Benchmarking the Financial Performance of Irish Local Authorities

Benchmarking the Financial Performance of Local Councils in Ireland It was over a quarter of a century ago that financial statements were used to benchmark the efficiency and effectiveness of local government in the US (McAteer amp; Stephens, 2013) It is acknowledging that a city, just like any private sector business, has a limited ability to interpret its financial performance and condition other than through comparisons with similar-sized cities (Brown, 1993).  Suites of financial ratios are commonly used to benchmark firms in the business sector (Carmeli, 2002).  With the global adoption of New Public Management ideas, benchmarking practice spread to the public sector and has been employed to drive improvements (Julnes amp; Holzer, 2001, Bowerman et al., 2002, Magd amp; Curry, 2003).  Benchmarking in the public sector needs to continuously change in response to changing population needs and political climate (Wynn-Williams, 2005).  The fiscal crisis in Europe and need to cut public sector costs, is resulting in many countries moving towards compulsory large-scale benchmarking projects. However, the manner in which local authorities in OECD countries compare and benchmark their performance varies widely (Kuhlmann amp; Jäkel, 2013).   The methodology developed in this paper to rate the relative financial performance of Irish city and county councils is adapted from Browns (1993) assessment tool used to measure the financial condition of small cities in the US. For each of the 34 local authorities there is a scorecard  and an overall score. We present the overall scores for 2011 data in our paper.  Our paper reveals a small number of county councils exhibiting signs of financial difficulty, with poor levels of revenue collection, relatively high levels of annual operating deficits, and rising debt levels.  Overall, the results indicate that the majority of Irish city and county councils performed satisfactorily in a financial sense relative to central government performance despite the fiscal crisis, the downturn in economic activity and the resulting fall in council income. The benchmarking exercise is useful in highlighting those councils that, in relative financial performance terms, are the best worst performers.  Lessons may be learned from further examination of relative good and poor performance.