Modern period of Ukrainian development is characterized by extended process of local governance and administrative-financial decentralization reforms, as well as a set of sectoral reforms that started in 2014. The process, which can generally be characterized as the decentralization process, has become the driving force directed at improving the level of territories’ socio-economic development and strengthening the local governance capacity in Ukraine. It is grounded on growing financial autonomy of local authorities, expansion of the list and improving quality of public services granted to residents, and meeting the needs of territorial communities in all activity domains. The paper aims to examine the process of financial decentralization as a precondition of increasing the capacity of local governance in Ukraine. The paper determines that local finances are the process of making financial and investment decisions according to the planned tasks and sources of maintenance. It reveals that the sources of financial provision of territorial communities stipulate the forming of local budgets’ revenues in time based on real processes. The approach contributes to avoiding the excessive expenses and more distinct but rather short-term predicting of budgets composition, as well as optimal defining of funding priorities for corresponding activities. The structure of funding sources in Ukraine is analyzed. The weight of local budgets’ revenues in the structure of Ukraine’s consolidated budget in 2014-2018 is determined. The fact that financial decentralization as one of the key reforms is directed at strengthening of financial-economic capacity of territorial units based on the principles of autonomy, self-sufficiency, and efficiency is emphasized. 

local governance, reform, territorial communities, financial-investment provision, financial resources 

Reforming of the system of local governance and administrative and territorial structure in Ukraine aims to create the new powerful ground for territorial development. It is about the redistribution of functions in the sphere of public governance, deconcentration and decentralization of liabilities between the state and local authorities and budget decentralization. Current market economy conditions and consolidation of financially incapable territorial communities generate qualitatively new administrative and territorial units – consolidated territorial communities, which merge the economic capacities, creating opportunities for newly created local governments to solve more complicated socio-economic development tasks. However, even in case of absence of own sources to finance territorial development and poor development of productive forces at the territory of a community, it is able to activate financial processes by foreign investment. The reform of local governance in this context opens new opportunities for local governments to attract additional funding through extension of their functions in the sphere of territorial organization of economic processes and development of community’s economic capacity. Therefore, the issue of forming and management of territorial community’s investment capacity as the component of its economic capacity through creation of favourable internal conditions in a community to attract investment becomes of utmost importance. The paper aims to analyze the mechanisms of the endogenous factors’ influence on activation of the use of territorial communities’ investment-innovation capacity in Ukraine in conditions of local governance reform. The mechanisms of the endogenous factors’ influence on activation of the use of territorial communities’ investment-innovation capacity in Ukraine in conditions of local governance reform. The nature of investment capacity is outlined. Endogenous factors of forming and use of territorial community’s innovation capacity are defined. Main indicators of endogenous factors of forming and development of territorial community’s investment are specified. The regions are divided by the share of foreign investment in the period of administrative and territorial reform. 

endogenous factors, investment, innovations, local governance reform, territorial communities