What is Local Financial Management

Local governments in Bulgaria have stable property rights regulated by the Constitution (1991) and the Municipal Property Act (1996). Municipalities own and use different types of assets to provide public services to local communities, but the effectiveness of local financial management is a controversial and topical issue. This chapter aims to analyze the financial performance of 18 large municipal companies for the period 2006-2020 by applying the Z-Score model. The results show that most municipal companies achieve profitability while providing a wide range of public services, such as water supply and sanitation, garbage collection, maintenance of urban infrastructure, management of municipal markets, construction supervision, investor and technical control, property management, geodetic services, and security services. At the same time, the municipal companies that provide district heating and urban transport and operate the municipal sports complexes are in poor financial condition and need appropriate measures to improve their financial performance.