Document of The World Bank Report No: ICR2145 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-45280 TF-51789) ON A LOAN IN THE AMOUNT OF US$ 30 MILLION TO THE RUSSIAN FEDERATION FOR A REGIONAL FISCAL TECHNICAL ASSISTANCE PROJECT December 29, 2011 Poverty Reduction and Economic Management Russia Country Department Europe and Central Asia Region CURRENCY EQUIVALENTS (Exchange Rate Effective December 29, 2011) Currency Unit = Ruble 1.00 = US$ 0.03 US$ 1.00 = 31.56 Rubles FISCAL YEAR: January 1 – December 31 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy CPS Country Partnership Strategy FER Foundation for Enterprise Restructuring (PIU) FFRFRP Fiscal Federalism & Regional Fiscal Reform Project FMD Fiscal Monitoring Division, Ministry of Finance GDP Gross Domestic Product GOR Government of Russia IMWG Inter-Ministerial Working Group ICR Implementation Completion Report ICT Information and Communication Technology IRI Intermediate Results Indicator ISR Implementation Status and Results Report MOF Ministry of Finance OED Operations Evaluation Department PIU Project Implementation Unit PDO Project Development Objective QAG Quality Assessment Group RF Russian Federation RFTAP Regional Fiscal Technical Assistance Project Vice President: Philippe Le Houerou Country Director: Pedro Alba Sector Manager: William Dorotinsky Project Team Leader: Stepan Titov ICR Team Leader: Ronald Myers ii Russian Federation Regional Fiscal Technical Assistance Project CONTENTS DATA SHEET…………………………………………………………………………iv 1. Project Context, Development Objectives and Design ............................................... 1 2. Key Factors Affecting Implementation and Outcomes .............................................. 7 3. Assessment of Outcomes .......................................................................................... 10 4. Assessment of Risk to Development Outcome......................................................... 14 5. Assessment of Bank and Borrower Performance ..................................................... 14 6. Lessons Learned ....................................................................................................... 17 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 18 Annex 1. Project Costs and Financing .......................................................................... 20 Annex 2. Outputs by Component ................................................................................. 22 Annex 3. Economic and Financial Analysis ................................................................. 30 Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 31 Annex 5. Beneficiary Survey Results ........................................................................... 33 Annex 6. Stakeholder Workshop Report and Results................................................... 34 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 35 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ....................... 38 Annex 9. List of Supporting Documents ...................................................................... 39 MAP.………………………………………………………………………………….40 iii DATA SHEET A. Basic Information Regional Fiscal Country: Russian Federation Project Name: Technical Assistance Project Project ID: P058587 L/C/TF Number(s): IBRD-45280,TF-51789 ICR Date: 12/30/2011 ICR Type: Core ICR GOVERNMENT OF Lending Instrument: TAL Borrower: RUSSIAN FEDERATION Original Total USD 30.00M Disbursed Amount: USD 28.61M Commitment: Revised Amount: USD 28.61M Environmental Category: C Implementing Agencies: Foundation Of Enterprise Restructuring Cofinanciers and Other External Partners: B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 01/09/1998 Effectiveness: 08/30/2000 08/30/2000 Appraisal: 04/15/1999 Restructuring(s): 07/01/2009 Approval: 12/22/1999 Mid-term Review: 02/14/2003 Closing: 12/31/2004 06/30/2011 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Low or Negligible Bank Performance: Satisfactory Borrower Performance: Satisfactory iv C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Satisfactory Implementing Quality of Supervision: Satisfactory Highly Satisfactory Agency/Agencies: Overall Bank Overall Borrower Satisfactory Satisfactory Performance: Performance: C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA): Problem Project at any Quality of No Satisfactory time (Yes/No): Supervision (QSA): DO rating before Satisfactory Closing/Inactive status: D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 50 42 Law and justice 8 15 Sub-national government administration 42 43 Theme Code (as % of total Bank financing) Debt management and fiscal sustainability 20 20 Law reform 20 20 Legal institutions for a market economy 20 20 Municipal finance 20 20 Tax policy and administration 20 20 E. Bank Staff Positions At ICR At Approval Vice President: Philippe H. Le Houerou Johannes F. Linn Country Director: Pedro Alba Michael F. Carter Sector Manager: William Leslie Dorotinsky Pradeep K. Mitra Project Team Leader: Stepan Anatolievich Titov Lawrence M. Hannah ICR Team Leader: Stepan Anatolievich Titov ICR Primary Author: Ronald E. Myers v F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The Regional Fiscal Technical Assistance Project (RFTAP) pursues the following objectives: build institutional capacity to advance the reform of inter-governmental fiscal relations, and improve fiscal performance at the regional and municipal level. Revised Project Development Objectives (as approved by original approving authority) • Improve the legal framework for sub-national public finance and inter- governmental fiscal relations; • Establish a mechanism for improving compliance with federal laws and regulations in the area of fiscal management and promote fiscally responsible behavior at the sub-national level through appropriate economic incentives; • Strengthen the Government‘s capacity to monitor sub-national performance and reform efforts; • Strengthen the institutional capacity of sub-national governments to carry out fiscal and structural reforms. (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Indicator 1 : Laws and legal amendments on expenditure assignment Three new laws and legal amendments on expenditure Laws and legal assignments were Value Inadequate legal amendments on drafted and quantitative or framework for expenditure approved by Qualitative) expenditure assignment assignment drafted 12/31/2006 with a fourth drafted by 5/8/2010. All were put into effect. Date achieved 12/22/1999 05/31/2002 05/08/2010 Comments (incl. % achievement) Indicator 2 : Formula-based equalization transfers designed Formula based Transfers often based on equalization Value ad hoc criteria and Formula-based transfers were quantitative or negotiations between equalization designed by Qualitative) federal and sub-national transfers designed 06/29/2001 and government. instituted by July vi 31, 2002 for all regions participating in the Regional Fiscal Reform Fund, which also received technical support from the project. Date achieved 12/22/1999 06/29/2001 06/29/2001 Comments Subsequently the use of formula based transfers was expanded nationwide and (incl. % accounted for 98 percent of transfers by December 31, 2009. achievement) Indicator 3 : Computerized information network for fiscal monitoring Computerized information Computerized network was Federal fiscal monitoring Value information designed, installed is paper based, slow, and quantitative or network for fiscal by August 2001, suffers from Qualitative) monitoring in and subsequently discrepancies place upgraded to provide timely and accurate data. Date achieved 12/22/1999 08/31/2001 08/31/2001 Comments (incl. % achievement) Indicator 4 : Computerized systems, in particular financial reporting As of 12\31\2003 computerized systems were introduced in project participating Computerized regions, which Value Slow paper based systems, in allowed a switch to quantitative or financial management in particular financial the treasury Qualitative) regions. reporting, installed principle of budget execution. Module for medium term financial planning added in December 2005. Date achieved 12/22/1999 12/31/2003 12/31/2003 Comments (incl. % achievement) vii (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : Inventories of expenditure assignments An inventory of all expenditure assignments to Inventories of Value No reliable inventory of regional entities expenditure (quantitative expenditure assignments was completed by assignments or Qualitative) existed May 2001 and has completed. been regularly updated and kept current since. Date achieved 12/22/1999 05/31/2001 05/31/2001 Comments (incl. % achievement) G. Ratings of Project Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 06/30/2000 Satisfactory Satisfactory 0.00 2 12/27/2000 Satisfactory Satisfactory 0.80 3 06/28/2001 Satisfactory Satisfactory 1.90 4 12/21/2001 Satisfactory Satisfactory 3.34 5 06/25/2002 Satisfactory Satisfactory 4.69 6 12/24/2002 Satisfactory Satisfactory 7.06 7 06/26/2003 Satisfactory Satisfactory 9.27 8 12/15/2003 Satisfactory Satisfactory 12.04 9 06/15/2004 Satisfactory Satisfactory 14.53 10 12/22/2004 Satisfactory Satisfactory 17.55 11 06/09/2005 Satisfactory Satisfactory 20.03 12 12/20/2005 Satisfactory Satisfactory 21.92 13 07/14/2006 Satisfactory Satisfactory 22.80 14 03/13/2007 Satisfactory Satisfactory 23.16 15 12/26/2007 Satisfactory Moderately Satisfactory 24.07 16 12/02/2008 Satisfactory Moderately Satisfactory 25.42 17 06/26/2009 Satisfactory Moderately Satisfactory 26.67 18 01/14/2010 Satisfactory Moderately Satisfactory 27.40 19 01/17/2011 Satisfactory Moderately Satisfactory 27.96 viii H. Restructuring (if any) ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions 07/01/2009 Y S MS 26.67 If PDO and/or Key Outcome Targets were formally revised (approved by the original approving body) enter ratings below: Outcome Ratings Against Original PDO/Targets Satisfactory Against Formally Revised PDO/Targets Satisfactory Overall (weighted) rating Satisfactory I. Disbursement Profile ix 1. Project Context, Development Objectives and Design (this section is descriptive, taken from other documents, e.g., PAD/ISR, not evaluative) 1.1 Context at Appraisal (brief summary of country and sector background, rationale for Bank assistance) With 89 constituent regions which vary widely in population and density, geographic size, economic development, cultural background, and natural resource deposits, the Russian Federation confronted in the late 1990s serious issues of inter- governmental fiscal relations. Following the breakup of the Soviet Union there had been a significant devolution of political and fiscal power away from the central government, with significant implications for macro-economic performance, allocative effectiveness, and productive efficiency within the entire public sector. While varying degrees of decentralization of responsibility and funding for service delivery are common in physically large and diverse nations, the process of decentralization and parallel fiscal changes had been chaotic in Russia with no clear responsibilities at the federal or local levels. Regional budgets were based mostly on negotiated expenditure norms, customized revenue sharing rates and bargained transfers from the federal government. Some resource rich areas benefitted from their own local tax base (and ability to negotiate with the center over the distribution of tax collections) while poorer regions suffered from increased mandates for social and other service spending without augmented funding from an overstretched federal government. Beyond financing, the legal framework for fiscal federalism was deficient, compliance was spotty, and the institutional capacity of many regions quite weak. The situation came to head during the financial crisis of 1998. By that point most sub-national governments had slipped into deficits, their combined interest payments in 1998 on a growing stock of debt had reached a large 0.74% of GDP, and defaults by regions threatened. The government and outside observers agreed that while