Designing provincial financial assistance to villages: A policy analysis of flat intergovernmental transfers under heterogeneity in Bogor, Indonesia

Since the beginning of the administrative and territorial reform in Ukraine, the financial decentralization process has been intensified. It aims at optimizing the budgetary resource redistribution in order to make communities financially independent. This significantly increases the financial capacity for self-organization and self-development of a united territorial community, which determines the need to apply valuation methods to increase the territory’s investment attractiveness.
The article outlines the peculiarities of the united territorial communities (UTCs) management under fiscal decentralization, taking into account the need to apply current methods of value-oriented management. At the same time, the use of SWOT analysis as one of the methods of value-oriented management made it possible to evaluate the efficiency and attractiveness of UTCs under decentralization. The financial activity of 665 UTCs was analyzed and the model for managing the united territorial community was created. It is emphasized that the modern understanding of financial support for united territorial communities remains unresolved today, and the expediency to introduce changes in the UTC, which envisage using the subsidiarity principles, is not justified.
The key directions for managing the UTCs are identified. This refers to communities that began their activities and already faced the first challenges: management of available resources, provision of needs and sustainable development of the community, changes in the ratio of their income and expenditure components, increase in the budget income per capita.
It is recommended to focus on tools of value-oriented management in the united territorial communities in order to attract investors and increase the financial capacity of local authorities.

In this article, updated approach to assess the impact of fiscal decentralization on economic development is offered. The relationship between the proper level of fiscal decentralization and economic growth for 27 advanced and emerging economies in Europe from 1992 to 2017 was evaluated using panel data. In the EU members, Belarus, Georgia and Ukraine expenditures decentralization was more essential than revenue decentralization. The vast majority of the counties from Central and Eastern Europe have increased the level of fiscal decentralization since 1992. It was found that revenue decentralization was associated with lower growth rates, while expenditures decentralization could slightly encourage economic development. The overall decentralization indicator adversely affected the growth, but that interconnection was not robust. The empirical investigation showed significant role of demographic structure and sustainability to ensure economic development. The authors propose the statements for the local authorities to develop the methodical bases of the fiscal policy’s design. In the survey, a balanced approach to the tax and public spending policy’s preparation and planning is presented.

Since the reform era, Indonesia has experienced three stages of fiscal decentralization. In the third stage, the focus of the policy shifted to village development by giving authority to manage village funds. However, due to a lack of supervision and inefficient governance, this policy has not been able to improve the quality of rural development. The purpose of this study is to evaluate the level of efficiency of village fund use and analyze the variables that influence it. This study employs data envelopment analysis (DEA) to determine the level of efficiency and binary logistic regression to determine the variables that influence it in 2018 and 2021. The results show an increase in the number of provinces experiencing efficiency in managing village funds. In 2018, 10 provinces (30.30%) were declared efficient, but the remaining 23 (69.70%) were declared inefficient. In 2021, the number of provinces declared efficient increased to 14 (42.42%), while 19 (57.58%) were still considered inefficient. This finding signals that the level of village fund efficiency in Indonesia is still a major challenge toward increasing rural economic growth. The variable that significantly affects the level of efficiency is the level of education of the village head. The lack of human resources who have expertise in village fund management has resulted in low-quality implementation of village development and community empowerment programs.