ABSTRACT
The financial performance of the municipalities is very important because it shows how decentralization is functioning in practice and whether local governments are coping with the responsibilities that have been transferred to them. In recent years, municipalities have been given much greater responsibilities – from public services to infrastructure projects—and at the same time, they were given much greater financial freedom. The Republic of North Macedonia is an interesting example of this, because the decentralization process in our country began relatively early and has constantly being evolved over the years. Therefore, the aim of this research is to compare municipalities in the Republic of North Macedonia through the financial performance management index (FPMI) for the period 2021–2023. The results of the FPMI model show that there are clear and lasting differences among municipalities in Macedonia in the way they manage their financial position in the period 2021–2023. Municipalities with stronger own-source revenues and more active capital investment generally achieve better results. Those with limited fiscal space face greater difficulties and tend to rely more heavily on intergovernmental transfers. This paper adds to the existing literature in a way that unlike the private sector in which the assessment of the financial condition of companies has been extensively researched, research on the assessment of the financial condition of local self-government units (LSGUs) is insufficient, especially when it comes to a small and underdeveloped country like the Republic of North Macedonia.
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