The impact of responsibility in fiscal management on the financial condition of municipalities

Responsibility in fiscal management, in accordance with the Fiscal Responsibility Law, presupposes planned and transparent action, through compliance with limits and conditions, including in relation to registration in Remains Payable. The present study sought to identify the influence of responsibility in fiscal management on the financial condition of municipalities. To this end, the influence of the main variable Remaining Payable on the financial situation of municipalities was analyzed, using the econometric model based on Martins et al. (2021). The financial condition is represented by the surplus/deficit divided by the municipalities' total revenue, while the volume of commitments recorded in Remains Payable divided by total expenditure is used as a metric for responsibility in fiscal management. It was also investigated whether the election year (2020 was a municipal election year) has a significant influence on the financial situation of municipalities. To achieve the research objective, a sample of municipalities in Bahia with a population of up to 100 thousand inhabitants was used, whose information was made available in the Brazilian Public Sector Accounting and Tax Information System (Siconfi). The absence of some data was a limitation of this study. Bahia is the state in the Northeast with the most municipalities, which justifies the sample selection. Furthermore, there are no related studies that cover the region. The period chosen was from 2019 to 2021, using multiple linear regression and applying the Ordinary Least Squares (OLS) method. The results suggest that the main variable Remains to Pay negatively influences the financial situation of the municipalities, while the election year, represented by the dummy variable , did not present statistical significance. This result highlights the impact of Remains Payable on the financial situation of municipalities, revealing that better control of this institute by managers must be carried out.