CC BY
1DOI: 10.29141/2658-5081-2023-24-2-1 EDN: ZOLTPL JEL classification: H50, H61, H72
Elena G. Knyazeva Ural State University of Economics, Ekaterinburg, Russia Kirill N. Samkov Ural State University of Economics, Ekaterinburg, Russia
From performance to efficiency of government programmes' financing in the subjects of the Russian Federation
Abstract. Government programmes as an element of strategic planning are meant to logically link budget expenditures with attaining long-term priorities of socioeconomic development. In the Russian Federation, the vast majority of regional budget expenditures are programme expenditures. At the same time, a plenty of practical examples evidence the imperfection of the established methodological approaches to financing government programmes, which impairs their outcomes. The paper aims to produce practical recommendations on improving the assessment of government programmes' financing efficiency in the subjects of the Russian Federation. Methodologically, the research relies on the approaches of programme-based budgeting. The methods are logical structural analysis and synthesis. According to the qualitative analysis of the government programmes' financing at the regional level in the Russian Federation, the major problem of assessing the efficiency of this financing is the insufficient coherence between its structure and expected outcomes. As a consequence, the target programme method is applied formally. The analysis of the case of the Sverdlovsk oblast demonstrated that the existing method for assessing the efficiency of the government programmes' financing in the subjects of the Russian Federation actually evaluates performance rather than efficiency of the financing. In line with this, the paper formulates practical recommendations concerning the improvement of the method for assessing the efficiency of the government programmes' financing and the development of the system for their financing in the constituting entities of the Russian Federation: to decompose target indicators more accurately, to avoid including financing of maintenance activities, to impose stricter requirements to the composition of the funding and the quality of goal-setting.
Keywords: funding; government programme; efficiency; outcomes; budget expenditures; subjects of the Russian Federation.
For citation: Knyazeva E. G., Samkov K. N. (2023). From performance to efficiency of government programmes' financing in the subjects of the Russian Federation. Journal of New Economy, vol. 24, no. 2, pp. 6-27. DOI: 10.29141/2658-5081-2023-24-2-1. EDN: ZOLTPL.
Article info: received January 26, 2023; received in revised form February 22, 2023; accepted March 6, 2023
Introduction
Government programmes are the key mechanism for implementing the socioeconomic policy in the subjects of the Russian Federation. Programme financing is the main part of the budget expenditures, and the government programme (GP) as an element of the strategic planning system ensures attaining the long-term goals of socioeconomic development. Accordingly, government programmes link budget expenditures with the achievement of strategic priorities. In this regard, the GP financing can be considered a goal-oriented part of the financing the public authorities' activities, which, unlike the financing of maintenance activities, aims at achieving large-scale outcomes that significantly impact on the life quality and the regional economy.
Despite the fact that government programmes have been used all over the world quite for a long time, an extensive analysis of their financing in the Russian Federation shows the imperfection of commonly used theoretical and methodological approaches. Economists note many contradictions inherent in these programmes: the vagueness of goals, the lack of target indicators hierarchy and their values underestimation, unreasonable choice of programme activities, insufficient funding, low responsibility of the executives, etc.
One key reason for these problems is the lack of a unified scientific approach to determining the GP financing efficiency and, accordingly, the formality of the method currently being used. In fact, the method developed at the federal level and applied at present for assessing the GP financing efficiency evaluates not the efficiency, but the performance. Focusing primarily on achieving the planned values of target indicators and completing the implementation activities, this method does not take into account the cost minimisation. In this regard, the financial aspect of efficiency assessment of government programmes requires special attention.
Addressing this research problem is especially relevant under the current global economic challenges, geopolitical instability, fundamental changes in usual value chains and, accordingly, increasing risks for the budget revenues at all levels. To respond to these challenges, it is necessary to increase the rationality of budget expenditures and switch from achieving outcomes (performance) without taking into account the costs to the GP financing efficiency. This, in its turn, will make it possible to direct the allocated budget funds to additional social measures, improve the outcomes of socioeconomic development, and improve the quality of lives.
The purpose of the study is developing practice-oriented recommendations for improving the assessment of the GP financing efficiency in the Russian Federation's subjects.
Fulfilling this purpose requires achieving the following objectives:
- complementing theoretical ideas concerning the GP financing and methodological approaches to their efficiency assessment;
- distinguishing between similar in meaning and often substituting concepts of performance and efficiency of GP financing;
- identifying the main issues of efficiency assessment of GP financing based on the analysis of results of financing concrete GPs in the Russian Federation's subjects;
- producing practical recommendations for refining the method for efficiency assessment of the GP financing in the Russian Federation's subjects.
GP financing: Theoretical approaches
The cost approach to allocating financial resources is characterised by a weak relationship between resources and the outcomes of their use: "cost budgeting is focused primarily on spending available resources" [Afanasyev, Shash, 2014, p. 51]. The disadvantages of the cost model are manifested "in the poor performance of government authorities" [Kalimullin, 2007, p. 15]. A model designed to overcome these shortcomings is the GP financing based on strategic priorities.
In this case, budgetary funds are allocated according to the goals of the programmes under consideration. This is where programme financing differs fundamentally from cost budgeting, which distributes funds by items according to the types of expenditures [Tambovtsev, 2021, p. 50]. It is worth noting that in the model of GP financing, budget expenditures are also planned according to target items and types of costs, and the difference will be obvious in the costs grouping. Thus, the main difference between programme financing and cost financing is the connection with the goalsetting of government programmes, focused on achieving the strategic development priorities of a country or a region.
