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DOI: https://doi.org/10.34069/AI/2024.73.01.5
How to Cite:
Barida, N., Demydenko, L., Nakonechna, Y., Tretiak, D., & Miedviedkova, N. (2024). Ensuring transparency and publicity of local
budgets in Ukraine in the face of new challenges. Amazonia Investiga, 13(73), 56-73. https://doi.org/10.34069/AI/2024.73.01.5
Ensuring transparency and publicity of local budgets in Ukraine in the
face of new challenges
Забезпечення прозорості та публічності місцевих бюджетів в Україні в умовах нових
викликів
Received: November 27, 2023 Accepted: January 7, 2023
Written by:
Nadiia Barida1
https://orcid.org/0000-0002-0480-5506
Liudmyla Demydenko2
https://orcid.org/0000-0003-1340-8374
Yuliіa Nakonechna3
https://orcid.org/0000-0003-0601-7172
Diana Tretiak4
https://orcid.org/0000-0002-1610-6905
Nataliia Miedviedkova5
https://orcid.org/0000-0001-6359-561X
Abstract
The article analyzes the essence and features of
transparency and publicity of local budgets in
Ukraine and abroad using advanced foreign
experience. The need to ensure transparency and
publicity of local budgets is substantiated.
International ratings of openness and
transparency of local budgets are considered.
Successful projects and practices in ensuring
budget transparency and publicity are analyzed.
The features of ensuring budget transparency and
publicity in war conditions are determined.
Recommendations are proposed to increase the
transparency and publicity of local budgets in
Ukraine in the face of new challenges.
To achieve the goals of this article, general
scientific and special methods were used, such as
the structural-functional method (to study
individual tools, successful projects, and
practices in ensuring transparency and publicity
1
Ph.D., Associate Professor, Department of Banking and Insurance, Kyiv National Economic University named after Vadym Hetman,
Ukraine. WoS Researcher ID: JRX-4045-2023
2
Ph.D., Associate Professor, Department of Finance, Taras Shevchenko National University of Kyiv, Ukraine. WoS Researcher
ID: HTN-6109-2023
3
Ph.D., Associate Professor, Department of Finance, Taras Shevchenko National University of Kyiv, Ukraine. WoS Researcher
ID: JRX-7453-2023
4
PhD, Associate Professor, Department of Insurance, Banking and Risk Management, Taras Shevchenko National University of Kyiv,
Ukraine. WoS Researcher ID: AAF-9251-2022
5
Ph.D., Associate Professor, Department of Finance, Taras Shevchenko National University of Kyiv, Ukraine. WoS Researcher
ID: T-4368-2017
Barida, N., Demydenko, L., Nakonechna, Y., Tretiak, D., Miedviedkova, N. / Volume 13 - Issue 73: 56-73 / January, 2024
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of local budgets), comparison method
(comparison of data openness across countries,
successful projects, and practices in ensuring
budget transparency and publicity). All this made
it possible to develop measures to ensure
transparency and publicity of local budgets in
Ukraine in the face of new challenges.
Keywords: local budgets, budget transparency
and publicity, international ratings,
decentralization, war, new challenges.
Introduction
Research into the strategic course of modernizing
public finances and seeking to adapt it to EU
requirements should be considered in the context
of research into medium-term budget planning,
budget transparency, control, and combating tax
fraud. The main aspects of deepening
cooperation between Ukraine and the EU and the
content and directions of bringing Ukrainian
legislation closer to the EU acquis
communautaire were determined by the
Association Agreement with the EU, which was
signed in 2014. Since 2017, the Agreement
entered into force, several measures have been
implemented to increase budget openness and
public participation in the budget process.
Ensuring the prompt, proper, and continuous
implementation of local budgets is extremely
important in martial law conditions.
The results of the work are to determine the
features and ensure budget transparency and
publicity in war conditions, taking into account
the following factors: the status of the
community, region, the presence of important
military strategic facilities and critical
infrastructure facilities in a particular region or
territory; the results of the review of
interbudgetary relations; the emergence of a new
management level — the requirements and
challenges of European integration.
In addition, successful projects and practices in
ensuring budget transparency and publicity were
studied, which made it possible to develop
recommendations for increasing the transparency
and publicity of local budgets in Ukraine in the
face of new challenges: digitalization and
transparency, digital ecosystem "Dream";
openness and transparency in management;
system for monitoring and assessing regional
development; municipal statistics and
administrative supervision; e-democracy:
rethinking citizen participation; activating people
through e-democracy.
Literature review
The study of openness and transparency of local
budgets is quite relevant since society always
shows an interest in proper financial support, on
which the city's socio-economic development
depends. Thus, the local budget is the main
document showing not only the activities of the
government body but also how well it satisfies
the population's needs for public services.
The article also used a methodology for assessing
the transparency of local budgets. The
methodology was developed under the general
editorship of O. Holynska and A. Matvienko
(2017).
According to T. Wood & M. Aronczyk (2020),
democratic communication within the state is
based on the principles of publicity and
transparency: when, through publicity, it
becomes possible for transparency to
demonstrate its communicative ability.
Moreover, M. Huba & M. Lynetsky (2022)
consider publicity and transparency of the local
budget as an instrument of anti-corruption policy
at the local government level. According to
scientists J. Nakonechna and L. Demydenko
(2016), if information transparency and
accessibility of the state of local budgets are
ensured, corruption can be eradicated in Ukraine,
and high levels of financial security in our state
can be achieved.
Many scientists have developed conceptual
approaches and practical recommendations to
increase the transparency and publicity of the
budget process and local budgets.
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Thus, researchers L. Demydenko,
Y. Nakonechna & N. Miedviedkova (2021)
substantiated the need to improve the use of tools
to increase transparency and publicity, taking
into account international experience, and also
identified ways to increase the efficiency of using
these tools to ensure the socio-economic
development of regions. N. Miedviedkova &
A. Karpych (2021) analyzed practices for
increasing the level of publicity and transparency
of Ukrainian local budgets. They are also
respected by the world experiment in increasing
transparency and publicity of local budgets
(Miedviedkova & Karpych., 2023).
