The larger is the number of residents in an amalgamated territorial community (ATC), the higher are the indicators of earned revenues per one resident of the community. On the other hand, communities with a low number of residents have a limited capability for sustainable development and provision of all required services to its residents.

It was so reported by Financial Decentralisation Coordinator of the Central Office for Reforms at the Ministry of Regional Development Yanina Kaziuk during the Coordination Meeting "Reform of Local Self-Government and Decentralisation of Power in Ukraine: Progress and Prospects".

The expert presented the study of financial capacity of 159 ATCs, which study was prepared by the Financial Monitoring Team of the Central Office for Reforms operating at the Ministry of Regional Development.

It is the financial aspect which is the most significant and the successful operation of the amalgamated territorial communities depends on it to a great extent. In the presented study, there were analysed the performance indicators of the 159 communities which amalgamated in 2015. The sources of analysis included demographic, statistical, and financial indicators for 2016.

The analysis was carried out on demographic grounds in terms of four groups of the amalgamated territorial communities: group 1 with the number of residents exceeding 15 thousand; group 2 with the number of residents of 10 to 15 thousand; group 3 with the number of residents of 5 to 10 thousand; group 2 with the number of residents up to 5 thousand.

Groups	Number of residents, thous. persons	Number of ATCs	Total number of residents in an ATC group, thous. persons	% of the total number of residents in the ATCs under study
Group 1	more than 15 thous. persons	20	483.4	34.86
Group 2	10 to 15 thous. persons	25	305.6	22.04
Group 3	5 to 10 thous. persons	56	395.9	28.55
Group 4	up to 5 thous. persons	58	201.6	14.54
	Total	159	1,386.5	100.0

The Financial Team worked at 27 indicators pertaining to the activities of the amalgamated territorial communities, 4 of which were determined to be the most significant and which reflect financial capacity of the amalgamated territorial communities, as well as have direct impact on it:

• earned revenues per one resident (ratio of the amount of earned revenues to the number of residents in the ATC concerned),
• subsidised level of budgets (ratio of the amount of basic or reverse government grant to the total amount of revenues of an ATC, exclusive of subventions from the state budget),
• capital expenditures per one resident (ratio of the development budget expenditures [exclusive of subventions from the state budget] to the number of residents in the ATC concerned),
• percentage of administrative expenses in the financial resources of an ATC (percentage of administrative expenses for local self-government bodies in the amount of general fund revenues subject to the basic government grant).

You can find some examples of the monitoring of financial capacity of the amalgamated territorial communities in terms of their grouping subject to the number of residents HERE.

When analysing the financial capacity of the communities, Yanina Kaziuk presented top 20 ATCs with the highest indicators of earned revenues per one resident.

"The analysis of indicators of local budgets shows that communities with more than 10 thousand persons have the highest indicators of earned revenues per one resident. However, high level of income is not always dependent on the number of residents in an ATC, since, in the territory of some small communities, there operate powerful major budget revenue generating enterprises, as, for example, in the Pryshybska ATC where the number of residents totals two thousand persons only or in the Shakhivska ATC with three thousand residents. Such communities are not numerous. В In general, communities with a low number of residents have a limited capability for sustainable development and provision of all required services to its residents", Yanina Kaziuk explained.

As a separate matter, the expert concentrated on the indicators of expenditures by the ATCs for exercising their powers. Administrative expenses constitute a considerable part in such expenditures. Their percentage in the budget general fund, according to the expert, fluctuated from 3.6 to 43.9%.

And capital expenditures (exclusive of subventions from the state budget) reveal the ATC's determination of long-term aims and reflect its own resources.

"The analysis showed a significant difference in the amounts of those expenditures per one resident: from UAH 13.00 to UAH 5.3 thousand. The Pryshybska ATC is an exception, where that indicator has even totalled UAH 12.6 thousand. Such situation is explained by the fact that the community channelled the balances of the 2015 budget general fund to capital expenditures", Yanina Kaziuk noted.

You can find integrated results of the financial capacity assessment of the 159 amalgamated territorial communities by 4 major indicators and of respective ATC groups subject to the number of residents therein (4 groups) HERE.

      The assessment of the financial capacity of the amalgamated territorial communities was carried out in the form of a rating in respect of each of the four indicators. The final value of the rating is an average indicator by each of those four indicators.

      The top 20 amalgamated territorial communities are as follows:

20 Leading ATCs of the Financial Monitoring

ATC	Oblast (region)	Sub-rating position
		Earned revenues per one resident	Subsidised level of budgets (percentage of basic / reverse government grant in revenues)	Capital expenditures per one resident (exclusive of subventions from the state budget)	Percentage of administrative expenses in financial resources (exclusive of the subvention)	General rating
1. Slobozhanska	Dnipropetrovsk	1	10	4	1	1
2. Verbkivska	Dnipropetrovsk	2	1	6	7	2
3. Bohdanivska	Dnipropetrovsk	3	4	5	8	3
4. Shakhivska	Donetsk	4	16	10	4	4
5. Hlobynska	Poltava	9	7	12	14	5
6. Rozsoshanska	Khmelnytskyi	7	22	13	3	6
7. Novooleksandrivska	Dnipropetrovsk	10	23	8	6	7
8. Shyshatska	Poltava	12	15	3	23	8
9. Tiachivska	Zakarpattia	20	28	9	5	9
10. Kalynivska	Vinnytsia	21	23	18	2	10
11. Desnianska	Chernihiv	11	12	33	11	11
12. Lymanska	Donetsk	13	21	34	15	12
13. Bilotserkivska	Poltava	8	11	2	64	13
14. Pyriatyska	Poltava	28	34	16	10	14
15. Biliaivska	Odesa	18	18	14	43	15
16. Pryshybska	Poltava	6	41	1	55	16
17. Solonianska	Dnipropetrovsk	23	23	28	32	17
18. Mohylivska	Dnipropetrovsk	36	23	24	25	18
19. Baikovetska	Ternopil	5	6	7	91	19
20. Krasnosilska	Odesa	15	35	11	58	20

According to Yanina Kaziuk, such financial monitoring allows the bodies of local self-government seeing their vulnerable spots, drawing conclusions, and making respective decisions. Also, those financial indicators will be useful for modelling study of future amalgamated communities and developing the Long-Term Plans of Oblasts.

"Such study allowed revealing consistent patterns showing that communities with a larger number of residents had a greater financial potential. That consistent pattern is explained by the fact that it is more beneficial to develop small and medium business in large communities because they have sufficient qualified labour forces, capacious local sales market for goods and services and better prospects of the community sustainable development. Also, large communities have a greater taxable capacity and more capabilities for ensuring proper maintenance of infrastructure facilities, the operation of municipality-owned establishments and institutions, and the bodies of local self-government may ensure the provision of high-quality public utility services", Yanina Kaziuk summed up.

Comment: Materials of the financial monitoring have been prepared on the basis of information provided by the Ministry of Finance of Ukraine, the State Statistical Service of Ukraine, and Oblast State Administrations.

Reference information

The Coordination Meeting "Reform of Local Self-Government and Decentralisation of Power in Ukraine: Progress and Prospects" was held in Kyiv on 20 June and presided by Vice-Prime Minister - Minister of Regional Development, Construction, and Housing and Communal Services of Ukraine Hennadii Zubko, with the participation of Deputy Heads of Oblast State Administrations responsible for the implementation of decentralisation, representatives of the Centres of Local Self-Government Development in regions, central executive authorities and donor organisations operating in the area of local self-government reform.​