the federal government had been making progress in restoring fiscal balance, the regions represented a serious risk to overall macroeconomic stability and national economic growth. The government therefore initiated a program to introduce more order and symmetry into the system of fiscal federalism. A Concept of Reform of Intergovernmental Fiscal Relations 1999-2001 paper was approved by the federal government in 1998, an Inter- Ministerial Working Group (IMWG) for Inter-Governmental Fiscal Reform was established, and dialogue was initiated with the regions. The medium term program envisaged actions to eliminate unfunded mandates to sub-national governments, a revised formula for allocating federal equalization transfers, and a rationalized assignment of expenditures and taxes to help establish a more stable and transparent system of inter- governmental finance with a revenue base at each government level commensurate with its respective responsibilities. The government requested Bank support for this program, reflecting the organization‘s extensive global experience in sub-national fiscal management, ongoing operations at the sub-national level in Russia, and a series of Bank analytic reports beginning in the early 1 1990s which had influenced government thinking on fiscal federalism. Together the government and Bank conceived an innovative program of competitive grants to regional governments (largely equivalent to provinces or states in other federal systems) based on their adoption of fiscal reforms—a program to be supported by the Fiscal Federalism & Regional Fiscal Reform Project (FFRFP, SCL-46470), a $120 million World Bank operation approved in January 2002. The subject Regional Fiscal Technical Assistance Project (RFTAP), designed by the same Bank and counterpart teams and approved two years earlier, was to prepare the ground work and subsequently support the implementation of the FFRFP. The TA operation would address the inadequate legal framework (mostly federal) and weak institutional structure (mostly regional). 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The Project Development Objective in the Technical Annex to the Memorandum of the President (Report No: T 7345-RU) is:  Improve the legal framework for sub-national public finance and inter-governmental fiscal relations;  Establish a mechanism for improving compliance with federal laws and regulations in the area of fiscal management and promote fiscally responsible behavior at the sub- national level through appropriate economic incentives;  Strengthen the Government’s capacity to monitor sub-national performance and reform efforts;  Strengthen the institutional capacity of sub-national governments to carry out fiscal and structural reforms. A set of 12 monitoring indicators was presented in Annex 1 of the Technical Annex which would apply to the regions participating in the FFRFP and project. They were not identified as PDO or intermediate results indicators (the latter was not in use by the Bank at that time). The indicators are output focused but consistent with the support to be provided by the project to the broader outcomes in the FFRFP.  Computerized information network for fiscal monitoring in place  Inventories of expenditure assignments completed  Laws and legal amendments on expenditure assignments drafted  Laws and legal amendments on unfunded mandates drafted  Treasury principles of budget execution implemented  Regional compliance with clauses of Code of Good Practice improved  Laws on reporting, budgeting and budget management drafted  Computerized systems, in particular financial reporting, installed  Model laws on capital and multi-year budgeting drafted  Model laws on budget audits drafted  Regional borrowing and debt servicing profiles improved  Formula-based equalization transfers designed 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 2 In line with a Bank wide effort in 2009 to ensure conformity between Legal Agreements and loan documents presented to the Executive Board, the team reviewed the relevant documents. It discovered that the Legal Agreement identified as PDOs the four objectives in the above section but the Technical Annex inadvertently put in broader goals involving ―building institutional capacity to advance the reform of inter- governmental fiscal relations, and improve fiscal performance at the sub-national level.‖ Following discussions and agreement with counterparts, the Board was notified in a Corrigendum that only the four PDOs in the Legal Agreement would be those for the project and that the approval document was modified to conform to those PDOs. 1.4 Main Beneficiaries, (original and revised, briefly describe the "primary target group" identified in the PAD and as captured in the PDO, as well as any other individuals and organizations expected to benefit from the project) The project was prepared prior to adoption of the current PAD and ISR formats so there is no primary target group identified. Based on the characteristics of the project, however, it could be assumed that the beneficiaries were, most directly, government officials and staff at the central and sub-national levels benefiting from training, improved business processes and policy framework, and some ICT equipment. The agencies affected by the project include the Ministry of Finance plus the various regional finance departments. It is fair to conclude that citizens are the ultimate beneficiaries in terms of improved services, better value for taxpayer resources, and improved macroeconomic performance in part due to the project. 1.5 Original Components (as approved) This project included four substantive components (plus project management). Support would be provided through technical assistance, training, with small investments in office equipment, information and communication technology, and supplies. The Bank would also finance a part of the operating costs of the Fiscal Monitoring Division as well as those of the Foundation for Enterprise Restructuring. A. Strengthening Federal and Regional Fiscal Legislation (Financing US$ 2.2 million) This component would fund local and international consultants to assist in legal and policy research efforts focused on high-priority themes in two sub-components related to (i) inter-governmental fiscal relations, regional budgeting and debt, and (ii) regional development funds. Anticipated activities included completing an inventory of the current assignment of revenue and expenditures responsibilities between the federal, regional and local governments; design of formula-based equalization transfers for the regions; federal regulations for monitoring sub-national fiscal performance; and analysis of the consistency and compatibility of existing legislation on sub-national public finance and inter-governmental fiscal relations. 3 B. Strengthening Federal Monitoring Capacity: Fiscal Monitoring Division and the PIU for the RFTAP (Financing US$ 8.1 million) The component would finance the provision of technical assistance relating to the strengthening of institutional capacity for the design, implementation and monitoring of the fiscal and structural reforms and performance at the sub-national level through three sub-components aimed at establishing (i) a ―standard‖ monitoring system, (ii) ―extended‖ and ―special‖ monitoring ratings, and (iii) a fiscal statistic database. The component would fund: (i) computer and information technology; (ii) the creation of a library and on-line databases; (iii) development and dissemination of Principles (Code) of Good Practice for regional financial management as an extra legal standard; (iv) design of financial disclosure requirements for sub-national and municipal borrowers; (v) ongoing monitoring of fiscal and structural reforms and performance at the sub-national level, as well as compliance with federal laws and regulations; (vi) analytical support and policy advice on key issues of inter-governmental fiscal reform and sub-national public finance; (vii) training, study tours for staff of the Finance Ministry‘s Fiscal Monitoring Department (FMD) and for government staff (including regional policy-makers) participating in the project activities to develop modern analytical skills required for the implementation of fiscal reforms; and (viii) office furnishing, administrative and computer support to the staff of the FMD and consultants working on other project components. C. Assistance to Sub-National Governments in Accounting and Budgeting (Financing US$ 9.4 million) This component would finance technical assistance to the regions participating in the fiscal federalism and regional fiscal reform program supported by the FFRFR loan. It would support institutional development programs through six subcomponents relating to: (i) financial planning, treasury and cash management; (ii) budgetary accounting, reporting and auditing; (iii) expenditure and public sector restructuring; (iv) debt management systems; (v) regional budget procurement systems; and (vi) regional fiscal management guidelines, best practice standards, and regional and local public finance manual. Support would be provided for computer equipment and design of software programs, training of local staff needed for a successful installation of and subsequent application of integrated financial management systems in the selected regions, as well as diagnostic reviews and development of reform plans in budgeting and fiscal management. D. Sectoral Public Expenditure Review (Financing US$2.2 million) The component would assist participating regions with the design of expenditure reform plans by financing nine public expenditure reviews. These would primarily focus on the sectors which had been the largest recipients of subsidies from consolidated regional budgets such as housing and utilities, agriculture, public transportation, education and health, etc. The reviews were expected to result in prioritization of budget expenditures into key functional sectors, identification of lower priority programs, introduction of 4 appropriate pricing policies to provide for cost recovery, as well as identification of sectoral expenditure programs for alternative provision by the private sector. 1.6 Revised Components There were no revisions in the components. 