Financial Health and Distress in Local Government
Financial health of a local government refers to its ability to be solvent, both in the short and long run, and at the same time to maintain a certain minimum level of services for its community; the related concept of fiscal distress is associated with the ability of a local government to meet short- and long-term financial obligations and avoid State takeover or bankruptcy.
Especially in recent years, local governments (LGs) across the world, and municipal governments in particular, have confronted varying degrees of financial distress mainly as consequence of severe economic crises. LG’s financial distress is a complex and multidimensional process. The causes behind jurisdictions that fall into financial distress are varied, and no simple linear relationship exists. Falling revenues, central State and regional grant cuts, investment losses to pension funds, and...
KeywordsFinancial Distress Accounting Information City Government Financial Flow Financial Health
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