Financial Condition Of Local Governments Research Articles

How Direct Citizen Participation Affects the Local Government Financial Condition: A Case of Participatory Budgeting in South Korea

In theory, direct citizen engagement in budgeting helps local governments reflect the citizens’ budget preferences more precisely, thereby enhancing citizen-government communication. However, the efficacies of budget participation remain ambiguous considering both its democratic values and the cost of deliberation. In this study, we test how direct citizen participation by means of participatory budgeting (PB) affects the financial condition of local governments. We use a sophisticated concept of financial condition that encompasses various abilities of local government. We measure the degree of citizen participation as the availability of institutional mechanisms associated with different levels of inclusiveness and authorities determined by South Korean local government ordinances of formal budget participation. Our empirical analysis based on South Korean local governments’ data between 2012 and 2019 reveals that a PB institution with higher participation level further worsens the local financial condition. The adverse effects are mostly identified in the mid-term and long-term financial conditions, whereas the short-term financial condition remains unaffected. The findings imply that direct participation in theory corrects mismatches between bureaucratic and citizen priorities, but, in practice, the citizens may inappropriately direct mid- and long-term oriented public investment and debt management.

Eliminating the effects of external environmental factors to improve the analysis of local government financial condition: a study in Indonesia

ABSTRACT This article proposes an approach to the assessment of the financial condition of local governments by eliminating uncontrollable external environmental factors using cluster analysis. The author found seven clusters of provincial government, 13 clusters of regency government, and seven clusters of city government in Indonesia. The article provides evidence that clustering local government increases the effectiveness of analysis of financial conditions. The academic contribution of this article is generating cluster variables that are more comprehensive and relevant than those presented in previous studies. In addition, findings of this study can be used by authorities to develop local government financial management policies that are fairer.

Financial Performance of Banten Province Before and During the Covid-19 Pandemic

The government of Indonesia has taken several policies to reduce the State Revenue and Expenditure Budget as a consequence of the Covid-19 pandemic. This also affects the financial condition of local governments, including the province of Banten. This study aims to determine the financial performance of the Banten province in the pre-pandemic and during the pandemic which is reflected in the degree of fiscal decentralization, the effectiveness of local own-source revenue, degree of dependency, and independence. This research is a quantitative descriptive genre using secondary data from 2015-2021 sourced from reports on the results of financial audits from BPK-RI and The Central Bureau of Statistics of Banten. The method used in this research is financial ratio analysis and comparison of results. The results showed that the degree of fiscal decentralization of Banten province was in a very good category with effective PAD, the degree of regional independence was in a good category and the degree of dependence was low. The results of intra and inter-comparisons show that Banten's position in financial performance during the pandemic is in the very good category. This study recommends the need for commitment and consistency of local governments to continue to improve and maintain financial independence.

The geography of financial condition in the Mexico City metropolitan area

There has been academic and policy concern about the financial capacity of administratively fragmented metropolitan areas to implement inclusive development measures and provide public services. Metropolitan public financing is problematic because there is a geographical mismatch between extended functional urban regions and administrative units. While local governments are responsible for implementing policies, spending, and raising revenues, financial capacity tends to differ across jurisdictions in response to economic, social and political factors, resulting in manifold disparities. Such variations can be particularly acute depending on the complexity and size of the metropolitan area, and can lead to major spatial disparities in the life standards of residents. This paper focuses on the local financial condition in Mexico City Metropolitan Area, which is often used to exemplify a fragmented metropolitan area. Official statistics from 1989 to 2018 are used to identify major intra-metropolitan variations in the financial condition of local governments. A novel methodology is used to classify municipalities according to their financial health, and discriminant analysis is used to explore the factors shaping the geography of financial performance. The economic and demographic size of municipalities appear to play a significant role.

