Enhancing Budget Literacy for Budget Openness in Russia

1. Budget Literacy in the Context of Improving Budget Openness in the Russian Federation S.V. ROMANOV, DIRECTOR DEPARTMENT FOR BUDGETING METHODOLOGY AND FINANCIAL REPORTING IN THE PUBLIC SECTOR

2. Budget Information Management System • Forming skills to enable public utilization of budget information: • Proactive Budgeting (PAB) Development Program for Subjects of the Russian Federation • PAB rating methodology for subjects of the Russian Federation • Promotion of various PAB practices in the subjects and municipalities III. Public Engagement • Training citizens to understand budget information: • - National Mid-term Budget Literacy Enhancing Program • - Budget Literacy Learning Package for senior high school students ; materials for other target groups of the population • Integrating budget literacy elements in proactive budgeting and fiscal literacy II. Budget Literacy • Establishing requirements, standards and methodologies for ensuring budget openness at all levels of Russia’s budgetary system: • - Improving budget data openness in the Russian Federation based on new international requirements and own experience • - Measuring the budget data openness • Methodology for the citizens’ budget quality assurance • Collecting and disseminating best practices in the area of budget openness I. Openness of the information

3. I. Openness of Information Russia’s Position in the International Practice of Budget Openness Over the past 10 years Russia has made significant achievements in enhancing budget openness including: Comparative Open Budget Index rating of countries in the region • Unified Budgetary System Portal of the Russian Federation; • Program budgeting as a tool of openness; • Forming current statistics on public finance management; • Review of and compliance with requirements and recommendations of international organizations (citizens’ budget, mid-year review, etc.); • Building a set of incentives for improving budget data openness at the regional level. Global Average Azerbaijan Outcomes as at the end of the period: - Russia ranks 11th among 102 countries as regards the Open Budget Index; - IMF acknowledges that over the past 15 years Russia has made a ‘leap’ in ensuring fiscal transparency; - Forming openly accessible up-to-date budget data sets including such sets provided in a format clear for citizens.

4. I. Openness of Information Current Challenges for Russia in the Area of Budget Data Openness Lack of citizens’ skills to apply open budget data in practice. Reduced novelty (compared to 2013) of enhancing budget openness as perceived by regional and municipal authorities (the need for regular efforts in this area is perceived as “extra workload”). Lack of legislative consolidation of a number of issues in the area of budget openness. Insufficient knowledge and skills of regional and municipal officials in this area. Underdeveloped institutions for engaging citizens in public finance management. Enhanced requirements of international organizations regarding public engagement (or taking citizens’ opinions into account) in budgeting (number of questions in the IBP Questionnaire increased from 5 to 17).

5. I. Openness of Information Building Budgets in a Form Clear for Citizens: Evolution of the Methodology Planned: 1. Russia’s Ministry of Finance’s Decree ‘On Adoption of Guidelines for Fundamental Principles of the Federal Law on the Federal Budget for the Next Fiscal Year and the Planning Period in the format of Citizens’ Budget’; 2. Updated Guidelines for Subjects of the Russian Federation and Municipalities (introduction of amendments into MoF’s Decree No. 145n). 2017 Procedures of Interaction between the Ministry of Finance of the Russian Federation and Fiscal Bodies of Subjects of the Russian Federation in Preparing the Annual Report on Best Practices of Developing Citizens’ Budgets in the Subjects of the Russian Federation and Municipalities. 2016 Order No 145n of the MoF of Russia, dated September 22, 2015“On Adoption of Guidelines for the Presentation of Regional and Local Budgets of the Russian Federation and Budget Execution Reports in a Form Understandable for Citizens”. 2015 • Procedures for Annual Formulation of Fundamental Provisions of the Federal Law on the Federal Budget for the Next Fiscal Year and Planning Period in the Citizens Budget Format. 2014 Order No 86n of the MoF of Russia, Order No. 357 of the Ministry of Regional Development of Russia and Order No. 468 of the Ministry of Economic Development of Russia, dated August 22, 2013“On Adoption of Guidelines for the Presentation of Regional and Local Budgets of the Russian Federation and Budget Execution Reports in a Form Understandable for Citizens”. 2013 The methodology did not exist before 2013.