Importantly, the programme financing in the public sector compared to financing in the commercial sphere has a number of specifics that make it difficult to realise the potential of the target programme method. Thus, in commercial structures, the performance-based budgeting focuses mainly on the production cost, and only then -on the performance assessment [Nikitina, 2009, p. 9]. It is due to the possibility of a direct correlation of costs and outcomes, since both of them are expressed in comparable monetary terms.
In the public sector, goals and outcomes often cannot be compared in such way. Indeed, how is it possible to express in monetary terms the benefits for the population
from the construction of a school or a bridge, major hospital renovation, park improvement and other activities? Accordingly, the correlation of costs of the GP implementation and its outcomes is initially difficult, so the main attention is paid to the formalisation of goals and performance indicators.
We identify the following specifics of government programmes: tough legal regulation; strict subordination, systematic reporting; spending mainly budgetary funds; public control; focus on achieving priority goals for society; preference for social effect over profitability [Abramkina, Vladykina, Lukina, 2019, p. 40]. The incompatibility of the elements of programme financing with the traditional elements of bureaucratic management deforms the essence of a programme in the public sphere ([Yakimova, 2017, p. 19]).
These specifics should be taken into account when considering the GP financing. Among the problems encountered when the authorities use the programme method of financing, we should highlight a decrease in the interconnection between programme goals and mechanisms for achieving them. This problem is due to the heterogeneity of the tasks that are solved within government programmes, and the impossibility of a simple correlation of programme results and the resources spent on it.
What is GP financing? Polyak believes that a government programme is a set of measures linked in terms of resources, executors and deadlines for settling problems and requiring state support1. Makashina defines a target programme method as a system of organising public administration, in which expenditures are planned taking into account the results achieved [Makashina, 2008, p. 1]. Unlike traditional financing, GP financing links together the components "goals - resources - outcomes" [Fedotova, 2013, p. 30].
The above examples of definitions eloquently demonstrate that the concept "GP financing" has a clear and accepted definition in economic studies. According to the general view, it involves spending on achieving priority goals. At the same time, the quality of the interconnection between the goals and the composition of the GP expenditures requires deeper consideration. Since the lack of their consistency can threaten the very meaning of the target programme method and limit the realisation of its potential.
The GP financing is closely related to programme budgeting, which Lavrov understands as the budgeting and its executing in line with the goals and outcomes of the public authorities' activities [Lavrov, 2019, p. 227]. Unlike the traditional budgeting, the programme one is based on the classification of expenditures according to the goals, not types of expenditures. Thus, the programme budget is the budget, parts
1 The budget system of Russia: a textbook. Moscow: UNITI Publ., 2011, p. 541. (In Russ.)
of which are structured according to the relevant government programmes and their activities.
Performance-based budgeting is defined as a system for the forming, executing and controlling the budget, which reflects the relationship between budget expenditures and the outcomes achieved [Zhigalov, 2009, p. 28]. Researchers argue that the budgeting based on GPs, linked to the development strategy of a state or its regions, provides a comprehensive planning of activities and resources [Yastrebova, Bogacheva, 2014, p. 50]. The target programme method of budget management is believed to be a method that allows controlling the use of budget funds and ensures the transparency of their spending [Kantsur et al., 2020, p. 1027]. The present stage of budgeting reforms is characterised by a reorientation of public funding from cost management to outcome management, which determines medium-term planning parameters and increases the spending efficiency in the public sector [Avramchikova, 2019, p. 7].
Hence, economists generally agree on the understanding of programme budgeting. At the same time, existing approaches raise the following questions. To what extent are budget expenditures and the GP implementation outcomes supposed to be interconnected? What is the limit of this interconnectedness? Should the GP financing fully ensure the achievement of one or another strategic priority? Is it possible to switch to outcome management if the GP financing is formed in accordance with the established conservative practice of budgeting, using manual management and without taking into account the objective assessment of its efficiency?
Leaving these questions unanswered, the GP financing is implemented only formally - the goals set in general terms (i.e., in fact, they are absent) are weakly related to the heterogeneous areas of programme financing. Therefore, this financing is not a target programme, but a traditional cost-based one.
We cannot but consider the project approach to financing, which is similar to the target programme method. Diethelm specified major attributes of projects: novelty, result orientation, time constraints, dependence on resources, responsibility for quality, freedom from hierarchical structures, the use of innovative approaches [Diethelm, 2004, p. 18].
Projects imply accomplishing objectives within a certain period of time using resources in all activities that are separate but interdependent and must be completed in order to achieve the goal. At the same time, a project is not an objective, since it may include a number of them aimed at achieving the ultimate goal for which it was created and implemented.
Gray and Larson distinguish the following attributes of a project: the presence of a goal, the diversity of participants, the completion of something new, special requirements regarding duration, costs and quality [Gray, Larson, 2003, p. 17]. In their
opinion, the project is a complex, non-repetitive, one-time event, limited by time, budget, resources, as well as clear instructions for implementation, developed according to a customer's needs. Such definition of a project (as an event) seems to be rather narrow, since projects usually include a set of activities. In addition, projects in the public sector are often not one-time projects and are implemented over several years.
