The Soviet Financial System: Structure, Operation, and Statistics

Citation preview

ROOM International Population

THE

Statistics Reports, Series

SOVIET

FINANCIAL

P -90, No. 23

SYSTEM

Statistics

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Structure, Operation , and

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THE

SOVIET

FINANCIAL

SYSTEM

Structure , Operation ,and Statistics

by DanielGallik , Cestmir Jesina, and Stephen Rapawy t

Foreign Demographic Analysis Division International Population Statistics Reports Series P -90, No. 23

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U.S. DEPARTMENT OF COMMERCE C. R. Smith , Secretary

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William H. Chartener, Assistant Secretary for Economic Affairs

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BUREAU OF THE CENSUS A. Ross Eckler, Director

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A. Ross Eckler, Director

Robert F. Drury , Deputy Director Conrad Taeuber, Associate Director

FOREIGN DEMOGRAPHIC ANALYSIS DIVISION Paul F. Myers , Chief

Issued June 1968

Library of Congress Catalog Card No. A68-7399

SUGGESTED IDENTIFICATION U.S. Bureau of the Census. The Soviet Financial System : Structure, Operation , and Statistics, by Daniel Gallik , Cestmir Jesina , and Stephen Rapawy. International Population Statistics Reports , Series P - 90 , No. 23 . U.S. Government Printing Office , Washington, D.C. 20402, 1968

For sale by the Superintendent of Documents, U.S. Government Printing Office Washington , D.C. 20402, or any of the Field Offices of the Department of Commerce. Price $ 2.50

DEPOSITORY

PREFACE This report is one of a series of studies on the Soviet Union carried out by the Foreign Demographic Analysis Division of the Bureau of the Census. Pre pared under contract with the U.S. Arms Control and Disarmament Agency, the report provides a detailed description of the organization and adminis tration of the Soviet financial system and of the plans, accounts , reports , and control procedures employed , as well as the statistics produced. Particular attention is given to the state budget, although other financial data systems are also examined in detail. The report was prepared Leedy, then Chief, U.S.S.R. conduct of research and the drafted chapters I, IV , V - A drafted chapters II, V - B , VI, VIII- A , -B , -D , and -E . The end of April 1967 .

under the general supervision of Frederick A. Branch. Daniel Gallik was responsible for the primary editing of the entire manuscript. He and -C , VII, VIII - C , and IX . Cestmir Jesina and X ; Stephen Rapawy drafted chapters III and report is based on materials available as of the

Invaluable bibliographic aid and substantive advice was given by Murray Feshbach , as well as by Milton Giffler and other staff associates of the U.S.S.R. Branch . Helpful comments were received from numerous governmental specialists and private scholars whose cooperation is gratefully acknowledged , even though it did not prove possible to adopt all the suggestions made. The interest and patience of the U.S. Arms Control and Disarmament Agency in seeing the project through to completion is appreciated , particularly that of the project monitor , Mrs. Ruth Sivard . Users of the report are invited to send their comments and criticisms to the Chief , Foreign Demographic Analysis Division , U.S. Bureau of the Census , Department of Commerce Building, Washington , D.C. 20230 .

III

SELECTED

ABBREVIATIONS AND

TERMS USED PICAS

A.S.S.R. ..

. Avtonomnaya sovetskaya sotsialisticheskaya respublika-- Autonomous Soviet Socialist Republic (a third -level administrative - territorial subdivision , coordinate with the oblast and kray -- see chapter II)

СЕМА

.Council for Economic Mutual Assistance (the Communist -bloc trade organization, also known under the abbreviation CMEA, or the acronym Comecon )

C.P.S.U .... FMS (or FMU ) . FZMK .

Communist Party of the Soviet Union .Fabrika mekhanizirovannogo scheta (or ucheta )--Machine data proc essing factory Fabrichno - zavodskoy ili mestnyy komitet --Factory -plant or local committee (of trade union )

Gosbank .

Gosuderstvennyy bank --State Bank

Gosplan

.Gosudarstvennyy planovyy komitet-- State Planning Committee

Gosstrakh .

.Glavno ye upravleniye gosudarstvennogo strakhovaniya --Main Adminis tration of State Insurance

Gosstroy. Gostrudsberkassy .

GSVTs ..

..Gosudarstvennyy komitet po delam Construction Affairs

stroitelstva -- State Committee for

.Gosudarstvennyye trudovyye sberegatelnyye kassy -- State labor savings banks

..Gosudarstvennaya Network

seť

vychislitel'nykh

tsentrov-- State

Computer

GUTMO

.Glavnoye upravleniye torgovli Ministerstva oborony--Main Adminis tration for Trade of the Ministry of Defense

Ingosstrakh .

.Upravleniye innostrannogo ( gosudarstvennogo ) strakhovaniya-- Admin istration of State Insurance for Foreign Operations

Khozraschet

.Khozyaystvennyy raschet-- Economic calculation; also rendered (else where) as economic (business , commercial , cost) accountability (accounting , management, reckoning ), self -financing, or autonomous financing--see chapter III

Komsomol.

.Kommunisticheskiy soyuz molodezhi-- The Young Communist League

Kray

.A third - level administrative -territorial subdivision , coordinate with the oblast and A.S.S.R., which exists only in the R.S.F.S.R .-- see chapter II

MSB..

Mashinoschetnoye byuro--Machine data processing bureau

MSS .. .

.Mashinoschetnaya stantsiya --Machine data processing station

MTS.

.Mashino - traktornaya stantsiya --Machine -tractor station

NTO . .

Nauchno - tekhnicheskoye obshchestvo--Scientific - technical society

Oblast

.A third - level administrative -territorial subdivision , coordinate with the A.S.S.R. and kray -- see chapter II

OKS..

.Otdel kapital'nogo stroitelstva--Capital construction department (of an enterprise )

ORS..

Rayon .

Otdel rabochego enterprise)

snabzheniya -- Workers' supply department (of an

„ A fourth -level administrative - territorial subdivision -- see chapter II

V

VI

SELECTED ABBREVIATIONS AND TERMS USED -- Continued

R.S.F.S.R ... Sel'khoztekhnika .

Rossiyskaya Sovetskaya Federativnaya Sotsialisticheskaya RespublikaThe Russian Soviet Federated Socialist Republic

.

Obʼyedineniye po prodazhe sel'skokhozyaystvennoy tekhniki, zapasnykh chastey, mineral'nykh udobreniyi drugikh material'no -tekhnicheskikh sredstv --Association for the Sale of Agricultural Equipment, Spare Parts , Fertilizers, and Other Material- TechnicalMeans

Sotsstrakh .

.Sotsial'noye strakhovaniye-- The state social insurance system

Sovnarkhoz .

.Sovet narodnogo khozyaystva --Regional economic council -- literally , Council of the national (or public ) economy; from 1957 through 1965 , a regional agency for administering industrial enterprises and , until 1962, construction enterprises

Soyuzsel'khoztekhnika .

.All -union agency of the sel’khoztekhnika system

S.S.R ..

. .Sovetskaya sotsialisticheskaya respublika -- Soviet Socialist Republic , the designation for each of the 15 constituent union republics, the second - level administrative- territorial subdivision of the U.S.S.R.

Stroybank .

.Vsesoyuznyy bank finansirovaniya kapital'nykh Bank for Financing Capital Investment

Tekhpromfinplan

.Tekhniko -promyshlenno - finansovyy financial plan of an enterprise

TSBVR ...

( q.v.)

vlozheniy -- All-Union

plan -- Technical, industrial, and

Tsentral'noye byuro vzaimnykh raschetov --Central Bureau for Mutual Settlements

TSSU .

.Tsentral'noye statisticheskoye upravleniye --Central StatisticalAdmin istration

Vneshtorgbank .

.Bank dlya vneshney torgovli -- Foreign Trade Bank

CONTENTS Chapter Introduction . .

II. Survey of economic -administrative agencies.. A. Outline of the governmental system 1. The structure of the Soviet Government . 2. Reorganization of the economic - administrative system , 1957-67 ... B. Major organs of economic administration and planning, 1957-67 1. The SupremeEconomic Council... 2. The State Planning Committee (Gosplan ). . 3. Economic councils (sovnarkhozy ) . 4. The State Committee for Construction Affairs (Gosstroy) . .. C. The financial system . 1. The Ministry of Finance . 2. The State Bank (Gosbank ) . 3. The All -Union Bank for fi nancing capital investment (Stroybank ) 4. The Foreign Trade Bank (Vneshtorgbank ) . D. The Central Statistical Adminis tration (TSSU ) . ...

. III. Organizational forms of financing A. Khozraschet organizations 1. Basic characteristics . 2. Variants of khozraschet financing .. 3. Khozraschet in cooperative organizations and collective farms... . B. Budget -financed institutions C. Other forms of financing . 1. Financing administrative economic agencies 2. Other self - supporting organizations . IV . Financial plans and planning . A. The role of finance in economic planning . . B. Types of financial plans

5 ол

I.

Page

5

6

11 11 11 14

19 22 22 23

26 29

29 35 35 35 37

38 39 40 40 41

45 45 47

Chapter

IV . Financial plans and planning --Con . C. Preparation of the annual eco nomic plan and budget 1. Preparation of the national economic plan . 2. Preparation of the budget . 3. Dissemination 4. Actual performance. V. Budget categories and classifications of revenues and expenditures . A. Types of budgets and budget classifications 1. Types of budgets . . 2. Revisions of the budget clas sifications . B. The classification of revenues . C. The classification of expenditures.. 1. Major groups and their divisions . 2. Group I: national economy 3. Group II: social and cultural measures .. 4. Groups III and IV : defense and security . . 5. Groups V and VI: adminis tration 6. Other groups (VII - X ) . 7. The classification of expendi tures by object ( articles) . . VI. Major state revenues A. The turnover tax . . 1. General survey : . 2. Source of the tax by sector 3. Tax rates .. 4. Taxable sales in relation to allocation funds 5. Exemptions from the tax 6. Payers of the tax 7. Types of prices and methods of computing the tax 8. The payment system 9. Allocation of the tax to the budgets .. 10. The turnover tax and the military establishment. 11. Current controversies con cerning the tax . B. Profits .. 1. Determination of profits in the enterprise

Page

49 50 52 52 53

55

55 55 55 57 65 67 69 71

75 75 76 77

85 88 88 89 90 93 94 95 97 98 100

101 102 103

103 VII

VIII

CONTENTS-- Continued

Chapter

Page

VI. Major state revenues--Con . 2. Profitability measures . 3. Origin of profits by economic sector. 4. The primary distribution of profits 5. The profit tax , 6. Retained profits 7. Recent reforms .. C. Other budget revenues 1. Revenue groupings and statistics.. 2. Taxes and collections from the socialist economy .... 3. Taxes and collections from the population ... D. Financial resources of khoz raschet organizations, 1. Amortization deductions. 2. Special- purpose funds . 3. Bank credit .. E. Special means of budgetary institutions... 1. The sources of special means . 2. Special-means estimates 3. Net earnings and transfer prices. 4. Restrictions on expenditures. 5. The significance of special means.

....

VII. Defense and other major state expenditures . A. Summary of state expenditures 1. Consolidated state financial balance sheet.. 2. Summary state budget expenditures B. Defense expenditures . 1. Soviet descriptions of budget defense expenditures . 2. Financial practices in the Ministry of Defense . VIII. Accounting and reporting procedures for financial data ... A. Khozraschet organizations 1. Background . 2. The standard classification of accounts ... 3. Systems of accounting registers, 4. Accounting reports of primary units.. 5. Submission , review , and approval of accounting reports . . 6. Consolidated reports of superior organizations. . 7. Effects of recent reforms on accounting and reporting

106

107

110 113 116 122 126 126

128

Page

Chapter

VIII. Accounting and reporting procedures-- Con . 216 B. Budgetary institutions 1. The standard classification of accounts 217 2. Systems of accounting documents.. 219 221 3. Accounting reports 4. The submission , review , and approval of reports . 227 C. Gosbank . 227 1. General accounting and 228 reporting practices . 2. Settlement and collection 230 services 3. Enterprise groupings in short term credit and settlement accounts .. 4. Reporting on wage expendi ture controls D. Finance agencies. . 1. Accounting procedures . 2. Reporting by finance agencies . 3. The submission of reports . E. Other systems

134 139 139 146 148 151 151 153

Accounting and reporting in other sectors . 2. Preservation of accounting documents and reports. 3. The centralization of account

233 236 237 238 241 245 246

1.

153 154 155

ing and reporting 4. The mechanization and com puterization of data processing. 5. Financial statistics in the TsSU work plan

167 167

246

249 250

251 256

167 IX .

167 171 174 176

185 185 185 187 191 197

211 212 215

The mechanics of financial transactions A. Budget appropriation procedures . B. The system of payments . 1. General features . . 2. Noncash methods of payment . C. Bank statistics on the volume and methods of payments 1. Regularly reported statistics.. 2. Sample survey statistics D. Standardization of payment documents ..

X. Control and audit of financial statistics . A. Control and audit activities.. 1. Superior administrative agencies . 2. Ministry of finance 3. The banks . 4. Other agencies .. 5. The effectiveness of control .. B. The reliability of statistics .

269 269 271 271

271 277 277 278 281

287 287

287 288 290 291 292 292

CONTENTS--Continued

IX

FIGURES

Page

Figure 2-1 . 2-2. 2-3. 2-4 . 2-5 . 2-6 . 2-7 . 2-8 . 2-9 . 2-10 . 2-11.

2-12 . 2-13. 4-1. 6-1 . 6-2 . 8-1. 8-2. 8-3. 8-4 . 8-5 . 8-6 .

Central governmental structure of the U.S.S.R .: March 1963 to March 1965 . ...... Central governmental structure of the U.S.S.R .: February 1967. Organizational structure of Gosplan U.S.S.R.: Mid - 1965 . Typical administrative structure of a sovnarkhoz Organizational structure of Sovnarkhoz U.S.S.R .: Mid - 1965 . Organizational structure of Gosstroy U.S.S.R .: Mid - 1965 . Organizational structure of the Ministry of Construction , Ukrainian S.S.R .: Mid - 1965, . . Organizational structure of the Ministry of Finance U.S.S.R .: Mid - 1965. Organizational structure of Gosbank U.S.S.R.: Mid - 1965 Organizational structure of Stroybank U.S.S.R .: Mid - 1965 . The flow of statistical reports on industry and construction : January 1963 to September 1965 ... The flow of statistical reports on agriculture : 1962 to present. . Organizational structure of TsSU U.S.S.R .: Mid - 1965 . . Outline of the schedules for preparing annual plans and budgets Types of prices and their components Profit distribution and formation of internal funds as outlines in the methodological directives of January 1966. . Standard bookkeeping accounts classified by functions and type Sample format of turnover statement of detail accounts The memo - order system . The journal - general ledger system . The journal-order system . Form No. 294. Record book of credits (appropriations) and expenditures

9 10 13 16 18 20 21 23 25 28 31 31 32 51 97 125 190 192 193 193 194 221

TABLES

Table 5-1. 5-2. 5-3 . 5-4 . 5-5 . 5-6 . 5-7 . 5-8 . 5-9. 5-10 . 5-11 . 6-1 . 6-2. 6-3. 6-4 . 6-5 . 6-6 .

6-7 . 6-8 . 6-9 . 6-10 . 6-11. 6-12 . 6-13 . 6-14 . 6-15 .

6-16 . 6-17 .

Budget designations and classes, by level of government. Divisions of the revenue classification . . Central budget classification of revenues. Local budget classification of revenues . Outline of central budget classification of expenditures. . Outline of local budget classification of expenditures . Groups and divisions of the expenditure classification Sections and subgroups under division 200 , “ enlightenment" Sections and subgroups under expenditure division 203, “ Health ” , of the classification . Sections under expenditure division 207, “ Social Security ” , of the classification . The classification of expenditures by object (articles ) Consolidated state revenues, by type : 1960 to 1964 Budget revenues , by type: 1950 to 1965 Percent distribution of the turnover tax, by sector of origin : 1931 to 1962. . Retail sales and turnover tax : 1950 to 1965 . Components of industry wholesale prices and income rates: 1958 to 1965 Turnover tax receipts--distribution between the union budget and state budgets of all the republics and contribution to total revenues: 1950 to 1965 . Illustrative calculation of planned profits on sales ofmarketable output, Illustrative calculation of planned “ balance - sheet" profits and the tax -norm base Net profits , by sector of origin : 1950 to 1965.. Net profits of industry , by branch : 1958 to 1965 . Gross profits of the state sector, by use , on year - earned basis : 1957 to 1964 Alternative concepts of total , taxed , and retained profits in the state sector : 1958 to 1964 . Budget revenues and profit tax, by budget level : 1950 to 1965 Total profit taxes paid , by sector of origin : 1950 to 1965 . Contributions to incentive funds of state enterprises and economic organizations, by sector of the economy: 1959 to 1965 . Incentive funds of state enterprises and economic organizations, by type of fund : 1950 to 1965 .. Contributions from profits to incentive funds of state enterprises and economic organizations in industry: 1959 to 1965 .

56 57 58 62 65 67 68 72 74 74 78 86 87 89 91 92 100 105 106 108 109 111 112 117 118 119

120 123

X

CONTENTS--Continued TABLES--Continued

Table

Page

6-18 . 6-19 . 6-20 . 6-21. 6-22 .

Local taxes and collections: 1950 to 1965 ... Social insurance revenues, by budget level: 1950 to 1965 State loan revenues, by type : 1950 to 1965 ... Personal savings accounts in savings banks: 1950 to 1965 Amortization deductions as percentages of total production costs, by branch of industry: 1959 to 1965 .

6-23 . 6-24 .

Amortization deductions, by sector of the economy and use: 1950 to 1965 Amortization deductions designated for capital investment --amount and percent of total capital investment : 1950 to 1965 ... Short- term and long - term bank credit, by sector and type of loan : 1950 to 1965 . Working capital in the economy, by sector and source: 1965 . Consolidated state expenditures and surplus: 1960 Budget expenditures, by category and level: 1950 to 1965 .

6-25 . 6-26 . 7-1. 7-2. 7-3 . 7-4 , 7-5 . 7-6 . 8-1. 8-2. 8-3. 8-4 . 8-5 . 8-6 . 8-7 . 8-8 . 8-9. 8-10 . 8-11. 8-12. 8-13 . 8-14 . 8-15 . 8-16 . 8-17 . 8-18 . 8-19. 8-20 . 8-21 . 9-1.

9-2.

9-3.

Budget expenditures of republics, by selected object : 1950 to 1965 . Budget revenues, expenditures, and surpluses , by level: 1950 to 1965. Defense expenditures -- plan and actual: 1950 to 1967... Identified components of the expenditure classification used in the Ministry of Defense estimate , Standard summary accounts for the khozraschet sectors . Accounting reports of industrial enterprises . . Accounting reports of construction organizations . Accounting reports of railroads .. Accounting reports of domestic state trade organizations Standard accounting registers used in completing the balance sheet in industry. Standard accounting registers used in completing selected reports of an industrial enterprise . Consolidated reports of superior agencies for industry . Major standard accounting forms used in budgetary institutions. Accounting reports of budgetary institutions . Gosbank statistical reports identified as in use during the sovnarkhoz period . Number of Gosbank clients and their accounts : 1941 to 1961 . Sectoral groupings in first -order settlement and credit accounts of the Gosbank system . Comparison of Gosbank and budget classifications of accounts for sovnarkhoz industry: 1957 to 1965 ..... Primary documents used in budget - execution accounting. Accounting registers used by finance agencies .. Reports on budget execution by local finance organs. Reports on budget execution by republican ministries of finance, Accounting reports submitted by foreign trade associations. Centralized accounting offices , by type of organization served : 1960 to 1966 Machine data processing organizations: 1954 to 1965. .. Noncash payments for goods and services regularly reported by Gosbank --total volume and share of clearing settlements: 1940 to 1964 . Percent distribution of reported noncash payments for goods and services in Gosbank, by method : 1940 to 1964... Clearing settlements in Gosbank -- percent distribution and share of actual offsets, by type: 1940 to 1963..

127 131 136 137 143 145

146 149 150 168 169 172 173 174 176 189 199 204 206 207 209 210 213 220 222 231 232 234 235 238 240 242 244 247 251 254 277

278 279

APPENDIXES Appendix A. Supplementary figures and tables . Table IV - 1 .-- Consolidated financial plan of the national economy IV - 2 .-- Balance of monetary income and expenditures of the population IV - 3 ,--Cash plan of Gosbank U.S.S.R. . IV - 4 .--Financial plan of a sovnarkhoz for 1965

297 299 300 301 302

CONTENTS --Continued

XI

APPENDIXES-- Continued

Appendix

Page

A. Supplementary figures and tables--Continued Figure VIII- A VIII- A VIII- A VIII - A

- 1.-- Form - 2 .-- Form - 3.--Form - 4 .-- Form

VIII - A - 5 .--Form VIII - A - 6 .-- Form VIII - A - 7.-- Form VIII- A - 8 .-- Form VIII - A - 9.-- Form VIII - A - 10.-- Form VIII - A - 11 .-- Form VIII- A - 12.-- Form

No. No. No. No.

1. 2. 3. 5.

304 312 316 319 320 323 325 327 329 331 333 336

Balance sheet of an industrial enterprise Supplement to the balance sheet of an industrial enterprise Movement of the charter fund Production expenses . .

No. 6. Cost of marketable output. No. 7 , Production services and administration expenses . No. 10. Financing and special funds. No. 11. Movement of fixed assets and the amortization fund. . No. 12. Sales of output No. 20. Profit and loss No. 35 -KS. Balance sheet for capital investments No. 36 -KS. Balance sheet of a construction organization .

340 349

Table VIII - A - 1 .--Standard account titles and numbers used in major khozraschet sectors. VIII- A - 2 .--Standard registers of the uniform journal- order system of accounting

354 356

Figure VIII- B - 1.-- Form No. 1. Balance sheet of a budgetary institution VIII - B - 2 .-- Statement on movement of budget financing, attached to balance sheet . VIII - B - 3 .-- Form No. 2-3. Report on execution of the expenditures estimate of scientific - research institutions VIII - B - 4 .-- Form No. 3-3. Report on staff, enrollment, and wages in scientific research institutions. VIII- B - 5 .-- Form No. 4. Report on execution of the nonbudgetary ( Special) means estimate ...

357 358 359 360 361

VIII- B - 6 .-- Form No. 5. Report on movement of fixed assets . VIII - B - 7 .-- Form No. 6. Report on movement ofmaterial valuables

362 363

Table VIII - B - 1 .-- Standard classification of accounts for budgetary institutions . VIII- C - 1.--Standard Gosbank classification of accounts VIII - D - 1 .--Standard classification of accounts used for budget execution in the ministry of finance system .

366 367 368

VIII - E - 1 .-- Archival retention periods for selected types of records . VIII - E - 2 .-- The 1965 work plan of TsSU for financial and price statistics. Figure

IX - A - 1 .-- Form No. 13. Expenditure schedule for financing institutions maintained by the budget.. IX - A - 2 .--Form No. 15. Expenditure schedule for financing economic organizations IX - A - 3.--Form No. 12. Expenditure schedule -- financing plan IX - A - 4 .--Form No. 830. Budgetary authorization . IX - B - 1.-- Form No. 883- K . Invoice -payment demand

.

IX - B - 2 .--Form No. 873. Payment authorization IX - B - 3 .-- Settlement check IX - B - 4 .-- Form No. 868. Invoice. Table

IX - C - 1.-- Percent distribution of total noncash payments in Gosbank , by sector and purpose : sample survey , June 16-21, 1958 . IX - C - 2 .--Percent distribution of total noncash payments in Gosbank , by purpose, destination , and type of instrument: sample survey , September 18-30 , 1961 . IX - C - 3 .--Percent distribution of noncash payments in Gosbank , by purpose and payer or destination : sample surveys, 1958 and 1961 . IX - C - 4.-- Payments for goods and services by khözraschet organizations --percent distribution by type of Gosbank account and estimated credit participation : 1958.. IX - D - 1 .--List of model forms recommended by Gosbank for use in financial transactions

B. List of sources cited ...

384 385 386 387 388 389 390 391

392 393 394

395 396 399

1.

INTRODUCTION

This report contains an extensive description of the Soviet financial system -- its organization , ad ministrative structure, operation , and statistics . All levels, from the individual economic unit to the national organization , are treated . Particular attention is given to data recording and reporting practices, and detailed information is presented on terminology, accounting categories and classifi cations, forms and schedules, recording and re porting requirements , and data processing facilities at various stages in the chain of command . The system of data control , including verification and auditing , is briefly examined . The study was sponsored by the U.S. Arms Control and Disarmament Agency as part of a general inquiry into into the feasibility of using budgetary and other economic data verification in the disarmament process . One basic objective was the intensive examination of the state budget, and much attention has been given to the planning, classification , and statistics of the budget. The nature of Soviet economic organization , however , clearly called for the budget to be examined in the context of the entire state financial system . The scope of the study therefore extends to the finances of state - owned enterprises and institutions and to the banking system . Relatively little attention is given to the collective farm and cooperative sectors. A second objective of the study was to examine the origin and generating processes of financial statistics. This has involved a careful review of the administrative structure and operation of the various financial agencies, the reporting practices of the primary units , the accounts and report forms used at all levels , and the timing , review , consolidation , verification , and other operational aspects of the statistical reporting system . Only a limited amount of the great variety of financial statistics available are presented here, and these are included for purposes of generalorientation , Several chapters of the study are concerned with general background information . Chapter II is devoted to organizational aspects of the Soviet economy as a whole as well as its financial com ponents . In addition to a brief description of selected individual agencies, major organizational trends and recent administrative reforms in the economy are examined. Chapter III is designed to facilitate an understanding of the financial system by examining typical modes of corporate organi zation to be found in primary , intermediate, and superior units, particularly in terms of their financial, juridical, and data - reporting Status.

Chapter IV attempts to place financial planning in perspective by showing the relationship of the budget to economic planning in general and to the other types of financial plans prepared by various agencies and at various levels . Chapter V is devoted to the budget itself in terms of the struc ture of its components and the formal classification of revenues and expenditures . In chapters VI and VII, which dealwith individual types of revenues and expenditures, the scope of the discussion is extended beyond the formal budg et to include the finances of the state sector generally. Chapter VI, concerned with state reve nues, thus considers profits as a whole as well as profit taxes, and takes up other revenues not appearing in the budget. Chapter VII surveys over all state expenditures and examines a component of particular interest, the defense budget. Due to the constraints of time and the existence of a num ber of recent Western studies in the field , other major expenditure categories are not examined in detail. Chapter VIII, which represents a major por tion of the overall study , is devoted to a relatively detailed examination of financial data record keeping, accounting, and reporting practices in all the major components of the financial sys tem . It takes separate account of the two main classes of state organizations, the Khozraschet (or commercial - type ) enterprises and budget supported units , as well as the monolithic state bank , the budget- administering agency, and other systems. The level of detail in this examination extends to standard classifications of accounts , in ternal recordkeeping documents , and individual reports . Translations of selected individual docu ments and reports are given in appendix A. Chapter IX is concerned with the payments machinery, in terms of documents and procedures, in both budgetary and “ commercial” financial transactions involving operational units , the banks, and the budget agency. Chapter X examines the machinery of financial checks and controls including that of both the specialized control agencies and other agencies .

Appendix A consists of a variety of detailed materials related to various chapters of the study, such as lists of documents or reports , classi fications, and full translations of individual reports . Figure and table numbers in the appendix employ Roman numerals and letters coordinate with chapter numbers and section headings .

1

2

INTRODUCTION

One of the difficulties encountered during the study was the problem of change over time. This element has inevitably had an impact on certain aspects of the financial system , e.g.; the existence or functions of specific agencies or organizations ( chapter II), the planning system (chapter IV ), and the accounting and reporting systems of various agencies (chapter VIII) . Changes that have occurred in varying degree in these areas during recent years, however , have not fundamentally altered the essential system .

In contrast, very fundamental changes have oc curred in or have great potential impact on certain other aspects of the financial system . Thus, the reform in planning and managerial practices at the enterprise level, although still incomplete and in flux at this time, has initiated changes that will have a significant effect on many financialpractices The potential changes that may and procedures. arise from various more or less radical experi ments exemplified by the Liberman proposals could have even greater impact on the financial system . The extent and direction of these changes are still unresolved , for there are many forces at work , operating in different directions . On the one side, certain groups or individuals advocate a shift to more centralized planning and direction , arguing that the new mathematical tools and models plus increasing computer capabilities give the planners the technological ability and capacity to meet increased demands. On the other side , opponents of a highly centralized planning system argue for a recognition of the “ unplannability ” of the Soviet economy in certain areas --that it is too complex for complete planning, that only a few simple goals should be set centrally, and that greater dependence should be placed on primary - level initiative and a market - type determination of activity levels . Given these currents and undercurrents of thought and change in Soviet economic circles, what has been the actual trend of change in financial planning and practices ? There seems little doubt that, since at least the mid - 1950's, it has been toward greater reliance on financial indicators, as opposed to physical indicators . This shift is evident in at least four disparate fields. First, in the area of planning, increasing im portance has been given to national- income type balances, at least in the initial stages of the planning process. Aggregative value measures have been used to a greater extent. Although national income or product as computed in the Soviet Union is restricted to material products (all services are excluded), such aggregates emphasize value meas urements and comparisons as contrasted to physical measures . This change has been evident at least since 1957 when a major redesign of the In national economic balances was instituted .

addition , there has been a revival of interest in the Consolidated Financial Plan , which since the early 1930's has been compiled in a very casual and unofficial manner in Gosplan (see chapter IV ) . Second, greater emphasis on financial indica tors has been noticeable in agriculture , and es pecially in the affairs of the collective farm . Prices have been revised in such a way as to make measurements in value terms more appro priate ; the income of the collective farmer is now computed largely in value terms rather than in kind; and much greater attention has been given to collective and state farm financing in general. Over the past few years an increasing number of monographs and textbooks devoted to the instruction of collective farm officials in the problems of financing, accounting, and reporting has appeared, and both newspapers and journals ( scholarly and popular ) have shown increasing interest in and concern for the problems of agricultural planning. Third, there has been a distinct shift from the budgetary to the Khozraschet form of organization This shift has throughout the entire economy. caused an expansion in the role of exchange and a greater reliance on financial transactions. A number of examples of this conversion in form of financing, which have occurred quite apart from the theoretical and experimental moves of the past few years, can be cited. The machine- tractor stations were converted from a budgetary to a Khozraschet basis in the period 1959-60 , many postal organizations were converted in 1960 , many scientific - research organizations were placed on a Khozraschet basis beginning in 1954 and especially after 1962, and numerous construction - design and survey organizations, communal- economy and housing agencies, and even some cultural, ed ucation , and health agencies were converted in recent years .

And fourth , the recent reform of planning and managerial procedures is a move toward greater This is dependence on financial indicators . especially true of the charge placed on capital and the planned price revisions, which are to be determined so as to make profitability a more use ful decision -making criterion, and not only an accounting measure. The extent of actual change during the past decade has been obscured by the doctrinal ab horrence of such change. Deep - seated and long held theoretical notions have been challenged and resistance to change has been both loud and bitter . As recently as 1961 , at the 22nd Congress of the Communist Party which proclaimed the end of the period of transition from socialism and the beginning of the building of communism , much of the discussion seemed to envisage a

INTRODUCTION w future trend to demonetize the economy and to increase the role of the budgetary mechanism in distributing income and providing free services, This expectation evidently was carried over into the realm of long -term planning; at least some long - range urban plans since then have assumed an increased share in the future of “ public ” or

unpaid

services and facilities.

This doctrinal

attitude against monetization appears to be losing The actual trend toward the ground , however, increasing importance and use of financial in dicators over the past decade seems clear, and all impending or proposed reforms point in the same direction .

II.

SURVEY OF ECONOMIC -ADMINISTRATIVE AGENCIES

This chapter describes the governmental organs that are closely connected with the operation ofthe financial system . The first section reviews the broad structure of the Soviet government -- the hierarchy of territorial divisions, the types of governmental organs, and the organizational devel opments of recent years. Later sections are devoted to the organization , functions, and responsibilities of the major economic and financial administrative agencies. Throughout the Soviet period , and particularly during the Khrushchev era , the administrative sys tem was frequently reorganized. Under Khrushchev , industrialministries were abolished , the system of state committees was vastly expanded , a system of regional economic councils for the management of industry and construction was established ,many oblast governments were split into industrial and agricultural parts with dual sets of administrative was overhauled , organs, the the banking system planning agencies were reshuffled , and several reforms were carried out in agriculture. It is not the purpose here to trace all these changes in full scope. Instead , attention is focused on the present status, functions, and responsibilities of major administrative organs and on the past only to the extent necessary to bring out the essential contrasts and the nature of the changes. A. OUTLINE OF THE GOVERNMENTAL SYSTEM 1.

The Structure of the Soviet Government

The Soviet governmental structure is based a hierarchy of five levels of territorial This hierarchy descends administrative units . the all - union level through the republic , from oblast, and rayon to the rural soviet . The last three levels are known collectively as “ local" government.

on the basis ofminor nationality groups. Most of them (16 ) are located in the Russian Republic (or R.S.F.S.R.) ; there are also 2 in the Georgian , 1 in the Uzbek , and 1 in the Azerbaydzhan Republics. The kray, which in general comprises large, spar sely populated areas, now exists only in the R.S.F.S.R. , where there are six . The most com mon third-level subdivision , the oblast, is distrib uted among the republics as follows: 49 in the R.S.F.S.R., 25 in the Ukraine, 15 in Kazakhstan , 9 in Uzbekistan , 6 in Belorussia, and 1 in Kirgiziya . Third - level territorial divisions do not exist in the republics of Armenia , Estonia , Latvia , Lithuania , Moldavia , and Turkmenistan , where the line of subordination runs from the republic directly to the fourth level of administration . In the Kirgiz and Tadzhik Republics a number of fourth - level rayons are directly subordinated to the governments of union republics .

The fourth level consists primarily of two types of administrative units . One type, the rayon , is somewhat comparable to the county in the United States. The other type consists of cities and other economically important urban settlements which are directly subordinated to the A.S.S.R., kray, or oblast of which the rayon is a part. Consequently , these cities possess a status which is equivalent to that of rayons. There are also 18 units (15 in the R.S.F.S.R., 1 in Georgia , 1 in Azerbaydzhan , and 1 in Tadzhikistan ) called either autonomous oblasts or national okrugs, which are formed on the basis of nationality groups and occupy a position between the third and fourth levels of admin istration , The autonomous oblasts and the national okrugs usually consist of several rayons; auton omous oblasts are established within krays and national okrugs are established within both krays and oblasts .

The highest, or all -union level, which encom passes the entire territory of the Soviet Union , and the second , or republican level, which consists of the 15 union republics, need no further definition here. Each level of local government is described briefly , however, because of the admixture of territorial divisions which are included.

The lowest level of administration is made up of rural soviets , which comprise both rural areas and one or more villages, and small cities or other urban settlements . Although administrative organs of these units are a part of the system of local government, they are greatly limited in function and play a minor role in the work of state admin istration ,

The third level of administration consists of au tonomous republics (A.S.S.R.'s ), oblasts ,krays , and cities which are directly subordinated to the govern ments of the union republics. Autonomous republics are subdivisions of union republics which are formed

Most large cities are coordinate with rayons in terms of administrative level. Cities can be sub ordinated to a variety of levels , however. Major cities are subordinated directly to a union republic and thus bypass all other territorial subdivisions .

5

SURVEY OF ECONOMIC - ADMINISTRATIVE AGENCIES

6

Moscow and Leningrad, in fact, while technically under the Russian Republic , enjoy a specialde facto status comparable to that of republics in some planning and administrative contexts . Other cities may be subordinated to various lower governmental units , including the rayon itself in the case of small cities and urban - type workers' settlements . To gether with the urban districts (gorodskiye rayony) of large cities, and the rural soviets , these urban localities make up the lowest governmental admin istrative level. The principal types of governmental organs at each administrative level are as indicated below . Throughout the Soviet period there has been almost constant change in the names, size, and boundaries of the territorial units - particularly the oblasts , rayons, and rural soviets. Within the past decade there has been a trend toward reducing thenumber of these units through amalgamation .

Adminis trative level

Territoriall Legisla tive unit organ

Principal Executive adminis trative organ agency

First

U.S.S.R.

Supreme Soviet

Council of Ministry Ministers

Second

Union republic

Supreme Soviet

Council of Minist ry Ministers

Autonomous Supreme republic Soviet

Council of Minist ry Ministers

Third

Oblast Kray

Soviet of Workers ' Executive Department Deputies Committee

the U.S.S.R. through inferior bodies which are entirely part of and subordinated to the all -union agencies. Organs of the union - republican type have counterparts in the governments of each union republic (and often in local governments as well) . Each unit is subordinate both to the governmental executive organ at its own level and to its parent agency at the next higher level. Thus , the finance department in a rayon is subordinate to the executive committee of the rayon and to the finance depart ment of the oblast of which the rayon is a part. The finance department of the oblast is in turn sub ordinate to the executive committee of the oblast and to the republican ministry of finance, Finally , this ministry is subordinate to the republican council of ministers and to the U.S.S.R. Ministry of Finance . Because of the dual subordination of the union republican type of agencies, executive organs below the top level possess regulatory powers in the management of the affairs of these agencies. In some cases, such regulatory powers are quite extensive and represent genuine regional or local control; in the case of the Ministry of Defense or the Ministry of Foreign Affairs, the union republican status appears to be solely a formality . The administrative agencies of a republic , in addition to the union - republican type , may also be of the republican type. The latter agencies are established for administration of affairs within a given republic and they are subordinate only to the republican council ofministers . They do not have a union - level counterpart, and need not appear in all republics .

2. Reorganization of the Economic Administrative System , 1957-67

Fourth

Autonomous oblast National okrug Rayon City

Soviet ofl Workers ' Executive Department Committee Deputies

Fifth

Rural soviet Workers ' settle ment

Soviet of Workers ' Executive Commission Deputies Committee

The U.S.S.R. Council of Ministers is the highest executive and administrative organ . It issues decisions and orders and verifies their execution . These decisions and orders are binding throughout the territory of the U.S.S.R.

In the past decade , the structure of economic administration in the Soviet Union has been reorga nized several times. The first and most radical reform was carried out in May 1957 when the system of economic administration by ministries, which was based on the branch principle ofmanage ment, was abandoned in the fields of industry and construction and replaced with an entirely new system based on territorial-administrative units and exercised through regional economic councils , or sovnarkhozy . The second and third major re forms (November 1962 and March 1963) were largely retreats from the first reform . The fourth reform , which was approved in September 1965 , eliminated the regional councils and the territorial system of administration entirely and restored the ministerial, branch system of administration ,

Administrative agencies of the U.S.S.R. Govern ment are of either all -union or union - republican type in terms of structure , All- union agencies exercise their functions throughout the territory of

The administrative structure which existed prior to the reorganization of 1957 has often been referred to as “ departmentalism " because eco

OUTLINE OF THE GOVERNMENTAL SYSTEM nomic ministries played a prominent role in it. Enterprises and other economic organizations which were producers of one type of product were subordinated to a ministry which had responsibility for the branch of industry to which the product belonged . Such ministries directly exercised the functions of management. They had a strong in fluence on the drafting of production plans for each of their enterprises and for the entire industry , in selecting the place and form of new investment projects, and in deciding to shift resources and production capacities among their various plants . In addition , they distributed their output through their own sales organizations, acquired materials and equipment through their own supply agencies, and organized research and other experimental work in their own institutes and design bureaus. The main concern of each ministry wasto fulfill the tasks assigned to it by the plan . For this purpose the ministries were often inclined to be autarkic by keeping at their disposal extra production capacities and establishing their own subsidiary production lines in order to diminish their dependency on deliveries from plants of other ministries .

1

The stated intent of the reorganization of 1957 was to increase the efficiency of the industrial and construction sectors by eliminating wastefulness and improving the system of economic administra tion through the establishment of a regionalsystem of management -- thus eliminating the autarkic ministries and the branch , or departmental, A decree in May 1957 introduced a structure . number ofmajor changes: It created 104 economic administrative regions, each with an administrative agency known as a sovnarkhoz; it abolished 10 all union and 15 union -republican industrial and con struction ministries, including their counterparts in the republican governments , and transferred their enterprises and other economic organizations to the sovnarkhozy ; it reduced the number of re maining ministries, largely by mergers (the Ministry of GeneralMachine -Building, for example , was merged into the Ministry of Defense Industry); it transferred to the sovnarkhozy , according to a list confirmed by the U.S.S.R. Council ofMinisters, the enterprises and other economic organizations of the all - union ministries of Aircraft Industry, Defense Industry , Radio - Electronics Industry, Shipbuilding Industry , Chemical Industry , and Energy and Electrification (these ministries were retained until their transformation into state com mittees between December 1957 and December 1958 ); and finally, it subordinated the new sovnarkhozy to the republican councils ofministers , eby assumed wider powers and respon which sibilities in the management of industry and construction .

7

As a result of this reorganization , industrial enterprises producing about three- fourths of the total volume of industrial output of the U.S.S.R., including all the output of cast iron and iron ore, metallurgical equipment, steam and gas pipe , diesel locomotives , automobiles , combines and other machines, and chemicals , and almost all the out put of steel, rolled metal, nonferrous metal, coal, oil, cement, electric power, and the light and food industries were transferred to the sovnarkhozy ? Enterprises of local industry remained outside the sovnarkhoz system until November 1962when most of them were transferred to the sovnarkhozy.3

The transfer of enterprises from ministries to sovnarkhozy was accompanied by a transfer of supply and sales agencies. The planning of to interrepublican deliveries was entrusted Gosplan , which , in April 1958, was authorized to establish 10 main administrations for interrepub lican deliveries. In the reforms of November 1962 these main administrations were transferred to Sovnarkhoz U.S.S.R.

Research institutions closely connected with production which had been attached to the abolished ministries were transferred to the respective functional administrations of Gosplan , Those institutions of the surviving ministries engaged in general research , testing, design work , and ex perimentation were retained , however , and re mained with the ministerial agencies after they were transformed into state committees .