6. I. Openness of Information Set of Incentives to Produce and Publish Citizens Budgets • Open Budget Indexcalculated by the International Budget Partnership • Monitoring and Evaluation of the regional finance management quality carried out by the MoF of Russia pursuant to Order No. 552 dated December 3, 2010 • Open budget data ranking of the Subjects of the Russian Federation produced by the Research Institute of Finance (NIFI) on commission from the MoF of Russia • Annual Report on Best Practices of Developing Citizens’ Budgets in the Subjects of the Russian Federation and Municipalities • Based on the Procedures of Interaction between the Ministry of Finance of the Russian Federation and Fiscal Bodies of Subjects of the Russian Federation in Preparing the Annual Report on Best Practices of Developing Citizens Budgets in the Subjects of the Russian Federation and Municipalitiesна • Contest of Ideas pertaining to Citizens Budgets, held by the University of Finance among corporate entities • Similar initiatives of regional financial authorities in relation to municipalities

7. I. Openness of Information Outcomes at the Federal Level The Citizens Budget characterizes the Law on Budget in a most comprehensive way: It includes the structure of revenues and expenditures broken down by function presented in a graphically friendly fashion. It includes information on reported and planned national program key indicator values in connection with their funding amounts. It includes information for over 20 target social groups of population. It highlights the RF Government’s priority projects with specific expenditures being as deeply detailed as possible. It characterizes inter-budgetrelations with regions and select measures implemented in municipalities. It includes information on the Government’s efforts aimed at improving the budget expenditure efficiency.

8. I. Openness of Information The new Order will cover three stages of the budget process • “…before October 1 of the current fiscal year but no later than two weeks after the submission of the draft Federal Law on the Federal Budget to the State Duma” Phase 1 Phase 2 Phase 3 Budget Execution Budget Preparation Budget Adoption • “…after the adoption of the Federal Law on the Execution of the Federal Budget for the next Fiscal Year but no later than three months after its official publication” • “…in parallel with official publication of the Federal Law on the Federal Budget for the next fiscal year and planning period “ • The Citizens Budget is produced for each of the three phases of the budget process, i.e. : • – drafting and scrutiny of the Federal Budget; • – adoption of the Federal Budget; • – execution of the Federal Budget. • Brief versions of the citizens budget are produced for the preparation and execution phases. • A comprehensive version of the citizens budget is produced for the budget adoption phase.

9. I. Openness of Information Annual Report on Best Practices of Developing Citizens’ Budgets in the Subjects of the Russian Federation and Municipalities[1] (has been developed by the MoF of Russia since2013) • The Report’s Main Objectives: • Encourage governments of the subjects of the Russian Federation to implement measures aimed at improving budget data openness (the report is annually presented at the Governmental Commission for the Coordination of the Open Government Activity and distributed to the heads of the regions together with the Federal Citizens Budget”); • Dissemination of Citizens Budget best practices among regions and municipalities (In addition to being posted on the MoF’s website the Report is also published on the websites of regional fiscal authorities); • Identifying areas of further development for the joint MoF – Open Government Project ‘Citizens Budget’. In 2017, the Report will be focused on best practices of proactive budgeting in the subjects of the Russian Federation, their regulation, and organizing interaction with municipalities on the issues of openness.

10. I. Openness of Information Report on Best Practices of Developing Citizens’ Budgets in the Subjects of the Russian Federation and Municipalities[2] Criteria for the evaluation of budget and budgetary system data presentation • 1. Coverage of budget process phases • 2. General specifications of the budget • 3. Regional budget expenditures within the framework of • national programs of the subjects of the Russian Federation • 4. Data on expenditure toward implementation of the • Presidential Executive Orders of May 7, 2012 • 5. Presenting information distributed by target groups • 6. Data on expenditures for socially significant projects • 7. Clarity of budget information FORM 1 • 8. Budget data visualization • 9. Dissemination of budget information • 10. Engagement with citizens in the course of budget preparation and execution • 11. Interaction (guidance and support)with the local self-government bodies in preparing the citizens budget NEW! • Implementing proactive budgeting programs FORM 2

11. I. Openness of Information Report on Best Practices of Developing Citizens’ Budgets in the Subjects of the Russian Federation and Municipalities[3] Report Preparation Stages: On May 31, 2017, the MoF of Russia sent a request to fiscal authorities of the subjects of the Russian Federation to provide materials on the practice of producing and publishing citizens budgets as well as of implementing proactive budgeting practices; No later than June 30 of the current year, the fiscal authorities of the subjects of the Russian Federation are to provide MoF of Russia with information on their experience of producing and publishing citizens budgets in the subjects of the Russian Federation (as well as information on such experience of municipalities, if available) in the form of answers to the questions of the request for information; No later than August 30 of the current year MoF of Russia posts the finalized Report on its official website and recommends the fiscal authorities of the subjects of the Russian Federation to post it too. Composition of the Request for Information:

