The White House says goodbye to FAIP

Starting from 2024, the government is ready to abandon one of the traditional documents of the budget process – the federal targeted investment program (FAIP). Its annual adoption as an independent document is considered redundant. As follows from the amendments to the Budget Code introduced in the State Duma, the investment program will be replaced by a register of budget-financed construction projects based on the Electronic Budget system. According to the authorities, this should speed up the decision-making process on the use of budget investments, ensure digitalization of the process and increase its transparency.

The White House, as part of the reform of the public capital investment management system, submitted to the State Duma draft amendments to the Budget Code (BC), providing for the abandonment of the FAIP from 2024 and the introduction of the register principle of planning budget investments instead of this program. This decision, as stated in the explanatory note to the bill, is aimed at completing the transition from the formation and implementation of the FAIP to the comprehensive state program “Construction”, at accelerating business processes when determining objects that will be financed from the budget, and at reducing the time frame for the redistribution of money between construction sites , and between planning periods.

Let us recall that the FAIP is a document that combines all budget expenditures on government construction projects. This tool appeared in BC in 2007, although in fact it began to be used much earlier. The FAIP mechanism has been criticized for many years due to the slow absorption of funds in its application and the emergence of “unfinished projects”. This led to a reform of the management of the FAIP, which began with the creation of a “Single Customer in the Construction Industry” in 2021 for the completion of problematic facilities and the transfer of authority to form the FAIP to the Ministry of Construction from the Ministry of Economy in 2022. At the same time, FAIP became five years old and was immersed in the state program “Construction”, which has been implemented since 2023.

According to the introduced bill, all provisions on the FAIP are excluded from the BC – now information about budget-funded construction projects will be accumulated in a register based on the “Electronic Budget”. The procedure for maintaining the register will be determined by the government. From the explanatory note it follows that it will include the same information as the FAIP: information about the object, its cost, commissioning deadlines. The register will be linked to the monitoring of budget construction projects that is being prepared for launch in 2024 (see Kommersant of December 5).

As the office of Deputy Prime Minister Marat Khusnullin explained to Kommersant, in order to cancel the FAIP, it was first necessary to analyze how the new comprehensive “Construction” program works. As a result, the formation of the FAIP as an independent document was considered redundant. The need for changes in the explanatory note is explained by the fact that the FAIP duplicates the list of objects contained in the state program “Construction” and, moreover, the program is not fully integrated into the system of government project activities.

During the formation and implementation of the FAIP, “systemic deficiencies” were identified annually, the government points out. This is, for example, late adoption of regulations, object-by-object detailing, late approval of project documentation, postponement of the commissioning of objects. Such problems are associated with the need to annually approve the FAIP, make changes to it and, accordingly, with a large amount of paper work. It is expected that the complete transfer of all procedures to the “Electronic Budget” will partially eliminate these shortcomings. As Marat Khusnullin’s office adds, “the register will contain up-to-date information about objects that are financed from the budget. At the same time, monitoring using information from the register will allow for effective management of capital investments.”

The Ministry of Finance explained to Kommersant that the presence of an object in the register will be the basis for starting financing – this will not require the adoption of acts of the main managers of budget funds, while objects under construction will be in the register until their completion. “This will reduce the time it takes to make and implement a decision, ensure digitalization of the process and monitoring, while increasing transparency,” the department notes.

Anna Zolotareva, Deputy Head of the Budget Policy Research Laboratory of the Institute of Economics and Economy of the Russian Presidential Academy of National Economy and Public Administration, believes that the need to abolish the FAIP has been brewing since the adoption of the state program “Construction”. Ksenia Bondarenko, a lecturer at the Department of World Economy at the National Research University Higher School of Economics, agrees with this: duplication, according to her, complicates the investment process. According to Anna Zolotareva, the abolition of the FAIP “will give impetus to the revision of a huge volume of by-laws on the issues of capital investment planning, which are extremely confusing and contradictory.” However, she believes that replacing the FAIP with a register will not significantly affect the efficiency of investments: the main problems in the field of planning will remain. According to Ksenia Bondarenko, efficiency will still increase due to “a reduction in the volume of bureaucracy, a reduction in the time frame for approving projects and, accordingly, the start of work.”

Evgenia Kryuchkova