Financial Condition of Local Government in Poland vs StructuralReforms of Municipal Government in Scandinavian States

The authors have undertaken an analysis of the phenomenon of debt of local government units in Poland. It is a dynamic phenomenon, which affects vast majority of municipalities and districts. A barrier to debt expansion has been established in the form of the Individual Debt Index (IOI), which has been in place since 2014 and its new elements entered into force on 1 January 2020. The structure of the index is intended to allow regional accounting chambers (RIO) to control the process and prevent its progression. The authors indicate, however, that the main problem for local self-government units is insufficient own income, which forces them to increase the pool of funds transferred from the central budget to self-governments in the form of grants and subventions and to look for various forms of loans for their activities. Using the experience of the Scandinavian countries, the authors propose to start territorial and resource consolidation reforms of small local government units – municipalities and districts. The aim is to facilitate better use of endogenous resources of territorial self-government units and use of economies of scale related to local economy and social resources. This should result, as in Scandinavia, in the development of public entrepreneurship, higher social efficiency and effectiveness, and stabilisation of the income of individual units. After more than 20 years of operation, small local government units in Poland have become structurally and functionally obsolete and do not guarantee modern development of local communities.

Impact of Textile Industry Restructuring on the Financial Condition of Local Government Units for the Example of the Łódź Region in Poland

Technical, technological, IT and organisational progress is most evident in industry. In a situation where innovations are accompanied by structural and political changes, it is all about restructuring. In Poland, restructuring processes occurred most frequently in the 1990s. Currently, the phenomenon still occurs, but on a much smaller scale, with the transformations concerning generic, personnel and processes structures. The textile industry is still significant and is a hallmark of the Łódź region in Poland. The recent past has shown that companies from the textile industry, although very fragmented, remain on the market and are doing well in the new economic system. The purpose of the study is to assess the financial condition of municipalities and cities with district rights in the context of the restructuring activities of the textile sector, with particular emphasis on local government units of the Łódź region in the years 2007-2017. The work consists of three parts. In the first, the authors include theoretical premises for the restructuring of enterprises. The second part contains research hypotheses which have been empirically verified with an econometric model developed in the last part of the work. The purpose of the econometric model is to describe the relationship between the self-financing indicator and the explanatory variables, which largely describe the financial condition of enterprises in the textile sector in Poland over the period between 2007 and 2017. The results of the research conducted allow to conclude that the financial condition of communes and cities with district rights is diverse, and is affected by factors related to the location, type and level of development of local government units. In addition, the restructuring which took place in industry, in particular the textile industry, had a positive impact on the financial condition of local governments, in particular on their level of self-financing.

EKSPLORASI KETERKAITAN KONDISI KEUANGAN PEMERINTAH DAERAH DENGAN TINGKAT LAYANAN PENDIDIKAN

ABSTRACTPurpose – This study aims to explore the lingkage between the financial condition of local government and education service level in cluster two of local government. Methodology –The financial condition of local government are measured using dimension that related to services that given by local government, this dimension is service level solvency. This dimension consists of two ratios, expenditure ratio and asset ratio. The level of education services is measured using achievement indicators contained in the minimum education service standard (SPM). This study uses a descriptive qualitative method. Secondary data were collected through documentation technique and the primary data were collected through semi-strutured interview technique.Findings – The findings in this study showed that there is no linkage between the financial conditions of local governments and the level of education services. interviews were conducted to confirm how the involvement of local governments in the planning and budgeting processes in the regions, priorities that form the basis of budgeting and factors that influence the achievement of minimum service standards (SPM). The results of interview data analysis indicate that the involvement of the local education office (dinas pendidikan) in the planning and budgeting process in the local government is quite good, and minimum service standards are one of the bases in budgeting. Furthermore, the factors that influence the achievement of minimum service standards are human resource capacity, stakeholder awareness and budgeting capabilities in the education unit.

Analisis Rasio Keuangan Daerah untuk Mengukur Kinerja Keuangan Pemerintah Kabupaten/Kota di Jawa Barat

Measurement of the financial performance of local governments can show the financial condition of local governments and the ability of the region to explore and manage the existing sources of funds. A good regional financial performance can be seen from its effectiveness in exploring regional potentials, lower dependency on the central government, and a larger portion of PAD to finance regional development. This study seeks to measure the financial performance of the District-City Government in West Java by using a regional financial ratio measurement tool, which consists of the Fiscal Decentralization Ratio, the Regional Government Financial Dependency Ratio, the PAD Effectiveness Ratio, and the Capital Expenditure Ratio. The results of the measurement of the Fiscal Decentralization Ratio concluded that the financial capacity of the Regency-City Government in West Java is still classified as "LESS". The measurement results of the Regional Government Financial Dependency Ratio concluded that there were no local governments whose financial dependence on transfer funds falls into the "LOW" category. The results of the measurement of the PAD Effectiveness Ratio concluded that the majority of local governments in West Java had been effective and very effective in realizing the PAD target. And the results of the Capital Expenditure Ratio measurement concluded that there had been efforts from the District-City Government in West Java to maximize Capital Expenditures. This study has several limitations. Subsequent research can add the scope of testing or assessment to be more comprehensive, for example by conducting tests or studies on the determinants of the financial performance of local governments or the impact resulting from the factual conditions of the financial performance of local governments.

