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A Factor Analytic Assessment of Financial Sustainability: The Case of New South Wales Local Government
Author(s) -
Drew Joseph,
Dollery Brian
Publication year - 2016
Publication title -
australian accounting review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.551
H-Index - 36
eISSN - 1835-2561
pISSN - 1035-6908
DOI - 10.1111/auar.12092
Subject(s) - sustainability , consolidation (business) , government (linguistics) , local government , business , finance , psychological intervention , accounting , county government , economics , public administration , public economics , political science , ecology , linguistics , philosophy , biology , psychology , psychiatry
Financial sustainability in local government remains a pressing problem which has seen a host of public policy interventions, including compulsory consolidation and performance monitoring through financial sustainability ratios. In September 2014, the New South Wales (NSW) Government announced a reform program centred on increasing scale in local government to make councils ‘fit for the future’. We apply factor analysis to the financial ratios informing the NSW Government's reform initiative to identify the underlying factors for observed financial performance data. We find evidence indicating that three independent underlying factors account for the adopted measures of financial sustainability. The public policy implication arising from this study suggests that the reforms imposed by the NSW Government on NSW municipalities may only meet with limited successa.