Improvement of the system of managing state debt, accounts payable, and contingent liabilities in the Republic of Karelia (Project of the Department of International Development of Great Britain, 2003–2004)
The main goal of the activity of rendering the IET’s services is to assist the government agencies of the Republic of Karelia in developing a comprehensive system of managing the government debt as well as credit indebtedness of the budget of the Republic of Karelia.
Within the framework of this goal, the principal tasks of the IET are to involve the development of such a system on the basis of the following instruments:
- comprehensive records of the obligations imposed on the republican budget that would include the information on the volume of the obligations included in the government debt, as well as the information on the credit indebtedness of budgetary institutions and on the indebtedness of regional State unitary enterprises; development of a schedule of servicing and repaying debt obligations;
- the procedures (confirmed on the normative basis and transparent) for attracting, servicing and repaying, as well as for regulating the amount of the borrowings made by government agencies, budgetary institutions, unitary enterprises and the organizations controlled by government agencies, based on a reasonable debt policy pursued by the regional authorities;
- a system of assessing the debt policy pursued by the government agencies of the Republic of Karelia based on a complex of objective indices that would characterize the degree of risk associated with the decisions being made.
The IET, when implementing this terms of reference, must take into account the results obtained during the implementation of associated projects, primarily those in the framework of the project of technical assistance to the reform of the budgetary system on the regional level.
The volume and content of work
In accordance with the specified tasks, certain work is to be done so as to include the following components:
1) Analysis of the existing system of accounting and debt management at the regional level.
Within the framework of this component, the existing system of accounting and government-debt management in the Republic of Karelia will be duly analyzed. The major task of the IET will consist not only in analyzing the system of accounting and management of the government debt acknowledged as such in accordance with the RF Budget Code, but also in analyzing the system of accounting and management of the credit indebtedness of budgetary institutions, and the indebtedness of state and municipal unitary enterprises, as well as of other organizations controlled by government agencies of the subject of the Russian Federation.
When considering the practice of debt management, the IET must pay special attention to the analysis of the declared and actual objectives of the said loans, to the compliance with the repayment and debt service schedule, and to the administration's activities aimed at optimizing the debt structure.
The work to be done on the analysis of the existing system of accounting and debt management at the regional level will represent a preliminary stage necessary for elaborating the proposals dealing with the improvement of the abovesaid system.
2) Consolidation (inventory) of the accounting registers concerning the structure and the total amount of debt including the credit indebtedness of budgetary institutions and the indebtedness of regional state unitary enterprises as well as of other organizations controlled by government agencies of the subject of the Russian Federation (in particular, the enterprises of the housing and communal sector).
In order to develop a complex system of government-debt management, it is necessary to make an inventory of all the various types of liabilities to be covered by the republican budget. Within the framework of work on this component, the IET will compose a register of regional liabilities based on the data provided by the government agencies of the Republic of Karelia, including the data on the regional government debt, the credit indebtedness of budgetary institutions and the indebtedness of regional state unitary enterprises, as well as of all the other organizations whose credit indebtedness may be acknowledged as a liability of the republican budget.
The register shall be submitted in the form of an electronic data base, thus making it possible to regularly update the data so as to take into account the emergence of new liabilities and the repayment of the existing ones, and to do so in accordance with the special forms of accounting specified for the organizations whose indebtedness is to be reflected in the data base, and also to take into account the data contained in the Debt Register of the Republic of Karelia. The IET must also elaborate an instruction concerning the keeping of the Register.
The IET must also develop a schedule of servicing and repayment of the liabilities included in the Register.
3) Elaboration of recommendations concerning the upgrading of the debt management system in the Republic of Karelia.