1.7 Other significant changes (in design, scope and scale, implementation arrangements and schedule, and funding allocations) The project was originally designed to complement the FFRFP SAL project, focus on inter-governmental fiscal reforms in regions competitively selected for grants, and close in 2004. In fact it was extended four times, becoming a critical source of support for a broader program of budget reform at both the federal and regional levels. In effect, the operation entered a second stage, reflected in amendments to legal agreements signed in 2004, as the government determined that regularizing inter-governmental fiscal relations would be insufficient given the serious problems in federal budget practices being replicated in the regions. Deeper budget and public financial management reforms were needed at the federal level in tandem with the effort to build institutional capacity and compliance at the regional level. Project extension was viewed by the government as the best approach to maintain the momentum of fiscal federalism reforms, building upon a good partnership with the Bank. The project and related FFRFP project were deemed by the government to be highly successful and important national priorities. In its observations for the FFRFP Implementation Completion Report (ICR), the government said that together they were ―one [sic] of the most successful projects performed jointly with the IBRD‖. (Indeed even today Finance Ministry officials refer to the two projects as one operation.) The value added by the Bank was highly regarded, consisting of: (i) facilitating access to best international practices and experts (in the Bank, firms, and academia); (ii) quality control exercised through Bank team oversight; (iii) the relative speed, weight given quality of bid proposals, and accessibility afforded to international consultancies under Bank procurement practices; and (iv) the domestic funding predictability for the reform effort afforded by the presence of a Bank loan. For the Bank the project became an important vehicle for policy dialogue in the critical area of government financial management and an instrument to address systemic challenges impacting Bank lending to sub-national entities. Rather than seeking a new project, which posed practical difficulties as the government had decided to limit resort to international development funding, the Finance Ministry significant increased the amount of counterpart funding for the project. At appraisal Bank funds were projected to finance 83% of the project, but by loan closure the Bank had financed 41% of the operation. Conversely, counterpart funding increased from a planned $6.2 million to $41.6 million. While implementation continued (with augmented government funding) the rate of loan disbursements slowed after 2004, with only $10.4 5 million disbursed in the last 7 years of the project, largely reflecting the dilution of Bank loan funds. On the other hand, while Bank funded disbursements fell in absolute amounts during this period, total disbursements, which include both the Bank and counterpart funding increased to $49.2 million signaling that the project activities continued at a good pace. A secondary issue was the procurement process which, while correct, was slower than anticipated given government processes, the scope of the project, government‘s desire to secure the highest quality inputs, close attention to quality of consultant products (often requiring additional work and delaying payments), etc. Funding allocations did not change significantly within the Bank loan, although the increase in counterpart funding led to notable increases in two components. Given the increased focus on deeper budget reform at the federal level total spending under Component 1 increased from a planned $2.2 million to $17.92 million. Similarly the expanded effort to reach more regions raised expenditures in Component 3 from a planned $9.4 million to $28.66 million. Spending for strengthening federal monitoring capacity in Component 2 also increased although less so from an anticipated $8.1 million to $11.69 million, while funding for the public expenditure reviews in Component 4 increased from $2.2 million to $3.1 million. As the bulk of original performance indicators were met by 2004, the Bank sought new indicators to accompany the extension of the project and respond to QAG suggestions to better capture project outcomes. This effort, first mentioned in a supervision mission Aide Memoire in November 2005 reached fruition with additional performance indicators adopted in December 12, 2008. The process was prolonged in part given the enhanced status of performance indicators as they were embedded in the legal agreement and viewed within the Russian administration as firm commitments rather than indicative targets or aspirations. Moreover, the project as a complex technical assistance operation which cut across various departments and initiatives was an entirely new experience for the Ministry of Finance. Consequently the identification, vetting, and final approval of the new performance indicators, despite considerable pressure and specific proposals from the Bank, took time. Unlike the original performance indicators, which were mostly of qualitative, output oriented, and discrete nature, the new ones were measuring changes in both qualitative and quantitative outcomes over the project‘s life period and the MOF paid special attention not only on achieving but also over achieving these targets:  MOF performs quarterly monitoring of overdue accounts payable of the Russian regions  Monitoring of debt of the Russian regions, including borrowings from international financial institutions without sovereign guarantee, is performed by the MOF on an annual basis  Allocation of transfers, subsidies, and subventions from the budgets of at least 60 Russian regions is based on approved methodologies  In at least 70 Russian regions revenue assignments and expenditure responsibilities are made according to the relevant federal legislation 6  Debt stock in at least 90 percent of the Russian regions is in compliance with the Budget Code caps  Number of regions, which received federal grants from the Regional and Municipal Fiscal Reform Fund (managed by the MOF) during years of its operations, is not less than 25% of total number of regions New performance indicators reflected the necessity to advance sub-national PFM reforms through capacity building and approval of additional legislation, normative acts, and methodological recommendations on a wide range of issues, thus leading to improvements in the key parameters of the sub-national public finance system. Reflecting in part federal concern about serious public sector performance shortfalls across many regions, in 2004 President Putin determined that regional governors would be appointed by the President rather than elected by regional voters. This was a significant policy change impacting the character of Russian inter-governmental relations as well as incentive and accountability dynamics for governors. However, the project‘s focus on capacity development in fiscal matters appears to have been only marginally affected by the decision. For example, compliance with federal legislation and Budget Code caps is judged by the Finance Ministry to have significantly improved over the course of the project. In any case a comprehensive fiscal federalism legal framework, sound financial management systems and practices, increased staff skills and ICT capacity, and appropriate monitoring of performance in complying with federal regulations and mandates are core attributes of well functioning fiscal federalism regardless of broader arrangements, at least in the short to medium term. In the longer term, the theory and practice of fiscal federalism suggests that the efficiency and the impact of decentralization is stronger when local decision makers are accountable to the public of their jurisdictions. In December 2011 President Medvedev and Prime-Minister Putin announced their intention to move to the system when governors are elected by regional voters. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry (including whether lessons of earlier operations were taken into account, risks and their mitigations identified, and adequacy of participatory processes, as applicable) The project at entry was satisfactory. This judgment reflects its alignment with the Government‘s decentralization and fiscal federalism program, deep analytical work by World Bank staff on decentralization challenges in the country, direct link to the large adjustment loan (FFRFP) which would leverage the reforms supported by the project, and a strong multi-disciplinary Bank team which sought outside expert quality reviews. The extent and quality of Bank analytical work on decentralization issues in Russia was impressive and included: (i) Russia and the Challenge of Fiscal Federalism, Wallich (1994); (ii) Fiscal Management in the Russian Federation, World Bank Report No. 14862-RU, Le Houerou (1995); (iii) Federal Transfers in Russia: Their Impact on Regional Revenues and Incomes, Comparative Economic Studies 38(2-3) 21-44 Le 7 Houerou and Rutkowski (1998); (iv) Subnational Budgeting in Russia: Preempting a Potential Crisis, World Bank Technical Paper No. 452, Freinkman, Treisman, Titov (1999); and (v) Decentralization in Regional Fiscal Systems in Russia: Trends and Links to Economic Performance, Policy Research Working Paper No. 2100, Freinkman and Yossifov. While no official Quality at Entry review was conducted on the project, a comprehensive one was carried out on the parallel FFRFP operation. The QER team noted in its May 29, 2001 report, besides a positive assessment of the FFRFP, that ―the presentation of the loan would be strengthened if the strong linkage between the regional fiscal reform TA loan [RFTAP] and the present operation were more clearly developed and emphasized….We consider this linkage to be one of the strengths of the program….‖ The project sought to incorporate lessons from the Bank‘s experience in Russia as well as with technical assistance operations. Regarding the former it noted that sub-national reform operations (St. Petersburg Center City Rehabilitation, Urban Transport, and Housing projects, among others) suggested a need for careful monitoring of activities at the sub-national level, leading directly to a component aimed at strengthened federal monitoring. Perhaps more importantly these operations suggested that advances in public financial management at the regional level could be patchy and unsustainable in the absence of more systematic nation-wide reforms. Drawing on OED findings, the project also sought to build a strong management structure for the operation through the designation of the Foundation for Enterprise Restructuring (FER) to be the Project Implementation Unit (PIU). The Foundation had developed an exemplary disbursement record and high quality of outputs in managing other Bank operations. The Inter- Ministerial Working Group, chaired by the Deputy Finance Minister, was tasked with providing policy oversight to the project, and undoubtedly reinforced the priority attached to the reform effort and reduced risks of flagging counterpart commitment. 2.2 Implementation (including any project changes/restructuring, mid-term review, Project at Risk status, and actions taken, as applicable) Implementation of the project in each of its components proceeded well after effectiveness. The commitment, capacity, and influence of the Ministry of Finance seems to have ensured a relatively smooth execution of project activities, close coordination with the parallel FFRFP, attainment of all original and additional performance indicator targets, and fulfillment of PDOs. A Quality of Supervision Assessment, conducted by a Quality Assessment Group (QAG) panel in mid 2004, gave the project an overall rating of Satisfactory. The Mid Term Review, conducted in February 2003 found satisfactory progress in project implementation which had already led to considerable achievements. It noted the intellectual leadership and excellent management of the project by the Finance Ministry. No substantive changes were proposed. The report noted that greater than expected challenges in procurement (complexity in terms of reference, processing time, and extent 8 of quality review and report presentation) were slowing the anticipated rate of disbursements. The authorities and team both signaled a desire to extend the project. There was no substantive restructuring of the loan, although as detailed above, the extensions of the loan and increases in counterpart funding facilitated an expanded focus on federal budget reform with subsequent replication and capacity building in the regions. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization Monitoring and Evaluation of outcomes was an important substantive aspect of project design as a large project component was specifically targeted at improving the capacity of the federal government to monitor fiscal and structural reforms at the sub-national level. Technical assistance, training, and some ICT support were aimed at improving the ability of the FMD specifically to improve the reliability, timeliness, and relevance of data collected from sub-national entities as well as FMD‘s ability to evaluate the data. For a project prepared in the late 1990s there was a fairly extensive list of detailed performance indicators. These indicators were viewed by the authorities as solid legal commitments (rather than aspirations, guidelines, or bell weathers of performance), thus explaining the extended process of adding additional indicators. A survey of stakeholders and/or final seminars among stakeholders to review project performance, however, did not occur, according to Finance Ministry officials, because project results were already discussed at periodic (semi-annual) workshops for CEOs of finance departments of all Russian regions and at the conferences, which were incorporated into practically all major contracts. Finance Ministry officials indicate that final project results will be discussed during the next semi-annual workshop for regional CEOs in spring 2012, and that the surveys will be undertaken in the future, and that they recognize their important feedback benefits. 