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Indicators For Assessing The Financial Condition And Municipality Management

Author

Listed:
  • Jarmila SEBESTOVA

    (Silesian University in Opava, School of Business Administration in Karvina, Karvina, Czech Republic)

  • Ingrid MAJEROVA

    (Silesian University in Opava, School of Business Administration in Karvina, Karvina, Czech Republic)

  • Irena SZAROWSKA

    (Silesian University in Opava, School of Business Administration in Karvina, Karvina, Czech Republic)

Abstract

The aim of the article is to create a set of indicators for assessing financial stability and municipality management. Local governments in the Czech Republic are fully financially responsible for their budget and management. Financial stability of municipalities is a crucial condition for long-term sustainable development as disproportionate debt can generate risks for providing public services and their standard functioning. The Ministry of Finance defined a set of financial indicators (SIMU system) which could be used for financial stability evaluation, but only two of them are obligatory (a share of liabilities to total assets in percentage, and the current ratio). Indisputable advantage is its standard form of financial evaluation for all municipalities and relatively simple method of calculation based on delivered data. Main disadvantage can be seen in the fact that the municipality receives feedback only for two indicators, which have a recommended value. The municipality does not get a clear idea of the state of its cash position and this approach is not taking into account short-term and long-term indebtedness as well as the size of the municipality. That is why a new methodology based on three groups of indicators (budgetary management, indebtedness and liquidity) was developed and tested. The article presents results about local governments in the Moravian-Silesian region. The methodology increases transparency in the municipality management and supports citizen´s engagement into public matters through standardized approach to each municipality based on seventeen ratios.

Suggested Citation

  • Jarmila SEBESTOVA & Ingrid MAJEROVA & Irena SZAROWSKA, 2018. "Indicators For Assessing The Financial Condition And Municipality Management," REVISTA ADMINISTRATIE SI MANAGEMENT PUBLIC, Faculty of Administration and Public Management, Academy of Economic Studies, Bucharest, Romania, vol. 2018(31), pages 97-110, December.
    • Handle: RePEc:rom:rampas:v:2018:y:2018:i:31:p:97-110
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    References listed on IDEAS

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    1. Daniel Covitz & Nellie Liang & Tobias Adrian, 2015. "Financial Stability Monitoring," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 357-395, December.
    2. Evgenia Gorina & Craig Maher & Marc Joffe, 2018. "Local Fiscal Distress: Measurement and Prediction," Public Budgeting & Finance, Wiley Blackwell, vol. 38(1), pages 72-94, March.
    3. Gennady Vasilievich Osipov & Vladimir Ivanovich Glotov & Svetlana Gennadievna Karepova, 2018. "Population in the shadow market: petty corruption and unpaid taxes," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 6(2), pages 692-710, December.
    4. Stewart Jones & R. G. Walker, 2007. "Explanators of Local Government Distress," Abacus, Accounting Foundation, University of Sydney, vol. 43(3), pages 396-418, September.
    5. Samuel B. Stone & Akheil Singla & James Comeaux & Charlotte Kirschner, 2015. "A Comparison of Financial Indicators: The Case of Detroit," Public Budgeting & Finance, Wiley Blackwell, vol. 35(4), pages 90-111, December.
    6. Benjamin Y. Clark, 2015. "Evaluating the Validity and Reliability of the Financial Condition Index for Local Governments," Public Budgeting & Finance, Wiley Blackwell, vol. 35(2), pages 66-88, June.
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    Cited by:

    1. Filip Hrůza, 2023. "Analysis of the Financial Behaviour of Czech Municipalities as a Possibility for International Comparisons," Prague Economic Papers, Prague University of Economics and Business, vol. 2023(4), pages 389-410.

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    Keywords

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    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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