The reform of local self-government and decentralization of power presupposes overcoming the challenges faced by the country, in particular: dependence of regions on the center; infrastructural and financial weakness of communities; degradation of rural territories; high level of governmental grant provision to communities; little investment attractiveness of territories, etc.
Decentralization is transferring powers, resources, and competence to decide main issues of life to the level closest to people, where it could be done with maximum effect (this is the principle of subsidiarity).
The level of communities is most important for decentralization as they have to exercise powers: pre-school and basic secondary education, utility service issues, local infrastructure, social care, etc.
However, the powers can be transferred only to those who can exercise them. To be able to do this, communities have to be capable – institutionally, financially, and in terms of staff. Therefore, in the course of decentralization communities become larger, join their resources, become wealthier and develop better. For example, a town and surrounding villages will comprise a single territorial community.
Fiscal decentralization is taking place simultaneously with power decentralization. This means that the community will receive a bigger share of taxes paid and, therefore will plan the budget according to targeted programs, which will cover the needs of exercising new powers.
The direction and logic of local self-government reform were determined in the Concept of the Reform of Local Self-Government and Territorial Organization of Power in Ukraine approved by the Government on April 1, 2014.
The reform of local self-government and territorial organization of power has to stand on three pillars: transfer of powers from center to the lowest possible level; according to the powers transferred, financial resources shall be transmitted, and state control over the activity of self-government bodies should be established.
Since adoption of the Concept, a legal framework of the reform was shaped, there were adopted laws opening the possibility of creating capable communities and cooperation of territorial communities; the Tax Code and Budget Code of Ukraine were amended (fiscal decentralization); the State Strategy of Regional Development was approved, and the Law “On State Regional Policy” was adopted; the process of changing administrative-territorial system was initiated.
A peculiar feature of power decentralization in Ukraine is that the reforms of local self-government, territorial organization of executive power, administrative-territorial system, and state regional policy are taking place simultaneously.

1. Finish development and approval of long-term perspective plans for the establishment of capable
   communities in all regions of Ukraine.

Decision-making authority: Cabinet of Ministers, Ministry of Regional Development.

2. Decrease the influence of regional (oblast) councils on shaping long-term perspective plans for the establishment of capable communities.

Decision-making authority: Verkhovna Rada.

3. Finish the development and approve the Methodology of hospital districts establishment.

Decision-making authority: Cabinet of Ministers, Ministry of Healthcare, Ministry of Regional Development.

4. Adopt the Resolution of the Cabinet of Ministers of Ukraine on composition of hospital districts.

Decision-making authority: Cabinet of Ministers, Ministry of Healthcare, Ministry of Regional Development.

5. Adopt the Resolution of the Cabinet of Ministers of Ukraine on administrative districts.

Decision-making authority: Cabinet of Ministers.

6. Simplify the mechanism of creation of amalgamated communities by implementation of the mechanism of territorial community accession.

Decision-making authority: Verkhovna Rada.

7. Introduce the mechanism for recognition of amalgamated communities as capable according to the decision of the Cabinet of Ministers of Ukraine.

Decision-making authority: Verkhovna Rada.

8. Decision-making authority: Verkhovna Rada.

Decision-making authority: Verkhovna Rada.

9. Determine the principles of shaping administrative-territorial system, conditions and procedure of creation of administrative-territorial units, their reorganization, status of settlements, procedure of naming
   and renaming settlements and administrative-territorial units through adoption of a separate law.

Decision-making authority: Verkhovna Rada.

1. Transfer the functions of architectural and construction supervision to local self-government bodies.

Decision-making authority: Cabinet of Ministers, Ministry of Regional Development.

2. Transfer the functions of residence registration, registration of legal entities and individual entrepreneurs, civil associations, provision of information from the State Land Cadastre, state registration of property rights to immovable property and their encumbrances to local self-government bodies.

Decision-making authority: Cabinet of Ministers, Ministry of Justice.

1. Extend the basis of taxation and possibilities of regulating the rates of local taxes and duties, particularly real estate tax. Shift to the European real estate tax formula when determining the tax rate without reduction of payment for the untaxed area.

Decision-making authority: Verkhovna Rada.

2. Regulate the income part of local budgets according to their expenditure authority.

Decision-making authority: Verkhovna Rada.

3. Solve the problem of jurisdiction of local self-government bodies of the amalgamated territorial communities on the territories outside the localities.

Decision-making authority: Verkhovna Rada.

4. Grant the amalgamated territorial communities the right to approve the planning scheme of the territory of the community and manage land resources within their jurisdiction according to the approved urban planning documentation.

Decision-making authority: Verkhovna Rada.

5. Grant local self-government bodies the right to control the use of land resources according to the approved urban planning documentation.

Decision-making authority: Verkhovna Rada.

6. Improve transparency and efficiency of budget funds use through introduction of targeted program method of making and using local budgets. Introduce the procedures of transparent formation of local budgets with participation of the public and reporting on execution of the budget, electronic procedures for subthreshold procurements, etc.

Decision-making authority: Ministry of Regional Development.

7. Stipulate in the budget for 2017 and subsequent years the funds to support the development of infrastructure in amalgamated territorial communities.

Decision-making authority: Verkhovna Rada.

1. Introduce effective mechanisms of citizen participation in preparation of decisions by local self-government bodies: local initiatives, public hearings, general meetings of citizens, electronic petitions, performing public expert examination, establishment of advisory and consultative bodies.

Decision-making authority: Verkhovna Rada.

2. Ensure the right of territorial communities for local referendum and determine the issues that can be decided during local referendum.

Decision-making authority: Verkhovna Rada.

3. Improve the procedure of establishment of bodies of citizens’ self-organization, determine a clear procedure for granting them a part of powers of the local self-government, except those having authoritative character, as well as provision of costs to exercise these powers.

Decision-making authority: Verkhovna Rada.

1. Enlarge the State Fund for Regional Development (SFRD) to 1.5% of the State Budget.

Decision-making authority: Verkhovna Rada.

2. Improve the mechanism for distribution of funds of the SFRD, part of which should be aimed at financing the implementation of the State Regional Development Strategy in the Regions by 2020.

Decision-making authority: Verkhovna Rada, Ministry of Regional Development.

3. Introduce a transparent procedure for selection of local self-government projects to be financed from the SFRD.

Decision-making authority: Cabinet of Ministers, Ministry of Regional Development.

4. Ensure monitoring of SFRD funds use, supervision over conformance of their allocation to the determined efficiency indicators, a reporting system.

Decision-making authority: Cabinet of Ministers, Ministry of Regional Development.

5. Ensure medium-term budgeting of regional development projects.

Decision-making authority: Cabinet of Ministers, Verkhovna Rada.

1. Ensure supervision over legality of acts of local self-government bodies by local state administrations of higher level.

Decision-making authority: Verkhovna Rada, Cabinet of Ministers.

2. Ensure the system of dissolution of local self-government bodies in case of inaction or adoption of decisions that pose a threat to the security of the country and its territorial integrity.

Decision-making authority: Verkhovna Rada.