The Evaluation and Financial Situation Forecast of the Selected Cities of The Eastern Poland

Abstract

Purpose – The article attempts to answer the question about the current and future financial capabilities of local governments. This study was conducted on the basis of financial situation in 18 cities located in the eastern part of the country, which vary in terms of demographics and functions. Research method – Recognizing and evaluating many processes and financial phenomena occurring in cities is possible due to the financial analysis. Its subject is the diagnosis of their financial situation and the forecast of future money inflows. The analyses’ results, obtained on the basis of the financial forecast model developed with that aim, may constitute a starting point for the local governments’ decisions regarding future financial policies. Results – Maintaining the existing historical trends, resulting in the operational surplus decrease, might cause the limited development potential of the studied cities. In order to counter this situation, it is crucial to take steps to reverse negative identified trends, including the improvement of the net operating result. It seems that in order to achieve that, it is necessary for local governments to take action, and to change central authorities’ policy in relation to the local government subsector. Originality /value /implications /recommendations – Theoretical research was carried out on the financial condition of selected cities in eastern Poland, assessing their current and future financial potential. A financial forecast model was developed and used in the implementation of this research.