Abstract
The global financial crisis represents one of the main reasons for the situation suffered by many European countries both at national and local level.
 
 Furthermore, the increased attention given to financial budgeting in the last years highlights the importance for public administrations to learn more about how to measure financial sustainability, how to implement strategies to avoid distress, and how to represent the expected results of these strategies.
 
 We argue that a local government shows good financial conditions when it can provide public services without damaging its ability to face future obligations (GASB, 1987). On the contrary, local governments in poor financial health are unable to deal with their financial obligations and provide public services. Often, in this case, the quality or quantity of these services turns out to be damaged (Raphael, Renwick, Brown, & Rootman, 2010).
 
 It is essential to say that the level of financial condition cannot be easily represented since it cannot be readily measured by a single performance indicator, but rather it is determined by different measures directly observable.
 
 We propose an explanatory case study to analyze the first results obtained through a plan devised to restore a good financial condition through a process of spending review in the municipality of Rome, one of the most important local governments. More specifically, we have analyzed the income statements and the final balance sheets for the years 2013-2017.
 
 We further argue that our case study represents an inspiring strategy for financial sustainability thanks to an ad hoc legislation especially devised to overcome the crisis. Our case study also reveals all critical issues emerged during the analysis of the final data collected in the official documents drafted with accrual accounting across the five years.
Highlights
In the last decade several European countries, including Italy, have suffered from a financial vulnerability due to an unsustainable public debt accumulated over the years and to an uncontrolled increase of annual deficits
We propose an explanatory case study to analyze the first results obtained through a plan devised to restore a good financial condition through a process of spending review in the municipality of Rome, one of the most important local governments
In this second period of analysis we observed a significant increase in some items of expenditures: purchase of raw materials and consumer goods, staff costs, transfers and contributions to other public or private administrations, provisions for risks, changes in inventories of raw materials, financial charges
Summary
In the last decade several European countries, including Italy, have suffered from a financial vulnerability due to an unsustainable public debt accumulated over the years and to an uncontrolled increase of annual deficits. The harmonization of the accounting systems for ILGs was regulated by the legislative decree 118/2011 (fully operational after a period of testing in 2015) while new accounting standards were introduced by legislative decree n.126 of 10 August 2014, corrective and supplementary of 118/2011 (regulating planning, financial accounting, accrual accounting and the consolidated financial statements). Analyzing such processes from a local government perspective allows to appraise the information of the shifting from the cash basis to the accrual accounting approach and represents a radical change in the literature on the subject. The focus of investigation for financial crisis in Italian public organizations has been traditionally based on the official documents drafted with a cash-basis method
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