Yevtushenko M. (2018) provides
recommendations for organizing information
systems of local governments to increase the
accessibility and simplify the perception of
information on local budgets by representatives
of civil society, as well as introducing changes to
the regulations for the exchange of information
between local financial authorities and the State
Treasury Service of Ukraine in terms of
improving monitoring expenditures of local
budgets through interbudgetary transfers from
the state budget, the use of which provides for co-
financing.
A. Demianiuk (2016) notes that to increase the
level of transparency of budgets, the public
should be more actively involved in the budget
process. Researches S. Diachenko &
Ye. Fetishchenko (2016) propose that the
Ministry of Finance of Ukraine annually, during
the preparation of the draft State Budget of
Ukraine, prepare a public budget and bring it to
the public-on-public web portals using various
visualization methods as well as use such public
participation mechanism as public consultations.
The group of scientists I. Lyutiy, Yu. Petlenko,
& N. Drozd (2022) developed conceptual
approaches to ensuring the effective use of
budget resources in the defense and security
sector by summarizing the practical
implementation of the principles of openness and
transparency of budgeting, developing effective
mechanisms for budget oversight, and
compliance with public accountability standards.
The results of these studies indicate that the
policy of ensuring transparency and publicity of
local budgets in Ukraine could be more effective.
Paying tribute to the developments of domestic
economists, we note that some issues require
additional research, especially in the context of
the latest global challenges.
The purpose of the study is to analyze the state
of ensuring transparency and publicity of local
budgets, in particular, to summarize global and
domestic practices of successful projects in
ensuring budget transparency and publicity, as
well as recommendations for their improvement
in the face of new challenges.
To achieve these goals, the following tasks were
set: 1) study successful projects in world
practice; 2) study the approaches of foreign and
domestic scientists to ensuring publicity and
transparency of local budgets; 3) analyze
domestic experience; 4) study the problems
arising in the face of new challenges; 5) consider
the prospects for increasing the transparency and
publicity of local budgets in the face of new
challenges.
Methodology
Methods of theoretical generalizations are used
to study the theoretical foundations of ensuring
budget transparency and public participation in
the budget process, as well as deepening the
content of transparency of the budget process and
clarifying the concept of openness and
transparency in the budget process (Bak, 2014;
Huba & Lynetsky, 2022; Demianiuk, 2016;
Petlenko, Drozd, & Morgun, 2021).
Many scientists have used several scientific
approaches to analyze the achieved level of
budget transparency, as well as the transparency
of the budget process in Ukraine (Bak, 2014;
Demianiuk, 2016).
Researcher Zhabynets (2019) used the
comparison method to analyze the fulfillment of
legislative requirements on disclosing
information about the budget between equal
united territorial communities (comparing
information about the budget, passports of
budget programs, and budget execution).
I. Lyutiy, Yu. Petlenko., & N. Drozd (2022)
provided an empirical description and used data
from expert discussions and approaches to the
multidimensional assessment of the openness
and transparency of the budget process in the
defense and security sector to improve the
efficiency of the use of military budget funds.
To achieve the goals of this work, general
scientific and special methods were used, such
as:
− structural-functional method (for studying
individual tools, successful projects, and
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practices in ensuring transparency and
publicity of local budgets);
− comparison method (comparison of data
openness across countries, successful
projects, and practices ensuring budget
transparency and publicity). This method
involved comparing countries using the
Public participation, Budget Oversight, and
Transparency indices.
To understand the progress made by the
Ukrainian government in achieving publicity and
transparency of local budgets, we will look at the
dynamics of recent years, which have made it
possible to understand the shortcomings and
risks of the local finance system. This, in turn,
allows us to develop recommendations regarding
measures to increase the transparency and
publicity of local budgets in Ukraine in the face
of new challenges.
The structural-functional method was used to
identify types of risks in the field of public
finance, namely: Open budget planning and
execution of budgets, Boost-analysis budget
analysis tool, Spending use of public funds,
Proifi international financial projects (MFO
loans), Education expenses, Reimbursement
VAT, State banks, Debt policy, Foreign trade
indicators, Financial market indicators,
Investment policy of the Ministry of Finance,
Efficiency of use of funds, Budget widget,
Chrome extension, Telegram bot, Training
courses. An integrated approach to the research
allowed us to form a holistic picture of domestic
projects and successful foreign practices
recommended for Ukraine to use in the face of
new challenges.
The comparative method was used to review
successful projects and practices ensuring budget
transparency and publicity. Budget
Visualization, Participatory Audit, Online
Budget Consulting Tools, Participatory Budget,
and Gender-Responsive Budgeting were
compared.
We analyzed the public availability of budget
documents in Ukraine in the context of
documents such as the pre-budget statement,
executive budget proposal, adopted budget,
public budget, current reports, semi-annual
review, annual report, and audit report during
2010-2021. A positive trend is that the public
budget has been available since 2017. The
analysis allowed us to conclude that, in general,
the public receives all the necessary information.
We also used another report, the Open Budget
Survey (OBS), which assesses the public's ability
to determine how the central government collects
and spends public resources. In addition to
Ukraine, we considered Bulgaria, Moldova,
Slovakia, Romania, Armenia, Poland, the Czech
Republic and Hungary. We concluded that since
2015, there has been a positive trend: Ukraine has
increased its rating from 46 to 65.
Policy, Portals, Impact, and Data quality are
considered to build the open data ranking. In
turn, their components were compared: Policy
consists of Policy framework, governance of
open data, open data implementation; Portals – of
indicators Portal features, Portal usage, Portal
provision, Portal sustainability; Impact – of
indicators Strategic awareness, Measuring re-
use, Created impact; Data quality – of indicators
Monitoring and measures, Currency and
completeness, DCAT-AP Compliance,
Deployment Quality.
Results and Discussion
The need to ensure transparency and publicity
of local budgets
The formation of local budgets is an important
component of budget policy, determines the
degree of effectiveness of the implementation by
local self-government of the functions and
powers assigned to them, and affects the socio-
economic development of administrative-
territorial units.
Undoubtedly, the principle of transparency of the
budget system and its publicity is specified in
Article 7 of the Budget Code of Ukraine. It
should also be noted that the budget system as
“the totality of the state budget and local
budgets” (clause 2.1.5 of the Budget Code of
Ukraine) is transparent since the content of the
State budget and local budgets is obvious. The
latter's composition is clearly standardized by
law (clause 2.1.34 of the Budget Code of
Ukraine) (Bak, 2014).