2.4 Safeguard and Fiduciary Compliance (focusing on issues and their resolution, as applicable) Satisfactory financial management capacity and systems were in place at project effectiveness and maintained through the life of the project. Use of the Foundation for Enterprise Restructuring (FER)—a central unit supporting several other World Bank funded operations—assured smooth loan management and project administration. Quarterly financial monitoring reports were submitted on time and were acceptable to the Bank. Annual audit reports for the project and FER were submitted by the due date and were unqualified; auditors did not raise any issues in the management letters. Procurement under the project proceeded smoothly without any declarations of mis- procurement by the Bank or receipt of suppliers' complaints. During eight post reviews carried out by the procurement staff no violations were identified. Goods and services were delivered in full volume and in due time and no delays were identified in payments. In the months immediately prior to loan closure the Bank reluctantly gave several retroactive clearances on an exceptional basis where contracts had been amended or extended (the reason for late application to the Bank was the Borrower's long bureaucratic procedure for obtaining appropriate signatures for requests). Beyond these 9 exceptions to the Bank‘s procurement policies, procurement performance in the project was satisfactory. 2.5 Post-completion Operation/Next Phase (including transition arrangement to post-completion operation of investments financed by present operation, Operation & Maintenance arrangements, sustaining reforms and institutional capacity, and next phase/follow-up operation, if applicable) Substantial advances in laws, regulations, and procedures, staff skills and capacity, management information systems, federal monitoring capacity, etc. strengthened by the project have been institutionalized within the public sector according to government officials and private sector observers. They form the basic fabric of fiscal federalism now and are expected to be sustained. Nevertheless challenges remain, so a follow up Public Finance and Financial Sector Modernization Loan is in preparation. A major component planned for that project on Inter-Government Fiscal Relations will seek to improve the quality of budget management at regional and municipal levels, improve the efficiency and effectiveness of budget transfer mechanisms, clarify expenditure obligations of state bodies versus local self-governments and strengthen the internal revenue base of sub-national governments. The project will also seek to address the challenge of incentivizing lagging regions to undertake needed reforms. The original decision of the combined RFTAP and FFRFP operations to concentrate resources and attention on reforming regions selected on the basis of competition linked to initiation of fiscal reforms created positive dynamics, established models, and permitted the piloting of various policies and procedures at both levels of governments in a hospitable environment. Nevertheless, Russia (like all federal states) must return to the challenges of promoting reforms and improving services to citizens in regions which lag for a variety of geographic, political, economic, or social circumstances. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation (to current country and global priorities, and Bank assistance strategy) The project objectives were consistent with the Country Assistance /Country Partnership Strategies as highlighted in the past four CAS/CPS documents dating back to 1999. At project approval a core strategic priority of the December 1999 CAS was to ―increase emphasis on reform of systemic policies and institutions intended to improve the performance of public sector institutions that are vital for public administration and for the development of an environment attractive to investors.‖ This approach in fact reflected a shift in Bank lending emphasis away from regional investment projects and project lending in infrastructure and energy in favor of increased emphasis on systemic aspects of institutional development. The Bank‘s Country Partnership Strategy, approved on November 20, 2006 and extended to 2011 in a Progress Report to the Board on July 30, 2009 identifies four main goals: diversify the economy for sustainable development and growth, improve public sector management and performance, improve delivery of communal and social services, and enhance Russia‘s global role in international development. The RFTAP clearly fits within the second pillar of improved public sector 10 management and contributes to attainment of the two others relating to diversifying the economy and improving delivery of services. The extensive co-financing provided by the government to the project, fulfillment of PDOs and initiation of activities not contemplated at approval, and multiple extension requests for the loan underscore the relevance attached to the project by the authorities. Finally, the design of competitive grants to regions based on transparent indicators of reform performance and supported by a parallel technical assistance operation has served as a model in other sectors such as education and health. 3.2 Achievement of Project Development Objectives (including brief discussion of causal linkages between outputs and outcomes, with details on outputs in Annex 2) With the support of the project, Russia has made considerable progress in reforming and unifying the legal and procedural framework for public sector financial management and budgeting at both the federal and regional levels, creating a more smoothly functioning system of fiscal federalism and strengthening the capacity of selected federal and regional government agencies involved in fiscal federalism. The project has met its four inter- related development objectives which together have strengthened public financial management at both the federal and regional level: Improving the legal framework. The project supported the design and drafting of laws and regulations increasing the coherence and modernizing the approach of the fiscal legal framework. Project funded consultants directly supported the conceptualization, development, and drafting of a long list of key laws and a myriad of implementing regulations. Supported by new procedures, operational methodologies, manuals, and trained staff (also funded by the project) the norms constitute a coherent and core legal framework for fiscal policy in Russia. The laws cover the full range of possible legislation including expenditure assignments, unfunded mandates, capital and multi- annual budgeting, and auditing. After 2005 major achievements under this component included improvements in the legal framework with respect to asset management, the introduction of temporary financial administration, strengthening of sub-national public finance, the development of financial control systems, the transformation of budgetary organizations into autonomous entities, and strengthening financial management in line ministries and departments. Strengthened federal monitoring: The project significantly strengthened the federal government‘s capacity to monitor sub-national fiscal performance as well as reform efforts. Direct assistance to the FMD through technical assistance improved the capacity of staff, coherence of procedures, and monitoring methodologies. As a result, regional fiscal performance is monitored monthly through indicators on all macro expenditure and revenue data as well as spending in key social sectors. (When the integrated financial management information system being supported by a separate World Bank operation – Treasury Development Project- P064508--is completed the accuracy and timeliness of data will be enhanced further.) An annual report is prepared by FMD on each region which is published online and presented to the respective governor. Where needed, 11 corrective recommendations are made to the region and shared with the federal district (a powerful intermediate layer between regional governors and the federal Presidency). Ceilings for regional debt and guarantees are set annually by the federal government and monitored by FMD, and in the event of breeches of the ceilings performance agreements are reached between the Finance Ministry and the region. Strengthen sub-national governments’ institutional capacity: The project supported a series of interventions in training (specifically training to enhance capacity of municipal and regional employees in the course of implementation of the municipal and budget reforms), ICT investments, and policy dialogue to improve the ability of sub-national governments to implement fiscal and structural reforms. Notable achievements include technical assistance to 24 regions on design and implementation of basic level public sector reform programs plus enhanced technical assistance to 6 regions in the adoption of a series of modern public sector management systems (medium term financial planning, treasury and cash management systems, debt management, public procurement, accounting, and audit). To date, 54 of 83 regions have submitted public financial reform programs and received federal grant support. These institutional capacity building exercises are in line with those supported by the project, with the aim of improving compliance with new federal norms and procedures also supported by the project. Semiannual meetings are held with finance officials of all regions to in part share experiences and facilitate cross regional learning. The project funded the development of Best Practice Codes for regional/municipal public financial management. After 2005 special emphasis was put on issuing best practice recommendations on expenditure management and public sector restructuring at the sub-national level, improvements in efficiency of service delivery in the key budgetary sectors (e.g. education, public transportation, housing & utilities), strengthening intra-regional transfers system, implementation of medium-term financial planning and performance based budgeting, and development of budget auditing including performance auditing in the regions. Improving compliance with federal laws and promotes responsible behavior: As a result of improvements in the legal framework, strengthened federal monitoring, and support to regions, regional compliance with federal laws has improved significantly. According to the Finance Ministry and its websites which provide information on fiscal performance by regional governments, the bulk of such governments are in full compliance with federal norms. Compliance with the Budget Code caps on debt stock, budget deficit, debt service, and revenue-current expenditure ratio improved significantly- from non-compliance of 23 regions in 2003 to only 2 in 2010. This situation contrasts with that prior to the project where there were unclear budgetary rules, regulations, and procedures, spotty and late reporting of performance, excessive regional borrowing, etc. As indicated above regions are now graded annually on their adherence to federal guidelines and those falling short received detailed corrective recommendations from federal authorities. In the worst of cases the federal authorities can intervene in the region, a sanction which has occurred in only one case but which is seen as a strong lesson and potent sanction for encouraging good behavior. (Performance indicators in Annex 2 provide evidence of additional improvements). 