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Corresponding author:
1 I.I. Mechnikov Odessa National University, Ukraine.
2 Lviv Polytechnic National University, Ukraine.
3 State Higher Educational Institution “Vadym Hetman Kyiv National University”, Ukraine.

DOI: https://doi.org/10.30525/2256-0742/2019-5-1-126-130

FINANCIAL AND ECONOMIC BASES  
OF THE FUNCTIONING OF STATE EXECUTIVE BODIES:  
PAST, PRESENT AND PROSPECTS OF IMPROVEMENT

Oleksandr Mykolenko1, Iryna Lychenko2, Olena Klymiuk3

Abstract. The aim of the article is to analyse legal regulations and perspectives available in the specialized 
literature concerning financial and economic bases of the functioning of state executive bodies, which should 
be strengthened and formed according to one of the areas of administrative reform in Ukraine. The subject of the 
study is financial and economic bases of the functioning of state executive bodies: past, present, and prospects of 
improvement. Methodology. The study is based on the use of general scientific and special-scientific methods and 
techniques of scientific knowledge. The historical and legal method enabled to analyse the legal regulations of 
administrative and financial law on past, present, and prospects of improvement of financial and economic bases 
of the functioning of state executive bodies. The comparative legal method was used to improve the system of 
executive bodies and their authorities’ exercise. The system-structural method enabled to consider and identify 
the most negative effects of the insufficient financing of executive branch activities and the exercise of their 
authorities. The methods of grouping and classifying were the basis for the author’s approach to the identification 
of forms of financing state executive bodies. The technical legal method enabled to interrogate the state of affairs 
in financial and economic bases of the functioning of state executive bodies. The results of the study enabled 
to highlight the drivers of the improvement of forms of financing state executive bodies. Practical implications.  
In the study, scientific sources and legal regulations of administrative and financial law on past, present, and prospects 
of improvement of financial and economic bases of the functioning of state executive bodies are interrogated.  
The article highlights that strengthening and forming new financial and economic bases of the functioning of state 
executive bodies have been provided for by one of the areas of the Concepts of Administrative Reform, which 
nowadays is implemented both at the legislative and law enforcement levels. It was concluded that the formation 
of new financial and economic bases of the functioning of state executive bodies failed. There is only modelling of 
certain forms of financing of state executive bodies, familiar to the history of the origin and development of these 
bodies. Therefore, financial and economic bases of the functioning of state executive bodies should be interrogated 
by representatives of both administrative and financial law not only from a historical perspective or from a modern 
perspective but also with a view to the future. Relevance/originality. The original author’s approach to the definition 
of financial and economic bases of the functioning of state executive bodies is the basis for developing the most 
promising areas of improvement of domestic legislation in this sphere.

Key words: administrative reform areas, state executive bodies, state budget, financial and economic bases of 
functioning of state executive bodies.

JEL Classification: K23, H72

1. Introduction 
Ukraine is undergoing significant changes in all 

spheres of public life, mainly due to the transition 
from the post-Soviet system of state administration 
(command-administrative system) to the system 
of public administration, effectively manifested 
in democratic countries of the world. Ukraine is 
a democratic, social, and legal state; and human rights, 

freedoms, and their guarantees determine the content 
and targeting of public activities. However, in practice, 
these provisions of the Constitution of Ukraine 
cannot be implemented without changes in both the 
system of public administration and the tools used 
by public administrators to exercise their powers. To 
confirm acknowledgement of Ukraine’s status as a legal 
democratic state, the state, represented by its bodies, 



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should be responsible for asserting and ensuring human 
and civil rights and freedoms. This cannot be achieved 
without strengthening the financial and economic bases 
of the functioning of state executive bodies.

