Spending Pressure, Revenue Capacity and Financial Conditon In Municipal Organizations: An Empirical Study (original) (raw)
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Management and Marketing, 2013
Drawing on a set of financial and budget specific indicators, the paper examines the financial activities of local authorities, aiming at diagnosing local public financial management. In the context of the increasing decentralization of public finance, local authorities must demonstrate the ability to manage local resources as efficiently as possible, adopting decisions (including financial ones) to respond promptly to citizen needs. For this reason, we set out to present an analysis model aimed at accustoming local decision-makers with the specific tools and methods and assisting them in gaining awareness of the benefits of such analyses. Empirical research shows that local authorities, due to the low income generation capacity, face a shortage of own resources, creating dependency on the state budget. Moreover, it has been demonstrated that that lack of resources limits both the investment capacity and the decision-making autonomy of local authorities in prioritizing spending. The...
Measuring Financial Condition Of Urban Local Government: A Study Of Municipalities In Bangladesh
The Journal of Developing Areas, 2017
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.
Kopanyi F rom Detroit to Lahore, most cities around the world face financing challenges, yet they are still expected to carry out their increasingly complex functions. Municipal Finances: A Handbook for Local Governments Governments takes sides. It takes the side of mayors and municipal practitioners. Few publications on this topic target local-level decision makers and financial staff in such a direct and pragmatic way. The content and key messages are geared to respond to daily concerns and issues faced by cities and municipalities in managing their finances. Municipal Finances takes a position. In eight chapters, this book reviews lessons learned on intergovernmental relations, metropolitan finances, financial management, revenue management , expenditure management, public asset management, external funding, and municipal finances performance measurement. It covers topics from decentralization to transparency and accountability and travels less-charted waters of asset management, credit worthiness, response to financial crises, and reporting mechanisms to various levels of governments and citizens. Municipal Finances takes action. Not only does it provide cutting-edge knowledge on many technical issues, but it also guides local governments through the maze of existing instruments. In particular, the Municipal Finances Self-Assessment proposed in Chapter 8 should help municipalities assess their own situations and move forward on the path of reforms. Municipal finance is a key theme for development policy today. It is especially important for urban areas, where most of the demographic growth in developing countries will take place over the coming decades. The effective management and financing of urban services by local government bodies will be critical for inclusive and environmentally smart growth. Indeed, one of the main constraints to sustainable and scaled up solutions for urban service provision is the fact that municipal authorities all too often lack the institutional and financial capacity to attract market-based investment finance and to effectively operate and maintain whatever physical assets there have been able to install, often with help from higher level government or external donors. This book provides an excellent resource for anyone interested in addressing these important issues in a practical and evidence-based manner. Johannes F. Linn, PhD, Non-resident Senior Fellow, The Brookings Institution This volume fills an important gap in the literature, which has many good texts and empirical studies, but relatively few volumes that are accessible and immediately relevant to practitioners. The chapters, each written by experienced hands and carefully edited, are very readable and illustrated with useful information about good practice drawn from many helpful examples and case studies. All in all, the volume essentially provides a welcome and useful " owner's manual " for those charged with managing both expenditures and revenues at the municipal and metropolitan level.
Assessment of the financial resources of municipalities
South African Journal of Economic and Management Sciences, 1998
The challenges with which municipalities are currently faced, include the fulfilment of the expectations of many new communities to whom they must render services, while they must simultaneously improve the quality of existing services and eliminate backlogs. The sources from which local authorities generate their revenue at present do not appear to be adequate for the increased need for funds. This paper provides an overview of the issues that have led to the current state of municipal finances and the factors that influence the revenue and expenditure of municipalities. In the light of the lack of sources of income for municipalities, particular attention is given to issues which could have an effect on the improvement of administration in municipalities.
GLOBAL BUSINESS FINANCE REVIEW
This study aims to obtain empirical evidence related to the effect of the variables such as local government characteristics, infrastructure, and local government financial condition to the financial distress of local governments in Indonesia. Population of this study is all local government that issue the financial statements audited by the Supreme Audit Agency (Badan Pemeriksa Keuangan Repulik Indonesia-BPK RI) in the period 2007 to 2009. The method of sampling is purposive sampling method producing 152 observations. Method of analysis is binary logistic regression. The results show that size (SZ), total program cost for assets (RPCTA), carrying value (CV), ratio of cash quickly (CQR), performance of government wealth (PERF), return on equity (ROE), profit margin (PM), and current liabilities (CL) significantly associate with probability of financial distress of local government. It implies that information presented in the financial statements of local governments in Indonesia has a predictive value, and, therefore is relevant tobe used in decision making.
