Municipal year-end analysis

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The municipal annual financial statement analysis , as a type of balance sheet analysis, deals with the examination of local authorities with regard to their economic situation based on their annual financial statements or their overall financial statements .


The municipal year-end analysis can be carried out internally by the local authority for its own purposes or externally by analysts . The purpose is to determine economic key figures from the annual financial statements, which provide information about the economic situation of a regional authority. Local authorities are all state subdivisions (such as federal states , municipalities or associations of municipalities ) except for the federal government . This also applies accordingly abroad.

Creditors of a local authority ( credit institutes at Kommunalkredit , suppliers , lessors , partners at public-private partnerships ) have an interest in determining the economic situation of a municipality in order to be able to assess their credit risk . This also applies to rating agencies who, as part of a municipal analysis of the annual financial statements, set a rating that creditors who are not self-analyzing can use.

Municipal accounting

The municipal annual financial statement analysis is based on the published figures of the municipal accounting system . In Germany and around the world, two alternative accounting systems are in use in the public sector , the double accounting and / or the cameralistics . Since July 2009, the relevant Budgetary Principles Act (HGrG) in Section 1a (1) HGrG provides for a single or “state double bookkeeping” in accounting. In the case of “state double-entry”, this must follow the provisions of the Commercial Code (HGB) according to Section 7a (1) HGrG , in particular with regard to ongoing bookkeeping, inventory , accounting and financial statements. According to Section 95 (2) GemO NRW, the municipal annual financial statements consist of a profit and loss account , financial account, partial accounts and the balance sheet ( asset account ).


The double municipal annual financial statements must be prepared in accordance with § § 242 ff. HGB and consist of the balance sheet with precise classification rules ( § 266 HGB), the income statement ( § 275 HGB) and the appendix ( § 284 HGB) and may be supplemented by the management report ( Section 289 HGB). As in the case of companies , key figures can then be developed from the annual financial statements that make statements about operational conditions, but do not take into account the characteristics of the community.


While in most of the German federal states, for the first time since the decision of November 2003, the double- entry system was gradually introduced, in some states there is still cameralistic accounting based on income and expenditure (e.g. in Belgium , France , Portugal ), in which the analysis methods have to be adapted accordingly . A distinction is made here between the administrative budget and the asset budget , which must be merged for the purpose of analysis. The cameralistics leads to key figures that have to be developed from the budget and differ significantly from the key figures of double accounting.

Communal economic indicators

The annual financial statements in accordance with the German Commercial Code (HGB) enable the determination of key business figures for municipalities and companies. However, this is not sufficient for assessing the specific municipal economy. Rather, it is also necessary to take into account the typical characteristics of the municipality, from which additional key figures can be obtained. The figures required for this can also be found in the HGB annual financial statements.

Revenue-related metrics

Operating income is all municipal income from self-imposed taxes , fees , levies , distributed annual surpluses from municipal companies and municipal companies and other administrative income. The operating income is supplemented by the transfer income and together with this form the total income:

Transfer income is all income that a municipality receives from higher-level regional authorities as part of the financial equalization scheme.

The higher the share of operating income in total income, the more independent a municipality is from state transfer payments and vice versa. Ideally, a community is abundant and not dependent on state transfer payments.

Output-related metrics

Operational expenses are all municipal expenses that result from administrative activities (so-called real expenses such as personnel expenses and material costs), including expenses for debt servicing (loan interest and repayments for municipal loans taken out). The operational expenditures are supplemented by the transfer expenditures and with these form the total expenditures:

Transfer expenses serve to redistribute income policy and are all expenses that a municipality has to make to its citizens and companies for legal reasons ( social benefits and subsidies for private and public companies) without these having to provide a market-based consideration (see transfer payment ):

The higher the share of transfer expenditure in total municipal expenditure, the larger the share of non-working citizens in the total population of the municipality (high unemployment and / or high percentage of children and / or pensioners). In municipalities with high transfer rates, there is therefore hardly any positive economic effect in the event of a general economic upturn, while a recession even leads to a disproportionate deterioration in the transfer rate (higher unemployment benefits and lower tax revenues). This lack of responsiveness with a high transfer rate remains unchanged with "passive flexibility".

Financial structure / liquidity

Two key figures concern the municipal financial structure:

Income and expense structure

The following key figures provide information about the municipal income and expense structure:

Municipal debt ratios

Debt ratios can also be developed from the annual financial statements . Municipal liabilities are made up of cash advances , other municipal loans and all other liabilities including provisions (for components, see debt ratio ). In order to determine the municipal debt sustainability, these total debts are compared with the total income:

If the total debt is below the total income, the debt could theoretically be repaid from the income within one year, whereby the income could then not be used for other purposes.

The municipal debt service coverage ratio indicates the extent to which the interest and repayments to be raised for debts can be paid by the municipality from its total income.

The debt service to be paid for the debts ( interest expense and repayment ), expanded by the leasing expense , should at best be able to be covered from the operating income:

If the operating income is insufficient for this, additional transfer income or new borrowing must be used to cover. This is a clear indication of a lack of debt sustainability.