State executive bodies have a significant influence 
on the development of social relations in political, 
socio-cultural, and economic spheres; therefore, 
they are an important element in the system of 
public authorities, regardless of checks and balances 
provided by national legislation in relations between 
the legislative, judicial, and executive bodies. Initially 
during the Administrative Reform implementation, 
and then during the optimization of the state executive 
branch system, the key issues under consideration are:  
1) construction of an effective system of state executive 
bodies with clear allocation of their authorities and 
responsibility; 2) creation of an effective mechanism 
for providing state executive bodies with professional 
personnel; 3) creation of effective forms of work with 
local self-government bodies, especially with regard 
to financing and implementation of authorities in the 
respective territory; 4) strengthening and formation 
of new financial and economic foundations for state 
executive bodies functioning. For the period of 
Ukraine’s independence, all of the above-mentioned 
spheres have undergone changes, ambiguously 
evaluated in the specialized literature. For example, 
administrative procedures incorporated into the 
legislation, the establishment of an administrative 
service institution, the use of an administrative 
contract are considered as positive changes in the 
legal regulation of state executive bodies’ activities. 
The growth of corruption, sharp decline in public 
servants’ professionalism, and efficiency reduction in 
the law enforcement sphere are considered as negative 
changes that have taken place in the activities of state 
executive bodies. One of the major courses of stalling 
the reform of the state executive bodies is the lack 
of necessary economic and social conditions and 
underestimated importance of the financial factor in 
the executive branch development. Due to financial, 
logistical support of state executive bodies, these 
bodies get the opportunity not only to comply with 
laws but also to formulate and implement state policy 
in certain spheres of public life.

Therefore, the financial and economic basis of 
state executive bodies’ functioning determines their 
effective performance. In view of this, it is important to 
track the development of scientific thought and current 
legislation regarding the financial and economic bases 
of the functioning of state executive bodies in Ukraine.

To some extent, the issues of financial and economic 
bases of the functioning of state executive bodies 
were studied by D. A. Bekerska, O. A. Bukhtiiarov, 
O. I. Derevchuk, S. T. Kadkalenko, O. Ye. Korystin, 
H. A. Kravchuk, M. P. Kucheriavenko, O. P. Orliuk, 
P. S. Patsurkivskyi, D. P. Rotar, I. Ye. Rukolainina, 

L. A. Savchenko, D. L. Chernykov, A. H. Chubenko and 
other domestic scientists. However, in specialized legal 
literature, works, which reveal the essence of financial 
and economic bases of the functioning of state executive 
bodies as one of the areas of their reformation, are rare.

Therefore, consideration of the doctrinal approaches 
to the financial and economic bases of the functioning 
of state executive bodies becomes relevant and 
constructs the aim of this article. For its successful 
achievement, the following tasks should be solved: 
first, to outline the key aspects of financial and 
economic bases of the functioning of state executive 
bodies; second, to analyse the perspectives available 
in the specialized literature in relation to financial and 
economic bases of the functioning of state executive 
bodies; third, to propose an author’s original approach 
to the improvement of financial and economic bases of 
the functioning of state executive bodies.

2. Presentation of the main material
Initially, the Concept of Administrative Reform 

in Ukraine, approved by the Decree of the President 
of Ukraine of July 22, 1998 (The Concept of 
Administrative Reform in Ukraine), stated the 
necessity to develop and incorporate into the national 
legislation the new financial and economic foundations 
of the functioning of public administration. The key 
areas of such a reform were: creation of a new legal 
framework regulating state administration in Ukraine; 
formation of new institutes, organizational structures 
and instruments of public administration; staffing of 
the new public administration system; scientific and 
informational support of the state administration 
system, formation of scientific and informational 
monitoring of its functioning; strengthening and 
shaping new financial and economic foundations for 
public administration functioning.

Over the last twenty years, firstly, the terminology 
has changed in the science of administrative law 
(instead of the term “state management,” the terms 
“public management” and “public administration” 
are used), and secondly, each of the above-mentioned 
areas have received the corresponding implementation 
both at the legislative and enforcement levels  
(for example, the Laws “On Central Executive Bodies,” 
“On Administrative Services,” “On Public Service,” 
the Concept of the Development of Electronic 
Governance in Ukraine, etc. were adopted).

However, along with a large number of proposals 
for improving the system of executive bodies and 
the exercise of their authorities, the Concept of 
Administrative Reform (hereinafter – the Concept) 
insufficiently revealed the content of an area of 
administrative reform such as strengthening and 
shaping new financial and economic foundations of 
the functioning of executive bodies.



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First, the Concept noted that the cost of maintaining 

managerial staff (officials) would be adequate for 
the financial and economic conditions of the state. 
However, the Analysis of State and Local Budget 
expenditures in the first half of 2014-2017, prepared 
by the Financial and Economic Analysis Office of 
the Verkhovna Rada of Ukraine (Analiz vydatkiv 
derzhavnoho ta mistsevykh biudzhetiv u I pivrichchi 
2014-2017), demonstrates that this provision of the 
Concept is ignored and not realized due to many 
subjective and objective reasons. For example, in 
comparison with January-June 2014, in January-
June 2017 state budget, the share of expenditures on 
national functions increased from 21.7% to 28.2% 
due to the minimum wage increase, salaries of public 
servants, subsistence minimum, etc. W hile in 2014, 
the largest share was spent on social protection 
and social security, in 2017, it was expenditures on 
state functions. At the same time, it was noted that 
expenditures on social protection and social security 
decreased from 32.6% to 25.8%, on education, from 
10.9% to 8.6%, and on health care, from 2.7% % to 
1.8%. However, to advocate the current situation, the 
transfer of a part of financing social functions of state 
authorities, financing educational institutions and 
health care facilities to the local level is considered as 
an argument.

