Direct results in this instance will be understood as the volume of goods and services being provided by the State. For example, the indices of direct results may be: the number of students to whom educational services under a given curriculum have been provided; the number of patients treated in accordance with the estab lished standards; etc.
As for the indices of final results, they reflect the achievement of social results in the form of a certain level of satisfaction of society’s needs, for example, the im provement of education quality, decreased mortality from certain diseases, lower incidence of crime, improved road traffic safety, etc.
It is obvious that the achievement of final results is, indeed, the goal of socio economic policy, while the provision of government services represents its instru ment. This division of the results of the activity of budget planning subjects gives a Annexs new sense to the indices of social and economic performance, because they can be now measures in terms of quantity. Thus, in order to measure the social per formance of budget expenditure it would be sufficient to compare the planned and actual final results (the achievement of a certain social result per unit of expendi ture), while economic performance can be measured by comparing the planned volume of services with that of the services actually provided (output volume per unit of expenditure).
It would be most feasible to base the measuring of the results of activity of the recipients of budget funds on the indices of direct results (although there might be some exceptions to this rule). At the same time, the main recipients of budget funds must ensure that the increased immediate results would lead to the achieve ment of final results, thus reflecting the priorities existing in society.
In order to increase the objectivity of the assessment of BPSs’ activity, it is necessary to calculate net final results, that is, without the impact of external fac tors (the macroeconomic situation, the contributions of other ministries, etc.), for which a special assessment methodology must be developed.
Attention should be focused on the fact that presently the BPSs participating in the experiment are making active attempts at involving the main part of the budget network – that is, subordinate administrators and recipients of budget funds – in the process of implementing PBB. In this connection, it would be logical to assess the activity of a large number of BPSs, and primarily those who organize the provision of government services, on the basis of the indices of their subordi nate budget networks. This requires that a concept of reforming the budgeting process at the intradepartmental level should be developed, including the mecha nisms for transforming the goals and aims of BPSs into the goals and aims of re cipients of budget funds. Naturally, in each specific case there emerge some spe cific features, which, however, do not change the essence of the matter. Moreover, PBB does not represent any rigid set of methods, fixed and established once and for all – on the contrary, it can be adapted, rather freely, to different conditions of economic life and to different levels of authority.
Thus, in a longer perspective, PBB must become, through a system of applied indices, not just another new method for planning and a new instrument for analyz ing budget execution, but an efficient mechanism, capable of revealing, among the deviations, those areas that are open to further improvement.
Beside the improvement of the procedures for preparing the reports of BPSs or the summary report of the RF Government, there still remains one more issue of paramount importance – that of improving the performance level of monitoring procedures, whose logical outcome should be the consideration of the causes and potential legal consequences of a failure to meet the established performance indi ces.
It seems logical that the control over the implementation of budget funds by ministries of departments should be gradually shifted from the external control of the targeted use of the allocated funds to the internal control of BPSs over the level of performance of their expenditures. The estimates of social and economic per RUSSIAN ECONOMY IN trends and outlooks formance within the framework of planned activity must be applied in planning ex penditures for a next budget year.
The necessity of improving the system of monitoring the results of PBB im plementation has also been confirmed by the fact that the estimation of the per formance of BPSs on an annual basis makes it possible to critically revise the exist ing areas of spending and then to eliminate those items of expenditure that are being funded “by inertia”, without any social and economic justification for their existence.
It is necessary to further improve the procedure for monitoring the effective ness of budget expenditure – both through raising the level of personnel training and better elaborating the target programs, and through building a multi tier sys tem of control. At the first tier, the control over the performance of budget funded institutions must be executed by those BPSs to whose jurisdiction those institutions belong. The loosening of control over the areas of spending the funds allocated to the budget funded institutions switched over to performance based financing must be synchronized with toughened control over the volume and quality of services being rendered by them. The main administrators of budget funds must perform regular monitoring of the achievement, by budget funded institutions, of the planned volumes of services, and adjust the volume of financing if the actual per formance indices are below or above the planned targets. This will make it possible to make benefit of the main advantage of performance based financing – the pos sibility of correlating the volumes of financing with the volumes of services being rendered by the institutions.
Alongside state control, it also necessary to strengthen the measures of non government control over the volume and quality of the services being rendered, to expand the practices of creating supervisory boards at budget funded institutions, and to increase the role of consumers’ societies in this process.
At the second tier, the control over the performance of BPSs must be exe cuted by the Government Commission for improving the performance of budget expenditure. This type of control must be implemented within the framework of the consideration, by the Commission, of those sections in the reports submitted by the main administrators of budget funds that deal with the results of their activity during a reporting period, as well as reports on the results of implementation of in terdepartmental and departmental target programs (for reference: there has been established, as yet, no normative definition of the procedure for monitoring the re sults of the implementation of interdepartmental programs for those planning sub jects who are not the head institutions in such programs). The results of the as sessment of performance of the main administrators of budget funds must be entered into the summary budget report. In this connection, the methodology should be developed for estimating the quality of budget funding administration by the planning subjects.
