Financial capacity of local budget as a basis for sustainable functioning of a territory

Abstract

The level of local budgets financial capacity plays an important role in sustainable socio-economic development providing to the region. The financial capacity of a local budget is capability of the local governmental bodies to exercise local budget expenditures in a timely and proper way, in full conformity with their own direct authorities and delegated authorities, in order to achieve tactical and strategic objectives of social and economic development in a region through accumulating sufficient amount of financial resources. The main factors that have a significant influence on the financial capacity of local budgets are: balanced financial resources and independence of local governmental bodies in making financial decisions. The financial capacity of the local budget consists of three components, characterizing its various dimensions: financial potential, financial autonomy and financial sufficiency. The evaluation of the financial capacity of local budgets is an important problem today. In the article, the authors have proposed a methodology for the financial capacity of the local budget evaluation by calculating the integral index, based at coefficients usage. The proposed approach is of practical importance. It allows making an adequate analysis of the local budgets financial capacity in Ukraine, timely identification of problems, determination of the causes of their occurrence, reserves and ways to improve efficiency of financial relations at the regional level.