Kudrin in Duma: Russian Accounts Chamber’s key performance indicators

The head of the agency about risks of the loan bubble, “delicate task” in the fight against corruption and violations in government procurement equal to 722 billion rubles

Aleksey Kudrin reported on the performance of the Accounts Chamber in 2018 in the State Duma on 9 July — the politician headed the agency last May. In his report, Kudrin named the critical line in Russians’ consumer lending, provided data on corruption, colossal costs in government procurement — it accounts for over a third of all violations — and talked about the problem of a big number of abandoned construction sites. Realnoe Vremya has collected the top 10 important results and facts about the chamber’s performance in 2018.

1. Check on achievement of national goals

Giving a speech in front of deputies, Aleksey Kudrin noted that the country’s new development goals set by the president made his agency focus on the check on the implementation of national projects and correct the strategy of the Accounts Chamber. According to him, the crucial task is to objectively analyse tendencies for what is happening in the country.

“Our role is not only to criticise, grab one’s arm, what the controlling body should do from time to time but also offer certain solutions that can help improve the situation,” the head of the Accounts Chamber explained.

Development of strategic audit, achievement of national goals are the second task. Kudrin noted that the chamber had had a new auditor in the field of strategic audit and a related department appeared. The achievement of national goals is going to be regularly monitored in the next six years, and the indicators of national projects can be tracked on the website of the chamber from February, including the latest data.

Kudrin added that they still had a lot to do to increase the publicity, openness, accountability regarding processes and government decisions that are made: “It also refers to the openness, fullness of data when making a decision, better feedback, public control”. The Accounts Chamber, in particular, is already publishing results of audits: 61 reports have been published for six months in 2019, 67 reports have been published last year.

2. Ministry’s transparency rankings

Kudrin complained about insufficient data update and its fullness. “We analysed the quality of agencies’ information systems, it showed that they are quite weak. It is not always possible to make managerial decisions on the basis of these information systems,” he claimed.

In Government Transparency report delivered at 2019 SPIEF and that, as Kudrin admitted, caused a great outcry has ministries and agencies’ transparency rankings. Several test requests of citizens were needed for this purpose.

3. Fight against corruption

“The task is delicate,” Kudrin briefly characterised this aspect and said that an agreement on closer cooperation was signed the previous week with the Prosecutor General’s Office.

Kudrin thanked the deputies for correcting the law on duties of the chamber: “This will help to analyse the activity of state corporations’ subsidiaries,” he went back to the aspect of corruption.

4. Violations equal to 722 billion rubles

According to the head of the Accounts Chamber, the number of violations during the audits doesn’t have to grow: the chamber’s task to improve regulations to reduce the number of violations and, as Kudrin stressed, pay more attention to prevention.

In the last year, the agency has had 419 control and expert analytics for 10,000 facilities whose violations totalled 722bn rubles. This is a consequence of the change of regulations and orders of the Ministry of Finance: “The number of our violations is reducing because according to the new rules we don’t consider all the violations found during the inspection in accounting, specification of authenticity and the inspections during this period. It is even good that we have had fewer violations,” he concluded and reminded the situation in 2017 at Roscosmos “where over 800 billion were immediately considered as violations”.

5. After audit of 40 criminal cases

Last year, the Accounts Chamber sent 408 proposals and just 28 recommendations, as the number of proposals submitted on time increased.

Chairwoman of the State Duma’s Committee for Control and Regulation Olga Savastyanova, Kudrin’s co-speaker, specified the indicators after her colleague’s speech: “The number of proposals submitted on time increased 1,6 times, the number of proposals that weren’t submitted on time reduced 2,5 times.”

Inspectors opened 81 cases on administrative violations, 41 public workers were held accountable, over 80 million fines were charged. There were 492 disciplinary actions, 21 people were fired. 120 materials were sent to law enforcement agencies, 99 proposals for them were submitted to the prosecutor’s office, consequently, 40 criminal cases opened, which is more than a year ago.

“We should ask if it is good or bad, the result is positive or problematic,” Savastyanova noted. “Neither I nor our committee can answer this question because <…> we don’t see a connection between quantitative and digital numbers and effectiveness, the results of audits and experts’ analytic research.”

6. Government procurement accounts for over third of violations

A significant share — 38% — of violations that were detected are in government and municipal procurement, it is almost 300 billion rubles. Moreover, the violations in this sphere were assessed at 118bn rubles last year.

“We began to detect more violations in procurement, I think it is one of the key problems today. We haven’t so far learnt how to prevent these violations,” Kudrin concluded.

7. Over 100bn rubles frozen on 4,000 abandoned construction sites

Analysis of construction of abandoned sites is going to be done across the country this year. It will become one of the priorities, Kudrin stressed. The problem is more characteristic of North Caucasus.

“There have been found over 4,000 abandoned construction sites, investments of over 100bn rubles “stay idle”. The construction of 1,180 sites began over eight years ago.”

There can be found a board with all abandoned facilities in all the regions on the chamber’s website. Kudrin stressed that “it is necessary to increase responsibility for construction of a facility and the frozen money spent on it”.