Anshin and Ilyina define a project as a purposeful, pre-designed and planned set of actions, as well as management decisions and measures for their implementation [Anshin, Ilyina, 2013, p. 49]. However, it seems that project goals may be the creation (modernisation) of a much more diverse list of objects (processes). In addition, this interpretation does not fully disclose other structural elements of a project.
National projects that are implemented in the Russian Federation do not have their own income, since financial resources come to them as redistribution of incomes of other subjects in the economic system. In this regard, the national project is interpreted as "a financial concept, since it is implemented in the sphere of distribution and redistribution of funds" [Barkova, 2008, p. 13].
It is expedient to consider project financing as a set of activities limited by time and carried out by teams created specially for this purpose. The ultimate goal of this process is to obtain a unique result - to achieve the project goal. Thus, the project financing is close in its content to the GP financing, but not identical to it.
In contrast to traditional cost financing, GP financing is targeted, oriented towards the strategic priorities of a state or its constituting territory, and ensures transparent monitoring of achieving socially significant results. Application of this method in the public sphere allows coordinating financial, primarily budgetary, spending and achieving the goals of state policy.
At the same time, the GP quality has not been properly studied in economic literature and the minimum level of requirements for the relationship between goals and the expenditure composition has not been determined. Insufficient consistency of these components can threaten the very meaning of the target programme method.
Efficiency evaluation of GP financing: Scientific approaches and problems
The GP financing is well known to link the elements "goals" and "resources" in achieving strategic socially significant priorities. However, along with the recognition of the basic ideas about target programme financing, scientific community criticises the quality of the implemented GPs in the Russian Federation and its subjects. Thus, there is a lack of funding; redundancy in the composition of indicators, the multiplicity of indicators; unrealistic goals, ignoring circumstances and risks, etc. [Ezangina, Gromyshova, 2020, p. 117]. Practically, the imperfection of applying the target programme method to state regulation in the Russian Federation is manifested in the
duplication of activities within various programmes, chronic underfunding, violation of completion deadlines and ineffective control over the achievement of goals [Fo-mina, Khodkovskaya, 2017, p. 114].
At the same time, GP financing is not always insufficient. Not less important is the problem of its redundancy, when, often excessive, multi-level and small-scale, goals, as well as targets indicators, are formulated formally but a great amount of budget funds is provided.
Some researchers emphasise that the transition from the cost-based to the target programme method of financing has failed. To date, the main goal of this transition - linking budget allocations with specific achievable indicators and activities - has not been achieved [Masterov, 2019, p. 87]. In fact, introducing target programme approaches into Russian practice is still of a formal nature; in reality, programmes turn out to be more like declarations of intent and desired goals than real programme documents. The hasty shift to the target programme principle in budgeting resulted in just specifying the current bureaucratic activities of departments. We agree that the efficiency of using performance-based budgeting and whether it will turn into a formality that in no way affects the decision-making process will largely depend on its implementation [Starodubrovskaya, 2008, p. 133].
Some authors shift from general problems concerning programme implementation to their background. Thus, in their opinion, the programme budget does not become a key financial mechanism due to the following constraints: it is complicated to correlate goals, objectives and indicators; there is not any effective coordination between responsible executors; there is not any positive dynamics of indicators with the growth of financial parameters; an excessive number of target indicators contradicts the principles of necessity and sufficiency [Kankulova, Ivanova, 2019, p. 17].
Thus, the most frequently discussed problems of GP financing include the formality and vagueness of goals; unattainably high or, conversely, underestimated values of target indicators; the general or unjustified nature of the activities; the controversial amount of funding, etc. Specialists also emphasise the need to compare the dynamics of target indicators and the level of GP financing.
Foreign researchers have focused on the efficiency assessment of the GP implementing and financing for a long time. One example is the work of Barber Ordered to get results [Barber, 2011, p. 360]. Bruijn argues that the transition to the GP financing model involves linking information about the results of activities with the allocation of limited budgetary resources. Achieving this transition is possible through the use of target programme expenditures allocation and constant monitoring of their efficiency, as well as the dissemination of this information to assess the activities of public authorities [Bruijn, 2005, p. 98].
The most famous example of a system for efficiency assessment of budget programmes is the PART (Program Assessment Rating Tool) model used in the USA [Khan, Hildreth, 2002, p. 203]. The advantage of this model is that it allows for an integrated efficiency assessment based on the study of the most important aspects - from the moment of preparation of programme documents to control procedures for evaluating the final outcomes of programmes being implemented. However, one should bear in mind the specifics of the programme budget in the USA [Miller, Hildreth, Rabin, 2010, p. 341]. In certain periods, the number of budget programmes reached almost 3 thousand, and each of them had its own performance indicators. At the same time, most of the programmes included indicators of direct rather than final outcomes.
Kroll and Moynihan examined multiple waves of US performance management reforms: the Government Performance and Results Act (GPRA) of 1993, the Program Assessment Rating Tool (PART) (2002-2008), and the GPRA Modernization Act (GPRAMA) of 2010 [Kroll, Moynihan, 2021, p. 599]. In line with the findings, the performance management reforms are considered as party tools used by the US president and this fact severely limits their usefulness, as individual civil servants will always obstruct the progress, often depending on which party the president of the country belongs to.
When evaluating the GP financing efficiency, their complex nature should be taken into account [Khan, Hildreth, 2002, p. 79]. In France, the budget law contains indicators that measure the results achieved for each government programme. In departments, an employee in charge of a programme splits its budget into separate elements, which lower-level specialists become responsible for. When assessing the programme implementation, three main criteria are taken into consideration: socioeconomic effect; service quality; management efficiency.
