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Concepts and definitions

Annual contribution margin

Annual contribution margin indicates the income financing available for investments and the paying of loan instalments after running costs have been covered. It is a key figure when evaluating the adequacy of income financing. The basic assumption is that income financing is adequate if the annual contribution margin is at least equal to the capital depreciations.

The depreciations indicate the average annual need for replacement investments. If the annual contribution margin covers depreciations (replacement investments), the municipality does not need to contract debts, realise capital assets or long-term investments or lower its working capital in order to keep the production system of services operational. If the annual contribution margin is negative, income financing does not even cover running costs.

Joint municipal authority

Joint municipal authorities were introduced as a form of intermunicipal cooperation in connection with the revision of the Local Government Act in 1993. They replaced the earlier inter-municipal associations. A joint municipal authority is a form of permanent collaboration of more than one municipality in some field of operation. A joint municipal authority is set up under an agreement (charter) between the local authorities concerned which has been approved by their councils.

Joint municipal authorities are independent legal persons and governed by the legislation on local government. A joint municipal authority can acquire rights and enter into commitments and has the right to be heard before authorities. Ultimately, the participating municipalities are responsible for the finances of the joint municipal authority.

Loan stock

Liabilities - (Advances received + Accounts payable + Adjusting entries for liabilities + Other liabilities) from the balance sheet of the municipality/joint municipal board.

The loan stock of a municipality or joint municipal board refers to interest-bearing liabilities.

Tax funding

The tax-based financing of municipalities comprises municipal tax revenue and state subsidies to municipalities.

Referencing instructions:

Official Statistics of Finland (OSF): Quarterly local government finances [e-publication].
ISSN=2343-4139. Helsinki: Statistics Finland [referred: 16.7.2024].
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