Effectiveness of State Financial Control at the Federal and Regional

Levels

Raisa I. Sedelnikova

, Ekaterina D. Vetoshkina

and Elena S. Koscheeva

Volgo-Vyatka Institute (branch) of the Moscow State Law University named after O.E. O.E. Kutafin (MSLA),

Kirov (region), Russia

Keywords: state financial control, effectiveness audit, regulatory control of financial control, federal and regional level

Abstract: The article conducts a research of state financial control from the standpoint of its effectiveness.

In particular, it analyzes: regulatory control at the federal and regional levels, practical problems

of spending budget funds, assessment of effectiveness of control, including the responsibility of

bodies. The author's position comes down to considering state control as a system, the elements of

which must interact in coordination. If there is an interrelation between regulatory control at all

levels, the availability of transparent procedures and methods to overcome the practical problems

of spending budget funds, as well as the measures of responsibility of financial control bodies, it

can be said about its effectiveness. The analysis of the legal phenomena under consideration is

carried out through the understanding of the unity of the purpose of state financial control, which

is consistent with the idea of effective spending of funds by budgetary organizations. The

conclusion summarizes, that organizational measures should be taken both at the state and

municipal levels. The purpose of this work is a systematic analysis of state control and the

development of measures to improve its effectiveness. The identification and substantiation of such

proposals correspond to the feature of scientific novelty. The materials and results of the research

can be used as a theoretical basis for the further scientific development of topics, related to the

development of state financial control both at the federal level and at the regional level

1 INTRODUCTION

The advantage of the public sector is the transparency

of budget spending. The population, as the only

source of power in Russia, has the right to know for

what purposes budget funds are being accumulated

(Minashkin, S.A., 2016).

There are two forms to determine the reliability of

financial documentation: state financial control and

effectiveness audit of government costs. The

integration of these forms has taken place recently.

The audit is used in order to confirm the reliability of

financial statements, as well as to develop

recommendations for correcting violations. The audit

is extremely important and necessary because

confirms the compliance of financial transactions

with budget funds and state property with financial

https://orcid.org/0000-0002-4862-6438

https://orcid.org/0000-0001-7729-5386

https://orcid.org/0000-0003-0272-7759

documents, analysis of effectiveness. The audit not

only establishes the reasons for the unprofitableness

but first of all, gives recommendations on how to

correct the situation. The introduction of

effectiveness audit into the system of state financial

control will expand the activities and powers of

controlling bodies, and ensure effective management.

Effectiveness can be ensured only if the state control

covers all levels: from the federal to the level of

municipalities.

Effectiveness audit requires reforming the

structure of state financial control, a qualitatively new

and modern approach, that would meet the economic

interests of the state (Nazaretyan, D.G., 2016).

Sedelnikova, R., Vetoshkina, E. and Koscheeva, E.

Effectiveness of State Financial Control at the Federal and Regional Levels.

DOI: 10.5220/0010662500003224

In Proceedings of the 1st International Scientiﬁc Forum on Jurisprudence (WFLAW 2021), pages 93-98

ISBN: 978-989-758-598-2

2 REGULATORY CONTROL OF

FINANCIAL CONTROL AT THE

FEDERAL AND REGIONAL

LEVELS

Currently, in the Russian Federation there are more

than two hundred acts of the federal and regional

levels, acts of local self-government bodies, that

control relations in the field of financial control. The

Tax Code of the Russian Federation contains chapters

on financial control. Currently, delegated legislation

is in force, in particular, the Decree of the President

of the Russian Federation "On the system and

structure of federal executive bodies", etc.

The constituent entities of the Russian Federation

also adopt numerous acts, that control relations in the

field of financial control, including special ones. By

the nature of these acts, and, despite the specific

content and volume, it is possible to try to form them

into homogeneous groups.

So, the first group unites the main acts of the

constituent entities of the Russian Federation - the

Constitutions and charters of the constituent entities

of the Russian Federation, which contain general

regulations on the bodies, exercising financial

control. Regional regulations reveal the specifics of

the organization of control and accounting power in a

particular region, therefore they play a special part in

the system of sources of legal control. Relevant

regulations may be contained in the laws of the

constituent entities of the Russian Federation, as well

as in regulatory legal acts of the sublegislative level,

adopted in accordance with regional laws.

The second group can include the laws on the

budgetary structure, budgetary process, adopted

mainly in all constituent entities of the Russian

Federation, and in which articles or chapters on

financial control are highlighted.

The third group of acts is constituted by the laws

on the audit chambers of the legislative

(representative) bodies of state power of the

constituent entities of the Russian Federation, these

are important regulations, controlling relations in the

field of financial control.

The laws of the constituent entities of the Russian

Federation on state financial control contain

regulations, controlling the organization and activity

of regional control and accounting bodies. Such laws

usually confirm the organizational and legal

foundations of state financial control, carried out at

the regional level, its principles, methods of

implementation, determine the place, that control and

accounting bodies occupy in the institutional system

of regional state financial control.

