OMfCAL DocUMENTs IJ Supplemental Letter No. 2 RUSSIAN FEDERATION December 6, 2013 International Bank for Reconstruction and Development 1818 H Street, N.W. Washington D.C. 20433 United States of America Re: Loan No. 8288-RU (Public Finance Management Technical Assistance Project) Performance Monitoring Indicators Dear Sirs and Mesdames: In connection with Section II. A. of Schedule 2 to the Loan Agreement of this date between the Russian Federation (the Borrower) and the International Bank for Reconstruction and Development (the Bank) for the above-captioned Project, I am writing on behalf of Borrower to set forth the following: We hereby confirm to the Bank that, for purposes of paragraph (1) of Section II A of SCHEDULE 2 to the Loan Agreement, the indicators set forth in the attachment to this letter shall serve as a basis for the Borrower to monitor and evaluate the progress of the Project and the achievement of the objectives thereof. Very truly yours, RUSSAN FEDERATION B Auth 'zed Repr rtative Attachment Attachment to Supplemental Letter No. 2 RUSSIAN FEDERATION Public Finance Management Technical Assistance Project Performance Monitoring Indicators roject Development Objective (PDO): o improve transparency and results focus in public financial management and build institutional foundations for improved budget efficiency, effectiveness and accountability. E Unit of Cumulative Target Values Data Source/ Responsibility Description PDO Level Results Indicators o Baseline Frequency for Data (indicator U Measure YR 1 YR 2 YR3 YR 4 YR5 Methodology Collection definition etc.) . Maximum time spent on tax Man-hours 290 180 170 160 160 160 Annual World Bank World Bank Reduced time alculation and payment by "Doing spent dealing MEs (within Doing Business Business" with Taxes ating) EIndicator based on Doing Business Survey for small and medium businesses . Number of regions with PFM Number 71 72 73 74 75 76 Annual Results of MoF Increase in the uality satisfactory to MOF MoF number of monitoring regions with and PFM quality evaluation of satisfactory to PFM quality the MOF, based at the regional on a regular level, based MOF on MoF Rules monitoring according to methodology on an annual basis . Open budget index Points 74 74 77 77 80 80 Annual Open Budget MoF Improvement in calculated by International O Index (Open Open Budget udget partnership) Budget Index (OBI) Project) score Coverage of the federal Percentage 1.3 25 50 70 90 90 Annual MoF reports MoF Share of the udget appropriations with budget erformance indicators expenditure lepicting goals and results of allocations, Pudget implementation covered by performance measures INTERMEDIATE RESULTS itermediate Result (Component One): Improving the Economic Efficiency of Tax Policy and Administration S Unit of BCumulative Target Values Data Source/ Responsibility Description Results Indicators aBaseline Frequency for Data (indicator Measure YR 1 YR 2 YR3 YR 4 YR5 Methodology Collection definition etc.) I Reformed tax regime for oil Text Fiscal Financial Pilot National Annual MoF reports Text A reformed tax id gas sector reforms model of application roll-out of regime for oil set out in proposed s of new new tax and gas sectors Instructio tax regime tax regime regime that improves n #700-p is are their of May 3, developed completed transparency, 2012 and equity and Instructio efficiency in n #433-p capturing the of April rent under [l 12, 2012 different and volatile economic and project conditions while taking into account the effect that this would have on private sector investment .2 Ratio of tax appeals settled Percentage 2.10 2.60 3.63 4.03 4.50 4.50 Annual Federal Tax FTS Proportion of ia pre-court mechanism (by [O Service (FTS) tax disputes that igher tax office) to tax appeals Statistics are resolved roduced by the courts through administrative rather than judicial processes ntermediate Result (Component Two): Modernizing the System of Inter-Governmental Fiscal Relations and Sub-National PFM E Unit of Cumulative Target Values Data Source/ Responsibility Description Results Indicators M s Baseline Frequency for Data (indicator Measure YR I YR 2 YR3 YR 4 YR5 Methodology Collection definition etc.) .1 The number of subjects of the Number 7 7 7 6 5 5 Annual MoF Reports MoF Reducing the LF in which the estimated share number of sf intergovernmental transfers I subjects of the om the federal budget RF in which the xcluding subventions, and estimated share deral Investment Fund subsidies of the subjects of the Russian intergovernment -deration) exceeds 60 percent al transfers from the federal budget exceeds 60 percent 2 Share of RF regions, which Percentage 40 45 50 55 60 64 Annual Regional data, MoF Percentage of ansformed their regional O] submitted to RF regions from idgets towards program the MoF the total number adgeting