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Local Government Program

Evaluating Fiscal Health

What is it?
A government’s financial condition, defined as its ability to meet both its financial and service obligations now and in the future, is of considerable importance. Certainly, local officials are, or should be, interested in financial condition as they are responsible for managing the government’s resources and monitoring its financial performance. In addition, investors and creditors consider financial condition as they assess a government’s credit risk, and citizens want to know whether their government has the ability to continue to provide services at an adequate level.

The Fiscal Health Evaluation is a three-part educational program targeted at local officials. The following is a basic outline of the program:

  • Educate local officials on techniques and tools for analyzing financial condition
  • Prepare an assessment of financial condition in cooperation with the local government
  • Provide assistance interpreting indicators used in the assessment
  • Offer strategies for improving financial condition and heading off financial problems
  • Encourage the government to track indicators of financial condition over time and incorporate them into future local policy decisions

How can this tool be used?

  • To provide demographic and other background information to reflect the government's needs and resources
  • To examine six fiscal indicators: revenues, expenditures, operating position, debt, unfunded liability, and capital plant
  • To compare financial indicators over time and across governments
  • To explain external economic conditions, management practices, and local political culture essential to fully understanding a government's financial condition

What does it take to make this happen?

Preparation of a Fiscal Health Report is a very labor- and time-intensive task. Accordingly, there is a fee for this service. The amount depends on the extent of the analysis, the availability of Comprehensive Annual Financial Reports (CAFR) for the past five years, and the number of comparison communities and the availability of their recent CAFRs. Further, local assistance is required to gather much of the data needed that are only available from internal accounts.

How can I find out more?


Rebecca Bishop, Local Government/Public Finance Specialist
Office of Local Government
Department of Agricultural Economics

John Leatherman, Professor and Director
Office of Local Government
Department of Agricultural Economics