Abstract
This study aims to evaluate three dimensions proposed by the IFAC (International Federation of Accountants) in relation to impact financial sustainability. These dimensions are service, revenue, and debt. In 2017 and 2018, a regression analysis was conducted for Italian local governments on the different components of financial sustainability. Based on goal-setting theory, and in combination with the ambition to pursue adequate good financial sustainability, significant results were demonstrated. It was seen that these local governments would have to maintain a good level of autonomy with current revenue. They would also need to control the quantity and quality of service in order to pursue financial sustainability. This study suggests practical implications for policymakers and the managerial class, and it seeks to identify methods to drive and keep financial sustainability under control. It also seeks to define current and future management strategies that focus on pursuing intergenerational equity in local governments.
Highlights
In recent years, the international financial crisis has made financial sustainability a relevant concept in public entities
Financial sustainability is considered a component of wider concepts, such as financial health or financial condition (CICA 1997; Cuadrado-Ballesteros, Mordán, & García-Sánchez, 2014; Zafra-Gómez, López-Hernández, & Hernández-Bastida, 2009a, 2009b, 2009c)
This study investigated the three dimensions of financial sustainability proposed by the IFAC: service, revenue, and debt
Summary
The international financial crisis has made financial sustainability a relevant concept in public entities. This is true in the case of local governments, which have been involved in a decrease in public revenue and cuts in public expenditure (Bailey, Valkama, & Salonen, 2014; Checherita-Westphal, Hughes Hallett, & Rother, 2014; IMF, 2014). Fiscal sustainability is––at the state and local levels––the long-term capability of a government to consistently meet its financial responsibilities. It reflects the adequacy of available revenue to ensure that services can continue to be provided. It ensures capital levels that the public demands (Chapman, 2008)
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