The process of transforming the surviving min istries into state committees started in December 1957 , and ultimately most of the 25 industrial and construction ministries abolished after May 1957 were recreated in the form of state committees. By mid - 1963 only 3 all- union and 8 union - republican ministries remained in existence. 5 Except for the all -union ministries of the Maritime Fleet and the Railways and the union - republican ministries of Finance , Defense, Communications, and Agri culture , all other ministries were in charge of matters related to foreign , political, cultural , and social affairs (Foreign Affairs, Foreign Trade, Culture, Health , and Higher and Specialized Secondary Education ).

The new state committtees were attached to the Council of Ministers U.S.S.R. and their counter parts in individual republics were similarly attached to republican councils of ministers. These committees were responsible for studies of new technological processes, standardization of equip

8

SURVEY OF ECONOMIC - ADMINISTRATIVE AGENCIES

ment , methods of production , experimental work and testing, design work on new products, and similar activities. Aside from developmental - type organizations, they were not intended to administer productive enterprises .

The second set ofmajor changes in the organi zational structure of economic administration was carried out in November 1962 and represented a change of direction from the territorial principle back to the branch principle . This was manifest in the following structural changes and institutional innovations: A reduction in the number of sovnarkhozy from 104 to 47; the separation of construction enterprises from the sovnarkhozy and the creation of an administrative system for con struction under a single agency , Gosstroy ; the con centration of all planning in Gosplan ; and the establishment of Sovnarkhoz U.S.S.R., which was to be responsible for the implementation of economic plans. The reform of November 1962 also included a decision to split government as well as party organs and some trade unions into industrial and agricultural sections, in accordance with the so - called production principle . The idea of two sys temswas so unrealistic and impracticable that only a half -hearted attempt was made to carry it out. During 1963 separate administrative organs for in dustry and agriculturewere established in a number of oblasts and krays ,but by the end of the year there were a number ofmergers to restore single organs. Further mergers were carried out in 1964 , and after the dismissal of Khrushchev the decision to split administrative and party organs according to the production principle was officially revoked by the party plenum of November 1964.

At the beginning of 1963 a number of state committees were attached to Gosplan and their authority was somewhat increased. A decree of Jan uary 11, 1963, gave them the authority “ to distribute financial and material resources allotted for the fulfillment of plans for new technology ; to finance scientific research and experimental-design work by organizations, regardless of their agency sub ordination , within the limits of budgetary alloca tions stipulated for these purposes; and to check on the fulfillment of this work ." The necessary physical resources and financial means allocated to the state committees for branches of industry under Gosplan U.S.S.R. were to be stipulated in the draft plans for the development of the national economy of the U.S.S.R. and the U.S.S.R. budget.

The third major reform was carried out in March 1963. It established the Supreme Economic Council as an organ to provide leadership and coordination for the work of three other major organs, namely, Gosplan , Sovnarkhoz U.S.S.R., and Gosstroy. Each of these four agencies was assigned a number of state committees and charged with the task of coordinating the work of these and other subordinate bodies. In addition , a number of state production committees were created and placed under the supervision of two of the major organs - the Supreme Economic Council and Gosstroy . These state production committees were each assigned a number of industrial enter prises to administer ; in this respectthey resembled the presovnarkhoz industrial ministries and their creation foreshadowed the restitution of the min istries in 1965.

The assignment of state committees and state the four top - level production committees to agencies in January and March 1963 apparently was not guided by a clearly defined principle ; nonetheless, some features stand out prominently : ( 1 ) State committees closely connected with in dustry of military significance were assigned to the Supreme Economic Council, although the Council was also given responsibility for nonmilitary committees and specialized agencies; (2 )most com mittees created to work with individual branches of industry were placed under Gosplan ; ( 3) state state production committees committees and operating in the construction field were placed under Gosstroy; ( 4 ) two state committees (fishing and trade) together with the All-Union Agricultural Equipment Association were initially subordinated to Sovnarkhoz U.S.S.R., but were soon transferred to other agencies; and (5 ) state committees con cerned primarily with political affairs remained directly affiliated with the Council of Ministers U.S.S.R., in addition to a number of nonpolitical state committees and specialized agencies.

The reform of March 1963 was a further move in the trend toward the restoration of the branch principle of economic administration . This de velopment was most clearly expressed in the for mation of state production committees, because these committees were given direct operational control over the enterprises in their field of interest.

The structure of the central governmental system prevalent between March 1963 and March 1965 is shown in figure 2-1.

9

OUTLINE OF THE GOVERNMENTAL SYSTEM

Figure 2-1.--CENTRAL GOVERNMENTAL STRUCTURE OF THE U.S.S.R .: MARCH 1963 TO MARCH 1965

Council of Ministers U.S.S.R. All -Union Ministries :

State Committees :

Union -Republican Ministries :

Defense Communications Culture Agriculture Finance Foreign Affairs Health Higher and Specialized Secondary Education

Maritime Fleet Railways Foreign Trade Civil Aviation

Cinematography Cultural Relations With Foreign countries Foreign Economic Relations Labor and Wages Party -State Control Press Procurement Radio Broadcasting and Tele vision State Security Trade State Production Committee for Irrigation of Agricul ture and Water Economy

Specialized Agencies : Gosbank Vneshtorgbank TsSU Foreign Economic Affairs Commission Main Administration of State Material Reserves Main Administration for the Protection of Military and State Secrets in the Press Other

Supreme Economic Council

Gosstroy State Production Committees : Medium Machine Building Gas Industry Energy and Electrifi cation Fishing Industry

Specialized Agencies : State Commission for Mineral Reserves Stroybank All -Union Agricultural Equipment Association

Sovnarkhoz U.S.S.R.

Gosplan

State Committees :

State Committees :

Aircraft Technology Defense Technology Radio Electronics Shipbuilding Electronics Technology Inventions and Dis coveries Geology Use of Atomic Energy Coordination of Scientific - Research Work Standards and Measures and Measuring Instru ments

Civil Construction and Architecture Construction Materials Industry Construction , Road , and Communal Machine Building

State Production Committees : Installation and Special ized Construction Work Transport Construction Construction in the Cen tral Asian Economic Region

State Committees :

Machine- Building Heavy , Power, and Trans port Machine -Building Chemical and Petroleum Processing Machine Building Automotive , Tractor, and Agricultural Machinery Ferrous and Nonferrous Metallurgy Fuel Industry Petroleum Extraction Industry Petroleum Refining and Petrochemical Industry

Chemical Industry Light Industry Food Industry Timber , Paper , and Wood Products Electrical Technology Instrument-Making , Auto mation Equipment , and Control Systems Vocational and Technical Education

Source: Ekonomicheskaya gazeta, no. 1 , January 4 , 1964 , p . 34 ; Ponizov, Upravleniye , 1963, insert; Pravda , March 14 , 1965 .

The dismissal of Khrushchev in October 1964 was a prelude to further changes in the structure of administrative organs. The first step wasmade on March 2 , 1965 , when the Supreme Soviet U.S.S.R. issued a decree transforming five state committees, all of which had been attached to the Supreme Economic Council, into all -union min istries. At the same time, the State Production Committee for Medium Machine - Building was transformed into two ministries , 8 These changes were as follows:

Former state committee

New ministry

Aircraft Technology Defense Technology Radio Electronics

Aircraft Industry Defense Industry Radio Industry Shipbuilding Industry Electronics Industry GeneralMachine

Shipbuilding Electronics Technology Medium Machine Building

Building Medium Machine Building

An aspect of these changes which deserves special note is the fact that this transformation of

state and state production committees into min istries involved only agencies active in the field of defense production . At a session ofGosplan held on March 19 , 1965 , Alexey Kosygin , the new Chairman of the Council of Ministers U.S.S.R., in an obvious reference to these changes, stated : “ Recently the administration of the defense branches of industry was reorganized ."

In September 1965 , a party plenum approved a fundamental reorganization of administrative organs, 10 This reform abandoned the territorial principle of management in industry and construc tion by abolishing the entire sovnarkhoz system and reestablishing theministries, placing individual enterprises and organizations under their adminis tration , These actions restored the traditional structure of the economic - administrative system as it had existed prior to 1957 .

The structure of the central governmental system established in September 1965, including a number ofminor changes effected between that time and February 1967, is shown in figure 2-2.

:Source

:Construction

Ministries epublican R-Union

Committee for State and Science Technology

for Committee State Material and Technical Supply

-Union All Ministries

Labor and Wages

; Committee State

Committees and State Specialized Belonging Agencies Ministers of Council the to

Committee State for Construction Civil Architecture and

Gosstroy

Committees Specialized and )(pri Agencies Attached to Council the Ministers of Committee :

CEMA Commission

SURVEY OF ECONOMIC - ADMINISTRATIVE AGENCIES

ppendix 966 1IaAF2.,A;Tp22 storiya sikulin 967 nd February -2 7.4,2119 pebruary ugust 966 Pravda

Standards Measuring ,aMnd easures -Technical Vocational Education Instruments Procurement Agricultural Discoveries and Inventions Use Atomic of Relations Energy Economic Foreign Cultural Relations Control Foreign with People's State Security Countries Forestry Television and Broadcasting Radio Cinematography Specialized Agencies : Press Gosbank : Agencies Specialized UAll - nion tural Stroybank Agricult Equipmen Association Vneshtorgbank Ts SU State of Administration Main Reserves Material Mineral Reserves for Commission Administration Main Hydro for Service meteorological Arbitration State Commission Juridical Commission Setting for Personal Pensions Administration Foreign for Tourism Administration Main Archives of Other

Committee State Prices for

Gosplan

Industry :Defense : Industrial Aircraft Industry Industry Heavy of Construction Coal Industry Defense Industry Petroleum Extraction Industry Enterprises Electronics Industry Petro and Refining Petroleum Construction Industrial BGeneral - uilding Machine chemical Industry Construction Machine BMedium - uilding Electrification Energy and Construction Agricu.ltural Radio Industry Ferrous Metallurgy Con Special and Installation Shipbuilding Nonferrous Metallurgy Work struction Chemical Industry Industry :Other C,aPLogging nd ellulose aper Noneconomic : Automobile Industry Industry Woodworking Machine Petroleum Chemical and Materials Construction Industry Building Culture Industry Light a,RCom nd oad Construc tion Defense Industry Food -Building Machine munal and Meat Industry Dairy Finance Electrotechnical Industry Affairs Foreign Economic :Other Gas Industry Education aHeavy Transpor ,Pnd ower t Agriculture Specialized Secondary and Higher B-Machine uilding Amelioration Economy Water and Education M-Instrume ,Aaking utomatio ntn Communications Order Public Protection of and Control Systems Economy Fishing Health Public Light -Band Machine for uilding Geology Household and Industries Food Trade Appliances Machine and Industry Tool Tractor Agricultural and BMachine - uilding Nonindustrial : Civil Aviation Trade Foreign Maritime Fleet Railways Construction Transport

-UAll nion Agricultural Committee

Chairmen Deputy by Headed Agencies

Ministers of Council U.S.S.R.

.: U.S.S.R FEBRUARY THE OF STRUCTURE 1967 GOVERNMENTAL CENTRAL .-2-2 Figure

10

MAJOR ORGANS OF ADMINISTRATION AND PLANNING , 1957-67 B. MAJOR ORGANS OF ECONOMIC ADMINIS TRATION AND PLANNING , 1957-67 1. The Supreme Economic Council During the discussions preceding the reorgani zation of industry and construction in May 1957, proposals were made to establish a Supreme Economic Council. As explained by Khrushchev in a speech to the Supreme Soviet, the idea was re jected on the ground that such an organ “ would inevitably require an apparatus similar to that currently existing for the ministries and chief administrations" and also would “ duplicate thework of the regional sovnarkhozy and of the correspond » ll ing industrial departments of Gosplan . By 1963, however, Soviet leaders evidently felt the need for such a top - level body and by a decree of March 13 established the Supreme Economic Council as “ the highest State agency for the leadership of industry and construction in the country, invested with all necessary rights and plenary powers to decide questions connected with the work of industry and construction and to assure successful fulfillment of State plans." 12

The duties entrusted to this Council included the following: Coordinating the activities of the planning and other economic agencies; promoting the effective use of capital investment, materials, labor, and financial resources; securing the uni versal growth of labor productivity; promoting the reduction of costs and the improvement of quality of products on the basis of the latest advances of science and technology; and elaborating and imple menting measures for the development of industrial production . A specific task of the Council was to deal with current problemsarising in theprocess of fulfilling State plans.

In order to accomplish these goals the Supreme Economic Council needed near - supreme authority; therefore , Gosplan , Sovnarkhoz U.S.S.R., and Gosstroy were made subordinate to it. Numerous state committees and three state production com mittees 13 were attached directly to the Council, were Stroybank , the State Commission for Mineral Reserves, and the All -Union Agricultural Equipment Association . The Ministry of Railways and the Ministry of the Maritime Fleetwere placed under the Council only in respect to questions connected with their work in industry and construc tion .

The Council was made up of the chairman and his deputies, the chairmen of Gosplan , Sovnarkhoz U.S.S.R., Gosstroy, the State Committee for Co ordination of Scientific Research Work U.S.S.R., the State Committee for Labor and Wages , and the state branch and production committees, and various other officials .

11

Nominally the Supreme Economic Council was intended to be the most authoritative agency in the economic - administrative hierarchy, but the struc ture contained serious practical flaws. The Council of Ministers U.S.S.R. delegated none of its ultimate powers of policy decision to the Economic Council, and the actual responsibilities for planning and implementing plans were assigned to Gosplan , Sovnarkhoz U.S.S.R., and Gosstroy. The Council was interposed between the central Government and its high -level administrative agencies and given responsibilities described only as “ leader ship and coordination ." This situation may account for the fact that during its existence the Council remained relatively obscure.

A number of signs indicate that at the time of its formation the Supreme Economic Council was intended to play a major role in defense production and related activities . Thus , state committees directly concerned with defense production and a large number of state committees with functions closely related to defense were subordinated to the Council. It was also a significant fact that Dmitriy F. Ustinov , Chairman of the Council, had been Minister of Defense Industry between 1953 and 1957 and a Deputy Chairman of the Council of Ministers U.S.S.R. -ostensibly without a clearly assigned field of responsibility - between 1957 and March 1963.

2. The State Planning Committee (Gosplan ) Because the Soviet economy is a planned economy, Gosplan , the chief organ entrusted with translating the broad economic directives of the Council of Ministers into a definite set of plans, has always occupied a unique position among all Soviet governmental organs. Its work and influence cut across departmental and regional lines and play an extremely significant role in the ultimate success of all economic activity. Gosplan has had a power ful influence on the determination of production priorities , the volume and assortment of output, the place and form of capital investments , the prices of products and trade discounts, labor require ments and wages, the allocation of resources, and many other matters.

The organization , functions, and operation of Gosplan have been constantly under close scrutiny by the central Government because of the strategic role which the agency plays, and over the years it has been subject to frequent reorganization . As the increasing complexity of the Soviet economy has made planning more and more difficult in recent years , several attempts have been made to increase its flexibility and responsiveness to new require ments. During the last 12 years, planning has been reorganized five times. These changes are summa rized below .

12

SURVEY OF ECONOMIC - ADMINISTRATIVE AGENCIES

Central agency responsible for:

Time period

July 1955 May 1957

Long - term planning

Gosplan

May 1957 April 1960

April 1960 November 1962

Short - term planning

Implement ation of plan

State Economic Commission (Gosekonom komissiya )

Ministry

Gosplan State Economic Council (Goseko nomsovet )

Gosplan

November 1962 September 1965

Gosplan

Sovnarkhoz U.S.S.R.

September 1965 Present

Gosplan

Ministry

As is indicated , the reform of 1957 combined both long- term and short -term planning in Gosplan . Also , the disappearance of industrial ministries created a vacuum among top - level organs in respect to central control over the implementation ofplans and , by default rather than by design , this function fell to Gosplan in addition to its planning work. At the lower level, regional sovnarkhozy were re sponsible for the detailed and immediate super vision of plan implementation . The arrangement lacked a clear -cut delineation of responsibilities which was partly remedied in 1960 with the estab sovnarkhozy lishment of republican in the R.S.F.S.R., the Ukraine, and Kazakhstan . Aware ness of the need to have a top - level organ respon sible for the implementation of plans becamemore and more acute and finally crystallized into the idea of establishing Sovnarkhoz U.S.S.R. in Nov ember 1962. At that time, all planning was concentrated in Gosplan and the responsibility for implementation given to Sovnarkhoz U.S.S.R. Al though Gosplan was for a time subordinated to the Supreme Economic Council, the importance of its functions and responsibilities preserved its status as an extremely authoritative organ . The functions of Gosplan were last defined in a joint decree of the Central Committee of the C.P.S.U. and the Council of Ministers on January 11 , 1963.15 The decree stipulates thatthe planning system be based on plans compiled directly by enterprises, construction organizations, kolkhoz sovkhoz production administrations, and other primary units and then combined and coordinated by the sovnarkhozy , the republics, the state com mittees for branches of industry , and all-union ministries and departments. 16 Plans for the development of the national economy are to be

compiled for five years with the tasks for in dividual branches, union republics , and major economic regions to be distributed for each year. The most important indicators for the development of the national economy are also to be determined for the year following the five - year period . This means in effect that the decree calls for a permanent five- year plan adjusted after each single year .

The decree assigns to Gosplan the following specific tasks: To elaborate the procedure, dead lines, and standard methodology for the compilation of general economic plans, material balances , cost estimates, and plans for the distribution of equip ment and materials among the union republics , state committees for branches of industry , and ministries and departments of the U.S.S.R .; to determine, with the participation of other state organs, the volume of production , amount ofcapital investment, level of labor productivity , costs of production , and other key indicators and to transmit them to the republican councils of ministers, state committees for branches of industry, ministries , and departments for guidance in elaborating their plans; to review , with the participation of Sovnarkhoz U.S.S.R. and Gosstroy, the draft plans submitted by other agencies; and to prepare pro posals for the coordination ofplans for the develop ment of the national economy with the national economic plans of other socialist countries.

further required Gosplan to decree The elaborate , together with the Ministry of Finance and other state agencies , proposals for improving wholesale prices of industrial and agricultural products , retail prices of consumers' goods, rates for transportation of both freight and passengers , and trade discounts and price markups; and to review and confirm the basic norms for the utili zation of raw materials, fuel, power ,machines, and equipment. The actual work in each of these fields of responsibility is performed by specialized departments of Gosplan . The structure of Gosplan is shown in figure 2-3.

At the time of reorganization in 1957, both Gosplan U.S.S.R. and Gosplan R.S.F.S.R. included within their structures departments for defense Sources describing the structure of industry.17 Gosplan U.S.S.R. after November 1962, however , make no mention of defense industry as a separate department. Moreover , the decree of January 11, 1963, setting up the new Sovnarkhoz U.S.S.R., called for it to draw up and implement plans for military equipment output and capitalconstruction (presum ably of defense plants ) covering a variety ofsectors and agencies, to plan the civilian output of defense industry plants , and to preparemeasures connected with meeting the country's defense needs. It would thus appear that the planning of defense needs was 19 at that time entrusted to Sovnarkhoz U.S.S.R.

13

MAJOR ORGANS OF ADMINISTRATION AND PLANNING , 1957-67 Figure 2-3.--ORGANIZATIONAL STRUCTURE OF GOSPLAN U.S.S.R .: MID -1965

State Committee for Prices

Council for the Study of Productive Forces

Chairman Institute of Integrated Transportation Problems

Main Computing Center Executive Board

Scientific -Research Institute of Economics

Other

Departments for Materials Balances and Distribution Plans

General Departments

Machine - Building

Materials

Finance

Capital Investments

Transportation and Communications

Pipe and Hardware

Costs

Materials Balances and Distribution Plans

Consumers ' Goods

Output of the Machine Building Industry

Productivity of Labor and Labor Resources

Agriculture

Other

Commodity Turnover

Summary Departments

National Economic Plan

Departments of National Economic Plans

Culture Subdepartments :

Heavy Industry Education

Ferrous Metallurgy

Electrification of the National Economy Health

Nonferrous Metallurgy Coal Industry

Chemicalization of the National Economy

Petroleum Industry

Foreign Trade Coordination of National Economic Plans of the U.S.S.R. and of Socialist Countries

Lumber Industry Construction Materials Industry

Other

Gosplan of the Union Republic

Oblast Planning Commission

Rayon Planning Commission

Note : For the state committees attached to Gosplan U.S.S.R. between 1963 and 1965, see figure 2-1 . Source : Frolov, Organizatsiya , 1963 , p . 37 ; Planovoye khozyaystvo , no . 4 , 1964 , p . 9 ; Laptev , Pravovoye, 1963, p . 93 ; Yevenko , Voprosy, 1959 , pp . 41-43 .

14

SURVEY OF ECONOMIC - ADMINISTRATIVE AGENCIES

There are cogent reasons to consider such a conclusion with reservation , however. Sovnarkhoz U.S.S.R. was not responsible for planning in other areas of the national economy and therefore can not be assumed to have possessed sufficient information to plan defense needs realistically and efficiently . In addition , the expression used for plan preparation (osushchevtvlyayet razrabotku literally , “ carries out the elaboration ” )may also be interpreted as signifying merely the preparation of a preliminary draft of defense production , which was then to be refined and incorporated in the national plan by Gosplan. The logic and structure of Soviet planning support the view that Gosplan still has a separate department in charge of defense planning , although this department may have been combined with another such as the Department of the National Economic Plan , the Department ofMaterial Balances and Distribution Plans, or the Department of Heavy Industry - or it may be one of the " other " departments ( see figure 2-3).

The structure and functions of Gosplan U.S.S.R. are duplicated in each republic in the form of republican Gosplans which perform similar work within the extent of their territories. 20 At the oblast and rayon levels corresponding work is done by planning commissions. 21

The Soviet Union is divided into 18 large economic regions which represent broad geographic areas but do not have administrative organs . Planning commissions have been established for these economic regions, but they are for the most part informal bodies and have little practical 22 significance.

The sovnarkhoz system was adopted in the belief that a single management over all, or almost all, enterprises and other economic organizations within a specific region would be able to effect many improvements in the performance of the economy. It was expected that the sovnarkhozy would eliminate duplication of work among enter prises, prevent waste of resources and minerals , rationalize the distribution system and reduce distances involved in the shipment of products between producers and consumers, and systematize the allocation of major construction projects. For these reasons, the sovnarkhozy were assigned wide ranging responsibilities and granted important rights in the statute of September 26 , 1957 . 23 This statute assigned to each sovnarkhoz the following tasks:

to secure fulfillment of the production plan in accordance with the specified indicators (e.g., volume, quality , nomenclature, and assort ment of output, introduction of new capacities into operation , productivity of labor, reduction of costs, norms of accumulation , payments to the budget, deliveries of output) for the sovnarkhoz as a whole and for each subordinate enterprise and economic organization ; to prepare plans for the development of each region in respect to production , the introduction of new technology, scientific research , capital construction , material- technical supply, trans portation , and finance; to elaborate proposals for administrative im provements , the rational use of resources, the mobilization of reserves, and the speciali zation of production ;

3. Economic Councils (Sovnarkhozy) a . The Sovnarkhoz System.- One of the major elements of the reorganization in 1957 was the introduction of the sovnarkhoz, which was an administrative body formed to manage and control the industrial and construction enterprises and certain other organizations within an economic administrative region . In the larger republics, each such region comprised one and sometimes several oblasts ; in the smaller republics, the region and republic were coterminous . A total of 104 regions, each with a sovnarkhoz , were formed in 1957: 68 in the R.S.F.S.R., 11 in the Ukraine, 9 in Kazakhstan , 5 in Uzbekistan , and l each in the remaining 11 republics. In succeeding years, changes were made in the number and composition of these regions, the generaltrend being to combine regions or parts of regions and thus reduce the number . In November 1962, the total number was cut to 47 and at the end of 1965 when the system was abolished the total was 50 .

to provide leadership in scientific research , design work , and the development of better machines, new inventions , and new types of materials ; to

seek improvements in financial affairs by strengthening khozraschet., increasing the profitability of enterprises, and promoting the effective use of fixed and working capital;

to prepare a list of prices, subject to sub sequent confirmation by higher organs , of products produced by subordinate enterprises, wholesale prices within the and to confirm range of its authority;

determine current and future needs of with specialized secondary or specialists higher education and organize the training and placement of specialists in enterprises, other economic organizations, and institutions;

to

MAJOR ORGANS OF ADMINISTRATION AND PLANNING , 1957-67

to prepare estimates of credits needed by sub ordinate enterprises and to submit these estimates to Gosbank and the banks for long term investments ; and

15

to retain a reserve of no more than 5 percent of the credits established by the credit plans of Gosbank and the banks for long -term credit;

to confirm wholesale prices in specified cases ; to review and approve accounting reports and balance sheets of subordinate enterprises and to compile summary accounting reports and balance sheets, by type of economic activity , for submission to higher organs .

The major rights granted by the statute to each sovnarkhoz in the fields of planning, capital con struction , material- technical supply , finance and credit , and labor and wages were as follows: to approve, and in case of necessity to alter, the tasks set for the production , capital ac cumulation , and other activities ofsubordinate enterprises and organizations;

to approve or modify design specifications for the construction of facilities for which the cost estimate exceeds 25 million rubles (except for projects having special national importance); to redistribute , with the consent of Gosplan , capital resources between branches of industry or construction ;

to distribute or redistribute natural resources , raw materials, fuel, machinery, or means of transportation between subordinate enter prises, organizations, and offices;

approve , in accordance with the national economic plan and budget of a union republic , the financial plans of subordinate enterprises and organizations or the budget estimates of institutions;

to

to establish for subordinate enterprises and organizations the total amount of working capital for their use and the limits to be maintained on certain items (production stocks, unfinished output, finished products, etc.);

to confirm estimates of administrative expend itures by subordinate enterprises and organi zations; and

to approve the structures, administrative staffs , salaries , and wage funds of subordinate organi zations. Each sovnarkhoz established two sets of internal organs: functional departments or administrations concerned with matters common to the sovnarkhoz as a whole , such as economic planning, finance, capital investment, material- technical supply , sales, etc .; and branch administrations concerned with the management of all enterprises and organi zations of a particular branch of industry located within the region . The number of branch admin istrations varied greatly from one sovnarkhoz to another , depending on the variety of enterprises located in a given region . A typical sovnarkhoz administrative structure is shown in figure 2-4 .

showed that the regional Experience soon sovnarkhozy were unable to fulfill effectively all the In the R.S.F.S.R., the tasks assigned to them . Ukraine, and Kazakhstan , republican sovnarkhozy charged with the task of coordinating the work of the regional sovnarkhozy within each republic were established in June- July 1960. 24 Although Soviet sources offer little information about these repub lican sovnarkhozy, it appears that their structure was essentially the same as that of the regional sovnarkhozy - i.e ., they consisted of both functional and branch administrations. The latter , however , were probably administrative organs only , with no directly attached enterprises. The formation ofthe three republican sovnarkhozy was also accompanied by the transfer of Main Administrations for Supply and Sales of Industrial Output from republican Gosplans to these republican sovnarkhozy. 25 A

to open bank accounts for the redistribution of working capital and other funds between sub ordinate enterprises and organizations, and to establish accounts of reserve funds for render ing financial aid to enterprises and organi zations; to increase , up to 10 percent and in agreement with the Ministry of Finance of a union republic , the budget appropriation per calendar quarter for the soynarkhoz at the expense of appropriations designated for succeeding cal endar quarters ;

second and far more drastic measure to

improve the sovnarkhoz system was taken in No vember 1962. The number of regional sovnarkhozy was reduced to 47 (24 in the R.S.F.S.R., 7 in the Ukraine, 7 in Kazakhstan , 1 for the 4 Central Asian republics - Uzbek , Kirgiz , Tadzhik , and Turkmen and 1 in each of the remaining 8 republics).? At the same time, most enterprises of local industry were detached from the local soviets and trans ferred to the sovnarkhozy. In addition , construction enterprises were detached from the sovnarkhozy and placed under a separate hierarchy for con struction . Finally a new organ , Sovnarkhoz U.S.S.R., was formed. This agency will be discussed below .

16

SURVEY OF ECONOMIC - ADMINISTRATIVE AGENCIES Figure 2-4 , -- TYPICAL ADMINISTRATIVE STRUCTURE OF A SOVNARKHOZ

Chairman

Technical-Economic Council

Functional Administrations and Departments

Branch Administrations for Production

Production

Ferrous and Nonferrous Metallurgy

Finance Radio and Electronics Industries Capital Investment Technical

Heavy and Transportation Machine - Building

Chief Accounting Office

Machine -Building

Chief Mechanical Engineer and Chief Power Engineer

Agricultural Machine Building and Motor Tractor Industries

Economic Planning Labor Organization , Wages , and Labor Safety Chief Quality Control Inspectorate

Electrical Equipment Industry and Instrument Manufacture Fuel Industry Chemical Industry

External Relations

Housing and Children's Institutions Legal Affairs and Arbitration

Construction Materials Industry Furniture and Wood working Industries

Lumber Industry Cadres and School Establishments Cotton Textile Industry Material- Technical Supply and Sales Administrative Affairs

Industrial Fabrics and Knitwear Yarn

Linen Industry

Equipment and Complementary Items

Flax Processing Mills

Building Security

Wool and Silk Industries

Maintenance and Support Services

Light Industry Leather - Footwear Industry

Garment Industry Large Enterprises , Production Associations (Firms) , Trusts, and Organizations

Meat and Milk Industries

Food Industry

Poultry Farms

Source : Moskovskiy , Ekonomika , 1963 , p . 113 ; Ponizov , Upravleniye , 1963, insert.

Enterprises

MAJOR ORGANS OF ADMINISTRATION AND PLANNING , 1957-67 b . Sovnarkhoz U.S.S.R. -.The decision made 1962 to abolish the division in November between long - term and short-term planning re sulted in the transfer of all planning functions to Gosplan and the assignment of responsibility for implementation of plans to the newly formed Sovnarkhoz U.S.S.R. The Central Committee C.P.S.U. and the Council of Ministers U.S.S.R. issued a joint decree on January 11 , 1963, which listed among duties of Sovnarkhoz U.S.S.R. the following: 27

to promote the most rational and effective use of materials , labor, and financial resources; to

eliminate

excessive

costs and losses

in

production ; to organize the implementation (realizatsiya ) of tasks assigned by the national economic plans for production of industrial products ; to devise and carry out measures for increasing production, improving the quality of goods, and increasing the assortment of popular con sumers' goods;

to determine, in accord with approved material technical supply plans, specific needs for raw materials , fuels , supplies, and equip ment for the national economy of the U.S.S.R. as a whole , for the republics, for ministries and departments of the U.S.S.R., and for export;

to determine the specific needs of the national economy for raw materials , supplies, and equipment which are to be acquired through import ;

to elaborate plans for the production and distri bution of products not provided in the national economic plan (based on proposals by, and nomenclatures agreed with , union republics , interrepublican sovnarkhozy, and U.S.S.R. agencies) ; to elaborate and approve plans for interrepub lican deliveries of goods and materials and for deliveries of goods of national importance which were not specified in the national economic plan ;

to approve plans for coordinated deliveries of castings, forgings , stampings , key assemblies, and parts of machinery and equipment; to establish rational and long-term economic ties among republics, economic regions , and enterprises;

17

to organize the supply of equipment, instru ments, and cable to especially important construction sites and enterprises being re constructed according to a list approved by the Council of Ministers U.S.S.R .; to make corrections and adjustments to plans for the extraction of supplementary resources , within the limits of the indicators of the national economic plans, but without changing interrelationships between the plan and the budget;

to establish priorities for the delivery of goods and establish procedures for acquiring and disposing of excess, unused , and unsold raw materials, supplies, fuel, equipment, and other products; and to create state commissions for approving and putting into operation major new enterprises and other structures .

Sovnarkhoz U.S.S.R. was further responsible for the implementation of plans for delivery to agri cultural organizations of tractors, vehicles, agri cultural machines, earth -moving equipment, min eral fertilizers, pesticides and herbicides, vehicle tires, fuel for vehicles, and construction materials which are included in the plan according to needs established by the All -Union Agricultural Equip ment Association .

In the field of foreign economic relations, the responsibilities assigned to Sovnarkhoz U.S.S.R. as follows: To implement annual plants for the delivery of equipment and goods for export and check on fulfillment by the Ministry of Foreign Trade of plans for delivery of equipment and goods to the national economy from imports ; to participate in the preparation of proposals for the specialization of production among CEMA member countries; and to submit to the Council of Ministers U.S.S.R. recommen dations concerning the draft of annual plans for the export and import of goods, for deliveries of equipment for construction projects being built abroad with Soviet technical cooperation , and for a draft of annual trade agreements with foreign countries.

The decree stated that Sovnarkhoz U.S.S.R. was to “ carry out the drafting and implementation of plans (osushchesvlyayet razrabotku i realizatsiyu planov ) : ofmilitary equipment output covering (po ) the aircraft , defense , shipbuilding , radio electronics , and electronics branches of industry , including capital construction ; covering the Ministry of Defense U.S.S.R., the Committee for State

18

SURVEY OF ECONOMIC - ADMINISTRATIVE AGENCIES

Security attached to the Council of Ministers U.S.S.R., and also draw up measures connected » 28 with meeting the country's defense needs” . z Sovnarkho U.S.S.R. was also required to submit to Gosplan a draft of the plan for the production of civilian goods prepared at enterprises of the de fense branches of industry . However , defense industry planning functions may have been shifted the Supreme Economic Council, which was created a few months later . The state committees for these same branches of industry were trans ferred to the Supreme Economic Council from the Council of Ministers, together with the newly formed state committees for general and medium machine- building which are generally assumed to be defense - related.29

The collegium , or executive body, of Sovnarkhoz U.S.S.R. consisted of of the chairman chairman and and his deputies, the deputy chairmen of state branch committees attached to Gosplan , and and other officials --altogether a total of between 50 and

60 persons . The agency consisted of the usual departments . Most ad administrations and for ministrations were established specific branches of industry and were responsible for promoting and assuring the fulfillment of pro duction plans within their respective branch . Departments , on the other hand , were primarily functional units responsible for matters common to all branches of industry . (See figure 2-5 .)

This

distinction

between

administrations as

operational organs and departments as functional organs, however , was not always applied con The work of such administrations as sistently. Planning - Production or Specialization and Co operation , for example , resembled very closely the type of work done by various functional depart Conversely , the Department for Agri ments , culture fitted imperfectly into the framework of departments . This inconsistency in designation was not unique to Sovnarkhoz U.S.S.R. but existed in most administrative agencies.

Figure 2-5 .--ORGANIZATIONAL STRUCTURE OF SOVNARKHOZ U.S.S.R .: MID -1965

Chairman Executive Board

Administrations

Departments

Heavy Machine- Building

Finance and Cost of Production

Autotractor and Agricultural Machine - Building

Labor and Wages

Ferrous Metallurgy

Introduction of Computing Techniques

Electrotechnical Industry Oil and Gas Industry

Summary Department of Material - Technical Supply

Chemical and General Machine Building Industry Chemical and Oil Processing Industry Wood , Pulp , and Paper Industry Machine - Tool Industry and Artificial Diamonds

Agriculture

Scientific -Research Institute for Organization of Management and Standards

Main Administrations for Interrepublican Deliveries of Materials , Equipment, and Products

Ferrous and Nonferrous Metals (Soyuzglavmetall) Construction Materials, Lumber , Woodworking, Pulp, and Paper (Soyuzglavstroymaterialy ) Electrotechnical and Cable (Soyuzglavelektro) Chemical, Rubber , and Medical Products (Soyuzglavkhim ) Coal, Peat, and Shale (Soyuzglavugol!)

Oil and Gas (Soyuzglavneft ) Machine-Building (Soyuzglavmash )

Light Industry Food Industry Planning- Production Specialization and Cooperation Supply of Materials and Fuels Supply of Equipment and Machinery

Transport and Communications

Heavy Machine -Building ( Soyuzglavtyazhmash ) Autotractor and Agricultural Machinery (Soyuzavtosel'mash) Radiotechnical Raw Materials for the Food In dustry (So zglavpishchesyr've ) Raw Materials for Light Industry (Soyuzglavlegsyr'ye )

Main Administrations for the Delivery of Integrated Sets of Equipment, Instruments , Cable , and Other Products to Especially Important Construc tion Projects in : Ferrous and Nonferrous Metallurgy (Soyuzglav metallurgkomplekt Radioelectronic Industry (Soyuzglavradiokomplekt) Chemical , Pulp , and Paper Industry (Soyuzglavkhim komplekt ) Coal and Other Branches of Industry (Soyuzglavkomplekt)

Oil Industry (Soyuzglav neftekomplekt) Machine- Building Industry (Soyuzglavmashkomplekt) Light and Food Industries , (Soyuzglavlegpishchekomplekt) Automatic Equipment (Soyuzglavkomplektavtomatika ) Electrical Equipment ( Trest Sovuzelektrokomplekt ) Hydroelectrical Equipment (Trest Soyuzgidro mashkomplekt)

Note : Broken line indicates organs attached to (pri) Sovnarkhoz U.S.S.R. Source : The decree setting up Sovnarkhoz U.S.S.R. mentioned only the Administration for the Machine - Tool Industry and Artificial Diamonds . All other administrations and departments listed were included on the basis of numerous references found in Ekonomicheskaya gazeta ; Gorbushin and Bukshteyn , Spravochnoye, 1963, pp . 34-35 ; Kozlov, Sovetskoye , 1964 , pp . 14-15 .

MAJOR ORGANS OF ADMINISTRATION AND PLANNING , 1957-67 There were two groups of organs attached to Sovnarkhoz U.S.S.R. which possessed a certain degree of administrative autonomy. 30 One group consisted ofMain Administrations for Interrepub lican Deliveries of Materials , Equipment, and Products . These administrations had various duties which included : Planning interrepublican de liveries; planning deliveries of materials, equip ment, and products for both export and state reserves; issuing authorizations and directives for the delivery of goods to consumers; supervising the fulfillment of the All- Union Plan for Interrepublican Deliveries; and maintaining a system of reporting. Instructions of the Main Administrations for Inter republican Deliveries were obligatory for all organs of supply and sales within the republics.

The other group of attached organs consisted of Main Administrations for the Delivery of Inte grated Sets of Equipment, Instruments , Cable , and Other Products, which were responsible for such deliveries to important enterprises under con struction or reconstruction in various branches of industry. The deliveries were made in ac cordance with a list of projects approved by the Council of Ministers U.S.S.R.

It appears likely that after Sovnarkhoz U.S.S.R. was dissolved in September 1965 most of its functions and responsibilities connected with these two sets of attached main administrations, were assigned to the new State Committee for Material and Technical Supply.

4. The State Committee for Construction Affairs (Gosstroy) In the reorganization of 1957 , supervision and management of construction enterprises were transferred from a ministry to the regional sovnarkhozy. The arrangement of combining industry and construction under one administrative organ did not produce the results expected , how ever, and in November 1962 the Government decided to remove all construction activities from the sovnarkhozy and put them under the general super vision of Gosstroy . This committee was originally established in May 1950, but until 1963 it had been concerned primarily with technicalmatters and had role in the operational played practically management of construction work . The reorgani zation of March 1963 assigned to Gosstroy three state production committees and three state com mittees (figure 2-6 ).

The functions of Gosstroy were last defined in a decree of January 11 , 1963, as follows:31

19

to secure the completion ofproduction capacities as scheduled in construction and production plans;

to provide documentation for designs and esti mates;

to support technical progress and higher quality of construction ;

to promote greater productivity of labor and effective use of resources; to

conduct scientific construction ; and

research

in the field of

to approve , in cooperation with other agencies , the list of construction projects and sites.

The decree also assigned Gosstroy the duty to draw up and approve: Summary plans for con struction and installation work ; plans for the development of construction capacities and for the comprehensive mechanization ofconstruction proc esses; plans for standard planning, design , and scientific - research work ; and norms for carrying out construction and installation work . Gosstroy was responsible for supervising the fulfillment of construction plans. It also was authorized to redistribute capital construction funds and material and technical resources among the republics and various branches of industry in order to secure their most effective use and the fulfillment of construction plans. Such redistributions had to be reported to Gosplan and TSSU .

As part of the reorganization in November 1962, construction ministries were established in the republics. A single ministry was set up for the four republics of Central Asia ; in both the R.S.F.S.R. and the Ukraine a separate Ministry for Installation and Special Construction Work was established in addition to the Ministry of Construction . Most of the state construction trusts and administrations engaged in work on industrial, agricultural, housing, and other public construction projects were trans ferred to thenew ministries, 32 The structure of the Ministry of Construction , Ukrainian S.S.R., which presumably was typical of the other republican ministries, is shown in figure 2-7. As is indicated in the figure, this ministry engaged in defense as well as civilian industry construction. The State Production for Committee Installation and Specialized Construction attached centrally to Gosstroy may also have engaged in defense- related work .

Agricul of Design tural Construction

,of Enterprises Design aBuildings , nd Structures

Scient and Design ific for Organiz Researchations Con the and Construction Industry Materials struction

ns Administratio Main

-10 7OY4.,p"1;.pp p963 rganization evropin 2-54

Other

Oil and Chemical Construction

Design for Planning ific Scient and and Work Research Model of Organization Designs

Construction State Inspection

Appraisals State

Agricultural Construction

Production Distribution

ns Administratio Branch

Institute R-Scientific esearch Construction Economics of

e Affairs Administrativ

,;3p.n85964 ovetskoye SK1gazeta ozlov o ya Ekonomicheska

U.S.S.R. osstroy Gpattached ri )to (indicates organs line roken B:Note

Gosstroy Republican

Other

Cadres

Mechanization

Financecs and Economi

-Technical Material Supply (Obespecheniye

Administrations Functional Departments and

Board Executive

Chairman

Construction Administration

Executive Committees Soviets City the of LMoscow ,ofeningrad Other Kiev ,and Cities Major

Council Republican Ministers of

Rnd ,aConstruction oad Machine -BCommunal uilding

Construction and Civil Architecture

Materials Construction Industry

Committees State

965 1U.S.S.R -.: MID GOSSTROY OF L STRUCTURE ORGANIZATIONA .-2-6 Figure

SURVEY OF ECONOMIC - ADMINISTRATIVE AGENCIES

Construction Enterprises Organizations and

Other Republics

Construction of Ministry Republican

ction Constru Transport

Installation and Construction Specialized

Territorial Main Adminis trations (19 the in R.S.F.S.R. ,7in the Kazakhstan ,6in )Ukraine

U,Russian krainian and Kazakh Republics

Committees Production State

Sets Integrated of Delivery the n for Administratio Main Products Other aCIto ,Equipment able nstruments ofnd in Projects Construction Important Especially Industry Materials Construction the and Construction S)( oyuzglavstroykomplekt

20

MAJOR ORGANS OF ADMINISTRATION AND PLANNING , 1957-67

21

Figure 2-7 .--ORGANIZATIONAL STRUCTURE OF THE MINISTRY OF CONSTRUCTION , UKRAINIAN S.S.R .:

Minister

Executive Board

Main Production Administrations

Functional Departments and Administrations

Branch Production Administrations for Construction of :

Economic - Planning

Ferrous and Nonferrous Metallur gical , Ore Mining , and Chemical Industry Enterprises

Construction Industry Motor Transport Technical Construction Mechanization

Fuel, Oil , and Gas Industry Enterprises

Finance

Supply and Sales Labor and Wages Estimates -Contracts

Machine -Building , Electrical Equipment, Instrument-Making, and Defense Industry Enterprises

Other Construction , Construction Materials, Logging, Paper , Woodworking , Food , Light, Meat, Milk , Sugar , and Bakery Industry Enterprises

Main Territorial Adminis trations for Construction

Housing , Sociocultural , and Other Service and Communal Facilities , and Purification Installations Agricultural Facilities Source :

Adapted from Kozlov , Sovetskoye , 1964 , pp . 46–47 .