12 The project also promoted responsible behavior by the significant efforts made to improve budgeting through the adoption of multi-year budgeting as well as program based budgeting. The latter is scheduled to be implemented in the 2013 federal budget and then rolled out to the regions. Classifying spending based on programs (a major effort for any government) is the foundation for facilitating a focus on results and improving performance based budgeting and service delivery. 3.3 Efficiency (Net Present Value/Economic Rate of Return, cost effectiveness, e.g., unit rate norms, least cost, and comparisons; and Financial Rate of Return) As an institution-building project, quantitative computations of rates of return are not applicable. 3.4 Justification of Overall Outcome Rating (combining relevance, achievement of PDOs, and efficiency) Rating: Satisfactory The project‘s highly relevant focus on improving public financial administration nation- wide, achievement of its PDOs, and efficiency in leveraging a $30 million loan to support comprehensive fiscal reforms at the federal and regional levels over 11 years fully warrants a Satisfactory rating. Improved public sector fiscal administration in terms of legal framework, procedures, information sharing, results focus as well as improved performance in regions undertaking reforms supported by the project is a fundamental building block of effective governance. Its relevance to Russia‘s economic and social progress has been recognized by the authorities and Bank since the beginning of Bank operations in the country. It remains a priority as the government seeks to introduce a program and results focus into budgeting, accelerate capacity building in lagging regions, and tackle more comprehensively fiscal performance at the lower municipal level. 3.5 Overarching Themes, Other Outcomes and Impacts (if any, where not previously covered or to amplify discussion above) (a) Poverty Impacts, Gender Aspects, and Social Development There is no direct poverty, gender or social impact on the population. Indirectly, however, the project has contributed to better managed resource allocation through strengthened public financial management in a number of sub-national districts accounting for 59 percent of the national population, to improved processes and information flows underlying the functioning of inter-governmental contacts, and to institutionalization of a more orderly fiscal federalism. (b) Institutional Change/Strengthening (particularly with reference to impacts on longer-term capacity and institutional development) As previously covered, the project helped deepen institutional reform in terms of legal framework, formal procedures, and actual practices as well as organizational capacity in key public finance and budget units at the federal and regional levels. This was through 13 training, changes in system wide budgeting and public financial management rules and processes, exchanges of information and experiences, and a dynamic of reform stimulating many regions to improve their public financial management using their own resources. (c) Other Unintended Outcomes and Impacts (positive or negative) Outcomes and impacts of the project exceeded those anticipated at project approval given the mobilization of significant additional counterpart resources, the expanded focus on budgetary reform, and over fulfillment of original and additional performance indicators. Unintended outcomes and impacts include the creation of a demand at various levels of government for public financial management reform, development of a small industry of local consultant firms which are now competing for contracts (both domestically and internationally), as well as a strengthened capacity (and comfort) within the Ministry of Finance to design, develop, and manage the outsourcing of analytical work using both domestic and foreign firms. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops (optional for Core ICR, required for ILI, details in annexes) No beneficiary survey or stakeholder workshops were conducted specifically for purposes of reviewing project performance. 4. Assessment of Risk to Development Outcome Rating: Negligible to Low Government and non-government observers believe the new legal and operational framework for federal budgeting and inter-government fiscal relations represents a comprehensive and coherent structure which, despite inevitable refinements, will remain the standard for the foreseeable future. Initiatives toward enhanced program budgeting, increasing results tracking, shifts in funding sources or expenditure assignments among levels of government, or changed incentives at the sub-national level would build on, rather than replace, this structure. The continuing efforts of regions to improve their performance and federal ratings, incentives and disincentives for performance incorporated into the system, plus plans for a follow up operation reinforce confidence that the achievements will be sustained. 5. Assessment of Bank and Borrower Performance (relating to design, implementation and outcome issues) 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry (i.e., performance through lending phase) Rating: Satisfactory The Bank‘s performance in ensuring quality at entry was satisfactory. The Bank drew on a long record of analytical work on decentralization both globally and in Russia. It tapped into lessons from sub-national projects in the country in the design of the project‘s 14 management structure. Its planned linkage of the project to a subsequent adjustment operation (FFRFP) providing grant funding to competitively selected regions undertaking fiscal reforms was insightful and innovative. Insightful as it provided notable incentives for reform to regions—perhaps less for the amounts of money involved as for the dynamic of regional competition and professional pride. Making the quick disbursing resources grants rather than on-lent funds reduced complications for the regions and reform effort. The process was an innovation in Russia and led to replication in several sectors such as health and education. The project reflected a well balanced approach—addressing the legal framework as well as strengthening capacity at the federal and regional levels and improving the monitoring of performance. This holistic view recognized the inter-connectedness of the component parts and the value chain between federal laws and regional performance. The subsequent extensions of the project and expansion into deeper reform in budgeting did not reflect design flaws or implementation delays, but rather operational successes and opportune decisions to build on the advances. The project, in providing a reform championing counterpart team with a reliable source of international experience and financial assistance, broadened the debate and policy options considered as Russia designed and built its fiscal federalism structure. (b) Quality of Supervision (including of fiduciary and safeguards policies) Rating: Satisfactory The Bank‘s supervision of the project was thorough and highly valued by counterparts. From 2003 onward the task team leader was a field based Russian speaking fiscal economist. He was supported by an adequate mixture of headquarters and local staff. Until 2004, when the FFRFP closed, there was considerable overlap and synergy between the project and the FFRFP teams, with joint supervision missions and aide memoires, full integration of the operations, etc. All terms of references for contracts under the operation (which totaled 94) were vetted by the Bank. All contracts were also subject to prior Bank review. Fiduciary and safeguard standards were fully met. Country Directors, Sector Managers, and team members recognized the high profile of the operation and its importance to the Bank‘s interaction with the Finance Ministry and Government, and provided high level attention to the operation. The control function was carried out both by the Bank and by the client. According to all consultants interviewed, the client was rigorous in demanding quality and insistent in seeking adjustments to products when it deemed it necessary. The 2004 QAG review of supervision quality found the operation ―a good example of a well designed and implemented technical assistance project‖. The QAG panel thought it ―Likely‖ that project objectives would be attained. It noted that ―Supervision of the operation was greatly helped by an efficient PIU, very good, high-level government ownership and the operation of the Inter-Ministerial Working Group (IMWG)‖. The adequacy of supervision inputs and processes was rated as highly satisfactory, with the focus on development effectiveness and the supervision of fiduciary/safeguard aspects judged satisfactory. The panel felt that the realism and quality of project performance 15 reporting was moderately satisfactory because the outcome and monitoring indicators focused on processes and outputs rather than outcomes. The region consistently differed with the panel on this issue, viewing the project as a means to create inputs (from the TA loan‘s point of view ―outputs‖) which contributed to ―outcomes‖ under the RFFRFR adjustment operation. There were internal discussions in the Bank about the merits of the latter loan extensions, with some questioning whether it undermined the coherence of the investment project mechanism or was unduly costly to the Bank in terms of administrative budgets given the low disbursement rates. The long time needed to secure definition and agreement on additional performance indicators was also a point of concern. The slow pace of loan disbursements and extended time required to finalize an expanded list of performance indicators led to implementation ratings of Moderately Satisfactory. On balance and in retrospect, however, the value added by the Bank‘s presence to the government‘s program, the high commitment of the authorities to a successful and important operation, and their strong desire for continued partnership with the Bank in the project validates the decisions to extend the project. During the years of almost no borrowing from the Bank, extensions allowed the client to implement a new round of budget reforms and to strengthen further capacity at the sub-national level. Once agreement was reached in principle on a new operation (in turn reflecting increased scope for revived Bank lending to Russia) which would continue the reform program, the Bank signaled its desire to cease additional extensions and the loan was closed. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory The project exceeded its original expectations. Its extension and expansion reflected the government‘s appreciation of its importance and opportunities it helped create, the soundness of its conceptual design, its solid supervision, and the quality and credibility conferred by the Bank‘s presence. The additional co-financing resources provided by the Government plus request for a follow-up operation are also tangible, market test, measures of the Bank‘s overall performance. 5.2 Borrower Performance (a) Government Performance Rating: Satisfactory The various government units involved in the project‘s design and execution performed in a satisfactory manner. Project Development Objectives as well as original and added intermediate results indicators and outcomes were met or exceeded. This achievement at the federal level and in those reforming regions undertaking fiscal capacity building is impressive, and reflects commitment and maturing capacity at all levels. The coordination, positive responses from regional governments, and reinforcements through a variety of incentives by the federal authorities demonstrated good collaboration and shared vision. The determination of senior government officials as well as their deft bureaucratic skills were noted by many observers. 