2018
The purpose of the research is to determine if rural municipalities are financially viable and capable to sustain itself in the provision of services from the available financial resources. The study deployed both qualitative and quantitative method and research data was collected from the questionnaires, interview schedule, analysis of documents such as the municipal budgets, annual financial statements, auditor general reports, municipal annual reports, Provincial and national treasury reports as well as key observations during the data collection process. Financial viability is fundamental in the provision of services within local government on the basis that municipalities are substantially financed by means of own resources. However, the low rate of collection and unfavourable socioeconomic conditions of households weaken the capability of municipalities to sustain themselves in the provision of services from the available financial resources. The study confirmed that service delivery in rural municipalities is below the accepted levels according to citizens' expectations. The municipalities are providing basic services such as water, sanitation, refuse removal and electricity however community members are not satisfied with the level and quality of those services. Because citizens deemed the provision of these services as unsatisfactory and of poor quality, they have resorted in not paying for their municipal services. This non-payment of services by citizens, pose a huge challenge in a municipality to provide services in a sustainable manner. Non-payment of services also pose a threat on financial viability of the municipality because the municipality can't recover any costs associated to the provision of services. Municipalities experience financial viability challenges that are perpetuated amongst others by operational issues such as financial management capacity within municipalities. Financial management capacity is dependent on factors such as, skills and competency levels of finance officials in relation to financial management practices and overall compliance to good governance. The capacity and expertise of officials dealing with revenue management contributes to the existing challenges of revenue management and collection because they are not providing any strategies to curb this existing revenue management and collection challenges. Households are the biggest contributor of municipal debts in rural municipalities. This is due to high level of indigents, high level of unemployment and culture of non-payment which make it difficult for municipalities to provide services in a sustainable manner. Household's socioeconomic challenges such as poverty and unemployment have a direct impact on payment of municipal services. These socioeconomic challenges make consumers to struggle to pay their municipal accounts and depend on reliefs the municipality is providing for indigents. These reliefs are subsidized by the equitable share from the national government. Municipality continue to perform functions on behalf of other state institutions without any funds associated to them and such functions are not included in the powers and functions allocated to them by the constitution or any legislation. Such services included the libraries and licensing services and are exerting pressure on municipal budgets because municipalities perform them on behalf of the provincial government.
Methods of Assessing Local Government Financial Condition: A Critical Review
2012
This study is aimed to review and to provide critical review to the methods of assessing the financial condition of local government (LG). Research assessing the financial conditions of LG is relatively new. As a result, there is little agreement about what appropriate methods, procedures, dimensions, and indicators to assess the financial condition of LG. To review the methods, this study utilise the criteria of a good measure (i.e. reliability, validity, and practicality) as a benchmark. The methods reviewed are compared with the criteria. The critical review will identify the strengths and limitations of the methods. The results show that there is no model that satisfies all the attributes of a good measure.Several common weaknesses of the previous methods are involving too many variables; assuming that all dimensions and indicators of the financial condition have equal importance; utilizing non-financial indicator instead of 'financial indicators to assess the financial cond...
2013
Many developing countries have deficiencies in their ability to manage their government expenditures in an efficient and accountable manner, so as to effectively deliver critical, pro-poor public services such as basic education, health, and other public services that are essential to economic development and poverty reduction. An important — but often overlooked — element in sound public financial management is to make sure that resources flow down within the public sector to the local (subcentral) level where public services are actually delivered and where economic development takes place. Instead, public financial resources often remain stuck at the central government level, where these resources are either diverted or fund bloated and inefficient bureaucracies. While fiscal decentralization and local government finance reform have been treated as an important theme in international development and in the design of country assistance strategies for developing economies, the syst...
Role of Financial Management in the Improvement of Local Government Performance
Humanities & Social Sciences Reviews
Purpose of Study: This study aimed to analyse the influence of the financial management of local government on its performance related to internal control and the competence of the apparatus. Methodology: The study population includes all local government managers in 38 cities of East Java provinces and out of 1067 units of local government (offices) only samples of 81 local government offices are used in this study for analysis. Partial Least Squares and t.test were used to test the hypotheses. Results: It has been found that the competence of personnel directly affect the performance of local governments’ public services, but has no effect indirectly through local financial management, while internal controls affect the performance of local governments’ public services, either directly or indirectly through local financial management.
Determinants Of Financial Condition: A Study Of U.S. Cities
2004
How well a local government is able to provide for the needs and preferences of its citizens generally depends on the financial resources available; and, how such resources are allocated, distributed, and managed. Demographics, size of local government, supply and age of infrastructure, financial position of the government, and the local economy represent a few of the factors affecting what public goods and services citizens prefer. Internal systems of accounting and control affect the allocation, distribution, and management of financial resources. As such, these internal systems significantly affect the provision of public goods and services. The research outlined in this study examined the relationship between a government's financial management capacity (independent variable) and its financial condition (dependent variable), while controlling for environmental factors related to governance and demographics. Financial condition was quantitatively measured using financial ratios calculated from a database of over 1,600 U.S. cities compiled by the Government Finance Officers Association. Financial management capacity and its relationship to financial condition were measured with a survey of the chief financial officers of almost 500 of the sample cities. This research was exploratory in nature as there is little empirical evidence with respect to financial management capacity or its relationship to overall financial condition. In this study certain statistically significant moderate correlations were found with respect to financial condition and financial management capacity. However, multiple regression analysis of financial condition and financial management capacity (controlling for governance and socioeconomic vi TABLE OF CONTENTS LIST OF FIGURES .