Developing a Method to Assessing the Municipal Financial Health
- 5 July 2012
- journal article
- research article
- Published by SAGE Publications in The American Review of Public Administration
- Vol. 43 (6), 729-751
- https://doi.org/10.1177/0275074012451523
Abstract
Following the conceptual framework developed by the Canadian Institute of Chartered Accountants, which is based on three broad dimensions of sustainability, flexibility and vulnerability, this paper proposes a method for evaluating the financial health of municipalities. This methodology could be useful for performance assessment in any country and framework. An aggregate indicator has been obtained for each municipality that covers all the aspects analyzed. For this, multivariate statistical techniques of principal component analysis and discriminant analysis are combined. The proposed method overcomes the problem that we detected in the literature related to the weighting of variables, optimizing the measurement of the variability of all indicators that are included in the financial condition. The indicator evaluates and ranks the degree of financial health of each municipality and serves as a tool to study how different factors might have an impact on its financial health. The performance of the indicator has been contrasted with the socioeconomic variables of population size and geographic location. The proposed method has been applied to 5,165 Spanish municipalities.Keywords
This publication has 35 references indexed in Scilit:
- Causes and consequences of fiscal stress in Michigan citiesRegional Science and Urban Economics, 2011
- Someone to Watch Over meThe American Review of Public Administration, 2005
- Fiscal Institutions, Credit Ratings, and Borrowing CostsPublic Budgeting & Finance, 2005
- The States' Role in U.S. Local Government Fiscal Crises: A Theoretical Model and Results of a National SurveyInternational Journal of Public Administration, 2003
- Introduction: Fiscal and Financial Crises of Local GovernmentsInternational Journal of Public Administration, 2003
- Innovation in Public Management: The Adoption of Strategic PlanningPublic Administration Review, 1994
- Responding to Municipal Fiscal Distress: An Emerging Issue for State Governments in the 1990sPublic Administration Review, 1992
- An Evaluation of Municipal Rainy Day FundsPublic Budgeting & Finance, 1987
- Comparative Local Government Financial AnalysesPublic Budgeting & Finance, 1986
- Fiscal Management of American Cities: Funds Flow IndicatorsJournal of Accounting Research, 1977