Ministry of Finance of Russia Alexandra Smirnova, Ministry of Finance of the Russian Federation APEC...

Ministry of Finance of Russia

Alexandra Smirnova,

Ministry of Finance of the Russian Federation

APEC FISCAL SPACE SEMINAR

REVIEWING, ASSESSING AND PRIORITISING GOVERNMENT EXPENDITURE

Performance Budgeting


Fiscal Space: Does Performance Budgeting help

• To create it?• To use it properly?

1. PB is not first and easiest way to create fiscal space;2. PB does not create much fiscal space;3. PB certainly helps to use fiscal space efficiently;

4. PB is only helpful at the certain level of fiscal space available


PB is not first and easiest way to create fiscal space

ALLAN SCHICK’S PRINCIPLES OF BUDGET REFORM SEQUENCING:

• Foster an environment that supports and demands performance before introduction of performance and outcome budgeting

• Control inputs before seeking to control outputs • Budget for work to be done before budgeting for results to be achieved • Enforce formal contracts in the market sector before introducing

performance contracts in the public sector• Have effective financial auditing before moving to performance

auditing • Adopt and implement predictable budgets before insisting that

managers efficiently use the resources entrusted to them


Russian Budget reforms of 2000s

Input-based short-term Input-based short-term budgetingbudgeting (1991 - 2000) (1991 - 2000)

establishment of budget procedures and regulation (organic budget law - Budget Code (2000)

cash execution

Federal Treasury

fiscal dicsipline and expenditure control

equalization transfers

Results-based medium-Results-based medium-term budgeting (from term budgeting (from 2008)2008)

Long-term budget stability and sustainability

Revenue and expenditure assignments for federal, regional and local budgets

Meduim-term budget planning

Performance budgeting

Public sector restructuring

2001-2007


PB does not create much fiscal space

Zero-based BudgetingAll expenditure items are revised every budget period

Incrementalist ApproachOnly new commitments are discussed (5-10% of total expenditure every budget period, only …% of which is inefficient)

VS

1. Gain on allocative efficiency

2. Gain on technical efficiency

Spending bodies’ efficiency gains are usually not more than the inflation rate


2014 20152011 2012

Factoring of Public Expenditure Commitments into the Mid-term Budget

Salaries and emoluments, Military pay and allowance

2008 2009 20102007 2013Reg

iste

r of

the

expe

ndit

ure

com

mit

men

ts

Resource for new commitments

Expenditure limits

Acting commitments

Pensions and benefits (Public liabilities)

3-year budget

State Arms program (till 2015)

Long-term Targeted Programs

Investment objects


Russia’s case: Structure of Expenditure commitments in 2008

Public service commitments;

28,0%

Legislative and juditial powers ;

1,0%

Public liabilities; 49,3%

Interbudgetery liabilities; 15,3%

International commitments; 1,6%

Debt service and redemption; 2,5% Other

commitments; 1,9%

Capital investment; 0,2%


New commitments (5-10%)

• new legislation• new programs

approval

inclusion in the budget

Acting and new commitments

Acting commitments (90-95%)

• public transfers (calculation)

• debt service (schedule)

• governance, maintenance

of the facilities (indexation)

• acting programs (plan)


Russia’s case: Sequence of budget planning

Before 2008 According to Budget Code

amendments

Step 1 Economic forecasting

(revenue, debt strategy) Economic forecasting

(revenue, debt strategy)

Step 2 Claims for new commitments Calculation of acting commitments (register)

Step 3 Calculation of expenditure (acting and proposed new commitment)

Estimation of the resources for new commitments

Step 4 Adjustment (correction of revenue and expenditure estimations)

