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President of Russia Vladimir Putin: Ms Golikova, we have discussed matters concerning effective budget spending on many occasions. You have briefed me on various aspects of these issues too, and we agreed that you would conduct a comprehensive analysis of the situation.

Please, go ahead.

President of the Accounts Chamber Tatyana Golikova: Mr President, following your instruction, we made this analysis and I sent you the report. I am working closely on these matters with the Finance Ministry, which, as you know, is currently preparing the budget for 2016–2018.

Given the current financial constraints we face, finding new internal reserves and making our spending more effective are the paramount tasks. In this context, there are at least three issues I want to highlight. In reality, the range of issues is broader, but I highlight these three in particular because they are more profitable in terms of the potential internal reserves we can free up.

First, a law came into force several years ago on procedures for financing budget-funded institutions working on the basis of state-mandated tasks. Budget-funded institutions exist to provide services to the public, and we in turn must make the necessary financing available based on the relevant state commitments.

Looking at the situation as it stood on January 1, 2015, we had a total of 208.6 billion rubles in unused funds that had built up from earlier allocated financing. The amount of these unused remainders increased by more than 48 percent in 2014. This is a large amount of money. If we look at the breakdown by sector, we see that slightly more than half of this money was for the social sector and science, and the rest was for industry and agriculture.

What does this mean? It could point to ineffective planning and lack of supervision from the relevant ministries for the institutions under their responsibility. It could also be a sign of ineffective management within these institutions themselves. The services they are there to provide, after all, are services for the public.

What we end up with is a situation in which we earmark funds, and increase our expectations, but the actual services are not provided. In this respect, we proposed that you instruct our colleagues accordingly to take a thorough look into this situation. We are not talking here about taking these funds away again, but about maybe not allocating further funds, or about channelling other funds into other more important tasks.

 The next subject is even more sensitive and we have also discussed it on many past occasions.

Vladimir Putin: Accounts receivable and accounts payable…

Tatyana Golikova: Accounts receivable. We are right up against this problem now because the increase in this kind of debt goes beyond the reasonable limits. Our budget spending does not increase at such a pace from year to year, but this debt is increasing at a rate of 28.7 percent from one year to the next.

This means that we made advance payments but did not get the work we were paying for – facilities brought into operation, for example, or purchased equipment. In money terms, this comes to 3.8 trillion rubles.

Vladimir Putin: I recall you gave me a figure of 2.2 trillion.

Tatyana Golikova: Yes, the figure is the overall total and it breaks down into revenue and costs. Revenue accounts for 1.1 trillion rubles in debt, and the rest is costs. But the problem is that this figure is growing all the time and this process has become never-ending.

As far as revenue goes, of the 1.1 trillion rubles in revenue debt, nearly 750 billion is debts for fines for non-compliance with currency laws. This is Rosfinnadzor’s [Russian financial monitoring agency] responsibility. Unfortunately, this debt is growing. This situation is linked to two problems. The first is problems with the legislation itself in terms of imposing fines, and second is the existence of fly-by-night companies.

As a result, debts are rising, and so we propose sorting out both aspects of this issue.

Another revenue-related issue is the bailiff service. Debts on their fees are also on the increase. This debt comes to 90 billion rubles and the increase in 2014 was slightly more than 31 billion. The biggest problem with this kind of debt though is the fines for non-compliance with this or that law. Non-payment of fines to the budget discredits the decision-making process in these areas and indicates an irresponsible attitude towards enforcing this country’s laws.

As far as costs, the figure is a large one and advances make up 95.6 percent of the total. These advances are a problem that has built up over the years now and they are still rising at a rate of 600 billion rubles a year. I think that sorting out these debts is an absolute priority because the current situation is that advances are not getting settled and new money continues to be allocated.

This chain keeps on moving and moving, but rather than getting the actual facilities we have paid for, we are getting only higher demands for money to cover increased construction costs. I think this is a serious issue that we must address.

Finally, there is the matter of public procurement. There has been some improvement in the situation here, but nonetheless, a selective check of ministries and agencies alone in 2014 revealed violations worth a total of 39 billion rubles. We did not carry out thorough checks of these institutions but only checked the main disbursers of funds.

The violations are about non-compliance with the law. For example, the initial maximum cost of a contract is not set, contracts are revised, deadlines are shifted, additional agreements are signed, and so on. If we were to conduct deep-reaching thorough checks of these institutions, I think we would find a lot more potential money to save than the 39 billion that we have noted for now.

In today’s situation, I think this kind of internal work on the budget is even more important than our usual talk about increasing this and increasing that. In today’s conditions, we need to go as slowly as we can in spending the reserves that we built up over the previous years.

Vladimir Putin: I agree. I realise that people justify the debt situation and the increase in advance payments and so on by the lack of cheap long-term credit, but we need to monitor, of course, the effects produced by the instruments the state authorities use, and we need to examine this whole situation very carefully.

I want to take a closer look at the details, and then we will discuss the steps we should take to change this situation.

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