In South Korea, the GP efficiency is assessed using sociological methods according to the following algorithm: 1) considering the information provided by departments on the self-evaluation of programmes; 2) controlling the self-evaluation report in accordance with the requirements for the structure, management system, progress of the programme and the results achieved. A complete analysis of a programme is carried out approximately once every three years.
The study of the Korean experience of obtaining feedback to improve the GP performance (Korean Performance Assessment Rating Tool, or K-PART) found that inside information is more useful when searching for shortcomings in programmes [Min, Oh, Brower, 2021, p. 123].
It is worth bearing in mind the differences in the models of the state structure and the budgeting system in Russia and abroad. The analysis of domestic and foreign
experience in evaluating the efficiency of programme documents has shown that none of the methods successfully applied abroad can be fully implemented in Russia [Fomina, Khodkovskaya, 2017, p. 214]. Russian researchers need to rethink foreign practice based on the regional characteristics of the Russian Federation.
To sum up, the afore-described approaches do not consider the problems and factors that impede the efficiency assessment of GP financing in the Russian Federation's subjects. First and foremost, the problem of the formal application of the target programme method of financing and the lack of coordination between the structure of expenditures and the goals of these programmes remain unresolved.
Setting target indicators, financing GPs and assessing their efficiency in the Russian Federation's subjects
Let us assess the extent to which the composition of the GP activities' financing is related to the achievement of its target indicators using specific examples. Since the government programmes of the Russian Federation's subjects cover the entire spectrum of the regional authorities' activities, they are implemented in the social sphere (education, health care, social welfare, culture), infrastructure development (housing, ecology, roads, utilities), etc.
To deal with the research problem, we will limit the analysis to the sphere of economic development, where implemented government programmes are meant to ensure the growth of industrial production, entrepreneurial activity, the creation of a favourable investment climate, etc. The object of study is Sverdlovsk oblast, where several GPs of the indicated direction are being implemented (Table 1).
Table 1. Sverdlovsk oblast's GPs implemented in the sphere of economic development in 2023
Programme Responsible executor
"Improvement of the socioeconomic policy in the Sverdlovsk oblast until 2027" Ministry of Economy and Territorial Development of the Sverdlovsk oblast
"Improvement of the investment attractiveness of the Sverdlovsk oblast until 2027" Ministry of Investment and Development of the Sverdlovsk oblast
"Development of industry and science in the Sverdlovsk oblast until 2027" Ministry of Industry and Science of the Sverdlovsk oblast
"Development of international and foreign economic relations of the Sverdlovsk oblast until 2027" Ministry of International and Foreign Economic Relations of the Sverdlovsk oblast
The economic policy of the Russian Federation's subjects is heterogeneous due to the peculiarities of the socioeconomic situation and the strategic priorities of a particular region, established in the socioeconomic development strategies. In the region
selected for the study, the Strategy for the socioeconomic development of Sverdlovsk oblast for 2016-2030 (hereinafter referred to as the Strategy of the SED SO)1 is such a document. The Russian Federation's subjects determine the composition of the executive authorities, the list of government programmes they implement, the goalsetting and GP financing independently. Accordingly, the government programmes of different regions cannot be absolutely comparable.
At the same time, target values of key efficiency indicators for the activities of senior officials in the Russian Federation's subjects2 (hereinafter referred to as the SrO indicators) are set annually. In economic development, such indicators are the growth rates of real average monthly wages, real per capita income of the population, the volume of investment in fixed assets, as well as the number of people employed in small and medium-sized businesses.
Certainly, the achievement of these indicators depends on a number of factors, including the general macroeconomic situation in the country, and the activities of federal authorities. At the same time, the SrO indicators help determine the final expected outcomes of GP financing at the regional level. They characterise the core results of the public authorities' activities in the Russian Federation's subjects in a consolidated way. At the regional level, the SrO indicators are decomposed into more specific target indicators established in the socioeconomic development strategy. Thus, the expected outcomes of the implementing the Strategy of the SED SO are:
- increasing real incomes of the population;
- including a region in the top five of the National Rating of Investment Climate;
- increasing gross regional product per capita;
- rising the volume of shipped industrial products;
- boosting investment in fixed assets;
- increasing the share of products of high-tech industries;
- expanding exports.
Along with the 'upper level' target indicators, the strategies for socioeconomic development include the mechanisms for achieving the established target values. The next level of decomposing goal-setting indicators and mechanisms for implementing the economic policy of the region is a plan for implementing this strategy and government programmes, which set financing measures to achieve the strategic priorities in the socioeconomic development of the region.
The analysis of the government programmes in the Sverdlovsk oblast in the sphere of economic development revealed a clearly excessive number of target indicators
1 On the Strategy for the socioeconomic development of Sverdlovsk oblast for 2016-2030: Law of the Sverdlovsk oblast of December 21, 2015 no. 151-OZ (as amended on December 12, 2019). (In Russ.)
2 On efficiency assessment of the senior officials' activities in the Russian Federation's subjects and the executive bodies' activities in the Russian Federation's subjects: Decree of the President of the Russian Federation of February 4, 2021 no. 68. (In Russ.)
included in them (from several dozen to more than 100). It can be explained by the target indicators that decompose the indicators of the SrO and the Strategy of the SED SO. For instance, the GP "Development of industry and science in Sverdlovsk oblast until 2027" includes target indicators "the volume of export of industrial products" and "the volume of shipped products in priority areas of the import substitution", decomposing more general target indicators "total exports" and "total volume of shipped goods of own production".
