ASSESSMENT OF THE FINANCIAL CAPACITY OF THE CITIES ON THE EXAMPLE OF THE SUMY REGION

Abstract

Local finance system in Ukraine changes considerably and rapidly during the last decade (namely, adoption of the Tax Code and transformation of local taxes; transformation of fiscal equalization system etc.), but reform of fiscal decentralization is the most urgent one and is under the public and government scrutiny. The main objective of this reform is to build financially independent local communities and strengthen their financial capacity, though permanent monitoring of the reform results and correction of it based on the revealed shortcomings become an actual task. The article is devoted to the assessment of financial capacity level of the city budgets of the largest cities of Sumy region (Sumy, Glukhiv, Konotop, Lebedyn, Okhtyrka, Romny, Shostka) for 2014-2018 based on indicators developed by experts of the Financial Monitoring Department of the Central Office of Reforms of the Ministry of Local Communities and Territories Development of Ukraine. Research is based on the analysis of trends of change of such indicators as: 1) local budget own revenue per capita; 2) level of local budget dependence on state budget grants, which is calculated as a share of subsidies from state to local budget in total local budget revenue (it is better when actual value of this performance indicator is less than 30 %); 3) level of expansion of local authorities bureaucracy, which is calculated as a share of expenditures for the maintenance of the management apparatus in local budget own revenue (it is better when actual value of this performance indicator is less than 20 %). In the paper it is compared not only the absolute values ​​of each of the Key Performance Indicators, but also their average values and baseline growth rate. Such multidimensional analysis of KPIs for measurement of local communities financial capacity allowing characterize common framework of local finance development in Sumy region. Besides, the analysis made it possible to identify the strengths and bottlenecks in ensuring the financial capacity of the investigated local communities, and on this basis to formulate specific recommendations to counteract the identified negative aspects.