Abstract
<p>Local governments are important parts of public sector and they play significant role in daily life of residents. Their role is usually underestimated in comparison with central government tasks and responsibilities. Residents usually realize the real importance of municipal role when municipalities are in financial problems or even bankruptcy and for these reasons they have to restrict their services. This research paper focuses on the issue of financially distressed Czech municipalities and relevant financial areas or indicators in period prior financial problems of municipalities similar to a bankruptcy. This case study is specific due to the fact that this country misses bankruptcy legislation for municipalities and small total number of already existing cases of municipal bankruptcy due to limited time period of their higher autonomy after 1989. Thus the research sample of comparable cases is very limited and this paper serves as a pilot case study. The research for this paper is focused on the financial management of municipalities from the perspective of negative financial situations and the preceding phase to reveal and achieve certain preliminary findings and experience as a pilot lesson for financial management improvements and further exploration and research.</p>
Highlights
One of the current topics of public finance is the increasing overall indebtedness of the public sector—including the municipal sector—in the shadow of central government
The aim of the research is to identify the financial conditions of Czech municipalities going into bankruptcy or a state very similar to bankruptcy in some way, to identify and describe their financial behavioral patterns in the period prior to the occurrence of the negative financial situation, and to find the characteristics and symptoms associated with this condition (Evans & Patton 1987)
We need to seek for comparable aspects which can strengthen our knowledge and experience with bankruptcy and improve the system From the perspective of this paper it could be interesting to point out characteristics assigned to bad financial situation of a municipalitiy due ACIR (1973) where:
Summary
One of the current topics of public finance is the increasing overall indebtedness of the public sector—including the municipal sector—in the shadow of central government. Local government debt is usually compared to central government still relatively very small but this issue is more about its micro- the macro- point of view and associated context to all local governments on individual basis. In the twenty two years since the independent Czech Republic was formed, a group of municipalities have passed into states that are similar or close to the state of bankruptcy as a technical term or legal status. Such a status is usually regulated by federal legislation. The lack of a legally established definition for bankruptcy in terms of municipal finances could be solved using the generally accepted concept of bankruptcy and its form from other areas of the national economy
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