The Ministries of Construction in the large republics operated through Main Territorial Administrations for Construction , of which there were 19 in the R.S.F.S.R., 7 in the Ukraine , and 6 in Kazakhstan . These Administrations had authority and functions similar to those of the regional sovnarkhozy and were, in effect, a parallel network of organs . In large cities , such as Moscow , Leningrad , and Kiev, Main Administrations for Construction (Glavstvoy) were established within the framework of the executive committees of the city soviets . All construction enterprises and organizations within such cities were subordinated to these Main Administrations. At the bottom

of this hierarchy , of course ,

were the operating enterprises and other organi zations which actually perform the construction work . In 1965 , there were 11,612 primary contract construction organizations and 1,343 design organi zations in the construction sector.33

After the dismissal of Khrushchev , theGosstroy structure was dismantled . In December 1964 , the State Production Committee for Construction in the Central Asian Economic Region was abolished and its construction organizations transferred to con struction ministries established in the four republics of Central Asia . In October 1965 , the state committees for the Construction Materials Industry and for Construction , Road , and Communal Machine - Building, together with the two state production committees for Installation and Special ized Construction Work and Transport Construc tion , were transformed into ministries, Gosstroy became a state committee of the Council of Ministers U.S.S.R., to which was attached the State Committee for Civil Construction and Archi tecture. 34 As a result of these changes, Gosstroy lost all functions of operational management over contract construction organizations and became an agency responsible merely for technological guid ance in the construction sector .

SURVEY OF ECONOMIC - ADMINISTRATIVE AGENCIES

22

C. THE FINANCIAL SYSTEM 1.

The Ministry of Finance

The management of financial matters in the Soviet Union is entrusted to specialized agencies forming a coordinated system which has been much more stable than the system of management in industry and construction . The principal organi zation is the Ministry of Finance U.S.S.R., a union republican agency . A ministry of finance exists in each republic and autonomous republic , and a finance department exists in each oblast, kray, and The network of the banking system was rayon , under the supervision of the Ministry for many years . Gosbank was directly subordinate to the Ministry of Finance until April 1954 , when it was made a special agency of the Council of Ministers . An investment bank system was subordinate to the Ministry of Finance until December 1961when it was placed under the Council of Ministers.

As the principal financial agency of the Soviet Government, the Ministry of Finance manages the budget system at all levels of government, super vises the financial system of the country , and is generally responsible for carrying out the Govern ment's financial policy . Its specific functions are numerous and varied . 35 The Ministry of Finance prepares drafts of the union and consolidated U.S.S.R. budgets 36and sub mits them for review to the Council of Ministers U.S.S.R., which in turn submits them to the Supreme Soviet U.S.S.R. for approval. After approval, the budgets become law and the Ministry supervises their execution .

In the process of preparing the state budget, the Ministry reviews and approves the financial plans of “ economic " (i.e., largely self - supporting) all union ministries and agencies, as well as the budgets of government- supported agencies at the union It also reviews drafts of the republican level. budgets which are at the same time being reviewed This by the republican councils of ministers. procedure is followed at the oblast and rayon levels , for each of which finance agencies at higher levels of the administrative hierarchy actas review organs.

and collection of state and local taxes, deductions from the profits of state enterprises and economic organizations, and other nontax revenues. With respect to expenditures, it supervises the financing 37 of enterprises, organizations, and insti tutions in all sectors of the economy.

The Ministry is responsible for enforcing fi nancial discipline throughout the Soviet Union and for enforcing conformity with financial laws and regulations. It supervises and exercises control over financial operations of lower finance organs , enterprises, economic organizations, and other institutions; it analyzes accounting reports and takes corrective actions in cases of violations of regulations or malfunctions ofthe fiscalmachinery; and it supervises the registration of enterprises and economic organizations by local finance offices.

The Ministry is responsible for the printing of currency and coinage and is in charge of matters concerning budget grants , credit, money cir culation , precious metals , and state insurance, both In addition , it has compulsory and voluntary . primary responsibility for the studies of financial affairs and problems which are conducted in the Scientific -Research Institute of Finance , one of its attached agencies .

Another important function of the Ministry is control over the staffing and administrative ex penditures of all government agencies. Budget maintained institutions are required to report on employment and to maintain their staffs in con formity with pre - set model staff schedules for organizations of given types and sizes. Similar control is exercised over khozraschet units and other “ economic " organizations, although in their case only administrative and managerial staffs and expenses are kept under direct surveillance by the Ministry. Certain agencies, including defense, security , and party organizations, are exempted from the requirement to register administrative expense estimates and staff schedules with finance agencies, and the scope of such exemptions is also being extended throughout the productive sphere of the economy. 38

The organizational structure of the Ministry of Finance U.S.S.R , is shown in figure 2-8 . For the purposes of implementing the state budget, the Ministry of Finance issues decrees and regulations within the limits of its competence and drafts laws for approval by the Council ofMinisters. In cooperation with TsSU , the Ministry works out the formats for various reporting and operational documents, and issues instructions concerning the coverage of and procedures for financial reporting. The Ministry is responsible for the computation

The functions and responsibilities of the repub lican ministries of finance are similar to those of the U.S.S.R. Ministry. These ministries prepare budgets for the republics, review draft budgets of oblasts, check on the execution of republican budgets , and conduct other related activities . Their structure duplicates in most essential aspects the structure of the Ministry of Finance U.S.S.R.

THE FINANCIAL SYSTEM Figure 2-8 . - ORGANIZATIONAL STRUCTURE OF THE MINISTRY OF FINANCE U.S.S.R .: MID - 1965

Minister Scientific Research Insti tute of Finance

Executive Board

Administrations

Budget

and Departments

Pensions and Grants to Collective Farmers

State Revenues Financing of Industry Financing of Construction

State Insurance (Gosstrakh ) Foreign Insurance ( Ingosstrakh )

Financing of Agricul ture and Procurement

Financing of Transpor tation and Communications Financing of Trade Financing of Housing and Communal Economies

Precious Metals Chief Administration for the Production of State Notes , Coins , and. Awards (Gosznak ) Accounting and Reporting Control and Auditing

Financing of Cultural , Health , and Social Security Organizations Financing of Defense

23

finance ministries and usually consists of sections for the budget, state revenues , financing of the national economy, accounting and audit, staff , cadres , and state insurance . The finance departments of rayons and cities constitute the last link in the chain of finance organs. Usually they consist of inspectorates of the budget, state revenues, and state insurance , and an accounting office. The inspectorate of state revenues plays an important role , since its func tions and responsibilities include verification of calculations made by all enterprises and organi zations in the locality with respect to tax payments The inspectorates also issue due the State . instructions to financial workers of enterprises and organizations regarding the computation of pay operations and ments, analyze the financial operations economic activities of enterprises and organi zations in an attempt to discover production reserves, keep a record of tax payers and of tax collections, check tax computations of each payer, supervise and enforce payments according to estab lished schedules, and supervise fulfillment of the plan for commodity turnover by trade organiza tions. Execution of the State Budget of the U.S.S.R. therefore depends largely on the work of rayon and city finance departments and their inspectorates of state revenues.

Certral Staff Cadres and Cadre Training

2. The State Bank (Gosbank )

Legal Foreign Currency (Valyutnoye )

Credit and Money Circulation

Administrative Office Central Archives

Republican Ministry of Finance

As the name implies, the State Bank , or Gosbank , is the principal banking agency and one of the major financial organs in the U.S.S.R. It is responsible for planning, carrying out, and verifying public financial transactions in the Soviet economy, except the administration of funds allocated for capital investment and financial transactions with foreign Private financial transactions, which countries . are primarily those connected with the savings of individuals , are handled by a separate network of savings banks which is under the general control and supervision of Gosbank .

Oblast Department of Finance

Rayon Department of Finance

Source : Aleksandrov , Gosudarstvennyy , 1965 , p . 160 ; Borodin , Finansy , 1963, pp . 49-51 ; D'yachenko , Finansovo , Vol . II , 1964 , p . 51 . In oblasts and krays , the counterparts of the ministries are called finance departments . They prepare budgets for the oblasts and krays , review the draft budgets of rayons and cities, and supervise their execution . The structure of finance depart is less elaborate than the structure of ments is

The current functions and rights of Gosbank were defined in the Statute of the State Bank of the U.S.S.R. which was approved by the Council of Ministers on October 29 , 1960 . The major stipulations of this Statute are summarized in the following paragraphs. (Specific details on many of Gosbank's activities will be discussed in later chapters, particularly chapters VIII and IX .) All payments of taxes and other state revenues by enterprises , organizations, and institutions are made to Gosbank , which in turn credits the pay ments to the appropriate accounts of the all-union , republican , or local budgets. Transfers ofmoney from one budget to another , or payments from budget accounts are likewise effected by Gosbank .

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SURVEY OF ECONOMIC - ADMINISTRATIVE AGENCIES

The Bank maintains a record of receipts and ex penditures, and compiles monthly and annual re ports on the execution of the union and republican budgets. 40 Gosbank handles all transactions between enter prises, organizations, and institutions concerning payments for goods and services. Except for small amounts of cash in petty funds, enterprises and other organizations are required to deposit all monetary holdings in Gosbank . Likewise , theymust make all payments , except payrolls and petty cash disbursements , from accounts in Gosbank , Idle money of other credit institutions and savings banks must also be deposited in Gosbank . For these purposes, Gosbank maintains a large number of settlement and current accounts .

Short- term credits are provided by Gosbank to enterprises and organizations which operate on a khozraschet basis. These credits are also extended to collective farms, to sustain them in the period before receipts from harvests are available, and to intercollective farm organizations. Economically sound and dependable enterprises and organizations can be granted short - term credits on termsmore favorable than the standard terms specified in existing laws , whereas enterprises with a poor economic record and standing must meet all re quirements before credit is given . Short -term credits are granted to enterprises for such purposes as: Acquiring seasonal and other above -norm pro duction stocks , including stocks of semifinished goods; meeting expenses incurred in the intro duction of new technology ,mechanization , and auto mation of production ; providing for the expansion of facilities and the improvement of the quality of production; and making expenditures on capital repairs and other temporary needs.

In regard to long -term credit operations, Gosbank is authorized to grant such credits to collective farms for carrying out measures en visaged in their production - and - financial plans. Under specified conditions Gosbank can grant long term credits for the construction of individual housing in rural localities as well as to state and collective farms for financing the resettlement of workers . In areas where there is no office of Stroybank , Gosbank acts as its agent in issuing credits and accepting payments for long - term loans granted by Stroybank ,

Many of the control functions over the execution of government budgets and agency financial plans approved by the Ministry of Finance are actually carried out by Gosbank . This involves an elaborate system of authorizing documents based on the budgets and plans and issued by both the Ministry

of Finance and administrative agencies (see chapter IX for details ). The control is of the pre -audit type, i.e., conformity to authorizations and limits is determined before the financial transactions are permitted to take place. Gosbank exercises such control over three broad groups of transactions: ( 1 ) Current operating expenditures of all institu tions maintained on union and republican budgets (local-budget - supported institutions are controlled directly by local finance agencies); ( 2) capital in vestment financing, with funds of both budgetary and non -budgetary origin , of those institutions or projects not so financed by Stroybank - namely , state agricultural, forestry , water economy, and cooperative enterprises, state cultural and edu cational institutions in rural areas, and certain budget - financed investment (largely equipment )not included in the national capital investment plan; and ( 3 ) certain outlays of khozraschet units insofar as they are specified in approved financial plans and are subject to special control, e.g., payrolls, capital repair expenditures , and specialpurpose budget grants .

The term “ control by the ruble" is given to the surveillance Gosbank exercises over the financial and economic activities of enterprises and other organizations in order to assure fulfillment of production and financial plans, proper use of funds, and maintenance of financial discipline. In order to carry out these responsibilities, Gosbank has the authority to issue necessary instructions and to require the following types of information : From enterprises and other organizations - accounting reports, financial documents , statistical reports prepared in accordance with regulations of TsSU , financial plans, and other information necessary for deciding on applications for credit; from state administrative organs, enterprises , organizations and institutions -- planning and accounting docu ments necessary for the preparation of credit and cash plans; and from statisticalorgans - summaries of basic indicators which are needed by Gosbank in its planning and general financialactivities, Finally , as part of its powers to effect “ control by the ruble ," Gosbank has the right: To inspect all financial documents and accounting records of enterprises; to demand of enterprise directors and higher officials that certain measures be taken to improve financial operations; and to stop , or impose limitations on , credits to enterprises which have failed to fulfill their obligations .

The financial transactions and documents of Gosbank units are supervised and audited by a special group of auditors in the Gosbank system . Since it is an all- union type of agency, the Bank submits its annual report and balance sheet to the Council of Ministers U.S.S.R. for approval (not later than May 1st of the following year).

THE FINANCIAL SYSTEM The Gosbank system (see figure 2-9) includes offices (kontory) in republics, autonomous re publics, krays, oblasts , and large cities, and branches (otdeleniya ) in rayon centers and smaller

25

cities. In areas remote from rayon centers, the bank has agencies (agentstva ) which are directly subordinate to either oblast offices or rayon branches of Gosbank .

Figure 2-9 .-- ORGANIZATIONAL STRUCTURE OF GOSBANK U.S.S.R .:

MID - 1965

Chairman Executive Board

Administrations and Departments

Credit Administrations

Sovnarkhoz Industry

Economic - Planning

Control of Wages

Economic - Monetary

Labor and Wages

Agriculture

Execution of the Cash Plan

Collective Farms

Local Economy

Cash

Technical Legal

Execution of the Budget

Cadres

Transport and Communications Trade

Cash Emission Operations

Long - Term Credit for Private Housing Construction

Auditing

Defense Industry

Central Accounting Office

Educational Institutions Administrative Office Kantselyariya ) Main Administration of State Personal Savings Banks and State Credit

Republican Office

Oblast Office

Rayon Branch

Local Agency

Source :

Rayon Branch ( in Republics With no Third - Level Administrative Divisions )

Payment and Collection Points

Borodin , Finansy , 1963, p . 64 ; Syromyatnikov , Denezhnoye , 1962 , p . 77 .

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SURVEY OF ECONOMIC -ADMINISTRATIVE AGENCIES

Republican offices of Gosbank are subordinate only to the Executive Board of Gosbank U.S.S.R .; they are not subordinate to the republican govern ment . The structures of these offices vary from republic to republic , depending on the extent and In general, complexity of financial activity . however , the organization of republican offices resembles that of Gosbank U.S.S.R. Republican offices perform the following functions : Prepare drafts of cash and credit plans for the republic and present them to the Board of Gosbank U.S.S.R. for review ; participate in the preparation of balances of income and expenditures of the popu lation ; establish , on instructions from the Executive Board, reserve funds of bank and treasury notes and of coin ; insure fulfillment of cash and credit plans by individual enterprises, organizations, and institutions, and by the republic as a whole ; issue instructions to subordinate offices on the repayment of long -term credits and on “ calling in ” the assets of indivisible funds of collective farms; insure the regular submission of reports ; and provide day to-day supervision and leadership to subordinate banking institutions within the republic .

The offices of Gosbank in autonomous re publics , krays, and oblasts are subordinate to the republican office and perform similar work within their respective territories. A typical oblast office of Gosbank has separate credit departments for industry , the local economy, agriculture, and trade and procurement, as well as severalfunctional departments such as economic -planning , monetary circulation , audit , cadres, and accounting. The branches at the rayon level are subordinate to oblast offices - except for the republics which have no oblasts , where the rayons are directly subordinate to the republic . They maintain re serve funds of bank and treasury notes and coins, release money into circulation channels, prepare drafts of cash plans and long -term credit plans which they submit to higher offices for approval , participate in the preparation of plans for short term credits , receive payments of taxes and other revenues, and give assistance to enterprises and organizations in strengthening their system of khozraschet. The same work is performed by the agencies (agentstva) in remote areas. There are also payment and collection points (pripisnyye i prikhodnyye kassy) in various organi zations and large enterprises. Each such point is subordinate to the rayon branch and conducts banking transactions for the enterprise or organi zation in which it is established . In addition , it accepts payments from the population for communal services, taxes, and similar purposes. In 1963, theGosbank system included 164offices, 3,950 branches and agencies , and 3,736 payment 41 and collection points . At the beginning of 1967

Gosbank was serving about 600,000 client organi zations . Savings banks, which had been removed from the Ministry of Finance in 1963 and placed under the supervision of Gosbank, numbered 75,000 in 1967 with 61 million individual depositors whose total deposits reached nearly 23 billion rubles. The Gosbank system including the savings banks 43 employs over a quarter million persons.

3. The All -Union Bank for Financing Capital Investment (Stroybank ) For many years, long -term investments were administered by several banks, each specializing in particular sectors of the economy. During the period 1957-59 , these banks were consolidated into a single bank . Thus, the Trade Bank (Torgbank ) ceased operations as of January 1 , 1957 , and its functions were transferred to the Agricultural Bank (Sel khozbank ) and to the Central Communal Bank (Tsekombank). In July 1959 , these two banks were abolished and the IndustrialBank (Prombank) , the only remaining bank for long - term investment , was renamed the All -Union Bank for Financing Capital Investment, or Stroybank. At that time, Stroybank became the only bank authorized to administer funds for capital investment, with the exception of some types of investment in the agri cultural and cooperative sectors of the economy which were assigned to Gosbank . Initially , Stroybank was subordinated to the Ministry of Finance , but , on December 2 , 1961, it was detached and placed directly under the supervision of the Council of Ministers U.S.S.R. This relationship lasted only until March 13, 1963, when Stroybank was subordi nated to the new Supreme Economic Council, After the reform approved by the party plenum of September 1965 , Stroybank was again attached to the Council of Ministers U.S.S.R. At the end of 1964, a new charter of Stroybank was approved , and it was further supplemented by a set of regu lations on the financing of construction which was approved by the Council of Ministers U.S.S.R. on October 8 , 1965 .

Stroybank is a specialized bank responsible for administering funds earmarked for: Capital invest ments by state enterprises, organizations, and institutions; financing operational expenditures connected with construction; financing capital repair of fixed assets of construction , installation , design , and geological organizations which keep their settlement accounts in Stroybank; granting short term credits to contract construction organizations; and for granting long- term credits . It performs regular banking functions for all transactions involving payments made by investors and contract construction organizations, and exercises control functions over them similar to those exercised by Gosbank. Stroybank is an all - union type of agency.44

THE FINANCIAL SYSTEM The regulations of October 1965 on financing construction projects and activities provide a wealth of detail on the functions and responsibilities of Stroybank in all construction operations. These regulations are summarized in the following para graphs. 45

Before the machinery of Stroybank for financing capital investment and related activities can be put into operation , state enterprises, organizations, and institutions are required to draw up proper invest ment plans, to obtain appropriate design and esti mate documents , and to submit them to their higher organs for approval. Individual ministries , departments , main administrations, trusts , com bines, and other higher organizations submit to Stroybank approved plans for capital construction , title lists of construction projects , and annual plans for financing capital investments, with a quarterly breakdown . At the same time, Ministry of Finance organs inform Stroybank organs of plans for financing capital investments which have been approved for individualministries and other top - level agencies, and transfer to Stroybank budgetary allocations earmarked for capital in vestment. On their part, state enterprises, organi zations, and institutions submit to the proper Stroybank units their title lists of construction projects . Economic organizations having such resources deposit appropriate sums of amorti zation deductions and profits earmarked for capital investment in Stroybank every ten days. In some cases such deposits are made in a centralized fashion by superior organizations. Stroybank also receives accounting reports on the amounts of amortization deductions, profits , and other sums which are due .

The documents and money deposited in Stroybank provide the means for its control over the financial operations of state enterprises , organizations , and institutions in their capital investment operations . Before releasing funds for individual payments , Stroybank verifies their conformity to regulations and limits . As an exception to Gosbank's wage control monopoly , Stroybank also handles the funds for wages of construction workers, for maintaining management staffs (direktsii) of enterprises under construction , for the training of construction workers, and for scientific - research work support ing construction activities .

In addition to administering funds earmarked for capital investment and related operations, Stroy bank provides short - term credits to contract con struction organizations for : Procurement of con struction materials in excess of norms but in

27

accordance with the planned need for such materials; procurement of construction materials in excess of the limit specified for the end of a quarterly period; payments for work on unfinished construction and installation projects ; advance settlement of invoices in transit and certain types of checks; payment for capital repair work on construction machinery and transportation equip ment; payment of bills accepted by the investor but not honored by him because of a temporary lack of funds; completion of clearing settlements between enterprises and their superior agencies ; the redistribution of working capital; payment of wages; payment of expenditures on the intro duction of new technology , mechanization and auto mation of construction processes; purchases of both domestic and imported equipment; and other temporary needs. The special conditions under which such credits can be granted and the period in which repayment must be made are stipulated for each type of credit .

Prior to September 1965 Stroybank provided long -term credits in a limited number of cases to state enterprises , organizations, and institutions for the expansion of production facilities and to workers and employees for the construction of homes. The decision of theparty plenum to enforce more responsible attitudes by restricting the practice of free budgetary grants automatically enlarged the role of long - term credits, but the actual procedures to be introduced still remain to be worked out.

Like Gosbank , Stroybank has the right to give easier terms to enterprises and organizations with a good record in financial discipline and production performance , and on the other hand to impose financial sanctions on enterprises with a poor record . It is also authorized to impose a special regimen of financial transactions on con tract construction organizations which fail to live up to their commitments .

The network of Stroybank's organs consists of offices (kontory) in republics, autonomous repub lics, krays , and oblasts , branches (otdeleniya ) in many rayons and cities, and centers (punkt y ) located in Gosbank branches in the rayons having no Stroybank branch . The structure ofthese organs is analogous to that of Stroybank U.S.S.R., though the actual composition of a given organ depends on the volume and diversity of construction activ ities which it oversees. The organizational structure of Stroybank U.S.S.R. is shown in figure 2-10 .

SURVEY OF ECONOMIC -ADMINISTRATIVE AGENCIES

28

Figure 2-10 .--ORGANIZATIONAL STRUCTURE OF STROYBANK U.S.S.R .: MID - 1965

Chairman Executive Board

Departments for Financing Con struction of Enterprises in :

Administrations and Departments

Metallurgical and Chemical Industries

Economic - Planning

Coal , Oil , and Gas Industries and Geology

Technical

Construction of Power Stations

Financing and Crediting of Foreign Economic Operations

Machine - Building Industry

Audit - Control

Timber , Cellulose - and -Paper , and Woodworking Industries

Operational

Construction and Construc tion Materials Industries

Long - Term Credit

Housing - Communal and Sociocultural Sector

Cadres

Light and Food Industries

Central Accounting Office

Transport and Communica tions Sector

Legal

Department for Financing Design Work

Republican Office

Oblast Office

Rayon Branch

Source :

Borodin , Finansy , 1963, pp . 73 , 75 .

Rayon Center

THE FINANCIAL SYSTEM - THE CENTRAL STATISTICAL ADMINISTRATION 4.

The Foreign Trade Bank (Vneshtorgbank )

The state monopoly of foreign trade, which is exercised mainly by foreign trade associations of the Ministry of Foreign Trade , has a counterpart in a monopoly of foreign currency transactions. This monopoly is held by Gosbank under the general control of the Ministry of Finance and its Foreign Under Gosbank's Currency Administration . 46 authority , a large portion of foreign currency dealings are carried out by the third and last bank system in the U.S.S.R., the Foreign Trade Bank ( Vneshtorgbank). Other foreign currency trans actions are conducted by Gosbank itself through correspondent accounts with foreign banks and the bank of CEMA (the Communist bloc trade organi zation ), and by several Soviet -owned banks in for eign countries. Until 1961, Vneshtorgbank was little more than a semiautonomous extension of Gosbank , and its foreign exchange operations were limited mainly to such non - commercial areas as tourism , dealings with diplomatic missions, and remittances, for which special exchange rates were used prior to the 1961 devaluation of the ruble .47 At that time, Vneshtorgbank's operations were expanded to in clude commercial transactions involving foreign trade associations, previously handled byGosbank . At the end of 1962, Vneshtorgbank was given a new charter and reorganized with a basic capital of 300 million rubles contributed by Gosbank and other Soviet state and cooperative organizations. Vneshtorgbank organizes and conducts all financial operations connected with the import and export of goods, and provides various other related services in the field of international trade. Trans actions involving foreign currencies and grants of credits customary in international banking prac tices fall within the scope of the Bank's activities . It is authorized to establish agencies in both the U.S.S.R. and foreign countries, The Bank accepts payments from foreign banks and firms on behalf of Soviet foreign trade organi zations and other bodies . On instructions from the latter agencies, the Bank makes payments from their accounts to foreign enterprises and firms. It may purchase gold , silver , and other precious metals abroad, and conclude agreements with foreign banks concerning the nature of financial transactions and accounting practices. In practice , Vneshtorgbank operates in close conjunction with Gosbank , which contributed mostof its capital, supplies a number of officers and top level personnel (together with the Ministry of Finance), and as the central bank of the country maintains control over Vneshtorgbank's activities. Having only a central office in Moscow and a branch operates in the in Leningrad, Vneshtorgbank operates

29

U.S.S.R. through correspondent accounts with Gosbank and its branches. Together the two banks maintain correspondent relations with over 1,000 foreign banks. Vneshtorgbank balance sheet data recently published for the first time for the be ginning of 1965 and 1966 show it to be a large bank indeed , with total assets at the later date of 3.76 billion rubles and deposits of 2.28 billion rubles . 49 An increasingly large volume of foreign oper ations are also being conducted by Soviet -owned banks in foreign countries, particularly the Moscow Narodnyy Bank Limited in London and the Banque Commerciale pour l'Europe du Nord S.A. in Paris. 50 Other Soviet- owned banks include a branch of the Moscow Narodnyy Bank established in Beirut in 1963, the Wosschod ( i.e. , Voskhod ) Handelsbank A.G. established in Zurich in 1966 , and the Russo Iranian Bank . These banks are owned by Vneshtorg bank and Gosbank U.S.S.R.

D. THE CENTRAL

STATISTICAL ADMINIS

TRATION ( TSSU ) The collection , processing, and publication of statistical data in the U.S.S.R. is primarily the responsibility of the Central Statistical Adminis tration (TsSU ). It is a union - republican type agency which is attached directly to the Council ofMinisters U.S.S.R. Each republic has a counterpart TsSU attached to its Council of Ministers, under which there are statistical administrations in autonomous republics, krays, and oblasts, and inspectorates of In 1962, state statistics in rayons and cities. special territorial inspectorates of state statistics, each comprising several rayons, were created to collect agricultural data from collective and state farms. Since 1948, when TsSU was removed from Gosplan's supervision , all statistical agencies below the republic level have been subordinate only to the statistical agency at the next higher level, and not to the executive organ of the local government, Thus , despite being formally of union - republican type, TsSU is a highly centralized form a far - flung agency whose 50,000 employees network throughout the Soviet Union .51 It should be noted that the collection and proc essing of statistical data in the Soviet Union is by no means concentrated exclusively in TsSU . Numerous other agencies, both operational (e.g., the Ministries of Railways and Foreign Trade) and functional (e.g., the Ministry of Finance and Gosbank ) maintain extensive internal statistical systems of their own, in addition to reporting selected data to TSSU . By and large , TsSU's activities are closely subordinated to the needs of administrative and planning agencies. Thus , reports bearing on the fulfillment of plans and other types of data needed for the preparation of

30

SURVEY OF ECONOMIC - ADMINISTRATIVE AGENCIES

plans occupy a prominent role in TsSU's statistical system . Where responsibility for major plans is assigned to specific agencies ( such as the Budget to the Ministry of Finance and the Cash and Credit Plans to Gosbank ), TsSU collects and processes statistics on a more selective basis . In other areas, such as industry, construction , and agri culture, TsSU's statistical system has virtually supplanted that of the administrative agencies,52

tions should send a copy of the reports which they mail to TsSU to their superior agencies (branch administration , trust, combine) to be used for operational pur poses; branch administrations of sovnar khozy (or trusts or combines) should prepare and submit to the statistical administrations only consolidated reports on costs of industrial production and construction - installation work . In all re

The administrative reform of 1957 effected sub stantial changes in the system of statistical report ing. Prior to the reform , the collection and proc essing of statistical data was performed both by the individualministries and by TsSU . The result of this arrangement was a lack of standardized definitions and uniformity of methodology, dupli cation of work , and tardiness in the flow of data . In order to eliminate these shortcomings, the Council of Ministers U.S.S.R. issued a decree on September 6 , 1957, which provided that: 53

maining matters, branch administrations , trusts , and combines should receive con solidated reports on sectorsof the economy, enterprises, and construction projects from statistical administrations.

( 1)

enterprises, construction projects , and other organizations subordinate to sov narkhozy should submit their statistical reports to the statistical administrations of krays, oblasts , and republics, within the time limits and in accordance with instructions issued by TSSU ;

( 2 ) statistical administrations ofoblasts ,krays , and autonomous republics should submit data arranged by sector of the economy, by branch administration of the sovnark hozy, by trust or combine , and by indi vidual enterprise and construction proj ect to local administrative organs and planning agencies, to sovnarkhozy, and to republican statistical administrations;

( 3 ) statistical administrations or republics should submit statistical data arranged by sector of the economy, by sovnarkhoz , and by individual enterprise and construction project to republican administrative organs, planning agencies, sovnarkhozy , and ministries, to TSSU U.S.S.R , for sub sequent submission to the Council of Ministers , and to Gosplan and other central organs; (4 ) upon instructions issued by TSSU , industrial enterprises, construction projects, and other organizations should submit, in ad dition to their reports to statisticaladmin istrations, copies of particular types of reports to rayon (city ) inspectorates of state statistics for subsequent transmis sion to rayon (city ) administrative organs and planning agencies. Enterprises, con struction projects, and other organiza

Thus , after 1957 the entire system of statis tical reporting in the industrial, construction, and agricultural sectors was centralized in the sense that statistical data were to be collected and processed only by organs of the state statistical system and that at each level the statistical organs were to supply statistical summaries to both their superior agencies and the executive and party organs at their own level. At the lowest ( rayon ) level, the state statistical inspectorates receive from enterprises only some abridged reports which contain data pertaining to local needs. The oblast, therefore, is the lowest level which receives an extensive set of statistical data . 54

Differences in the flow of statistical information through the channels of TsSU and other agencies between industrial or construction reports and agricuicural reports can be seen in figures 2-11 and 2-12 . The most important difference is that in agriculture, where collective and state farms submit their statistical reports to territorial inspectorates of state statistics and not directly to the oblast statistical administration . After the enlargement of the sovnarkhozy in 1962 to encom pass several oblasts, enterprises submitted their statistical reports to both the statistical adminis tration in their own oblast and the " head " oblast statistical administration in the region of the sovnarkhoz . After the abolition of the soynarkhoz in September 1965 , " head" oblasts dis system appeared. It appears that each enterprise now submits reports to the statistical administration in These reports are aggregated by its own oblast. at the republican and union levels , then TsSU transmitted to the individualministries.

The status, functions, and responsibilities of TSSU were newly defined in the Directive on the Central Statistical Administration confirmed by the Council of Ministers U.S.S.R. on January 11, 1960 55 The Directive assigned to TsSU and its organs broad responsibilities and many specific functions in the organization , systematization , and dissemi nation of statistical data . In financial matters, the

31

THE CENTRAL STATISTICAL ADMINISTRATION Directive requires TsSU to furnish the Ministry of Finance U.S.S.R., according to a program worked out with this Ministry, data from accounting and statistical reports necessary for preparing the draft state budget of the U.S.S.R., for financing branches of the national economy, and for check ing the execution of the U.S.S.R. State budget," and " to supply Gosbank U.S.S.R. and Stroybank U.S.S.R. with summaries of the basic indicators ofaccounting reports and statistical data necessary for them in planning, granting credits, and financing thenational economy.

Figure 2-11. - THE FLOW OF STATISTICAL REPORTS ON INDUSTRY AND CONSTRUCTION : JANUARY 1963 TO SEPTEMBER 1965

TSSU U.S.S.R.

Ministry of Agri culture U.S.S.R.

Republican Ministry for Production and Procurement of Ag ricultural Products

Sovnarkhoz U.S.S.R.

Gosplan U.S.S.R.

Council of Ministers U.S.S.R. Gosplan U.S.S.R.

Republican Council of Ministers

Republican TSSU Republican Gosplan

Supreme Economic Council

Gosstroy U.S.S.R.

TSSU U.S.S.R.

State Committee for Procurement U.S.S.R.

Oblast Administra tion for Production and Procurement of Agricultural Products

Council of Ministers U.S.S.R.

U.S.S.R. Ministries and State Committees

Figure 2-12.- THE FLOW OF STATISTICAL REPORTS ON AGRICULTURE : 1962 TO PRESENT

Collective and State Farm Produc tion Administration

Oblast Sta tistical Ad ministration

Local Govern ment and Party Organs

Territorial Inspectorate of State Statistics

Local Govern ment and Party Organs

Collective and State Farms Republican Council of Ministers

Republican Ministries and Agencies

Republican TSSU Republican Gosstroy

Republican Sovnarkhoz Republican Gosplan

Head Oblast Statistical Administra tion in Sovnarkhoz Region

Main Con struction Administra tion

Local Government and Party Organs

Sovnarkhoz (Regional)

Local Oblast Statistical Adminis tration

Enterprises , Construction Projects

Source : p . 17.

Inspector ates of State Statistics

Local Government and Party Organs

Adapted from Maslov , Statistika , 1964 ,

Source :

Maslov , Statistika , 1964 , p . 18 .

The data collected by TsSU are processed and summarized by severalmajor categories, such as population and labor resources , national wealth , industrial and agricultural output, level of living , cultural conditions, public health , and other. Each major category is subdivided into more specific types of information . The central apparatus of TsSU consists of departments , each of which specializes in collecting and processing particular types of data . The organi zational structure of TsSU (figure 2-13) appears to have remained relatively unchanged in the past decade. The notable changes were the addition of the Central Machine Data Processing Station and the territorial inspectorates . The recent dis cussions concerning basic principles of planning, enterprise management, and incentive systems, as well as the developments in data processing tech nology , have led to various proposals for radically revamping TsSU into someform of highly integrated and automated information network . Some aspects of these proposed systems are discussed below in chapter VIII - E .

Natural Resources

Labor and -Of Cost Production

Machine Building

Summary and Economic

, Light Food , and Local Industry

Heavy Industry

Industrial Statistics Administration

State Farms

Summary and Economic

Procurement

Animal Husbandry

and Harvests

Cultivation

Agricultural Statistics Administration

Capital Construction

Techniques New , Mechanization , Automation , , Specialization Cooperation and

Material Supply

-Republic Union and Economy Distribution of Forces Productive

Urgent

Transportation Communications

and

and Housing Communal Economy

Statistical Information

Health Public

Population

Culture

Trade

and

Statistical Departments

Financial

Chief

City and Rayon Inspectorates

Recordkeeping and Reporting

Budget

:A960 SSource 1Feshbach System .,p9aStatistical sources other numerous from information with supplemented nd oviet dapted

Capitalist Countries

People's Democracies

World Economy

and Prices o-Cost f Production

and Labor Wages

National Economic Accounts

Summary Statistic and s Statistical Methodology

Institute Research Scientific Centers Computer Designing for Systems Information Economic and

1-2-13 965 MID .: U.S.S.R TsSU OF STRUCTURE .Figure -ORGANIZATIONAL

Central Machine Station Processing Data

Central for Station Mechanized Processing |Data

Bureau Design

Specialists Bureau of

thematical Ma and Methods Technical Information Department

Administration Main for Mechanized Processing Data

Staff Offices

Scientific Methodological Council

Territorial Inspectorates

, A.S.S.R.'s of Administrations Statistical nd K,aLMOblasts rays eningrad oscow RCapital - epublics Union of Cities

Administrations Statistical -Republics Union of

Board Executive

SURVEY OF ECONOMIC - ADMINISTRATIVE AGENCIES

Statistical State House Publishing

Administrative Services

Office Inspections

Department Cadre

Personnel Computing Administration Training

Department for Mechanization Computing of Agriculture in Work

Administration Main Work Computing for

32

NOTES TO CHAPTER II

Romashkin , Zakonodatel’nyye , 1961, pp . 27-32 . 2 Yevenko, Voprosy, 1959, p . 17 . Prior to 1961, Soviet statistical yearbooks included a table showing the relative shares of output pro duced by enterprises of the various types of subordination . Between 1957 and 1960, enterprises subor dinated to the sovnarkhozy produced 71-74 percent of total industrial output while enterprises of union subordination contributed only 6 percent of the total (Nar . khoz . 60, p . 213). Since that time, such data were not published in statistical yearbooks until 1965, when 49 percent was produced by union industry (Nar , khoz. 65 , p . 123) . 4 The text of the decree is in Romashkin ,Zakonodatelnyye, 1961, pp. 337-339 . 5 Fedoseyev, Osnovy, 1964, p . 105 . 6Khazikov , Sbornik , 1964, pp. 232-236 . ? In May 1964 this state committee was changed into State Production Committee for the Fishing Industry (Vedomosti...RSFSR , May 21, 1964. p , 276 ).

8 Pravda , March 4 , 1965 , p . 2 . ' Ekonomicheskaya gazeta , no. 16 , April 21, 1965, p . 4. Another source (Tsikulin , Istoriya , 1966 , pp . 82-84) speaks of the formation at this time of 5 defense- industry ministries in the defense and machine building group , explicitly referring to the Defense , Aircraft, and Shipbuilding industries, and implicitly to Medium and General Machine - Building . 10 The plenum also adopted far- reachingmodifications of themanagement system and introduced a strong emphasis on profit as an instrument promoting economic efficiency and financial responsibility. These aspects of the reform are reviewed in chapter VI - B .

" Pravda, May 8 , 1957 . 12 For the text of thedecree , see Khazikov , Sbornik , 1964, pp . 18-20 . In addition to its full name (Vysshyy sovet narodnogo khozyaystva), the Council was also known by its initials (VSNKh) and acronym (Vesenkha). 13 Gas Industry, Energy and Electrification , and Medium Machine -Building. As noted above , the latter Committee was converted into two all- union ministries (Medium Machine- Building and General Machine Building) in March 1965 . 14 One of the few indications of its activity was its adoption of a decree in August 1964 on improving the system of economic incentives and raising the material incentives of workers in creating and introducing new equipment (Ekonomicheskaya gazeta , no. 39 , September 26 , 1964, pp . 4-5 ). 15 Khazikov , Sbornik , 1964, pp. 22-26 . 16 In a speech to a session of Gosplan on March 19 , 1965, A.N. Kosygin referred to discussions concerning the best procedure for compiling the state economic plan : whether the process should start at the center, i.e., Gosplan , and be gradually disseminated to lower organs for review and adjustment within the range of goals set by the center ;or whether the process should start at local levels and with progressive aggregation at each higher level, be finally “ put together " by Gosplan. The latter process had been favored by Khrushchev, but Kosygin said that “ such a primitive notion about planning could be held only by people who had no idea how plans should be composed.” (Ekonomicheskaya gazeta , no . 16 , April 21 , 1965, p . 3.) 17Ministerstvo yustitsii R.S.F.S.R., Khronologicheskoye, 1960 , p . 161; Yefimov , Perestroyka , 1957 , pp . 85 , 87 . 18 8 Khazikov, Sbornik , 1964 , p . 231. 19 See the discussion of Sovnarkhoz U.S.S.R., below . 20 Frolov , Organizatsiya, 1963, p . 41. 21 Yevenko , Voprosy , 1959, pp. 41-43. 22 Ekonomicheskaya gazeta, no. 42,October 19 , 1963, pp . 12-13 . Of the 18 regions, 2 correspond to union republics (Kazakh and Byelorussian ), while the Moldavian republic has yet to be assigned to a region . 23For the text of the statute , see Romashkin , Zakonodatel'nyye, 1961, pp. 166-183. 24 Laptev , Pravovoye, 1963, p . 154. 25Fasolyak , Material'no, 1961, p . 17; Romashkin , Zakonodatel'nyye , 1961, p . 338 .