At the same time, some of the SrO indicators and the Strategy of the SED SO are not included in the economic GPs of Sverdlovsk oblast, and there is a downward trend for certain 'upper-level' target indicators. It does not seem reasonable to include other target indicators in GPs, for example, "presence of the developed sectoral strategy", "the number of industrial entities that received financial support in 2022", "the number of participants in the Lesorub-2018 championship from Sverdlovsk oblast". In fact, instead of characterising the degree of approximation to the expected outcomes of a programme, they duplicate individual minor activities.
In addition, the 'upper-level' and other target indicators within a GP are of the same significance, and this inevitably distorts the results obtained when assessing the efficiency of a programme implementation. In this regard, it is advisable to establish clear requirements for goal-setting and building a system of target indicators according to the principle of hierarchy, that is, according to significance levels.
Most of the funded activities of the GP "Improvement of the socioeconomic policy in Sverdlovsk oblast until 2027" are of an organisational nature: training in project activities, developing a strategy for the socioeconomic development of the Ekaterinburg agglomeration, etc. At the same time, among the areas of its financing (Table 2) there are not any mechanisms for achieving SrO indicators for the growth of real average monthly wages and average per capita cash income, as well as other expected results of the Strategy of the SED SO.
Table 3 shows the target values of indicators of the GP "Improvement of the socioeconomic policy... ", established for 2023.
Having grouped the target indicators, we found that their most numerous part actually duplicates the current activities of the responsible executor of the government programme - the Ministry of Economy and Territorial Development of Sverdlovsk Oblast ("forecast for...", "implementing the Plan...", "submitting an annual... report" and etc.). A number of other indicators, such as "the volume of overdue accounts payable on obligations of the regional budget" and "the share of judicial acts ...", are clearly formal. At the same time, the essential indicators of the development of the region's economy are either not included in the GP or do not have sufficient financing that ensure the achievement of the stated goals.
Table 2. Financing areas of the GP "Improvement of the socioeconomic policy in the Sverdlovsk oblast until 2027" for 2023
Financing area Financing amount, thousand rubles
Introduction of initiative budgeting mechanisms 50,000.0
Activities for the feasibility study of interregional, regional and intermunicipal infrastructure development projects 14,000.0
Creation of a strategy for the socioeconomic development of Ekaterinburg urban agglomeration 8,000.0
Organisation of a project management course and a certification for participants of the projects 4,691.1
Organisation of credit rating assignment 2,166.0
Grants to encourage municipalities to achieve the best values of performance indicators 1,828.3
Monitoring of the citizens' satisfaction with the quality of state and municipal services 1,720.4
Subsidising the budget of the Ivdel urban district to implement measures for the socioeconomic development of the indigenous peoples of the North (Mansi) 1,344.6
Table 3. Target indicators of the GP "Improvement of the socioeconomic policy in the Sverdlovsk oblast until 2027" for 2023
Target indicators Value, 2023
Target indicators duplicating current activities
Forecast for the socioeconomic development of Sverdlovsk oblast for the medium term Document
Developed strategy for the socioeconomic development of Ekaterinburg urban agglomeration Done
Number of completed research projects on feasibility study of interregional, regional and intermunicipal projects 1
Share of municipalities that sent applications for participation in the regional competitive selection of initiative budgeting projects 55
Share of indicators for evaluating the activities efficiency of senior officials in the Russian Federation's subjects ..., monitoring of which is carried out using the indicators of strategic, programme and planning documents 100
Submitting an annual regulatory impact assessment report Until March 1, 2023
Implementing the Plan for the expertise of normative legal acts in Sverdlovsk oblast 100
Number of developed methods for assessing the participants' competencies in project activities in Sverdlovsk oblast 1
Share of elements (processes) of project activities in Sverdlovsk oblast provided with methodological support 80 or more
Table 3 (concluded)
Target indicators Value, 2023
Share of approved regional project passports out of those to be formed in accordance with the agreements 100
Share of municipalities participating in the implementation of regional and departmental projects (programmes) 77 or more
Achieving a comprehensive programme indicators to support socially oriented non-profit organisations in Sverdlovsk oblast 100
Share of efficiency conclusions on investment projects prepared in a timely manner, at the expense of the regional budget 100
Formal target indicators
Share of executed judicial acts of the arbitration court issued as part of the consideration of insolvency (bankruptcy) cases 100
Share of municipalities implementing programmes to improve the performance of local governments 100
Volume of overdue accounts payable on obligations of the regional budget 0
Target indicators with undetermined impact
Achieving the target indicators for increasing the average wage for certain categories of employees in the public sector, as defined in the Decrees of the President of the Russian Federation of May 7, 2012 100
Maintaining the credit rating of Sverdlovsk oblast BBB
Share of lost tax revenues as a result of tax benefits in the volume of tax revenues of the regional budget Not more than 5
Target indicators without any impact
Ratio of people employed in the economy to workforce 77,0 or more
Level of citizens' satisfaction with the quality of state and municipal services 90 or more
This circumstance indicates that financing (its structure) and expected outcomes (composition of targets) are not properly coordinated. It should be noted that it is the Ministry of Economy and Territorial Development of Sverdlovsk Oblast that determines the method for the formation, implementation and evaluation of the GP efficiency in Sverdlovsk oblast. It would be logical to expect that the document formed by this authority will serve as a model for the GP formation, but at present it is rather an anti-example.