12. I. Openness of Information Ranking of the Subjects of the Russian Federation as Regards their Budget Data Openness Level Since 2015, the ranking of the subjects of the Russian Federation is produced by the MoF’s Research Institute of Finance. Ranking Data on the Budget Data Openness Level in the Subjects of the Russian Federation in 2016 The set of new questions to be integrated into the evaluation methodology will include questions aimed at evaluating measures to improve public budget literacy that are to be developed in the course of subsequent cycles.

13. Project ‘Budget Literacy for Senior High School Students’ • II. Budget Literacy • Budget Literacy is the ability to read, decipher and understand budgetary information. • The Goalof improving the budget literacy is to make a considerable segment of public take a responsible civic stance through understanding functions and objectives of the state budget and their rights and responsibilities in reference to the budget. • The Russian project is unique and unparalleled and may be used as a model for other countries. • The materials already developed may be used both within the framework of a separate course, and for purposes of proactive budgeting and fiscal literacy.

14. II. Budget Literacy Medium-Term Public Budget Literacy Improvement Program in the Russian Federation • The Programwill include: • Detailed description of organizational forms and methods for the education of various target audiences; • Functions of all executing agencies and participants engaged in its implementation; • Detailed implementation plan with check dates (Roadmap). • A distinctive feature of the Program will be availability of well-developed measures for incorporating budget literacy into simultaneously implemented projects of the Russian Government and supreme executive authorities of the subjects of the Russian Federation in order to achieve synergy and expand the audience, as well as to identify and utilize new opportunities of promoting initiatives related to budget and budget literacy. • In the course of preparing the Program, performance indicators for each program activity must be developed.

15. II. Budget Literacy Building a System of Informational Support to Activities Aimed at Improving Budget Literacy of the Population Stage I Create (on the basis of the NIFI’s official website) a National Budget Literacy Portaldesigned to establish an Internet community of teachers, trainers and mentors working in the area of budget literacy, which should incorporate the following sections: news, learning packages, project documents, outcomes of piloting in the regions, and knowledge bases (library). (deadline – December 2017) Stage II Establish a Center for Budget Literacy Improving Competences in Russia that would coordinate activities aimed at improving budget literacy of select population groups, promote budget literacy concepts in the regions, and promote public participation in implementing proactive budgeting projects. (deadline - 2018)

16. III. Public Engagement in Budgeting Proactive Budgeting Implementation Effects • ECONOMIC • SOCIAL • Building loyal citizenship • Improved effectiveness of budgetary expenditures • Better engagement of citizens in budgeting • Improved sustainability of the implemented projects • Higher level of trust to the authorities • Additional funding • Decreased welfare mentality and more active participation of the population in local development

17. III. Public Engagement in Budgeting Classification of Public Engagement Practices

18. III. Public Engagement in Budgeting PAB Project Implementation Methodologies for Regions and Municipalities Methodological guidelines for the preparation of the land improvement rules in settlements, megacities and inner city districts (approved by Order No. 711/pr, dated April 13, 2017, of the Ministry of Construction of Russia). Proactive budgeting practice operational manual: an example of the Local Initiative Support Program (published within the framework of the Proactive budgeting development project in the Russian Federation), 2016. Manual for the implementation of proactive budgeting in Russian municipalities. European University in Saint-Petersburg, 2015. In addition to the methodologies, there are a number of reference and teaching materials • Set of teaching programs and materials designed by NIFI of the MoF of Russia for proactive budgeting trainings: 38-hour training programs for federal level officials, 40-hour programs for regional level officials and 74-hour programs for municipal-level officials; • On-line training course for the University of the Committee of Citizens’ Initiatives; • National proactive budgeting portal http://budget4me.ru/.