16 (b) Implementing Agency or Agencies Performance Rating: Highly Satisfactory The Ministry of Finance performed in a highly satisfactory manner. PDOs were achieved, the reach of the project expanded and deepened, and important precedents in terms of competitive grant procedures to promote sub-national reforms or extensive use of international experiences and consultant studies to inform policy decisions piloted. The Ministry provided clear project leadership, strong ownership, and proactivity in identifying and addressing emerging issues. The administration of the project by FER was professional with the successful contracting of a multitude of studies, nearly flawless fiduciary performance, substantive inputs, and close working relations with both the client and Bank. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory The borrower successfully implemented a comprehensive and technically challenging capacity building project at two levels of government. Targets were met or exceeded with real and sustainable impacts on an important facet of public sector operations. The advances serve as the foundation for further reforms in the remaining regions and municipalities as well as structure for important improvements in public sector resource allocation and efficiency improvements nation-wide. These systemic reforms and capacity improvements do not guarantee improved outcomes for citizens, but better service delivery would be impossible without them. 6. Lessons Learned (both project-specific and of wide general application) Strong ownership of public sector reform programs is a sina qua non for success. Commitment and shared vision are salient for all Bank projects. But operations which seek to change policies, procedures, incentives across a country‘s public sector, and sometimes touch the core of a nation‘s political economy, require a higher threshold of counterpart understanding, dedication, and leadership. The steadfast support of key officials within the Finance Ministry across a 14 year period from project preparation to loan closure is impressive. The rarity of such sustained commitment or stability in counterpart champions attests to its value in this case. Bank operations in public sector reform too often rest on the narrow shoulders of reform champions whose admirable willingness to undertake worthy efforts can also suggest vulnerability and short tenure. The Bank team also sought to assure in preparation that the project enjoyed high level support and designed a governance structure to involve and inform key stakeholders. Multiple benefits from marshalling global expertise both for the analytical foundations of the project and credibility with client. The extensive analytical work used to design the project and accompanying FFRFP reflected an understanding of the various key deficiencies in the legal framework, federal monitoring, capacity weaknesses, and gaps in sector knowledge. The intellectual breadth of the Bank team, access to the 17 best international practice and experts, and commitment to policy dialog continued into execution. This Bank succeeded in bringing together a superior team of experts which was the only route to gain credibility with a Middle Income Country which while challenged by its current practices, was certainly sophisticated in realizing the wealth of international experience and options to tap that experience through the private sector directly or through other institutions. Synergies and incentives from quick disbursing operations parallel to technical assistance operations magnify project impact. The twin stars of the RFTAP and FFRFP provided significant synergy during the first years of the project in terms of the analytical foundation for reforms, incentives to regions, higher profile within the government for the reform program, demonstration of Bank commitment and confidence in the reform effort, and as a model for subsequent combinations of technical assistance/grant funding reform operations. The overlap in team memberships, on both sides, permitted seamless decision making on the two operations. Value of multi-year partnership with committed clients. The Bank and Finance Ministry have become strong partners in the area of fiscal federalism and broader PFM reform over the 11 years of the operation. There appears to be a level of confidence and goodwill on both sides which facilitates open dialogue. The various extensions of the project, whatever the valid questions regarding the role and length of investment projects, or costs to the Bank‘s administrative budget, reflected a level of commitment by the Bank to a well performing project and a serious client which should not be discounted. The multi-year project helped the client to conduct deep and thorough reforms of PFM and intergovernmental fiscal relations, to transform those systems into the modern ones. The Bank‘s ability to contribute to this economic and social development of this partner can only have been enhanced by the Bank‘s record in staying the course and showing flexibility by adhering to its highest goals in bringing the best it could offer to this client. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies Relevant changes of numbers have been made in the ICR with respect to the comments on a number of Russian regions in the 1990-ies and total Project Management costs. The final name of the follow up operation is still under discussion due to an increase in the project scope, that is why the name of the operation in the text could be treated as a tentative. Recurrent Costs of participating regions were provided in-kind. For reasons of accuracy only cash contributions by the federal government have been disclosed in the financial section of this report. Project performance indicator ―Regional Borrowings and Debt Servicing Profiles Improved‖ consists both of qualitative and quantitative measures. Improvements with respect to qualitative changes have been highlighted in explanations of the rating. On the 18 other hand quantitative measures did not improve. That is why the rating remained at ―Partially Achieved‖ level. (b) Cofinanciers Not Applicable (c) Other partners and stakeholders (e.g. NGOs/private sector/civil society) No consultations were conducted with NGOs/private sector/civil society during project preparation or implementation. 19 Annex 1. Project Costs and Financing 1 (a) Project Cost by Component (in USD Million equivalent) Actual/Latest Appraisal Estimate Percentage of Components Estimate (USD (USD millions) Appraisal millions) STRENGTHENING FEDERAL 2.2 17.92 814 LEGISLATION STRENGTHENING FEDERAL 8.1 11.69 144 MONITORING CAPACITY ASSISTANCE TO SUB- 9.4 28.66 304 NATIONAL GOVERNMENTS SECTORAL PUBLIC 2.2 3.10 141 EXPENDITURE REVIEWS PROJECT MANAGEMENT 6.8 8.08 119 Total Baseline Cost 28.7 69.45 242 Taxes 4.3 Recurrent Costs 0.43 Price Contingencies 2.9 0.00 Total Project Costs 35.9 69.89 Front-end fee PPF 0.0 0.00 Front-end fee IBRD 0.3 0.30 Total Financing Required 36.2 70.19 193 1 Given discrepancies relating to price contingencies, taxes and component costs in the text and tables of the original Technical Annex, it has not been possible to replicate some of cost estimates. As a result the costs at Appraisal are based on Table 3.1 of the Technical Annex, with so called operating costs attributed to Project Management and goods split two thirds/one third between Components 2 and 3. Figures for actual costs are based on project financial statements and categories. 20 (b) Financing Appraisal Actual/Latest Type of Estimate Estimate Percentage of Source of Funds Cofinancing (USD (USD Appraisal millions) millions) Borrower 6.2 41.58 670 International Bank for Reconstruction 30 28.61 95 and Development 21 Annex 2. Outputs by Component Output Indicators (Twelve ―Performance and Monitoring Indicators‖ were listed in an attachment to the Technical Annex but not identified as PDO or Intermediate Results Indicators (the latter were not in use by the Bank at the time of loan approval). All are addressed below. Six of the twelve indicators tracked in ISRs beginning in 2005 (five of which were deemed PDO indicators) are noted with an asterisk. New indicators added in 2008 are noted with two asterisks.) A. Strengthening Federal and Regional Fiscal Legislation Indicator/Target: Achieved: Main laws and legal amendments on expenditure Laws and legal assignments were completed by 12/31/2006 with the drafting amendments on and subsequent approval of : expenditure assignments  Federal Law No. 258-FZ (December 29, 2006) ―On completed.* introduction of amendments to certain legislative acts of the Russian Federation, in the context of modernization of authority delimitation.‖  Federal Law No. 122-FZ (August 22, 2004) ―On introduction of amendments to certain legislative acts of the Russian Federation and on certain legislative acts of the Russian Federation, deemed to have lost force, with regard to adoption of Federal Laws (i) ―On amendments to Federal Law, (ii) ―On common principles of organization of legislative (representative) and executive public bodies of the RF subjects‖, and (iii) ―On common principles of organization of local government in the Russian Federation‖  Federal Law No. 83-FZ (May 8, 2010) ―On Introduction of Amendments to Certain Legislative Acts of the Russian Federation in Connection with Improved Legal Status of State (Municipal) Institution‖ was drafted with project support. Indicator/Target: Laws Achieved: Laws and legal amendments on unfunded mandates and legal amendments were drafted mostly in 2001, including: on unfunded mandates  Draft Law ―On amendments to Federal Law ―On drafted public guarantees and compensations for individuals, working and living in Far North regions and regions, assimilated to them‖.  Draft Law ―On amendments to Federal Law ―On veterans‖.  Draft Law ―On amendments to the RF legislative acts on issues of remuneration for employees of budget sphere organizations‖. 22  Draft Federal Law ―On common principles of organization of local government in the Russian Federation‖ in the part of financial provision of local government.  Federal Law of October 6, 2003 No. 131-FZ ―On common principles of organization of local government in the Russian Federation‖.  Federal Law of August 22, 2004 No. 122-FZ ―On introduction of amendments to certain legislative acts of the Russian Federation and on certain legislative acts of the Russian Federation, deemed to have lost force, with regard to adoption of Federal Laws (i) ―On amendments to Federal Law, (ii) ―On common principles of organization of legislative (representative) and executive public bodies of the RF subjects‖ and (iii) ―On common principles of organization of local government in the Russian Federation‖. Indicator/Target: Laws Achieved: Laws and legal amendments on budget reporting on reporting, budgeting were drafted in 2004 and legislation was approved by and budget management December 2005: drafted  Order of the RF Ministry of Finance of 24.02.05 No. 26N ―On adoption of Methodical recommendations on introduction of budget accounting instruction, approved by the order of the RF Ministry of Finance‖;  Order of the RF Ministry of Finance of 21.12.05 No. 152N ―On adoption of recommendations on usage of budget classification of the Russian Federation‖. Laws and legal amendments on budgeting and budget management were drafted mostly in 2008-2009 and regulations issued by October 2009:  RF Government decrees of December 29, 2008 No. 1065 ―On formation and financial provision of execution of public assignment by federal executive bodies and federal public institutions‖.  Circular letter of the RF MOF dated 04.07.2008 No.02-02- 05/1959 ―On methodical recommendations on formation of expenditure liabilities‘ planning registries of budget planning subjects and public non-budget funds of the Russian Federation for 2009 and planned period of 2010 and 2011‖;  Circular letter of the RF MOF dated 11.09.2009 No. 02-09- 01/4389 ―On expenditure liabilities‘ planning registries and rationalization of budget provisions of chief administrators of federal budget funds for 2010‖; 23  Circular letter of the RF MOF dated 01.10.2009 г. No. 02- 09-01/4670 ―On methodical recommendations on formation of expenditure liabilities‘ planning registries of chief administrators of federal budget funds for 2010 and planned period of 2011 and 2012, methodical recommendations on formation of rationalization of budget provisions of chief administrators of federal budget funds for 2010 and planned period of 2011 and 2012‖. Indicator/Target: Achieved: Model laws on capital and multi-year budgeting Model laws on capital were drafted mostly by 12/30/2005 and legislation updated and multi-year subsequently (Federal Law of 24.11.2008 N 204-FZ (ed. of budgeting drafted.