Financial Condition and Internal Control Deficiencies: Evidence From New York Counties

In recent years, significant attention has been given to measuring the financial condition of local governments, predicting when those governments will experience fiscal distress, and understanding how public managers navigate financial shortfalls. Researchers have given less focus, however, to understanding how financial condition affects other financial management practices—such as the administrative systems used to ensure financial accountability. This study uses a 19‐year panel of county‐level data from New York State to examine whether financial condition affects the likelihood of internal control deficiencies. The findings indicate that the incidence and severity of internal control deficiencies increase as financial condition deteriorates.

The determinants of local public spending on culture

AbstractMunicipalities in Poland are important makers of local cultural life. Municipalities organise and fund public cultural entities: libraries, houses of culture and so on. They decide on 70% of public spending on culture. The local spending on culture was grown in the past years. But the level of this spending varies between municipalities. The aim of this study is to find determinants of these differences. Public spending on culture is important in less-developed or peripheral regions where citizens do not have access to private cultural institutions. That is why this study focuses on rural municipalities. In econometric panel model, 1,565 units and their operational spending on culture in the years 2002–2014 is analysed. Four groups of potential determinants of spending are analysed: characteristics of local society, the financial condition of local government, characteristics of local politicians and the factors that influence the costs of cultural services. Such an approach has roots in the median voter model and is widely used in the analysis of decentralised spending, but the studies related to cultural spending are rare. To my knowledge, there is no such analysis for Poland or other East European countries. This study proved that an expenditure demand model is good for the analysis of local spending. This kind of analysis can help to understand local spending’s variation. It also helps to design the proper revenues equalisation system.

Factors Affecting Financial Condition of Local Government in Indonesia

This study empirically examines factors affecting the financial conditions of local governments (LGs) in Indonesia. This study utilizes a quantitative approach to achieve the research objective. The theory used to achieve the objective is the theory of demand and supply. To test the hypothesis, this study employs multiple regression analysis. The results show that four of seven factors identified in previous literature (namely, financial efficiency, cost of services and goods, population, and revenue-base) significantly influence the financial conditions of LGs, whereas the remaining three factors (namely population density, age profile of the community, and wealth of community) do not. Based on the law of supply, technology is known as one factor that influences the number of products and services produced by an organization. This study does not examine the impact of this variable on financial conditions of LGs because there was no data available about the level of technology utilization in LGs in Indonesia when this study was undertaken. These findings have implications for central government, LG executives and legislators in Indonesia in formulating policies pertaining to the financial conditions of LGs, for example, policy for decentralization funds. Such policies can enable quality decision-making to improve their financial conditions.

Budgetary solvency of Italian local governments: an assessment

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.

Measuring Financial Condition Of Urban Local Government: A Study Of Municipalities In Bangladesh

Studies on local governmental financial conditions are focused on developing tools for detecting and avoiding potential financial problems. These studies are confined mostly in self-governed local government entities in the western world. This research seeks to measure financial conditions of local government organisations in Bangladesh. Municipalities, one of the two types of urban local government, play an important role in providing a range of services and carrying out certain socioeconomic objectives in Bangladesh. Using financial data from a representative sample of 72 municipalities, this research measures and compares municipal financial conditions of local government municipalities in Bangladesh. A composite index of eleven indicators was developed under four dimensions, viz., short term solvency, budgetary solvency, service level solvency and long term solvency by following the relevant literature on local government financial conditions as well as keeping consistency with data availability. This composite index was applied to measure the financial conditions of the three classes (Class I, II and III) of municipalities in Bangladesh for a period 2007 to 2015. Results obtained indicate that there are differences across these three types of municipalities in their overall financial conditions as well as in their short term, long term and service level solvencies. The index measure explains the financial and operational strengths and weaknesses of municipalities, a clear understanding of which is necessary for improving their performance on sustainable basis. The result of this research is likely to have implications for devising policies for making municipalities more effective organizations. While, the findings will help municipal management to focus their operations to improve their financial and service performance, policy makers at the central level will find it as a useful tool in devising policies for equitable distribution of resources among municipal organizations.