Compliance with the principles of transparency
and publicity of the budget process is important
for establishing trusting and transparent relations
between citizens and authorities, particularly in
finance.
The introduction of modern IT technologies into
the management process allows local
governments to become not only the official but
also the only source of high-quality and
accessible information about every community
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budget. An effective combination of open
information, transparent budget decision-
making, and innovative practices in the budget
process can become a driving force for
establishing a new budget policy in Ukrainian
communities (Pleddg, 2020).
Also, on March 11, 2022, the Government of
Ukraine adopted Resolution “Some issues of the
formation and execution of local budgets during
martial law” No. 252, which defines the features
of the formation and execution of local budgets
during martial law (Resolution No. 252, 2022).
In particular, it states that the formation of local
budgets and ensuring the uninterrupted
functioning of institutions and institutions of the
public sector and public utilities is carried out by
budget legislation, taking into account the
following features:
− local government bodies, their executive
bodies, local state administrations, and
military-civil administrations continue to
exercise budgetary powers;
− the executive committees of the relevant
local councils, local state administrations,
civil-military administrations, or military
administrations manage local finances
according to the needs and characteristics of
the military conditions;
− local financial authorities ensure the
preparation of draft local budgets according
to the requirements of the Budget Code of
Ukraine;
− the State Treasury Service provides
settlement and cash services for local
budgets and reporting on the execution of
local budgets using electronic media;
− temporarily, until the termination or
cancellation of martial law, inspections by
the State Audit Service on the
implementation of local budgets are not
carried out, and the inspections that have
begun are stopped.
International ratings of openness and
transparency of local budgets
It should be noted that before the war, the level
of transparency in Ukraine could be defined as
high, confirmed by international ratings:
− Open Data Maturity Report (ODM) – 2nd
place out of 35 (97% open data maturity
(2022));
− Corruption Perceptions Index (CPI) – 116
out of 180 countries in the world in the
ranking (33 points out of 100 (2022));
− Open budget survey (OBS) – 65 points
scored (2021).
The Open Budget Survey (OBS) ranks countries
by their level of accountability in national budget
processes. It is the world's only comparative,
independent, and regular assessment of
transparency, oversight, and participation in
national budgets in 120 countries.
A country's budget transparency score, reflected
in the Open Budget Index, evaluates the public's
access to timely and complete budget
information. A transparency score of 61 (out of
100) indicates that a country publishes enough
information to support informed public debate
(International Budget Partnership, 2021).
Fig. 1. Public participation in Ukraine compared to others
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The OBS evaluates the formal opportunities
provided for the public to meaningfully
participate in various stages of the budget
process. It examines the practices of the central
executive, legislature, and supreme audit
institution using 18 equilibrium indicators
aligned with the Global Initiative for Fiscal
Transparency's principles of public participation
in fiscal policy and scores each country on a scale
of 0 to 100.
Ukraine has a public participation score of 39
(out of 100).
Fig. 2. Extent of opportunities for public participation in the budget process.
The International Budget Partnership
organization draws attention to several factors
that determine the need for transparency in the
budgets of countries worldwide (International
Budget Partnership, 2021).
Transparency can help attract cheaper
international loans: we found that, after
controlling for various economic variables,
countries with higher levels of fiscal
transparency have higher credit ratings and a
lower gap between lending and lending rates,
thus lowering the cost of borrowing states;
− opacity in financial matters can undermine
fiscal discipline: a study by the International
Monetary Fund (IMF) found that one of the
essential methods for calculating a country's
financial reliability and solvency is the
indicator of the transparency of its financial
systems and practices. Looking at the recent
global economic crisis, the IMF study
attributes nearly a quarter of unexpected
government debt among the countries
studied to a lack of available information
about the government's financial position;
− transparency and public participation help to
identify leaks and improve the efficiency of
government spending by identifying
instances of misuse of funds and obliging the
government to return money spent
unreasonably;
− transparency and public participation
contribute to the fair distribution of national
resources in accordance with national
priorities.
The state of ensuring transparency and
publicity of local budgets in Ukraine
Transparency and openness of budget
information is the key to the effective use of
budget funds and public control over public
funds, given the growth of the budget openness
index can be considered an important indicator of
the success of the implementation of reforms in
the budget sector at both the state and local
levels. Ukraine's main problems in budget
transparency are violation of deadlines and
insufficient completeness of the publication of
budget documents in the budget process. In
particular, many analytical studies have been
devoted to this issue (Boex et al., 2023; Alt,
2019).
The government untimely submits documents on
the basics of budget policy for the next year, the
deadlines for promulgating the draft budget are
violated, there is no information on semi-annual
budget reports, the Law on the State Budget of
Ukraine, and the decision to approve local
budgets were not adopted in a timely manner.
The study proposed using a quick test to assess
the transparency of local budgets (Slukhai et al.,
2019).
The process of financial decentralization that
began in 2015 provided local governments with
new sources of their own income. At the same
time, it became possible to implement
participatory budgets for broad public
involvement. Financial decentralization has
generally increased the budgets of territorial
communities to meet their socio-economic
needs. At the same time, there is no empirical
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evidence that the above-mentioned fact
automatically provided the population with high-
quality local public services — education,
healthcare, etc.
The consolidation of territorial communities
from 11 thousand local budgets to 1460, as of
November 2023, helps to optimize costs for the
maintenance of the social sphere and increase
allocations for priority areas of the territorial
community’s economy and social development.
The key task of further development of fiscal
policy is to stimulate the efficient use of local
budget funds.
The publication of information on the civil
budget began positively in 2015–2016, which
deserves further widespread use in the budget
process. Involving the general public in the
budget process will ensure greater transparency
and openness of local finances and ultimately
their orientation towards public satisfaction with
public goods and services at both the state and
local levels (Zakharii et al., 2019).
The unprovoked aggression of the Russian
Federation caused significant damage at the
community level, destroying civilians, local
infrastructure, and businesses; according to the
latest figures, about 6.2 million Ukrainians left
the country, of which 5.6 million found refuge in
various EU countries. But despite the dire
consequences suffered by those who survived the
occupation of the territories, life is gradually
returning to the liberated territories and
communities (Refugee (n.d.)).