19. III. Public Engagement in Budgeting Resolution of the Federation Council of the Federal Assembly of the Russian Federation No. 18 SF, dated February 1, 2017, on extending state support to social and economic development of Stavropol Krai Ministry of Finance of the Russian Federation is recommended to : 1) Continue monitoring the implementation of proactive budgeting projects in the subjects of the Russian Federation aimed at the development of infrastructure and land improvement in municipalities; 2) Based on the monitoring data analysis, develop guidelines for preparation and implementation of proactive budgeting projects to be applied by governments of subjects of the Russian Federation (RF), local self-government bodies and citizens; 3) Organize dissemination of best regional (municipal) practices in implementing said projects.

20. III. Public Engagement in Budgeting MoF’s plans for the development of PAB practices in the subjects of the Russian Federation (progressive advance) • Develop the system of regulatory support to proactive budgeting at the regional level (including the PAB Development Program for the RF subjects, and a generic package (mandatory requirements forregulatory and methodological documents regarding the development of PAB practices for RF subjects’ authorities). • Project Centers – a key component in engagement procedures(appropriate if the minimum total cost of implemented projects is equal to or exceeds RUR40 mln.). • Train consultants and staff of authorities in practical aspects of development and regulation(series of workshops and conferences, training centers, library of best practices, etc.). • Research support to the PAB development and regulation process (large-scale analysis of factors, opportunities and limitations in each Russian region). • Create a flexible system of incentives to encourage participation of the state and municipal authorities of the subjects of RF in PAB(ranking the regional practices, contests, etc.).

21. III. Public Engagement in Budgeting Possible Solutions worked at in the course of designing the Medium-Term Proactive Budgeting Development Program for subjects of the RF • Analyze the possibility of including the proactive budgeting concept into: • Budget Code of the Russian Federation (new edition) : addition to basic concepts or the principle of accountability and transparency (openness); • Federal Law No. 131-FZ“On General Organizing Principles for Local Self-Government in the Russian Federation (hereafter FZ131); • Federal Law No. 184-FZ“On General Organizing Principles for Legislative (representative) and Executive Authorities of the Subjects of the Russian Federation” (hereafter – FZ184). 1. Include proactive budgeting in the set of measures worked out within the framework of the Concept of Improving the Budget Expenditure Effectiveness for the period until 2023 as regards regional finance effectiveness. 2. 16 Work on the issue of including proactive budgeting practices into the national program formulation methodology: - Order No. 582, dated September 16, 2016, of the Ministry of Economic Development of Russia “On Adoption of Guidelines for the Development and Implementation of National Programs of the Russian Federation”; - Methodological recommendations for drafting and executing budgets of RF subjects and local budgets on the basis of national (municipal) programs. 3. • Development of proactive budgeting as a component of RF National Programs of the MoF of Russia: • Public Finance Management and Financial Markets Regulation; • Developing federal relations and creating conditions for effective and responsible regional and municipal finance management. 2014 4. 2013 Development of an independent priority project for the development and application of proactive budgeting practices is also possible. 5.

22. III. Public Engagement in Budgeting Public Сontest for Citizens Budget Projects Goal: identify and disseminate best practices of producing citizens budgets in a format ensuring openness and accessibility of public finance management information for citizens. Dynamics of the Numbers of Contest Participants Individuals Corporate Total These numbers of participants confirm a stable interest of individual citizens and a number of corporate entities towards participation despite the absence of any Prize Pool.

23. III. Public Engagement in Budgeting The 2017 Contest Process • The contest consists of two rounds: • Total 115 applications were received in the course of the preliminary selection (first round of contest) within the period from April 1, 2017 through May 15, 2017. • After the preliminary selection 103 applications were recommended for the participation in the second round. • Applications for the second round will be presented from July 1, 2017 through August 1, 2017. • Information on the contest results will be posted the Contest Organizer’s official website(www.fa.ru)no later than August 25, 2017 and will include the date, time and venue of the awarding ceremony for the Contest winners and participants. The 2017 Contest is run among individuals in the following categories: 1) “Budget: how much do I pay and what do I get?”; 2) “Municipality’s Budget in Questions and Answers”; 3) “Popular Glossary of Budget-related Terms”; 4) “Social Advertising of Citizens Budget”. Corporate entities will compete in the following categories: 1) “The Best Citizens Budget Project”; 2) “State and Municipal Services for Citizens”; 3) “Interactive Citizens Budget”; 4) “Public information on State (municipal) Institution’s Finance”. Pursuant to the Contest Commission, one of the individual and one of the corporate winners will be awarded Diplomas at the Moscow Finance Forum to be held by the MoF of Russia on September 8, 2017.

24. Thank you for your attention!