Assessment of Financial Capacity of Territorial Communities

Abstract

Considered structural sectoral reforms taking place in Ukraine in the process of decentralization are aimed at forming viable territorial communities that are able to solve social problems to meet the needs of residents of administrative-territorial units, taking into account socio-economic, environmental, geographical, cultural, historical and other factors of their development. At the same time, the issues of obtaining financial results from the introduction of tax and budget decentralization, budget financing of expenditures guaranteed by the state remain relevant. Assessment of indicators in these areas will allow to determine the level of financial potential and risks for the functioning and development of spheres of life of local governments. The outlined indicators of assessing the financial capacity of local budgets are based on the analysis of budget indicators of territorial communities and aim to identify problematic issues that hinder the socio-economic development of administrative territories and the inability of local authorities to perform their own and delegated powers. Among the factors influencing the indicators of indicators of local government solvency assessment, the system of horizontal budget equalization and the methodology for determining the local budget tax capacity index need to be improved. Standardization of indicators for assessing the financial capacity of local communities will increase the effectiveness of existing methodologies for measuring them. The updated mechanism for assessing the financial autonomy and independence of local budgets is based on a deeper analysis of financial indicators of local budgets, which requires further study.