While abandoned construction sites stay idle, 168,000 orphans can’t see their home. The delay in the queue in some cases exceeds 10 years, Kudrin said indignantly. Since a region does not always have money, one can get a house only by court’s decision, this changes the queue for houses. To solve these problems, systematic measures are needed “that have been offered to the government many times” and have been discussed by the government.

The rescue system of 112 out of service is a surprising moment mentioned in the report. “During the inspections, the system hadn’t been fully launched in all the regions, it didn’t allow to send emergency messages to the services 01, 02, 03 automatically in 17 regions,” Kudrin enumerated. The government is polishing the system on the president’s instruction, he added.

Carelessness when preparing explanatory notes to a bill was a frequent problem. It turned out in corresponding analysis that 75% of bills introduced to the State Duma say that no additional money was presupposed. In the end, often this isn’t true: “Real costs often come about only after the adopting in the first reading, as a rule, it is a second reading.”

A big number of justifications of the money were like a non-committal reply, and only 5% have serious justifications: “Justifications should improve, there must be accountability for a low-quality preparation of bills.”

8. Reduction in regions’ subsidies on national projects

Then Kudrin switched to the crucial task — the implementation of national projects. “We see how hard this process begins, we’ve already noted the difficulty in managing this system of national projects.” The state programmes that national projects included aren’t so effective at the moment, and we should be talking about improving the quality of state programmes through which they are implemented.” A lot of attention will be paid to it this year and next year, the functionary promised.

Explaining this aspect, Kudrin couldn’t help but note a reduction in financial possibilities to implement national projects: “Subsidies (44,9%) for equilibrium reduced, transfers between budgets increased. It turned out that the regions’ resources they spend reduced. <…> Such a reduction in the independence impedes the regions’ performance from being flexible and not always brings to effectiveness, sometimes it even brings to distorted motivation”.

Regions don't always meet their obligations in national projects: every project must have about 40-50 agreements with federal agencies, it is more than 4,000 agreements in service:

“Regions sometimes assume obligations that aren’t within their power, we should very carefully see this aspect. As a result of the analysis, it turned out that only 11 regions considered it was possible to achieve the goals they set, 15 consider the indicators unattainable, 38 note the risks of not achieving them. We don’t say that the goals are unattainable, we say that measures that would make them attainable have to be taken.”

Deputies paid most of the attention to this clause. For instance, Nikolay Arefyev from the CPRF asked if the chamber controlled the implementation of national projects, what’s the reason for their unsatisfactory implementation. “Some project began operating in October, some did on 1 January. Specifications to some compositions of national projects are still added. The programme of their implementation is also specified. The percentage of costs on national projects catches up with the total percentage of all costs of the federation budget by the middle of the year. And there won’t be any questions by the end of the year.

Kudrin noted that regions should be more independent when implementing national projects, at the moment this factor is reducing: “A big focus has to be made on developing human capital and support of health care. The share of GDP costs for these purposes hasn’t changed in comparison with the previous years, I would like it to increase.”

9. More than half of entrepreneurs consider business a dangerous work

One of the deputies Oleg Nikolayev asked the speaker to explain if the national projects of entrepreneurship development would change the assessment of the business climate in the country. Kudrin gave an affirmative response to the question but asked not to forget other moments, for instance, the work of law enforcement agencies:

“More than half of entrepreneurs consider running a business dangerous and the work of corresponding law enforcement agencies was insufficiently fair and transparent — these issues should be solved outside the project on SME support. Only such an improvement in the investment climate will boost the youth’s trust in this kind of activity. Only 6% of youngsters want or are ready to start a business, 2% start it.”

Such indicators aren't enough for the country that wants a breakthrough in private initiatives, investments which will become a basis for economic growth, Kudrin claimed and gave an example of Indonesia with over 60%: «We should improve the attitude to entrepreneurship but also increase the security of entrepreneurship, simplify procedures, lower the administrative load on businesses."

10. No credit bubble but with risks

Consumer lending hasn’t reached the state of a bubble yet, the head of the Accounts Chamber claimed in answer to deputy Danil Shilkov’s question about the evaluation of lending growth pace as critical by the Central Bank.

Growth was 20% last year, it is a very big number, but consumer lending has its boundaries linked with objective circumstances, a rise in real incomes and financial literacy, Kudrin went on: “This is linked not only with refinancing or the rise in debt load — this proves both the expansion of the number of those people who take out loans and those who haven’t taken out loans.”

Apart from increasing financial literacy, he noted the negative side of the trend — some citizens have to borrow from banks due to a worse quality of life and financial state. These borrowings aren’t always expected to be given back, and here we should be very careful.

He characterised the debate of the Central Bank and the Ministry of Economic Development as the initiation of additional analysis: “The debate that’s taking place now is likely to show us the truth because the critical line hasn’t been crossed yet, but it requires constant analysis. If both this year and will next year it grows by about 20%, we will get closer to the critical line.” We can’t say for sure now if it is good or bad, but we haven’t blown up a bubble. One should think twice before taking out a loan.”

By Leysan Nabiyeva. Photo: duma.gov.ru

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