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The transition to PBB requires that each budget planning subject (BPS) (fed eral ministries, as well as the services and agencies headed by the RF President or the RF Government, the federal bodies of legislative and judicial authority, the RF CEC, the RF General Procuracy and the RF Clearing House) should submit to the Government Commission for improving the performance of budget expenditure, the RF Ministry of Economic Development and Trade and the RF Ministry of Fi nance three iterative versions of its report. While preparing the reports, the federal bodies of executive authority must systematize the goals and tasks of their activity, with their subsequent correlation with the goals of the RF Government, as well as to separate, within this activity, the program and non program components, distribute their expenditures by each goal, task and program, and to report on the perform ance based spending of budget funds.

The results of a selective analysis of the reports prepared in 2005 and have made it possible to reveal a whole set of systemic gaps in the organization of budget planning, both at the level of BPSs and in the sphere of interdepartmental relations. There is little doubt that the process of eliminating these gaps, in order to finally build an efficient budgeting system, is going to be time consuming, but even now quite a few things can be improved. Below we are going to discuss the meas ures to be taken in that direction and the problems that should be provided solu tions to as a matter of priority.

First of all, it should be noted that when the goals, tasks, programs and figures stated in the reports are compared to the goals of the RF Government and the po tential indices relating to them, it becomes evident that these goals overlap with the Annexs goals, tasks and programs of BPSs in many instances in a purely fragmentary fash ion. Moreover, many goals of the RF Government turn out to be unachievable for lack of proper coordination between BPSs in their attempts to implement certain sub goals within the broader goals of the RF Government. In the present situation, the role of a coordinating and supervising center is assigned to the Government Commission for improving the performance of budget expenditure, which must not only accumulate and analyze the reports submitted by the budget planning sub jects, and to develop proposals for improving the procedure for preparing and submitting the reports, for specifying the main directions and results of the activity of budget planning subjects, for the development of departmental target programs and the improvement of performance of federal target programs, but also to en sure the uniformity of the activity of different BPSs in order to implement the whole system of the RF Governments goals. However, the results of the Commissions activity can hardly be estimated as satisfactory, because so far it has not become possible to ensure the efficient interaction between BPSs and between them and the bodies of state authority of other levels of the RF budgeting system.

The RF Ministry of Economic Development and Trade also has an important role to play in the process of PBB implementation, because it performs the func tions of supervising the implementation by BPSs of the declared provisions of their reports, while being fully responsible for the preparation of the summary report on the results and main directions of activity of the Government of the Russian Federa tion (hereinafter summary report), designed to become a strategic planning document summarizing the key provisions of the reports submitted by individual BPSs. However, despite being of paramount importance as a component of the system of target program budgeting, the summary report in its present form (pre pared by the Ministry of Economic Development and Trade on the principle bot tom to top, and then cut up and glue) has mostly a formal character, performing the function of an intermediary link between the declared priorities for the countrys socio economic development and the complex of measures planned by BPSs for a three year period, rather than being a carefully elaborated program of comprehen sive development, which sets specific targets for the subsequent development of BPSs plans of action for a medium term.

Besides, it should be noted that because of the underdeveloped mechanisms for implementing joint measures, any broad spectrum of potential directions for improving performance through finding efficient solutions to interdepartmental problems is simply unattainable. Consequently, it becomes possible to improve the performance of budget expenditure within the framework of such a poorly organ ized system of budget planning only at the level of individual BPSs.

Another important shortcoming in the organization of the process of distribut ing the expenditures of BPSs among their goals, tasks and programs being imple mented is the still existing opportunity for an analytical (or experts) approach to distributing budget expenditures, with the right not to break up the programs ex penditures between several goals being simultaneously achieved by a given target program. The lack of a well defined procedure for allocating and correlating ex RUSSIAN ECONOMY IN trends and outlooks penditures with goals, tasks and programs results in a situation when the minis tries, as before, at first, for a whole year, pursue a certain activity within the frame work of their competence, and then later, during the preparation of the intermedi ate and final reports, try to fit the actually implemented measures into the goals, tasks and indices determined in the report. Obviously, the budgeting organized in such a way is of little use as a method for financial planning, while the report has not yet become a program of action for the nearest perspective, to be applied in the process of managing government finances.

Moreover, the low quality of the reports sometimes gives rise to erroneous targets being established for the allocation of budget funds to the specific spheres of activity of the federal bodies of executive authority. Here we refer to the subse quent application of the materials cited in the reports in the preparation of the summary report, drafts of the prospective financial plan and the federal budget for the next financial year.

The poor level of organization and low efficiency of planning at all levels of the budget planning system is predetermined not only by the absence of an efficient coordinating center, the lack of proper qualification and budgeting skills of the staff of BPSs, and low degree of automation in the process of preparing and monitoring the reports, but also by the remaining gaps and limitations of prevailing legislation regulating the implementation of PBB. Our analysis of the standard requirements to the preparation and content of a report, as well as the materials of a number of re ports prepared by BPSs have made it possible to point out to certain existing draw backs.

