentive they have to maintain a sound financial condition.

Does the size of local government debt affect the level of debt of off-budget entities? The case of local government in Korea

2018 ◽  
Vol 86 (2) ◽  
pp. 333-348
Author(s):  
Seong-ho Jeong
Keyword(s):  
Local Government ◽  
Local Governments ◽  
Government Debt ◽  
Debt Management ◽  
Public Enterprise ◽  
Accounting System ◽  
Public Enterprises ◽  
Debt Level ◽  
Panel Regressions ◽  
Metropolitan Cities

The rapid growth of debt of off-budget entities is the result of budgetary constraints. When local governments face fiscal stress, with rising debt, they tend to rely on local public enterprise debt to minimize debt limits and budgetary constraints. This study tests how the debt level of local governments affects the debt level of off-budget entities in 16 Korean metropolitan cities and provinces from 2008 to 2013, applying panel regressions. The results assert that as the debt of a local government increases, public enterprise debt increases accordingly. The findings confirm that public enterprises are used to lessen budget pressure by increasing the total public debt. This practice is like concealing local government debt by using off-budget entities, which eventually creates a fiscal illusion. Points for practitioners Off-budget entities are tools for bigger government and larger debt, so it is necessary to control the use of off-budget debt by imposing ceilings on the off-budget debt limit. From a comprehensive debt management perspective, off-budget entities should be used less to pursue government projects. Additionally, a segmented accounting system should be introduced within the off-budget entities.

scholarly journals Benchmarking the financial performance of local councils in Ireland

2016 ◽  
Vol 64 (1) ◽  
pp. 1-27 ◽  
Author(s):  
Geraldine Robbins ◽  
Gerard Turley ◽  
Stephen McNena
Keyword(s):  
Financial Performance ◽  
Local Governments ◽  
Public Management ◽  
New Public Management ◽  
Assessment Tool ◽  
Financial Statements ◽  
Local Authorities ◽  
Financial Condition ◽  
The Us ◽  
Composite Scores

Abstract It was over a quarter of a century ago that information from the financial statements was used to benchmark the efficiency and effectiveness of local government in the US. With the global adoption of New Public Management ideas, benchmarking practice spread to the public sector and has been employed to drive reforms aimed at improving performance and, ultimately, service delivery and local outcomes. The manner in which local authorities in OECD countries compare and benchmark their performance varies widely. The methodology developed in this paper to rate the relative financial performance of Irish city and county councils is adapted from an earlier assessment tool used to measure the financial condition of small cities in the US. Using our financial performance framework and the financial data in the audited annual financial statements of Irish local councils, we calculate composite scores for each of the thirty-four local authorities for the years 2007–13. This paper contributes composite scores that measure the relative financial performance of local councils in Ireland, as well as a full set of yearly results for a seven-year period in which local governments witnessed significant changes in their financial health. The benchmarking exercise is useful in highlighting those councils that, in relative financial performance terms, are the best/worst performers.

Budgetary solvency of Italian local governments: an assessment

2019 ◽  
Vol 32 (2) ◽  
pp. 122-141 ◽  
Author(s):  
Marco Bisogno ◽  
Beatriz Cuadrado-Ballesteros ◽  
Serena Santis ◽  
Francesca Citro
Keyword(s):  
Financial Management ◽  
Local Governments ◽  
Public Services ◽  
Financial Health ◽  
Content Type ◽  
Financial Autonomy ◽  
Financial Condition ◽  
Public Financial Management ◽  
External Sources ◽  
Fresh Insight

PurposeThe purpose of this paper is to investigate budgetary solvency (BS) as a part of the financial condition of local governments (LGs), considering that the growing demand for public services is primarily affecting this variable.Design/methodology/approachThe study investigates a sample of 132 Italian LGs with more than 50,000 inhabitants for the period 2005–2014. The authors obtain a set of indicators as proxies of BS, which serve as the dependent variable of a regression model aimed at testing several independent variables which the authors are interested in, namely, financial autonomy, current equilibrium, level of indebtedness and investments.FindingsBS, as well as its three indicators—sustainability, flexibility and vulnerability—are positively related to financial autonomy and current equilibrium and negatively related to the level of indebtedness and investments.Practical implicationsTo cover citizens’ demands for public services guaranteeing sound financial management, policymakers are advised to control both the balance between current revenue and expenses and the level of indebtedness while preserving financial autonomy from external sources.Originality/valueThis study adds fresh insight to the literature on financial health, emphasising the relevance of public financial management.

scholarly journals DEVELOPING A MEASURE OF LOCAL GOVERNMENT’S FINANCIAL CONDITION

2015 ◽  
Vol 29 (2) ◽  
Author(s):  
Irwan Taufiq Ritonga
Keyword(s):  
Local Governments ◽  
Composite Index ◽  
Warning System ◽  
Predictive Ability ◽  
Condition Index ◽  
Short Term ◽  
Financial Flexibility ◽  
Financial Independence ◽  
Financial Condition

This study develops an instrument to measure the financial condition of local governments(LG) in Indonesia. The instrument will serve as an early warning system for local governments’financial management. The instrument to measure their financial condition consists of sixdimensions, namely short-term solvency, long-term solvency, budgetary solvency, service-levelsolvency, financial flexibility, and financial independence. Each dimension has its own indicators.There are a total of eighteen indicators examined in this study. These indicators are combinedto form a composite index, called a Financial Condition Index (FCI). The reliability andvalidity of the composite index is analyzed and the results show that the measures developed inthis study are reliable and valid. In addition, the instrument possesses the criteria of a goodmeasure: it is theoretically sound, a comprehensive assessment, it has predictive ability, distinctiveability, it is practical, objective, and a resistant to manipulation and gaming.Keywords: financial condition, local government, short term solvency, long term solvency,budgetary solvency, service-level solvency, financial flexibility, financial independence

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