Under martial law, legislation was updated; the
right to make changes to the local budget was
granted to the executive committees of the
relevant local councils, local state
administrations, military-civil administrations,
or military administrations on the proposal of
local financial authorities without making a
corresponding decision by the relevant local
councils.
In November 2022, the right to approve and
amend community budgets upon the proposal of
local financial authorities was returned
exclusively to local councils or military
administrations of settlements in the event of
their creation. However, this norm during its
operation made it possible to ensure the
continuity of the budget process. To some extent,
it deprived compulsory health insurance of the
right to adopt solutions.
The budget process has been somewhat
simplified by the abolition of certain
requirements for the publicity of the budget
process, provided for in Art. 28 of the BCU,
simplification of the reporting process, abolition
of the application of regulatory procedures and
norms for coordinating the provision of state
assistance to business entities. An analysis of
budgetary processes at the level of local
communities is presented in the study “The
Impact of War on the Budgets of Territorial
Communities” (Decentralization, 2023).
Local governments that have received sufficient
powers as a result of the decentralization reform
must, under martial law, perform additional tasks
due to modern challenges: keep records of
internally displaced persons; assist internally
displaced persons in processing social payments;
provide food packages and necessities;
organization of assistance with goods and
services for the organization of psychological
support; assistance in providing medical
services; educational services for children of
preschool and school age who are classified as
internally displaced persons, as well as for
children who have traveled abroad, but continue
to study remotely in Ukrainian schools.
To summarize, we note that after the end of the
war, local self-government bodies will be faced
with the issues of returning citizens and creating
conditions for full integration into the life of the
community, improving the socio-economic
conditions of all residents of the community by
their wishes and vision for the development of
the territory.
Under martial law, reforms aimed at integration
into the EU continue, where local government
plays an important role. The Ministry of
Development of Communities, Territories, and
Infrastructure of Ukraine on 7-11-2023 presented
a roadmap for the reform of local self-
government bodies and the territorial
organization of power, where a significant place
is given to compliance with the principles of
transparency, openness, and accountability of the
activities of local self-government bodies.
Successful projects and practices to ensure
budget transparency and publicity
Research into the strategic course of modernizing
local finance and finding ways to adapt it to EU
requirements should be considered in the context
of research into transparency and publicity of
budgets. The main aspects of deepening
cooperation between Ukraine and the EU and the
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content and directions of bringing Ukrainian
legislation closer to the EU acquis
communautaire were determined by the
Association Agreement with the EU, which was
signed in 2014. Since 2017, when the Agreement
entered into force, several measures have been
implemented in the following areas:
The most successful examples are the E-Data,
ProZorro, and DoZorro projects.
E-data is an open data platform in the field of
public finance, implemented in pursuance of the
order of the Cabinet of Ministers of Ukraine
dated February 11, 2016, No. 92-r “On approval
of the Concept for creating an integrated
information and analytical system “Transparent
Budget.”
Thus, it is not only an official state information
resource that presents information in open data
format but also an accessible tool for public
control over the planning and use of public funds.
Users of E-data are citizens of the country,
government bodies and institutions, and
international organizations (Fig. 3).
Fig. 3. Є-DATA USERS
It is important to note that E-data includes 16 modules:
Table 1.
E-data modules
Module name
Content
Open budget planning and execution of
budgets
Information on budget planning and execution at the state and local
levels
Boost analysis budget analysis tool
Analytical tool for studying budget execution indicators at all
levels
Spending use of public funds
Information on the use of public funds from state and local budgets
by managers.
Proifi international financial projects (MFO
loans)
Register of projects implemented with the involvement of funds
from international financial organizations.
Є-DATA USERS
Citizens of Ukraine who are
not specialists in the field of
public finance
Civil society institutions and
their associations
Associations, employers'
organizations and their
associations
Regulatory authorities
Students, graduate students
and teachers conducting
research in the field of public
finance
Bodies of state administration
and local self-government
Bodies of self-organization
of the population
Associations, employers'
organizations and their
unification
Financial industry experts Managers and recipients of
budget funds
Legal entities of private and
public law
Auditors and rating
agencies
Open data portals
International financial
organizations
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Education Expenses
Analytical tool for analyzing the activities of higher and secondary
education.
VAT refund
Register of applications for the return of the amount of budgetary
reimbursement of value-added tax.
State banks
Key performance indicators of state-owned banks and information
on non-performing loans.
Debt policy
Register of state guarantees, list of primary dealers, calendar, and
auction results.
Foreign trade indicators
Analytical tool for analyzing the volume of import-export of goods.
Financial Market Indicators
Key indicators of the money market, capital market, and foreign
exchange market
Investment policy of the Ministry of
Finance
Investment instruments and credit ratings of international agencies.
Efficiency of use of funds
Results of financial control over the use of budget funds
Budget widget
Presentation of the community's main budget indicators on its web
page.
Chrome extension
Quick access and a convenient way to move platform modules.
Telegram bot
E-data platform messenger — information about the public
finances of the state
Training courses
Financial and budget literacy, open data, public control.
Policy, Portals, Impact, and Data quality are
considered to build the open data ranking. In
turn, Policy consists of Policy framework,
Governance of open data, Open data
implementation, Portals – of indicators Portal
features, Portal usage, Portal provision, Portal
sustainability, Impact – of indicators Strategic
awareness, Measuring re-use, Created impact,
Data quality – of indicators Monitoring and
measures, Currency and completeness, DCAT-
AP Compliance, Deployment Quality).
Table 2.
Open Data Rating
Country
Policy
Portal
Impact
Data Quality
Open Data
Maturity
Ukraine
640
617
600
606
97%
Switzerland
495
475
320
517
71%
Sweden
572
463
510
437
78%
Spain
632
591
560
545
92%
Slovenia
615
613
455
598
90%
Slovakia
480
300
280
448
59%
Romania
435
571
300
394
68%
Prozorro is an electronic system that ensures the
openness of government tenders in Ukraine.
Since its founding, it has received several
international awards, particularly as the most
transparent procurement system in the world.
The Wired and The Economist have written
about its phenomenon in the fight against
corruption and involving citizens in controlling
budget expenditures.
Until 2016, the area of public procurement in
Ukraine was closed and corrupt. Information
about tenders was published by the state
enterprise "Vneshtorgizdat" in the newspaper
"Bulletin of State Procurement" with a
circulation of several hundred copies. Interested
parties purchased the newspaper's circulation,
and bid proposals could only be submitted in
paper. Undoubtedly, many sentences were “lost”
on the way to the addressee.
