Budgeting must be result-oriented

11 april 2017

Analytical Center experts Tatiana Gorovaya and Yekaterina Bgantseva spoke at a seminar titled Analyzing the Effectiveness of Program-Based Budgeting and Achievement of the Targets of State Programs: Monitoring the Effectiveness of Budget Spending. Practice of Introducing Program-Based Target-Oriented Methods. Result-Oriented Budgeting.

Speaking about the effectiveness of state programs, Ms. Gorovaya noted that under the current requirements the method for assessing the effectiveness of programs must include a number of indicators such as the degree of completion of a measure, conformance to the target spending level, whether the program takes into account the specific feature of the industry it is being implemented in and some others. However, in practice, federal executive authorities use the same standard methodology that does not take into account which industry they are working with. The only thing that the federal executive authorities use consistently is significance weights they attach to specific sub-programs and targets. Such weights are used for example to assess the implementation of the May Decrees of the Russian President.

In addition, as a rule the methodologies for determining the effectiveness of programs normally show the target federal budget subsidies in accordance with the consolidated table of budget allocations at 31st December of the reporting year. By contrast, in state programs the budgeting indicators are specified in accordance with the federal budget law and are not to be adjusted later on based on budget reallocations. Add to that the fact, that the amounts of budget allocations at 31st December of the reporting year normally match the actual spending figures. This means that this assessment method cannot be objective by design. When achievement of targets is analyzed, the targets specified in the state program are used. By contrast, the program-based target-oriented method envisions pegging the results of specific activities to the amount of resources allocated to those activities.

"It should also be noted that the success of a state program cannot always be characterized by the achievement of specific targets and the occurrence of some control events," Ms. Gorovaya said. "So it would also make sense to assess the achievement of quantitative and qualitative target outcomes of the state program and its subprograms."

Yekaterina Bgantseva noted that the methodologies currently in use rely on the same approach to assessing the implementation of specific state program measures regardless of what kind of work the implementation of those measures involves.  "In order to account for the differences between various measures, including differences in financing, we suggest that additional criteria should be used to characterize the success of the implementation of specific types of measures," Ms. Bgantseva said. It will apply to cases, for example, when there are measures that call for the provision of subsidies to specific regions or legal entities to provide social services to the population etc. Such criteria can be taken into account by adding special coefficients to the formulas used to calculate the degree of implementation of the key measures of a program.

Thus, the expert believes that in order to carry out comprehensive multifaceted analysis of how successful subsidies provided to businesses have been, it would make sense to include indicators that characterize total output as well as the amount of taxes and other duties the subsidies businesses pay. In the event that a measure includes capital expenditure (investments), it would also make sense to include quantitative indicators characterizing the success of the investments, including, where applicable, the net present value, the actual payback period, the internal revenue rates, as well as indicators characterizing the public and social effects of the measures (for social projects) and other indicators.

Photo: from open sources