Second, in the Concept, in the part concerning its 
financial and economic provision, it was noted that the 
practice of financing the executive bodies from the so-
called additional mobilized and self-sustaining funds 
should be ceased (The Concept of Administrative 
Reform in Ukraine). For example, during the course 
of 1998, the Cabinet of Ministers of Ukraine was 
empowered to take a decision on the allocation of funds 
for the payment of salaries, pensions, scholarships, 
and other social payments by mobilizing additional 
funds (Pro mobilizatsiiu dodatkovykh koshtiv na 
finansuvannia sotsialnykh vyplat). However, the 
key elements that characterize state expenditures 
are: a certain complex of basic and working capital 
provided for the organization, its operational and 
economic independence, self-responsibility for all 
economic transactions and concern on their results. 
That is, the self-supporting relations are not inherent 
to budget organizations, and especially to executive 
bodies, because they have the right to spend only 
general and special funds of the state budget.

The possibility for the executive bodies to create 
and dispose of extrabudgetary funds is mentioned 
in the scientific literature of the early 70s-90s of the 
last century. For example, D. A. Bekerska defines 
“extrabudgetary funds”/own receipts as permits by 
the competent authorities to receive revenues from 
various enterprises, institutions, organizations for the 
execution of works, the provision of services, sales of 
products, sums with the right to their targeted use, as 

well as the sums received from interest deductions of 
individual departments for the execution of works of 
general-sector nature and centralized mechanisms 
(Bekerskaia, 1973).

However, Budget Code of Ukraine of 2001 prohibited 
the creation of extrabudgetary funds by state 
authorities, authorities of the Autonomous Republic 
of Crimea, local self-government bodies and other 
budget institutions (Biudzhetnyi kodeks Ukrainy). 
Later, Budget Code of Ukraine of 2010 reiterated 
this prohibition by providing for minor exceptions 
to the general rule concerning, first, the placement of 
temporarily free funds of a single treasury account and 
funds of foreign currency accounts of the state budget 
on deposits or through the purchase of government 
securities with the subsequent repay until the end of 
the current budget period (Part 8, Article 16), and 
second, the implementation of local budgets (Part 2, 
Article 78) (Biudzhetnyi kodeks Ukrainy).

Therefore, the adoption of the Budget Code of 
Ukraine of 2001 initiated the distinction between 
the terms “special budget fund” and “extra-budgetary 
funds.” The current Budget Code of Ukraine 
(2011) provides for that own receipts of budgetary 
institutions are received in addition to the general 
budget funds and are included in the special budget 
fund, which consists of: 1) targeted budget revenues 
(including own receipts of budgetary institutions);  
2) budget expenditures from specific defined revenues 
of the special budget fund (including own revenues 
of budgetary institutions); 3) budget crediting 
(repayment of loans to the budget with the definition 
of the target and granting of credits from the budget, 
carried out from specific defined revenues of the 
special fund of the budget); 4) financing of the special 
fund of the budget.

According to A. H. Chubenko, these provisions 
of the Code solve the problem of delineating state 
budget and extrabudgetary funds and fully comply 
with the principle of the budget system completeness 
(Chubenko, 2012).

Third, the Concept provided for that ministries, 
similar to most other central executive bodies, should 
be financed from the state budget, while a small group 
of central executive bodies (referred to in the Concept 
as “executive bureaus”), created to implement 
registration and authorization functions in relation to 
individuals and legal entities (a paid basis included) 
may have mixed financing, that is, both from the 
budget and own income. It was noted that in national 
legislation, counter-commercialization mechanisms 
for such executive bodies should be provided for.