From April 1, 2016, the Prozorro system became
mandatory for central authorities and
monopolists, and from August 1, 2016, it became
mandatory for other public customers. The
sphere of public procurement is regulated by the
Law of Ukraine, “On Public Procurement,” the
main policy maker in this area is the Department
of Public Procurement, which is part of the
Ministry of Economy. SE "Prozorro" and the
electronic system Prozorro are 100% owned by
the state of Ukraine and subordinate to the
Cabinet of Ministers (Prozorro, n.a.).
Since the beginning of the full-scale invasion,
Prozorro has not stopped working for a day, and
now its use is only expanding. Due to this, the
Ministry of Defense has returned to conducting
procurement in the system and is saving billions
of UAH. International donors have begun
purchasing from Prozorro, and citizens are
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increasingly monitoring how funds are spent
during the war and influencing the determination
of priorities.
The DoZorro monitoring portal is a platform
where each participant in the system (supplier,
customer, regulatory body, citizen) can provide
feedback to the government customer or supplier,
discuss and evaluate the conditions of a specific
procurement, analyze the procurement of a
separate government body or institution, prepare
and submit an official appeal to regulatory
authorities and much more.
For public activists and the media, the portal
allows you to discuss a specific tender with
potential and existing suppliers, find their expert
opinion on the correctness of the wording in the
tender documentation, receive professional
expertise, etc. But the main thing is that it is a
convenient tool for managing monitoring —after
all, keeping records of monitored procedures and
violations found thanks to the portal has become
very simple.
Government customers can evaluate a specific
supplier, analyze business feedback, make
appropriate procurement process changes, and
create their risk management system (Dozorro,
(n.a)).
Local budgets are important because they
establish allocating resources to provide public
services, promote economic development, and
provide a platform for democratic participation
and citizen engagement. Effective local
budgeting is critical to the well-being of its
residents. However, several characteristics make
local budgets unique (Lyutiy, 2023).
Foreign experience shows that there are also
projects that are more aimed at ensuring publicity
while promoting budget transparency. These
include Budget Visualization, Participatory
Audit, Online Budget Consulting Tools,
Participatory Budgeting, and Gender Responsive
Budgeting.
Visualization of budgets – visibility, creation of
conditions for visual monitoring of budget funds,
as a rule, at the stages of approval and use.
Elements of graphics, infographics, interactive
mapping, etc., can be used.
The project aims to present budget information in
a way ordinary citizens can understand. Clear
budget information contributes to greater public
awareness of financial issues in society and
motivates more active participation and
involvement in budget processes. It is
implemented in Poland, the UK, the USA,
Kenya, and Ukraine (Chernivtsi, Lviv, etc).
The advantage is clarity and compactness; the
disadvantage is the need for additional work from
graphic designers, highlighting the most
important, color printing (Holynska &
Matviienko, 2017).
Participatory audit (Citizen Participatory Audit)
is an audit that unites civil organizations (CSOs),
citizens, and auditors of the Audit Commission
(State Audit Service — Ukrainian) as one audit
group. Its goal is to strengthen citizen
participation in the government audit process to
increase transparency, efficiency, and
effectiveness in the use of government resources.
The result is the involvement of citizens in
monitoring the use of funds, cooperation between
regulatory authorities and citizens, and increased
financial discipline of authorities. It is used in
Cambodia, the Philippines, Angola, and
Indonesia.
The advantages of the practice are the ability of
citizens to control spending fully, and the
disadvantages are the need for special knowledge
and the presence of a significant part of free time.
Online tools for consulting on budget issues —
remote consultation of citizens on budget policy
issues. The goal is to better understand city
residents' priorities in its development, efficient
allocation of funds, and improvement of the
provision of certain services.
The project results in the formation of
partnerships between the authorities and citizens;
residents see the opportunity to influence the
adoption of important decisions for the city, and
local authorities see support for their actions.
It is being implemented in Britain (online info
hub “Be Heard”). Through this city, residents can
communicate their opinions and proposals on
various issues important to the city, including the
distribution of budget funds, construction, waste
recycling, or social services.
Another tool is the Birmingham Speaks portal,
where residents can post their thoughts and ideas
for the city's development and evaluate ideas
submitted by other citizens, including proposals
for the budget.
A similar system operates in the city of
Manchester. The Manchester budget page on the
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city's official website greets residents with the
slogan, "Our budget is based on what you say."
Here, in particular, the results of consultations
with residents and the city development priorities
formed based on these consultations are
described in detail.
The city of Derby (the UK) also has a separate
section (office) for consultations: “Your city -
that's up to you to tell.” The advantages of the
practice are attracting more potentially active
citizens with knowledge and desires but less time
for offline meetings. Disadvantages of the
practice are the need for a permanent online
consultant and additional software for
developing an online consulting platform.
Today, local financial authorities face severe
challenges related to the war. Considering this,
each decision must be balanced and clearly
supported by the relevant legislation, which
encourages the search for more effective and
economical approaches to spending budget
funds.
Attracting additional funds can be carried out
either by using new sources or by economically
and rationally using existing funds. Active
citizen participation in this process can be one of
the best ways to manage public funds.
Participatory budgeting is one of the forms of
democracy at the local level, which provides a
systematic approach to involving citizens in the
process of making budgetary decisions of a
certain territorial community. Participatory
budgeting allows citizens to decide where public
resources should be spent.
Thus, the public budget is a tool for active
citizens to change and improve the city, and the
city implements the projects most voted for by
residents under public control.
Participatory budgeting provides experience in
implementing changes together, improves the
“government-community” dialogue, and gives
every resident a chance to realize their dream by
directly distributing a share of the local budget.
In addition, the public budget provides
transparency in the decision-making process for
developing a city, district, or street.
Although the specifics of each participatory
budgeting process may differ, the overall goal is
to increase citizen participation in decision-
making and promote a more transparent and
accountable distribution of public funds.
The participatory budget mechanism originated
in Porto Alegre (Brazil) in 1989, and several
years after its implementation, it contributed to
achieving positive results. In particular, it
reduced corruption, significantly improved the
quality of education and health care, and
improved the city's sewerage and cleaning
systems.