Industry support is a strategic direction for Sverdlovsk oblast development, since the economic growth of the region is largely determined by the rise of industrial production: about one third of GRP is produced by manufacturing and mining enterprises. The main area of financing the GP "Development of industry and science in Sverdlovsk oblast until 2027" (Table 4) is a subsidy to the regional fund for the technological development of industry to provide financial support to enterprises, implement the national project "Labour Productivity" and financially support the activities of the fund.
Table 4. Financing areas of the GP "Development of industry and science in the Sverdlovsk oblast until 2027" for 2023
Financing area Financing amount, thousand rubles
Subsidies to the Fund for the technological development of industry of Sverdlovsk oblast for providing financial support to industrial entities; achievement of the goals of the national project "Labour Productivity"; financial supp^ort of activities 365,256.1
Subsidies to management companies of industrial technology parks in Sverdlovsk oblast 81,432.0
Implementation of measures aimed at the scientific and technological development of the Sverdlovsk oblast 19,490.0
Implementation of the project "Glorify the working man!", organising and holding the competition "The best young employee of the defence industry" in the Sverdlovsk oblast 7,200.0
At the same time, only enterprises that meet the established requirements, for example, in terms of annual revenue, can become participants in the regional priority project devoted to labour productivity. In this regard, 10 organisations are planned to become its participants in 2023. It is clearly not enough to increase labour productivity in Sverdlovsk oblast in general, where more than 10 thousand large and medium-sized industrial enterprises carry out the production activities. Under the conditions of import substitution, the envisaged volume of support for enterprises is also less than necessary. This allows us to conclude that there is not clear coherence in the composition of financing and the expected final outcomes of the government programme under consideration. These elements are separate and loosely related to each other.
Let us consider the financing areas of the GP "Improvement of the investment attractiveness of the Sverdlovsk oblast until 2027" (Table 5). The main financing flow in terms of the SrO indicator "the number of people employed in small and medium-sized businesses" is subsidies to the Sverdlovsk Regional Fund for Entrepreneurship Support to support and develop small and medium-sized businesses (hereinafter referred to as SMEs). The range of support measures provided to small businesses is really demanded and flexible and annually receives stable funding.
A subsidy to ANO Investment Promotion Agency (hereinafter referred to as the Agency) in the total amount of 425.4 million rubles is provided in order to meet the SrO indicator "growth in the volume of investments in fixed assets". It is noteworthy that the organisational and legal form of the recipient of this subsidy (the Agency) and the wide range of tasks it deals with make it difficult to assess the degree to which the spending of these funds corresponds to the region's priority goals in the investment sphere.
Table 5. Financing areas of the GP "Improvement of the investment attractiveness of the Sverdlovsk oblast until 2027" for 2023
Financing area Financing amount, thousand rubles
Subsidy to the autonomous non-profit organisation "Investment Promotion Agency of Sverdlovsk oblast" for attracting investments 425,415.9
Subsidies to the Sverdlovsk regional entrepreneurship support fund for supporting small and medium-sized businesses 260,655.3
Subsidies to the management companies of industrial technology parks in order to repay loans, interest on loans to finance the design and creation of infrastructure facilities for industrial technology parks 143,763.7
Implementing projects in the social entrepreneurship by social enterprises or by small and medium-sized businesses 37,984.9
Subsidy of JSC "Special economic zone "Titanium valley" for the financing costs associated with the performance of work and (or) the provision of services (except for the capital nature) 35,000.0
Maintaining infrastructure facilities of industrial parks in single-industry municipalities 29,517.5
In addition, despite an increase in the volume of funding, annual performance indicators of the Agency in 2019-2022 projects remain unchanged, for instance, the target value for the total number of concluded agreements for the support of investment stays the same (20 agreements). We can state that this government programme also does not have a high degree of interconnection between financing and goalsetting.
As a result of the implementation of the GP "Development of international and foreign economic relations of the Sverdlovsk oblast until 2027" (Table 6), the total exports of Sverdlovsk oblast should increase by 2.74 billion US dollars (from 8.03 to 10.77 billion US dollars) by 2027. This target indicator of the programme is obviously its main expected outcome. At the same time, in 2023, as in previous periods, no funding is provided for activities that significantly affect its achievement.
In 2023, only five programme activities were funded: the provision of two subsidies to the Agency in the total amount of 11 million rubles, including for the promotion of Sverdlovsk oblast's products abroad; the implementation of management training plan; studies to evaluate the implementation efficiency of humanitarian projects; support of compatriots abroad. Athough that more than 90 % of the Sverdlovsk oblast's exports are provided by large enterprises of mechanical engineering, steel industry, the chemical industry and mineral products manufacturers, this programme does not provide for any tangible support for these enterprises in order to significantly increase exports.