* 02.12.2009) "On federal budget for 2009 and planned period of 2010-2011� ).. Multi-year budgeting began in RF in FY 2008. A revised capital budget system was initiated in FY 2008. For regional and municipal levels the project supported the development of:  Concept of medium-term financial planning in subordinate Russian Federation regions/entities;  The resulting legislation regulating issues of the budget process;  Methodical recommendations on medium-term financial planning  Decrees on development, adoption, execution and monitoring of long-range financial plan of Russian Federation regions/entities for N – (N+2) years with annexes  Legal acts regulating the common order of interactions of financial body‘s units on development, execution and monitoring of execution of medium-term financial planning with annex: ―List of data and indicators, necessary for development of long-range financial plan for N – (N+2) years‖. Examples of laws introduced: Vologda Region Law of February 27, 2005 No. 1230-OZ ―On amendments to Vologda Region Law ―On the budget process in Vologda Region‖. The Chuvash Republic Cabinet of Ministers decrees of February 25, 2005 No. 42 ―On adoption of Order of formation, review, adoption and execution of long-range financial plan of the Chuvash Republic‖. Decree of Governor of Chelyabinsk Region dated 25.02.2005 No. 64 ―On amendments to Decree of Governor of Chelyabinsk Region dated 28.12.2004 No. 691 ―On adoption 24 of order of formation of long-range (medium-term) financial plan of Chelyabinsk Region‖. In all three indicated regions the long-range financial plan was firstly adopted by decrees of the subjects‘ executive bodies before the beginning of the financial year (in Vologda Region – by Government Decree dated October 15, 2004 No. 950, in Chelyabinsk Region – by Governor‘s Decree of 28.12.2004 No. 691, in the Chuvash Republic – by Decree of Cabinet of Ministers dated 30.09.2004 No. 235). Indicator/target: Achieved: Model laws on budget audits were drafted by Model laws on budget November 2009 (RFTAP1.22) and were approved by audits drafted February 2010.  Section IХ ―Public and municipal financial control‖ of the Budget Code of the Russian Federation (edition of October 2009)  Section 9 ―Development of public (municipal) financial control system‖ of Program on enhancing of budget expenditures effectiveness for the period up to 2012,  Action plan for realization of Program on enhancing of budget expenditures effectiveness for the period up to 2012 (para 27 ―Adoption of order of internal control execution in federal executive bodies‖). Earlier in 2008 for regional and municipal levels were formulated (RFTAP3.7):  List of sub-systems of finance management system and procedures, connected with them, which need research during audit (independent expert evaluation) of public and municipal finance;  Key criteria and indicators for usage during audit of public and municipal finance;  Model (standard) and expanded programs of audit of public and municipal finance;  Methodic of evaluation of budget expenditure effectiveness (education, healthcare, social policy);  Order of organization and implementation of budget audit, requirements to auditors, authorities of auditors. B. Strengthening Federal Monitoring Capacity: Fiscal Monitoring Division and the PIU for the RFTAP Indicator/Target: Achieved: Computerized information network was designed Computerized and developed shortly after project effectiveness and fully information network for installed by August 2001. Subsequent upgrades, supported by fiscal monitoring in the project, have improved capacity as modules and 25 place.* information requirements are added. Indicator/Target: Achieved: An inventory of all expenditure assignments to Inventories of regional entities was completed by May 2001 and has been expenditure assignments regularly updated and kept current since. completed.* Indicator/Target: Achieved: Beginning in 2001 the MOF in cooperation with the MOF performs Federal Treasury began monitoring all overdue payables of all quarterly monitoring of regions on a monthly basis and produced monthly reports overdue accounts published on the internet. The results are available at payable of the Russian http://info.minfin.ru/isprf.php regions.** Indicator/Target: Achieved: Non-systematic monitoring of regional debt, Monitoring of debt of including borrowings from international financial institutions the Russian regions, without sovereign guarantee began in 2003. Beginning May including borrowings 2007 monitoring became systematic and is performed by the from international MOF on a monthly basis. The results are published on the financial institutions internet at http://www1.minfin.ru/ru/public_debt/subdbt/ without sovereign guarantee, is performed by the MOF on an annual basis.** C. Assistance to Sub-National Governments in Accounting and Budgeting Indicator/Target: Achieved: Treasury principles of budget execution were Treasury principles of instituted by July 31, 2002 in all regions participating in the budget execution Regional Fiscal Reform Fund, which also received technical implemented.* support from the project Indicator/Target: Achieved: as of 08/31/2007 in participating regions Code of Regional compliance Good Practice were introduced. A program on dissemination with clauses of Code of of information on results of this introduction among the RF Good Practice improved subject entities was implemented by the project. Indicator/Target: Achieved: Computerized systems, As of 12\31\2003 computerized systems were introduced in in particular financial project participating regions, which allowed a switch to the reporting, installed treasury principle of budget execution. As of 12/31/2005 a model operation of medium-term financial planning (including special software to calculate medium-term financial plan) was introduced in participating regions. As of 12/01/2009 an automated system in the MOF of financial management quality evaluation of chief executives implementing the federal budget was introduced. As of 12/01/2009 a system of collection and processing of data on execution of budgets of the RF subjects was introduced. Indicator/Target: Partially Achieved: In project participating regions a formal 26 Regional borrowing and method of planning and managing direct and indirect debt servicing profiles liabilities was introduced by 03/31/2006. It was connected improved with systems of financial planning and investment activities (for example, a loan cap began to be defined by calculation of ―debt capacity‖). Corresponding normative legal acts included:  Government Decree of Vologda Region dated 04.10.04 No. 927 ―Concept reforming of debt management system in Vologda Region‖  Government Decree of Vologda Region dated 15.10.04 № 951 ―On modernization of public debt management in Vologda Region‖, ―Clause on execution of register of debt liabilities and credit debt of Vologda Region, enterprises and organizations, in which the share of Vologda Region is more than 50 percent of capital stock‖  Concept of public debt management in Chelyabinsk Region (adopted by Decree of Governor of Chelyabinsk Region dated 25.02.2005 No 66)  Concept of public debt management in the Chuvash Republic ( adopted by Decree of Cabinet of Ministers of the Chuvash Republic dated 25.02.2005 No. 41)  Edict of the Minister of Finance of the Chuvash Republic dated 25.02.2005 No.64/P ―On adoption of Order on regulation of overdue payment on the Chuvash Republic debt liabilities and overdue credit debt of public organizations in the Chuvash Republic‖ Debt stock to total revenue ratio (as of January 1, 2002 in comparison to January 1, 2011) increased for these three participating regions: Vologda Region- from 42.6% to 51.3%, Chelyabinsk Region- from 0% (no debt at all) to 12.1%, and Chuvash Republic- from 20.7% to 36.7%. These levels are judged acceptable by the MOF. And for the Chelyabinsk regions debt has now become a modest policy tool. On 29.12.2006 ―Methodical recommendations on public and municipal debt management for the RF subjects and municipal organizations‖ were published on the official web-site of the RF MOF. Regional and municipal debt management as a whole has switched from mostly non-market forms of deficit financing (budgetary loans) to mostly market forms (funded loans),with increased duration of debt liabilities of participating regions from one year to more than three years with decreased real percent rates. 27 Indicator/target: Achieved: Formula based equalization transfers were Formula-based instituted by July 31, 2002 for all regions participating in the equalization transfers Regional Fiscal Reform Fund, which also received technical designed.* support from the project. Subsequently the use of formula based transfers was expanded nationwide and 90 percent of equalization transfers to regions were based on a formula as of end 2006. That figure reached 98 percent of transfers by December 31, 2009. Indicator/target: Over Achieved: As of December 2009 the allocation of Allocation of transfers, transfers, subsidies, and subventions from the budgets of all subsidies, and Russian regions (100%) is based on approved methodologies. subventions from the These methodologies are based in legislation and federal budgets of at least 60 norms developed in significant part with project support. Russian regions is based In participating regions this condition was completed by on approved 07\31\2002 methodologies. ** Indicator/target: In at Over Achieved: As of December 2009 revenue assignments least 70 Russian regions and expenditure responsibilities are made according to the revenue assignments relevant federal legislation in all (100%) regions. and expenditure responsibilities are made according to the relevant federal legislation. ** Indicator/target: Debt Over Achieved: As of December 2009 the debt stock of 96 stock in at least 90 percent of Russian regions was in compliance with the Budget percent of the Russian Code caps. By December 2010 the RF Budget Code regions is in compliance requirements on public debt ceilings and cap of expenditures with the Budget Code on public debt service of the RF subject were achieved in 100 caps. ** percent of regions. Indicator/target: Over Achieved: As of December 2009 65% of regions (54 Number of regions, regions plus 20 municipalities) have received federal grants which received federal from the Regional and Municipal Fiscal Reform Fund. The grants from the Fund was closed in 2010. The MOF has created a new fund to Regional and Municipal promote regional programs to increase budget efficiency on Fiscal Reform Fund the similar principles. (managed by the MOF) during years of its operations, is not less than 25% of total number of regions. ** D. Sectoral Public Expenditure Reviews No specific intermediate results indicators were established, but a series of public expenditure reviews and sectoral studies carried out by April 2004 supported achievements within the other components. The studies included: 28  Public expenditure review of housing and utilities (RFTAP/QCBS/4.1) was completed by January, 2002.  Public expenditure review of education (RFTAP/QCBS/4.2) was completed by December, 2001.  Public expenditure review of health (RFTAP/QCBS/4.3) was completed by December, 2001.  Public expenditure review of culture and recreation (RFTAP/QCBS/4.4) was completed by July, 2003.  Public expenditure review of public transportation (RFTAP/QCBS/4.5) was completed by July, 2003.  Public expenditure review of national economy (RFTAP/QCBS/4.6) was completed by April, 2004.  Public expenditure review of law enforcement (RFTAP/QCBS/4.7) was conducted by July, 2003.  