The government has developed preventive methods of financial control over recipients of budget funds
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The White House has developed preventive methods of financial control over recipients of budget funds – with their help, the risks of violations are promised to be identified in real time. We are talking, in particular, about monitoring (“invisible” control for its object) and controlling (control monitoring), which involves voluntary disclosure of data to the treasury. The introduced preventive control is especially relevant after relaxations have been made in the process of distributing budget subsidies and will be ensured by the digital management model established by the White House.
The government has submitted to the State Duma a bill amending the Budget Code (BC), providing for the expansion of methods of state financial control. We would like to remind you that such control is carried out in relation to recipients of budget funds (including subsidies and loans with state guarantees). As Prime Minister Mikhail Mishustin explained at a government meeting, “checks and audits of the movement of state support funds based on events that have already happened, that is, after the fact, are not enough.” According to him, many violations and errors can be prevented at a preliminary stage with proper risk management.
It should be noted that the preliminary control provided for in the amendments is being implemented against the backdrop of relaxations in the process of distributing subsidies, the annual volume of which averages about 2 trillion rubles. For two years, the Ministry of Finance has been engaged in a reform that changes the rules for their distribution by unifying the process and transferring it to electronic format (see Kommersant dated May 24, 2023). By Resolution No. 1780, approved in October 2023, the government introduced uniform rules for selecting subsidy recipients, but meaningful decisions about who will receive government funds and for what purposes they can be spent were left to the level of industry regulators.
It is planned to include two new tools in the BC: observation and control monitoring (controlling; this method will begin to work in 2025). Surveillance involves carrying out “invisible” control – without notifying its objects and without their participation, continuous collection and analysis of information will be carried out using the digital environment available to the state, in particular, through data from state information systems and interdepartmental exchange. This is done to ensure timely response to risks and signs of violations. If they are detected, financial control authorities will issue warnings, in particular, about the need to eliminate them.
Controlling by the Treasury is reminiscent of tax monitoring by the Federal Tax Service (remember, it began with the control of several companies with sufficient “digital maturity”, and by 2024 it covered 445 companies from 18 industries). The mechanism also involves the voluntary disclosure of credentials by the recipient of state funds, which will free them from unnecessary control burden, in particular, conducting on-site inspections. In exchange, the treasury will be provided with remote access to the data of the control object and the ability to adjust its “budget behavior” in real time. It is promised that the Treasury will present its reasoned opinion – ignoring it may result in an inspection or audit. The procedure and cases of controlling will be established by the government, which will allow flexible configuration of this tool.
Let us note that the head of the Treasury, Roman Artyukhin, spoke about this method back in 2021 – then it was assumed that the department would “look after” state subsidies to exporters as one of the largest forms of state support. This mechanism is provided for by the departmental project of the Ministry of Finance “Electronic SMART control” and should become an alternative to classical checks. It was assumed that based on the monitoring results, participants would be able to receive a certificate of budgetary trust, which would free them from checks and excessive interaction with controllers, and also increase the likelihood of receiving government support in the future. It was expected that the mechanism would be worked out jointly with the REC in 2022 on exporters, after which it was to be extended to other recipients of state support with a sufficient level of “digital maturity” – the method requires remote access to the information systems of the control object and its accounting and budget reporting.
According to the introduced bill, in addition to control powers, financial control bodies, similar to the Accounts Chamber, will also receive expert and analytical functions. As the prime minister explained on Thursday, they will be able to analyze the expenditure of public funds, “assessing the legality of operations based on available sources, for example, through the integration of information systems.” As the office of Deputy Prime Minister Dmitry Grigorenko explained to Kommersant, “today the government has a digital management model that allows you to work effectively with big data—with its help, the preparation of documents, the implementation of national projects and state programs are monitored in real time, and deadlines are monitored.” execution of tasks, the risks of non-fulfillment will be determined, which makes it possible to take the necessary measures in advance.” This model, the staff notes, is already used for financial control of budget execution—government amendments are aimed at legislating this practice.
The deployment of expert-analytical work is associated with “the need to provide objective and prompt analytical information on an ongoing basis” about the activities of recipients of public funds, including expert assessment of investment projects, monitoring the implementation of state programs, in order to “form a judgment about the validity of the allocated volumes of state support measures, identify the reasons for non-achievement of results or their risks,” the explanatory note to the bill says. Apparently, in the context of a decline in economic activity, the assessment results will be required by the government to make decisions on the directions of government stimulation – excessive budgetary stimulus can cause accelerated price growth, while insufficient one carries the risk of dampening business activity and slowing the economy.
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