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Yet another variant of transformation of budget institutions in the sphere of arts is separation of organizations that carry out cultural activ ity from those that control and manage real estate and equipment pro vided by the government for such an activity. We believe this creates institutional prerequisites of enhancement of functional efficiency of individual sub systems of the sphere of culture. This primarily concerns theatres. It often occurs that theatre companies with unpopular reper toire control huge complexes that are empty or leased to young promis ing companies that do not have any place to perform. While the effec tive law (more specifically, Art. 296 of the Civil Code of RF) allows the owner (the state) to withdraw an excessive, idle, or misused property fixed with an institution, there have been no such precedents as yet. In such situations it would be appropriate to establish an AI to manage the real estate, as well as an organization in the AI or PANO form that would be directly delivering services in the sphere of culture and arts. For in stance, basing on competition procedures, the managing AI can pro vide one or several successful theatre companies with a place to per form.

It should be noted that the transformation of public (municipal) insti tutions into other organizational and legal forms should not affect the legal arrangements with respect to historical and cultural treasuries, natural resources and other kinds of property whose use in the civil turnover is limited or which were withdrawn from that. The RF law Fun damentals of the law of the Russian Federation on culture seriously limits possibilities for privatization of cultural objects. In compliance with Art. 44 of the law, it may not be possible to privatize the cultural heritage of the peoples of the Russian Federation, including cultural values stored in public and municipal museums, archives and libraries, galler ies, assortment offices of enterprises of artistic industry and folk arts, including the respective premises and buildings. Privatization of other objects of culture is allowed according to the procedures set by the RF law under the following conditions: keeping the cultural activity as a core one; keeping core services; organizing servicing the categories of the population entitled to benefits; securing the current number of jobs and employees social guarantees (for the term of up to 1 year).

4.4.3. Main findings As one of avenues of transformations in the area of culture and fine arts it is proposed to optimize the current network of recipients of budget funds by assigning non profile federal institutions to profile min istries, their transformation into AIs and PANOs, along with keeping their departmental affiliation, and reassigning a part of the federal insti tutions to the regional level.

The second avenue is to increase the variety of organizational and legal forms of non for profit organizations of culture and fine arts with the participation of government agencies and local self governance bodies as their founders. The legislative fixing of new organizational and legal forms should contribute to a more efficient consumption of re sources and allow attraction of additional funds to the area of culture and fine arts. It is proposed in particular to transform a part of public institutions of culture into AIs and PANOs, with the employment of the criterion of the share of extra budgetary funds in the institutions budget to identify the array of institutions subject to such a transformation.

The third possible reform avenue is separation the functions of ren dering services in the area of culture from those associated with control over the public property complex designated for provision of such ser vices. The property complex designated for provision of cultural ser vices should be given to organizations of culture on the basis of open tender procedures that imply such conditions as their assuming obliga tions on the volume, quality and costs of the services. Such a measure would allow introduction of additional opportunities for private compa nies that deliver cultural services to enter this particular market and in crease the quality of the services in question.

Conclusions The analysis of the present state of the budget network and budget financing in various sectors of the social sphere conducted in the first section allows the conclusion of the existence of the following major challenges:

In the health care sector there still exists a two track system of fi nancing: namely, from the budget (basing on estimates) and out of the CMI funds (performance based financing). That diminishes the effect from new methods of payment existing in the CMI system and contrib utes to reproduction of the current costs do not matter type of eco nomic performance. The per capita resource potential of the health care system appears practically constant throughout Russia. That means that regional specifics practically are ignored in the process of shaping and financing the budget network. On the federal level, the mission of organization of the budget network is challenged by the exis tence of a broad network of health care institutions that do not match the mandate of the agency under purview of which they fall. An ample network of therapeutic and preventive care institutions in the Russian Federation finds itself in possession of a considerable and, in many as pects, excessive human and resource potential. The structure of medi cal services is dominated by inpatient medical assistance with a longer term of hospitalization than in most overseas countries.

The main challenges in the education area are:

The rise in the number of students in the higher education area which aggravates the problem of shortages of budget financing and encourages the rise in paid services in this particular sub sector;

A drastic differentiation of conditions of provision of educational services in general (school) education both between regions and within them;

An insufficiency of the budget network in the preschool education coupled with a drastic differentiation between conditions of func tioning of its institutions, which does not allow adaptation of a con siderable part of children to the primary school conditions and, ac cordingly, the possibility for a positive influence on the quality of education;

An outdated material and technical base of the primary and secon dary vocational training, because of which graduates are not ade quately trained to operate modern equipment;

The mismatch between the substance and technologies of educa tion and requirements set by the modern society and economy.

To increase the efficiency of the use of budget funds in the condi tions of the insufficient budget financing of higher education, in the government ruled to launch an experiment on transition to a stan dardized per capita funding of higher education on the basis of GPEL.

The introduction of the latter was linked to the experiment on transition to the uniform state examination (USE) for secondary school graduates.

