RISK-BASED CONTROL OF INTERGOVERNMENTAL TRANSFERS AS A TOOL FOR PREVENTING FINANCIAL VIOLATIONS IN TERRITORIAL COMMUNITIES

Abstract

The article examines risk-based control over the use of intergovernmental transfers as a tool for preventing financial violations in territorial communities. The relevance stems from the growing share of transfers in local budget revenues in 2022–2024 (from 24.6% to 27.7%), the deterioration of budget balance indicators, and the 2024 extension of the Accounting Chamber’s powers to audit local budgets and international assistance funds. The aim is to advance the theoretical and methodological foundations of risk-based control over intergovernmental transfers by systematising financial risks, identifying their indicators, and substantiating the interaction of external audit, internal control, and digital monitoring within the financial security system of territorial communities. The methodological basis includes the systems approach, analysis and synthesis, statistical comparison, and generalisation, with an empirical basis drawn from Accounting Chamber data for 2022–2024. It is shown that growing transfer dependence is not an unconditional threat to financial security, but may amplify risks of inefficient use, financial violations, and moral hazard where budget planning, internal control, and accountability are insufficient. The study distinguishes errors, inefficient decisions, budgetary offences, abuse, and fraud, showing that indicators such as unspent subvention balances or overdue receivables signal elevated risk without themselves proving a violation. Five risk groups are identified — misuse, inefficient use, fraud, non-utilisation, and debt risk — each linked to observable signs, a data source, and a control response. The empirical part illustrates the diagnostic value of these indicators through the concentration of overdue receivables, the rising share of local external debt, and the narrowing of communities’ own tax base. The scientific novelty lies in linking distinct risk categories to concrete data sources and control responses, unlike approaches focused mainly on recording violations already committed. The practical significance consists in providing a basis for internal audit planning and for developing a risk-scoring model for assessing the use of intergovernmental transfers.