in the Russian Federation Program Budgeting in the Russian Federation Nikolay Begchin Ministry of Finance of the Russian Federation March 2018

Presentation outline Program budgeting implementation in Russia: history and general context. (slides 3-6) The current program budgeting framework. (slides 7-12) Implementation of Government Programs: initial lessons and outcomes. (slides 13-18) Future work ideas. (slides 19-24)

Program Budgeting Implementation in Russia: History and General Context

Program-based approach implementation in Russia Possibility to establish federal targeted programs (starting from 1995) or similar subnational or municipal programs: To address high-priority socio-economic, defense, scientific, environmental and other key issues, normally of cross-sectoral nature Socio-economic development programs. Sectoral development programs. A concept to reform the budget process in 2004-2006: goals, objectives and indicators for all types of activities performed by bodies of executive power; departmental targeted programs. RF Government program to boost budget expenditures efficiency for 2010-2012 Implementation of government programs and migration to program-based federal budget; Legislative framework to support program-based budgets within the budget system; a new way to manage government services providers (instead of financial estimates – public contract with agencies’ performance indicators).

Background for the advent of government programs – 2010 expenditures during 2000es increased dramatically, but often without alignment with priorities; bargaining for resources and weakening of budget discipline; incentives to increase budget expenditures persist; no conditions for achieving a higher budget expenditures efficiency; a weak connection between strategic planning and budgeting; a poor link between expenditures mix/dynamics and government policy goals; majority of active programs’ documents are not reflected in the budget; no assessment of the impact produced by all government policy instruments (budget, fiscal, tariff, customs, regulatory).

A desired model of strategic performance-based planning Long-term development strategy (concept) Goal setting Sectoral strategies Long-term socio-economic development projections Long-term budget projection Conditions Socio-economic development projections for 3 years 3-year budget Gov’t programs what? who? how? Authority and instruments

The Current Program Budgeting Framework

Selecting budget format (starting from budgets for 2016-2018) Federal budget Program-based Agency-based + Subnational (constituents’) budgets Program-based Agency-based + The right to choose between Program-based Agency-based + OR Local budgets Function-based Agency-based + Program-based Agency-based +

Federal budget expenditures to support implementation of government programs in 2018-2020 (billion rubles)  Title 2017 2018 2019 2020 Amount % in total expenditures % in total expenditures 1 2 3 4 5 6 7 8 9 10 Federal budget expenditures, TOTAL 16,728.4 100 16,529.2 16,373.7 17,155.3 of which: Expenditures to support implementation of RF Government Programs, total 8,953.7 53.5 9,108.5 55.1 8,720.8 53.3 8,842.0 51.5 Expenditures to support implementation of non-programmatic areas 7,774.7 46.5 7,420.7 44.9 7,652.9 46.7 8,313.3 48.5 Non-programmatic areas: Judiciary Presidential Executive Office Office of the Government State Duma Council of the Federation Public Prosecution Office Investigation Committee Chamber of Audits Elections Commission Pension system Defense

Program-based budget classification Federal budget for 2014-2016, 2015-2017 Chapter Section Sub-section Special-purpose item Expenditure type PASOC CA (analysis) GP SP Item of expenditure 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 - Х Starting from federal budget for 2016-2018. Chapter Section Sub-section Special-purpose item Expenditure type PASOC (accounting and reporting) GP SP CA Item of expenditure 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 - Х GP - government program SP - subprogram CA – core activity

Program-based expenditures structure: example Bln rubles Title GP SP CA 2017 RF Government Program “Health Care” 01   311.3 "Prevention of diseases and formation of healthy lifestyle. Development of primary healthcare " 1 125.0 “Prevention of infectious diseases, including immunoprophylaxis " 02 17.1 “Prevention of HIV, viral hepatitis B and C" 03 17.8 “Improving mechanisms of medical products provision” 05 89.2 "Improving the provision of specialized medical aid and emergency aid" 2 46.5 “Improving the system of medical care provision to TB patients” 5.2 “Improving the system of medical care provision to patients with mental and behavioral disorders” 04 4.8 “improving the system of medical care provision to patients with vascular diseases" 1.1 “Improving high-tech medical care" 10 6.7 “Development of blood banking" 11 4.1 "Development and introduction of innovation methods of diagnosis, prevention, and treatment and fundamentals of personalized medicine” 3 26.8 “Development of nuclear medicine” 2.3 “Development of fundamental, translational and personalized medicine" 19.3 “Medical aid provided in the course of clinical testing of methods of diagnosis, prevention, treatment and rehabilitation”

AIS “Government Programs” Information Exchange E-Budget AIS “Government Programs” Government program structure Expenditures classification components Inputs for government program Expenditure allocation according to BCC during budgeting Performance indicators, nature of activities Budget, consolidated quarterly budget breakdown Government program amendment proposals Financing parameters Approved/specified government program Cash execution of the budget on the expenditure side Annual report  consolidated annual report on government programs Annual report on budget execution The package submitted to the State Duma (Lower House)

Implementation of Government Programs: Initial Lessons and Outcomes

Government Programs implementation: positive outcomes A more transparent and easy-to-understand composition of the federal budget expenditures. Improved discipline and understanding of the need to achieve specific outcomes. Broader opportunities for analysis: previously unnoticed issues tend to draw attention. Possibility to formalize the relationship between activities pursued by the federal authorities and regional/subnational authorities action.