of RF regions, that transform their non- consolidated budgets into budgets presented on a program basis. rtermediate Result (Component Three): Support for the Development of E-Budget System Percentage of .1 Access of public sector bodies the regions t the regional and local level of l MoF reports (municipalities) ie RF to E-Budget system (share Results of of the RF, where f regions (municipalities) of Percentage 0 0 0 5(0) 15(5) 15(5) Annual supervision MoF public sector .ussia, budget organizations of missions organizations ublic management of which have have access to ccess to E-budget) E-Budget system Percentage of E- Oi Budget system users surveyed Once, who respond .2 User satisfaction with the E- Percentage 0 60 60 before the Survey MoF thatthe ludget system end of the performance of project. the E-Budget system is satisfactory or better Text Federal Monthly Continued Continue Continued Annual MoF MoF Benchmark of 3 budget publication monthly d monthly from Year publication of .3Monthly publication of execution of publicatio monthly publication 2 monthly omprehensive federal budget reports are comprehen n of publicati of comprehensive xecution reports based on the not sive federal comprehe on of comprehen (reflecting all Lata extracted from FTAS publicly budget nsive compreh sive federal codes of budget Latabases available execution federal ensive budget classification) on a reports budget federal execution federal budget monthly using execution budget reports execution basis FTAS data reports executio using reports achieved using n reports FTAS data and maintained FTAS using data FTAS data itermediate Result (Component Four): Enhancing Budget Efficiency Unit of Cumulative Target Values Data Source! Responsibility Description Results Indicators a Baseline Frequency for Data (indicator _ Measure YR I YR 2 YR3 YR 4 YR5Methodology Collection definition etc.) I Implementation of the Text The Program Year I Year 2 Year 3 Year 4 The Annual MoF reports MoF The overnment budget reform l is drafted, milestones mileston mileston milestones Program is and findings Government rogram till 2018 but not achieved es es achieved approved from budget reform approved achieved achieved by the supervision Program till Governmen missions 2018 provides a t and road map for the implemente next phase of d the budget reform, aimed at improving effectiveness and efficiency of public finance management in Russia .2 Internal audit is introduced at Text Internal Relevant Internal 700 civil Internal First Annual MoF reports MoF Internal audit ie federal level in Russia [ audit primary audit servant audit internal and findings standards and function is and procedur have function is audit from manuals not secondary es and been operating reports supervision developed and implemented legislation standards trained in 70% of issued for missions implemented required are in new Federal 70% of The new for adopted approach Ministries federal approaches implement es, ministries to the ation of procedur and internal internal es and agencies budget audit is standards control were adopted. for reflected in Strategy internal the for budget Government implement control Draft Law ation of and audit on internal Amendment audit in stothe the RF is Budget Code developed in the Area of State Financial Control 3 Federal standards for Text 5 federal 20% of 30% of 40% of 60% of 60% of Annual MoF reports MoF Federal counting and financial reporting O accounting standards standards standards approved planned and findings standards for the public sector, based on standards are are are standards (20) federal from public sector 'SAS, are developed and drafted but implement impleme impleme are accounting supervision accounting are iplemented not ed nted nted implement standards missions formally implemented ed have been approved and implemente issued and a New law on d across all timetable for accounting entities to implementation will be which they is set out effective apply. from January 2013, requiring use of uniform federal accounting standards. .4 Budget efficiency and Text Budget 90% of 95%of 3 year 3 year 3 year Annual Project MoF and World Achievement of ability enhancement allocations State State budget is budget is budget is monitoring Bank milestones in the are not programs programs approved approved approved and development linked with are are on the on the on the basis supervision and strategic approved approved basis of basis of of state implementation policy by the by the state state programs of program objectives Governme Governm programs programs 95%of budgeting and nt ent 950/of 95%of State measurable 3year State State programs results budget is programs programs are prepared are are approved and approved approved by the adopted by the by the Governmen on Governm Governme t program ent nt classifica tion