Other regulatory legal acts, controlling the

activities of a regional control and accounting body

include, first of all, local (internal) regulatory legal

acts, adopted by the regional control and accounting

bodies themselves, as well as various contracts and

agreements, that govern the interaction of control and

accounting bodies with each other and their

cooperation with other state bodies.

The fourth, small group, consists of special acts

on financial control. Such acts are adopted only in

certain regions of the Russian Federation.

For example, the Law of the Volgograd Region

No. 1800-OD dated December 04, 2008, "On State

Financial Control in the Volgograd Region" contains

regulations, establishing the inspection by the state

financial control bodies of the Volgograd Region of

compliance by the objects of state financial control

with the budgetary legislation of the Russian

Federation, the legislation of the Volgograd Region

and other regulatory legal acts, controlling budgetary

legal relations, and the effectiveness of the use of

state financial and material resources.

The fifth group includes acts of the executive

bodies of state power of the constituent entities of the

Russian Federation. In accordance with Art. 269.2 of

the Budget Code of the Russian Federation, the

procedure for exercising powers for internal state

financial control at the regional level is determined,

along with the Budget Code of the Russian

Federation, by regulatory legal acts of the supreme

executive body of state power of the constituent

entity.

Article 51 of the Law of the Pskov region No.

769-OZ dated June 6, 2008 "On the Budgetary

Process in the Pskov Region" establishes, that internal

state financial control is carried out by the regional

administration and the financial department, and the

procedure for exercising the relevant financial and

control powers is determined by the regional

administration.

State financial control legislation often becomes a

problem. The interrelation of all regulatory legal acts

is of great importance in the formation of the basis: in

order to prevent situations, when there are several

regulations, but still no control. The duty of the

legislator is to objectively review the legislative basis

and eliminate situations of lack of regulatory control.

Today, it is obvious, that the Federal Law “On

State Financial Control” needs to be adopted to

clarify all powers, functions and other gaps. It is

possible to improve the quality of financial

management only by eliminating all the

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nonconformities (Kulaev, M.O., 2013). Currently,

there is a model law "On State Financial Control",

which was adopted at the twenty-fourth plenary

session of the Interparliamentary Assembly of the

CIS member states, which sets guidelines, that can be

used as the basis for federal control in this area.

Determination of these foundations at the federal

level will make it possible to assess uniformity and

identify shortcomings of regulatory control at the

regional level.

3 REGULATORY CONTROL OF

FINANCIAL CONTROL AT THE

FEDERAL AND REGIONAL

LEVELS

Currently, the sphere of spending budget funds has a

number of practical problems. These problems, of

course, are reflected in the effectiveness of state

financial control. Let us pitch upon the analysis of

some of the most relevant of them.

One of the problems is the overpricing of

contracts, which leads to ineffective use of budget

funds. If the requirements for the selection of a

supplier, the method for calculating the initial price

and the established restrictions are met, then in fact,

the controlling bodies do not have the opportunity to

take measures against such a customer.

So, for example, judicial practice indicates one of

the reasons - the procedure for applying methods for

determining the initial price of a contract in the

Methodology of the Ministry of Economic

Development is advisory in nature. In one of the cases

on a claim of the OFAS of the Murmansk Region, the

arbitration court concluded, that the auction

documentation, contained a justification for the initial

price of the contract and complied in this part with the

provisions of clause 1 of Part 1 of Article 64 of Law

No. 44-FL. The defendant's references to the

violation by the Procurator's office of the provisions

of clause 3.7 of the Order of the Ministry of Economic

Development of Russia No. 567 dated 02.10.2013

“On Approval of Methodic Recommendations for the

Application of Methods for Determining the Initial

(Maximum) Price of a Contract, the Price of a

Contract, Concluded With a Single Supplier

(Contractor, Executor)”, were not accepted by the

court. Law No. 44-FL does not contain a certain

procedure for establishing and justifying the initial

(maximum) contract price), according to the number

of requests sent and comparable market prices.

The solution to this problem will be market

research, as well as monitoring market prices and

confirmation of price range, increasing responsibility

by introducing such an administrative violation

(Miheeva, O.A., 2015).

Another problem is the procurement of goods, the

demand for which is either not present or functionally

broader. And again, existing legislation is unable to

solve this problem. Since the establishment of the

quantity, quality, price range will not affect, it is

necessary to have authority within the framework of

refusal to conclude a contract. The goal of solving all

the problems is the same - this is, first of all, the

saving and rational use of budgetary funds.

4 ASSESSMENT OF THE

EFFECTIVENESS OF STATE

FINANCIAL CONTROL

One of the problematic dilemmas in the field of state

financial control is the assessment of its effectiveness.

The effectiveness of control implies the ratio of

compensated damage to the cost of its

implementation. Effectiveness is characterized by

performance, efficiency and cost effectiveness. And

at the moment, the legislation does not formulate

criteria for assessing the effectiveness, efficiency and

cost effectiveness (Kirichenko, S.V., 2015).

In practice, each controlling body determines the

criteria and creates formulas for the assessment. In

such a situation, it is almost impossible to clearly

assess the effectiveness, to compare all the

controlling bodies with each other.

