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The transfer of issues of local importance in their full volume implies that the bodies of local self government of settlements, in fact, will lose control over the decision making in respect of a given issue of local importance, while remaining formally accountable for that issue to the population. Accordingly, the agreements envisage neither monitoring nor any control by the bodies of local self government of settlements over the execution of the powers transferred to the municipal raion, or any accountability of the raion bodies of local self government to settlements, etc. Thus, the provision concerning financial sanctions for the non execution of an agreement cannot be realized in actual practice, either. At the same time, it should be noted that in those cases when powers are transferred from a municipal raion to settlements (which actually happens sometimes), the situation may become en tirely different. This asymmetry can be observed in the agreements being made in Cheliabinsk Oblast. Thus, in Troitsk raion, in the agreement on the transfer of pow ers from settlements to the municipal raion there is neither a special section con cerning the rights of a settlement nor any sanctions for the non execution of the obligations undertaken by the raion. At the same time, sanctions are envisaged for settlements if they do not transfer in due time the subventions to cover the execu tion of the transferred powers (as a rule, it is a penalty in the amount of 1/300 of the rate of interest esytablished by the RF Central Bank for each day of delay). As for the agreements on the transfer of powers from the municipal raion to settlements Section Monetary and budgetary spheres (this transfer of powers has taken place in the sphere of pre school education), their structure is quite different. There exists a well elaborated section in the agreement concerning the rights of the municipal raion in respect to the agree ments execution, including the conduct of checks and revisions, experts assess ment of pre school educational establishments, the formation of an estimate of ex penditure for each establishment, the establishment of the regime of operation for each establishment, the procedure for demanding explanations, the issue of in structions, etc.

3. Subventions for the financing of the powers being transferred are either not established altogether, or are determined on a purely formal basis in an amount clearly insufficient for the backing of the relating activity. The main bulk of expendi tures to cover the transferred powers come from the budget of a municipal raion. It should be noted that no such participation in the financing of the powers trans ferred under an agreement is envisaged in legislation, in contrast to the transferred state powers that can be co financed from local budgets. Thus, no references to the lack of financial resources in the budget of a settlement may be regarded as le gitimate grounds for making an agreement. In actual practice, the bodies of local self government are attempting to bypass these restrictions, entering into agree ments of other types, instead of the agreements on the transfer of powers. For ex ample, in Orenburg Oblast and in the Republic of Chuvashia they apply agreements on the interaction between the administration of a municipal raion and settlements in the decision making with regard to issues of local importance. However, such approaches cannot be recognized as being fully compatible with the existing legal space.

4. The bodies of local self government of settlements transfer to a municipal raion such powers, which by their very nature cannot be treated as transferable.

Thus, for example, the powers for ownership, use and disposal of a settlements property are transferred. In this connection it is not clear how, in absence of any opportunities for the execution of its property rights, a settlement can deal with is sues of local importance. Evidently, the necessity of transferring appropriate pow ers in a certain specific sphere may follow from the transfer to the raion level of the powers to provide the population with some municipal services; however, no trans fer of powers for the ownership, use and disposal of a settlements property as a whole may be regarded as being lawful.

A similar situation arises when the transfer of powers may give rise to a con flict of interests. Thus, for example, it happens in a situation when to the bodies of local self government of a municipal raion the right to represent the interests of a settlement in a court of justice is transferred. This right cannot be executed in an event of direct court proceeding between a municipal raion and a settlement and may give rise to a conflict of interests when, while representing the interests of a settlement, the municipal raion has its own related interest in a given case, which is different from the settlements interests.

The procedure of the transfer of powers cannot always ensure the best possi ble division of rights and responsibilities between municipal raions and settlements, RUSSIAN ECONOMY IN trends and outlooks either. For example, the surveying of this issue in one of the raions in Orenburg Oblast yielded the following picture. Although the oblast has declared that from 2007 it is implementing full scale municipal reform, the actual volume of powers assigned to settlements has not increased by comparison with the year 2006. The text of the agreement elaborated by the raion administration for 2007 envisages the transfer to the raion level of 12 key issues of local importance, including in the sphere of utilities, constructioin and maintenance of motor roads, cultutal services, physical culture and sport, library services, the formation of a settlements archival funds, the use of lands and construction thereon, civil defense, mobilization readi ness, promotion of agricultural production and small businesses, childrens and youth activities, and the calculation of housing and utilities subsidies and the provi sion of these subsidies.

All the settlements in a raion make agreements in a single format, in condi tions of rigid administrative pressure. The decision concerning the transfer of pow ers is made by the representative bodies of settlements orally, no materials in writing being distributed. The whole list is being voted on, and not each power separately. The raion administration submits no report as to how it has been exe cuting the powers transferred to it for the previous period, or which funds have been spent in this connection. The division of objects of property does not corre late in any way with the division of powers: for example, the powers for utilities ser vices are transferred to the bodies of local self government of a municipal raion, while boiler stations are transferred into municipal ownership.