33

34

SURVEY OF ECONOMIC - ADMINISTRATIVE AGENCIES 26 The Central Asian sovnarkhoz , the only interrepublican sovnarkhoz, was abolished in December 1964 and separate sovnarkhozy reestablished in each of the four republics (Pravda, 23 December 1964; Sovetskaya Kirgiziya , 25 December 1964 ; Kommunist Tadzhikistana , 24 December 1964; Pravda Vostoka , 31 December 1964; and Turkmenskaya Iskra, 31 December 1964). The total number of sovnarkhozy thus increased to 50 . On September 17 , 1964, a new charter defining the rights and duties of regional sovnarkhozy was approved by the Council of Ministers U.S.S.R., but it did not introduce any major innovations from the charter approved in 1957. See text in Kabalkin , Normativnyye, 1965, pp. 56-76 . 27Khazikov, Sbornik , 1964, pp . 227-232. 28 This is a literal translation of a somewhat ambiguous text given in ibid. , p . 231 . 29 See the discussion above of the March 1963 reform and the Supreme Economic Council. 30Gorbushin and Bukshteyn, Spravochnoye , 1963, p . 35 . 31Khazikov, Sbornik , 1964, pp. 249-253. 32Yevropin , “Organization .” 1963, pp. 7-10 . 33Nar. khoz . 65 , pp. 544, 546 . 34 Tsikulin , Istoriya, 1966 , pp . 113-114. 35 The following survey of the functions and structure of the Ministry of Finance is based primarily on a detailed description in Borodin , Finansy , 1963, pp . 48-61. 36 See chapter V for a discussion of these different types of budgets. 3?In the Soviet lexicon , the term “ financing ” (finansirovaniye)usually signifies the making of grants not requiring repayment, and is therefore associated primarily with the budget- .although it is also used for nonrepayable grants awarded out of centralized agency resources. “ Crediting ” (kreditovaniye ), on the other hand , signifies lending operations on a returnable basis, the province of the banking system . A limited type of borrowing between an agency and its constituent elements is known as “temporary financial assistance. 38 The Ministry of Finance continues to receive report data on these aspects, however , as indicated in chapter VIII. See chapter X for a more complete description of this control function . 3 The text of the statute may be found in Romashkin , Zakonodatel'nyye , 1961, pp . 140-154 . 40At the local level, finance organs maintain their own accounting of budget execution . Although this is based partly on Gosbank data relating to particular accounts , the Bank does not submit formal reports on local budgets . 41Ekonomicheskaya gazeta , no. 48, November 30 , 1963, p . 13. 42 Den’gi i kredit, no.2, 1967, p.4. 43 Ibid. , p . 5 . 44Ekonomicheskaya gazeta , no. 47, November 18 , 1964, p . 38 ;Finansy SSSR , no. 2, February 1965 , pp . 91-93. 45The texts of the regulations are published in Ekonomicheskaya gazeta , no . 45 , November 1965, pp . 25-28 . 46D'yachenko, Finansovo, vol. I, 1961, p . 205 ; figure 2-8 . 4?This account is based extensively on Gekker, “Soviet”, (forthcoming), and an excellent treatment of Communist bloc foreign operations in Garvy, Money, 1966 , pp . 94-107, 123 . 48 The reorganization took place December 26 , 1962, on the basis of a charter approved August 22, 1962, and published in Den'gi i kredit, no . 1 , 1963 pp . 45-54 . 49Den’gi i kredit , no. 8 , 1966 , p . 92. These figures are the equivalent of 4.18 and 2.53 billion dollars , respectively, at the official exchange rate of $ 1.11 per ruble (calculated before rounding) . 50See Gekker , “ Soviet” , ( forthcoming), passim ., for a comparison of balance sheet data on these banks with the recently published Vneshtorgbank data, and for a penetrating analysis of the functions of these banks. 51Maslov , Statistika , 1964, p . 16 . 52 The 1965 Work Plan of TsSU U.S.S.R. for financial statistics is shown in appendix A and discussed in chapter VIII - E .

53Maslov , Statistika, 1958 , pp . 16-17 . 54Maslov , Statistika , 1964 , p . 16 . 55The text is given in Romashkin , Zakonodatel’nyye, 1961, pp. 136-139 . For an extensive English summary of the pre - 1960 situation , see Feshbach , Soviet Statistical System . . . Since 1957 , 1962, pp . 8-9 .

III .

ORGANIZATIONAL

In terms of the form of financing, organizations in the Soviet Union are widely viewed by both Soviet and foreign observers as falling into either of two major types: the khozraschet enterprise , or the budget - supported institution . Most organizational units can be so categorized , but there are others sometimes known as the " estimate - financed" organizations , which have important differences from the two main types. In a rare instance where the existence of three types of organizations is recognized in official literature, they are described as follows:

(1 ) State enterprises and other state organi zations on khozraschet, which have fixed and working capital and an independent balance sheet; ( 2) institutions and other state organizations on the state budget , which have an inde pendent estimate , and whose head is a a credit administrator (with exceptions established by law ) ; and (3 )

state organizations financed from other sources which have an independent esti mate (smeta ) and an independentbalance sheet .

Each of the first two types, while clearly distinguishable in general , often contains elements Khozraschet enterprises, though of the other . theoretically self - supporting, receive support from the budget - even when they make a profit . Many budgetary institutions have subordinate units which derive income from their activities. The makeup of the third type listed here is somewhat uncertain , although several candidate formshave been located . This chapter gives a brief description ofthe various organizational forms found in each type and outlines their salient characteristics .

A. KHOZRASCHET ORGANIZATIONS 1. Basic Characteristics

The term khozraschet 2 entered the Soviet economic vocabulary in the early 1920's when the New Economic Policy was introduced . At that time it was used only in respect to the industrial administrative “ trusts ,” but in the latter partof the 1920's, in connection with the introduction of planning and the industrialization drive , the

FORMS OF

FINANCING

khozraschet system was extended to enterprises and other parts of the economy_including activities such as railroad and river transport.3 Use of the system has since expanded to covermany additional types of activities in the state and cooperative sectors of the economy .

The concept of khozraschet is not limited to a particular formal system ofaccounting or economic calculation ; rather, it connotes a broad system of control and administration over economic units . It is officially defined as “ a form of planned organi zation of the economic activity of a socialist enterprise under which the financial- economic situ is directly related to the ation of the enterprise » 4 Although profit and profit quality of its work . ability are important attributes of khozraschet, its central purpose is that of an instrument for fulfilling plans. This emphasis on fulfilling the plan instead ofmaximizing profit is , according to Soviet writers , of the major distinctions between the one khozraschet enterprise and the business firm of the capitalist countries .

Khozraschet is usually described in termsof the following characteristics: ( 1 ) Economic operational independence; (2 ) financial self - sufficiency and profitability ; ( 3) material responsibility ; (4 ) the use of material incentives; and (5 ) control by the ruble . 6 Each of these characteristics is outlined briefly below .

(1 ) Economic operational independence. In th Soviet view , this is one of the most important and distinguishing aspects of khozraschet. It prescribes the manner in which the enterprise director and staff fulfill their plan within the confines of the planned , centrally directed system . The operational independence of an enterprise depends very basically on the rights given to the enterprise management, within established limits, to adopt measures which will ensure the best utilization of resources in pursuance of the assigned tasks. In essence it consists of a number of factors, each of which contributes in some way to the individuality and independence of the enterprise .

First , each enterprise is assigned a set of tasks in fulfilling the economic plan . Having its own goals to meet under the plan is a genuine hallmark of a khozraschet enterprise . Second , every khozrascnet enterprise has a charter fund (ustavnyy fond ) con sisting ofboth fixed capital and working capital.? The

35

36

ORGANIZATIONAL FORMS OF FINANCING

enterprise's use of these assets is subject to fairly detailed control - both in monetary terms, as exer cised by its superior agency , the Ministry of Finance , and the bank , and in physical terms, as imposed by output and distribution plansfor supplies and equipment originating in Gosplan and adminis tered by superior agencies . Nevertheless, the substantial freedom of maneuver within plan limi tations which is associated with a fund of " own " working capital is a major distinction between khozraschet and other organizations. Many khozraschet units , especially in construction and railroad transport, do not have a formal charter fund of their own , but the assets allotted to them by a chartered superior organization are employed in the same fashion . 8

Third , the settlement account in Gosbank , which contains the monetary assets of an enterprise, is an important element in the operational inde pendence of the enterprise . In principle, all receipts from the sale of products and allpayments received for services performed are deposited in this account and payments to cover expenses are made from it, although other accounts are also used . The enterprise receives cash from the bank to pay wages and certain other expenses, but virtually no cash is involved in transactions with other economic entities. Instead , an enterprise presents payment documents to the bank , which the bank uses to credit the settlement account of the selling enterprise and debit the settlement accountof the purchaser . Thus, the settlement account serves to expedite trans actions, to reduce the use of cash , and to afford the bank and other organs the opportunity to monitor and control the activities of the enterprise. It also carries with it the opportunity to obtain short -term bank credit as well as an indirect form of inter enterprise credit (brought about by overdrafts) , which distinguishes the settlement account of khozraschet enterprises from the basic bank accounts of other types of organizations.

Fourth , the khozraschet enterprise is a juridical person with certain rights , including the right to own property, to enter into binding contracts, and to sue and be sued . Fifth , the enterprise has an independent balance sheet , with accompanying re ports, which establishes it as a primary khozraschet reporting unit. The balance sheet itself is an important source of financial data and serves as an instrument of control for superior organizations.

(2 ) Financial Self -Sufficiency and Profitability . Khozraschet enterprises are generally expected to conduct affairs in such a manner that income will cover expenses and leave someprofit . The primary goal, however , is to fulfill the output plan rather than to maximize profits , though a number of bonuses are tied to the level of profits . This emphasis on meeting the output plan is apparent

in the existence of a sizable number of so - called planned enterprises--in the former sovnarkhozy they constituted 21.5 percent of all industrial enterprises . The large number of such enter prises results from the long - standing policy of setting prices in the vicinity of average rather than marginal costs, a policy which is currently in process of change. Both planned - loss enterprises and those which incur losses contrary to the plan exist for one or more of the following reasons : 10 The enterprises may be obliged to master new products or introduce new production techniques whose higher costs are not yet in line with fixed prices; prices for basic products may be intention ally set below cost; or the enterprises may have obsolete plant and equipment which increases pro duction costs . The efficiency of planned -loss enterprises is not measured by profitability , of course , but by cost- reduction achievements ,

Despite much emphasis on financial self sufficiency , typical khozraschet enterprise receives extensive support from the state budget. A major share of all capital investment by khozraschet enterprises is financed from the state budget, and budget appropriations partially supple ment increases in working capital and contribute to the maintenance ofkindergartens,nurseries, and other nonbasic activities.

( 3 ) Material Responsibility . This means that the enterprise incurs penalties for not meeting its responsibilities in a prescribed manner . Enter prises which violate the provisions of contracts or are late with deliveries pay fines and penalties. Enterprises which are tardy with payments on bank loans have their interest rate increased by 5 percent. 11

If an enterprise consistently has difficulties in meeting its financial obligations it is put on a “ special credit and settlement regimen ” to force it to adopt a more responsible financial policy. This system is characterized by the following basic ( a ) Loans to cover shortages of own sanctions.12 working capital are issued to the enterprise up to its own normative limit only when a superior organization guarantees their repayment . In the event of the withdrawal of the guarantee or the inability of a superior organization to repay the loans, banks are required to stop new credit and call in previously issued credit . (b ) The enter prise is required to employ forms of settlement e.g., which guarantee payments to suppliers: letters of credit, certified payment authorizations , etc. (c ) The enterprise is forbidden to use materials received until suppliers are paid . This is known as the responsible custody system (rezhim otvetsven nogo khraneniya ). (d ) The bank withholds certain types of credit if the enterprise has past -due indebtedness to the bank .

37

KHOZRASCHET ORGANIZATIONS ( 4) The Use of Material Incentives. Workers are given bonuses for outstanding performance from such sources as the socialist competition fund , the profit fund from the production of con sumer goods made out of waste , and the enter prise fund - all of which can be formed by independent an khozraschet enterprises with balance sheet. 13 As a counterpart to this procedure, penalties may be imposed on workers for defective production . 14 (5) Control by the Ruble . All transactions of an enterprise are ultimately reflected in value terms when passing through Gosbank , thus placing the bank in a strategic position from which to control the activities of the enterprise. The bank compares actual results with planned targets and takes certain prescribed actions if there is deviation from the plan .

2. Variants of Khozraschet Financing a . Intraenterprise Khozraschet. — The fully in dependent khozraschet enterprise is usually a large and complex organism engaged in activities in volving several sectors of the economy, and this multiplicity of activities is duplicated in the organi zational structure . The activities and their cor subdivisions within responding the typical enterprise may be classed into four groups in terms of degree of dependence, means of financing, These four groups in and method of reporting. clude the main or basic activity of the enterprise and three groupings of nonbasic activities: Self supporting and virtually independent units ; self supporting but subsidiary units; and units or activities supported by “ special- purpose” re sources.

The basic activity can include a variety of subactivities, but all are directly related to the primary function of the enterprise . The type of basic activity is specified only in broad terms paralleling the major sectors of the national economy, such as industry, construction , trans portation , etc. Subactivities are usually organized into shops or departments (tsekhi). Although some of these are termed auxiliary (uspomogatelnyye – e.g., repair , internal transport, power generation), or secondary (pobochnyye - e.g., the manufacture of consumer goods from waste) , they are treated as part of the basic activity .

A form of khozraschet applicable to individual basic - activity shops or sections is frequently referred to as intraplant khozraschet. A sub division operated on this basis does not have its own working capital, independent balance sheet, or settlement account in the bank . The attributes of this form of khozraschet vary , but usually include the following: 15 ( 1) The establishment ofproduction

and cost targets ; ( 2) themaintenance of expenditure records for each subdivision ; (3) the comparison of planned and actual expenditures ; and ( 4) a system of awards and honors given to workers for outstanding achievement. The

second

group

of

subdivisions

in

a

khozraschet enterprise consists of units engaged in self- supporting nonbasic activities which enjoy such a degree of autonomy that they approach the status of a fully independent khozraschet enterprise. The principal examples of such units are the capital department kapitalnogo construction (otdel stroitel’stva - OKS) and the workers' supply depart ment (otdel rabochego snabzheniya - ORS). Admin istratively they are attached to the industrial enterprise which they serve, but from a financial and reporting viewpoint they operate independently . They have their own bank accounts, maintain a separate set of books , and prepare balance sheets and other types of financial reports which are entirely distinct from the “ basic activity ” set ( chapter VIII- A ).

The remaining two groups ofnonbasic activities, whether or not self - supporting, do not have such independence and are carried on the basic -activity balance sheet . Activities in the self -supporting termed “ subsidiary economies, group , often include agriculture (for supplying the public dining activities of the workers' supply departments ), automotive or other transportation (other than that primarily serving, and incorporated in , the basic activity) , residential housing, and communal econ omy activities (laundries , baths, barbershops, and These other personal services and utilities) . subsidiary economies sell their goods or services mainly to other subdivisions of the same enter prise or to its employees . They maintain income and expense records and draw up separate (but not independent) balance sheets . They are therefore operated on a limited kind of khozraschet, but their balance sheets are incorporated in the basic activity balance sheet on a standard summary and " nonindustrial production for account operations" (account No. 29 , table VIII- A - 1) and the scope of data in the basic - activity set of financial reports generally includes these activities.

The three groups of activities described above generate their own income and are essentially self- supporting (although housing is often partially subsidized by the other activities ). The fourth group consists of activities that are supported either by grants from the state budget (health and children's institutions) , by resources channeled through special funds originating in enterprise profits (e.g., the “ enterprise fund” and other incentive funds) , or by special- purpose charges to basic activity costs administered by superior agencies (e.g., for research and cadre training) . Budgetary and special- purpose resources are often combined in

38

ORGANIZATIONAL FORMS OF FINANCING

financing a given activity. Some of these activities may take in receipts, such as fees for nursery or kindergarten services or tuition payments for boarding schools , but these are treated asnegative (budget) expenditures rather than income (see chapter VIII- B ) . b . Production Associations. The production association 16 combines in one unit several enter prises related in a variety of technological or other ways. The association is flexible in content, and can be either vertically or horizontally integrated . It is formed to provide the component enterprises with greater technical and management skills and greater economic resources than they could provide for themselves. It has the rights of a juridical person, which are exercised by thehead enterprise as part of its responsibility for admin istering the other enterprises (filialy ). This type of organization , first formed in 1961, was employed primarily in light industry at the beginning but subsequently spread to other branches of industry . By January 1955 there were over 400 in existence . 17 The relationship between member enterprises and the central apparatus of the association has not been standardized , but the numerous variants in existence may be classed into three broad types. In the first, which is relatively infrequent, the component enterprises remain juridical persons and retain full khozraschet rights and obligations The association formed by these enterprises has a limited authority comparable to that of a branch administration in the former sovnarkhoz . 19 This type is sometimes labeled the “ association firm ” 20

In the second type of relationship , enterprises operate on a curtailed khozraschet basis . They calculate their own production costs, which include expenditures for themaintenance of the association , and each enterprise has its own current account in the bank for deposits and payments. However , all receipts from the sales of products are first deposited in the association's settlement account and subsequently distributed. The director of each enterprise has the right to hire and dismiss employees. The association itself is a full khozraschet organization .

In the third type, enterprises have few rights , and aside from separate physical location there is no essential difference between them and the basic production shops of the usual enterprise . This type has been referred to as the “ enterprise - firm . ” 21 The practice of limiting the operational inde pendence of enterprises is not confined to enter prises subordinated to associations, however . Such limitations are also experienced by enterprises in construction , railroad transport , and state trade (see chapter VIII- A ) .

3. Khozraschet in Cooperative Organizations and Collective Farms The khozraschet system extends beyond state owned enterprises to cooperative organizations and collective farms. With few important exceptions, most characteristics of the system described above are applicable to this sector . The basic distinction between the state -owned enterprise and the co operative organization centers primarily around the legal ownership of property . In the state enterprise the initial capital is provided by the state, through the charter fund , and therefore the state is the owner. In the cooperative sector such capital is provided by the members of the cooperative.

Cooperative organizations and collective farms receive very little budgetary support. A con siderable portion of the capital investments made by state enterprises is budget financed , but in cooperatives and collective farms capital invest ments are made out of " own " resources . 22 Co operative organizations are also deprived of budgetary aid in covering current losses, as a rule , and are forced to rely on their own resources. Some budget aid is given to these organizations in an indirect way , however , for budget funds finance a number of activities such as agricultural institutes , the training of specialists for collective farms, ex perimental stations , and veterinary services.

In most other respects , the khozraschet system in the cooperative sector is quite similar to that in the state sector . The collective farms have economic and operational independence , and their “ indivisible fund ” is a capital fund counterpartofthe charter fund in State enterprises. The collective farms obtain their own fixed and working capital from retained income, use long - term and short term bank credit, have current and other accounts in the bank , compile independent balance sheets , and have the rights of a juridicalperson; in general, they possess the full legal rights and economic powers of a khozraschet enterprise.

The reforms of the last few years brought some additional financial aid to the collective farms. The new pensions for collective farmers, for example , will be financed jointly from collective farm resources and state budget appropriations.24 And in 1966 a change was made in the method of paying collective farmers. Prior to that time, wageswere paid only after other obligations were met ; now , under the so - called minimum guaranteed wage , at least a portion of collective farm wages are paid first. If the farm does not have sufficient funds, Gosbank is authorized to issue special credit. The role of Gosbank in issuing credit has thus been expanded and the bank has replaced the procurement organizations as the principal source of collective farm credit. 25

BUDGET-FINANCED INSTITUTIONS B.

BUDGET- FINANCED INSTITUTIONS

Budgetary institutions consist of the organs of state administration and a large number of social , cultural, educational, health , defense, and other institutions. 26 The source of support for these institutions is the State Budget of the U.S.S.R.

Although many budgetary institutions engage in secondary income- yielding activities, such income is of minor importance and is not used to support the primary activity of the budgetary organization which produces it. The State Budget of the U.S.S.R. parallels the governmental structure with each level of govern ment having its own budget. The budget, like the government, is divided into three major levels union , republican, and local (chapter V ). A given budgetary institution is supported from the budget of the government to which it is attached . For example, a village elementary school is supported by the rural soviet budget, but a secondary rayon school serving the whole rayon is supported by the rayon budget. The basic plan document specifying appropriated budget funds and itemized expenditures is called an estimate ( smeta ). Hence, the budget -supported organizations are said to be estimate - financed . The contents of the estimate vary with the type of institution and degree of aggregation , but the individual estimate of a primary - level unit generally consists of three parts . 27 Part one, in addition to identifying the institution and the govern ment budget from which funds are obtained , specifies the division , chapter, and section of the budget classification under which the appropriation is made, and itemizes it by object of expenditure (see chapter V ) . Part two gives basic operational data for the institution ; for example , the estimate of a school shows the number of pupils , classrooms, classroom hours per week , etc. Part three contains the detailed calculations justifying each article of expenditure and its subelements.

Some institutions, especially those in cultural, health , and educational activities, have at their disposal other resources, known as extra- budgetary means.28 These consist mainly of the so - called special means, which are obtained from sub sidiary production activities such as agriculture or training shops attached to schools. Occasionally the budgetary institution itself is engaged in income producing activities such as renting housing units it owns or charging admission to museums, concerts , lectures , and similar functions . In general, income derived from a given activity is expended only on that activity and any surplus is deposited in the budget as revenue. However, some advantages accrue to the parent budget organizations in the form offacilities and equipment without additional budgetary appropriations, and the

39

products of subsidiary units are sold to the parent budget organization at cost, thus providing it with a convenient source of supplies at low prices . Two additionalminor sources ofextrabudgetary are sums (summy po means commissioned porucheni yam ), which consist of assets of other organizations entrusted to the budgetary institutions for specific purposes, and monies temporarily deposited (depozitnyye summy) by individuals or other institutions, Money obtained from these an income for sources does not constitute institution , since its use is out of the control of the institution . Over the past decade, there has been a wide spread trend to remove institutions from budget financing and to place them on a khozraschet basis . Economic efficiency has generally been given as the reason for the changes , which have taken place in a variety of sectors. In agriculture , the machine tractor stations (MTS's) had been budget financed until they were disbanded in 1958 and mostof their equipment sold to collective farms. The repair technical stations (RTS's) created at the sametime to provide maintenance services for the newly acquired agricultural equipmentof collective farms were placed on khozraschet and attached to the newly - formed Agricultural Equipment Association (Selkhoztekhnika), a khozraschet materials - and equipment supply - and - service organization . 29 In communications, all enterprises were estimate financed until 1950 , when at least somewere trans ferred to khozraschet , 330 The scope of khozraschet principles of operation has even been extended to such less amenable activities as those in the research , design , and development field which have traditionally been primarily budget supported . This has been done most thoroughly in the construction engineering or " designing and surveying” organizations closely The associated with the construction sector 31 approximately 1,300 such organizations attached to various administrative agencies (but not limited to those administering construction ) constitute a sub stantial sector in themselves , with an annualoutput of over 1 billion rubles and an estimated employ ment of about half a million in 1964. 32 As of 1959, all such organizations were converted from direct budget financing to operation on a khozraschet basis . 33 Their services are valued at standardized prices or rates (including a profit allowance) and are contracted for by the agencies or enterprises investing in capital construction Funds to pay for these services are projects . provided for in state capital investment plans and are financed out of a common pool of budget grants and so - called " own " resources of khozraschet enterprises (largely centralized by their superior Design and survey work can also be agencies ). financed by decentralized capital investment funds

40

ORGANIZATIONAL FORMS OF FINANCING

( i.e. , outside the state capital investment plan) , by the basic activity resources of enterprises and by direct grants from the state budget. The latter source , reportedly substantial in volume, is used to finance work of nationwide significance bymeans of grants to the superior agencies to which the service organizations are attached , and for work of local significance on the preparation of technical economic analyses and city planning . 34

Scientific research , long a directly budget supported activity in the Soviet Union , has been extensively converted to khozraschet forms of operation . This conversion has been piecemeal, however , and has given rise to numerous organi zational forms and complex financial arrange ments . 35 Although the sources of funds are essentially only two -- the state budget and the re tained earnings of economic organizations - diverse methods are used to channel the funds from each of these sources .

The first step in the conversion to khozraschet apparently occurred in 1958 , when research insti tutions devoted to construction affairs (construction itself , the construction materials industry, and the construction and road -buildingmachinery industry) were placed on a system in which financing, although still primarily originating in the state budget, was channelled largely through the estimates and finan cial plans of sovnarkhozy , ministries , and other superior agencies. In addition , an average of 15 percent of the total volume of research in each agency was to be done under contract and paid for by the “ own funds” of customers, 36 In 1959, new financing arrangements were installed in agricul tural scientific research institutions whereby the state budget was to provide 40 to 85 percent of the The funds, depending on the type of institution . remainder was to come from contract work paid for out of the resources of collective and state farms and other customer organizations, and from the substantial profits earned by the institutions themselves from the sale of their crop and animal husbandry output. 37

As of the beginning of 1962, all branch -oriented scientific research and product designing organi zations were converted to a khozraschet basis, with a large share of their work program to be financed out of customer resources rather than At the time of conversion , it was the budget. anticipated that by 1963 sovnarkhoz - subordinated research organizations would finance 95 percent of their total volume of work in this manner , republic subordinated organizations --50 percent , and union - subordinated organizations - 40 percent. All of this type of financing was described at that time as being done under contract, but it apparently includes financing out of charges to costs of the in are centralized which enterprises , enterprises' superior agency and transferred to the

subordinate research institutions on the basis of a composite work program (or job -orders - naryady zakazy) covering much or most of its activity . The latter method , known as “ basic - activity financing," is contrasted to work done under a direct contract with a customer organization which employs its own 38 funds (other than centralized charges to cost). Basic - activity financing also can apply to budget funds, if the institution is primarily a budget supported one, and can include other resources assigned by planning agencies. In addition to contracted work , work " basic - activity" and khozraschet branch research institutions may conduct work financed by the budget under a special resolution of the Council of Ministers U.S.S.R. Numerous research institutions remain on budget financing, particularly those engaged in theoretical research or other areas not ascribable to a branch of the economy. Included among such budget institutions are the research institutes of : The Academy of Sciences of the U.S.S.R , and union republics, the Academy of Pedagogic Sciences U.S.S.R. (formerly R.S.F.S.R.), the ministries of health , culture, education , social security , and several others.39 Budgetary institutions can also perform work under business contracts with paying customers. Such payments are considered “ special means" which are segregated from budget appro priations in accounting and reporting ( see chapters VI- E and VIII - D ). The budget can serve as a source of financing for contracted work as well , since budget grants for the so - called operational expenditures made to enterprises and organizations can be used to finance research , and the regular set of appropriations to budgetary institutions includes a provision for research expenses (see Articles 5 and 31). C. OTHER FORMS OF FINANCING 1. Financing Administrative -Economic Agencies The major economic agencies of the SovietUnion can be considered as falling into two separate groups: Operational agencies administering prod uctive enterprises,40 and functional agencies. In recent years a large number of agencies of the operational variety have been transferred from budget financing to financing by deductions charged production costs of their subordinate to This has been especially true of enterprises. superior organizations at the lower levels of the hierarchy . The organizations financed in this manner include associations, trusts , combines, branch administrations, sovnarkhozy themselves ( before their abolition ), and at least some sub divisions of economic ministries and other agencies. Those departments of local soviets which administer local industry are also financed by charges to cost. A noteworthy result of the policy of financing

OTHER FORMS OF FINANCING administrative agencies from nonbudget sources is the remarkably low level of budget expenditures on government administration ( see table 7-2 below ) . This policy will apparently be continued in the post ministries which have replaced the sovnark 1965 42 hozy .

literature these administrative Soviet In agencies, commonly referred to as economic organizations or organs (khozyaystvennyye organi zatsii, khozorgany), are frequently subsumed in the khozraschet category. However, such a designation has been challenged , since funds obtained from subordinate units merely replace grants from the state budget, and do not meet the khozraschet prerequisites enumerated earlier43 Themanner in which Soviet authorities classify these organizations in regard to financing is uncertain and may not be uniform , but they appear to fall into the third type defined in the quotation at the beginning of this chapter . The functional economic agencies include the Ministry of Finance, Gosplan , TSS , some state committees, and the banks. With the exception of both of which are Gosbank and Stroybank , both khozraschet organizations financed by incomefrom their own activities, all of these agencies are supported by budget appropriations. 44 From the point of view of financing, therefore, they fall into the traditional category of budgetary institutions and do not form a distinct group .

2. Other Self - Supporting Organizations Another form of organization belonging to the third type of financing is the self- supporting, or From a " estimate -financed ," organizations. 45 between stands form this view of point financial

41

the full khozraschet organization and the fully budget- supported institution ; it is more dependent on budget support than a typicalkhozraschet enter prise, but relies more on income of its own for operating expenses than does the budget- supported These self - supporting organizations institution , are part of the nonproductive sphere ofactivity and are attached to cultural, educational, and health institutions. The bulk of their income apparently is derived from their own activities, and only their deficits are financed from the budget.46 In addition , self - supporting organizations have a cur rent account in the bank instead of a settlement account. 47 These organizations derive their income from numerous activities. For example, in large cities , medical- prophylactic institutions provide medical services for a fee and are able to cover their expenses out of income received . Theaters and other cultural institutions similarly derive income As noted above , those their activities. from organizations which are unable to cover their operating expenses have the deficit financed from Moreover, capital investments and the budget. increases in working capital are totally financed by the budget. 48 Self- supporting organizations should not be confused with the subsidiary units of budgetary institutions which operate on a “ special means" estimate, nor with the subsidiary khozraschet enterprises attached to budgetary institutions (chapter VIII - D ). The latter type of organization has an independent balance sheet , which establishes it as a primary reporting unit and distinguishes it from organizations financed by special means whose activities are reflected in the reports of the parent budgetary institutions .

NOTES TO CHAPTER III

1 Yefimochkin , Khozyaystvennyye, 1962, p . 111. The quotation is from the definition of a juridical person in the Supreme Soviet enactment of December 1961, “ Fundamentals of Civil Legislation of the U.S.S.R , and the Union Republics . " 2 An acronym for khozyaystvennyy raschet - literally economic calculation or reckoning. Translated variously as economic , business, cost, or commercial accounting, or as economic management, 3 Tatur , Khozyaystvennyye , 1964, pp . 7 , 9 . 4 D’yachenko , Finansovo , vol. II, 1964, p . 574. 5 See Tatur, Khozyaystvennyye, 1964, pp . 14-15. • D'yachenko , Finansovo , vol. II , 1964 , p . 574 . ? The terms fixed capital (osnovnyye fondy ) and fixed assets (osnovnyye sredstva) are used inter changeably both by Soviet authors and in thepresent text. Working capital and current assets are also used interchangeably in this text as translations of the Soviet term oborotnyye sredstva which is made up of the two Soviet categories of oborotnyye proizvodstvennyye fondy ( circulating [ productive ] capital), com prising essentially inventories of material supplies and work in process , and fondy obrashcheniya (distri butive capital), which includes finished goods inventories, cash , bank deposits, and receivables . 8 Zlobin , Bukhgalterskiy , 1963, p . 398 . 9Kondrashev , Tsena , 1963, p . 236 . 10 Tatur, Khozyaystvennyye , 1964, p . 120 . 11D'yachenko , Finansovo , vol. II, 1964, p . 575 . 12 Ibid ., pp. 159-160 . 13 Goloshchapov, Spravochnik , 1965, p . 401, and chapter VI- C , below . 14 Tatur , Khozyaystvennyye, 1964, p . 125 . 15D'yachenko, Finansovo , vol. I, 1961, p . 245 . 16 Ob” yedineniye (firma). The use of this dual label by most Soviet authors is apparently designed to distinguish these associations from an older form which essentially resembles a trust or chief administra tion, and possibly to avoid the capitalist connotation of the term “ firm ."

17Medvedev, Razvitiye , 1965, p . 38 . 18 Tatur , Khozyaystvennyye, 1964, p . 152 . 19Medvedev, Razvitiye , 1965 , pp. 38-39 . 20 Firma-ob" yedineniye (Yefimov , Proizvodstvennyee, 1966 , p . 9). 21Firma-predpriyatiye (ibid .). 22Bor, Planovyy , 1959, p . 114 . 23Molyakov, Finansirovaniye , 1966 , p . 100. 24 Allakhverdyan , Finansovoye , 1966 , p . 69. 25 Ibid ., pp. 75-76 . 26 Aleksandrov, Gosudarstvennyy , 1965 , p . 303. In 1961, there were less than 418,500 budgetary institu tions with accounts in Gosbank (table 8-12). A 1964 source (Finansy SSSR , no . 7 , 1964, p . 17) indicates there are over 780,000 budgetary institutions, including nurseries, kindergartens, elementary schools , medical institutions, etc. The discrepancy in order of magnitude is probably accounted for by the fact that small institutions do not have separate bank accounts. 27Aleksandrov , Gosudarstvennyy , 1965, pp . 304 , 306 . 28Mastalygina, Bukhgalterskiy , 1962, pp. 204-205 . For a detailed discussion of these extrabudgetary means, see chapter VI- E . 29Valovoy, Razvitiye , 1962, p . 251. 30Koksharskiy , Ekonomika , 1963, pp. 239-240.

42

NOTES TO CHAPTER III

43

31Designing and surveying (proyektnyye i izyskatel'skiye) organizations (also translated elsewhere as “ project- survey organizations” ) engage in a variety of activities including the designing, surveying , and preparation of blueprints for all kinds of buildings and construction projects , the development of standard or model designs, city planning, the preparation of standards and normative material, the research , design , and experimental work associated with the development of construction technology, and others. The designing and surveying category as employed in statistical reference books does not include product designing and project-making (proyektno- konstruktorskiye) organizations, geologic - prospecting (geologo razvedochnyye) organizations, and designing and estimating bureaus (proyektno- smetnyye byuro ) which prepare technical documentation for the capital repair of buildings ( TsSU , Kapital'noye, 1961, pp. 264, 266 , 268) . 32 The number of organizations and value of output (in January 1, 1962 prices) through 1965 are reported in Nar , khoz , 65 , p . 546 ; employment has been estimated by Feshbach (“Manpower ,” 1966 , p . 773). 33 Dushen’kina , Finansirovaniye, 1961. p . 5 . 34 Ibid ., p . 16. See also articles 26 and 27 of the budget expenditure classification, by object, in chapter V. 35 " Scientific research ” as a field does not have closely defined boundaries in the Soviet Union, but in a broad sense it is often taken to include theoretical and applied scientific research institutes (nauchno issledovatel'skiye instituty - NII), various special-purpose product design bureaus konstruktorskiye byuro - SKB , OKB , or TsKB ), scientific - research technology engineering institutes (nauchno - issledovatel skiye proyektno -tekhnologicheskiye instituty - NIPTI), and various production organization institutes. These types of organizations are generally financed in a similar manner and are here considered as a group. Research is also conducted in higher educational institutions, industrial enterprises, specialized scientific and technical societies , and other locations. Tyamshanskiy , Ekonomika , 1967, chapters I and II; see also Bashin , Planirovaniye, 1966 , pp. 5-9 , and Rogovtsev , Planirovaniye , 1965, pp . 49-54. 36 Barash, Dogovory, 1962, p . 9 . 37 Potekhin , Planirovaniye , 1962,

p . 208. Nonbudget resourceswere to amount to the following: Percent

State agricultural experimental stations . Zonal and other scientific research institutes .

50-60

Union and republican branch institutes (per special list )

15-20

30-40

Of the institutions' planned profits from their own activity , 40 percent could be used to finance theoretical research and acquisition of equipment and supplies . 38 Tyamshanskiy, Ekonomika , 1967, p . VIII - D .

168; see also the description of report form 5 -NK in chapter

39 Potekhin , Planirovaniye , 1962, p. 194 . 40 The productive sphere is formally defined as including those activities which contribute to national income; i.e., which yield a material product. Its meaning is extended here to include all transport and communications, trade, and public housing, i.e., all income- earning activities operated on khozraschet. For a detailed discussion of the classification of Soviet economic activity see Elias, Soviet Practice, 1961. 41 Manokhin , Poryadok , 1963, pp . 174-180; Mergelov, Planirovaniye, 1962, p . 27 . 42 Bachurin , “ Economic , " 1967 , p . 2 . 43 Sovetskoye gosudarstvo i pravo , no. 3 , 1959, p . 14 . 44 Manokhin , Poryadok , 1963, p . 180; Mergelov , Planirovaniye , 1962, pp . 5-6. 45 Organizations in this category are apparently referred to as “ estimate -financed” in order to distin quish them from the usual khozraschet unit where a “ financial plan ” rather than an “ estimate " is used (see Goloshchapov, Spravochnik , 1961, pp. 285-286 , and Masevich , Pravovyye , 1962, p . 12). The fully budget- supported institutions are also frequently referred to as being “ estimate - financed” (D’yachenko , Finansovo , vol. II, 1964 , p . 350 ). 46Molyakov , Finansirovaniye , 1966 , p . 237 . 47 Orlovskiy , Yuridicheskiy , 1963, p . 320. This distinction may not apply in all instances. 48 Ibid .; Bor , Planovyy , 1959, pp. 114-115 .

IV .

FINANCIAL PLANS AND PLANNING

The examination of financial planning in this chapter is intended to provide a general background for a more detailed examination of financial data systems in subsequent chapters. Section A briefly examines financial planning within the context of economic planning in general; section B outlines and describes the various types of financial plans; and section C deals with the interaction and timing of economic and financial plans in the course of annual plan formulation .

A. THE ROLE OF FINANCE IN ECONOMIC PLANNING It has been generally recognized, by both Western and Soviet observers, that Soviet financial planning has a distinctly subordinate role in the overall planning process. The financial plans are deriva tive of other types of plans, such as those for output, product distribution , capital investment, or labor force utilization , which are usually expressed in physical or " real" value terms. Thus, planning the availability and use of financial resources neither precedes nor controls the formulation of other types of plans. Despite this subordinate status in terms of the manner in which critical economic planning decisions are made, financial plans have several major roles in the operation of the economy whose importance can easily be underestimated . Perhaps the most important role is that of policing the execution of nonfinancial plans. “ Control by the ruble, " a phrase which applies primarily to banking operations but also extends to the discipline imposed by financial plans and operations generally , is an elaborate and extensive system . The per vasiveness of this control is deliberate and appears to be highly valued by Soviet authorities. Financial plans also play a major role in particular areas of economic management. One such area , for example, is the relationship between the amount of disposable income in the hands of the public and the volume of consumers' goods and services made available . Maintenance of a general correspondence between the two is important in controlling inflation . (It is noteworthy that the maintenance of price stability also facilitates the policing role of financial plans.) Themain financial plan , the state budget , is of course an important device for distributing the nation's financial ac cumulations among sectors of the economy and the population , and its planning is crucial to the operation of many elements of the economy. The

budget's importance as a fundamental, policy setting plan , however , is not as great as might be expected ; for most elements of the economy, the basic goals and programs are already incorporated, at least in outline form , in the national economic and other nonfinancial plans . Financial plans have a third role of providing a check on the validity of physical planning. This role has been a relatively minor one formost of the Soviet period . It has , however , expanded signifi cantly during the past decade, and numerous proposals for giving financial planning a more substantive role in fundamental planning processes are currently to be heard . The dependence of financial plans on physical and other nonfinancial types of economic plans means that the quality and effectiveness of the former depend on the quality and effectiveness of the latter. An extensive description of the manner in which economic planning is conducted cannot be given here. In fact , such a characterization would be difficult to provide in detail, since little is written by Soviet experts on the specific planning methods and techniques that have been and arebeing used by central authorities.

Soviet discussions of the general methodology of Soviet planning, which is labeled the “balance" method , indicate that it involves numerous source and -allocation tables for a wide range ofvariables, usually in physical terms--labor force , productive capacity, product output and distribution , in vestment, etc. The general structure of these tables is described in Soviet literature. That they should be made mutually consistent is obvious, but Soviet literature on the “balance " method is very vague on the resolution of the basic questionswhere does one start and how does one proceed , in view of the many reverberating interconnections among economic sectors and variables. An early approach , which was favored at the beginning of the planning era , may be sketched as follows: Pick one or a few leading industries which should have a major influence on many others (e.g., electric power, coal, steel) ; postulate a program for these industries, and trace its effects until the need for corrections in the initial program are apparent; then repeat the process until a relatively ac The primitive nature of ceptable plan results . this method is readily apparent; furthermore, as more industries are permitted to obtrude into first category status, the method becomes increasingly difficult to implement. 45

46

FINANCIAL PLANS AND PLANNING

A more recent approach has been to let each branch or activity work up its own hypothesis as to its path of development, and then proceed to compile preliminary balances for national invest ments , etc. 2 Since total requirements compiled in this way tend to exceed availabilities by large margins, several preliminary variants of the plan are required . The method currently in use attempts to avoid the compilation of unrealistic initial variants of the plan and thus to speed up the entire process. A frank and vivid characterization of this method by a Soviet critic , presented below in full , is among the most explicitdescriptions available and provides a useful summary of the basic economic planning methodology in use . 3 ... At the present time, the compilation of the national economic plan begins with a determi nation of orientational magnitudes of capital investment in the plan period . Orientational magnitudes of capital investment are determined from calculations of possible magnitudes of national income in the period , and within national income, of the share of accumulations, the size of the amortization fund , and the portion of it going into the reproduction of fixed capital. Pos sible magnitudes of national income in the plan period are determined by rather arbitrary and , in essence , extrapolative methods, using the macroeconomic tables of the planned balance of the national economy. In actuality, the mag nitudes of national income and capital invest ment in the plan period themselves seriously depend on the internal structure of material Therefore , in the process of production . further work on the plan , these indicators are revised . After determining the generalmagnitude of capital investment in the plan period , a pre liminary apportionment among sectors of the economy takes place. Even before they receive the capital investment limits , economists in the sectoral departments of Gosplan U.S.S.R. and other organizations occupied with planning the development of particular sectors begin to study the production possibilities of their own sector which may be achieved during the plan period by raising the productivity of equipment in operation and improving the utilization of in stalled equipment. They determine possibilities for increasing production from productive ca pacity being built or reconstructed at the begin ning of the plan period , and make preliminary estimates of the needs of other sectors for the products of the given sector . On the basis of all this , a preliminary assessment is made of the capital investments needed to construct produc tion capacity for each type of product from the viewpoint of the sector .

After apportioning the preliminary capital investment total among sectors, the amounts of new construction and the commissioning of new productive capacities are charted , in accordance with which the possible outputs of each sector are determined . Then a calculation is made of the need for the output of the given sector which arises after determining the output of other sectors. The inconsistencies observed in the needs and projected outputs of each type are eliminated by reducing the projected output of certain products and raising that of others. These processes of successive correction in the drafts of plans are at present of an empirical nature; they are not built on rigorous and well founded iterative processes. Under themethods of successive corrections which have developed in practice, theremay be encountered unjustified changes in initial technological normatives or arbitrary changes in reserves and stocks during the course of plan compilation, and so on . Even such actions do not always help put things in balance, as the opportunities for their use are limited and some disproportions remain im bedded in the plan in obvious fashion . All these obvious and inobivious disproportions lead to interruptions in thework of existing enterprises, the mothballing (konservatsiya ) of newly -built enterprises, and other undesirable conse quences. Determination of the indicators of the plan proceeds along two intersecting paths. On the one hand, the establishment of basic proportions of the structure of output and capital investment by sector of the economy is performed by central planning agencies with the aid of methods of economic dynamics. On the other hand , “ ascend ing” from the enterprise through the branch and territorial planning agencies to top - level layers of planning are the “ low level " projections of the volumes and distribution of output and of the use of primary resources, which in the course of the “ ascent" become an ever more aggregated and primary re nomenclature of products sources .

