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President of Russia Vladimir Putin: Let us begin with the Accounts Chamber’s performance.

Accounts Chamber Chairman Alexei Kudrin: Mr President, two events took place at the Accounts Chamber in the past month. First, we reported on our performance in 2021 at the Federation Council and the State Duma. Second, we have recently submitted our findings on implementing the 2021 budget to the State Duma. This substantial work was aimed at screening all the main managers of budgetary funding. In all, we audited over 90 managers in this category, and we completed this work in six, rather than nine, months for the first time. From now on, we can assess the Government’s report in summer, during the spring session. Consequently, we are noting drawbacks and providing feedback that can be used to draft the budget for the following year, which will be submitted by the Government in September.

Speaking of our performance, members of the Federation Council and the State Duma noted that the quality of our audits has improved; they also commented on the analytical aspects of our audits and achievements in improving their methodology. Actually, we devote more attention to the fact-finding aspects and argumentation in our audits.

I can say right away that we exposed violations worth 1.5 trillion rubles last year alone; this concerns all our work and all audits. This mostly includes accounting violations, those linked with the misuse of funding and the violation of procurement proceedings. Speaking of procurement, this mostly implies efforts to calculate minimal and maximum procurement prices.

We have now finished assessing the budget, and, of course, we noted the Government’s truthful and transparent report. At the same time, we exposed violations worth 676 billion rubles, mostly accounting violations. Most of the violations were corrected during our audit because it is very important that every expenditure be recorded in the relevant item. Quite often, this includes the registration of properties and newly completed buildings. This registration procedure may be delayed by months and even years, and we noted these delays. We often remarked that yet unregistered buildings were being operated.

But I would like to note that the Government has executed 97.5 percent of its budget – the highest percentage of spending in five years – even with the 2 trillion rubles added during the year to finance anti-crisis measures. As for the balance of accounts, the unexecuted expenditures, we have calculated at 645 billion – as a reminder, last year, it was 1 trillion. The remaining 645 billion mostly account for already secured contracts with payments to be made next year. There are certain unused funds, so far unaccounted for by any contract. Nevertheless, there is a positive trend to reduce this kind of unused balances.

You have instructed us to assess the effectiveness of the national projects. The national projects are implemented through state programmes. The budget is structured by state programmes, so the quality of state programmes, in fact, confirms the quality of public administration. Every penny should be spent for a purpose and towards an objective. Therefore, we do not just audit the expenditures; we make sure that the established state programme targets are achieved. We proposed to the Government and the Ministry of Economic Development an innovative way to assess state programmes, to enhance the assessment of their efficacy in order to subsequently make decisions on their adjustment to make them more effective.

For example, we noted that a significant part of the 1,500 targets set for all state programs are technical indicators. Only 22 percent of those targets are high-level indicators that show real results. The rest largely sound like “the number of entities receiving support.” So, they received state support, and then what? Or the number of events held – this does not confirm any result either. Therefore, we required that programmes be more result-oriented. And the figures indicating final results should grow. For example, 50 percent of a programme indicators are planned with dynamics close to zero – this means they do not grow. The same result is achieved from year to year, no increase. We also pointed this out.

The number of unmet targets is decreasing; they do not exceed 20 percent, which constitutes good progress. Nevertheless, these 20 percent indicate underachievement in state programmes. However, I would like to note the most successful programmes: the agricultural development programme, the transport system development, nuclear engineering, and the Accessible Environment programme. We believe they are well-balanced, with good dynamics, the right final indicators, have fewer purely technical targets, and are better managed. The programme to develop space activities is, on the contrary, among those where we found shortcomings.

Last year, the Government established a Reserve Fund, money that it can spend without changing the law. This is why we are particularly attentive to the expenses that the Government distributes within its authority without changing the law. Last year, this spending reached 4 trillion. The Reserve Fund is large now because of the need to respond promptly to the current situation. As a rule, these funds go for social support, anti-COVID measures, to responding to the consequences of emergencies and support for businesses in a crisis. I must say that everything is quite well defined, but there are still some minor violations that need attention.

