Russia’s Evolving Budgeting and Audit System: Reforms and Challenges

Russia’s approach to managing public money has undergone a remarkable transformation over the past three decades. Moving from the rigid, centrally-planned Soviet model to a more modern framework, the country has introduced multi-year budgets, program-based financial planning, and an independent constitutional audit body. Yet the journey has been far from smooth. While technical reforms have brought the system closer to international standards, persistent challenges around coordination, efficiency, and transparency continue to shape the landscape of Russian public financial management.

The foundations of Russia’s modern budgeting system 🔗

At the heart of Russia’s budget architecture sits the Budget Code, adopted in 2000, which established the legal framework for budget formation, execution, and control across all levels of government. The Russian Constitution, through Article 71, and the Budget Code together govern how the federal budget is created and executed. The budget is a three-tier structure, reflecting Russia’s federal nature: the federal budget at the national level, regional budgets for the 85+ subjects of the Federation, and local budgets for municipalities.

The budget formation process follows a structured annual calendar. By October 1 each year, the government submits a draft federal budget to the State Duma, the lower house of parliament. The Duma reviews the document through three readings-first approving basic parameters, then reviewing section by section, and finally adopting the law as a whole. After State Duma approval, the draft passes to the Federation Council (upper house) and is ultimately signed into law by the President.

From annual to multi-year budgeting 🔗

One of the most important shifts in Russia’s budgetary philosophy came in 2007, when the country transitioned to three-year budgeting. This transition followed an update to the Budget Code and drew on similar practices used by many European countries. The three-year framework covers the upcoming fiscal year plus a two-year planning horizon, making budgeting a continuous rather than one-off exercise.

The logic is straightforward: by looking beyond a single year, ministries can plan longer-term initiatives, investors get clearer signals about fiscal direction, and governments avoid the “stop-start” nature of annual planning. The current 2026-2028 budget, for instance, sets spending limits across the full three-year horizon and lays out revenue projections based on assumptions about oil prices and economic growth.

In practice, however, the second and third years of the budget often undergo substantial revisions as economic conditions and political priorities shift. The 2025 federal budget, for example, was revised three times in less than 12 months, with the projected deficit growing from 0.5% to 2.6% of GDP. Sanctions, commodity price swings, and wartime spending have all contributed to this instability.

The move towards program budgeting 🔗

Russia began experimenting with program budgeting-a technique that ties spending to measurable goals rather than line items-more than two decades ago. The International Monetary Fund documented early reform efforts that introduced targeted programs with clear objectives, performance indicators, and competitive allocation of budget resources. Budget institutions were required to submit annual reports on the results of their main activities, including an assessment of spending efficiency measured against predetermined indicators.

The approach took more formal shape with Federal Law No. 172-FZ of June 28, 2014 “On Strategic Planning”. Under this framework, a government program is a strategic planning document containing an interconnected package of activities with defined objectives, timeframes, executors, and resources.

How program budgeting works in practice 🔗

Russian state programs are grouped by policy area-for instance, education, healthcare, regional development, or “Good Governance.” Research on Ministry of Finance data shows that federal expenditures under the “Good Governance” area grew steadily, reaching 14% of the overall expenditure structure by 2018. Each program is broken down into sub-programs, activities, and performance indicators, creating a layered framework that links strategy to spending.

Despite this sophisticated structure, analysts note that existing methodologies tend to assess the performance of budget programs rather than their true effectiveness. In other words, agencies can show they spent money and delivered outputs, but whether those outputs actually achieved the intended social or economic outcomes is harder to pin down.

The Accounts Chamber: Russia’s external audit authority 🔗

No budget system is complete without a credible watchdog, and in Russia that role belongs to the Accounts Chamber (Счётная палата). The Accounts Chamber is a permanent body of financial control formed by the Federal Assembly-Russia’s bicameral parliament-and is accountable to it. Its constitutional status is anchored in Article 101 of the Russian Constitution, giving it a level of institutional protection that shields it from executive pressure.

The origins of financial oversight in Russia stretch back further than many realise. The prototype of today’s Accounts Chamber was the Chamber-collegium established by Peter the Great in 1718 for managing state taxes and sectors of the state economy. The modern Accounts Chamber, in its present form, was established in 1995.

Structure and appointments 🔗

The Chairman of the Accounts Chamber is appointed by the State Duma for a term of six years on the proposal of the President of the Russian Federation. The Deputy Chairman is appointed by the Federation Council, again on a presidential nomination. Together, the two houses each appoint six auditors for six-year terms, bringing the total leadership to a Chairman, Deputy Chairman, and twelve auditors. The Chamber consists of a Board and an Office, with the Board acting as the main governing body handling operational issues.

Functions and audit powers 🔗

The Accounts Chamber serves as Russia’s supreme audit institution, with responsibilities spanning three distinct audit types. Financial audits verify the legality and accuracy of budget execution, ensuring public money is used according to law. Performance audits assess whether government programs deliver value for money. Strategic audits examine whether spending aligns with long-term national priorities.

The tasks of the Accounts Chamber include organising and monitoring the proper and effective use of federal budget funds and public resources, and auditing the feasibility and efficiency of achieving strategic goals of social and economic development. Russia’s external public and municipal audit system operates on three levels-federal, regional, and municipal-mirroring the structure of the country itself.