Within the framework of this component, the IET, in particular, must put forward detailed recommendations concerning the resolution of the following issues:
- determination of the subject of indebtedness and the procedure for realization of the subsidiary liability of the State against the obligations on the part of budgetary institutions delimitation of various types of obligations taken by government agencies in the name of the Republic of Karelia or in their own name (as juridical persons); determination of the subject of liability when purchases of various types of goods (work, services) for government use take place; determination of the procedure for calling to account the managers of budgetary funds as far as debt liabilities on the part of budgetary institutions in their jurisdiction are concerned, and the procedure for the implementation of court judgments;
- determination of the authorized or unauthorized indebtedness included in the register of regional liabilities, including the development of a methodology for contesting the validity of obligations which contradict the law and / or exceed the limits of legal capacity established for budgetary institutions, and the development of methods for preventing any subsidiary liability of the budget as regards the obligations of budgetary institutions pertaining to the conduct by the latter of their business activities;
- determination of the ways to estimate the volume of indebtedness for each of the two types of obligations (public-law and civil-law obligations): differentiation of the ways to account for and repay the principal amount of the debt, and those of imposing financial sanctions;
- determination of the moment of the emergence of different types of indebtedness;
- determination of the composition of the credit indebtedness to be repaid by allocations to be included in the budgets for the following years;
- determination of the sources for the repayment of authorized and unauthorized indebtedness of budgetary institutions: the ways for preventing unauthorized obligations to be financed by budgetary funds;
- resolving of the problem of the reservation of budgetary funds in order to finance court judgments concerning the collection from the budget of the indebtedness against different types of obligations; establishment of a norm concerning a mandatory inclusion in the budget for the following years of all the allocations aimed at repaying credit indebtedness under the civil-law contracts (including labor contracts) previously concluded and implemented by the budget's contracting parties, as well as the allocations aimed at financing the civil contracts valid for more than one budget year which were concluded in the previous years;
- introduction of certain elements of medium-term planning as regards the obligations (target and investment programs) whose period of repayment exceeds the limits of the financial year in question;
- determination of the ways to repay various types of indebtedness (allocation of budgetary funds to finance the repayment of debts only by writs of execution, etc);
- introduction of a complete list of the grounds for and the regulation of the procedure for granting government guarantees;
4) Elaboration of the procedure and the forms of accountability for the organizations (state and municipal unitary enterprises, budgetary institutions, enterprises in which the regional administration has a 20% (and higher) stake) whose data on credit indebtedness are to be reflected in the register of regional obligations.
The IET must work out typical procedures for the submission of reports on the part of regional state unitary enterprises, budgetary institutions and other organization as regards the volume and structure of their liabilities to the creditors.
5) Elaboration of a system of indices that would make it possible to assess the risks of the existing debt policy.
Within the framework of this component, the IET must elaborate a system of indices which would make it possible to assess the debt policy pursued by the republican authorities from the point of view of its risks. Such a system of indices will be based on various types of indices and contain the threshold values of the necessary indices (among which the conditional and non-conditional values will be singled out). The system of indices to be elaborated by the IET are to be suitable for the use of the republican authorities both in decision-making concerning the attraction and repayment of loans and in assessing the results achieved during the implementation of the program for reforming regional finances.
6) Submission of recommendations concerning the issues of financing budget cash gaps within the budget year and other subperiods within the budget year.
Within the framework of this component, the IET must work out the approaches toward financing temporary cash gaps emerging within the limits of a financial year and in shorter periods (day, week or month). The recommendations on the issues of financing the temporary cash gaps in the republican budget must include a methodology for forecasting temporary cash gaps, the system of measures aimed at attracting resources for financing the emerging money requirements, including an assessment of the possibility to attract bank credits, to address the superior state authorities for short-term budget loans, and to create a financial reserve within the republican budget in order to finance temporary cash gaps.
7) The conduct of a seminar for the employees of republican government agencies so as to publicize and discuss the major results of the project; it shall be attended by the representatives of the federal government agencies and the government agencies of the RF’s subjects.
The results of the IET work will be suitable for the practical use of the financial agencies of the administration of the Republic of Karelia.
8) Education of the employees of republican government agencies in the matters of composing and keeping the register of regional obligations, debt management and risk evaluation.