Maybe it is a good idea to finish my report by saying that in the past two years, when COVID broke out and we started re-adjusting our national projects, spending on the regions went up 1.5 times and more, sometimes even doubling. This funding for the regions reached 3.7 trillion rubles in 2020 and 3.6 trillion rubles in 2021. This is enormous support for the regions.

At the same time, it appears that all these expenses are targeted, they seem to be ‘colour coded’. There are 347 subsidies like this, or to be more precise, targeted inter-budgetary transfers (this number increased from 197 to 347); there is an agreement for each one with every region or with most regions. We should note that now, a region’s independence is decreasing because of the increase in targeted support. Moreover, a given region must add its own resources, which are limited, to the funds received.

Vladimir Putin: In terms of our ultimate goals, maybe this makes some sense?

Alexei Kudrin: We are drawing attention to the need to balance this out a bit. While before, a region was authorised to spend about 50 percent of all support, now it is 28 percent.

Vladimir Putin: But the regions’ opportunities are expanding and their revenues are also growing.

Alexei Kudrin: Yes, their revenues are growing, and this is fair. But we are just saying, okay, we see the opportunities in keeping these expenses targeted, but maybe several subsidies (one state programme provides for three or four of them) can be consolidated, in which case a region will have to reach higher final figures. Incidentally, the State Council Commission on Inter-Budgetary Relations also suggests moving in this direction.

So, we believe there is an opportunity for consolidation. This would also be a chance to increase non-targeted resources a bit. This would allow the governors to respond better to the problems that arise in their regions but that are not always visible from the top.

In conclusion, I would, perhaps, like to mention several audits that were important last year. The Government, as a rule, responded to them and took into account our recommendations. Generally speaking, producing recommendations has become permanent practice for the Accounts Chamber. We give recommendations after each serious audit, and we list the opportunities we see for improving the effectiveness of some spending in a systematic way. There have been some 2000 recommendations over the last three years, and the Government has implemented approximately half of them. Thus, 503 of our recommendations were implemented last year. In other words, there is ongoing work with the Government to improve the entire system.

For example, we conducted a large-scale review on reforestation. Unfortunately, reforestation here lags behind use and logging. Or take, for example, maternity capital. After collecting maternity capital, people are often unaware that they are entitled to adjustment benefits, which occasionally are remitted with a delay, and that they have several thousand, 20,000 or even 30,000 rubles in their bank accounts. We have found about 4.7 billion rubles that people knew nothing about and which lay on the shelf collecting dust. But now, this has been paid out.

Another example is the State Information System in the housing and utilities sector and the Unified State Information System for the social security sector. The former should make it easier for people to apply for documentation or find out about the economic state of their residential building. The latter would expedite the provision of benefits or other social payments.

Of course, we have found certain errors in terms of maintaining, updating and inputting information. This decreases the efficiency of these systems, particularly the State Information System in the housing and utilities sector, as they cannot be used in managerial decision-making as much. Relevant recommendations have been issued. Generally, 67 government agencies use 630 state information systems, and maintaining them in a current, efficient state is one of our self-appointed missions.

We have audited the state of the efforts in the fight against the HIV infection, issued recommendations, and the Government has responded. We are investigating the state of affairs with housing for young orphans; there are still 280,000 orphans, who have not yet been provided with housing in a reasonable time. Last autumn, I reported to you on the fight against poverty and offered a number of proposals.

We worked with the Government, and the proposals for targeted benefits for families with children aged from 8 to 17 are very timely measures. This year, given the problems in the economy, this will help the potentially destitute considerably, or even reduce the number of these people in this country.

In conclusion, I would like to say that we, as I have said, are improving our analytical methods to see clearly whether the measures used by the Government have resulted in an improvement or if it is just a coincidence of some other trends in the economy. Differentiating the factors in any event in a stricter way is the serious work we are doing now. We use big data analysis and mathematical modelling. In general, we are making the Accounts Chamber’s work more substantiated or more evidence-based.

Vladimir Putin: Fine. Thank you very much.