Mechanisms for the improvement of the utility sector management efficiency within the local authorities
Authors: Chumakova Iryna , Dvihun Alla 
Published: February 2020

The key risks and problems in the field of decentralization and formation of united territorial communities in Ukraine in the context of providing transparent and responsible management of utility sector enterprises by local self-government bodies are identified. In the framework of Ukraine’s implementation of the provisions of the Association Agreement with the European Union in domestic practice, the reasonability of reforming the utility sector in Ukraine at the regional level based on the positive experience and best practices of the European countries and on the generally recognized world standards and principles of corporate governance is substantiated. The paper outlines the mechanisms for ensuring the management efficiency of utility sector and for introduction of new standards of transparency and accountability of utility sector enterprises. On the basis of the analysis of the respective provisions of the national legislation the authors conclude that Ukraine has created the legislative preconditions for the transparency and accountability of utility sector enterprises within the territorial communities. However, the changes introduced into the national legislation on accounting and financial reporting, as well as the revision of the Law of Ukraine on Auditing, imposes more stringent requirements for the disclosure of information about the activities of utility companies, recognizing them as companies of public interest and / or as the subjects of natural monopoly within the national market. In order to strengthen the supervision over such enterprises the collegial bodies - audit committees or appropriate supervisory boards - should be established within their management system. The article considers the differences of such bodies’ functioning and the procedural peculiarities of the respective supervisory councils’ establishment that are based on the legislative norm that is of recommendatory nature as for the establishment of such councils for village and city, and for all others - district, region - is of obligatory nature. The paper proves that it is not economically feasible to create supervisory boards within all utility sector enterprises. The author analyzes the competences of the relevant local councils within the national legislation of Ukraine. On the basis of the generalization of the best European experience and practices, criteria for determining the economic justification for the establishment of supervisory boards at domestic utility sector enterprises in Ukraine are proposed. Moreover, the recommendations for local authorities regarding the criteria for the selection of independent auditors (audit firms) for carrying out the statutory audit of annual financial statements of utility sector enterprises are also formulated. The introduction of the proposed recommendations will increase the competitiveness of the utility sector companies of Ukraine compared to the enterprises of private sector of economy, as well as will promote the implementation of international standards and European principles and the best practices of effective management of large corporations in the utility sector of Ukraine.