The financial component of GPEL issued to the graduates to cover their university tuition depended on their USE score. However, compromises and concessions derailed the efficiency of the system of financing.

More specifically, making universities bound to provide tuition to not less than a half of students only at the expense of GPEL and without any co payments on the part of the latter has resulted in cross subsidizing, while linking the GPEL categories to the sum of marks each school graduate earned at USE has lead to an artificial raising of their scores and, consequently, corruption. The contraction of the proportion of the budget of higher education allocated within the GPEL system has en tailed a decline in its financial substance, which lowered opportunities for enrolees from poor families to pick a university. Finally, the out comes of the first years of the experiment evidence that the yet unre fined USE system has enabled regions and universities keen to receive from the state GPEL of greater categories to influence the USE results, which leads to an unplanned rise in budget expenditures.

The analysis of international experiences provided in the second section demonstrates a number of opportunities for organization of provision of social services that can form an alternative to their delivery by budget institutions. An alternative provision of services allows lower delivery costs and getting the level of decision making closer to the lo cation where services are provided. The most popular models of alter native provision of services are: creation of specialized agencies to which the functions of organization of provision of services are dele gated; delegation of the respective mandate to another level of gov ernment, or to commercial/non for profit organizations that receive transfers for provision of services to the population; procurement of services from the private sector; creation of partnerships between the state and private companies; franchising/licensing and privatization of service providers.

In many countries, the budget sector employs at the institutional and individual levels assessment and performance evaluation systems (i.e.

benchmarking) and performance based ones.

However, international experiences warn against a poorly designed linking of evaluation of efficiency to award or penalty, as a poorly struc tured system of incentives can cause the staff's idleness or even un productive behaviour.

The analysis of indicators that characterize the state of the network of recipients of budgetary funds conducted in the third section al lowed a number of recommendations on increasing its efficiency and lowering the costs of its maintenance, such as, in particular:

Bringing the budget network in line with the new assignment of ex penditure mandates between the levels of the budget system;

Eliminating the practice of allocation of budget funds of one level of government by agencies of another one;

Assigning institutions that exercise identical functions under control of a single agency;

Depriving organizations that control less than 6 budget institutions of the status of manager of budget funds and transferring the re spective institutions under the immediate control of the principal manager of budget funds;

Reducing the number of levels of the budget network;

Legal division of powers of principal managers from those exer cised by managers of budgetary funds with respect to budgetary institutions;

Liquidating or consolidating institutions with a small contingent of customers.

Today, the function of social services delivery is exercised exclu sively by institutions that are under administrative control of govern ment agencies and the financing of which is exercised on the basis of estimates, which does not generate incentives to enhance their effi ciency. The budget network reform attempts should be aimed at sepa ration of functions of social services suppliers from those of their cus tomers, extension of the circle of potential services suppliers and mechanisms of their interaction with the state.

The RF Ministry of Economic Development and Trade presently has designed a set of bills that suggest introduction of two forms of organi zations that would constitute alternative to the budgetary institution that is, AO and PANO. They have certain organizational and legal specifics in common: performance based budgetary financing, independent control over any incomes of theirs and their independent liability for obligations they undertake. The difference between them lies in the following: while PANO delivers social services on the contractual terms, AO does that basing on the owner's mandatory commissions; while the government property is given to AO with the right to exercise operative control over it, PANO becomes its owner.

However, the bills have failed to provide answers to a number of fun damental questions, without which it is impossible to accomplish the budget network restructuring. More specifically, the bills do not contain strict criteria of selection of an organizational and legal form into which budget institutions can be transformed, given that the PANO status would clearly appear most advantageous to the team of any budgetary institution. This creates the risk that the selection of a reorganization option would be determined by informal relationship between budget ary institution(s) and managers of budget funds.

In the circumstances it is appropriate to opt for either strategy be low:

1) To postpone introduction of the new organizational and legal forms in the budgetary sector until the reform concept is specified, which suggests:

Identification of criteria of selecting a reorganization option;

A sound balance between rights and obligations of AOs and PANOs;

Identification of the array of budget institutions that may not be re organized (an institution should be kept in its current form if it is a monopoly on the local market and its services should be delivered without regard to costs involved);

Securing the possibility for various government agencies (local self governance bodies) and/or private individuals to jointly found AOs and PANOs.

2) To launch a partial introduction of new organizational and legal forms in individual sub sectors of the budget sector in an experimental way in the framework of the current law, which allows transformation of institutions into funds and autonomous non for profit organizations.

In opting for this particular strategy one must observe with the aforementioned conditions of permissibility of the transformation of budget institutions, as well as the following conditions:

To select institutions subject to transformation primarily from those that have a high specific weight of extra budgetary proceeds, as it evidences a fairly high level of the institution's preparedness to op erate in market conditions;

To reduce to minimum the scale of application of the compulsory (i.e. without regard to the staff's opinion) reorganization;

To employ mostly public control over organizations established in the course of transformation of budget institutions (via supervisory boards with the participation of local community representatives).

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