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Financial situation is a fundamental issue for the local government. Financial problems could result in insolvency that is why the analysis of financial situation is essential not only for current management, but also for the protection against side effects of economic downturn. One of the most important determinants of the development of the local government unit is its financial situation, which has an undeniable impact on the whole activities conducted by the local government. The aim of the article is to present the financial situation of the territorial self‑government – the voivodeship, and its changes in the years 2009–2014. The voivodeships which are in good financial situation are more competitive and efficient in conducting development policy. The best voivodeships in 2014 and 2011 were Mazowieckie and Dolnośląskie, in 2009 – Mazowieckie and Łodzkie; in 2014 were Lubuskie and Opolskie, in 2011 – Kujawsko‑pomorskie and Warminsko‑mazurskie, and in 2009 – Lubuskie and Warminsko‑mazurskie. The value of the index in 2014 fluctuated between 0.16 and 0.59, in 2011 between 0.22–0.64, and in 2009 – 0.16–0.64. The resulting measure depends on the number and type of variables taken for testing. It allows you to identify weaker areas and improved functioning of the unit, if its own position in relation to competitors. The behavior indicated methodology, and partial variables, allows the assessment of individuals between countries.

Diversification Synthetic Indicator for Evaluating the Financial Capacity of Local Government. The Case of Polish Voivodeships