As a result, one may come to the conclusion that, although the list of issues of local importance to be actually dealt with by newly created settlements, as it has emerged under the influence of both regional legislation and the agreements being concluded, does, indeed, differ from region to region, most often the bodies of lo cal self government of settlements realize their powers in the following spheres:

- creation of adequate public recreation conditions for the residents of a settle ment and the organization of adequate equipment of popular public recreation sites;

- organization of the collection and removal of domestic waste and litter;

- organization of the provision of all amenities and the planting of urban greenery on the territories of settlements;

- organization of street lighting and the setting up of signs with names of streets and numbers of buildings;

- organization of funeral services and the maintenance of cemeteries.

In some instances, these issues are supplemented by the maintenance of roads, childrens and youth activities, and the provision of cultural services to the residents. In a great majority of cases, the issues of the disposal of land resources are concentrated at the raion level. The treasury execution of the budgets of set tlements also takes place at the level of municipal raions.

Although the large scale transfer of powers is directed from the bodies of lo cal self government of settlements to those of municipal raions, there are also some instances of a reverse process the transfer of powers from municipal raions to settlements. Most often, the organization of pre school education is transferred Section Monetary and budgetary spheres to settlements (which is quite understandable, this service being of a local nature), and sometimes also such issues as the organization of supplementary training, current upkeep of educational establishments, current upkeep of medical institu tions, primarily first aid and tocological stations (FATS). However, this process is better developed at previously existing settlements and reflects the aforesaid trend of bringing the competence of the bodies of local self government of these settle ments to its pre reform level: while previously such issues were dealt with at the settlement level, now they are transferred to the same level by agreements.

Special problem is represented by the organization of financing procedures at the newly created municipal formations. Nearly all the regions have been faced with difficulties in that sphere. No adequate base has existed either for forecasting the revenues of settlements, or for planning their budget expenditures.

Also, certain difficulties arose in connection with the land tax, for which the tax base from the year 2006 has been radically altered. According to the information from the regions, the forecasting of revenues from this tax has, nevertheless, been done from the achieved level, on the basis of the data of previous years. This has resulted in serious errors, because the volumes of revenues from the land tax have changed significantly, being different in different regions and municipal formations.

Thus, in the municipalities of Kaluga Oblast the revenues from this tax declined nearly by one order, while in some regions of Orenburg Oblast the land tax pay ments increased six fold.

Different regions are practicing entirely different approaches to the granting of financial assistance to settlements from covering the difference between the actual or standard expenditures and the revenues, to applying complicated mechanisms of computations, with the determination of the tax potential index and the spending needs index. However, the application of the methodological recom mendations originating from the provisions of the Budget Code cannot by itself en sure any real financial equalization of settlements. Thus, in Orenburg oblast, where financial equalization represents a regional power delegated to the raion level, and financial assistance is being distributed on the basis of the equalization of budget sufficiency with due regard for the indices of tax potential and spending needs (that is, the existing system is fully compatible in this respect with federal legislation), the actual differences in the budget sufficiency of settlements in different raions are greater than by 10 times. The practice of granting dotations to settlements has also become quite widespread, which completely distorts the nature of this instrument.

As for the treasury execution of the budgets of settlements, such powers, with a few exceptions, have been transferred to the raion level.

2.6.3. The price of municipal reform is the cost of administration While the preparations to the implementation of municipal reform were going on, there was no end to discussions as to what would be the result of transforma tions from the point of view of the efficiency of budget expenditure. This issue if of especial significance in terms of administrative costs. Here, two opposite stand points have emerged. On the one hand, there existed the opinion that the approach RUSSIAN ECONOMY IN trends and outlooks suggested in Law No. 131 FZ to the reforming of local self government can sub stantially lower the level of performance in the administrative sphere and result in growing administrative costs. On the other, there were also some contrary argu ments since the total volume of powers assigned to the bodies of state authority and local self government was not to be changed, and was only to be redistributed between different levels of authority, the associated administrative costs were not to become greater, either. Only an analysis of the actual administrative costs can provide an adequate answer to the question as to whether resulting from the crea tion of tens of thousands of new municipal formations at the settlement level there will be significant losses due to the insufficient scale of administrative activity, as sociated with increased costs.

Naturally, it is yet too early to draw any final conclusions. Nevertheless, the analysis of this issue on the basis the national budget statistics for the first half year 2006, as well as surveys of the situations existing in some regions, has yielded the following results.

Firstly, the growth of administrative costs in municipal budgets in 2006, by comparison with 2005, was far ahead of the corresponding index of the previous years. This can be explained by different factors; at the same time, the conclusion that this has largely been produced by the implementation of municipal reform seems to be well substantiated. Such a conclusion is confirmed by the fact that in those regions where full scale implementation of reform from 2006 was declared, the corresponding growth was higher than in all other regions. At the same time, the highest growth was observed in those regions where municipal reform had been fully implemented, and the number of municipal formations had been accord ingly greatly increased. While the costs of the upkeep of the bodies of local self government grew in all regions, on the average, by 30.7% in real terms, in those regions where municipal reform had been fully implemented the growth was 32.8%, while in those where municipal reform had been fully implemented and the number of municipal formations increased more than twice by 41.7%.

Secondly, during our study certain facts have been revealed, which are indicative of the existence of real losses due to the insufficient scale of activity at the level of settlements, this problem, not having been softened in the course of re form, has become even more acute. This conclusion can be substantiated by the following arguments:

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