The interest coverage ratio indicates how high the share of interest expenses in total operating expenses is:

Limits of the municipal year-end analysis

The municipal annual financial statements are an accounting instrument and sometimes do not depict internal issues in sufficient detail. In addition, accounting policy measures can significantly influence the informative value of the annual financial statements. This is why the municipal annual financial statements do not show the shadow debt that has become significant, and in which the rating agency Fitch Ratings found in February 2009 that it lacked important financial data such as cross-border leasing and interest rate derivatives for a complete analysis of German municipalities . Fitch considers these financial instruments to be “disadvantageous” for municipalities and assumes that they “have and will have resulted in not inconsiderable contingent liabilities and an additional burden for the already desolate households”. This also applies to public-private partnerships whose debts outside the municipalities are accounted for in special purpose vehicles. Furthermore, the key figures borrowed from the private sector can only be applied and evaluated against the background of the specific accounting and valuation regulations of the municipal accounting law and the peculiarities of public tasks. For example, the informative value of municipal equity ratios does not correspond to that of the private sector, since the valuation of non-liquidable parts of municipal assets influences the actual value of the equity capital reported . The municipal equity is also offset by inalienable administrative assets ( Latin res extra commercium ), so that the equity does not represent a suitable debt coverage ratio. The information in the annual financial statements is also based on the past and the reporting date and is therefore not up-to-date. The annual financial statements are only published 5–6 months after the balance sheet date, so that the analysis is based on past facts. Nonetheless, the municipal annual financial statement analysis is a tried and tested instrument for preparing the data of the annual financial statements in a way that is appropriate for the target audience and can show indications, trends, tendencies and forecasts on the economic situation of the municipality. However, it should be carried out with great care and taking into account a sufficiently valid information base.


As a rule, key figures borrowed from the private sector are used as the basis for a municipal annual financial statement analysis. As part of the municipal annual financial statement analysis, various municipal economic aspects can be examined using suitable key figures. For this purpose, the analysis can be divided into different areas. On the one hand, the analysis serves as an inter-municipal comparison using key figures. In France there is a benchmarking system that is part of the municipal budget and presents the key figures of an individual municipality compared to other municipalities. In addition, the analysis of municipal economic structures and relationships with the help of the key figures can clearly lead to municipal economic decisions. A municipal annual financial statement analysis can still reveal hidden reserves and hidden burdens within the municipal balance sheet. In addition, balance sheet items can be restructured, reassigned and reevaluated in order to obtain a more precise representation of the municipality's asset and debt situation. It also serves to present the current and possible future asset, financial and earnings position of the municipality.

See also


  • Adolf G. Coenenberg : Annual financial statements and annual financial statements analysis, business management, commercial law and international principles - HGB, IFRS and US GAAP. 20. revised Edition. Schäffer-Poeschel Verlag, Stuttgart 2005.
  • Christoph Fußwinkel, Wilhelm Schneider: Municipal annual financial statement analysis - effects of a double accounting system on the analysis of the asset, financial and earnings situation of municipalities. Saarbrücken 2008, ISBN 978-3-8364-3979-4 .
  • Mark Fudalla, Martin Tölle, Christian Wöste and others: Accounting and annual financial statements in local government - principles for the “New Local Financial Management” (NKF). Berlin 2007, ISBN 978-3-503-10307-2 .
  • Klaus Lüder: New Public Budgeting and Accounting - Requirements, Concept, Perspectives. Ed. Sigma, Berlin 2001, ISBN 3-89404-738-0 .
  • Christian Magin: Possibilities and limits of the annual financial statement analysis with key figures of a municipal budget. In: the municipal budget. 107th year, 2006, issue 9, pp. 202–206.
  • Martin Wambach, Hilko Redenius: Guide to accounting and auditing according to NKFG. Opening balance sheet and annual accounts. BW, Nuremberg 2005, ISBN 3-8214-7903-5 .

Individual evidence

  1. Stefan Bajohr, Outline State Financial Policy , 2013, p. 59
  2. Lending interest is sometimes also included in transfer expenditure, although it represents a consideration to the lender for granting the loan: Volker Häfner, Gabler Volkswirtschaftslexikon, 2013, p. 410
  3. Werner Lachmann, Economics I: Fundamentals , 2013, p. 202
  4. Renate Neubäumer / Brigitte Hewel, Economics: Fundamentals of Economics Theory and Economics , 2013, p. 430
  5. Fitch Ratings of February 19, 2009, International Public Finance: Germany Special Report, German municipalities - an important role in the federal system , p. 5
  6. Christian Magin, Possibilities and Limits of the Annual Financial Statements Analysis with Key Figures of a Municipal Budget , in: der gemeindehaushalt , 107th year, 2006, issue 9, pages 202–206
  7. Annette Hurlebaus, principles of proper municipal accounting and their interpretation with regard to the evaluation of municipal property and equipment , 2012, p 122
  8. Adolf Coenenberg: Annual financial statements and annual financial statements analysis, economic, commercial and international principles - HGB, IFRS and US GAAP, 20th revised. Edition. Schäffer-Poeschel Verlag, Stuttgart 2005, p. 985 f.
  9. Mark Fudalla / Martin Tölle / Christian Wöste et al., Accounting and annual accounts in local government - principles for the "New Local Financial Management" (NKF) , Berlin 2007, p. 255 f.