Naturally , the initial plan drafts compiled at various levels of planning and administration cannot immediately correspond with one an other . In compiling the initial plan drafts at the higher levels, use is made of rather conven tional and aggregated indicators and normatives. At lower levels, where detailed nomenclatures are used , there is as a rule no possibility for correctly assessing the structure of require ments for various products, for in order to do this it would be necessary to have output and distribution plans for products of all other enterprises , to know the structure of consumer demand -- in other words, the national economic

THE ROLE OF FINANCE IN ECONOMIC PLANNING plan and all its parts clature .

in

a

detailed nomen

The personnel of planning and administrative agencies are obliged to occupy themselves in clarifying and eliminating discrepanciesbetween indicators at different levels . In so doing , each side (the representative of this or that planning level) demonstrates why its projections should As a result, often after long be accepted . argument, the sides come to a mutually accept able agreement, though sometimes the unre solved questions must be carried up to superior It may also happen that plans organizations. are approved with certain discrepancies . But one way or another, the initial projections as a rule are substantially changed . These revised projections take greater account of real pos sibilities in the national economy, and they are more in balance .

The disadvantages of such practices in bringing into agreement the plans of various sectors and levels of planning and administra tion strike the eye even in description . This is not a rigorously pursued approach to an optimal plan , but a process in which rather arbitrary changes in initial data are often permitted for the sake of reaching agreement. Carrying out such a process is associated with huge-- and, in essence, not unavoidableexpenditures of intellectual and nervous energy by a large number of people ....

This description of the physical planning process appears to be a literal one . There are several negative effects of the process on the quality of financial planning : Inconsistencies obviously are transferred from one set ofplans to the other ; also , it is evident that much financial planning must await the completion of physical planning.

B. TYPES OF FINANCIAL PLANS

The variety of financial plans employed in the Soviet Union can be categorized as follows: 4 (1)

The Consolidated Financial Plan

(2 )

The State Budget of the U.S.S.R.

(3)

The Cash and Credit Plans of Gosbank and Stroybank

( 4)

The State Social Insurance Budget

(5 ) Financial plans (or “ balances of income and expenditures” ) of state enterprises and other khozraschet organizations and their superior “ economic ” organizations

47

(6 ) “Estimates” of economic organizations en gaged in productive activities, but financed fully from the budget (7 ) “ Estimates” of budget - financed institutions in education , health , government , defense, etc.

(8 )

Financial plans of cooperative organizations

(9 ) Financial -production farms

plans

of

collective

(10) Financial plans of various financial insti tutions (insurance agencies, savings banks, etc.). The contents and interrelationships of all these types of plans will not be discussed here. In order to demonstrate the manner and detail with which financial planning is performed , however, the more important types are examined and examples of four of them are presented in appendix A.

( 1) The Consolidated Financial Plan .-- This is the most comprehensive of all financial plans.5 It is a consolidation ( svod ) of the governmental budget and the financial plans of top - level state agencies, both budget- financed and khozraschet . In effect, therefore, it is a comprehensive financial plan for the state sector of the economy. The very existence of this plan has been uncertain until recently , and its function and content are still Since it is compiled by somewhat obscure . 6 Gosplan's Financial Department (probably in con junction with the Ministry of Finance) essentially a planning aid , and at the earliest stages of planning, it is highly aggregated. The summary accounts shown in table IV - 1 ( appendix A ) may represent the maximum detail to which the plan is carried out.

In addition to the resources of the state budget , the plan reflects the availability and utilization of the financial accumulations of state enterprises and organizations--mainly retained profits, amor tization deductions, and other centralized funds charged to deriving from enterprise payments operating costs . The plan does not include bank credit operations or financial transactions between the cooperative and state sectors, except for trans fers to and from the budget. Its main function as a running check on the entire course of planning, from initial to final stages, appears to have become increasingly important recently . It is not submitted to higher authorities as a document, and it receives no formal approval. ( 2) The State Budget.-- The funds provided for in this document comprise 75 to 80 percent of those listed in the consolidated financial plan (see table 6-1). As the consolidated budget of all levels

48

FINANCIAL PLANS AND PLANNING

of government, it is the chief operational financial plan . Through it, the financial resources of the government, primarily the turnover tax and the profit tax , are collected and redistributed . The various classifications used in the budget are described in detail in chapter V , and budgetary revenues and expenditures are discussed ex tensively in chapters VI and VII.

( 3 ) Balance of Monetary Income and Expendi tures of the Population .--Several key types of nancial plans are related to this balance, which is an important aid in compiling other plans, both economic and financial. It is a component of the national economic plan , is reviewed by the Council of Ministers, and is approved as a “ directive ” document in the area of money circulation and retail trade . ? Since these directives are incor porated in other plans for which responsibility is assigned to specific agencies, it is not shown in the above listing. The basic purpose of this balance is to check on the consistency between levels of personal income and purchasing power , on the one hand, and consumer goods output, retail trade , and personal services on the other. It is thus closely related to the Cash Plan , production plans of light industry, and plans of retail trade agencies. A listing of the major accounts of the plan is shown in table IV - 2 .

The summary Credit Plan compiled by Gosbank contains the following major groups ofaccounts : Sources of funds

Gosbank capital and profits Union , republican , and local budget funds Funds of the economy deposited in settlement accounts and in process of settlement Funds deposited in currentaccounts of collective farms and state insurance, social insurance , trade union , and social organizations Funds of other credit institutions Money in circulation Other resources Uses of funds Short- term credit : Against goods and materials , for seasonal needs, etc. For introducing new technology For expanding consumers' goods production (as a sideline) Against settlement documents in transit For carrying out settlements For wage payments Other Gosbank assets . The Credit Plan is sometimes referred to as a

( 4 ) The Cash Plan .--Compiled by Gosbank , this plan is a natural counterpart of the Balance of Monetary Income and Expenditure of the Popu lation , and is based on many of the same types of data (table IV - 3). It covers only the currency and coin actually taken in and issued by Gosbank cashiers, and not all money in circulation . A certain amount of currency is permitted to be retained in retail trade and other organizations for wages and expenses. Also , the collective farm market, the postal services , and the savings banks account for small amounts of money circulation . Of the total cash issued through Gosbank , about 80 percent is made up of wages and salaries of workers and employees. About 90 percent of the cash intake comes from state and cooperative retail trade enterprises . 8

( 5 ) The Credit Plan of Gosbank .--In addition to the Cash Plan , Gosbank is responsible for preparing and executing the Credit Plan . This plan is restricted to short -term credit which is an important source of working capital for the khozraschet sector. The Credit Plan specifies the amount of credit by purpose , territorial distri bution , and sector of activity , and lists the re sources which Gosbank uses as backing. Since all note issues are controlled by the Cash Plan , the two plans are intimately related to each other in the area of money creation .

part of the national economic plan , although it does not constitute a formal component and is more in 10 the nature of a derivative of the economic plan . It is prepared quarterly by Gosbank , largely on the basis of credit applications of agencies made to Certain types of credit (against local offices. settlement documents in transit, for wages, for temporary needs, and for redistributing working capital) are planned centrally and covered by Gosbank's general reserves. 11 The summary plan prepared by the Gosbank Directorate is approved by the Council of Ministers, which considers comments on the plan made by Gosplan and the Ministry of Finance . Since the consolidation of the banks in 1959, when Gosbank became the source of long - term credit for collective farms, consumer cooperatives, and individual housing construction , a separate long - term credit plan is prepared for official approval. Unlike the short- term credit plan, this is an annual plan , and is expressed in terms of annual volumes rather than quarterly balances. It is comprised of the following major groups of accounts : 12 Sources of funds Gosbank assets -- repayments of loans by col lective farms, individual borrowers, con sumers' cooperatives, and communal enter prises

-

TYPES OF FINANCIAL PLANS Union budget assets , including those specif ically assigned to the fund for long - term credits, and those made temporarily avail able as support Assets of union - republican budgets Uses of funds Long - term credits , to : Collective farms, migrants, and the rural population Consumers cooperatives Communal enterprises Reserve Return of assets received for temporary support of credit resources from

the union budget .

(6 ) The State Social Insurance Budget.-- This plan is consolidated into the State Budget of the U.S.S.R. It is apparently listed separately because it is compiled by the trade -union hierarchy, with ap Its major proval of the Ministry of Finance . source of revenue is the compulsory payments of employing organizations , based on wage earnings (see chapter VI- C ). Social insurance benefits are disbursed partly by the trade unions and partly by the Ministry of Finance under the social security division of the budget .

(7) Financial Plans of Economic Agencies.The financial plans of state enterprises engaged in productive activities are of two basic typesthe estimates (smety) of budget - financed enter prises and the financial plans of the khozraschet enterprises. The budget - financed productive enter prises (the best known example of which was the agricultural machine - tractor station) have in recent times been extensively converted to a kozraschet basis, as was pointed out in chapter III. However , this type of organization still exists , particularly as agricultural and resource conservation service stations of various sorts . All expenses of such units are paid out of the budget , and all receipts are paid into the budget and considered as revenue. The estimates of nonproductive budget- financed institu tions are similar in format to those of the pro ductive units, despite the fact that differences in activity cause differences in expenditure patterns. The financial plans of khozraschet enterprises ( also known as balances of income and expendi tures) show net income only , and do not show current operating expenses and offsetting income. This may be seen from the financial plan of a sovnarkhoz , which is shown in table IV - 4 . Since the sovnarkhoz was a superior administrative agency, the plan shown in the table is a consolidation of the financial plans of all enterprises subordinated to it, and it resembles the plans of the inferior units in most ways . 13 It should be noted that this plan covers only the khozraschet portion of activities

49

within the sovnarkhozy. For example , it does not show expenditures in the budget- financed fields of public health and education . The sovnarkhoz acted as the credit. administrator of budget grants for these activities ( see chapter VIII- B ), and separate estimates similar to those of other budget- financed institutions were prepared.14 The consolidated (svodnyye) financial plans of agencies are derived directly from national economic plan targets , as will be seen in the next section . Since value magnitudes employed in the national economic plan are generally based on constant or comparable prices, they must be converted into current-price terms in order to serve as operational targets. This is done in the financial plans, where the national economic plan targets are accompanied by separate price - adjust ment entries. In table IV - 4 , for example , plans for capital investment and geologic prospecting work are adjusted in this manner . (See income items 6 and 7 , and expenditure items 1, 2 , 20a and 20b.) Targets appearing in economic plans in the form of gross or marketable output and relative costs must be converted to sales and total costs and shown as a profit or loss in the financial plan (see chapter VI- B ) .

Beginning in 1954, economic ministries (and later the sovnarkhozy) were granted a significant though still very modest extension of their capa bility for independent action . This was accomplished by permitting manipulation of various reserves , within targets and limits set for each agency as a whole in its economic or financial plan . For example , 5 percent of the overall volume of capital investment and geologic prospecting work could be withheld by the sovnarkhozy , to be released during the course of the year and reassigned among various projects in accordance with the progress of work--provided that overall and sectoral targets for capacity to be put into operation were met. A reserve of the overall wage fund could also be retained . Profits and losses could be shifted among sectors of the economy, again provided that plan targets for overall accumulations were met . It may be presumed that such leeway has also been accorded to the new (post - 1965) ministries. C. PREPARATION OF THE ANNUAL ECONOMIC PLAN AND BUDGET It is important to recognize that much economic planning takes place prior to the compilation of the budget and financial plans. Although a great deal of this planning is in purely physical terms, some of it is in value terms, and it all has a more or less direct influence influence on financial plans . Before discussing the processes involved in preparing the budget and other financial plans, therefore, the stages and timing in preparing the formal National Economic Plan will be traced . A diagrammatic

50

FINANCIAL PLANS AND PLANNING

outline of the time schedule for preparing economic and financial plans and the state budget is shown in This diagram and the following figure 4-1 . discussion are based on many sources dealing with various aspects of planning in the 1960-66 period .

1. Preparation of the National Economic Plan By about mid -May , Gosplan ordinarily prepares a skeletal outline of the economic plan . The first steps in this stage of planning take place as early as 1 month after approval of the previous annual plan. The elements of the plan at this stage are variously termed “ control figures” or “ preliminary assignments ,” and are designed to provide correc tives to annual goals contained in long - term (5- or 7 -year) plans .

The skeletal plan is submitted for approval to the Central Committee of the Party and the Council of It contains: ( 1) A set of “material Ministers . or source - and - allocation tables in balances, broadly generalized terms, for a selected group of rather broadly defined criticalmaterials and equip ment; ( 2) capital investment targets and limits ; ( 3) total output targets ; ( 4 ) labor productivity These targets ; and (5 ) cost - reduction targets . targets and limits , as formulated by Gosplan , are specified in terms of the major administrative and territorial units . The limits for the consumption of priority materials and equipment, for example, are assigned to about 90 major consumers, such as all union ministries and agencies, and union republics . It may be assumed that the Ministry of Defense is one such consumer . After approval by top- level party and govern ment agencies around mid -May , the " control figures” are progressively disseminated in a top - to bottom direction , reaching the primary level (enterprise) somewhere around June 1. Organi zations at all levels prepare economic plans using these control figures as guidelines. The expanded plans then travel an upward route beginning about July 1 . These plans are cumulated at each level, so that they reach the top again in summary form . They are slated to reach Gosplan U.S.S.R. about August 1. Some portions of the plans drafted by each major agency or union republic are submitted to specialized coordinating agencies at the all -union level. Thus, plans for particular branches of industry are sent to the appropriate ministry ; construction and designing plans are coordinated by the State Committee for Construction Affairs (Gosstroy); and research and development plans are coordinated by the State Committee for Science and Technology . These agencies , in turn , prepare combined plans for their specific sectors of activity and advise Gosplan on the problems of integrating them into the overall State Plan for the National Economy of the U.S.S.R. Some of this

work apparently occurs before August 1 ; for example, the plans for research and development are submitted to the State Committee coordinating such work by July 1 .

The upward moving “ counter -plans” drafted in this stage do not contain financial indices as such . Although they do include targets for such elements as the volume of capital investment, the amount of research work , costs per ruble of marketable out put, and the total of wage funds, which have a direct relevance to financing, they do not contain plans for profits, depreciation allowances, requirements for working capital, and various other indices needed for compiling financial plans. The financial plans are therefore drawn up separately , about 1 month after the draft of the economic plan at each successive stage (beginning at intermediate levels ). As indicated below , moreover , they are submitted to the appropriate Ministry ofFinance organ rather than to Gosplan . These financial plans are employed in the process of budget formulation , and are subsequently approved by finance organs. On the other hand, the Consolidated Financial Plan is compiled by Gosplan as an internal working document and is used primarily for purposes of checking on the consistency of the economic plan . This summary financial plan is probably drawn up as early as the time of formulating the control figures, i.e., by about May 15, and it undoubtedly plays a part in Gosplan's review of the budget in October . Much publicity has been given to the idea that economic plans should and do originate with enter prises themselves. This was claimed in official pronouncements to be a major innovation ac companying the administrative reform initiating the sovnarkhozy in 1957 , although the manner in which this policy was to be reconciled with the obviously paramount role of Gosplan was never clearly resolved. The same policy was reiterated after the 7 - Year Plan for 1959-65 was promulgated , in almost identical terms and in tacit admission that the previous claims were unfounded. The national totals and major distributions in the 7 - year plan to be extended downward throughout the economy until each primary enterprise and organi zation had its own 7 -year plan specifying themajor target indicators for each year in the plan period. Once this was done , the enterprise was supposed to be in a position to initiate the compilation of its own plan by itself, with only general guidelines being needed from central agencies . This idealized scheme was never realized . Even if enterprises managed to draft and get approval by their superiors of their own long - term plans based on the 7 - year plan , they did so only after the plan period was well under way, by which time the original plan had undoubtedly lost much of its force , and new target figures had to be filtered down each year. In the

51

PREPARATION OF THE ANNUAL ECONOMIC PLAN AND BUDGET Figure 4-1.-- OUTLINE OF THE SCHEDULES FOR PREPARING ANNUAL PLANS AND BUDGETS Agencies

Jan.

Feb.

March

April

May

June

Aug.

July

Sept.

Oct.

Nov.

Dec.

Supreme Soviet

1

Council of Ministers U.S.S.R. , Party Central Committee

4

Gosplan U.S.S.R.

Ministry of Finance U.S.S.R.

State committees and agencies ( coordination )

11

5 2.

(10

6 3

U.S.S.R , ministries and agen cies Republican governments, plan ning offices , and finance agencies

5

8

Republican ministries, sovnarkhozy

Oblast , kray , A.S.S.R. govern ments

Economic plans

Rayon and other local govern ments

Budgets

Financial plans

Enterprises and other primary units (12)

Key

2.

Preliminary drafts of " material balances" for critical commodities, summary national- income type balances (not including the consolidated financial plan ), and " control figures." Preliminary targets and limits for output and consumption of critical commodities , capital investment, labor productiv . ity, cost reduction , etc. Drafts of economic plans in expanded form . Copies are also sent to the Council of Ministers U.S.S.R. (not shown ) .

3. 4 . Draft of the aggregated " State Plan for the National Economy of the U.S.S.R." 5 . Preliminary drafts of summary financial plans of economic agencies and estimates (i.e., agency budgets ) of budget supported agencies .

. 6 7.

Preliminary drafts of the consolidated state budgets of union -republics, with draft summary financial plans and estimates ( 5) attached . Copies are also sent to Gosplan U.S.S.R. and the Council of Ministers U.S.S.R. (not shown ) . Draft of the consolidated " State Budget of the U.S.S.R., " with drafts of summary financial plans and estimates of all union agencies attached .

8 . Dissemination of targets and limits in the draft national economic plan . Initial, intermediate, and terminating dates are obscure , and probably vary for different types of indicators . Not shown is an upward flow of detailed specifications for allocated materials and products from consumers up to planning or "plan - realization " agencies ( e.g. , soyuzglavki of Sovnarkhoz U.S.S.R.) and a subsequent downward flow of production and delivery authorizations in final detail . 9 . Dissemination of budgets , financial plans, and estimates through the network of finance organs . The timing of this flow is obscure . Approved summary budgets and plans returning from the superior level are timed to meet preliminary and sum mary drafts coming up from the inferior level . Financial plans and estimates are approved at each level after receipt of approved budgets from above . 10 . Ratified budgets . 11 . Ratified national economic plans . 12 . Detailed " technical-production -financial plans , " or their equivalent, drawn up and ratified at the enterprise level. Reference copies are sent up to the next administrative level for control purposes (not shown ) . Source : See text .

process of drafting the plan for 1964, a new pro cedure was adopted in which major targets for 1965 were also prepared all along the hierarchy, thus in effect replacing the last year of the 7 - year

This procedure was not repeated in sub plan . sequent years, and the annual planning cycle is apparently still being initiated by Gosplan's issuance of “ control figures.

FINANCIAL PLANS AND PLANNING

52 2. Preparation of the Budget

Compilation of the budget documents begins shortly after the midyear point with the preparation of forms, schedules, and instructions by the Ministry of Finance U.S.S.R. The Ministry also draws up a preliminary balance sheet of the budget at this time, using the basic indicators in the pre liminary draft of the national economic plan . This preliminary balance probably is reflected in the instructions sent to the all -union ministries and agencies financed directly out of the all -union budget and to the ministries of finance of union republics. Agencies financed out of republican budgets, such as republican ministries and ( formerly ) the sovnarkhozy, prepare summary financial plans (“ economic " agencies) and agency budgets or " estimates" (budget - supported agen cies). The plans drawn up at this stage are not based on the individual plans of enterprises , but are esti mated at the top level of the agency on the basis of average indices and standards and the drafts of the national economic plan --which at this levelare compiled around July 1 . With the aid of these financial plans and estimates, which are submitted around August 1 , republican ministries of finance compile preliminary drafts of consolidated budgets for each republic and submit them to the Ministry of Finance U.S.S.R. by September 1 . At this same time, all- union ministries and agencies, presumably including the Ministry of Defense and the state committees dealing with defense - related sectors, submit their summary financial plans and summary branch estimates to the Ministry of Finance U.S.S.R. After reviewing these plans, checking their conformity to draft economic plans, and estimating other revenues and expenditures, the Ministry of Finance U.S.S.R. compiles a draft of the union budget . Then, using the accepted figures in the preliminary drafts of the budgets of the union republics and a draft of the Social Insurance Budget, theMinistry compiles a draft of the consolidated “ State Budget of the U.S.S.R ” by about October 1. This draft , together with the summary financial plans and estimates of all- union agencies, is submitted to Gosplan U.S.S.R., the Council ofMinistersU.S.S.R., and , it is believed, the Central Committee of the Party . Formally , Gosplan does not approve the draft budget -- it submits its recommendations and con clusions on the budget to the Council of Ministers. However, Gosplan is responsible for checking on the conformity of the budget to the State Plan for the National EconomyoftheU.S.S.R., which Gosplan completed drafting about a month previously , i.e. , by about September 1. The period of September October is believed to be one of intensive and probably hectic interplay among various adminis trative, planning , and governmental agencies aimed at ironing out inconsistencies among various portions of the national economic plan and the budget.

One tool employed in this process is the Consolidated Financial Plan . As noted above, this plan appears to be an internal document only , since it does not form a part of the national economic plan or of the budget, and receives no formal approval . It is the closest thing to a comprehensive financial plan for the entire economy to be compiled, and is in effect a financial plan for the state economy, with a structure paralleling that of the state budget , but with a broader scope . Un fortunately , little is known of the timing of its compilation . There is some indication that it runs concurrently with the entire process of formulating the annual plans, and is one of the tools drafted in the initial stage which is completed around May 15 . The Council of Ministers U.S.S.R. generally approves the national economic plan and the state budget simultaneously. November 1 is frequently listed as the deadline for this step . Although approval by the Central Committee is seldom reported , review by this body is believed to parallel that of the Council of Ministers, and approval probably is also close in timing. After approval by the Council of Ministers, the budget and national economic plan go to the Budget and Economic Committees of the Supreme Soviet. Each house has its own Budget Committee but only the Soviet of Nationalities has an Economic Com mittee . These committees have a number of sub committees ; for example, in 1962 each Budget Committee had a subcommittee devoted to the appropriations for agencies concerned with foreign trade , defense, etc. The functions of the various committees are to review the budget and plan prior to the plenary sessions of the two houses of the Supreme Soviet, and to make recommendations to their parent bodies. Recommendations for changes usually are made, generally on matters relating to housing , education , agriculture , etc., and the minor changes in the draft plans submitted by the council of Ministers are invariably adopted by the Supreme Soviet. Final adoption of the “ law ” on the state budget and the national economic plan appears to be scheduled for about December 1 , although no deadline for this has been mentioned --probably out of consideration of the ostensible supremacy of the legislature over the Council of Ministers.

3. Dissemination

Both the state budget and the national economic plan , as ratified by the Supreme Soviet, are in highly aggregated and summary form . While the national economic plan draft undergoes a process of cumulation from bottom to top in one of its states of formulation , the budget is initially drafted in a relatively aggregated form , and both undergo changes before final ratification . The process of

PREPARATION OF THE ANNUAL ECONOMIC PLAN AND BUDGET distributing and detailing the large number of targets and limits through numerous successive admin istrative and governmental levels is a lengthy one which could not be accomplished in time for implementation of the targets if it began after final approval at the top level, even if the ideal schedule for this procedure were observed . The downward dissemination of both the plan and the budget, therefore, begins before final ratification .

Information on this process is especially spotty and inconclusive . In the case of the budget, the process may begin as early ( ideally ) as October 1 , when the Ministry of Finance completes its draft of the consolidated state budget. At the same time that the ministries of finance of the union -republics receive approval from the Ministry of Finance U.S.S.R. for the preliminary drafts of their con solidated budgets, the finance organs at the next lower level (oblast , kray, autonomous republic ) submit their preliminary consolidated draftbudgets. After the union - republican ministries of finance break down their approved consolidated budgets into (central) republican budgets and local budgets , approved consolidated budgets for each oblast-level unit are sent down to oblast organs, where they are confronted by the preliminary draft of budgets sent up from the next lower level (rayon ), and so on . An ideal date of about November 1 has been cited in a Soviet source for the last-mentioned step. Thus , by the time the state budget of the U.S.S.R. (in summary form ) is finally ratified at the top level, the entire complex of inferior budgets has been prepared , SO that formal ratification by the legislative organs at descending levels can take place in rapid succession . Information available on actual practice in this regard indicates that only a few days intervene between final ratification at progressively descending levels. It is not known whether successive changes in the top - level budget introduced in the ideal interval between October 1 and December 1 are cumulated and a single revision is sent downward, or whether (more probably ) these changes are communicated to lower levels as they occur .

The schedule for the downward dissemination of the national economic plan is more complex and obscure. Sources of the early 1960's occasionally

53

cite November 15 as the date by which the economic plan should reach the bottom level--the enterprise . A recent source gives November 15 as the date for ratification of construction plans and December 1 as the date when these should reach individual construction projects . Plans for the production and distribution of centrally planned products are to be ratified by dates ranging from October 1 (for sub contracted parts and semifabricates) to December 1 ( for interrepublican deliveries and deliveries for all -union needs) . Authorization orders (naryady) for the production and delivery of specific products are to be issued by December 15. These distribution plans are in greater detail than those approved by the Council of Ministers U.S.S.R. and are approved by lower U.S.S.R. and republican agencies of the supply - and - sales or plan - realization type. ( See the main administrations for delivery ofmaterials and supplies in figure 2-5 above.)

4. Actual Performance In actual performance , the above deadlines are poorly observed . This is particularly true for the approval steps in the late stages. Thus, approval of the national economic plan and the budget of the U.S.S.R. by the Council of Ministers U.S.S.R., for which the ideal deadline is taken here to be November 1 , actually took place November 12 , in 1962, and December 7 in 1963. Final ratification by the Supreme Soviet, probably intended by December 1 , actually took place December 12 in 1962 and about December 19 in 1963. The final directives of the economic plans, which should reach primary - level units by a month or more before the beginning of the planned year, are frequently cited as arriving in late January or February . The elaborate plans of primary - level units based on these directives (e.g., the “ technical production - financial plans" of industrial enter prises), should ideally be completed before the beginning of the year ; the average actual date of completion appears to be some time in the middle or end of the first quarter of the planned year. As a result of such delays, many activities in the first quarter of the year , particularly financial activities, are based on plans for the same quarter of the previous year or on draft plans, rather than approved plans.

NOTES TO CHAPTER IV This method is attributed to the prominent economist, S. G. Strumilin , by Dudkin , Optimal'nyy, 1966 , p. 7.

The source attributes this approach to G. M. Sorokin (described as a former head of 2 Ibid . , p . 8 . Gosplan's summary planning department), as outlined in his Planirovaniye narodnogo khozyaystva, Moscow , Sotsekgiz, 1961, p . 332 . 3 Dudkin , Optimal'nyy, 1966 , pp . 9-11 . is critical of the method described .

As a proponent of mathematical- economic models, the author

4 Allakhverdyan , Finansy , 1962, p . 47 . 5 This plan is not to be confused with the aggregative “ financial balance” as it is often called , which is more properly known as the national income balance. The Soviet- style national income balance, consisting in effect of net material product accounts, is one of the main components of the aggregative set of balances of the national economy. The term " financial balance " is used in contrast to the so - called "material balance ” of this set, which deals with gross output or the aggregate social product. 6 Among the more informative sources on this plan are Bor, Planovyy , 1959, pp. 113-116 ; Koval', Planirovaniye, 1965, p . 527 ; Lyando, Voprosy , 1963, pp . 66-69, 73, 77, 85 , 115 ; Margolin , Planirovaniye, 1960 , pp . 31 , 39-41, ? Batyrev and Kaganov , Organizatsiya , 1964, p . 81 . As noted in chapter IX , these percentages have been cited over a period of years, and their reference date is uncertain . According to 1962 data for the Belorussian Gosbank office , which are held to be repre sentative for the country as a whole , labor renumeration (including that of collective farmers) made up 86 percent of outgo and retailtrade made up about 80 percent of intake (Ekonomika i matematicheskiye metody, no . 3, 1966 , p . 362) . 9 Barkovskiy , Organizatsiya, 1962, p . 284. 10 A detailed listing of the components of the formal national economic plan may be found in Glusker, Metodologiya, 1963, p . 28 ff. 1 Barkovskiy, Organizatsiya , 1962, p . 288. 12Ibid ., p . 296 . 13For a translation of an enterprise financial plan , as well as the rest of the tekhpromfinplan of which it is a part, see Giffler, Collection , (forthcoming) . 14Molyakov , Finansirovaniye, 1965, p . 30 , shows an excerpt from the budget expenditure schedule applicable to this same soynarkhoz , which makes it clear that only group I budget expenditures are involved (see chapter V ) .

54

V.

BUDGET CATEGORIES AND CLASSIFICATIONS OF REVENUES AND EXPENDITURES

This chapter is primarily concerned with the formal classification of revenues and expenditures employed in the State Budgetof the U.S.S.R. Several important categories and concepts not directly included in the formal classification , but dealing with types of budgets as well as their content, are also considered . The discussion is concentrated largely on a description of the classifications. The use of these classifications in a variety ofplanning, transaction , accounting , and reporting contexts is dealt with in other portions of this report. Their use in the individual plans or “ estimates” of budgetary institutions, for example , is described in chapter IV ; and their use in the context of standard accounting and reporting systems of budgetary institutions, Gosbank , and the Ministry of Finance are treated in sections B , C , and D of chapter VIII, and in the context of budgetary pay ment transactions, in chapter IX . A. TYPES OF BUDGETS AND BUDGET CLASSIFICATIONS

The budget classification is complex , employing a variety of classificatory criteria : Government levels, administrative agencies, abstract sectors of the economy, and types and objects of revenues and expenditures . Although there are a few common or related elements , the classification of revenues is almost entirely distinct from the classification of expenditures and they are discussed separately below . Before doing so , however , an examination of some nomenclature dealing with types of budgets is in order , as well as a brief survey of the recent history of the official classifications, 1. Types of Budgets The Soviet budget system is a consolidated one; that is , the state budget ofany given territorial unit includes both the individual budget of the top -level government of that unit as wellas the budgets of all lower -level governments within the given terri tory. The existence of two types of budgets for all but the bottom governmental levels -- that is , the individual budget for the government of the unit and the consolidated budget for the entire unit - gives rise to possible confusion . To avoid this confusion , the present text will follow Russian terminological practice in denoting the individual budget for the government of a unit by the adjectival form (e.g., republican budget” ), and the consolidated budget of all governments in the territory by the genitive form (e.g., “budget of the republic ” ) . An outline

of the various budget levels, showing the budget preparing agency and the designation ofthe individ ual and consolidated budget at each level, is shown in table 5-1 . The table also shows two classes in which budgets are usually grouped : “ central" or " local." These two groupings are employed in legal, accounting, reporting, and other aspects of Soviet budgetary practice , as well as in the formal budget classifi cations themselves. Until recently , as willbe seen , entirely separate classifications of both revenues and expenditures existed for central budgets and for local budgets. As employed here, the term “ central budget " encompasses the union budget and the republican budgets of the 15 union republics , and “ local budgets” refers to all of the nearly 48,000 lower - level budgets , including the republican budgets of the 20 autonomous republics. The term " bottom - level" budgets includes budgets of local governmental units having no sublevels and , conse quently, no consolidated budget. There are nearly 40,000 for the rural soviets alone .

In addition to the budgets of governmental organs, the budget of the U.S.S.R. includes the State Social Insurance Budget, whose preparation is formally the responsibility of the trade union system , and particularly of the All- Union Central Council of Trade Unions. This Budget is partially executed by the Ministry of Finance hierarchy, however, and since it is incorporated in the regular classifications of revenues and expenditures , its formal separateness is immaterial for present purposes. The consolidated State Budget of the U.S.S.R. can be thought of as including this State Social Insurance Budget plus the Union budget and the consolidated budgets ofall union republics, i.e., all central and local governmental budgets. The various types of budgets are of course widely disparate in terms of scope. The union budget alone makes up over 45 percent of the total, and together with individual budgets of the union republics (i.e., all central budgets ), about 80 percent (table 7-4 ). 2. Revisions of the Budget Classifications The formal budget classifications frequently undergo changes by the Ministry of Finance. These changes are usually in response to a reorganization of administrative agencies, inasmuch as the latter constitute an element of the classification . The

55

56

BUDGET CATEGORIES AND CLASSIFICATIONS Table 5-1 . - BUDGET DESIGNATIONS AND CLASSES, BY LEVEL OF GOVERNMENT

Individual budget of government unit (adjectival designation )

Government level ( budget -preparing agency)

Ministry of Finance U.S.S.R ..... Ministry of Finance of union republic ..

Ministry of Finance of autonomous republic ... Finance department of oblast executive committee.. Finance department of rayon executive committee ... Finance department of city executive committee..

Union budget

Consolidated budget (genitive designation )

State Budget of the U.S.S.R. Central

Republican budget

State Budget of union republic

Republican budget

State Budget of autonomous republic

Oblast budget Local

Officer ( s ) of city executive committee ... Officer ( s ) of workers ' settlement executive committee.. Officer ( s ) of urban district executive committee.. Officer ( s ) of rural soviet executive committee .. Source:

Class of budget

Budget of oblast

Rayon budget

Budget of rayon

City (with districts ) budget

Budget of (districted ) city

City (undistricted ) budget

Not applicable

Settlement budget

Bottom level

Not applicable

District budget

Not applicable

Rural budget

Not applicable

Aleksandrov , Gosudarstvennyy , 1965 , pp . 14-18 .

frequency and extent of the changes cannot be determined in detail for the period after World War II, since the official Ministry of Finance periodical announcing such changes is largely unavailable . Judging from previous periods, however , such changes were relatively limited within the intervals between large - scale administrative reorganiza tions ormajor revisions ofthe budget classification. Major revisions do not necessarily affect all revenues or all expenditures, but they must deal with the essentially separate classifications for central and local budgets, which differ in terms of structure . Several major revisions are known to have occurred since the mid - thirties. These are as follows:

Central budgets

1938 1943 (? ) 1958

Local budgets 1938 1943 1954 1959

Full texts of both revised classifications of 1938 and of the local classification of 1943 have been located, but not for the central classification of 1943 or for any of the subsequent revisions. No indication has been found that the central budget classification was revised in 1954 ; if true, this means that the basic structure of the classification lasted from 1943 through 1957, although numerous

modifications were undoubtedly introduced piecemeal basis during this period .

on

a

A major revision of the central budget classifi cation was introduced as of the beginning of 1958 , soon after the establishment of the sovnarkhoz system of administration in industry and construc tion . The elimination ofmany specialized minis tries and the creation of territorial administrative bodies constituted a radical departure from tradi tional administrative systems and required an overhaul of the classification .

A new classification for local budgets was put into effect at the beginning of 1959. This classifi cation represented a major departure from previous practice in that a deliberate effort was made to unify the central and local classifications. Some differences continued to exist, as will be seen , but a large degree of uniformity between the types was achieved, in contrast to their previous structural dissimilarities. Since neither the complete texts nor major portions of the latest known revisions are available , the description of them contained here is based on numerous fragmentary pieces of information gathered from a variety of sources. When the likelihood of change in individual elements of the classification seems large, or when uncer tainty exists as to whether a piece of information belongs to the 1958-1959 classifications, the infor mation is dated according to its timeof publication .

57

TYPES OF BUDGETS AND BUDGET CLASSIFICATIONS -REVENUES The administrative reform initiated in Septem ber 1965 , which eliminated the sovnarkhozy and restored the ministerial system as of the beginning of 1966 , undoubtedly brought about at least partial changes in the classifications, although details of such changes are not yet available. A suggestion of the pattern they may take is offered by a recent revision of the Gosbank system of accounts, which followed the same reorganization ( see chapter VIII - C ) .

B. THE CLASSIFICATION OF REVENUES

As far as is known, both central and local classifications consist of three levels . The labels and functions of the levels differ , however , The designations of the levels used in the two classifi cations are as follows: Classification Central

Local

Division

Division

Russian term

other sections of the classification which do not use articles, although this is not fully confirmed . The local classification of revenues closely resembles the central classification , though there are enough divergencies that the two must be considered separate systems. For the most part, the local classification contains divisions for the same major revenues as the centralclassification . This may be seen in table 5-2, which lists all identified divisions and shows their applicability to each classification . There are some revenues which go to local budgets only, however , and the local classification contains a number of divisions not matched in the central classification - e.g ., division 11 , which until 1967 , at least, was devoted to several types of local revenues, and division 14 , which contains the rental revenues of local soviets . Except for such differences, the divisions of the central and local classifications are matched and have the same designations.

Table 5-2 . - DIVISIONS OF THE REVENUE CLASSIFICATION

Razdel Classification

Section Article

Chapter

Glava

Section

Paragraf ($ )

No.

Title Central

Local

Stat’ya

In the central classification , divisions are established for major types of revenues such as the turnover tax , the profit tax, and state loans or customs duties; for major groups of similar revenues such as the state taxes on population or income taxes on nonstate enterprises and organiza tions; and for individual types of payments into the budget such as collections and various payments other than taxes or savings of administrative economic expenditures . Sections designate a smaller order ofmagnitude and provide more detail. They can specify adminis trative agencies from which taxes are collected (particularly within the turnover tax and profit tax divisions), sectors of the economy (division 3), individual types of taxes within a group (division 4 ), types of special collections and receipts (division 12), or the purpose for which a revenue may be used (division 36 ). Articles provide the finest degree of detail, and are used to indicate branches of industry for the turnover tax , branches of industry or sectors of economy for the profit tax, andmajor social groups for the personal income tax and the bachelor and small family tax. Articles are not used for the income taxes on collective farms and consumers' cooperatives, the agriculturaltax, the tax on horses, the tax on livestock in cities, forestry revenue, special collections and receipts, and deductions from the cash -or - commodity lottery . Theremay be

1

Turnover tax ....

X

X

2

Deductions from profits (profit tax ) ....

X

X

3

Taxes on income of collective farms , cooperatives , and public organizations .. State taxes on the population .

х

x

X

X

4 5

State loans... Revenue from machine - tractor

X

NA

6

stations (until 1960? ) ...... State social insurance funds ..

х

7

( - ) NA

8

Customs duties ....

X

( Title unknown ) .

X

NA

(x )

x

(x )

NA

9 10

Forestry revenue ..

11

Payments for productive capital ( 1967)..... State duties , admissions tax , local taxes and collections ..

11 12 14 15

16

Collections and various revenues other than taxes .... Rental revenue .. Excess of own current assets and planned free balances of amortization allowances ear marked for capital investment Return of funds received but not expended by institutions and organizations in the pre ceding year .......

See footnotes at end of table .

X

X X

X x

X

NA

(x )

X

58

BUDGET CATEGORIES AND CLASSIFICATIONS

Table 5-2 . - DIVISIONS OF THE REVENUE CLASSIFICATION Continued Classification

Title

No.

Central | Local

19

Receipts from revaluation of inventories of products in connection with a change in retail prices..

X

NA

28

Surplus revenues received from lower budgets ...

(x )

X

29

Receipts of penalties for dis charging unpurified sewage water ....

X

NA

30

Subsidies received from higher - level budgets...... Deductions of funds from cash commodity lotteries ...

X

X

(x ) x

NA

X

NA

31 36

(Used for transfer of funds ) ..

41

Receipts of 75 percent of the difference between fines collected and paid ....

43

59

Receipts from savings of administrative -economic expenditures .... Balances of budget funds..

60

Receipts of earmarked funds...

Not applicable . X Applicable . sumed . NA Not available .

Source :

X

The value and importance of individualdivisions differ vastly . In 1964, 76.5 percent of total budget revenues was accounted for in three divisions - the turnover tax (division 1 ), 38.9 percent; deductions from profits (division 2), 30.4 percent; and state taxes on the population (division 4 ), 7.2 percent. All other sources of revenue therefore contributed only 23.5 percent. (See table 6-2.)

The most significant differences between the local and central classifications are below the division level. The localclassification has chapters for second - order subdivisions in some divisions (especially division 2 ), and sections as the third order grouping. The central classification has no chapters, but employs sections and articles as second- and third -order subdivisions, respectively . The local classification appears to have no articles. No mention of them in the local classification after 1959 has been found , indicating an elimination of articles in the 1959 revision of the local classifica tion . The information available on all elements of the revenue classification is summarized below in table 5-3 for central budgets , and in table 5-4 for local budgets .

X

X

(x ) NA

X X

( ) Pre

Tables 5-3 and 54 .

A further and separate means of classifying revenues is based on the manner in which they are There are two assigned to individual budgets. groups in this classification scheme. One group includes those revenues which are assigned to particular budgets on a long - term basis , usually

Table 5-3 . – CENTRAL BUDGET CLASSIFICATION OF REVENUES

Division 1 .

TURNOVER TAX ( This division has 10 sections which pertain to categories of agencies or groupings of organizations [ 4 ]. The sections are further subdivided into articles which designate par ticular branches of industry [ 1 ]. )

Section 1 .

Enterprises subordinated to all -union ministries and committees attached to the Council of Ministers U.S.S.R. [ 2 ]

Art . Art .

1. 4 .

Automobile industry Ferrous metallurgy

Section 2 .

State Committee of Procurement [ 19 ]

Section 3 .

Ministries of trade of the union republics [ 19 ] Art . 1. Fish products Art. 2 . Other products

Section 4 .

Sales organizations for the delivery of petroleum products [ 19 ]

Section 5 .

Main Administration of the Gas Industry attached to the Council of Ministers U.S.S.R. [ 19 ]

See footnotes at end of table .

59

REVENUES Table 5-3. - CENTRAL BUDGET CLASSIFICATION OF REVENUES - Continued

Division 1.

