We find two reasons to develop an improved management information system for local governments. One is the apparent inability of current local government management information systems to warn of imminent financial collapse or to indicate the degree of financial weakness of a local government. Another reason is the need for information that will promote the most efficient use of resources in providing public services.

During the 1970s certain local governments were unable to meet their obligations. Their current obligations exceeded current revenues. The nation was made aware of the crisis when New York City defaulted on some of its loan obligations and sought federal assistance. Other local governments have faced similar crises. Cleveland, Ohio, was in default for a short period during 1978 until it sold some of its assets (urban land and an electric power generating plant) to obtain cash and reduced its programs to reduce current outlays. The crises in those large cities have brought national attention to the financial problems of many local governments—urban and rural, large and small.