Design and Analysis of Financial Condition Local Government Java and Bali (2013-2014)

This research aims to identify financial condition of local government in Java and Bali year 2013-2014. It is due to government financial condition, according to several researchers, provides an image on the ability of a government in fulfilling their obligations whether in the form of debt or service fulfillment in timely manner. According to assessment upon financial condition, local government is able to identify how to fulfill public needs, how to utilize resources and how to proceed resources so that it can be more productive. As for the measurement method of financial condition itself, the standard method cannot be determined. Therefore, indicator used for measuring local government financial condition is Brown's (1993)[2] indicator development adjusted to Indonesian government. In order to develop the indicator, this research employs qualitative method by comparing GASB No.34, SAP Government Regulation (“Peraturan Pemerintah ” - PP) 71 Year 2010, SAP PP 24 year 2005 and literature studies and expert validation. In order to obtain a balanced comparison, this research also employs clusters developed by Baidori (2015)[1] for government in Java and Bali. Results of this research showed that among 7 analyzed clusters, there are variations of results, even though each cluster has similar socioeconomic condition to each other. This variation upon Indonesian local government financial condition is caused by regional autonomy.

Local government financial condition and sustainable development of communities in Nigeria

This paper aims at examining the financial condition of local governments in Nigeria and to assess its implications on sustainable development of communities. Secondary data from 122 local governments for a period of three years were utilized in examining the financial conditions of local governments in Nigeria. Findings show that the financial condition of local governments in Nigeria is poor, indicating financial distress. Hence, the deteriorating state of communities as less is available for development. There is need for the development of revenue generating and management strategies by local government administrators in order to ensure sustainable community development.

Evaluating the Validity and Reliability of the Financial Condition Index for Local Governments

Understanding the financial condition of local governments is important for public managers and elected officials as they work to align revenues with p ublic demands for services, while maintaining financial solvency. This task becomes even more important when the economic and financial environment, over which local officials have little to no control, is collapsing around them. This article seeks to expand the literature of measuring financial condition of local governments by testing the validity and reliability of the Financial Condition Index (FCI). The FCI is a framework for evaluating financial condition that was initially developed by Groves, Godsey, and Shulman and later applied in US state‐level studies by a number of scholars. The results from this article cast serious doubt on the applicability of using the FCI, and the four associated solvency dimensions, as an appropriate methodology for evaluating local government financial condition.

DEVELOPING A MEASURE OF LOCAL GOVERNMENT’S 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

DEVELOPING A MEASURE OF LOCAL GOVERNMENT’S 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

Drivers for the financial condition of Local Government: a comparative study between Italy and Spain

This paper aims to analyse the influence of socio-economic, political and financial factors on the financial condition of Italian and Spanish local governments in a comparative approach. The research is also aimed at understanding to what extent a model for the analysis of the financial condition can be generalized to different contexts. We assume that the financial condition is a multidimensional concept, with the results highlighting that while in Spain there is a high correlation between the long term financial and short term economic situations and an indicator can combine both dimensions, in Italy both dimensions are differentiated. There are also differences in the drivers of financial sustainability in both countries.

Local Government Financial Condition Through the Great Recession

Understanding the financial condition of local governments is important for public managers and elected officials as they work to align revenues with public demands for services, while maintaining financial solvency. This task becomes even more important when the economic and financial environment, over which local officials have little to no control, is collapsing around them. This article seeks to expand the literature of measuring financial condition of local governments by testing the validity and reliability of the Financial Condition Index (FCI). The FCI is a framework for evaluating financial condition that was initially developed by Groves, Godsey, and Shulman (1981) and later applied in US state-level studies by a number of scholars (Wang, Dennis, and Tu 2007; Arnett 2011). The results from this article cast serious doubt on the applicability of using the FCI, and the four associated solvency dimensions, as an appropriate methodology for evaluating local government financial condition.