Although, in the opinion of many scientists, the
participatory budget model introduced in Porto
Alegre is considered an ideal model, this model
is not the only one used in the world. Since 2000,
participatory budgeting began to be actively used
in Europe (particularly in Spain, Belgium, Italy,
Germany, France, Portugal, Denmark,
Switzerland, the Netherlands, and Great Britain)
(Kirilenko & Chaikovskaya, 2015). In Central
and Eastern Europe (Bulgaria, Moldova, Poland,
Romania), the first attempts to begin the
participatory budgeting process began only in
2010.
In Ukraine, participation budgeting was
implemented in 2015 in Chernihiv, Cherkasy,
and Poltava. Later, participatory budgeting
gained significant popularity in Ukraine and
became one of the most effective tools for
cooperation between government and society
today.
Due to Russia's full-scale invasion of Ukraine,
most public projects have been delayed and will
be implemented with adjustments in cost and
priority. The fact is that relocated enterprises
from the East of Ukraine needed financial
support. In return, the budgets of the
corresponding cities will receive additional
revenue in the form of taxes paid by these
enterprises. Thus, if the amount of public budget
funds tended to increase over the following
years, then in war conditions, on the contrary, it
decreased.
Secondly, not only the amount of implementation
of initiatives but also the proportional
distribution between projects is subject to careful
review. Preference will be given to educational
and “green” projects and those related to
improving small streets. Social projects to
improve people's living conditions and social
adaptation will also occupy a significant place.
Projects that increase the safety of citizens and
provide the equipment for shelters or their
modernization are extremely important in war
conditions. Energy saving measures are no less
important due to damage to energy infrastructure.
Therefore, installing solar power plants on the
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roofs of schools will save electricity and allow
classes to be held even when the lights are turned
off (Dymnich, 2023; Polivchak, & Borysevich,
2023).
In our opinion, the following risks and
disadvantages arising in connection with the
implementation of participation budgets in war
conditions should be taken into account:
− due to the reduction in the amount of
participation budgets, there is a reduction in
project funding, which threatens the
possibility of their implementation;
− in case of “freezing” of a project, difficulties
arise in resuming the organization of the
voting process for the continuation of this
project and its victory, as well as bringing
this project to its logical conclusion;
− funds for implementing projects are
allocated for the year following the vote.
Given the change in the priority of projects
in war conditions during this period, the
project may lose its relevance;
− funds for the project implementation are
received not by the initiators but by public
utilities under city councils. In addition,
utilities themselves establish the order and
regularity of funding, which, due to war,
may increase the risks of project suspension.
To effectively further develop the participation
budget in the face of new challenges, it is
advisable to take into account not only the
shortcomings and risks existing in Ukraine but
also to use the experience of other countries
involved in the development of the local finance
system and the implementation of the public
budget. The international practice of using
participatory budgeting shows that the active
action of non-governmental organizations and
other public associations and constant public
monitoring plays an important role.
Gender-responsive budgeting is an effective tool
to help develop fair and effective budgets that
address the real needs of men and women and
groups of people with different and special
needs. Its purpose is to plan budget funds
considering the characteristics and needs of
specific gender groups of people.
The result is the rational use of funds with
maximum consideration of gender needs. It is
implemented in Ukraine and developed countries
(Iceland, Sweden, Norway).
The advantage of the practice is cost
optimization, and the disadvantage is the need for
special training for application.
Today, there is no single generally accepted
effective model of a gender-oriented approach to
budgeting since different countries have their
own specific socio-economic and political-
cultural conditions. Therefore, a gender-
responsive approach to budgeting must be
tailored to each state individually (Karpych &
Miedviedkova, 2021).
Gender-responsive budgeting and participation
in the budget process are critical to achieving
gender equality and empowering women and
men. By incorporating a gender perspective into
the budget process and including women and
other marginalized groups in decision-making,
the budget will reflect the needs and priorities of
all citizens. This will help reduce gender gaps
and increase opportunities for citizens to
participate in society fully. That is why the
practice of using gender-oriented budgeting is
becoming increasingly widespread in the world
(Lyutiy, 2023).
Features of ensuring budget transparency and
publicity in war conditions
Our country's experience under martial law
indicates that local self-government can be not
only a driver of democratic transformations
throughout society but also a powerful force for
defense and resistance to Russian military
aggression. It is relevant and progressive today
when there is an awareness of the real threats and
consequences of wartime and an understanding
of the need to transform financial relations
towards adapting the budget system to martial
law conditions.
Expanding the resource base and transferring
responsibilities, rights, and financial resources to
the local level can provide the necessary steps
toward victory, support regional recovery and
reconstruction, and improve the well-being of all
members of the territorial society.
The question arises whether it is worth thinking
about the openness of budget data, general access
to budget statistics, and reports of local
authorities; when Ukraine experiences missile
attacks from an aggressor country, citizens of
Ukraine die every day, the housing of ordinary
people, infrastructure facilities, and transport
logistics are destroyed.
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Budget transparency and publicity are the most
important factors in the democratic development
of any state. At the same time, the question that
worries the scientific community, government
officials, public organizations, and members of
society remains insufficiently studied: is it worth
taking measures to ensure budget transparency
and publicity in a warring country repelling
military aggression? There is a state of
emergency in the country, the war continues, and
now it is difficult to foresee the timing of its end.
The answer is obvious. During the war, there is a
need to maintain state secrets and ensure national
security, which may limit access to information
about budget operations, including local budgets.
The basic principle of budget transparency and
publicity in war conditions should be “no harm.”
We are not discussing the secrecy of information
about “secret expenses.” The content and
procedure for financing, which was from the
state budget, were well worked out even before
the war.
This refers to all expenses of military
significance at the local level, information about
which, if transparent and open, can be analyzed
by the enemy and used not in favor of the
integrity of our country. In this regard, it is
important to clearly define the list and types of
information materials regarding local budgets
that should not be made public.
At the same time, during the war, the interest of
society members in a more transparent and
efficient use of budget funds increased. The war
increased the demand for openness and publicity
of information about the activities of local
authorities to prevent corruption. Today,
ensuring its permanent control and audit is
becoming especially relevant. Under martial law,
transparency and publicity of the budget means
money and control over the proper use of funds
and lives saved. Thanks to open information,
citizens can check whether funds have been
allocated for the restoration and repair of
housing, whether bomb shelters have been built,
and whether the amounts allocated for relevant
projects are realistic and not inflated. Budget
transparency allows citizens to feel like full
consumers of the maximum level of public
services in exchange for their tax payments.
