The Korea Local Administration Review

This study analyzed the operating conditions of local governments’ financial guarantees, which are frequently used in public-private partnership projects to obtain private companies’ involvement, and sought ways to strengthen financial management on a contractual guarantee. A financial guarantee is one of the financial activities of local government in nature, but its procedures are not sufficiently in control in that guaranteed contract will have no impact on the local government’s fiscal position unless they are called. Although there is a possibility of causing a local financial crisis due to future obligations, it has been excluded from the target of local fiscal management rules. Accordingly, it is required to strengthen financial management using systems such as medium-term financial plan, local fiscal impact assessment, local fiscal investment review, and fiscal disclosure system.