According to the Law of Ukraine “On Central 
Executive Bodies” (Pro tsentralni orhany 
vykonavchoi vlady), the bodies authorized to 
provide administrative services are “public services.” 
However, no special provision in the law regulates 



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the financial and economic foundations of the 
functioning of public services as central executive 
bodies. Part 1 of Article 25 of the Law only states 
that financial and logistical support of the activities 
of ministries and other central executive bodies shall 
be from the State Budget of Ukraine, except in cases 
determined by law. That is, in each particular case, 
the legal regulation shall provide for the procedure 
for the creation, competence, and areas of executive 
body activities. For example, Article 28 of the Law of 
Ukraine “On Antimonopoly Committee of Ukraine” 
(Pro Antymonopolnyi komitet Ukrainy) provides 
for specificities of financing a central executive body 
with a special status, the Antimonopoly Committee of 
Ukraine. Financing of the Antimonopoly Committee 
of Ukraine and its territorial offices comes from 
the general and special funds of the state budget.  
The payment, charged to reimburse expenses on the 
examination of applications for concerted practice 
permit, the concentration of economic entities, etc., 
shall be credited to a special account of the special 
fund of the state budget. These incomes are not 
subject to withdrawal and are used for their targeted 
purpose to finance activities of the Antimonopoly 
Committee of Ukraine and its territorial offices, in 
particular, for the logistical maintenance, including 
transport, creation and development of information 
and analytical base, publication of printed matters of 
the Antimonopoly Committee of Ukraine, training, 
retraining, professional development and social and 
household support of employees of the Antimonopoly 
Committee of Ukraine and its territorial offices.

Financing and logistical maintenance of the National 
Police of Ukraine, as the central executive body, is 
carried out from the State Budget of Ukraine, as well as 
other sources not prohibited by law (Pro Natsionalnu 
politsiiu). For example, the Department of Police 
Security, as a structural unit of the National Police, 
today provides services for the protection of entities 
and protection of individuals on a commercial basis.  
Is this approach justified, especially in the context 
of the adoption of the Law of Ukraine “On Security 
Activity” in 2013 (Pro okhoronnu diialnist), according 
to which, security activities are defined as a type of 
economic activity of the provision of services for the 
protection of property and citizens?

For example, M. V. Zavalnyi criticizes this approach 
and argues that the provision of security services by 
the Security Police on a commercial basis contradicts 
the main functions and tasks of the National Police of 
Ukraine (Zavalnyi, 2018). N. A. Bulychova considers 
the financing of state executive bodies, including the 
bodies of Internal Affairs, from another perspective. 
According to her, the increasing need to raise funds 
of budget institutions’ own revenues, along with the 
insufficient total financing from the general fund, 
indicates significant changes in the state of affairs in 

the national economy, such as unsatisfied demand for 
social services and other features, and determines the 
introduction of paid public services. In addition, the 
inclusion of special funds of state bodies in the budget 
provides an opportunity to realize both the public 
interests of the state itself and the interests of society 
(Bulycheva, 2004).

3. Conclusions and perspectives  
for further research

The analysis of scientific sources and current 
legislation regarding financial and economic bases of 
the functioning of state executive bodies enables to 
conclude:

1. Strengthening and creating new financial and 
economic bases of the functioning of state executive 
bodies is one of the areas of administrative reform 
in Ukraine, which was officially originated in 1998, 
but is being implemented both at the legislative and 
enforcement levels. Despite politicians’ refusal to 
use the term “administrative reform” discredited by 
the inconsistent performance of state authorities in 
implementing the basic provisions of the Concept of 
Administrative Reform, reforming the state executive 
bodies on their democratization, optimization, 
decentralization, and financial and economic basis of 
functioning remains on the agenda.

2. The financial and economic basis for the 
functioning of state executive bodies is the subject 
of research in financial law, therefore, unfortunately, 
this aspect has not been comprehensively covered by 
studies of administrative law representatives, focused 
mainly on the problems of administrative and legal 
support of the executive bodies, optimization of 
their activities, improvement of public service, legal 
provision of relations between executive bodies and 
other entities, for example, natural and legal persons, 
local self-government bodies, etc. It is imperative 
to conduct further joint studies by representatives 
of administrative and financial law on financial and 
economic bases of the functioning of state executive 
bodies, not only in the historical aspect or from 
a modern perspective, but also with a look into 
the future. This is because to prevent corruption in 
executive bodies, the state has to increase gradually 
the cost of salary payments, implementation of the 
Concept of e-governance, logistical support for 
executive bodies, while the economic situation in the 
country does not allow the state to finance fully all 
areas in this sphere.

3. The formation of new financial and economic 
bases of the functioning of state executive bodies, 
provided for in the Concept of Administrative Reform, 
was not implemented. For now, previously existing 
forms of financing state executive bodies have only 
been modelled.



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