Without attracting charitable assistance from
foreign governments, as well as their local
authorities, in particular sister cities, and
international financial organizations, it would be
impossible to overcome the shortage of funds for
investment in the process of restoration,
rehabilitation, and development of communities
and territories. Donors of local budgets have
become active stakeholders who want to know
how the funds they provide are used; they are
interested in open information about the
directions, intended use, and efficiency of using
budget funds. The assistance of Western partners
depends on budget transparency.
In our opinion, determining the features of
ensuring budget transparency and publicity in
war conditions at the level of local budgets
involves taking into account the following
factors:
− status of the community and region. After
the outbreak of war, they can be divided into
those under occupation, de-occupied,
temporarily occupied, and not occupied. The
capacity of many communities and the
situation in the communities themselves
have changed, and front-line communities
have also emerged; communities that have
suffered human losses, losses of housing,
land, property, and income, problems of
depopulated territories have arisen,
difficulties in restoring public authority in
de-occupied territories;
− the presence of important military strategic
facilities and critical infrastructure facilities
in a specific region or territory;
− the results of the review of interbudgetary
relations, in particular, a list of local
authorities' own and delegated powers, as
well as a certain simplification of the
procedure for coordinating decisions
between state and local authorities;
− the emergence of a new management level -
military administrations. Thus, the list of
participants in the budget process under
martial law, in addition to the relevant local
government bodies and local self-
government bodies, also includes military-
civil administrations or military
administrations that approve local budgets
drawn up by local financial authorities
without the approval of the relevant
commission to the local to the council,
transfer of budget assignments from one
main manager of budget funds to another,
redistribution of budget expenditures and
provision of loans from the budget for
budget programs, including the budget
reserve fund, additional subsidies and
subventions, within the total volume of
budget assignments of the main manager of
budget funds, as well as an increase in
expenses development by reducing other
expenses by the budget program;
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− requirements and challenges of European
integration. Due to Russia's full-scale
invasion of Ukraine, the President of
Ukraine declared martial law on February
24, 2022. With the participation of local
government bodies, the military command,
together with military administrations,
executive authorities, and law enforcement
agencies, had to introduce and implement
the measures of the legal regime of martial
law provided for by the Law of Ukraine “On
the Legal Regime of Martial Law,”(Law
No. 389-VIII, 2015) implement the powers
necessary to prevent the threat and repel
armed aggression and ensuring national
security, eliminating the threat to the state
independence of Ukraine, its territorial
integrity.
Thus, regional, Kyiv city state administrations
and local governments have to create defense
councils and assist the military command in
introducing and implementing measures of the
legal regime of martial law. In connection with
the introduction of martial law, the Verkhovna
Rada of Ukraine changed the Budget Code of
Ukraine (Budget code No. 2456-VI, 2010) by the
Law of Ukraine dated March 15, 2022 No. 2134
(Law No. 2134-IX, 2022).
Let us determine the main factors that influenced
budget transparency and publicity against the
backdrop of the transformation of various areas
of interbudgetary relations in Ukraine during the
war, respectively, in particular, by the
amendments made to Section VI, “Final and
Transitional Provisions” of the Budget Code of
Ukraine and other legislative acts of Ukraine
(table 3).
Table 3.
Features of ensuring budget transparency and publicity during the war in Ukraine
Main areas of
ensuring budget
transparency and
publicity:
Factors that influenced budget transparency and publicity during the war in Ukraine
(Decree of the President of Ukraine No. 64/2022, 2022), (Law of Ukraine No. 2134-IX,
2022).
in the sphere of
formation of budget
revenues (tax
revenues)
Article 75-1 of the Budget Code and related norms for local budget forecasts do not
apply; local state administrations, military-civil administrations, or military
administrations (if they are formed) may decide to transfer funds from a special fund of
the local budget (except for the own revenues of budgetary institutions and inter-
budgetary transfers) to the general fund of the local budget. In case of transfer of funds from the special fund of the local budget to the general fund
of the local budget, as an exception to the provisions of Article 72 of this Code, the local
budget may be approved with a surplus for the special fund and with a deficit for the
general fund by amending the decision on the local budget.
in the field of budget
expenditures
Article 23 on the mandatory approval by the relevant commission of the Verkhovna
Rada of the Autonomous Republic of Crimea, the local council of the decision of the
Council of Ministers of the Autonomous Republic of Crimea, the local state
administration, the executive committee of the relevant local council on the
redistribution of budget expenditures and the transfer of budget assignments does not
apply; local state administrations, military-civil administrations, or military administrations (if
they are formed) may make decisions on the implementation as an exception to the
provisions of part two of Article 85 of the Budget Code (transfer by the state of the right
to carry out expenses), expenses not included in the relevant local budgets by this Code,
and the costs of maintaining budgetary institutions simultaneously from different
budgets. Such expenses are carried out by providing an interbudgetary transfer from the
local budget.
in the field of inter-
budgetary transfers
Part six of Article 108 on the mandatory agreement with the Verkhovna Rada of Ukraine
Committee on the Budget of decisions of the Cabinet of Ministers of Ukraine on the
distribution and redistribution of amounts of subventions and additional subsidies from
the state budget to local budgets between local budgets does not apply; Local governments or military administrations may decide to transfer funds from local
budgets to the state budget, meeting the food needs of the civilian population,
evacuation/removal/relocation the civilian population from areas where hostilities are
taking place and dangerous territories to safe places, including payment for transport
services, fuel, and lubricants, arrangement of accommodation for citizens in
communication with hostilities, they left their place of residence/stay, payment for other
measures aimed at supporting the civilian population under martial law; Local governments or military administrations may decide to transfer funds from local
budgets to the state budget.
