Assessing the Quality of Regional Finance Management: Methodological Issues and Areas of Improvement

Constituent entities of the Russian Federation play an important role in financing major social expenditures in the field of healthcare, education, social services and welfare. Their ability to finance the fulfillment of their spending obligations is of fundamental importance. At the same time, under political and economic instability the financial situation of RF constituent entities is most vulnerable, since, on the one hand, their budgets’ revenue receipts are highly dependent on economic conditions, on the other hand, the burden on regional budgets is increasing. In this regard, the effectiveness of managing available financial resources is of particular importance. However, insufficient attention is paid to issues regarding the quality of financial resource management and the necessity and methodology of its assessment. Available economic publications contain only a description of the methodology for assessing the quality of regional finance management approved by Order 552 of the Ministry of Finance of the Russian Federation, dated December 3, 2010 “On the procedure for monitoring and assessing the quality of regional finance management”, and an analysis of the monitoring results conducted by the Ministry of Finance of the Russian Federation based on this methodology. Scientific papers do not contain a critical analysis of the assessment methodology itself; this fact determines the relevance of research in this area. The aim of our study is to identify and systematize main shortcomings of the current methodology for assessing the quality of regional finance management and develop proposals for its improvement. We analyze Order 552 of the Ministry of Finance of the Russian Federation dated December 3, 2010 “On the procedure for monitoring and assessing the quality of regional finance management” and examine the areas and indicators on the basis of which the quality of regional finance management is assessed. Based on the results of the analysis, we put forward proposals regarding amendments to the methodology for assessing the quality of regional finance management in order to ensure an objective analysis of the organization of financial activities of Russia’s constituent entities.