Article 7, Volume 1 Issue 1:

What elements of financial stress affect contracting out and intermunicipal cooperation in the provision of local public services? The impact of the great recession

Author

José Luis Zafra Gómez – (University of Granada)

Juan Sánchez Fernández – (University of Granada)

Ana María Plata Díaz – (University of Granada)

Gemma Pérez López – (University of Granada)

Received April 8, 2014; accepted September 5, 2014.

Abstract

The current financial crisis is one of the main factors underlying proposals made for change delivery form of municipal services. However, this situation is affected by a wide variety of financial indicators, and it is necessary to determine which of these indicators have greatest influence on decisions regarding outsourcing or long-term inter-municipal cooperation. Furthermore, the Great Recession could have modified these financial indicators, and so we must identify which of them impacted on public-service outsourcing and/or cooperation both before and during the crisis. This paper evaluates these factors with respect to a sample of Spanish municipalities, for the periods 2002-2007 and 2008-2010, via a discriminant analysis. The results obtained show that the financial indicators that affect outsourcing and cooperation are different, specifically, we find that the variables which are related to spending on transfers, budget sustainability and the flexibility of the entity, measured by its outstanding debt have the greatest impact on the outsourcing process, while the cooperation processes are influenced, in addition to the latter factors, by the short-term solvency of the entity. The elements of short term solvency, flexibility and sustainability led municipalities to outsource their public services in the pre-crisis period, while only debt and financial independence influenced the cooperation decisions during the crisis period.

La actual crisis financiera es uno de los principales factores subyacentes a las propuestas realizadas para la entrega de cambios en la forma de los servicios municipales. Sin embargo, esta situación se ve afectada por una amplia variedad de indicadores financieros, y es necesario determinar cuál de estos indicadores tiene mayor influencia en las decisiones relacionadas con la subcontratación o la cooperación intermunicipal a largo plazo. Además, la Gran Recesión podría haber modificado estos indicadores financieros, por lo que debemos identificar cuáles de ellos impactaron en la subcontratación y / o cooperación del servicio público tanto antes como durante la crisis. Este artículo evalúa estos factores con respecto a una muestra de municipios españoles, para los períodos 2002-2007 y 2008-2010, a través de un análisis discriminante. Los resultados obtenidos muestran que los indicadores financieros que afectan el outsourcing y la cooperación son diferentes, específicamente, encontramos que las variables que están relacionadas con el gasto en transferencias, la sostenibilidad del presupuesto y la flexibilidad de la entidad, medida por su deuda pendiente tienen el mayor impacto en el proceso de outsourcing, mientras que los procesos de cooperación están influenciados, además de estos últimos factores, por la solvencia a corto plazo de la entidad. Los elementos de solvencia, flexibilidad y sostenibilidad a corto plazo llevaron a los municipios a externalizar sus servicios públicos en el período anterior a la crisis, mientras que solo la deuda y la independencia financiera influyeron en las decisiones de cooperación durante el período de crisis.

Citation

Zafra, J. L., Sánchez, J., Plata, A. M., & Pérez-López, G. (2014). What Elements of Financial Stress Affect Contracting Out and Intermunicipal Cooperation in the Provision of Local Public Services? The Impact of the Great Recession. The Impact of the Great Recession. European Accounting and Management Review1(1).

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