And, finally, the monitoring system will become complete after the implemen tation of the third tier of control – that of the control over the performance of the RF Government by the RF State Duma, with the participation of the RF Clearing House.
Annexs For purposes of ensuring the possibility of such a control, the RF State Duma must participate in the assessment of those sections in the summary report submitted by the RF Government and those reports on the results and main directions of activity of budget planning subjects that contain the information concerning the dynamics, over a reporting period, of both planned and actual performance indices. Before being considered by the RF State Duma, these materials must undergo, on a man datory basis, an expert’s estimation by the RF Clearing House.
By way of summing up everything that has been discussed here, we can offer the following conclusions:
1) although in just a few years the method of PBB has become the one in great demand in terms of government expenditure planning – both at the federal and the regional levels of the RF budget system, no noticeable improvement in the finan cial management of BPSs has been observed so far. As before, the main problem associated with implementing PBB – that of restructuring the activity of planning subjects through creating an efficient system of managing budget funded target programs – has remained unsolved. In other words, the final result of PBB imple mentation must become such an organization of the planned activity of ministries and departments that would be capable of representing nearly all their activity through the prism of the programs and singular measures being implemented by them, and, consequently, of increasing the responsibility of ministries and depart ments for the results of their activity;
2) the application of PBB in the years 2004–2006 has revealed the existence of important drawbacks and gaps – both in the prevailing normative and legal base and in the organization of the process of budget planning as a whole (the absence of an efficient coordinating center, lack of proper qualification and budgeting skills displayed by the staff of BPSs, low degree of automation of the process of prepar ing and monitoring the reports, etc.). And, although a certain improvement of the quality of PBB in Russia can indeed be achieved in the nearest future, if appropriate operative measures are taken in order to remove or at least to somewhat soften the revealed problems, a long time will, nevertheless, be required in order to learn to improve the performance of the whole system of managing budget funds.
Annex 4. Accounting Policy for Taxation Purposes:
Tax Accounting and Administration Federal law No. 137 FZ of July 27, 2006, “On the introduction of amendments to Parts One and Two of the Tax Code of the Russian Federation and certain other legislative acts of the Russian Federation in connection with the implementation of measures aimed at the improvement of tax administration” has introduced the defi nition of the term “accounting policy for taxation purposes” in the Tax Code of the Russian Federation.
The new version of the first part of the RF Tax Code (item 2, article 11) defines the accounting policy for taxation purposes as the set of means (methods) permit ted by the Code applied to determine earnings and (or) expenditures, to recognize, RUSSIAN ECONOMY IN trends and outlooks evaluate and distribute such earnings and (or) expenditures, as well as to take into account other indicators of financial and economic activities of taxpayers neces sary for taxation purposes as chosen by taxpayers.
Prior to the approval of the version of the first part of the Tax Code of July 27, 2006, the term “accounting policy for taxation purposes” was already referred to in some provisions contained in the second part of the RF Tax Code; however, this term was not defined.
At the first glance, the introduction of the definition of accounting policy for taxation purposes in the Tax Code does not appear to be an event of any special importance; however, in the context of the trends observed at present in the framework of reforms being implemented with respect to the Russia’s accounting system this change in the tax legislation deserves attention. Besides, this develop ment is important from the point of view of improvement of the tax administration.
Accounting policy for taxation purposes and the problem of correlation be tween financial and tax accounting The separation of financial (financial) accounting and tax accounting was fi nally formed after chapter 25 of the RF Tax Code “Profit tax on organizations” en tered into force on January 1, 2002; since that time, tax accounting became com pulsory for all Russian enterprises assessing and paying the profit tax.
However, as soon as the new type of accounting was introduced there arose a controversy concerning the feasibility of separation of financial and tax accounting.
The main argument against this development was more complicated accounting procedures and higher expenses of organizations associated with bookkeeping. In November of 2002, there were approved the Regulations on accounting “Account ing concerning the payments associated with the profit tax” (RA 18/02)38; the text of the Regulations avoids references to tax accounting39; however, the procedures governing the accounting for respective items did not become less complicated.
At present, the Concept of development of accounting and reporting in the Russian Federation in the medium term perspective40 envisages that tax accounting of Russian organizations should be compiled basing on the data formed in the framework of financial accounting by the way of adjustments made in accordance with the rules set by tax legislation41, whereas the Tax Code (article 313) permits leaves it to the taxpayer’s choice to use for the purposes of tax accounting either financial accounting ledgers (if they contain sufficient data), to form tax accounting ledgers on the basis of financial accounting ledgers, or to keep own tax accounting ledgers.
Order of the RF Finance Ministry No. 114n of November 19, 2002.
“These Regulations permit to reflect the difference between the tax on book profits (losses) rec ognized in the accounting and the tax on taxable profits formed in the framework of accounting and reflected in the tax returns as concerns the profit tax in accounting and reporting.” (paragraph 2, item 1 of RA 18/02).
Approved by Order of the RF Finance Ministry No. 180 of July 1, 2004.
See Section 2.1 of the Concept “Improving the quality of information formed in the framework of accounting and reporting”.
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