Firstly, one significant gap, in our opinion, is the lack of the requirement for a BPS to determine, when preparing a report, alongside the development of goals and tasks, also a list of specific measures aimed at the achievement of the declared goals, with the break up of the expenditures earmarked for such goals into current and capital costs. This would have made it possible to prevent potential misuse, by the ministries, of their right to submit the information concerning the directions of their activity in a broader format, stating their strategic goals and tactical aims in too general terms, which makes more difficult the selection of adequate quantita tive parameters for measuring the degree of their achievement. Besides, this fea ture would greatly increase the practical significance of a report as a program of concrete actions undertaken by a planning subject for a future period, with the separation of the investment component.

Secondly, in the provision on reports approved by Decree of the RF Govern ment of 22 May 2004, No. 249, there is no specification of short term goals, tasks and measures within the framework of a medium term planning period, which makes it impossible to follow the direct link between this document and the types of expenditures declared by a ministry of a department in its projected budgeting in dices. Besides, it appears to be of utmost importance at later stages, as more and more experience in PBB is accumulated, to expand the planning horizon to a period of at least 5 years, which is a necessary prerequisite for organizing the govern ments investment activity. Otherwise, as things stand nowadays, and in particular Annexs in connection with the newly created Investment Fund of the Russian Federation, which began its operation from the year 2006, there has emerged a discrepancy between the five year period established for the provision of state support and the three year period of planning the funds maximum volume on the basis of a pro spective financial plan.

Thirdly, the provision on the reports does not contain any methodological ap proach, which could make it possible to determine the degree to which certain re sults of socio economic development depend on the activity of budget planning subjects, and how much they depend on objective factors.

Fourthly, one more drawback is the absence of any methodological ap proaches to the development of planned indices, which makes more difficult their independent assessment.

Besides, the normative acts adopted at the federal level and addressing the procedure for preparing reports do not determine the schedule of actions to be taken in those cases when target indices are found to be different from planned in dices. This largely is due not to the shortcomings of the system of indices applied to determine the performance of budget expenditures, but rather to the objective impossibility to suggest any singly algorithm applicable to such cases. However, each instance of such a discrepancy, revealed by the results of a plan fact analysis, should be met with adequate and speedy response, otherwise doubts will be cast on the performance of the whole system of budget planning. And it is quite a differ ent matter that only on the basis of an in depth analysis of each specific situation it will be possible to judge if the deviation of a certain actual value of an index from a planned value can be regarded as a justification for cutting or increasing the vol ume of financing, or for keeping it at the same level, while changing some other conditions of BPSs functioning.

Fifthly, no normatives have been developed with regard to the mechanism for incorporating, in the indices of activity of the federal bodies of executive authority, the final results of the functioning, within the sphere of their competence, of the re gional and local bodies of authority, and so it is impossible to build a functional three tier structure of planning budget expenditures on the basis of single princi ples. The elimination of this shortcoming appears all the more necessary in view of the expanding initiatives of the Federations subjects for implementing PBB in the regional practice of budget planning.

Thus, it can be stated that the results of the first years of implementing PBB in the practice of budget planning at the federal level have revealed the existence of certain shortcomings and gaps both in the existing normative legal base and in the organization of this process as a whole. Consequently, the prospects for PBB de velopment largely depend on the earliest possible elimination of such bottle necks, while special attention should be focused on the following measures.

1. First of all, in our opinion, it is necessary to switch over from the existing structure strategic goal tactical aim target program to a multi step structure, like BPSs mission achievable goal of the RF Government tactical aim of BPSs budget target program action. The logic of interconnection between the RUSSIAN ECONOMY IN trends and outlooks components of such an hierarchy is evident. At first, each BPS formulated its mis sion, which represents a brief definition of one most important goal of government policy, for the achievement of which a given BPS is responsible, or for the achieve ment of which it has been created. The description of this mission may also contain the information concerning the services being provided by the BPSs, the customers and consumers of these services. Thus, it is the mission thast deter mines the functional peculiarities of a BPS.

Then, if order to ensure the transparency of the contribution of individual BPSs to the achievement of the RF Governments goals, each BPS must select from among the three tier system of the Governments goals those goals that would be compatible with the directions of its activity during a planned period of time. Also, the selected goals must correspond to the BPSs mission.

After that, the tactical aims of BPSs are determined, which are to reflect the volume of government services to be realized by a BPS during the planned period of time. The aims must be correlated with goals (or socially important results) and the BPSs mission.

After having formulated its tactical aims, each BPS must develop a plan of measures, determining the main phases in the achievement of goals and, most im portantly, the organizational structures (subordinated agencies and services, de partments of ministries) to be responsible for the achievement of each specific goal or aim. These separate homogenous services or similar types of activity, ori ented to finding solutions to specific problems, are then united into target pro grams. Therefore, a specific type of activity, a function or several types of activity, united into one functional group, can be called a program. The separation of meas ures into a specific component of planning will thus promote the responsibility of the staff of a BPS for their performance level, as well as improve the quality of monitoring over the intermediate results (monthly or quarterly) relating to the achievement of goals and implementation of programs.

2. For purposes of creating a well functioning system of quantitative indices of BPSs activity, it would be feasible, when estimating the performance of budget expenditure, to divide the results of BPSs functioning into direct (imme diate) and final.

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