Practical Aspects of the Formation of Financially Capable Territorial Communities in the Context of Administrative and Financial Decentralization: Risks and Ways of their Mitigation
Patytska K. O., Koval V. M.

Patytska, Khrystyna O., and Koval, Vasyl M. (2020) “Practical Aspects of the Formation of Financially Capable Territorial Communities in the Context of Administrative and Financial Decentralization: Risks and Ways of their Mitigation.” The Problems of Economy 1:113–122.
https://doi.org/10.32983/2222-0712-2020-1-113-122

Section: Regional economy

UDC 330:331.7:352.07 (477.8)

Abstract:
The article argues that the issue of effectiveness of forming united territorial communities (UTCs) lies in the plane of ensuring their ability to develop and requires identifying possible risks that arise in the process of community consolidation. In order to achieve this goal, a critical analysis of the formation of united territorial communities in the Carpathian region compared to UTOs in Ukraine in general is carried out in the context of completion of the first stage of administrative and financial decentralization. A comparison of the level of financial capability of UTCs of the region using individual indicators of local budget fulfillment is made, and the composition and structure of expenditures from local budgets per capita are analyzed, which made it possible to establish patterns in the development of the communities and determine the level of their budgetary provision. The study of the inclusion of cities in the formation of the UTCs allowed revealing two opposite trends: association of rural territorial communities in peripheral areas around cities of regional significance; refusal of suburban rural territorial communities to unite with / join cities of regional significance and formation of the UTCs excluding cities. As a result of the study, risks related to the formation of financially capable territorial communities are determined, and the main directions for their mitigation are identified. The main risks related to the formation of financially capable territorial communities under decentralization include: increased influence of local elites; inability of a significant part of the already created communities to ensure development of the territory and an appropriate level of service provision due to the lack of criteria for the formation of UTCs; refusal of suburban rural territorial communities to unite with / join cities of regional significance and formation of UTCs excluding cities due to the threat of loss of financial and managerial independence. It is proved that mitigation of the risks related to the formation of financially capable UTCs is possible in case of completion of the stage of voluntary association of territorial communities and transition to their conglomeration based on economic expediency, correspondence to public needs and financial soundness according to clearly defined criteria.

Keywords: financial capability, united territorial community, risks, budget revenues, budget expenditures, decentralization.

Fig.: 6. Tabl.: 1. Bibl.: 9.

Patytska Khrystyna O. – Candidate of Sciences (Economics), Senior Research Fellow, Department of Regional Financial Policy, Institute of Regional Research named after V. I. Dolishniy of the NAS of Ukraine (4 Kozelnytska Str., Lvіv, 79026, Ukraine)
Email: pelechata@meta.ua
Koval Vasyl M. – Head, Lviv Regional Branch of the Association of Local Self-Government Bodies (25 Shevchenka Str., Pidberiztsi, Pustomyty district, Lviv region, 81146, Ukraine)
Email: pidberizcivskarada@gmail.com

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