Table 6. Financing areas of the GP "Development of international and foreign economic relations of the Sverdlovsk oblast until 2027" for 2023
Financing area Financing amount, thousand rubles
Subsidy to the autonomous non-profit organisation "Investment Promotion Agency of the Sverdlovsk oblast" for promoting products manufactured in the Sverdlovsk oblast in international markets 8,000.0
Subsidy to the autonomous non-profit organisation "Investment Promotion Agency of Sverdlovsk oblast" for organising the promotion of the Sverdlovsk oblast in international organisations 3,000.0
Ensuring implementation of the State plan for the training the managerial personnel for organisations of the national economy of the Russian Federation in Sverdlovsk oblast on the terms of co-financing from the federal budget 2,548.2
Organising studies to evaluate the implementation efficiency of economic and humanitarian projects aimed at supporting compatriots living abroad 500.0
Support for compatriots living abroad 250.0
Thus, there is a clear gap between the expected outcomes and the financing composition of the considered GPs. In fact, these documents represent a set of loosely related areas of spending budget funds that do not contribute to the achievement of the region's strategic priorities. The support for SMEs within the GP "Improvement of the investment attractiveness of the Sverdlovsk oblast until 2027" is the only successful example of the coordinated funding and achieving 'upper-level' target indicators. The system of relevant measures has been built for more than 10 years and annually receives stable funding from the regional and federal budgets. In other cases, the vast majority of GP activities are rather a set of maintenance, but not target programme expenditures.
Further, we will consider how the existing method for assessing the GP implementation efficiency in Sverdlovsk oblast detects the discussed problems related to the lack of consistency in programme financing and goal-setting. This method1 uses three criteria:
1) achieving the established values of the GP target indicators (arithmetic mean of the ratios of the actually achieved values and the planned values of the target indicators for the reporting period);
2) GP financial support (the ratio of the total actual volume of its financing for the reporting period to the planned volume);
3) quality of the GP current management.
1 On approval of the Procedure for the formation and implementation of government programmes in the Sverdlovsk oblast: Decree of the Government of the Sverdlovsk oblast of September 17, 2014 no. 790-PP. (In Russ.)
The last criterion consists of three sub-criteria: prompt adjustment of GPs with the law on the regional budget; posting reports on GP implementation on the Internet; quality and timeliness of reporting on GP implementation. In our opinion, the inclusion of this criterion in the method under consideration is inappropriate. In fact, it represents three rather formal procedural requirements for the activities of the responsible executor and has practically nothing to do with the efficiency of programme implementation. In addition, this criterion has little coefficient of significance.
In this regard, the method used in Sverdlovsk oblast is common method of determining the success of the GP implementation in the Russian Federation's subjects. It consists in comparing the actual and planned levels of target indicators and financing without taking into account their coherence. According to this approach, it is not the efficiency, but the performance of GP financing that is assessed, since only positive results are taken into account, often formal and not in line with the strategic priorities of the socioeconomic development of the region.
Naumova fairly relates the GP financing to "a set of interacting subjects and objects that allows allocating financial resources and integrates financial and management indicators in assessing the performance of GP financing" [Naumova, 2018, p. 8].
Actually, the analysis according to the method under consideration is only a description of successfully implemented measures (according to the plan drawn up by the responsible executor) and the assessment of spending budget funds. At the same time, non-fulfillment of key target indicators may be covered by over-fulfillment of less significant indicators and their redundancy. Target indicators with different content have the same level of significance, which is unacceptable. As a result, the efficiency evaluation positively characterises the overall outcomes of the GP implementation without touching the quality of their planning and the financing efficiency.
It is easy to guess that the implementation efficiency of government programmes is estimated quite high every year. Due to the absence of an objective assessment, the executors of these programmes do not bear any responsibility, the programmes themselves are not substantively corrected, and keep on being financed and implemented in an unchanged way year by year.
Perfecting the GP financing efficiency assessment in the Russian Federation's subjects
In order to improve the assessment of GP financing efficiency of the Russian Federation' subjects, we propose to formulate possible results of evaluating programme financing (Table 7). It will allow distinguishing between the concepts "efficiency" and "performance" according to different scenarios of achieving the goal of financing and the corresponding expenditure of financial resources.
Table 7. Possible results of the GP financing assessment
Optional description Result evaluation (scenarios)
Not achieved 1. Ineffectual
Achieved, the actual costs for achieving the outcome are not estimated 2. Productive
Achieved, actual costs are in line with the planned level 3. Efficient
Achieved, actual costs are lower than planned 4. Highly efficient
Therefore, it is obvious that if the goal is not achieved (scenario 1), it is impossible to speak about neither performance nor efficiency. In scenario 2, the goal is achieved, but the costs are not estimated. This outcome, which does not take into account the resources spent, is determined by "performance". In scenario 3, the outcome corresponds to the planned level and indicates the financing efficiency. And, finally, in scenario 4, the expected outcome achievement is accompanied by resource savings. Economies in the financing plan implementation (which, we note, has already been formed as financially optimal one among other alternatives) indicates a high financing efficiency to achieve results.
Based on the foregoing, we propose to define GP financing efficiency as the degree of minimisation of financial resources used to achieve the planned final outcomes of the GP implementation. This minimisation can be characterised as follows:
1) the degree of correspondence between the actual and planned GP financing (GP financing efficiency), since this financing itself is focused on the efficient achievement of final outcomes, that is, on minimising financial resources compared, for example, with non-programme activities;
2) the minimisation of the planned financing (high efficiency of GP financing), which implies an increase in the efficiency of the already planned as an effective way of spending financial resources.