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in organizing the
budget process at the
local level
Parts seven and eight of Article 78 do not apply in terms of restrictions in decision-
making by the Verkhovna Rada of the Autonomous Republic of Crimea, the relevant
local council on amendments to local budgets; The Cabinet of Ministers of Ukraine can decide on the specifics of the formation and
execution of local budgets and the activities of participants in the budget process in the
relevant territories. According to paragraph 1. Part 3 of Art. 15 of the Law of Ukraine “On the legal regime
of martial law,” district and regional military administrations, formed in connection with
the failure to convene a session of the district and regional council, respectively, within
the time limits established by the Law of Ukraine “On Local Self-Government in
Ukraine”, exercise the powers to create and approve, respectively, district, regional
budgets, making changes to them, approving reports on their execution; distribution of
funds transferred from the state budget in the form of subsidies, subventions,
respectively, between district budgets, local budgets of cities of regional significance,
villages, towns, cities of district significance.
in the field of budget
lending
Article 23 on the mandatory approval by the relevant commission of the Verkhovna
Rada of the Autonomous Republic of Crimea, the local council of the decision of the
Council of Ministers of the Autonomous Republic of Crimea, the local state
administration, the executive committee of the relevant local council on the provision of
loans from the budget does not apply.
in the field of
borrowing
establish that during the period of martial law and within six months after its termination
or cancellation in the event of an overdue debt of an enterprise to the Autonomous
Republic of Crimea, regional council, or city territorial community on a loan (loan)
attracted by the Autonomous Republic of Crimea, regional council or city territorial
community or under a state (local) guarantee, as well as for a loan from the budget,
penalties and other penalties are not charged. Regional and city councils are given the right to carry out new local borrowings and
provide local guarantees, even if in the process of making payments to repay and service
the local debt, the payment schedule is violated, penalties are assessed, and overdue debt
has arisen.
reporting deadlines
the norm as Article 80 regarding compliance with the deadlines for submitting reports on
the execution of local budgets does not apply
Conclusions
Local authorities must focus on priorities:
winning, producing weapons and ammunition,
supporting businesses, and developing the local
economy.
Recovery should become a therapy for our
society, including improvement, modeling, and
strengthening the financial viability of
communities on the principles of joint state
building, people-centrism, and involving citizens
in decision-making.
Continuing decentralization reform provides new
opportunities for Ukraine. Decentralization
should be seen as a necessary reform to promote
effective and transparent governance at the
community level.
Main tasks and reforms:
1. Creation of an effective system of local self-
government that will meet the needs of
citizens and contribute to the development of
communities;
2. Decentralization of powers and resources
from central government to local
government;
3. Increasing the financial viability of
communities.
4. Ensuring transparency and accountability
of local government. Local authorities must
be transparent and accountable to citizens.
To do this, it is necessary to introduce
mechanisms of transparency and
accountability of local authorities, in
particular through holding local elections,
ensuring access to information about the
activities of local authorities, and creating
public control mechanisms.
So, a transparent community is one of the key
factors for the success of decentralization
reforms to ensure community development and
improve citizens' quality of life. It is necessary to
create a Register of decisions of local
government bodies.
Ensuring budget transparency and publicity
during war includes the following steps:
1. Digitalization and transparency: focuses on
the role of digitalization in achieving
transparency and involving citizens in
management decisions.
2. Dream Digital Ecosystem: Introduces the
Dream Digital Recovery Management
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Ecosystem, now actively deployed in more
than 150 communities.
3. Openness and transparency in management:
emphasizes openness in the processes of
project selection, decision-making, and
project implementation.
4. System for monitoring and evaluating the
development of regions: promises to
introduce a system for monitoring and
evaluating the development of regions and
communities to manage their
implementation effectively.
5. Municipal statistics and administrative
supervision: develop a bill on municipal
statistics and administrative supervision
over the legality of decisions of local
governments.
6. Electronic democracy: Rethinking the role of
people. Amid these transformations, the
concept of e-democracy is taking center
stage. Although it was not intuitive initially,
it proved to be a revolutionary strategy for
engaging citizens. E-democracy seeks to
activate citizens by involving them in
decision-making processes. This includes
forming project teams, proposing ideas,
participating in project discussions, and
prioritizing initiatives through direct voting
and surveys.
7. Activation of citizens through electronic
democracy. Integrating e-democracy into
the recovery process serves as a dynamic
tool for civic participation. Citizens are not
simply passive recipients of policies; they
become active participants in the
development program. Through digital
platforms, people can express their opinions,
propose solutions, and directly influence the
trajectory of projects, which promotes a
sense of ownership and empowerment.
Several steps make it possible to bring
transparency and publicity closer to European
practices; in particular, the involvement of local
authorities in the digitalization of the budget
process has proven effective, with a focus on
transparency, accountability, and the ability to
involve residents in the development and
adoption of decisions.
For this purpose, they are also launching a digital
ecosystem for managing the restoration of
Dream, in which more than 150 communities are
already actively working; by the end of the year,
a system for monitoring and assessing the
development of regions and territorial
communities will also be presented, which will
contain indicators of socio-economic
development.
Thanks to this system, it is possible to digitize
strategies at different levels. By the end of the
year, a system for monitoring and assessing the
development of regions and territorial
communities containing indicators of socio-
economic development will be presented.
The implementation of the system is the first step
towards the introduction of municipal statistics in
Ukraine. It will help communities and the
government receive and analyse current
information for making management decisions.
Several legislative initiatives will also be
presented that are important for completing the
decentralization reform; the absolute priority is
bill 4298, which should provide administrative
oversight over the legality of local governments'
decisions.
International partners are ready to cooperate with
the central authorities of Ukraine and local
authorities to ensure transparency and
accountability of local authorities. In turn, a
transparent and integrated community provides
the following opportunities:
− ensuring the legitimacy of decisions, multi-
level management, involvement of territorial
communities in the formation of national
and regional policies, and, certainly,
monitoring and combating corruption;
− strengthen and give tools to decoupled
communities to restore local self-
government, conduct municipal statistics,
and provide digital tools for planning and
forming projects;
− focus your support on reforms that
contribute to the creation of transparent and
effective government structures;
− involving citizens in management decisions
and strengthening the institutional capacity
of local government associations are also
key elements of success.
The Association Agreement between Ukraine
and the EU is an important step in developing our
state since the use of the experience of EU
member states allows us to reform the current
state of public finances. The process of reforming
public finances to EU requirements will not only
put public finance indicators in order but will
also ensure the creation of favourable conditions
for enhancing business activity, increasing the
level of social security in the country, and
attracting investment into the country.
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Decree of the President of Ukraine No. 64/2022.
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