TURNOVER TAX - Continued

Section 6.

Regional economic councils (sovnarkhozy) ( This section is subdivided into 23 articles according to branches of industry [ 4 ].) Automobile industry ( 10 ] Art . Art . Sugar industry ( 10 ) Art . Textile industry ( 10 ] Art. Chemical industry (13 ) Art . Knitwear and sewn goods industry ( 13 ) Art . 10. Confectionary industry [ 10 ] Art . 17 . Receipts of turnover tax from enterprises of sovnarkhozy and the Main Adminis tration of the Far East Fish Industry for Producing Fish Products ( 19 ) Art . 23. Other branches of industry [ 2 ]

Section 7 .

Local industry ( This section includes revenues received from enterprises subordinated to the council of ministers of autonomous republics and kray (oblast ] executive committees of soviets of workers ' deputies , as well as the ministries of local industry [ 2 ]. The articles of this section indicate branches of industry . ) Art. 6. Turnover tax on fish caught in local reservoirs [ 19 ] Other branches of local industry [ 2 ] Art . 8

Division 2.

DEDUCTIONS FROM PROFITS (The sections of this division are established to keep account of deductions from the profits of each sovnarkhoz , ministry , or agency [ 1 ]. The articles within the sections designate branches of industry [ 1 ] , or for several sections , branches of the economy [ 4 ].) Standard Articles for Sovnarkhoz Branches of Industry and Other Activities ( 12 ]

Art . Art. Art . Art . Art. Art . Art . Art . Art. Art . Art . Art . Art . Art . Art . Art . Art . Art . Art .

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 20. 21. 22. 23. 30. 31. 32. 40.

Coal industry Oil and gas industries Other branches of the fuel industry Ferrous metallurgy Nonferrous metallurgy Electric power stations , electric power and heat networks Machine -building and metalworking Chemical and rubber industry Logging , woodworking , and paper industry Construction Construction materials industry Other branches of heavy industry Meat and dairy industry Fish industry Other branches of the food industry Textile and other branches of the light industry Material -technical supply and sales Administrations (departments ) of workers ' supply Other organizations

(Note : The original (1957) list of economic administrative regions numbered 105. number of regions was subsequently reduced to 47 , as listed in [ 5 ]. ) Division 3.

TAXES ON INCOME OF ENTERPRISES AND ORGANIZATIONS OF THE COOPERATIVE NETWORK AND ENTERPRISES OF SOCIAL ORGANIZATIONS [ 2 , 4 ]

INCOME OF

Section 1 .

Tax on income of collective farms [ 2 ]

Section 2 .

Tax on income of cooperatives and economic organs of social organizations [ 2 ]

See footnotes at end of table .

The

-

BUDGET CATEGORIES AND CLASSIFICATIONS

60

Table 5-3. - CENTRAL BUDGET CLASSIFICATION OF REVENUES - Continued

Division 4 .

STATE TAXES ON THE POPULATION ( Sections are established for separate types of taxes; articles for categories of payers [1 ] . )

Section 1 .

Income tax on the population [ 1 ] Art .

Art .

2.

On workers and employees , and on persons of comparable status in respect to the payment of income tax [ 10 ] On independent craftsmen , artisans, and other payers [ 10 ]

Section 2.

Agricultural tax [ 10 ]

Section 3 .

Tax on bachelors , single persons , and small families2

Section

Tax on horses 2

Section

Tax on livestock in cities 2

Division 5 .

STATE LOANS (18 ]

Division 6 .

REVENUE FROM MTS's [ 18 ] (eliminated in 1960 ? )

Division 7.

FUNDS OF STATE SOCIAL INSURANCE ( 7 , 15 )

Division 8.

CUSTOMS DUTIES [ 8 ]

Division 9 .

( TITLE UNKNOWN ) [ 3 ]

Division 10. FORESTRY REVENUE [ 7 ] ( The number of this division is presumed here on the basis of the local classification . The sections indicate individual sources of revenue; there are no articles . ) Division 11. PAYMENTS FOR PRODUCTIVE CAPITAL [6 ] (1967) Division 12. COLLECTIONS AND VARIOUS REVENUES OTHER THAN TAXES [ 1 ] ( Sections group payments according to the types of collections and receipts [ sbory i dokhody ]. A 1952 source stated that it included approximately 50 separate types [ 17 ]. ) Section 1.

Coinage income (monetnyy dokhod ) [ 1 ]

Section 2.

Receipts from fines [ 1 ]

Section 5 .

Obligations to creditors and depositors for which the statute of limitations period has expired ( 14 ]

Section 8.

Deductions from payments on compulsory property insurance earmarked for preventive measures [18 ] ( The same deductions are listed in the local budgets under Division 60 , Section 4.)

Section 13. Markup on radio and television products [ 9 ] Section 20. (Includes amounts received for food sold in dining halls of military units to servicemen , engineering -technical personnel , and workers and employees who do not have the right to receive food free of charge; also includes the amounts representing 50 percent of the value of output of productive units attached to the kitchen establishments of military units located abroad [ 16 ]. )

Section 31. Other receipts ( Includes payments of price differentials on agricultural machinery [ 12 ]. articles under this section [ 7 ]. ) See footnotes at end of table .

There are no

REVENUES

61

Table 5-3 . – CENTRAL BUDGET CLASSIFICATION OF REVENUES - Continued

Division 15. EXCESS OF OWN CURRENT ASSETS AND PLANNED FREE BALANCES OF AMORTIZATION ALLOWANCES EARMARKED FOR CAPITAL INVESTMENT [ 12 ] Division 19. RECEIPTS FROM REVALUATION OF INVENTORIES OF PRODUCTS IN CONNECTION WITH CHANGES IN RETAIL PRICES [ 11 ] Division 29 , RECEIPTS OF PENALTIES FOR DISCHARGING UNPURIFIED SEWAGE WATER [ 15 ] Division 30. SUBSIDIES RECEIVED FROM THE ALL -UNION BUDGET [1 ] Division 31. DEDUCTIONS OF FUNDS FROM CASH - OR -COMMODITY LOTTERIES [ 7 ] ( The number of the division is presumed here on the basis of the local classification . sections indicate individual sources of revenue ; there are no articles [ 7 ] . )

The

Division 36. ( TITLE UNKNOWN ) (Sections 1 to 4 of republican budgets of union republics account for " special payments from the all - union budget for extraction of oil , extraction and processing of shale , and for deliveries of raw cotton and wool . 11" In local budgets , the same special payments are listed under Division 60 , Sections 5 , 6 , 7 , and 8 ( 18 ).) Division 41. RECEIPTS OF 75 PERCENT OF THE DIFFERENCE BETWEEN FINES COLLECTED AND PAID ( The remainder of net fines, including forfeits and penalties, is paid into the budget at the time of the annual recalculation of deductions from profit . Since 1962 , wholesale trade agencies pay 95 percent during the year ( 14 ] .) Division 43. RECEIPTS FROM SAVINGS OF ADMINISTRATIVE -ECONOMIC EXPENDITURES [ 12 ] Division 59. BALANCES OF BUDGET FUNDS 2Numbers in brackets identify the source as listed below . 2 Presumed on the basis of the local classification or other evidence .

Source : 1 . Aleksandrov , Gosudarstvennyy , 1961 , p . 48 . 2. Azarkh , Spravochnik , 1959 , pp . 61-62 . 3. Dedkov and Yakimov , Bukhgalterskiy , 1965, p . 395 . 4. D'yachenko , Finansovo , vol . I , 1961 , p . 173 . 5 . Ekonomicheskaya gazeta , no . 2 , January, 1964 , p . 34 . 6 . Ekonomicheskaya gazeta , no . ll, March , 1967 , p . 13 . 7. Gel'rud and Yakovleva , Al'bom , 1963, p . 16 . 8. Glezin , " Some Problems , " 1958 , p . 32 . 9 . Lasevich and Mindell , Tseny , 1963, p . 120 . 10. Lavrov , Gosudarstvennyy , 1961 , pp. 37, 38 , 40 . 11. Mokhov , Vyplaty , 1965 , p . 23. 12. Molyakov , Finansirovaniye , 1965 , pp . 20-21, 31. 13. Plotnikov , Gosudarstvennyy , 1959 , p . 34 . 14 . Ponomarev and Strelkov , Spravochnik , 1964 , p . 310 , 312 . 15. Rusin and Eydinova , Gosudarstvennyy , 1965 , p . 173 . 16. Safronov , Sprayochnik , 1966 , pp . 111, 120 . 17. Suchkov , Gosudarstvennyy , 1952 , pp. 27, 187 . 18. Tsilinsky, "Greater , " 1959 , p . 63 . 19 . Zhdanov , Planirovaniye , 1962 , pp . 14 , 37.

62

BUDGET CATEGORIES AND CLASSIFICATIONS Table 54. - LOCAL BUDGET CLASSIFICATION OF REVENUES

Division

1.

TURNOVER TAX ( This division has no further subdivisions , in contrast to the central classification ( 1 ). )

Division

2.

DEDUCTIONS FROM PROFITS ( This is the only division of this classification which is subdivided into chapters . chapters indicate branches of industry or branches of the economy [ 1 ] .

The

The chapters in division 2 of local budgets correspond to articles in the classification of central budgets . This is one of the inconsistencies between the classifications of central and local budgets which was not eliminated in the last revised version of the classification introduced for local budgets as of January 1 , 1959 , although the very purpose of this revision was to eliminate divergencies between the two sets of classifications ( 12 ] . )

Chapter

Chapter

3. Industry of A.S.S.R. and local subordination [10 ] (1965 ) Section 1 . Industry of A.S.S.R. , kray , or oblast subordination Section 2. Industry of rayon subordination 9. (Title unknown ) ( Two lines are established here for recording receipts from profit deductions , by separate branches of industry , if such a subdivision is authorized by the finance ministry of the union republic . The same arrangement applies to chapters 11 , 22 , 30 , 40, and 133 [ 4 ] . )

Chapter

23. Food industry [ 3 ] Section 3 . ( Title unknown )

Chapter

30. Light industry [ 1 ] Section 2 . Knitwear industry Section 3 . Sewn goods industry

Chapter

39. Local industry [ 1 ] ( 1961 ) Section 1 . Industry of A.S.S.R. , kray , or oblast subordination Section 2. Industry of rayon subordination

Chapter 133. Construction [ 11 ] Chapter 151. Agriculture [ 1 ] Chapter 153. Water economy , amelioration , and irrigated agriculture ( 10 ) Chapter 176. Automotive transport and road economy ( 10 ) Section 1. Automotive enterprises Section 2 . Industrial enterprises Chapter 180. Trade organizations [ 5 ] Chapter 189. Local economy [ 8 ] Section 1 . Industry [ 5 ] Section 2. Housing and communal services [ 8 ] Section 3 . Road economy [ 8 ] Chapter 190. Housing and communal economy [6 ] Section Section Section Section Section

1. Housing economy not converted to khozraschet 10. Electric power plants 14. Water supply and sewage system 15. Bath , laundry , and barbering enterprises 24. Communal budget -financed enterprises

Chapter 191. Economic organizations of cultural agencies

( This chapter has at least 10 sections [ 3 ]. ) See footnotes at end of table .

REVENUES

63

Table 54.- LOCAL BUDGET CLASSIFICATION OF REVENUES - Continued

Division

3.

TAX ON INCOME OF ENTERPRISES Section 1 . Income tax on Section 2 . Income tax on Section 3 . Income tax on

AND ORGANIZATIONS [ 6 ]

collective farms consumers ' cooperatives producers ' cooperatives (These cooperatives were converted to state enterprises as of October 1 , 1960.)

Division

4.

STATE TAXES ON THE POPULATION [6 ] Section 1 . Income tax on the population Section 2. Agricultural tax Section 3, Tax on bachelors, single persons, and small families ( This division is believed to include sections for the tax on horses and the tax on live stock in cities . )

Division 10 .

FORESTRY REVENUE [6 ]

Division 11 .

STATE DUTIES, ADMISSIONS TAX , LOCAL TAXES AND COLLECTIONS [6 ] Section 1 . State duties Section 2 . Admissions tax Section 3. Tax on buildings and land rent Section 6. One -time collections on collective farm markets ( It is believed that sections 4 and 5 relate to collections from owners of means of trans portation and collections from owners of livestock . )

Division 12 .

COLLECTIONS AND Section 9 . Section 11 . Section 13. Section 16. Section 25 .

REVENUES OTHER THAN TAXES (EXCLUDING RENTAL REVENUES) [ 6 ] Fishing and license collections [6 ] Proceeds from the sale of state property [6 ] Markups on radio and television ( 7 ) Proceeds from special funds of budgetary institutions [6 ] Other payments [ 6 ]

Division 14 .

RENTAL REVENUES Section 1 . Section 2. Section 5. Section 10 .

Nonresidential premises and dwelling houses under long -term lease Plots of land Agricultural property Other types of property

Division 16.

[6 ]

RETURN OF FUNDS RECEIVED BUT NOT EXPENDED BY INSTITUTIONS AND ORGANIZATIONS IN THE PRECEDING YEAR [ 6 ]

(Among other applications , this division is used to record cash issued by the bank out of budget credits and not returned for " restoration " of credit before December 31 [ 2 ].) Division 28.

Division 30 .

( TITLE UNKNOWN ) Section 1 . Section 2 .

Receipts of excess revenue from budgets of lower levels [ 5 ]

SUBSIDIES RECEIVED FROM HIGHER -LEVEL BUDGETS [6 ] Section 1 . From republican budgets of union republics [ 5 ] Section 3 . From rayon and city budgets [ 6 ]

Division 31. DEDUCTIONS OF FUNDS FROM CASH -COMMODITY LOTTERIES [ 3 ] Division 43.

RECEIPTS FROM SAVINGS OF ADMINISTRATIVE -ECONOMIC EXPENDITURES [ 3 ]

Division 59 .

BALANCES OF BUDGET FUNDS [6 ] Section 1 . Balances of budget funds at the beginning of the year used for covering expenditures Section 2 . Unassigned balances (svobodnyye ostatki ) of budget funds at the beginning of the year

See footnotes at end of table .

S

BUDGET CATEGORIES AND CLASSIFICATION

64

Table 54.- LOCAL BUDGET CLASSIFICATION OF REVENUES - Continued

Division 60 .

RECEIPTS OF Section Section

EARMARKED FUNDS ( TSELEVYYE SREDSTVA) ( 11 ) 1. Receipts of funds from local industry [ 5 ] 3. 3:}

( These funds are used for expenditures on residential, personal, and domestic services , and for financing the construction and expansion of local industry enterprises [ 9 ]. ) Section

4.

Deductions from payments on compulsory property insurance earmarked for preventive measures

( The same deductions are listed in the central budgets under Division 12 , Section 8 [12 ]. ) Sections 5-8 . (These sections concern accounts for " special payments from the all -union budget for extraction of oil , extraction and processing of shale , and for deliveries of raw cotton and wool . !!" The same items appear in the central budgets under Division 36 , Sections 1 , 2 , 3 , and 4 ( 12 ) . ) Section 10.

(Title unknown ) [ 5 ]

INumbers in brackets identify the source as listed below . Source : 1 . Aleksandrov , Gosudarstvennyy , 1961 , p . 53 . 2. Boguslavskiy , Bankovskiy , 1960 , pp . 274-275 . 3 . Dedkov , " Some Problems , " 1961 , p . 57 . 4. Dedkov and Yakimov , Bukhgalterskiy , 1965, p . 379 . 5. Goloshchapov , Byudzhetnyy , 1963, pp. 238 , 241. 6. Kudryashov and Chudinovich , Sostavleniye , 1960, pp. 14 , 15 , 7 . Lasevich and Mindel ' , Tseny , 1963 , p . 120 . 8. Menchinskiy , Sostavleniye , 1961 , p . 97 . 9. Plotnikov , Gosudarstvennyy , 1959 , p . 36 . 10. Rusin and Eydinova , Gosudarstvennyy , 1965 , p . 53. 11 . Sosin , " Planning , " 1963, p . 33 . 12 .. Tsilinsky , " Greater , " 1959 , pp . 62 , 63 .

in the laws which are issued from time to time defining the budgetary rights of the U.S.S.R. and the union republics. The revenues in this group are called " attached " (zakreplennyye ) revenues. The other group includes all - union revenues , a part of which is assigned to lower budgets on the basis of annual decisions made in the light of the particular needs of various budgets for any given year . These revenues are assigned in amounts large enough to bring the lower budgets into balance , and for this reason they are called “ regulating” (reguliruyushchiye) revenues .

Attached revenues consist primarily of state duties , admissions tax , local taxes and collections, the rental revenue of local soviets, proceeds from the sale of state property, the profit tax paid by enterprises of local subordination , and some other minor collections. All of these taxes and collections are paid directly and fully into the local budgets and therefore constitute a fixed revenue of these 3 budgets. The selection of individual taxes for inclusion in the group of attached revenues is guided primarily by the desires to promote admin istrative convenience and to stimulate local organs to enforce proper collection procedures. The attached revenues are far from sufficient to provide recipient budgets with enough revenue to cover all their regular expenditures.

Regulating revenues include all the major The complexities sources of budgetary funds. involved in balancing the individual budgets , how ever, require that two subdivisions be distinguished within the regulating revenues. One of these sub divisions consists of revenues which are used basically as regulating revenues but which at the same time possess some features of attached revenues. Certain of these revenues are assigned to state budgets of union republics and in this respect may be considered as attached revenues. They may also be divided between the republican and local budgets, however, so as to regulate the volume of receipts according to the volumeof expenditures. Such revenues include the forestry revenues, income taxes on collective farms, income taxes on consumers ' cooperatives, the agricultural tax, the bachelor and small family tax , and the lottery revenues , The major regulating revenues are the all -union state taxes and revenues. They are first divided between the all - union budget and the state budgets of union republics, secondly between republican and local budgets , and thirdly between oblast (A.S.S.R., kray) budgets and the budgets of rayons. Finally, rayons may assign parts of their share to their subordinate units . This process of successive allocation is carried out each year , as specified in

65

REVENUES -EXPENDITURES the annual budget laws. As a rule , the turnover tax, the personal income tax , and state loans have been used as the main regulating revenues. The distinction between attached and regulating revenues is maintained in order to achieve a regular flow of revenues throughout the year, to prevent temporary dislocations in the availability of cash needed to cover expenditures, and to increase the material interest of republican and local organs in fulfilling the plan of revenue collection . 4 The variety of purposes calls for flexible arrangements, and accounts for the fact that the regulating revenues assume a far larger role in this scheme than the attached revenues .

In addition , semiofficial “ subgroups” (gruppy, the same term as used for the first- order class ) are used instead of chapters to group types of social and cultural institutions. In general, the core of the classification is made up by divisions, chapters, sections , and articles. These all have Arabic numeral designations whose use is mandatory on fiscal documents.

The first -order headings, or groups , are not employed in fiscaldocuments related to the transfer of funds, but are used in compiling summaries of expenditures, in analyzing the budget , and in pre They are paring reports on its execution . 5 frequently employed in public statements on the budget.

C. THE CLASSIFICATION OF EXPENDITURES The classes employed in the expenditure clas sification are listed below in descending order , with their Russian equivalents: Groups.......Gruppy Divisions.... ,Razdely Chapters .....Glavy Sections...... Paragrafy ($ ) Articles......Stat'i Items (“ letter - subclasses” ). ...Liternyye pod ” razdelenii

by

The subdivision of articles into itemsdesignated letters is also limited . Items are used in

drawing up the estimates of individual institutions , particularly when a relatively large sum is involved , and in some internal accounts. The symbols do not appear to be standardized . A condensed outline of the entire expenditure classification is shown in table 5-5 , for the central, and in table 5-6 for the local classification . Un confirmed or speculative entries are denoted by a question mark .

Table 5-5 . - OUTLINE OF CENTRAL BUDGET CLASSIFICATION OF EXPENDITURES.

Division

Major group I. National economy

II .

Social and cul tural measures

Section

Chapter

1-104 : Individual sov narkhozy ( to 1962)

1-20 ( ? ) : Branches of industry and construc tion 120-199 : Individual and None union -republican minis tries 200. Enlightenment

204.

Physical culture

205. Stipends to mothers 206. State social insurance 207. Social security See footnotes at end of table .

Types of institutions (under agriculture only )

Subset B (for khoz raschet units ) Subset B

( Informal subgroupings ) 1 . General education 1-14 :

Types of institu- Subset A tions (for budgetary units ) ...do .... 15-19 : ....do... ....do ... 20-31 : ... do ... Subsets A and B 32-34 : .....do ... 35 . .do ... ..... do .... ..do .... 36-40 : .....do.... 41-44 ( ? ) : Types of ex ( NA ) penditures

Cultural activities Cadre training Science The press Arts and radio Local industry funds ( Informal subgroupings) 1. General and preven 1-13 : Types of institu tive medical in tions stitutions 2 . Sanitation ( includ- | 14-17 : Types of institutions ing preventive ) measures 3 . Other institutions 18-22 : Types of institu and measures tions 23, 43-44 ( ? ) : Types of 4. Local industry funds expenditures ( NA ) (NA )

2. 3. 14. 5. 6. 7.

203. Health

None

Article

(NA ) (NA )

1-3 :

(NA ) Types of expendi tures

None

1-15 :

Pensions , insti tutions

(NA ) Subset A

....do .... .....do ....

.do .... ...do ... ..do .... .....do ....

66

BUDGET CATEGORIES AND CLASSIFICATIONS Table 5-5 . - OUTLINE OF CENTRAL BUDGET CLASSIFICATION OF EXPENDITURES - Continued Division

Major group III . Ministry of Defense IV .

Committee for State Security and Ministries for Protection of Public Order

V. Courts and prose cutors ' offices

VI.

VII .

VIII .

Organs of state administration

Reserve funds

Transfers to re publican and local budgets

IX . Accounts with banks X

Various payments and other ex penditures

Section

Chapter

Article

208. Ministry of Defense

None

209. Committee for State Security

None

(NA )

(NA )

210. Ministries for Pro tection of Public Order

None

(NA )

(NA)

211 . Courts

None

212. Supreme courts 213 . Prosecutors ' offices

None None

214. Organs of state power and state ad ministration , all union and union republican 216 . Reserve funds

None

217.

Share of state taxes and revenues

None

Types of revenues

( NA )

218 .

Other transfers

None

Types of revenues

(NA )

220 .

Accounts with banks

None

221.

Various payments and other expenditures

None

1-35 ( ? ) : ( Types of serv- Unique set ices and expend itures )

Levels :

central, local

Subset A

..do .....

..do .... ...do ...

... do ..... ( 13 )

None

Levels ; special measures

Subset A

( NA )

(NA ) Types of payments

(NA )

(NA ) (NA )

NA Not available . Source : Table 5-7 and text , below .

The various classes can be characterized in terms of their use as follows:

(1 ) Major groups: Major subdivisions of the economy, such as the “ productive sphere" (national economy) , the personal consumption sphere (social and cultural measures), defense, and administration ;

Agencies, social and cultural ( 2 ) Divisions: sectors, major governmental functions, interbudg etary transfers;

Branches of industry (central ( 3 ) Chapters: classifications), agencies , government levels , and types of organs (local classifications );

( 4 ) Sections: Types of administrative subordi nation , classes of institutions ( social and cultural), agencies, and various miscellaneous items;

(5 ) Articles: Economic objects of expenditure , such as wages, investment, business expenses , and stipends ; and

(6 )

Items: Detail of articles.

It should be noted that classes (1 ) to (4 ) are different in nature from (5 ) and (6 ) . The (1 ) to (4 ) set generally designates sectors of activity and their respective administrative agencies or govern mental organs. The articles, on the other hand, designate objects of expenditures common to all or many types of activity , although some articles apply only to surprisingly narrow sectors. The cross - classification combinations possible with these two dimensions have much analytic and descriptive potential. Although the (1 ) to (4 ) set combines both activity sectors and agencies, they are so arranged as to permit grouping or regrouping by either activity or agency alone. In addition , the system budgets itself makes possible a of territorial- or governmental-level dimension .

67

EXPENDITURES Table 5-6 . - OUTLINE OF LOCAL BUDGET CLASSIFICATION OF EXPENDITURES

Major group I.

National economy

Division

1.

Industry

( 120-199 ? ) . Other branches ( corre spond to central classification ? ) II .

Social and cultural measures

Organs of state administration

1-39?:

Branches of industry

None

Local govern ment agencies

Section

Article

Sometimes used to show type of subor dination

Subset B (for khozraschet units )

Types of enterprises or institutions

Subset B

Types of institu tions ( corresponds to central classi fication )

Subset A ( for budgetary units )

200. 203.

Enlightenment Health

(9)

204 .

Physical cul ture Social secu rity

None

Organs of state admin istration

Levels of local government organs

Specific organs

Subset A

Subsidies Surplus to superior budget

None

Level of budget

(NA )

Other expenditures

(NA )

1-10( ? )

(NA )

207 .

III .

Chapter

214.

IV .

Funds transferred 218. to other budgets | 219.

V.

Other expendi tures

222 .

NA Not available . Source :

Table 5-7 and text .

1. Major Groups and Their Divisions

The divisions form the backbone of the ex penditure classification , They are numbered sequentially and the same numbers are employed in both the central and the local classification . They also have the same titles in both the local and central classifications (with the exception of divisions 1 and 214 ). Since the local budgets do notmake expenditures under a number of divisions, their list of divisions used is considerably shorter , and the major group titles and numbers diverge from the central classification beyond group II. The groups and divisions which have been identi fied are listed in table 5-7 , showing their appli cability to the central or local classifications where known or presumed . In this table , groups of the local classification are placed in brackets where they differ from those used in the central classification . Since the classification is subject to frequent change, especially in the event of organizational changes in governmental structure, the dates of sources mentioning a particular item are given in parentheses after the title . Where no date is given , the item is mentioned so frequently in Soviet sources and over so long a time period as to leave virtually no doubt of its continued existence ,

The composition of major groups has been quite stable over time. An overall total of 11 major groups in the central classification is mentioned in a number of sources dating from 1949 to 1961.6 After the apparent elimination of a group for state loans, the number was reported to be 10 in 1963.7 This does not preclude changes in the title or content of a given group , of course. Group III has been renamed from Ministry of the Armed Forces U.S.S.R. to Ministry of Defense U.S.S.R., and group X was titled Refund ofRevenues [vozvrat dokhodov ] and Other Expenditures in the years 1949-51.

Group VII was entitled State Loans in 1951, but no further mention of this title has been found in later sources and a 1963 listing of groups , which apparently is complete, omitted it.8 Subscription sales of state bonds to the general public were discontinued in 1957, and since budget expenditures on loan service fell sharply in 1962, theymay have been shifted to an “ other” category. ' The local classification reportedly contains five groups : National economy; social and cultural measures; organs of state administration ; funds other transferred to budgets ; and other expenditures,10 However , the last two itemsdo not appear to be fully standardized in terms of either consistent groupings or numeration 11

BUDGET CATEGORIES AND CLASSIFICATIONS

68

Table 5-7 . - GROUPS AND DIVISIONS OF THE EXPENDITURE CLASSIFICATION

Divi sion no .

Classification

Group and division title Central

Local

Table 5-7 . - GROUPS AND DIVISIONS OF THE EXPENDITURE CLASSIFICATION_Continued Divi sion no .

Central

Local

Enlightenment (1,3,10 ] Health ( 1,3,10 ]

X

X

X

X

Physical culture ( 3,10 ] Payment of state stipends to mothers with many children and to unmarried mothers [5,19 ]

X

X

206

State social insurance [5,19 ]

X

207

Social security ( 1,3,10 ]

X

Group II. Social and Cultural Measures

Group I. Financing the National Economy

Divisions 1 to 104 desig nate individual sovnarkhozy ) ( 1961 ) [ 1 ] 1 5

72 89

120

133 151 153 163

Altayskiy Sovnarkhoz ( 1962 ) [19 ] Bashkir A.S.S.R. Soynarkhoz ( 1962 ) ( 19 ]

X

-

X

-

Karagandinskiy Sovnarkhoz ? ( 1961 )

X

[Divisions 120 to 199 desig nate ministries and agen cies of the U.S.S.R. and the union republics] (1961) [1 ] State Committee of the Council of Ministers U.S.S.R. for Aviation Technology (1962 ) [ 19 ] Construction2 Agriculture ( 3,7 ) Water economy , amelioriza tion , and irrigation [ 2 ] Agricultural Products Pro duction and Procurement Administration ( 16 ); Agriculture [ 18 ]

Ministry of Communications [8] Automotive Transport and Roads [ 2,3 ]

Ministry of Trade ; Trade (Local ) [ 3,18,19 ]

189

Local economy?

190

Housing and communal economy [ 3,18 ] Ministry or Department of Culture economic organi zations ( 6,8 ]

199

204

x

X

Ministry of Railroads [ 19 ]

191

203

Kiyevskiy Sovnarkhoz ( 1962 ) ( 19 )

174

180

200

205

170

176

X

Industry

Other expenditures on the national economy [ 4,9 ]

Group III. Ministry of Defense U.S.S.R. (6,13 ] (208 )

X

X

X

(x )

(-)

(X ? )

X

( NA )

(x ) X

X

Group IV . Committee for State Security and Minis tries for Protection of Public Order 16,13 ] ( 209 )

X ( 210 )

X

X

(x ) X

X

X

(Ministry of Defense U.S.S.R.)

X

(Committee of State Secur ity ) (Ministries for Protection of Public Order )

Group V. Courts and Prosecutors (6,13 ]

X

(x)

( - )

(x ) | ( - )

X 1

1

Classification

Group and division title

( - ) (NA )

(x )

X

X

X

(NA )

X

(NA )

X

Courts [ 1,11 ] Supreme Courts ( 11 )

X

212 213

Prosecutors ' Offices [ 11 ]

X

Group VI. [ III – Locall Expenditures on Maintaining Organs of State Power and State Administration (of the U.S.S.R , and the Union Republics ) [ 6 ]

X

X

Expenditures on maintaining organs of state power and state administration (of the U.S.S.R. and union republics ) [ 1,11 ]

X

X

211

214 (x )

X

(NA )

X

X

EXPENDITURES Table 5-7 . - GROUPS AND DIVISIONS OF THE EXPENDITURE CLASSIFICATION Continued

69

Table 5-7 . - GROUPS AND DIVISIONS OF THE EXPENDITURE CLASSIFICATION -Continued

Source : Divi sion no .

Classification

Group and division title Central Group VII.3 Reserve Funds (12,13,14 ]

(216 )

Reserve funds [ 10 ]

Group VIII.3 Funds Trans ferred to Republican and Local Budgets (13,15 ]

X

5. 6 .

9.

X

10.

217

X

218

Other funds transferred to union republic and local budgets [ 15 ] Subsidies issued to inferior budgets [ 8 ]

X

Surplus revenue transferred to superior budgets [ 8 ]

( - )

7. 8.

Deductions from state taxes and revenues ( 15,17 ]

219

1. 2. 3. 4.

X

Group IV (Local ). Funds Transferred to Other Budgets [ 10 ]

218

Local

( - )

X

11. 12. 13. 14 . 15. 16. 17 . 18.

X

19 .

Aleksandrov , Gosudarstvennyy , 1961, pp . 49, 53. Aleksandrov , Gosudarstvennyy , 1965, p . 47 . Dedkov , Sbornik , 1960 , pp . 44-445 . Dedkov and Yakimov , Bukhgalterskiy , 1965 , pp . 381, 395 . D'yachenko , Finansovo , vol . I , 1961 , p . 173. Gel'rud and Yakovleva , Al'bom , 1963 , pp . 17 , 19 , 73 . Glezin , " Some Problems , " 1958 , p . 31 . Goloshchapov , Spravochnik , 1957, pp . 214 , 239, 242 . Kudryashov and Chudinovich , Sostavleniye , 1960 , p . 15 . Lavrov , Gosudarstvennyy , 1961, pp . 38 , 41 , 42 , 43 . Mergelov, Planirovaniye , 1962 , p . 15 . Plotnikov , Gosudarstvennyy , 1959 , p . 34 . Rovinskiy , Gosudarstvennyy , 1949 , p . 339 . Rovinskiy , Gosudarstvennyy , 1951 , p . 334 . Rusin , " classification , " 1962 , p . 55 . Sosin , " Planning , " 1963 , pp . 31 , 33 . Tsilinskiy , "Greater , " 1959, p . 63. Vishnyakov and Kudryashov , Sostavleniye , 1966 , p . ll. Yevdokimov , Finansirovaniye , 1962 , p . 5 .

X 2. Group 1: National Economy

(220 )

221

Group IX.3 Accounts With Banks (6,13 ]

x

Accounts with banks [6,10 ]

X

Group X.3 Various Payments and Other Expenditures ( 13,15 ]

х

Various payments and other expenditures ( 10 )

Group V. [ Local ). Other Expenditures ( 10 ]

222

a . Central Classification . - The divisions of group I, numbered from 1 to 199, represent specific agencies. As of 1961, individual sovnarkhozywere assigned numbers from 1 to 104 in the central classification . After their consolidation to 47 in 1963 and until their elimination in 1966 , they were renumbered 1-51.12

X

X

Other expenditures (meas ures ) [3,4,6 ]

X Applicable . - Not applicable . NA Not available . ( ) Presumed . 1 Years in parentheses indicate date of source . Numbers in brackets identify sources , as listed below . 2 Presumed on the basis of the revenue classi fication . 3 Prior to about 1963, when Group VII - State Loans (Division 215 ? ) was dropped , these groups had the next larger number .

Prior to 1966 , the set of divisions numbered 120 to 199 in group I included all -union and union repub lican ministries and other agencies such as state In addition to committees and administrations. “ economic " (khozyaystvennyye ) agencies, whose prime function is to administer a “ productive " other “ noneconomic " sector of the economy, agencies are listed, providingthey have subordinate enterprises and economic organizations. Since there are not enough numbers in the classification for a complete listing of each individ ual union and republic agency , and in order to facilitate consolidation , agencies with union and republican counterparts share the same division number ; similarly, agencies of different republics with like function but with no formal organizational tie also probably are combined in the same division .

70

BUDGET CATEGORIES AND CLASSIFICATIONS

Individualmajor agencies in the Soviet Union are notable for the variety ofactivities they encompass, and the use of agency -defined divisionsunder group I raises a number of questions as to the scope of “ Financing the National Economy” and the manner in which sectors of the economy or branches of indus try are recognized . It should be pointed out, first of all, that at least two major types of budget expenditures made by the agencies listed under group I are assigned to other groups . These are expenditures for Social and Cultural Measures (group II) and Administration ( group VI). Top - level agencies may thus serve as “ credit administrators" (i.e., recipients of budget appropriations - see The chapter VIII) under more than one group. extent of this practice is noteasily established . As will be seen ,budget financing of such clearly “ social and cultural” activities as primary education and health do not fall under group I, but scientific research and development , nominally a group II activity , apparently does. This is indicated by the presence in 1962 of division 120_State Committee for Aviation Technology - in group I.

One of the objectives of the 1957-58 reorganiza tion of industry and construction was to cleanse noneconomic agencies of economic enterprises and the to transfer by largely organizations, sovnarkhozy. The state committees and state production committees set up in place of many former ministries were charged with coordinating and policy -guidance roles; it was claimed that they had no subordinated enterprises, as a rule , with the exception of a small number of testing and experimental plants in the industry -oriented A branch such as the aircraft committees.13 industry , however, must have a substantial share of its facilities engaged in the developmental stages of production . In fact, a 1963 Soviet book on aircraft production suggests the existence of a class of engineering industries in which develop ment work makes up an important element. 14 Thus :

The aircraft industry belongs among those branches of machine- building which encompass research work , product design ing, and test-model and industrial produc Corresponding and enterprises tion . organizations are set up to specialize in one or another of these types of work . In somecases, designing and test -model pro duction is combined in one enterprise . In other cases, test-model and industrial pro duction are combined in manufacturing certain types of aviation equipment. Enterprises for industrialproduction in clude those which produce aviation equip ment for use in the national economy or in defense of the country .

As a rule , aviation research insti tutes, special design bureaus, and test model plants are classed as budgetary organizations, while plants performing in dustrial production are classed as khozra schet organizations. Characteristic of the first type of enterprise is the fact that they do not produce marketable output (tovar naya produktsiya ), that is , output designed for realization (sale ) , and are therefore fi nanced by the budget.

It is therefore likely that a large number of the state committees existing before the reorganiza tion of 1965-66 had research and developmental facilities attached to them , which were included in divisions 120 to 199 .

The content of group I is also partly defined by the nature of the subdivisions under the agency defined divisions. Since the advent of the sovnarkhozy, one set of principles guided the delineation of subdivisions for the sovnarkhozy and another set for all other agencies. A standard set of chapters representing branches of activity was established for the sovnarkhozy . This set was based on abstract groupings of enterprises in ac cordance with their basic activity, irrespective of the (nonstandard ) branch administration to which they belonged . It was identical with the breakdown employed for sovnarkhoz enterprises in the revenue classification for the profit tax. 15 Identified ele ments are shown in table 5-3 (division 2) , where the branches are listed as articles rather than chapters. The list of those “ identified ” shows 15 industrial branches and 4 other sectors. 16 The list extends to the number 40, but this may include reserved slots . According to a 1962 source, the sovnarkhoz breakdown recognized 20 branches of industry . Relatively little is known about the sections under group I in the central classification . They not employed under the chapters for the branches of sovnarkhoz industry, which are fol One 1961 source directly by articles. lowed directly indicates that under “ Agriculture," sections are used to designate types of institutions, but it is not clear that this applies to the “ Agriculture" under “ National Economy” in the central classifi Another 1961 source strongly implies cation . 18 that sections are not used at all under " National Economy” in the central classification . This seems implausible , since it would mean that a multiple activity agency such as the Ministry of Railroads (division 170) would have no further sectoral breakdown. Furthermore , the local classification makes extensive use of sections to refine the chapters under “ Industry and the agencies in divisions 120 to 199 into types of institutions or enterprises .

EXPENDITURES b . Local Classification . --The local classifica tion did not contain divisions for sovnarkhozy , which were affiliated with the governments of the union republics. In their place is division 1 , " Industry ." It is claimed that the remaining divisions under “ National Economy” in the local classification correspond with those of the central This is classification in number and content. 20 confirmed in the cases of divisions 151, “ Agricul ture," and 180, “ Trade. " (When either the central or local budgets have no counterpart for an agency assigned a division number in the other classifica tion , that number presumably is used only in the one classification . A sufficient sample ofdivisions in both classifications has not yet been identified to test this assumption adequately.) Division 1 , " Industry," is classified by branch of industry into chapters, of which the following have been identified : 21

71

as a “ purifying" device , but the method, which could be vital to the interpretation of certain financial statistics is not known , Sections are used extensively in the local classification . The following fragmentary informa tion has been located: 22

Division 151. Agriculture Section 1. 4. 7. 20. 25. 42.

Veterinary clinics (lechebnitsy ) Meat inspection stations Veterinary sections (uchastki) Seed inspection laboratories Other agricultural institutions Expenditures from the account for de ductions from insurance payments

Division 190. Housing and Communal Economy

Division 1. Industry Section Chapter 3. Fuel industry Timber industry Furniture industry Meat and milk industry Fishing industry

(Housing economy) 1. Housing economies not converted khozraschet 2. Khozraschet housing administrations

to

(Communal enterprises)

Chapter 30 . Light industry Chapter 39. Local industry

10. Electric power stations 14. Water works and sewage

Chapter 41. (For expenditures on development of local industry, out of redis tributed assets of local industry see also $ 41, division 200 , and $ 23, division 203.)

15. Bath , laundry , and barbering enterprises 24. Communal enterprises financed by the estimate method

Chapter 42. Expenditures from the account for deductions from insurance payments

Roads and bridges Lighting Landscaping Other expenditures on public facilities (blagoustroystvo ) and communal economy 32. Fire department 35. Rentals of nonresidential space used for repair of the urban housing fund

Chapter 190. Housing and communal economy The last two chapters in this listing are clearly different from the others. No. 42 is in the nature of a source , rather than an object of expenditures. It may be assumed that expenditures under this item are for purposes of financing industry, but much remains to be learned about it. Chapter 190 has the same title as division 190 , which appears elsewhere in group I, “ National Economy." The presence of chapter 190, “Housing and Communal Economy" under division 1 , “ Industry ,” raises the question as to whether chapter 190 applies to ( 1) industrial enterprises affiliated to " Housing and Communal Economy” agencies , or ( 2) housing and communal organizations attached to industrial enterprises and organizations. Chapter 190 and any similar chapters paralleling other divisions under “National Economy” is apparently designed

(Communal economy and public facilities)

25. 26. 27. 30.

Division 199. Other Expenditures on the National Economy

Section 11. Local communications (nizovaya svyaz ') (Rent for postal department quarters, and others )

3. Group II: Social and Cultural Measures The numeration and titling of Social and Cul tural Measures (SCM ) divisions is consistent in both central and local classifications. As table 5-7

72

BUDGET CATEGORIES AND CLASSIFICATIONS

shows, however , local budgets employ only divi sions 200, 203, 204 , and 207; expenditures under divisions 205, “ Stipends to Mothers," and 206 , “ State Social Insurance," are made from all -union and republican budgets .

Divisions 201, “ Higher Education " and 202, “ Professional and Technical Education " existed in the central classification in 1956 (when they were numbered 101 and 102, and the latter was titled 23 State Labor Reserves ). The revised central

classification put into force in 1958 renumbered all SCM divisions, changing the first digit from 1 to 2. These divisions (without numbers) were last mentioned in 1960,24 and were apparently elimi nated after the major reform of the educational system in 1958 and 1959. Although virtually no changes were made in the internal structure of sections under division 200 between 1955 and 1962 ( see table 5-8), its existing sections may have been adequate to reflect the additional expenditures.

Table 5-8 .--SECTIONS AND SUBGROUPS UNDER DIVISION 200 , " ENLIGHTENMENT"

Section no .

Subgroup and section title

[ Subgroup 1. General education and upbringing of children and adolescents, and also general education work among adults]

1. 2. 3. 4 . 5 . 6 . 7. 8. 8 -b . 9. 10 . 11 . 12 . 13 . 14 .

15 . 16 . 17 . 18 . 19 .

20 . 21 . 22 . 23 . 24 .

25 . 26 . 27 . 28 . 29 . 30 . 31 . 32 . 33 . 34 .