The Chamber’s jurisdiction has expanded significantly over time. In 2019, the State Duma passed a bill authorising the Audit Chamber to check subsidiaries of state companies and corporations, as well as other companies receiving federal subsidies. This broadened scope matters because much of Russia’s economy involves state-owned enterprises and their subsidiaries, which previously operated in a grey zone between public and private accountability.

Digital transformation and the electronic budget 🔗

Modern public financial management demands modern tools, and Russia has invested heavily in digitalising budget processes. The “Electronic Budget” system, launched in 2011, provides an integrated platform covering planning, execution, and reporting. It aims to reduce administrative costs, minimise data-entry errors, and improve public access to budget information.

The Accounts Chamber has also leaned into technology. A dedicated web portal now connects control and accounts authorities across Russia, enabling videoconferencing, electronic document management, and shared knowledge bases. Such platforms help standardise audit methodology between the federal Accounts Chamber and regional audit bodies-a coordination challenge in a country spanning eleven time zones.

Persistent challenges in Russia’s budget and audit system 🔗

For all these reforms, Russia’s budgeting and audit system continues to face significant headwinds. Understanding these challenges is essential for appreciating why reform remains a work in progress.

Coordination gaps between planning and execution 🔗

One of the most commonly cited problems is the weak link between strategic planning, program budgeting, and performance evaluation. Performance indicators set for budget programs don’t always reflect strategic national priorities, and audit findings don’t systematically feed back into the budget planning process. The result is a fragmented system in which different parts operate in parallel rather than in concert.

Capacity constraints at regional and local levels 🔗

Sophisticated frameworks only work when the people running them have the skills to use them. Many government entities, particularly at regional and municipal levels, struggle with limited technical expertise in modern financial management. The gap between what the Budget Code requires and what smaller jurisdictions can deliver creates uneven implementation across the vast Russian federation.

Inefficient use of public funds 🔗

The Accounts Chamber has flagged inefficiencies repeatedly. Past reports have exposed billions of rubles in contract violations, inflated construction costs, and misallocated subsidies. Even with a constitutional watchdog in place, systematic issues around procurement and project management persist-a reminder that oversight institutions can identify problems but cannot, on their own, fix the underlying incentives that cause them.

Transparency pressures during the war period 🔗

Budget transparency, a core goal of past reforms, has come under pressure since 2022. The Russian government has reduced transparency in federal budget reporting since the Russia-Ukraine war began in 2022, with the Ministry of Finance and Treasury no longer publishing detailed monthly, quarterly, and annual expenditure data. The classified share of the federal budget has risen to roughly 30% in 2025, up from about 22% in recent pre-war years, making independent evaluation considerably harder.

The evolving priorities of Russia’s budget 🔗

Budget documents are ultimately political documents-they show what a government actually values, beyond its rhetoric. The key priorities of the draft 2026-2028 budget, as stated by the Russian government, are fulfilling social obligations to citizens, providing financial support for defence and security, supporting families of participants in the special military operation, and achieving the national development goals set by the President through 2030. Social policy is identified as the budget’s top priority, with a “children’s” budget of more than 10 trillion rubles across the three-year period.

Yet the numbers tell a more complex story. Defence and national security will account for roughly 38% of all spending in 2026, or 16.8 trillion rubles, which is slightly lower than in the previous two years but still far above pre-war levels. The combination of high defence spending, falling oil and gas revenues, and accumulated reserves being drawn down creates a difficult environment for the kind of performance-focused budget reform that was championed in the 2000s and 2010s.

Looking ahead: reform priorities for the future 🔗

What might the next phase of Russian budget reform look like? Several themes emerge from recent analyses. Strengthening the evaluation component of program budgeting-moving beyond tracking outputs to measuring real outcomes-remains a key priority. The Accounts Chamber is expected to keep deepening its methodological capacity in performance auditing, building on the direction set by the 2019 Moscow Declaration of INTOSAI, the global body of supreme audit institutions.

Green budgeting and sustainability considerations are beginning to enter the conversation, though slowly. And the coordination between federal, regional, and local levels-always a challenge in federations-remains a long-term project. The success of these reforms will ultimately depend not just on technical fixes but on broader institutional conditions: the rule of law, the independence of oversight bodies, and the political willingness to act on audit findings.

What do you think? Can a country strengthen performance-based budgeting and external audit while simultaneously reducing the transparency of its public finances? And what lessons-positive or cautionary-can other federal democracies draw from Russia’s decades-long journey of budget reform?

References

1. https://en.wikipedia.org/wiki/Federal_budget_of_Russia
2. https://www.rand.org/content/dam/rand/pubs/perspectives/PEA3800/PEA3854-1/RAND_PEA3854-1.pdf
3. https://thinktank.4freerussia.org/economics/russias-budget-crisis-explained/
4. https://www.elibrary.imf.org/view/journals/001/2005/104/article-A001-en.xml
5. https://www.revistaespacios.com/a19v40n20/a19v40n20p30.pdf
6. https://en.wikipedia.org/wiki/Accounts_Chamber_of_Russia
7. https://ach.gov.ru/en/structure
8. https://wgrma.intosairussia.org/explore/russia.html
9. https://rapsinews.com/tags/tag_AuditChamber/
10. http://government.ru/en/news/56304/
11. https://www.themoscowtimes.com/2025/11/20/state-duma-passes-2026-28-budget-and-tax-increase-bills-a91191