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A Framework to Measure the Financial Performance of Local Governments

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  • Gerard Turley
  • Geraldine Robbins
  • Stephen McNena

Abstract

A framework to assess the financial performance of local governments is presented in this paper. The framework adapts and extends an earlier methodology and includes new financial performance measures reflecting considerations in the literature of appropriate financial performance measures for local government units. Using 14 indicators, five broad financial performance measures are employed, assessing liquidity, autonomy, operating performance, collection efficiency and solvency. We apply this numerical and narrative analysis of key financial performance indicators to Ireland’s primary local authorities during the recent boom and bust period. Through application of this financial performance measurement framework using a benchmarking methodology, we identify relatively strong and weak local authority financial performance. We recommend the adoption of this framework as an extension to the annual financial statements of local authorities to help users more easily assess financial performance and to distinguish between relatively well-performing councils and those showing signs of financial trouble, with a view to early identification of councils in financial difficulty.

Suggested Citation

  • Gerard Turley & Geraldine Robbins & Stephen McNena, 2015. "A Framework to Measure the Financial Performance of Local Governments," Local Government Studies, Taylor & Francis Journals, vol. 41(3), pages 401-420, May.
    • Handle: RePEc:taf:flgsxx:v:41:y:2015:i:3:p:401-420
    DOI: 10.1080/03003930.2014.991865
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    Cited by:

    1. Vicente Pina & Patricia Bachiller & Lara Ripoll, 2020. "Testing the Reliability of Financial Sustainability. The Case of Spanish Local Governments," Sustainability, MDPI, vol. 12(17), pages 1-22, August.
    2. Robbins Geraldine & Turley Gerard & McNena Stephen, 2016. "Benchmarking the financial performance of local councils in Ireland," Administration, Sciendo, vol. 64(1), pages 1-27, May.
    3. Gerard Turley & John McDonagh & Stephen McNena & Arkadiusz Grzedzinski, 2018. "Optimum Territorial Reforms in Local Government: An Empirical Analysis of Scale Economies in Ireland," The Economic and Social Review, Economic and Social Studies, vol. 49(4), pages 463-488.
    4. Serena Santis, 2020. "The Demographic and Economic Determinants of Financial Sustainability: An Analysis of Italian Local Governments," Sustainability, MDPI, vol. 12(18), pages 1-16, September.
    5. Turley Gerard & Di medio Rémi & McNena Stephen, 2020. "A reassessment of local government’s financial position and performance: The case of Ireland," Administration, Sciendo, vol. 68(2), pages 1-35, May.
    6. Gerard Turley & Darragh Flannery & Stephen McNena, 2015. "A Needs and Resources Assessment of Fiscal Equalisation in the Irish Local Government System," The Economic and Social Review, Economic and Social Studies, vol. 46(3), pages 459-484.

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