While the passage of Statement No. 34 by the Governmental Accounting Standards Board (GASB, 1999) created a more robust financial reporting model, local officials continue to struggle with defining financial condition, interpreting it from annual financial statements, and communicating it in a systematic way. This review presents a framework for analyzing, interpreting, and communicating financial condition within the fund and government-wide reporting structure. It specifically responds to the void in the public administration literature for a manageable, yet comprehensive, approach to financial condition analysis. The goal is to help local officials conceptualize financial condition from the interpretation of resource flow and stock as presented in annual financial statements.

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Purpose The purpose of this paper is to understand the impact of the Great Recession on the capital assets being depreciated and the capital assets condition ratio for the governmental activities of the government-wide financial statements, while identifying possible socioeconomic and financial variables that help explain capital investment behavior in local government. Design/methodology/approach Based on capital spending from fiscal year 2005–2006 (FY06) to fiscal year 2012–2013 (FY13) for the governmental activities of 471 North Carolina municipalities as reported on their government-wide financial statements, the authors use a fixed effects model to test our two hypotheses. Findings The authors find that most municipalities consistently invested in capital assets before, during, and after the Great Recession but were not able to maintain pace with depreciation. The authors also find that the capital assets being depreciated is affected by numerous socioeconomic and financial variables, while the capital assets condition ratio is not. Research limitations/implications The study continues to build on previous research, demonstrating that different results are produced when the analysis is based on local data rather than sub-national data. Practical implications An implication from our study that expands across research and practice is that capital investment and capital value are two different dimensions of capital management in local government, which drives research in terms of how this multidimensional concept is specified and drives practices in terms of how this multidimensional concept is approached within annual capital budgets and capital improvement programs. Originality/value The study represents one of the first studies that focuses on capital spending in local government based on data from the government-wide financial statements.