Abstract
Systematic assessment of the financial stability of local budgets is important for timely detection of budget imbalances and identification of their causes, thus helping to make informed management decisions of current and strategic nature on the development of territories, quality local public services and improving welfare. The article proposes the use of Kohonen maps to determine the financial stability of local budgets. The main advantages of the practical use of Kohonen maps for this purpose compared to such common assessment methods as integrated and matrix are the simplification of the process of assessing the financial stability of local budgets and at the same time visualization of the results for public presentation. On Ukraine's example local budgets were grouped according to the parameters of their financial stability with the construction of Kohonen maps based on the SOM-Ward algorithm. It allowed determining the financial condition of local budgets of Ukraine during 2017-2020 and accordingly the type of their financial stability. Taking into account changes in the financial stability of local budgets over time is important when adjusting fiscal policy. The idea is that simplifying the process of assessing the financial stability of local budgets is an important condition for its active practical application and at the same time will allow visualizing information for the public about local budgets which will promote transparency in budget management and increase trust in the formation of priorities of fiscal policy at the local level.
Highlights
Local budgets are a tool for implementing the policy of local governments on the development of a particular area, the implementation of local authorities of the most important tasks at the local level and obtaining the planned results
Budget management is studied in the framework of budget management which is considered as “a system that covers the interaction of bodies for the preparation, review, approval and implementation of state and local budgets through a set of related functions, principles, methods, techniques, procedures and other budgetary tools aimed at the development and implementation of management decisions and used to ensure the efficient and targeted use of financial resources” [21]
It can be argued that the financial stability of the local budget on the one hand is a tool of budget management, and on the other hand serves as an indicator of the effectiveness of budget management
Summary
Local budgets are a tool for implementing the policy of local governments on the development of a particular area, the implementation of local authorities of the most important tasks at the local level and obtaining the planned results. The general trend of development of countries with transformational economies in recent years is the intensification of practical implementation of budget decentralization reform which helped increase the role of local governments in addressing regional issues and strengthen their responsibility for financial stability of local budgets as a result of decisions. In recent years the problems of financial support for the development of territories have worsened due to the rapid growth of current expenditures of local budgets. In the context of global and local challenges significant rapid changes and in the course of the coronavirus pandemic, quarantine restrictions and threats of new waves, and the rapid growth of related budget expenditures and the need for debt financing, the problem of systematic timely assessment of financial stability of local budgets budget management is of particular importance
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