Public expenditure review of regional and municipal governance (RFTAP/QCBS/4.8) was completed by July, 2003.  Diagnostic review of the regional fiscal health and quality of fiscal management in the Novosibirsk Oblast (RFTAP/QCBS/4.9‖) was conducted by July, 2003. 29 Annex 3. Economic and Financial Analysis (including assumptions in the analysis) N.A. As an institution-building project, quantitative computations of economic and financial rates of return are not applicable nor estimated at appraisal. 30 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Program Team Lawrence Hannah Senior Economist Leader Stepan Titov Economist ECSPE Task Team Leader Eugene Gurenko Economist Task Team Leader Douglas Sumerfield Operations Officer Team Member Maria Shkaratan Economist Team Member Benoit Bosquet Young Professional Team Member Helena Makarenko Team Assistant Team Assistant Supervision/ICR Stepan Titov Senior Economist ECSPE Task Team Leader Procurement Olga Gubareva Procurement Assistant Assistant Alexander Balakov Procurement Specialist Procurement Alexander Rukavishnikov Procurement Specialist Procurement Financial Galina S. Kuznetsova Sr. Financial Management Specialist Management (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY99 212.47 FY00 69 138.64 FY01 0.12 FY02 0.00 FY03 0.66 FY04 0.00 FY05 0.00 FY06 0.00 FY07 0.00 FY08 0.00 Total: 69 351.89 Supervision/ICR FY99 0.00 FY00 35 77.09 FY01 48 120.29 31 FY02 30 81.80 FY03 18 74.64 FY04 28 41.23 FY05 29 45.80 FY06 24 39.32 FY07 31 59.47 FY08 37 79.28 FY09 36 98.86 FY10 26 65.02 FY11 27 68.04 FY12 8 45.31 Total: 377 896.15 32 Annex 5. Beneficiary Survey Results (if any) N.A. No beneficiary survey was conducted. 33 Annex 6. Stakeholder Workshop Report and Results (if any) N.A. No stakeholder workshop was conducted. 34 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR The following translation of the Letter from the Ministry of Finance (by Deputy Finance Minister Mr. Alexei Lavrov) represents comments by the Borrower on the Draft ICR (the original letter in Russian is available upon request). In general, the Ministry of Finance totally supports the key conclusions and assessments made by the International Bank for Reconstruction and Development in the Implementation Completion Report on the Regional Fiscal Technical Assistance Project. However, we find it necessary to make some minor clarifying amendments as follows: 1. Page 1: To amend Section 1.1 Context at Appraisal by changing the number of Russian regions from 83 to 89 to reflect the actual number of regions in the 1990s. Merger of regions that reduced their number to 83 by 2011 took place after the effectiveness of the Regional Fiscal Technical Assistance Project. 2. Page 9: To change the name of the follow-up MOF/IBRD project from the Public Finance and Financial Sector Modernization Loan to the Public Finance System Enhancement Project as the proposed project scope has increased to include various fiscal policy activities while financial sector development issues have been separated to form a self-standing project. 3. Page 18: Table Project Costs and Financing: actual amount allocated for Project Management is given as $8.09 million. According to the Russian counterparts, total costs financed under that category during the Project lifecycle amounted to $8.08 million. 4. Page 18: Table Project Costs and Financing includes Recurrent Costs. However, the amount specified in the Table reflects only MOF‘s costs leaving out Recurrent Costs incurred by the participating regions which amounted to $3,482 million. 5. Page 24: MOF finds it necessary to amend Project performance indicator Regional Borrowings and Debt Servicing Profiles Improved and replace the proposed indicator rating at Project completion from ‗Partially Achieved‘ to ‗Achieved‘. This can be justified not only by the institutional framework for managing regional borrowings and debt which radically improved at large and especially in the participating regions during and due to Project implementation but also by the qualitative parameters of the debt market in the participating regions which improved as follows: duration increased from 1 to 3 years; interest rates decreased 1.5-2 times; and the share of market instruments in the debt structure went up (the share of borrowings from the private sector increased, inter alia, via securities issue). Based on the above, it would be reasonable conclude that the target performance indicator in question was fully achieved. 35 The following translation of the Letter from the Ministry of Finance represents the summary of the Borrower’s ICR (both original letter and Borrower’s ICR in Russian are available upon request). Further to the Implementation Completion Report on the Regional Fiscal Technical Assistance Project submitted to the Ministry of Finance for review, I am sending you a proposed summary of the key Project results to be included in the ICR. The Regional Fiscal Technical Assistance Project played a key role in reforming the public finance management system in Russia in 2000-2011. It allowed achieving relevant and essential results in the following areas:  A reform of intergovernmental fiscal relations, a municipal reform, and establishment of a local budget system in general;  Transition to mid-term budgeting at the federal, regional and local levels;  Development of a regulatory and methodological framework for and implementation of performance-based budgeting, including a programmatic budget;  Introducing internal audit and performance evaluation of public expenditures;  Development and implementation of a budget network reform, including introduction of new organizational forms of public and municipal entities and institutions;  Improving the types and methods of statistical observation in the public sector;  Transition to using customer satisfaction indicators to assess performance of public institutions and entities and improve overall transparency and accountability of the public administration sector;  Significant improvement of the quality of financial management by public authorities and public administration entities at all levels of government;  Introduction of innovative methods to promote public sector reforms by developing subsidy allocation rules based on reform performance;  Preparation of recommendations on how to improve the efficiency of sector- specific expenditures at all levels of government;  Strengthening the institutional capacity of the Ministry of Finance in: public sector management; budget preparation and execution; monitoring of the quality of financial management by the Chief Budget Administrators; and methodological support of the budget process;  Professional development and retraining of the staff of regional financial authorities, local authorities, and financial departments of federal ministries and agencies;  Development of recommendations and consistent support of budget reforms in general, and significant improvement of the regulatory legal framework for a wide range of fiscal policy issues; and  Preparation and dissemination of a best practice code as a body of guidelines on specific technologies and blocks of the public finance management system based on international best practice. 36 The Project had a strong impact on the financial authorities‘ training system and education program content. The Project not only fundamentally improved the quality of financial policy in the public administration sector (inter alia, through large-scale best practice dissemination and professional development of financial department staff) but also laid the foundation for further sustainable improvement of fiscal policy mechanisms due to both creation of a competitive environment in best fiscal decision making and establishment of an advisory service market which provides federal, regional and municipal authorities with new guidelines based on international and best local experience. 37 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders N.A. No co-financiers or other partners. 38 Annex 9. List of Supporting Documents Technical Annex to the Memorandum of the President—Regional Fiscal Technical Assistance Loan, World Bank, November 30, 1999 Fiscal Federalism and Regional Fiscal Reform Development Loan Agreement Project Summary Reports (PSR) 2003-2004 Implementation Status and Results Reports (ISR) 2005-2011 Aide Memoires Russia Country Partnership Strategy Russia Country Partnership Strategy Progress Report, Quality of Supervision Assessment, Regional Fiscal Technical Assistance Loan, QAG, September 3, 2004 Implementation Completion Report, Fiscal Federalism & Regional Fiscal Reform Project, World Bank, January 4, 2006 Decentralization in Regional Fiscal Systems in Russia: Trends and Links to Economic Performance, Freinkman and Yossifov, World Bank, 1999 Intergovernmental Reforms in the Russian Federation, One Step Forward, Two Steps Back?, De Silva, Kurlyandskaya, Andreeva, Golovanova, World Bank, 2009 Persons Interviewed for ICR World Bank Pedro Alba Russia Country Director Stepan A Titov RFTAP Task Team Leader Galina Kouznetsova Financial Management Specialist, RFTAP Team Alexander Balakov Procurement Specialist, RFTAP Team Marsha Olive Country Manager, Tajikistan, Former Country Program Officer, Russia Department Government of Russia Alexei Lavrov Deputy Minister of Finance, MOF Larisa Yeroshkina Director of Inter-budgetary Relations Department, MOF Ekaterina Dmitrieva Head of International Finance Relations Division, MOF Mstislav Korolkov General Director, FER Vladislav Onischenko Deputy Director of the Project, FER Research Institutes/Consulting Firms Artyom Barakhovsky Director, Research Budgetary Center, Ekaterina Vaksova Deputy Director, Research Budgetary Center, Irina Starodubrovskaya Gaidar‘s Institute Galina Kurlyandskaya Director, Center for Fiscal Policy 39 This map was produced by the Map Design Unit of The World Bank. 70°N 80°N 80°N UNITED STATES OF AMERICA The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank A RCT IC O CEA N Group, any judgment on the legal status of any territory, or any Bering St endorsement or acceptance of such boundaries. ra Nor wegian Sea it 60°N NETH. NORWAY ng e Ra DENMARK r y B a r e n t s Franz Josef da SWEDEN East Siberian An GERMANY S e a Land Sea Anadyr Severnaya New Siberia Zemlya Islands Murmansk Novaya RUSSIAN FINLAND FED. Zemlya Kaliningrad Kola Laptev ESTONIA Pen. Kara Sea Sea LATVIA POLAND LITH. Karelia la insu In St. Petersburg Pen di Kolyma Pskov m yr ange Tay g irka Petrozavodsk Arkhangel'sk Novgorod Che rskiy BELARUS Nar'yan Mar Ran Kolmya R Yamal ga ge a wland n Smolensk Tver Pen. at Lo Vologda Gyda Kh Siberian MOSCOWYaroslavl Kotlas Vorkuta Pen. Bryansk Kaluga UKRAINE s. Kostroma Salekhard Orel Ivanovo Syktyvkar Ob Le t Tula Vladimir M na Kursk Magadan Ryazan Nizhny Novgorod Petropavlovsk- al Belgorod Lipetsk Kirov Central Kamchatskiy Ur Voronezh Cheboksary Yoshkar-Ola Tambov Okhotsk Saransk Kazan' Sea of Penza Izhevsk Siberian °N Yakutsk Range Perm' Khanty- Black 50 Ul'yanovsk Mansiysk Okhotsk Rostov- Sea on-Don R. Saratov Wes We s t Plateau a dzhur Len en Krasnodar Samara Ufa Yekaterinburg d Maykop Volgograd Al Stavropol Tyumen Si r S i b eO i a n Dzhug Chelyabinsk b Ye n Elista Orenburg l Gora El'brus Cherkessk bo To Kurgan Pla Plain i (5,633 m) sey Nal'chik Astrakhan r a l Angara U Vladikavkaz Nazran ur Omsk Am GEORGIA Groznyy Tomsk Makhachkala Yuzhno- Sea Novosibirsk Kemerovo Krasnoyarsk Sakhalinsk AZERBAIJAN Novokuznetsk Lake ian Barnaul Blagoveshchensk Khabarovsk Abakan Baikal Birobidzhan Ust' Ordynskiy sp Chita K A Z A K H S TA N Ca UZBEKISTAN Irkutsk Ulan Ude li n Gorno- Aginskoye ote-A Altaysk Kyzyl °N 40 RUSS I A N Sikh FEDER AT I O N CHINA Vladivostok Sea of OBLAST CENTERS Japan MONGOLIA FEDERAL CITIES D.P.R. J A PA N OF NATIONAL CAPITAL KOREA RIVERS REP. 0 200 400 600 Kilometers OF MAIN ROADS KOREA RUSSIAN RAILROADS FEDERATION IBRD 33470R2 0 200 400 600 Miles °N OBLAST, KRAI, REPUBLIC, AUTONOMOUS 30 OBLAST, OR AUTONOMOUS OKRUG MAY 2009 BOUNDARIES INTERNATIONAL BOUNDARIES 90°E 100°E 110°E 120°E 130°E