35 .

Kindergartens in cities and workers' settlements Kindergartens in rural areas General - education schools in cities and workers ' settlements General -education schools in rural areas Schools for working youth2 3 Schools for rural youth 2 3 Boarding facilities at schools Establishments and measures for after - school work with children Students aid fund (fond vseobucha ) 4 Children's homes Boarding schools for deaf , dumb , and blind children Child reception and distribution centers, child rooms (detskiye komnaty ) , and child adoption (patronirovaniye ) General education work among adults Methodological work Other general education measures [ Subgroup 2 . Cultural - enlightenment work ] Libraries Palaces (dvortsy ) and houses of culture , and clubs in cities Rayon houses of culture and clubs Reading huts (izby -chital'ni) and rural clubs Other cultural - enlightenment institutions and measures

[ Subgroup 3 . Training of cadres ] Factory schools and vocational - technical schools Schools for training and retraining low -skilled cadres (kadrov massovoy kvalifikatsii ) Technicums , trade schools (uchilishcha ) , and schools for training semiskilled sredney kvalifikatsii ) cadres Higher educational establishments ( VUZ ) Improvement(usovershenstvovaniya ) institutes ( excluding teacher improvement institutes ) , skill improvement (povysheniya kvalifikatsii) institutes, and cadre training and re training courses Academies for training managerial ( rukovodyashchiye) cadres Clinics attached to VuZy2, 6 Trade (remeslennyye ) and railroad schools Factory schools (FZO ) Trade schools for the mechanization of agriculture Vocational- technical schools (tekhnicheskiye uchilishcha ) Technical propaganda and other cadre training measures [ Subgroup 4. Science ] Scientific research institutions Museums and exhibitions Other scientific institutions and measures [Subgroup 5. Press ] Periodical press and publishing

See footnotes at end of table .

73

EXPENDITURES Table 5-8 . -SECTIONS AND SUBGROUPS UNDER DIVISION 200 , "ENLIGHTENMENT" -Continued

Section no .

36 . 37 . 38 . 39 . 40 .

41 . 42 . 43.8 44.9

Subgroup and section title

[ Subgroup 6 . Art and broadcasting ] Theaters Philharmonic orchestras , musical groups , and ensembles Artists ' unions (tvorcheskiye soyuzy ) Broadcasting Other art measures [Subgroup 7. Expenditures from the account for local industry accumulations ] Expenditures made from the account for local industry accumulations and profits of industrial cooperatives ? ( Expenditures out of insurance payment deductions? See Divisions 1 , 151 , and 190. ) ( Technical surveillance over school construction and repair ? ) 8 Expenditures on the maintenance of central accounting offices for public education

1 The distinction between nos . 3 and 4 in terms of location of schools is presumed from their titles in 1956 : " Beginning , 7 -year and secondary schools in cities and workers ' settlements, " and " .... in rural areas . 11 The change in terminology to " general -education schools " apparently took place in 1961. (Compare Aleksandrov , Gosudarstvennyy , 1961 , p . 347; Lavrov , Gosudarstvennyy , 1961, p . 83) . 2 Goloshchapov , Uchet , 1956 , p . 37; Lavrov , Gosudarstvennyy , 1961 , p . 82 . 3 " Schools for working and rural youth " may have been combined into Section 5 or 6 to make room for the new 4 boarding schools ( shkoly - internaty ) introduced in 1956 . Potekhin , Planirovaniye , 1962 , p . 58 . 5 ''Museums and exhibitions" were transferred from the "Science" subgroup ( section 33) to the "Cultural Enlightenment Work" subgroup in 1964. Min . fin . , Gos . byud . SSSR , 1966 , p . 6 . " Clinics attached to VuZy " were transferred to division 203 , " Health , " section 1 , " Hospitals and dispensaries" after 1961. Ibid , Dedkov , Sbornik , 1960 , p . 46 ; Goloshchapov , Uchet , 1956 , p . 37; the phrase " .... and profits of indus trial 8 cooperatives " appears only in the latter source . Dedkov , Sbornik , 1960 , p . 46; Gel'rud and Yakovleva , Al'bom , 1963 , p . 31; Kudryashov and Chudinovich , Sostavleniye , 1960 , p . 16 . 9 A total of 4h sections in all under Division 200 is reported in Yevdokimov , Finansirovaniye, 1962 , p . 67. Source : Yevdokimov , Finansirovaniye , 1962 , pp . 67-72 (unless otherwise noted ) .

Chapters are employed in SCM divisions only in They designate local the local classification , governmental organs dealing with particular areas. Following are the chapters identified to date : 25 Chapter 100. 101. 103. 120.

Public education Culture Health Social security

A 1959 source asserts that there are nine 26 chapters in the local classification under SCM . However, the use of the 100 to 120 range casts some doubt on this . These same governmental organs are specified in sections under division 214 , “ Administration ," and its various chapters, where only the administrative expenditures of the

It seems apparent that chapters are used only 27 Since in connection with divisions 200 and 203 . the local governmental organs specializing in other SCM activitiesmay also engage in the activ ities of divisions 200 or 203, this means that for some types of institutions (for example, “Kinder gartens in Cities" ) the budget classification would appear as follows:28 Division :

200

Chapter : Section :

100 , 101, 103, ..., 120

1

These references were found in connection with rayon budgets, where the titles as listed here are » In local preceded by “ Rayon department of budgets of other governmental levels , the appro priate A.S.S.R. ministry , oblast executive com mittee (ispolkom ) department , etc. is substituted with a fixed number for each area being used throughout.

department apparatus would be classified . Ex penditures under SCM would include funds trans ferred to operational units such as schools and hospitals , and centralized operational expenditures.

Thus, chapters in a sense represent a breakdown of the sections, even though the latter are on a lower classificatory level. Sections in the SCM group generally specify particular types of institutions or measures ( see tables 5-8 through 5-10 ). The section numbers and titles are claimed to be identical in nearly all

BUDGET CATEGORIES AND CLASSIFICATIONS

74

cases for both the central and local classifica tions,29 The subgroups combining a series of sections do not have standard symbols and are not used in all fiscal documents, as mentioned earlier . They are commonly used in public statements and statistical handbooks.

tures

on

physical

culture

are made

on

the

No examples have been found of the use of sections under divisions 204 , “ Physical Culture ," or 205 , “ Stipends to Mothers." Budget expendi

basis of estimates prepared by Councils of theUnion of Sports Socities. 30 For division 206 , “ State Social Insurance," which accommodates part ofthe budget of the same name prepared by the trade union agency, only three sections appear to be used --section 1 for social insurance pensions and grants, section 2 for unknown purposes, and section 3 for one - time and other grants to pensioners. 31

Table 5-9 . - SECTIONS AND SUBGROUPS UNDER EXPENDITURE DIVISION 203, " HEALTH " , OF THE CLASSIFICATION

Table 5-9 . -SECTIONS AND SUBGROUPS UNDER EXPENDITURE DIVISION 203 , " HEALTH " , OF THE CLASSIFICATION -Con ,

Section no .

Subgroup and section title

Section no .

Subgroup 1. General medical treatment and prophylactic institutions

. 1 2.

3. 4.

5.

6 . 7. 8. 9. 10 . 11 .

12 . 13 .

Hospitals and dispensaries in cities and workers ' settlements Hospitals and dispensaries in rural areas Independent out - patient clinics in rural areas ?, 2 Doctors ' (vrachebnyye ) medical units at enterprises and institutions Medical workers ' (fel'dsherskiye ) medical units at enterprises and other institutions Medical workers and midwife ( fel'dshersko -akusherskiye ) units First -aid stations Blood transfusion stations Sanatoria for tubercular patients Sanatoria for children and adolescents (nontubercular ) Nurseries in cities and workers ' settlements Nurseries in rural areas Children's homes Subgroup 2. Sanitary - prophylactic institutions and measures

14 . 15 . 16 . 17 .

Sanitary -epidemiological stations Disinfection stations Measures against epidemics Sanitary education homes and measures 1 , 2

Subgroup 4. Expenditures from the account for local industry accumulations 2

23 .

43.3

44 .

Source : Goloshchapov , Uchet, 1956 , p . 42; Vinokur , Sbornik , 1963, p . 158 ; Yevdokimov , Finansirovaniye , 1962 , pp . 77-81; and as indicated .

Table 5-10 . - SECTIONS UNDER EXPENDITURE DIVISION 207 , " SOCIAL SECURITY " , OF THE CLASSIFICATION Section no .

19 . 20 .

21 . 22 .

Other institutions and measures

Hospitals for invalids of the Fatherland War (as of 1956 ) 2 Sanatoria for invalids of the Fatherland War (as of 1956 ) 2 Hospitals , sanatoriums , and measures serving invalids of the Fatherland War ( as of 1961) Bureau for juridical-medicine expertise Other health measures See footnotes at end of table .

. 2

18 .

Expenditures made from the account for local industry accumulations2 ( Expenditures on maintenance of techni cal surveillance over construction and repair of health facilities ? ) Expenditures on the maintenance of cen tral accounting offices for health institutions

Lavrov , Gosudarstvennyy , 1961, p . 119 . 2Goloshchapov , Uchet , 1956 , p . 42 . 3Dedkov , Sbornik , 1960 , p . 46 ; Gel'rud and Yakovleva , Al'bom , 1963, p . 47 . 4Kudryashov and Chudinovich , Sostavleniye , 1960 , p . 16 .

1. Subgroup 3.

Subgroup and section title

Title Pensions and grants ( posobiya ) to invalids of the Civil and First World Wars and their families and to the families of war dead 1 Pensions and grants to personal pensioners ,

3.

Pensions to workers in the sciences

4 .

Other pensions and grants ? Training and employment assistance ( trudovoye ustrovstvo ) for invalids Homes for adult invalids

5. 6 .

See footnotes at end of table .

EXPENDITURES Table 5-10 . - SECTIONS UNDER EXPENDITURE DIVISION 207 , " SOCIAL SECURITY" , OF THE CLASSIFICATION_Con .

Section no .

Title

7

Homes for minor invalids

8 .

Prosthetics

9.

Medical - labor disability (vrachebno trudovyye ) expert commissions

10 .

One -time grants to Fatherland War inva lids , their families , and families of military dead 1,2,3

11 .

Sanatorium and health resort aid to inva lids ( including maintenance of rest homes for Fatherland War invalids ) ?, 2,3

12 .

Other social security institutions and measures

13 .

Pensions and grants to families of mili tary personnel and families of deceased military pensioners of private (ryadovogo) , sergeant, and master sergeant (starshinskogo ) rank4

14 .

Pensions to military personnel of private , sergeant , and master -sergeant rankų

15 .

Pensions awarded in accordance with direc tives of the U.S.S.R. Government by par ticular ministries 1 Paid 2 Paid 3 Paid 4 Paid

out out out out

of of of of

rayon and city budgets . A.S.S.R., oblast , and kray budgets. union -republican budgets . the union budget .

Source : Dedkov and Yakimov , Bukhgalterskiy , 1965 , p . 137 ff; Goloshchapov , Uchet, 1956 , p . 46 ; Kudryashov and Chudinovich , Sostavleniye , 1960 , p . 16 .

75

5. Groups V and VI: Administration a . Central Classification.-- The term “ State ad ministration ," or simply “ administration ," as used in the annual budget law confirmed by the Supreme Soviet , encompasses group V , “Courts and Prose cutors' Offices” and group VI, “ Expenditures on Maintaining Organs of State Power and State Ad ministration of the U.S.S.R. and Union Re publics.n32 In the central classification , these two groups are made up of divisions 211 to 214. Since chapters are not employed under these groups in the central classification , the groups are sub divided directly into sections as follows: 33

Division 211. Courts Section 1. Kray , oblast, oblast, okrug, courts Section 2. Peoples' courts

and city

Division 212. Supreme Courts Section 1. Central apparatus of the Supreme Court U.S.S.R. Division 213. Prosecutor's Office Section 1. Central apparatus of the Prose cutor's Office U.S.S.R. Section 2. Local organs of the Prosecutor's Office U.S.S.R. Division 214. State Administrative Organs of the Central institutions Section 1 . U.S.S.R. and union - republics Section 2 . Local organs of central institu tions Section 3 . Sovnarkhozy (1961) Election campaigns Section 4 . Section 14. All -union censuses Section 15. Sample surveys

4. Groups III and IV : Defense and Security These groups, in terms of the formal expendi ture classification , are rarely discussed in Soviet literature. The use of the Ministry of Defense's name in the title of group III indicates that it is the only agency represented . The group may be presumed , from the sequence of known groups and divisions , to occupy division 208. Little is known of the formal classification in this division , beyond the fact that it employs sections which appear to correspond to administrative services (sluzhby) of the Ministry, and that the large set of articles employed for designating objects of expenditure is entirely unique and distinct from the two major sets of articles described below . A discussion of the classification , along with other aspects of defense , is reserved for chapter VII ( see table 7-6 ). No recent mention of the content of group IV has been encountered; the numbers and titles of the division can only be presumed .

“ Notary offices" constitutes another section , but the division to which it belongs is not known. 34 Section 3 for Sovnarkhozy under division 214 has presumably been dropped, inasmuch as main tenance of the entire sovnarkhoz apparatus was fully financed by means of an allowance in the production costs of sovnarkhoz enterprises, begin ning January 1, 1962. 35 Since a total of 13 sec tions under " State administration organs ” were reported in 1959 , some additional ones have apparently been added. 36 A number of agencies are financed only from the union budget even though they have republican or local counterparts . In such cases, section 1 is used for expenditures on the central (all -union ) apparatus and section 2 for all other units. Such agencies and their local organs ) include: Prosecutor's Office U.S.S.R .; the Central Statis tical Administration U.S.S.R .; the Main Adminis

76

BUDGET CATEGORIES AND CLASSIFICATIONS

tration for safeguarding Military and State Secrets in the Press (Glavlit) attached to the Council of Ministers U.S.S.R .; the Main Hydrometeorological Service Administration (attached to the Council of Ministers U.S.S.R.) ; the State Control Commis sion of the Council of Ministers U.S.S.R. (since its 1961 reorganization ); and someother ministries and agencies.37 With the exception of theProsecu tor's Office (division 213), these agencies fall under division 214 . Other agencies financed entirely under division 214, whether by central or local budgets , include the Ministry of Finance apparatus and planning agencies, embassies, consulates, and other diplo matic organizations in foreign countries . 38

These chapters are further classified by sec tions specifying particular ministries , departments, etc. Thus , chapter 153 contains nine sections for : Rayon executive committee departments of public education ( section 1 ), .., culture ( 2 ), ... health ( 3) , ... social security (4 ), and others , such as local industry and agriculture.40

An overall total of 44 subheadings, including both chapters and sections, was reported in 1959 for division 214 of the local classification ; in the process of budget consolidation, these must be meshed with the 13 sections contained in division 214 of the central classification . 41

6. Other Groups (VII - X ) b . Local Classification . - The local classifica tion contains only one division (No. 214 ), and this division has the same title as in the central clas sification except for the omission ofthe words “ ... of the U.S.S.R , and union republics." In contrast to the central classification , the local local classification employs chapters under division 214 which group various levels of local governmental organs as follows: 39 Chapter 150 ?

A.S.S.R. supreme soviets; A.S.S.R , coun cils of ministers; kray and oblast executive committees

Little information is available on the remaining No groups of the expenditure classifications. mention has been found of what was then group VII , “ State Loans, " since 1951, and as noted above it probably no longer exists . The current group VII presumably is employed for the reserve funds of the councils of ministers , both U.S.S.R , and union It is frequently asserted that these republic . contingency funds are spent largely under group I, The funds are probably " National Economy." classed under group VII in the initial budget plan, and transferred to other appropriate groups in the report on fulfillment of the budget.

154 , City and city district soviets of workers' deputies and their executive commit tees

Group VIII of the central classification and group IV of the local classification deal with inter budgetary transfers. The “ subsidies" referred to in division 218 ( local) are interbudgetary only , and are analogous to the central budget “ regulating" revenues given to lower budgets. Although the use of division 219 for upward interbudgetary transfers has been confirmed only for local budgets, it may also be used by republican budgets of the central classification for transfers to the union budget . The sections under central divisions 217 and 218 relate to types of revenues. The sections of local division 218 and 219 distinguish the budget levels to which transfers are made.43 These divisions have corresponding revenue classifica tion divisions and sections for the use of recip ient budgets (e.g. , see revenue divison 30 ).

155. Administrations, departments , and state arbitration boards of city and city district executive committees

The “ other” groups in both classifications ( X in the central and V in the the local) contain some is information for which unusual elements

151. Ministries and agencies of A.S.S.R.'s ; executive committee administrations and departments of kray, oblast , and okrug soviets of workers' deputies; state arbitration courts 152. Rayon soviets of workers' deputies and their executive committees 153.

Administrations , departments , and in spectorates of rayon executive com mittees

156. Rural soviets and their executive com mittees 157 ? Workers' settlement soviets and their executive committees

158. Expenditures on soviet of workers' dep uties sessions and on election cam paigns

The central division 221 , “ Various Pay sketchy. ments (raznyye vyplaty) and Other Expenditures," contains a section (No. 5 ) used for various pay ments to retail trade organizations. These include reimbursements out of the union budget for their hauling expenses on certain products ( grain , salt, petroleum , vodka ) beyond the 11 kilometers from the receiving station allowed for in list prices.44 This section is also used for reimbursements of losses due to differences in zonal prices, and ,

77

EXPENDITURES

-

before their elimination in 1965, in urban - versus rural prices . The corresponding windfall gains are recorded as turnover tax revenue , Repayments of losses resulting from repricing inventories are also made from this section. The corresponding inventory revaluation gains are deposited as budget These types of ex revenue under division 19.45 penditures may be offset against their matching revenues, and may be netted out in the budget consolidation process . 46

Other expenditures charged to division 221 include postal expenses related to the transfer of tax payments and expenditures on the manufacture of medals and orders.47 Localdivision 222 , “ Other Expenditures," contains sections for repayments of certain types of (apparently, bank) loans other than for housing construction ( section 1); for expenditures on street traffic regulation ( section 3 ); for the construction of administrative buildings (section 8 ); and for commissions awarded to 48 Stroybank (section 10 ).

7.

The Classification of Expenditures by Ob ject (Articles )

The classification of expenditures by object is made up primarily of two major subsets of articles. The first, termed here “ subset A , " is for use by organizations financed wholly or largely by the budget. As noted in chapter III, such organizations are usually called budgetary institutions, and the entire process is known as estimate financing. The second , which has been titled " subset B ," is used by khozraschet enterprises and organizations . In addition , certain articles are reserved for partic ular types of budgets or special branches of the economy.

a . Subset A. - A total of 14 articles appears frequently in recent listings for subset A (see table 5-11). Used in both central and local budgets , they are numbered from 1 to 18 , with numbers 6 , 7 , 11, and 17 missing. A comparison of similar listings over a period of years suggests that the original set of 18 numbers dates from 1951.49 By 1955, judging from changes in titles and descriptions of content, Nos. 6 and 7 were combined with No. 5 ; No. 11 was combined with No. 12; and No. 17 with No. 3,50 At that time, article 25 , then titled “ Designing and Surveying Work , " was also associated with this subset.

Railroads, reports that articles 6 , 7 , 11, and 17 “ are left in reserve for appropriations not pro viced for (predusmotrennykh -- planned ?) under other articles. " 52 This presumably refers to appropriations outside the scope of the regular set (including "Other" "Other ")) rather than to late appropriations.

The content of these articles is defined by the Ministry of Finance in a set of instructions issued periodically . The following somewhat condensed description of the content of each article is taken from the most recent known set of instructions (issued in September 1960 ) and a closely matching description published in 1962.53

Article 1. - Wages. Includes wages paid on various bases to all staff personnel regardless of whether or not registered with financial organs, and also hourly pay to teachers; bonuses, except those paid in lieu of travel expenses (article 4 ); supplementary pay to teachers in schools ; consultant fees in medical institutions; differences between personal and position salaries; honorariums of academicians.

Does not include nonstaff (nonregistered ) per sonnel wages ( except hourly pay of teachers and consultants ), which are included in other articles corresponding to the service performed . These wages are segregated into a single subtotal for all articles . Article 2. -Supplement to Wages. Includes only state social insurance payments made on wages under article 1. Social insurance payments on nonstaff wages are included with those wages in other appropriate articles. Article 3. -Office and Overhead Expenses. Office expenses : Office supplies: bookkeeping and statistical books, forms, and blanks; binding, typographical, and publishing expenses.

Communications expenses: telephone and postal expenses . Handbooks and periodicals: Excludes books for permanent libraries and periodicals for social and cultural institutions (see article 5 ).

In the period between 1955 and 1962 there ap pears to have been little change in the content of the various articles,51 However , some reshuffling occurred in the articles dealing with capital in vestment in terms of distinctions between central ized and noncentralized investments ,

Overhead (khozyaystvennyye ) expenses: Rental of quarters , lighting, heating , water and sewage, etc .; current repair of buildings; current and capital repair of equipment and furnishings (in ventar' ) ; numerous miscellaneous purchases ;

A 1962 source, in discussing the financing of budgetary institutions attached to the Ministry of

rental of quarters and other services provided for TsSU U.S.S.R. inspectors (to be segregated in a separate entry) .

BUDGET CATEGORIES AND CLASSIFICATIONS

78

Table 5-11 .-- THE CLASSIFICATION OF EXPENDITURES BY OBJECT ( ARTICLES )

Article no .

Title

( 1-18 :

1. 2 . 3. 4 . 5 . 8 . 9 . 10 . 12 . 13 . 14 . 15 . 16 . 18 .

19 .

Wages Supplements (nachisleniya) to wages Office (kantselyarskiye ) and overhead (khozyaystvennyye) expenses Temporary assignments (komandirovki ) and official (sluzhebnyye ) trips Expenditures on education , on - the- job training of students , scientific research work , and library book acquisition Stipends Expenditures on food ( in medical, children's , and other social and cultural institutions ) Acquisition of medicine and bandaging supplies Acquisition of equipment and supplies ( inventar ' ) Capital investments not included in the state plan for capital ( investment) work Acquisition of clothing and bedding (myagkiy inventar ' ) , and uniforms (obmundirovaniye ) Capital investment in construction Capital repair of buildings and installations Other expenditures

Current expenditures of city budgets for maintaining urban public facilities (sooruzheniy gorodskogo blagoustroystva ) ( 24-36 , 42 , 53 :

24 . 25 . 26 . 27 .

28 . 29 . 30 . 31 . 32 . 33 . 34 . 35 . 36 . 42 . 53 .

" Subset A " --used for financing budgetary institutions )

" Subset B" --used for financing khozraschet enterprises and organizations)

Capital investments in khozraschet organizations and enterprises within the state plan for capital ( investment) work Capital investment of khozraschet organizations and enterprises not included in the state plan for capital ( investment ) work Model designing (tipovoye proyektirovaniye) and norm - setting ( normativnyye) work Technico - economic substantiation and project-design (proyektnyye) work in regional and city planning (planirovka ) Financing an expansion in own ( sobstvennykh ) working capital quotas (normativov) Appropriations to cover underquota deficits in own working capital State subsidies Operational (operatsionnyye ) expenditures Other expenditures Appropriations for forming basic herds of draft and productive livestock Bonus markups (premii -nadbavki) Payments on loans obtained for the development of the housing and communal economy Expenditures on bonuses Capital repair Covering the planned losses of enterprises and organizations on the housing and communal economy

Source : Goloshchapov , Spravochnik , 1961 , pp . 318-324 ; Yevdokimov , Finansirovaniye, 1962, pp . 30-66 ; inter alia .

Rental of apartments and payment for communal services furnished free to certain personnel of schools and other budgetary organizations (to be segregated in a separate entry).

Maintenance and rental of transport: Includes capital and current repair of equipment and hiring of transport for goods purchased under article 3 (transport of purchases under articles 5 , 12 , 14 ,

EXPENDITURES

and 16 is included in those articles). (Article 3 includes purchases of all items lasting less than a year , and all items costing less than two rubles. )

79

homes for invalids , children's homes , kinder gartens and nurseries, trade schools , factory plant schools , and other institutions. Also , special feeding of people working under adverse conditions.

Article 4. - Temporary Assignment and Offi cial Trips . Article Includes extra pay allowances (nadbavki) made in lieu of travel and temporary - duty expenses; does not include expenses for travel and assign ments of a scientific nature or teaching assign ments , which are classed under article 5 . Article 5. - Expenditures on Education, On The - Job Training of Students Scientific - Research Work , and Library Book Acquisition . Education and on - the - job training: Textbooks school supplies for students, aspirants and (aspiranty) , and children's institutions; various education -related expenses, such as excursions, classroom supplies and materials, textbook grants to aspirants, etc .; travel expenses and per diem allowances for both students and teachers on temporary on - the - job training assignments. Scientific -research work : Manufacture of test models , prototypes, and test stands; acquisition of various articles, materials, and experimental animals for research purposes ; conducting scienti fic conferences, expeditions, and travel for con sultation ; defense of dissertations; payment for experimental and testing work done for research institutes by other organizations ; preparation of scientific publications; various other expenses of scientific research institutions. Acquisition of books for libraries: Books and periodicals for the public library network and libraries of educational institutions; periodical literature for various social and cultural organi zations; library supplies.

Wages (oplata truda ) of skilled workers and engineering - technical personnel engaged in teach ing students of classes 8 to 10 of secondary schools at production locations.

Article 8. -Stipends. Stipends to students and aspirants ; also, stipends to interns at higher education, scientific research , and other institutions,

Article 9. - Expenditures on Food (in Medi cal, Children's, and Other Social and Cultural Institutions). Expenditures on food (including payment for products of subsidiary economies) by general medical treatment and prophylactic institutions,

10. - Acquisition of Medicine and Bandaging Supplies.

Acquisition ofmedical supplies, including blood for transfusion by medical institutions; acquisition of small medical instruments under two rubles in cost.

Article

12. - Acquisition of Equipment and Supplies.

Educational equipment for offices and labora tories of schools; medical equipment and instru ments; machines, apparatus, instruments , and other special equipment for scientific - research institutions; machines, geodesic instruments, and drilling , drafting, and other equipment for design ing and surveying work; physical culture equip ment; exhibits for museums and displays; various office furniture and special furniture for hospitals, laboratories, libraries, classrooms, and museums; kitchen and dining equipment; typewriters, adding machines, etc. (items under two rubles in cost or lasting under one year not included ). Transporta tion and supply costs of items purchased under article 12 are included . Purchases under article 12 by budget - supported institutions (on local or central budgets) are not included in plans for capital (investment ) work .

Article 13. - Capital Investments Not Included in the State Plan for Capital (Investment) Work .

Expenditures of budget - supported institutions on investments , not included in the state capital investments capital (investment) plan , and made from the following sources: Accumulations of local indus try; the 2 -percent deduction from the income of automotive transportation economies; additional ( unplanned ) revenues obtained in fulfilling the budgets of union republics; reserve funds ofunion republican councils ofministers; deductions from insurance payments; and other sources established by the U.S.S.R. Government. Also included are expenditures on public facilities of cities, workers' and resort settlements , and rural and rayon cen ters, and on monuments and telephone and radio networks in rural areas and rayon centers, taking place outside of the plan for capital investment work within limits provided for in union - republican budgets and, correspondingly, in the estimates of individual organizations . (Budget - financed capital investment expenditures made by khozraschet or ganizations, which are assigned to article 25, are not included here. )

80

BUDGET CATEGORIES AND CLASSIFICATIONS Article 14. - Acquisition of Clothing and Bed ding, and Uniforms.

Expenditures on the acquisition andmanufacture of linen (bel’y), clothing, footwear, uniforms, bedding, and special protective clothing. Article 15. - Capital Investment in Construc tion . Expenditures made by budgetary institutions on capital investment included in the state plan for capital investment . Also includes expenditures on equipment provided for in the construction esti mate for new projects . Article 16. Capital Repair of Buildings and Installations. Replacement or restoration of various building elements such as roofing , floors, partitions , foun dations, windows, plumbing, etc. Current repair work is not included (see article 3 ). Enlightenment, health , and social security organizations and local soviet executive committees may include work on connecting with water , sewage, and electric power lines, and installing central heating, elevators, and laundries.

b . Subset B. - Less is known about the articles reserved for use by khozraschet enterprises and organizations. In the central classification of 1951, there were 13 such articles in subset B for 54 common use and 10 for particular branches. According to a 1962 source , sovnarkhoz enter prises used 14 articles in common .

Prior to the 1959 revision of the local classifi cation , a special set of three or four articles existed for local khozraschet establishments . They duplicated analogous articles of the central classi fication , but were generally assigned unique num bers in a unified ordinal listing. In 1951, these articles occupied numbers 21 through 24 , with the last being used jointly in both classifications. Since 1959, all articles of the local and central classifi cations correspond , with the exception of articles 19 , mentioned above, and 35 , “ Payments on loans obtained for the development of the housing and These two are used only in communal economy." the local classification . It will be seen from

table 5-11 that no entries

have been found for numbers 20-23. It may be conjectured , on the basis of the above history, that they have been dropped ; alternatively , they may be reserved for the use of special branches of the economy.

Article 18. - Other Expenditures. Expenditures on : Cultural enlightenment'meas ures for students , children , patients , and invalids; physical culture measures and civil defense (massovoy oboronnoy) work in educational institu tions; budget - financed athletic competitions and other measures carried out by the central, re public , and local councils of the Union of Sports Societies , except capital investment which is clas sed under articles 24 and 25 (for khozraschet or ganizations );moving, travel, and per diem allowance for graduates of secondary , special, and higher educational institutions sent to work in schools, cultural- enlightenment, and medical institutions; travel expenses of workers going on leave from jobs credited with Far North preferential condi tions; awards to students and participants in competitions; various miscellaneous medical ex penditures; calling of witnesses, experts, and translators; manufacture of banners, decorations , and honorary documents; improving social and personal services for workers in institutions in amounts set by the Council of Ministers U.S.S.R .; conducting all -union censuses and sample surveys; payment of grants to widows of full members of academies of science; financing dormitory and apartment costs of students; subsidies to theaters and entertainment enterprises; culture parks and khozraschet sanatoriums; bonuses to exceptional workers of ministries, central institutions of the U.S.S.R., and union - republics and (formerly ) sovnarkhozy.

Another hiatus occurs between numbers 26 and 42. A 1957 source mentions article 37 , “ Fuel and lubricants of MTS's , The latest full listing of budget articles available at this time is dated 1938.57 In it, article 37 had the same title , and the set from 37 through 41 was devoted exclusively to machine -tractor station expenditures. Since these stations were removed from budgetary fi nancing and were placed on a khozraschet basis after 1957 , and later either sold to collective farms or transferred to the central agricultural equipment supply and service agency( Soyuzsel' khoztekhnika ) which is also operated on a khozraschet basis, it is quite likely that this group of articles has been dropped . Other articles in the 1938 classification used only for particular branches were devoted to investments in forestry ( 34 and 35 ), local industry ( 36 ), railroads (42, “ Capital repair and renovation ," and 43, “ Acquisi tion and Construction of new rolling stock " ), and shipbuilding and ship repair (44-47). No official instruction on the content of articles in subset B is available , as it is for subset A. The following description of subset B articles is based primarily on a 1962 source. Article 24. - Capital Investments in Khozra schet Organizations and Enter prises Within the State Plan for Capital (Investment) Work .

EXPENDITURES Includes expenditures on construction work ; equipment installation; the value of all types of equipment, both requiring and not requiring in stallation; value of tools and gear; the value of geological prospecting and drilling work ; all other work classified as capital construction . Budget credits under article 24 are usually opened in Stroybank ; financing through Gosbank can only take place under an authorization order of the Council of Ministers U.S.S.R. permitting such financing through Gosbank . Article 25. -Capital Investments of Khozra schet Organizations and Enter prises Not Included in the State Plan for Capital (Investment Work . Includes investments for improvements of cul tural and living conditions, expansion of produc tion , and introduction of new technology . Budget financing is mainly from supplementary revenue received by the budgets of union republics , re serve funds of union republic councils ofministers , deductions from the income of automotive trans portation economies, and deductions for the de velopment of local industry. Budget appropriations for geologic - surveying work can be used to build permanent residential buildings where such work is being conducted , over and above the approved volume of capital investment. No more than 25 percent of the reserve fund of union -republican councils of ministers can be diverted to capital construction , according to a recent ruling. Article

26. -Model Designing Setting Work ,

and Norm

Expenditures on model designing (tipovoye proyektirovaniye) ; setting all -union standard , technical specifications, and technical instructions for surveying , designing, and construction work ; research , design , and experimental work on new techniques in construction ; study and dissemina tion of domestic and foreign experience in design ing and construction . These appropriations are set by plans approved by Gosstroy within limits agreed upon by Gosplan . Article

27 .-- Technico - Economic Substantia tion and Project- Design Work in Regional and City Planning.

Technical and economic studies and materialon the development of branches of the economy, re gional planning projects, and city and town plan ning projects . Appropriations are made in accordance with plans approved by union republic councils of ministers, and by U.S.S.R , ministries and agencies, with the concurrence of Gosplan . Article

28. - Financing an Expansion in Own Working Capital Quotas.

81

Expenditures where the internal resources of the enterprise or organization are inadequate , or when such resources would not be available at the Actual release of time the capital is needed. funds is based on the degree of fulfillment of out put expansion plans , for most branches of the economy. In other branches , such as trade, appro priations are released in full without consideration of fulfillment of trade turnover plans. A portion of the appropriations under article 28 is diverted to a “ reserve fund for temporary financial assistance" at the disposition of ministries, agencies, and sovnarkhozy. Article 29.-- Appropriations to Cover Under Quota Deficits in Own Working Capital. Expenditures under this article are not planned in advance . They are made on the basis of year end reports on the financial and economic status of enterprises and organizations, by decision of the U.S.S.R. or union - republic councils of minis ters (for central budgets). Although no definite confirmation is available, it would appear that such appropriations are made out of Council of Ministers ' reserve funds . Article 30. - State Subsidies. Employed only for financing the basic products or services of enterprises or organizations which are contained in the national economic plan. The output of consumer goods shops and other un planned products , resale of purchased goods and materials , and unplanned services are not given state subsidies.

Article 31. -Operational Expenditures. Expenditures of khozraschet enterprises and organizations which are not charged to costs of production or distribution (obrashcheniya ) and are not directly related to expansion of output, but are considered “ expenditures on thenational economy" : Inventions and rationalization measures; product designing and preparation of test models ; scientif ic research and cadre training; geologic - prospecting and surveying work; maintaining icebreakers; con ducting underwater technical and rescue work; maintaining waterways and hydro - technical in stallations; maintaining fruit - crop nurseries; hunt ing economies; land use and forestry measures and reclamation; pest control, approbation of seed ings ; animal - disease control; and other measures in agriculture,59 (See also expenditure item 20 of table IV - 4 . )

Article 32. - Other Expenditures. Includes expenditures on measures related to the replenishment of material reserves, the “ moth balling" (konservatsiya ) of unfinished construction

BUDGET CATEGORIES AND CLASSIFICATIONS

82

projects , and several others. Possibly included here are expenditures on “mastering” new prod ucts and those connected with the start - up period (puskovoy period ) in new plants .60 Article

33. - Appropriations for Forming Basic Herds of Draft and Pro ductive Livestock .

Includes expenditures on replacing and expand ing : Herds of adult draft and productive livestock ( rabochiy i produktivnyy skot); and fur - bearing animals; poultry flocks; and beehives. These ex penditures are treated as additions to fixed assets , but are not included in the state plan for capital investment and are segregated in both the budget and in the production - and -financial plans of state farms.

Article 34. -Bonus Mark -Ups. Payments to collective and state farms made as incentives for increasing production of specific crops which serve as raw materials for particular branches of industry , and also for above - plan harvest of fish and sea animals . Article 35. - Payment on Loans Obtained for the Development of the Housing and Communal Economy. This article is found only in the local classifi cation ,

Article 36. -Expenditures on Bonuses. Used in exceptional cases for incentive bonuses to personnel in various branches of the national economy.

Article 42. Capital Repair . Capital repair in khozraschet enterprises and organizations is normally financed internally from depreciation allowances charged to production costs (or similar funds of other organizations re distributed within the same administrative system ). Budget expenditures under article 42 apparently are made when such resources are inadequate. It is noteworthy that the 1938 classification contained no common article for capital repair expenditures in khozraschet organizations and only the capital repair of ships and rolling stock was explicitly recognized . Article 53.

Covering Planned Losses ofEn terprises and Organizations on the Housing and Communal Economy:

This article is used for subsidizing the housing and communal enterprises attached to khozraschet organizations. These activities frequently operate at a loss. Excess working capital and enterprise profits on basic activity are also sometimes used to cover these deficits .

NOTES TO CHAPTER V

In Soviet terminology, “ central” and “ local” are not commonly used for these two groupings; the central grouping is invariably described in full as “ the union budget and republican budgets of union rep ublics, " and the local grouping as " republican budgets of autonomous republics and local budgets” (out of deference to the status of the former ). The Russian term “ centralized ” is sometimes used to designate the union budget only. 2 Finansovyy i khozyaystyennyy byulletin ', no . 15, 1938, pp . 3-28 ; SFKh, no . 11-12, 1942, pp. 3-11. Vishnyakov and Kudryashov , Sostavleniye , 1966 , pp . 50-60. 4 Aleksandrov , Gosudarstvennyy , 1965 , pp . 25-26 . 5 Aleksandrov , Gosudarstvennyy, 1961, p . 49 . 6 Ibid .; Allakhverdyan and Lyubimov, Finansy, 1958 , p . 356 ; Lavrov, Gosudarstvennyy, 1961, p . 40 ; Rovinskiy , Gosudarstvennyy, 1949, p . 339 ; Rovinskiy, Gosudarstvennyy, 1951, p . 334. 7Gel'rud and Yakovleva, Al'bom , 1963, p . 17 . 8 Ibid .; Rovinskiy , Gosudarstvennyy , 1951 , p. 334. 9 See chapter VI- C and table 7-2.

10 Lavrov , Gosudarstvennyy , 1961, p . 42 . 11 Dedkov, Sbornik , 1960 , p . 47; Vinokur , Sbornik , 1963, p . 182. 12 Rusin and Eydinova, Gosudarstvennyy , 1965, p . 48. The additional divisions may have been used to accommodate the Central Asian Sovnarkhoz, which encompassed four republics, and Sovnarkhoz U.S.S.R. 13 See, for example , Kozlov, Organy, 1960, p . 89 . 14 Andrianov, Organizatsiya , 1963, pp . 16-17 . 15 Glezin , " Some Problems, " 1958, p . 29 . 16 For a comparison of this classification of branches with a similar classification used in Gosbank accounts , see table 8-14 .

17 Yevdokimov , Finansirovaniye, 1962, p . 5 . 18 Lavrov , Gosudarstvennyy, 1961, p . 39. 19 Aleksandrov , Gosudarstvennyy , 1961, p . 49 . 20 Ibid ., p . 53. 21 Ibid ., p . 49; Dedkov, Sbornik , 1960, pp. 45 , 57; Dedkov and Yakimov , Bukhgalterskiy , 1965, pp . 306 , 382-383; Lavrov , Gosudarstvennyy , 1961, p . 43 ; Plotnikov,Gosudarstvennyy, 1959, p . 37; Rusin and Eydinova , Gosudarstvennyy , 1965 , pp. 47 , 54; Vinokur , Sbornik , 1963, p . 182. The numbers of chapters 3 , 30 , and 39 have been adopted from chapters with the samebranch title in the revenue classification , on the assumption that they correspond. 22 Dedkov and Yakimov , Bukhgalterskiy, 1965, pp . 306 , 382 ;Rusin and Eydinova , Gosudarstvennyy, 1965, p . 54.

23 Ryauzov and Tertus, Bankovskaya , 1956 , p . 210 . 24 D’yachenko , Finansovo, vol. I, 1961, p . 173. The source was “ signed to printers in March 1960 . 25 Dedkov , Sbornik , 1960 , p . 48 ; Sosin , “ Planning," 1963, pp . 31, 33. 26 Tsilinskiy, “Greater," 1959, p .63. 27 Lavrov, Gosudarstvennyy , 1961, p . 43 . 28 Dedkov , Sbornik , 1960 , p . 45 . 29 Aleksandrov, Gosudarstvennyy, 1961, p . 54 . 30 Rusin and Eydinova, Gosudarstvennyy, 1965, p . 167. 31 Aralov , Gosudarstvennyye , 1963, pp . 372, 399 , 406 ; Dedkov and Yakimov , Bukhgalterskiy , 1965, pp. 138 , 189, 192. See also Gel'rud and Yakovleva , Al’bom , 1963, p . 54, for an outline of the trade union budget. 32 Mergelov, Planirovaniye , 1962, p . 35 . 33 Aleksandrov, Gosudarstvennyy, 1961, p. 49;

Mergelov , Planirovaniye, 1962, p. 16 .

83

BUDGET CATEGORIES AND CLASSIFICATIONS

84

34 Lavrov , Gosudarstvennyy , 1961 , p . 39. Mergelov, Planirovaniye, 1962, p . 27. 36 Tsilinskiy , “Greater, " 1959, p . 69. 37 Mergelov, Planirovaniye, 1962, pp. 32-33.

38 Ibid . , pp. 6 , 15. 39 Aleksandrov , Gosudarstvennyy, 1961, p . 54; Dedkov , “ Some Problems,” 1961, p . 44; Dedkov , Razvitiye , 1962, p . 76 ; Kudryashov and Chudinovich , Sostavleniye , 1960, p . 16 ; Lavrov , Gosudarstvennyy , 1961, p. 43 . 40 Dedkov, Sbornik , 1960 , pp . 48-49; Dedkov, “ Some Problems, " 1961, p . 44. 41 Tsilinskiy , “Greater," 1959, p . 63. 42 Lavrov, Gosudarstvennyy, 1961, p . 41 . 43 Dedkov and Yakimov, Bukhgalterskiy , 1965, pp. 380 , 403; Goloshchapov , Byudzhetnyy, 1963, pp . 214, 239 , 242. 44 Kovylin , Nalog , 1963, pp. 166, 172 ; Lasevich and Mindel', Tseny, 1963, p . 262; Miroshchenko, Gosudarstvennyy , 1964, p . 94 ; Mokhov , Vyplaty , 1965, pp . 68-82 . 45 Mokhov , Vyplaty, 1965, p . 22. 46Gross and net statistics on turnover tax revenues have recently been released for the first time. See the discussion of “ The Payment System ” for the tax in chapter VI- A .