Government Programs: disappointed expectations No prioritization of activities and budget allocations has been achieved: programs are made by reshuffling the existing activities. No alignment of budget appropriations with outcomes has been achieved – despite the fact that the budget is based on government programs, their subprograms and core activities. Implementation outcomes and performance evaluations are not considered in budgeting for future periods. No change in current governance procedures: government programs are regarded as additional burden on top of regular workload. Government programs have failed to become a tool for sector management and a fully fledged component of budgeting process.

Reasons for the failures (1) I. Poor quality of goal-setting and indicators: lack of “top-level” indicators (no socio-economic development strategy); indicators and their values are developed by government programs implementers (no external verification); too many indicators with no hierarchy (outcome indicators lumped together with technical indicators); actual values for many indicators are generated too late; sector-based approach to designing GPs prevails over goal-setting logic; no (or weak) connection with subnational and local programs indicators; no uniform approach to dealing with cross-functional indicators.

Reasons for the failures (2) II. Inadequate integration of GPs into the budget process: GP performance evaluation outcomes are not considered in the course of budgeting; unclear authority of the agency in charge of GP in the budget process; no flexibility in the course of budget execution; the programs’ substance does not generate sufficient interest on the part of the Federal Assembly during draft budget review.

Components of some GPs vs. their implementation performance Indicators The Government Program “Health Care” 1. Mortality due to all causes. 2. Life expectancy at birth The Government Program “Health Care Development” Subprogram “Prevention of diseases and formation of healthy lifestyle and development of primary healthcare” 1. Coverage of adults by health screening. 2. Coverage of children with preventive medical examinations. 3. Percentage of patients with known malignant tumors at stages I-II Core activity “Development of primary care, an early disease detection system including administration of medical examinations and health screenings” 1.Number of designated population. 2. Number of visits  The Government Program “Education” Relative share of the graduates of organizations of vocational training of the latest year who were placed in a job they were trained for Subprogram “Delivery of Vocational Education Programs” Share of individuals admitted to practice-oriented programs in the total number of students admitted to bachelors’ programs Core activity “Delivery of education programs at universities” Number of students

Future Work Ideas

(launched in 2017 in “pilot” government programs) Suggested changes (1) (launched in 2017 in “pilot” government programs) Develop a goal-setting system for government programs (identify strategic development (1-2) and the government program proper (not more than 5) indicators, with an emphasis on socially important outcomes) – slide20. Streamline GP format (diversify levels for decision-making, indicators setting and monitoring) – slide 21. Consolidate within GP all budget appropriations that are related to a specific sector and impact expected outcomes. Develop projects that help to achieve GP goals (based on project ranking model). Transform processes into sectoral targeted programs. Include into GP mechanisms to coordinate constituents’ GPs and action programs (development programs, investment programs) pursued by legal entities.

(launched in 2017 in “pilot” government programs) Suggested changes (2) (launched in 2017 in “pilot” government programs) Include into GP mechanisms to coordinate constituents’ GPs and action programs (development programs, investment programs) pursued by legal entities. Clarify approaches to building budget classification and ensure comparability of budget indicators over time Expand the authority of responsible entities regarding GP inputs management. Develop a single information resource enabling access to complete information on GP parameters in real time. Assign GPs the status of the main instrument for planning and reporting outcomes of federal bodies of executive power activity.

Establishing a GP goal-setting system Level of goal-setting Institutional form Socio-economic development goal Strategy Indicator 1 Indicator 2 Government programs Value, by year Value, by year Indicator 1.1 Indicator 1.2 Indicator 2.1 Indicator 2.2 Sectoral targeted programs Sectoral projects Service contracts Service contracts KPI oi implementer KPI of implementer KPI of implementer KPI oi implementer KPI oi implementer KPI oi implementer KPI oi implementer KPI oi implementer KPI oi implementer KPI oi implementer KPI oi implementer KPI oi implementer KPII oi implementer KPI of implementer

Streamlining GP format Government Program (GP) (current format) Government Program (GP) (new format) GP description GP description List of capital structures (enlarged investment projects) Subprograms descriptions GP approved by the Government Rules for grants provision Rules for grants provision Approved by the Government (1 resolution) List of indicators and their values Approved by Presidium of the Council on Strategic Development Priority projects descriptions Sectoral projects descriptions List of core activities Approved by entity responsible for GP implementation Budget appropriations Budget appropriations Approved in Federal Law on Budget, budget projections Implementation plan Approved by Project Committees Approved by the Government (a separate resolution) Project implementation plans FTP Approved by responsible entity (co-implementer, participant) Agency programs Approved by responsible entity Detailed schedule

? Development of a Single Information Resource GOVERNMENT PROGRAM Budget appropriations, grant agreements, consolidated indicators of government contracts E-budget ? GOVERNMENT PROGRAM AIS “Government Programs” AIS for project activity GP indicators, composition Projects and implementation plans

Questions? Suggestions? Nikolay.Begchin@minfin.ru Nikolay Begchin, Deputy Director, Department of Budget Policy and Strategic Planning, Ministry of Finance of the Russian Federation Nikolay.Begchin@minfin.ru