Theoretical Application of Public Sector Planning and Budgeting

The corporatization of the government has resulted in the change of the government structure and it has a negative impact on the fiscal budgeting. This change has also resulted in the equalization and generalization of the public-sector finance to private-sector finance. The impact is the disappearance of sources of funds and the adoption of the four-legged horse budget apocalypse and the categorical funding. This adoption has resulted in economic marginalization, social exclusion, massive corruption, and non-sustainability. A sustainable fiscal budget design requires the application of theory on practice and a holistic approach through the organizational structure and the timeframe of each jurisdiction, based on factual evidence and scientific analysis.

Sustainability Management and Local Governments

After highlighting the breadth and complexity of the concept of sustainability and highlighting the role of local authorities in sustainable development, this chapter aims to interpret how sustainability management can consider the concept of financial sustainability in the context of local governments. It does this through the following specific objectives: 1) defining financial sustainability, considering it not only autonomously, but in an integrated manner with respect to the typical sustainability dimensions (environmental, social, and economic) that are usually involved in the local authorities activity; 2) proposing the main stages of the sustainability cycle in the local authorities to highlight the key moments and the role of financial sustainability; 3) analyzing some aspects of financial indicators as tools for measuring the financial side of the sustainability profile of a local government. In order to reach the aim of the chapter, the research methodology followed is the literature review.

Two Approaches on Local Governments' Financial Sustainability

The scope of this chapter is to examine the concept of financial sustainability in Catalan municipalities through two different perspectives: The first refers to the perspective of law as it is recorded in the relevant legislation. The second refers to the point of view of mayors and municipality executives who were called to implement the legislation in practice. For the purposes of the study, the relevant Spanish legal documents are analyzed. The reality in practice is captured through the analysis of official documents and semi-structured interviews and informal discussions with mayors and executives of Catalan municipalities. A gap appears to exist between existing legislation and the actual needs of municipalities, which ask for more flexibility and independence to act since the targets set by law are successfully met.

Different Perceptions of Factors Affecting the Financial Sustainability in Public Administrations

With the public finance crisis, the analysis of financial sustainability in governments, its influential factors, and the examination of politicians' perceptions about them have become relevant. In fact, it could be necessary to know whether politicians perceive as drivers or risk factors of financial sustainability those variables that prior research has identified with empirical findings. This chapter seeks to identify whether politicians are aware of influential factors previously identified by prior research for financial sustainability and whether personal characteristics of politicians (age, gender, or educational background) could influence this perception. So, an e-survey targeting politicians was conducted in sample of Spanish municipalities to capture their perceptions on potential risk factors and drivers, comparing this result with the findings obtained by prior research. Findings of this chapter indicate that there are different perceptions of politicians about drivers and risk factors among respondents according to their age, gender, and educational background.

Characterizing the Risk Factors for Financial Sustainability in Spanish Local Governments

This chapter aims to analyze the characteristics of Spanish governments that fail to achieve budgetary stability, as well as propose a model for the analysis of financial sustainability of governments that can help in predicting risk for financial sustainability. The analysis is focused on Spanish local governments with more than 5,000 inhabitants that have elaborated the annual plan because they did not achieve budgetary stability (79 local governments). Using the principal components analysis, the authors developed a model for the analysis of the characteristics of these governments. The model is made up of three components created from six indicators usually considered in the literature as relevant. The results evidence the indicators useful to measure the three dimensions identified by the IPSASB as relevant: revenue dimension, debt dimension, and public services dimension.

What Is Known and What Should Be Known About Factors Affecting Financial Sustainability in the Public Sector

The international literature suggests that the causes of weak financial sustainability of public organizations depend on both external and internal conditions. Whereas the external conditions are related to demographic and socio-economic factors, the internal conditions are associated with the political and managerial settings, and thus, the latter could be addressed by the local government with the aim to maintain financial sustainability over the long term. Based on a literature review, the authors explain the most consolidated trend of such variables with respect to the impact of those variables on financial sustainability, and simultaneously, they reveal a disproportion in what the literature has most recently analyzed. Ultimately, the authors highlight the need for further research regarding the managerial factors and additional cross-country comparisons of the roles of both external and internal conditions.

Explaining the Relation Between Efficiency and Financial Condition

There is a risk of presupposing that enhancing efficiency will simply improve financial health in local governments. However, there are several reasons to think that the healthy governments could be the least efficient ones. This chapter aims to contribute to this discussion by using a sample of the 132 largest Italian local governments during the period 2005-2014. The results show that the taken-for-granted positive effect of efficiency on financial condition is observable only when efficiency refers to current expenditures, but such a positive effect has not been observed in the case of capital expenditures.

Fiscal Sustainability, Demographics, and the Social Determinants of Health Driving Intergenerational Equity

The research developed in this chapter identifies intergenerational equity as a function of three dynamics: local government fiscal sustainability, demographic drivers, and place-based health equity. Intergeneration equity is researched from three related sets of pressures: One, the cost increases threatening the fiscal sustainability. Two, demographic changes result in a lower growth rate of working population. Three, persistent social inequities linked directly to neighborhoods correlate with wide disparities in life expectancy. The research develops a deeper understanding of each of these three dynamics, including the individual impact as well as the collective impact through their interconnectedness. This combined analytic framework better identifies the institutional mechanisms that can address these issues. The chapter concludes with mapping ways for local government to move forward by applying the design principals developed from research in sustainability of common pool resources.

Financial Conditions, Financial Sustainability, and Intergenerational Equity in Local Governments

The chapter offers a necessary summary of the key concepts of financial conditions, financial sustainability, and intergenerational equity in local governments through a close examination of different approaches. Focusing on a narrative literature review approach, the chapter has two main aims: first, to provide evidence on how to define the terms of theoretical and practical underpinnings to represent financial conditions in local governments in order to clarify the distinctive feature of financial conditions with a particular focus on the specific measures for budgetary solvency: sustainability, flexibility, and vulnerability; second, taking into account that the link between financial sustainability and intergenerational equity seems to be under-investigated, the authors discuss what the conditions for achieving financial health are while ensuring intergenerational equity with reference to the level of citizens' quality of life.

The Potential Correlation Between Organizational Structure and Financial Sustainability in Turkish Local Government

Throughout the membership process of the EU, Turkey has undergone various transformations in public administration structure. For this reason, the financial and public transformation experienced by Turkey in the Europeanization process must be evaluated. Financial localization and financial sustainability (FS) in local governments are one of the reflections of this transformation. Despite being a non-profit structure, financial sustainability seems to be extremely important in terms of local government units. Financial and economic crises, especially those at global level, have highlighted the need to address FS in non-profit bodies. In the light of the above-mentioned explanations, this chapter analyses the potential correlation between organizational structure and FS in Turkish Local Government—focusing on 14 municipalities in Muğla City—by conducting in-debt interviews. Therefore, the main aim of this chapter is to show the interest of local governments to use voluntary reporting, in terms of ethical-social-environmental, as a tool for financial sustainability.