It is appropriate to cite the opinion of Tambovtsev and Rozhdestvenskaya: "... If we interpret efficiency as a comparative characteristic of options for actions leading to the same result, but differing in costs, it will not be possible to detect differences between it and economies... In this case, efficiency is replaced by economy, which imitates efficiency. The consequence of such a substitution is usually a noticeable drop in the quality of public services and other types of public sector products" [Tambovtsev, Rozhdestvenskaya, 2021, p. 30]. And further: "reducing the efficiency to performance leaves budgetary savings 'overboard' of reforms, and reducing it to economy or use in accordance with the cost estimate ("purpose use") actually leads to a deterioration in the public sector performance" [Ibid., p. 31].
This statement confirms our conclusions about the unacceptability of replacing the assessment of the GP financing efficiency with an assessment of performance that does not take into account costs. At the same time, we cannot agree that efficiency, understood as a reduction in costs while achieving the desired results, is identified with economy. In our opinion, economy itself is characterised by a decrease in the resources used without considering the achievement, and even more so the effective achievement, of the expected outcomes or GP implementation. Thus, if performance evaluates outcomes without taking into account the resources expended, then economy characterises the frugality of the resources expended without taking into account the outcomes obtained. By combining performance and economy, efficiency evaluates the achievement of expected outcomes taking into account the minimisation of the resources involved.
Article 34 of the Budget Code of the Russian Federation does not have a clear definition of efficient budgetary funds spending: achieving the desired outcomes using the smallest amount of funds (economy) and (or) achieving the best outcome using the funds determined by the budget (performance). In the case of GP financing, efficiency can only shift from determining the desired outcomes to saving the financial resources used for this. The reverse direction, or two-way movement, in assessing the financing efficiency creates opportunities for various manipulations in evaluating programme outcomes and, accordingly, poses risks to the fulfillment of the initial tasks of GP developing and the objectivity in determining the degree of GP efficiency.
Further, we identify the types of expenditures that make up the GP financing, depending on their impact on the efficiency of this financing (Table 8).
Table 8. Impact of GP expenditures on its financing efficiency
Type of expenditure Expenditure characteristic Impact
Maintenance of the GP executor's activities Aimed at maintaining current activities of a GP executor (paying wages, logistics, etc.) Low
Maintenance of the execution of the authorities' powers Maintaining execution of state powers by the GP executor Low
One-time expenses Not sufficiently related to GP objectives Medium
Target expenditures Achieving GP objectives High
Project expenditures Costs for implementing a regional project as part of a GP (already stated in the regional project financing) High
The proposed classification of the structural elements of GP financing in the Russian Federation's subjects is based on the presence or absence of their relationship with the goals (planned final results) of these programmes. This classification allows
creating a method for efficiency assessment of GP financing, which correlates the composition of expenditures and the expected final outcomes of the GP implementation and applies the method of expert assessments.
The specified outcomes should be selected from a set of GP target indicators. Next, it is necessary to specify the part ensuring the achievement of these outcomes from the total amount of programme financing. Thus, we select from the total number of diverse and multi-scale target indicators, i.e., the expected final outcomes of the GP implementation, the totality of which actually constitutes its goal. After that, financing is determined, consistent with the achievement of the identified true outcomes of the GP implementation.
On this basis, we can develop a method for assessing the efficiency of GP financing. The novelty of the proposed approach lies in the fact that the subject of assessment is not an array of heterogeneous target indicators and unrelated areas of financing, but selected expected end results that correspond to complemented theoretical ideas about programme financing and the programme (rather than maintenance) costs that ensure their achievement. This approach is especially relevant at the present time, when a great number of low-quality government programmes are being implemented.
Conclusion
The problems and contradictions in GP financing noted by economists are confirmed by the qualitative analysis of the financing structure and expected outcomes of government programmes. Thus, we revealed a critically low level of consistency in goalsetting, resource provision and measures of regional economic policy.
GP goal-setting should become more substantial and qualitative. Thus, the 'upper level' target indicators are required to be decomposed in a more careful way. In order to improve the quality of GP financing, primarily its structure, we believe it important to put a stop to the unreasonable inclusion of maintenance (rather than programme) expenditures and activities in these documents. In this regard, it is necessary to clarify the methodological approaches to the formation of GP projects by tightening the requirements for the composition of their financing and the quality of goal-setting.
Creating a method for assessing the GP financing efficiency requires to ensure the availability of concrete measurable expected results (instead of formal general goals) and the possibility of calculating the economy in financial resources when goals are achieved. The preservation of the currently used method for evaluating the performance keeps the quality of GP low and, as a result, leads to rather poor outcomes of spending budget funds.
Resolving the research problem will make it possible to spend these funds more rationally and switch from achieving outcomes (performance) without taking into
account costs to efficiency of the GP financing in the Russian Federation's subjects. This, in its turn, will allow directing the released funds to additional social activities, improve the results of socioeconomic development, as well as the quality of life.
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Information about the authors
Elena G. Knyazeva, Dr. Sc. (Econ.), Vice-Rector for Further Education and Career
Guidance Counselling, Prof. of Finance, Money Circulation and Credit Dept. Ural State
University of Economics, Ekaterinburg, Russia. E-mail: keg55@list.ru
Kirill N. Samkov, Applicant for Candidate Degree of Finance, Money Circulation and
Credit Dept. Ural State University of Economics, Ekaterinburg, Russia. E-mail: vokmas@
yandex.ru
© Knyazeva E. G., Samkov K. N., 2023