Decisions on new commitments


Expenditure

Inputs

Activities

Output

Outcome

Traditional

Output budgeting

Outcome budgeting

Economy

Tec

hnic

al

effi

cien

cy

Tec

hnic

al

effi

cien

cy

Models of Performance BudgetingModels of Performance Budgeting

Intermediate outcome

Effectiveness

Eff

icie

ncy


Russia’s case: Policy area - Competition policyExpenditure 5 bln. roubles

Inputs 88 regional commissions, 2 000 employees

Activities Control and supervision of competition law adherence

OutputDecrease in number of competition law violations

Outcome Place of Russia in international rating of efficiency of competition authority

Goal 1 Promoting competition by means of prevention and control of anticompetitive behavior

Impl

emen

tati

onR

esul

ts


Russia’s case: Performance budgeting toolsDocument Contents

Long-term Economic Program National goals, Outcomes Line ministries’ results and activities

reports Policy goals, Intermediate outcomes

Long-term targeted programs, Policy outcomes, Intermediate outcomes, Resources

Ministerial targeted programs Intermediate outcomes, Outputs, Resources

Budget Allocation Justifications Outputs, Resources

Explanatory Note for budget projections National Outcomes, Outputs, Resources (summary)

Budget Execution and Reporting More autonomy for line ministries

Experiment on performance budgeting development in line ministries

Incentives for improvement


Budget programs,Justifications

of budget appropriations (public, assessed by MoF)

Long-term Economic Program (public, approved by Parliament)

Line Ministries’ Results and Activities Reports

(public, approved by Government)

Traditional budget supporting documents

(confidential, presented to MoF)Expenditure

Inputs

Activities

Output

Outcome

Russia’s case: Performance budgeting tools

Intermediate outcome


Performance Budgeting on all the stages of budget cycle:

Macroeconomic Planning

Budget Preparation

Budget implementation

Accounting and Reporting

Oversight

Revenue policy

Debt policy

Internal audit

Performanceaudit

Outcomeplanning

Outcomereporting

Medium-termplanning

Management accounting

Budget programs

Delegation and accountability


Platforms of Performance Budgeting implementation

Federal

Provincial

Municipality

Village

Budget formulation improvements and improved fiscal decentralisation

Budget implementation and control improvements

Reporting and accounting improvements

Accountability and review improvements


PB is only helpful at the certain level of fiscal space available

During last budget cycle Russian Federal Budget expenditure been raised by 28%

without any efficiency assessment


So the question is:Whether to implement Performance Budgeting?

YesBecause if you don’t set the rules

you could not use it when the time comes


Russia’s case: Budget Reform Matrix3 waves for decentralization of public finance management

Intergov.fiscalrelations2001-2004

Budget process

2004-2006

Public sectorrestructuring

2005-2007Budget fundsadministrtors

Public authorities Line ministries andagencies

Public serviceproviders

Responsibilities(functions)

Laws on functions(expenditures)

Administrativereforms

New types oforganizations

Funding Stable and unified tax-sharing rates

3-year expenditureprojections

Subsidies and contracts

Institutionalincentives

Economic and revenuegrowth, votes

Performancebudgeting

“Voting by feet”

Fiscaldicsipline

External fiscaladministration

Financial managementmonitoring

Standards for services,“buncruptcy”

From soft to hard budget constrains


Russia’s place in World’s Budget Reform

• Ukraine

• Australia

• New Zealand, Great Britain, Nederland, Sweden

• USA•

Medium-term Budgeting

Performance Budgeting

•

RussiaRussia (2006) (2006)

• Russia (2003)

•

• Bulgaria

•

RussiaRussia (2008) (2008)

Vietnam 2006

France 2006


Alexandra Smirnova

[email protected]

Thank you for your attention

APEC FISCAL SPACE SEMINAR

REVIEWING, ASSESSING AND PRIORITISING GOVERNMENT EXPENDITURE

Ministry of Finance of Russia Alexandra Smirnova, Ministry of Finance of the Russian Federation APEC...

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Transcript of Ministry of Finance of Russia Alexandra Smirnova, Ministry of Finance of the Russian Federation APEC...