Final report : local government in Russia -- a sector assessment

Basic laws for restructuring local government and municipal financial management are now in place, but their implementation remains incomplete. Considerable confusion surrounds responsibilities for municipal services provision, and greater clarity is needed in dividing functional responsibilities between levels of government; there are also significant problems in allocating revenues to appropriate levels of government for meeting expenditure requirements. Any attempt at reform in these areas must address the question of intergovernmental transfers; it may be more beneficial to focus on potentially achievable capital and operating budgeting. Many decentralization problems arise from the failure to match the pace of political decentralization with that of regulatory and organizational reform. Many local governments seem unable to plan beyond assembling wish lists. In general, the local governments visited have only been moderately successful at local resource mobilization. Russian budget cycle and other operations rarely include auditing and performance review. Concerning civil society integration, local elections are common. There has been an explosive growth in NGO registration, especially in St. Petersburg and Moscow, but NGOs often have a narrow financial base. Exchange of information about budgets has begun, but budget formulation processes remain opaque; until recently, budgets were regarded as state secrets. Russian civil society remains fragmented and overly preoccupied with narrow objectives addressing the immediate concerns of individuals. There is not much social or civic activism. Political legitimization, as well as the emergence of "policy champions" is extremely important, along with grassroots level training. Some potential best practices have emerged, such as the start of budget hearings in Nizhny Novgorod, hotlines for citizen information, public meetings under NGO sponsorship (particularly in European Russia), private sector supply of maintenance services for municipal housing, innovative revenue raising (sale of electric power to China) in Irkutsk, some innovative NGO activities and regional linkages and exchange of information between municipalities in Siberia and the Urals, and linkage of USAID technical advice and other donor credit programs for small enterprises. Regarding results, while progress has been made on a number of "process" objectives and outputs, several intermediate results and their indicators must be adjusted to reflect changed conditions, achievements, and future resource levels. The strategic objectives in local government and related areas are articulated in a way that makes it difficult to see how particular subobjectives fall within the manageable interest of the Mission. Planning in smaller increments could increase consensus and make it easier to agree on short-term, linked, programs. USAID recognizes the need for capacity building, but underestimates the amount of time it takes. It appears that donor efforts are more successful in being directed towards small and medium-sized cities. Concerning relevance, USAID has implemented some inappropriate activities, such as large drops of computer equipment to recipients without the capacity to use them effectively. Relevant assistance focused on facilitating the exchange of information between and within local government organizational units and between them and the citizenry on budget and other matters. There is a need to select partners carefully. Regarding other donors, duplication with the TACIS (European Union) program has been avoided through focusing on different cities and on different sectors. However, municipalities" and USAID contractors" lack of knowledge of the activities of other donors, particularly those who are potential partners in local government activities, is a problem.