APPROACHES TO EVALUATING THE EFFECTIVENESS OF PUBLIC EXPENDITURES IN THE PUBLIC SECTOR

Abstract

The article addresses the systematisation and comparative analysis of contemporary approaches to evaluating the performance of public expenditures in the public sector. Growing societal demands for transparency, accountability, and value for money in the use of public resources have brought to the forefront the need for robust, evidence-based tools capable of assessing not merely budget execution, but the actual outcomes and socioeconomic impacts of government spending. The traditional line-item budgeting approach is shown to be insufficient for this purpose, as it records only the fact of expenditure without enabling meaningful analysis of results achieved. Despite the legislative entrenchment of the program-target method in Ukraine's budget process, its practical implementation has revealed systemic shortcomings: a formalistic approach to defining goals and performance indicators, inadequate capacity among budget program developers, and the absence of a sound methodological foundation for assessing the real impact of public expenditures. The article examines the conceptual underpinnings and applied instruments of performance auditing based on the "3E" principles of economy, efficiency, and effectiveness as defined by INTOSAI standards. Alongside this, the spending review is analysed as a complementary internal budget mechanism that enables the systematic reassessment of baseline expenditure items and evidence-based reallocation of resources toward higher-priority areas. The OECD data confirming that 97% of member states apply spending reviews underscores their central role in modern public financial management. The article further analyses cost-benefit analysis and cost-effectiveness analysis as formalised tools for justifying expenditure decisions, while highlighting their methodological limitation in establishing causal attribution. This gap is addressed through impact evaluation grounded in counterfactual analysis – including randomised controlled trials, difference-in-differences, regression discontinuity design, and propensity score matching – recognised by the World Bank and the European Commission as the most reliable methods for isolating the effect of public interventions. Benchmarking is examined as a tool for identifying best practices and strengthening performance management systems. Practical recommendations are formulated for institutionalising spending review within Ukraine's Budget Code, establishing a competence centre for counterfactual evaluation, and integrating benchmarking into strategic planning at both central and local government levels.