Introduction. Given the limited own resources of local self-government, it is important to ensure the effective functioning of the mechanism for providing investment subventions from the state budget. Such investment subventions include subventions for the formation of infrastructure in the united territorial communities and subventions for the implementation of measures of socio-economic development of separate territories.
The purpose of the paper is the analysis of the mechanism of providing and using investment subventions to local budgets in order to identify disadvantages and eliminate them.
Results. Providing an “infrastructure” subvention to local budgets has strengthened the capacity of united territorial communities and to some extent improved the quality of services provided to the population. During 2016–2019, UAH 6.5 billion was allocated from the State Budget of Ukraine to local budgets for infrastructure development and 9475 projects were implemented. With the help of these subventions, schools, kindergartens, outpatient clinics, cultural and sports institutions, water mains and roads were built and repaired, and specialized transport was purchased. However, in recent years, the role of this subvention has decreased significantly due to the fact that the number of UTCs that received an infrastructure subvention during 2016–2021 has increased significantly, and its volume has hardly changed.
The amount of subventions from the state budget to local budgets for the implementation of measures for socio-economic development of certain territories has also decreased, which negatively affects the capacity of local governments in the field of investment projects.
Conclusion. The volume of investment subventions remains insufficient, and their distribution is partly in a “manual mode”, which creates a favorable environment for political corruption and lobbying.