These problems reduce the cost effectiveness,

which is unacceptable in the current difficult

economic and geopolitical situation. Problems can

turn up the heat and prevent from the further

development of the economy. An analysis of work

experience will stimulate the improvement of

legislation and the entire system of state financial

control. Awareness of the benchmark for further

development helps to improve the field of financial

and budgetary relations.

An obstacle in identifying problems in the field of

state financial control is, that currently there is no

methodology for assessing the effectiveness of

financial control. Without a full assessment, it is

impossible to minimize costs and detect

incompleteness in the financial control system.

Effectiveness of State Financial Control at the Federal and Regional Levels

5 RESPONSIBILITY OF

FINANCIAL CONTROL

BODIES

One of the main difficulties in the full implementation

of state financial control is the lack of a structured

system of state financial control. The system should

be hierarchical and provide for active interaction

between elements and participants.

Most of the authors tend to the point of view, that

the structure of state financial control lacks a special

supreme body. A significant disadvantage of creating

a body may be the expansion of an already large

officialdom. The supreme body itself already exists -

the Audit chamber of the Russian Federation. There

is a need to vest with additional powers, related to the

coordination of the entire structure of state financial

control, direct legislative initiative, consideration of

administrative violations, and refering a claim to

courts. The current legislation does not solve the

corresponding difficulties (Sherbenko, E.V., 2016).

Another urgent problem is the insufficient level of

responsibility of the state financial control bodies.

With a low level of responsibility, the most important

principle of control is violated - objectivity. Failure to

comply with this principle entails manifestations of

corruption in government bodies. The most effective

measure to prevent the government financial control

bodies from studying their own interests, which

interfere with the conscientious performance of

control functions and lead to nonobjective

conclusions, could be material incentives for civil

servants (Panskov, V.G., 2014).

Certain problems are caused by such a stage of

control as the implementation of audit materials. The

truth of the matter is the need to make effective

management decisions to eliminate and prevent

further identified violations, but adequate decisions

are often not made, or are taken untimely or not in

full.

The resulting difficulty in the implementation of

the effective functioning of state financial control is

the lack of adequate measures against violators of

budget legislation, and the measures, that exist, are

still not being implemented. To date, the Budget Code

of the Russian Federation establishes responsibility

for violations of budgetary legislation and provides

for 23 elements of violations.

The Administrative Violations Code of the

Russian Federation provides for only 3 elements of

violations. In 2003, criminal liability was introduced

for the misuse of budgetary funds and funds of state

non-budgetary funds.

In practice, it is impossible to impose liability to

those responsible for budget violations due to the fact,

that the Budget Code of the Russian Federation does

not define "budget violation", the law contains the

concept of "violation of budget legislation."

A state contract was concluded, the subject of

which was bank protection works on the sites,

provided for by the Agreement on the granting

subsidies, was concluded at the expense of targeted

grants, allocated to the constituent entity of the

Russian Federation from the federal budget as part of

the implementation of the Federal target program on

the terms of co-financing from the budget of the

constituent entity of the Russian Federation. Works

that did not correspond to the design estimates and

technical specifications, provided by the customer for

an open auction, were performed within the state

contract. The performance of work on this site was

not provided for by the conditions for obtaining a

subsidy, determined by the Agreement. The

acceptance of works not provided for by the project

and the use of budget funds for purposes, not

provided for by the program, were regarded by the

courts as a violation of budgetary legislation.

Financial control, being a specific form of

expression of the control function of finance in

general, plays an important role in the management of

public finance, creating reliable conditions for their

effective and targeted use, is a prerequisite for the

economic development of the regions of the Russian

Federation.

6 CONCLUSION

In order to develop financial control from the

standpoint of its effectiveness, according to the co-

authors, organizational measures should be taken

both at the state and municipal levels. It is necessary

to obligate institutions at all levels to establish

internal financial audit departments.

Analyzing the experience of foreign countries, we

can say, that only the creation of financial

management in the executive bodies and, as an

integral part of it, financial control, will increase the

effectiveness and performance of government costs in

government control.

The implementation of these measures together

will increase the effectiveness of state financial

control, the ultimate goal of which is to achieve

balance and financial stability (Logvinova, M.V.,

2014).

The main methodological measures, affecting the

development of state financial control, include:

WFLAW 2021 - INTERNATIONAL SCIENTIFIC FORUM ON JURISPRUDENCE

1. Monitoring the socio-economic situation, both

at the federal level and at the regional, and especially

at the municipal level. To implement monitoring, it is

necessary to develop a system of indicators, as well

as to monitor the dynamics of financial and economic

indicators and associated information and analytical

activity.

2. Effectiveness audit through the approval of

standards and objective quality indicators. A

comprehensive analysis of the effectiveness of

spending budget funds will allow to minimize costs,

and an analysis of the best world standards of state

financial control will allow to fully optimize the

entire system.

3. Development and validation of the concepts of

state financial control, with the aim of enhancing the

interaction of controlling bodies and increasing

transparency.

4. Combatting Corruption and Raiding.

Mandatory components in this area are the

examination of legislation for corruptogenicity and

the internal security system.

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