47 Lavrov , Gosudarstvennyy, 1961, p . 41. 48 Dedkov and Yakimov , Bukhgalterskiy, 1965, pp . 381-382 , 393 . 49 Rovinskiy , Gosudarstvennyy , 1949, p . 341 ; Rovinskiy, Gosudarstvennyy , 1951, p . 335 . 50Goloshchapov , Uchet, 1956 , p . 108 . 51 Dedkov and Yakimov , Bukhgalterskiy , 1965, pp. 381-382. 52Ivliyev, Finansirovaniye, 1962, p . 325 . Curiously, a 1963 book (Ivliyev , Finansy , 1963, p . 358) authored by the same person prints an authentic - looking blank form (with seal) of an “ expenditure schedule " (a claim for approved appropriations - see chapter IX ) which contains the date " 1961" but includes articles 6 , 7 , 11, 17, and 25, and employs titles matching those of the 1949 source (Rovinskiy , Gosudarstvennyy , 1949, p . 341 ) cited above. Elsewhere (page 349), a listing comparable to that in other recent sources is presented . It is conceivable that the “dropped ” articles are currently being used by railroads, and an old form was duplicated in order to avoid their disclosure . 53Goloshchapov , Spravochnik , 1961 , pp . 318-324 ; Yevdokimov, Finansirovaniye, 1962, pp. 58-66 . 54Rovinskiy , Gosudarstvennyy, 1951, p . 335 . 55Yevdokimov, Finansirovaniye, 1962, pp. 5 , 31 . 56Vaynshteyn , Razvitiye , 1957, p . 60 . 57 Finansovyy i khozyaystvennyy byulleten ', no . 15 , 1938 , pp . 3-23 . 58Yevdokimov, Finansirovaniye, 1962, pp . 30-56 . 59Molyakov, Finansirovaniye , 1965, p . 21; Rusin and Eydinova, Gosudarstvennyy, 1965, p. 59 ; Vysshaya partiynaya shkola , Finansy, 1962, pp . 93-95 . 60Bachurin , Ekonomicheskoye, 1957 , p . 120 .

VI. MAJOR STATE The State Budget of the U.S.S.R. has a signif icantly larger scope in relation to the total economy than is characteristic of nonsocialist countries. This is to be expected in view of the fact that most sectors of the Soviet economy are directly owned and operated by the state . The major exceptions to direct state administration of the economy are to be found only in agriculture--the collective farms, the consumer cooperatives providing retail trade services to the rural population , and the privately cultivated plots of individual workers and farmers . Much of the state - owned sector of the economy, however, and particularly the productive sector, is operated on the self - financing basis known as khozraschet (described in chapter III). This in dependence is a severely limited one, of course . In addition to various types of control executed by central agencies over khozraschet units , including the highly restrictive mechanisms involved in sub ordinating their activities to the national economic plan, a number of purely financial limitations are imposed . These limitations are essentially of three kinds . (1) As noted in chapter III, over 20 percent of the industrial enterprises , and even entire industrial sectors , operate at a loss on a current income and expense basis , thereby requiring support from other khozraschet units or, ultimately, the budget . (2 )

The khozraschet principle has traditionally been limited to operations on current account; capital formation has been liber ally financed by nonreimbursable grants from the budget .

(3 ) Current expenses, or costs of production , are frequently defined rather narrowly so that certain so -called operational expenses are not charged to cost and are notmet by current income, but by various special devices, including direct budget grants . These operational expenses include such significant ones as research and develop ment, cadre training, geologic prospecting , and others. (As will be seen , there has been a recent trend toward financing them by means of centralized agency -wide funds originating in fixed charges to costs.) Despite these limitations, severallarge financial flows relating to the state sector take place outside the state budget, at least in the formal sense . The nonbudget resources are made up largely of the.

REVENUES

retained profits of khozraschet units and agencies and the amortization fund formed to cover replace ment and capital (i.e., major) repair ofdepreciated fixed assets .

The use of these nonbudget resources, however, is closely controlled by central authorities . In many of their most important uses, such as invest ment in fixed and circulating capital, they are merged with budget funds and both are planned by the Ministry of Finance in correspondence with the same central plan as expressed in nonfinancial terms. In many respects , therefore, the division of financial resources into budgetary and extra budgetary is an arbitrary one, and the more meaningful concept of total centralized revenues available to the state , including both those formally entering the budget and those maintained outside the budget, is the frame of reference taken in the present chapter . Statistics on the two major nonbudgetary state revenues, retained profits and amortization funds, are relatively abundant (although of uncertain meaning), but data are extremely scarce on the total scope of state revenues and on some of its less publicized and smaller components . A sta

tistical picture of total state revenues , and the relationship of the formal state budget to this larger concept can therefore only be given in approximate terms. The broader concept embracing the state economy and including both the formal state budget and various retained resources of enterprises and agencies is reflected in a document known as the Consolidated Financial Plan , As noted in chapter IV , this document has no official role, being compiled by Gosplan as an aid in coordinating the national economic plan and the state budget. The Ministry of Finance presumably employs this plan , or a very similar one, in the process of drawing up the budget and approving the financial plans of individual agencies. However , so far as is known, only one statistic on its total scope in postwar years This placed the total has been made public . revenues of the consolidated financial plan in 1960 at 97.0 billion rubles, of which the planned budget of 77.3 billion rubles made up 80 percent. 1 In order to show the movement of total revenues and their relation to the formal budget in sub sequent years , an attempt is made in table 6-1 to reconstruct the planned total for 1960 and to estimate actual totals for the period 1961-64. This can be done only in approximate terms.

85

MAJOR STATE REVENUES

86

Table 6-1 .--CONSOLIDATED STATE REVENUES , BY TYPE : ( In billions of

1960

TO

1964

Figures in parentheses are estimated )

rubles .

Actual Type of revenue

Plan 1960 1960

Total .

97.0

Index .

(x )

Budget revenues .

77.3

Index .

(x )

Retained

profits ((gross gross ) ......

Index ... Amortization deductions .. Index .

Other resources .

Index ...

( 98.2 )

100 77.1 100

8.5 (x )

( 9.8 ) 100

9.0 (x)

9.1

100 (2.2 )

( 2.2 ) (x )

100

1961

( 101.0) 103

78.1 101

( 10.1)

103 10.2 112

( 2.6 ) 120

1962

( 110.3) | 112

84.3 109

11.5 117 11.3

124 ( 3.2 ) 144

1963

( 119.9)

122 89.5 116

11.0 112 15.6 171

( 3.8 ) 173

1964

( 127.5 )

130 94.4 .

122 11.5 117 17.0 187 (4.6 )

207

X Not applicable . Source : Plan : Total and budget revenues--Margolin , Planirovaniye , 1960 , p . 82 . Retained profits--table 6-11 . Amortization deductions--Bunich , " Amortization , " 1960 , p . 48 . Other resources--Residual .

Actual : Total--Sum of components . Budget revenues-- table 6-2 . Retained profits -- table 6-11 . Amortization deductions--table 6-23 . Other resources--Estimates based on the assumptions that 1960 Actual equals 1960 Plan , and that annual increase thereafter equals 20 percent.

Although the 97.0 billion figure for 1960 isbelieved to apply to the Consolidated Financial Plan as presented in chapter IV , that document does not distinguish between budget and nonbudget revenues. In the reconstruction of the total in table 6-1 , budget revenues are taken as one source and known nonbudgetary revenues are added. The residual component derived for 1960 has been extrapolated to subsequent years on the basis of an arbitrarily assumed 20 percent annual increase , for lack of any readily available alternative. These “ other resources” are made up primarily of the above

noted special- purpose funds maintained centrally by administrative agencies and formed out of fixed changes included in the costs of production 2 (See section D , below , of primary enterprises . for a description of these funds.) They have been increasing in number , and probably also The estimates for “ other resources, in size . and the overall total for state revenues may therefore be understated, although even larger rates of increase for this relatively small com ponent would not alter the general orders of magnitude significantly.

87

THE TURNOVER TAX Although the respective indexes show a some what larger rate of growth for total state revenues than for the budget , the difference is not large . The share of the budget in total state revenues has dropped from the 80 percent in 1960 to 74 percent in 1964 . Several recent developments might have led one to expect a more drastic shift from budgetary to " own" resources in financing the economy. These developments, as will be seen , include (1 ) an in crease in profit rates at the expense of turnover tax rates; ( 2 ) a major overhaul of and an increase in depreciation allowances (or “ deductions amortization funds" ); ( 3 ) the formation of several new funds charged to cost , including what may be large ones for meeting research and development expenses; and (4 ) the tendency noted in chapter III to shift from budgetary to khozraschet forms of financing , as in research , construction and me chanical designing , and elsewhere. The increase in total profits in the economy, however , has been paralleled by an increase in the share drawn into the budget , where it serves to make up for the lagging inflow of turnover tax collections; retained profits have been virtually stable . The retained profits shown in table 6-1 are gross of profits used to cover some of the losses of planned - deficit enterprises (see section B ). It is uncertain whether this measure of retained

profits is appropriate to the 97 billion rubles figure for 1960. The Consolidated Financial Plan shown in chapter IV does not list the covering of losses as an expenditure , and the financial plans of agencies apparently show only budget subsidies for this purpose . 3 This suggests that the Con solidated Financial Plan may show profits net of those losses covered by profits . On the other hand, the use of retained profits to cover planned losses is clearly planned , together with other uses of for covering losses, profits and other sources 4 including the budget.

Individual budget revenues are itemized in table 6-2 . The various types , which are discussed in detail below , are grouped here into the Soviet categories of revenues “ from the socialist econ omy” and “ from the population ." Revenues “ from the socialist economy” are shown to have become an increasingly larger proportion of the total, i.e. , from 83.7 percent in 1950 to 91.8 percent in 1965 . The share of revenues “ from the population " has dropped correspondingly , chiefly as a result of a deemphasis on state bond sales to the public . As noted in section C , however , this classification of revenues by “ public ” or “ private" does notproperly depict the burden of tax on individuals; a major distortion results from the assignment of the turn over tax (and its partial replacement, the profit tax) entirely to the “ socialist economy” grouping.

Table 6-2 .--BUDGET REVENUES, BY TYPE :

1950 TO 1965

(In millions of rubles . Figures in parentheses were derived as residuals . Figures may not add to totals due to rounding )

Item Total .

1950

1955

1958

1959

1960

1961

1962

1963

42,277

56,434

67, 236

74,014

77,078

78,054

84,306

71,002 30,916 20,744 1,231 934

346 (x ) (x ) 362

From the socialist economy . 35 , 396 47,619 60,404 66,605 70,139 Turnover tax . 23,611 24,238 30,454 31,073 31,337 Profit deductions 4,036 10,281 13,537 15,963 18,635 555 1,238 1,662 1,895 1,846 Income tax on organizations Collective farms.... 625 254 1,207 1,238 1,031 Consumers ' cooperatives and public 638 658 622 530 225 ...... organizations Producers ' cooperatives . (NA ) (NA ) (8 ) ) (84 ) 76 ( Noncommodity operations (x ) 370 733 689 504 481 Local taxes and collections (part)?. 362 624 969 182 Revenue from MIS'S..... 220 196 230 233 240 y revenue . Forestr Rental revenue 127 of local soviets . 118 117 160 119 Price differential on agricultural 1,874 1,565 38 machinery ... (x ) (x ) 3,739 3,583 2,613 1,932 3,264 State social insurance revenue Residual ..... (4,083) ( 7,766 ) | (9,433 ) (11,260 ) |11,979) From the population .. 7,409 6,939 6,881 8,815 6,832 4,834 5,189 State taxes... 3,585 5,598 5,521 Personal income tax . 2,045 3,553 4,213 4,554 4,637 Agricultural tax ... 441 798 422 416 397 742 838 538 540 560 Bachelor and small family tax ... Tax on horses of independent farmers (z ) (2 ) ( 16 ) ( 10 ) (4 ) Tax on livestock in cities .... 914 1,489 1,060 3,676 State loans.. 3,104 310 128 136 Lottery revenue . (291) (273) (271 ) ( 305 ) (193) Local taxes and collections (part) .

See footnotes at end of table.

297 (x ) (x) 386 (x ) 252 123

1964

1965

89,538

94,407

102,325

76,676 181,408 32,946 34,515 23,862 25,695 1,389 1,322 1,043 1,005

87,014 36,694 28,731 1,346 978

93,893 38,664 30,873 - 1,545 1,157

368 (x ) (x ) 384 (x ) 254 136

388 (x ) (x ) 390

317 (x ) (x ) 376 (x ) 262 128

1,044 1,100 4,153 4,414 62,097 ) (12,322) 7,630 7,052 5,832 6,002 5,076 4,871 389 375 568 548 (4 ) ( 3) 800 1,170 125 136 ( 322 ) ( 295 )

258 132

249 141

1,134 1,279 1,315 4,631 5,562 4,949 13,292 ) | (13,241) |(15,154) 8,432 7,393 8,130 7,697 6,308 6,753 5,401 6,772 5,857 351 357 364 541 544 568 (2 ) (1) (z ) 111 183 1,312 173 187 148 (365) (356 ) ( 362)

MAJOR STATE REVENUES

88

Table 6-2 .--BUDGET REVENUES , BY TYPE:

1950 TO 1965 --Continued

( In millions of rubles. Figures in parentheses were derived as residuals.

Item

1958

1955

1959

1961

1962

1963

1964

100.0

1965

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

83.7 55.8 9.5 - 1.3 0.6 0.5

84.4 42.9 18.2 2.2 1.1

89.8 45.3 20.1 _2.5 1.5

90.0 42.0 21.6 2.6 1.7

91.0 40.7 24.2 2.4 1.6

91.0 39.6 26.6 1.6 1.2

90.9 39.1 28.3 _1.6 1.2

90.9 38.5 28.7 1.6 1.2

92.2 38.9 30.4 . 1.4 . 1.0

91.8 37.8 30.2 1.5 1.1

0.9

0.9 (NA )

0.8 (NA )

0.4 (x )

1.0 0.2 0.3 0.2

0.5 (x ) 0.3 0.2

0.5

0.4 (x ) (x ) 0.4 (x ) 0.3 0.1

0.4 (x ) (x ) 0.4 (x ) 0.3 0.1

0.4 (x ) (x ) 0.4

0.3 0.2

0.4 (x) (x ) 0.4 (x ) 0.3 0.2

1.4 5.3 15.5 9.0 7.5 6.2 0.5 0.7

1.2 5.2 14.6 9.1 7.1 6.0 0.4 0.7

1.3 5.2 14.8 9.1 7.0 6.0 0.4 0.6

1.4 5.2 14.0 7.8 7.2 6.2 0.4 0.6

1.3 5.4 14.8 8.2 7.5 6.6 0.3 0.6

(Z )

(2 )

(2 )

(2 )

(2 )

1.0 0.2 (0.4 )

1.4 0.2 (0.4 )

1.5 0.2 (0.4)

0.1 0.2 (0.4 )

0.2 0.2 (0.4 )

(0.2)

(0.1)

1.1 0.9 0.5 0.3

0.9 1.1 0.3 0.3

0.9 (Z ) (x) 1.0 1.4 0.3 0.2

(x ) 4.6 (9.7) | 16.3 8.5 4.8 1.9 1.8

(x ) 4.6 (13.8 ) 15.6 8.6 6.3 0.8 1.5

0.1 4.9 (14.0) 10.2 7.7 6.3 0.6 0.8

2.1 4.8 ( 15.2) 10.0 7.5 6.2 0.6 0.7

2.4 4.9 ( 15.5) 9.0 7.3 6.0 0.5 0.7

(2 ) 1.6 0.5 (0.4)

(2 ) 2.0 0.2 (0.4)

(2 )

{ ) 2

) 2 (

PERCENT Total... From the socialist economy . Turnover tax ..... Profit deductions. Income tax on organizations Collective farms... Consumers ' cooperatives and public organizations...... Producers ' cooperatives . Noncommodity operations.. Local taxes and collections (part) . Revenue from MIS's.... Forestry revenue ... Rental revenue of local soviets .... Price differential on agricultural machinery ... State social insurance revenue . Residual ..... From the population .. State taxes ... Personal income tax ..... Agricultural tax .... Bachelor and small family tax .. Tax on horses of independent farmers .... Tax on livestock in cities.. State loans.. Lottery revenues Local taxes and collections (part) ...

1950

Figures may not add to totals due to rounding) 1960

(z ) 7.3

(0.5 )

6.5 (x ) (0.5 )

2 Less X Not applicable . NA Not available . Estimated as the difference between total " local tions assumed to come " from the population ." See section Source : Min . fin . , Gos . byud. SSSR , 1962, pp. 7-9 ,

1.2 0.2 (0.4)

0.2 0.1

than 0.5 million rubles or 0.05 percent . taxes and collections" ( table 6-18 ) and that portion of local taxes and collec C , below , for component revenues of the " local taxes and collections" category . 67-69 ; Min . fin . , Gos . byud . SSSR . 1966 , pp . 10-11 , 69-72 .

A. THE TURNOVER TAX

1. General Survey The turnover tax (nalog s oborota ) has long been the most important single source of budget revenue in the Soviet Union . It emerged in September 1930 from a reform which simplified the tax system in industry and trade by combining numerous different payments into a single tax, Many subsequent changes and modifications have made this tax a 5 highly complicated form of revenue. In its basic features, the turnover tax resembles an excise. It is levied primarily on consumers' goods, although some producers' goods are also subject . Sales which do not involve any material product (e.g., admission tickets ) as well as pay ments for various services are entirely excluded from the turnover tax system . Certain sales of material goods, defined in terms of product, producer , consumer , or use , are also exempted from the tax. In general, the tax is paid only once during the passage of a commodity from the producer to the consumer.

serves many many important The turnover tax economic functions. First, it is the principal source of state revenue, which is relatively easy to channel into the budget and is free from the effects of fluctuations in production costs. Second , it is an instrument used by the government to maintain a balance between the overall purchasing power of the public and the volume of consumers' goods that have been made available. In this way , the tax is used as a mechanism for preventing undue inflationary pressures. Third, it is used to adjust demand to supply by themanipulation ofrates on particular goods. Fourth , it is used to regulate profits: since prices are fixed for the producer as well as the consumer , in effect the tax rates determine the amount of profits allowed to producers. Manipulation of rates also is used to compensate producers for differences in costs and to provide adequate retained profits for internal investment needs . Insofar as profits have an incentive function , rates can be set to encourage output by producers, such as subsidiary shops and local industry, which are less directly controlled by the state . Finally , the turnover tax serves as a general indicator of economic performance which provides information on progress in the fulfillment

89

THE TURNOVER TAX of production or procurement plans, as revealed through deviations in the sales of commodities and in the subsequent tax payments into the budget.

The importance of the turnover tax in budget revenue hasundergone a long run decline from its high point of 71.8 percent of the total in 1936,6 despite several reversals of trend . Since 1958 , when its share of total budget revenue was 45.3 percent, it has declined steadily to 37.8 percent in 1965 (see table 6-2). This reduction in the impor tance of the tax has been partly associated with a general trend toward the elimination of subsidies from the budget. According to a Soviet estimate , more than a quarter of the turnover tax did not represent real revenue (apparently in the period 1946-48), due to various direct and indirect sub sidies granted to producers from the budget.? At present, such subsidies are relatively small, a result achieved primarily by various price in creases over the years.

The relative decline of the turnover tax as a source of budget revenue has been roughly com pensated for by an increase in the " deductions from profit," which in effect constitute a profit tax. This trend toward the substitution of the profit tax for the turnover tax as a source of revenue has been widely discussed by Soviet economists who are divided in their opinions as to its significance and desirability . The compensating increases in profit taxes have come from virtually all sectors of the

economy, including those sectors which do not contribute turnover tax revenue, such as construc tion , transportation , and most heavy industry. To some extent, however, the increase in profit tax revenue appears to have occurred directly at the expense of turnover tax revenue, and in effect represents a shift from one form to the other. Thus, as components of average prices in the light and food industries , the share of profit (most of which is taxed into the budget) has increased while the share of the turnover tax has declined (see table 6-5) .

2.

Source of the Tax by Sector

Although information available in Soviet sources is sketchy and poorly defined, an indication of the relative importance of various sectors of the economy as sources of turnover tax collections is given by the data in table 6-3. The sectors of origin are defined in terms of an agency context rather than a rigorous product classification . This introduces ambiguities, and possibly some incon sistency in coverage over time. The ambiguities arise especially in heavy industry since the taxed products of this sector include both consumers' and producers' goods. The entries for “ state trade, cooperatives, and other" presumably include only the tax on products produced or procured by retail agencies , since wholesale trade tax payments amounted to over 40 percent of total tax receipts in recent years (see below ).

Table 6-3.-- PERCENT DISTRIBUTION OF THE TURNOVER TAX , BY SECTOR OF ORIGIN :

Sector of origin

Total... Heavy industry . Light industry . Food industry . Alcohol...... Procurement ( agricultural products ) ... State trade, cooperatives, and other ..

1957 (plan )

Circa 1960-61

100.0

100.0

100.0

100.0

113.0 15.6 37.0

27.0 30.0

210

17.3 30.6 352.1 ( 3) ( 3) (3)

1931

1933

1937

1939

100.0

100.0

100.0

10.0 15.0 58.8 16.2

7.6 20.3 25.3 24.7. 10.6 11.5

11.0 12.3 27.5 9.6 33.3 6.3

1931 TO 1962

34.4 (1)

70-75 38.3 13.0 4 ( 11.7)

10-12 4 ( 3-10 )

1962

1 Petroleum industry --8.0 percent ; coal, machine -building, metallurgical, lumber , fishing, and other5.0 percent . 2May apply only to taxed output other than consumers ' durable goods (see text) . For 1957, the figure refers to actual rather than planned receipts . 3 The source lists only three sectors of origin ; presumably the figure for food industry includes turn over tax received from alcohol , procurement, state trade , cooperatives , and other . Estimated as a residual. 1931 , 1933, 1937 , and 1939 -- Smirnov , Ekonomicheskoye, 1957 -- Heavy industry , Bor , " Law , " 1957 , p . 23; light , Uryupin , " On payers , " 1957 , p . 20 . Circa 1960-61--Allakhverdyan , Finansy , 1962, p . 202. is given in the source , published in 1962 ; the recent period. 1962 -- Yevdokimov , " On the Question , " 1964 , p . 165 .

1963, pp . 211 , 225 , 227. food , and grain procurement , No time reference for the data figures presumably apply to a

90

MAJOR STATE REVENUES

A number of outstanding shifts in the source of the turnover tax have taken place in recent years. One such shift has been the reduction in the share paid by agricultural procurement agencies. The high level shown for 1939 , slightly more than one third of all turnover tax revenues, was probably maintained or increased in the postwar period until the reforms of the procurement system which began in 1953. The subsequent reduction in the share from this sector was due to increases in prices paid to producers with a concomitant reduction in the turn over tax imposed on sales ofprocurement agencies. ' The share of light industry nearly doubled between 1939 and 1957. The extent to which this was due to changes in the relative output of consumers' goods, as opposed to changes in tax rates, is not clear. Of the products included under the food and light industry sectors , the following groups and their approximate share in the total turnover tax revenue are reported in a 1963 source .10

Year

Billion rubles

1951 1952 1953 1954 1955

0.98 0.85 0.91 0.98 1.04

One of the largest tax sources among these groups is vodka products , which apparently produced over 17 percent of total turnover tax in the early 1960's . Cotton cloth accounted for about 10 percent in 1961.11 Another significant change in recent years has been an increase in the share of heavy industry . Table 6-3 shows a rise from 7 percent in 1957 to 17.3 percent in 1962.12 More recently, this share 13 is reported to have reached about 20 percent. While most heavy industry output is not taxed , those types that are taxed include both consumers' and producers' goods. Such consumers' goods as refrigerators, washing and sewing machines, radio and television sets, passenger automobiles, and household goods and appliances, which are taxed , are classified under “machine - building and metal working," which belongs to the heavy industry grouping . Several types of heavy industry products are subject to the turnover tax (atvarying rates ) whether sold for productive , institutional, or personal consumption. These include petroleum products, gas , and electric power , which are major sources of the turnover tax within the heavy industry grouping. Petroleum products alone accounted for about 7.5 percent of all turnover tax revenue in 1959, as compared with about 4 percent in 1951. Tax revenue from petroleum products in this period were as follows: 14

1956 1957 1958 1959

Billion rubles

1.16 1.32 1.93 2.34

A number of other producers' goods are taxed when sold through the "market fund" allocation (see section 4 , below ) to individuals , collective farms, and cooperatives. These goods include various construction materials, fuel, and tires. Sales to agriculture of such capital goods as trucks , tractors, agricultural equipment, and spare parts have also been subject to tax , 15 but the tax on such sales was slated to be removed as of January 1 , 1966, with the institution ofnew wholesale prices. 16

3. Alcoholic beverages, tobacco, and cosmetics . about one - fourth Cloth , knitwear, clothing , and footwear over one - fifth Sugar , confections, butter and lard , margarine , and other food products . about one - sixth

Year

Tax Rates

Despite considerable emphasis on the turnover tax in recent Soviet economic literature in con junction with the general discussion of prices, profits , and economic efficiency, very little data on actual rates have been released . Sensitivity in this area does not appear to have abated much from the Stalin era , even though many of the extremely high rates of that time have since been reduced.17 Average tax rates on specifc commodites or commodity groups are probably difficult to deter mine, even for the responsible authorities them selves. Multiple rates on the same commodity, numerous partially or completely tax -exempt sales, and variations in the distribution system or the methods of transacting sales, among other reasons, make the rate system extremely complex in practice. General factors affecting rates on various 18 products include: ( 1) The category of payer (e.g., union and union - republic industry, enterprise of local subordination ); (2 ) the type of material used in production (centrally allocated materials , local materials , waste products, scrap , etc.); ( 3 ) the degree of mechanization in production ; (4 ) desti nation of the product (e.g. , industrial or personal consumption , urban or rural area of consumption ); (5 ) the seasonal nature of production or procure ment; and (6 ) the existence of differentiated zonal prices on some goods. Turnover tax rates are established and reviewed by the Ministry of Finance in cooperation with other 19 Because so many considerations play agencies, a role in their determination, the number of rates is often very high . In 1957 , there were 1,443 different rates for products of the shoe industry , 1,196 different rates for products of the knitted goods industry, and 997 different rates for products of the cotton cloth industry . 20 Watches were

THE TURNOVER TAX

differentiated by 25 rates,metal spoons by 13 rates, and rubber shoes by 10 rates.

The rates may also be differentiated between enterprises producing similar goods, in order to regulate the profitability of certain enterprises according to their general economic condition . It has even been argued that the rates should be based on and reflect the particular economic cir cumstances of each enterprise and that enterprises should become the payers of the tax in order to achieve this goal ? " When the government wants to restrict the demand for or the use of a particular commodity , it establishes higher tax rates. Thus, according to a 1963 source, wheat flour is sold to bakeries for 71.30 rubles per ton , but is sold to per ton in order to the population for 110.00 rubles 24 discourage baking in homes.

Some indication of an overall tax rate may be obtained by the comparison of tax revenues and the volume of retail sales (roznichnyy tovarooborot) in state and cooperative trade, as shown in table 6-4, The steadily declining trend in the ratio of tax revenues to retail sales was arrested in 1964, but its future development is problematical. The overall rate shown in table 6-4 is somewhat over stated since the two series are not entirely commensurate . Although almost all products in retail trade are subject to the turnover tax , some taxed commodities, such as petroleum products and electric power intended for productive consump tion , do not enter retail trade .

Table 6-4 .--RETAIL SALES AND TURNOVER TAX : 1950 TO 1965 ( Sales and tax figures in billions of rubles)

Year

Turnover tax State and cooperative Percent of sales retail sales Amount ( 2 ) :( 1 ) x 100

( 1)

(2)

(3)

1950.... 1955 ... 1958 ... 1959 .

36.0 50.2 67.7 71.9

23.6 24.2 30.5 31.1

65.7 48.3 45.1 43.2

1960 ... 1961... 1962 ... 1963... 1964 .... 1965 ..

78.6 81.1 87.3 91.7 96.4 104.8

31.3 30.9 32.9 34.5 36.7 38.7

40.1 38.1 37.8 37.7 38.1 36.9

Source :

Column ( 1 ) :

Column ( 2 ) :

1950-61--Nar . khoz . 61, p . 633 . 1962-65--Nar . khoz . 65 , p . 631. Table 6-2 .

91

Another indication of overall turnover tax rates is provided by data on the structure of industry wholesale prices25 shown in table 6-5. These data were first published in the statistical handbook for 1962, and their interpretation is still open to some question (see note 1 of the table ). They show a decline in the share of the turnover tax during the period 1958-65 in average prices of all industry and especially of the light and food industry sector. The tax share for heavy industry remained fairly constant. The share of profits , on the other hand , rose in both major sectors of industry . Therefore, total accumulations (profits plus turnover tax ) of all industry have maintained a constant share of industrial wholesale prices since 1961 . This picture is consistent with that shown in tables 6-1 and 6-4 . As an indication of the turnover tax rate on all output, the data in table 6-5 (column 4 ) may be appropriate for the light and food industries. For all industry, however , and especially for heavy industry, the share ofturnover tax in the wholesale price of taxed commodities is understated since it is based on the value of total output, including producers' goods not subject to tax, The limited evidence available on tax rates for consumers' goods shows some suggestion of pro gressiveness . Soviet writers frequently point out that the highest rates fall on vodka, tobacco products , and luxury goods. As the listing below shows, however, rates on numerous low - income type goods are also quite high . In some cases these rates are understated as a result of tax levies on successive stages of processing. Further understatement arises from the like lihood that the cited rates apply only to urban retail prices . For 24 groups of common consumers' goods, retail prices in rural areas until 1966 26were 7-10 percent higher than in urban areas. In practice , the differential was applied only to sales by the retail organizations of consumers' Co operatives, since these outlets serve primarily the rural population . Part of the price differential was assigned to cover the relatively higher distri bution costs of these retailers, but most of it was treated as a higher level of turnover tax. The elimination of the urban - rural price differential on these goods, as of the beginning of 1966 , reportedly necessitated a downward adjustment of 400 million rubles in 1966 budget revenues. 27 According to a 1963 source, the highest rates of turnover tax are currently charged on vodka and brandy, beer, dental products made of gold , gold leaf, other articles made of precious metals, playing cards, many kinds of perfumery and cosmetics, tobacco products, rare furs, sturgeon The retail price (less the products , and others. retailer's markup) on these goods is described as "many times higher " than the enterprise wholesale price.

92

MAJOR STATE REVENUES Table 6-5 .--COMPONENTS OF INDUSTRY WHOLESALE PRICES AND INCOME RATES :

1958 TO 1965

( In percent)

Income rate

Price component Sector of industry and year

Total Cost of wholesale | production price and sales

(1 )

Profits of production enterprises and sales organi zations

Turnover tax ?

Accum lations as share of price ( 3 ) + (4 )

(3 )

(4 )

(5 )

(2 )

Rate based on cost Profits (3 ) (2 ) x 100

Accumu lations (5 ) ; (2 ) x 100

(6 )

(7)

ALL INDUSTRY

1958 19612 1962 .. 1963... 1964 . 1965 ..

100.0 100.0 100.0 100.0 100.0 100.0

71.6 74.7 74.3 74.6 74.2 74.7

7.4 8.4 9.3 9.4 9.9 9.4

21.0 16.9 16.4 16.0 15.9 15.9

28.4 25.3 25.7 25.4 25.8 25.3

10.3 11.2 12.5 12.6 13.3 12.6

39.7 33.9 34.6 34.0 34.8 33.9

100.0 100.0 100.0 100.0 100.0 100.0

83.4 82.2 80.9 81.2 81.6 81.3

9.9 10.6 11.9 11.4 11.5 11.6

6.7 7.2. 7.2 7.4 6.9 7.1

16.6 17.8 19.1 18.8 18.4 18.7

11.9 12.9 14.7 14.0 14.1 14.3

19.9 21.7. 23.6 23.2 22.5 23.0

100.0 100.0 100.0 100.0 100.0 100.0

61.2 67.4 . 68.2 68.2 66.5 67.6

5.1 6.1 7.0 7.5 8.2 7.1

33.7 26.5 24.8 24.3 25.3 25.3

38.8 32.6 31.8 31.8 33.5 32.4

8.3 9.1 10.3 11.0 12.3 10.5

63.4 48.4 46.6 46.6 50.4 47.9

HEAVY INDUSTRY

1958 . 19612 1962 . 1963.... 1964 .. 1965 .. LIGHT AND FOOD INDUSTRY 1958 19612 1962 . 1963 . 1964 .. 1965 .

1 In Nar. khoz . 62, p . 146 , the entry for column 4 reads " State budget revenues ( turnover tax and others)" ; in the later handbooks the entry is listed simply as " turnover tax ." Although virtually no explanation of the content of these data (which first appeared in the 1962 handbook ) or the methods by which they were derived is yet available , it would appear from Soviet discussions of the figures (see Stolyarov, o tsenakh , 1963, pp . 174-175 ) that the "other" revenues do not include the deductions from profit going into the budget, and that the " profits " in line 3 do include such deductions . " Differ ences in prices for products sold to agriculture " and " budgetary markups" are probably meant here . Rough calculations suggest that all turnover tax receipts are charged to industry , including those levied on agricultural procurements . 2 Preliminary data .

Source : Price components : 1958--Nar . khoz . 62 , p . 146 . 1961 --Stolyarov , 0 tsenakh , 1963, p . 174 . 1962--Nar . khoz . 63 , p . 138 . 1963--Nar . khoz . 64 , p . 156 . 1964-65--Nar . khoz . 65, p . 168 . Income rates : Derived as indicated .

THE TURNOVER TAX The retail prices of the following articles in clude turnover tax charges ranging from 50 to 75 percent or more: Householdmeters, fountain pens, photographic paper and chemicals, cameras, phono graph needles, phonograph records (of the third class), automobiles, bicycles for adults , automobile gasoline, typewriters, felt and custom -made foot wear, lightweight fabrics, fabricsmade ofartificial fibers , many types of knitted goods, wind instru ments, accordions, and others. The rates on some other products , according to the above source , are as follows:

Product

Percent of retail price

Vegetable fats .. Sugar.. Footwear with leather sole . Matches, kerosene , electricity and gas for household consumption , thread , and many kinds of textile articles. . Flour and grits sold to retailers . Fabrics made of artificial silk by enterprises of local industry Various kinds of kitchen utensils, stationery , combs , rubber foot wear and other articles made of rubber , fabrics made of artificial silk , skates, wire, nails and screws, cement, electric lamps, and sewing machines and their spare parts . Confections .. Fabrics made of natural silk by enter prises of local industry ... The “ Gaz -63" truck sold to collective farms.

to 70 over 55 52

over 50 about 50

93

intended to serve, One of the most defining taxable ways of sales (oblagayemyy oborot) is in terms of broad classes of use, or “ allocation funds” to which products are assigned. In order to clarify the concepts involved , this section will deal with allocation funds and their relationship to taxable sales. Further discussion of taxable and exempted sales will be taken up in the next section . product is important

For nearly every type of consumers' or pro ducers' goods, a “material balance," or resource and - allocation plan , is compiled by the planning and distributing agencies as an initial step . The “ resources" side of the balance sheet, which is divided into initial stocks, production , imports, and receipts from state reserves, does not relate directly to the turnover tax and will not be discussed here . The allocation side of the balance sheet, on the other hand , has a direct bearing on the determination of taxable sales and , for consumers' goods and related products , is generally distrib 33 uted in the following manner.

47-77

33-66 over 25

8-23 14

The basic tax rate on petroleum products (levied as a flat rate in rubles per ton ) was reported in 1962 to be about 40 percent of the industry whole sale price charged by petroleum sales offices. Retail market sales prices contain an additional 29 Electric power is taxed at average markup . rates set differentially for each power system . These rates are based on a variety of purchase prices set for different types of consumers, and the relative weight of each type of consumer in a given 30 power system . In 1961, the rates were doubled , reportedly at the expense of profits rather than final sales prices,31 For the regional sovnarkhoz power systems of the R.S.F.S.R., the rates in 1961 ranged from 10 to 60 percent of the sales price ." 4. Taxable Sales in Relation to Allocation Funds In order for a given product to be subject to a tax levy, an explicit tax rate for that product must be in force . Even though an explicit rate has been assigned , however, not all sales of the product are subject to taxation. Exempted sales are defined in numerous ways involving such factors as the nature of the producer or consumer, or the purpose the

1. Market fund 2. Fund for industrial processing 3. Nonmarket fund a . Fund for industrial consumption b . Fund for budgetary institutions c . Fund of special clothing and special footwear d . Exports e . State reserves f. Armed Forces g . Other consumers 4. Terminal stocks The definition of what constitutes taxable and exempted sales for a given commodity is often 34 made, at least in part, in terms of these funds. Each fund will be taken up in turn . ( 1) The “market fund” is made up of goods intended for sale on the retail market primarily to individual consumers and is analogous in scope to the statistical category “ retail turnover of state and cooperative trade." 35In addition to goods for sale to individuals , however , the market fund also contains element known an as “ minor wholesale " yy (melkooptov ) trade, made up of: (a ) Food prod ucts for sale to budgetary institutions of the sociocultural type; (b ) nonfood consumer products for sale to all kinds of organizations for operating needs (but not for production , construction , or re pair purposes); and (c ) all kinds of goods for sale to collective farms. 36

Because of the primary division of the total allocation (commodity ) fund into the market and nonmarket funds , sales from the market fund to nonmarket consumers (i.e., organizations making purchases under allocations other than the market

94

MAJOR STATE REVENUES

fund) are forbidden for industrial goods important to the population , such as cotton , wool, silk , and linen fabrics, sewn goods, and footwear. In addition , the sale of consumer durables such as refrigerators and washing machines to nonmarket consumers is restricted.

All products allocated to the market fund are subject to the turnover tax , provided that explicit tax rates have been established for them . For many products , it is only the allocation to this fund which is taxable ; allocations of these products to other funds are exempt. ( 2) The “ fund for industrial processing" includes goods to be used as the basic material for other types of products: for example , cloth used for the production of garments , or sugar and flour for the After pro production of confectionery goods. cessing, the finished products are diverted to the market fund . With numerous exceptions, sales from this fund are subject to tax .

“ Armed Forces fund ” as a fund separate and distinct from all others. Many listings of the allocation funds do not mention it , and one source cites it in 39 place of state reserves , suggesting a possible The same listing appears in interchangeability . another book published in 1966.40 The Armed Forces fund has been listed as a separate fund here on the basis of one source which mentions both it and the state reserve fund . 41 (39) The “ other consumers" category is not defined in Soviet literature . It is believed to consist of miscellaneous organizations for whom a special, and probably small, allocation of goods is planned . Allocations to this fund appear to be subject to taxation . (4 ) “ Terminal stocks, " which become the initial stocks of the subsequent planning period , are not taxed until assigned to one of the other allocation funds.

5. Exemptions From (3a ) The “ fund for industrial consumption” in cludes goods to be used as supplementarymaterials in the production of other articles, such as fabrics for upholstery or shoemaking , sugar for non alcoholic beverages, etc. This fund is also subject to the turnover tax , again with exceptions. (3b) The " fund for budgetary institutions" con tains nonfood products intended for state budgetary institutions, such as boarding schools , children's homes , nurseries , hospitals , and rest homes. (Food products are purchased by these institutions through the market fund and are thus taxable .) Among the products in this fund which are known to be taxed are cloth , cotton thread, leather and felt37footwear, knitwear and hosiery goods, and oilcake. Certain other products may be exempt, although this is not clear . (30 ) The “ fund for special clothing and special footwear" is designed to provide workers and employees in particular industries with work clothing, often in the form of materials which are then finished in the industry itself. The products listed as being taxable under the budgetary insti tution's fund are also taxed when assigned to this fund . These products may make up nearly the entire special clothing fund . ( 3d and 3e ) Goods allocated to both “ exports " and “ state reserves" are wholly exempt from the turnover tax . 38 ( 3f) It is not clear whether supplies allocated to the “ Armed Forces fund” are exempted from the turnover tax . The problem is discussed at length below in section 10 , “ The Turnover Tax and the Military Establishment." There is also a more basic question concerning the very existence ofthe

the Tax

The Soviet Government makes extensive use of exemptions (lᵒgoty ) from the turnover tax for special purposes and on particular kinds of sales. As has just been noted, some entire allocation funds are exempted , such as allocations to state reserves or exports . Other exemptions serve a large variety of purposes and consequently are defined in numerous ways - in terms of particular producers, kinds of products and the purposes for which they are to be used , particular consumers, or combi In general, these exemptions nations of these , can operate to the benefit of either: (A ) Sellers, (B ) purchasers, or (C ) both sellers and pur chasers . 42 In type A , the exempted seller charges the full price (including tax ) and retains all or part of the tax. In type B , the exempted seller charges the favored purchaser a price less tax . In type C , an intermediate price might be employed in which both would benefit, or , if both seller and purchaser are financially interdependent (an organization and its subsidiary activities), a benefit to either side would be a benefit to the other regardless of the price level.

Type A exemptions are granted: To promote the formation , by agencies of local industry and by various trade systems, of new enterprises for the production of consumers' goods from local raw materials, scrap , and waste products; to encourage the production of new types ofproducts designed for household use; to support enterprises employing handicapped labor; and to support industries using obsolete equipment, hand labor, or poor quality materials . Type B exemptions fall largely into two groups. One group appears to relate to the holding down of costs in cases where products are taxable at

THE TURNOVER TAX various stages of processing. Examples of this group are the exemptions on oil products sold to refineries , on fabrics sold to industry for further processing (but not on fabrics used to manufacture sewn goods), and on motorcycle , bicycle , typewriter , and sewing machine parts sold to plants producing such products . The second group consists of exemptions to all nonmarket consumers ( i.e., organizations making purchases under allocations other than the market fund ) on purchases of selected commodities , such as felt, paper , hemp and jute (nonfabric ) products, electronic parts , and trucks (except to agriculture ). Type C exemptions include those granted to certain productive enterprises, both industrial and agricultural, which are attached to nonindustrial agencies as subsidiary activities and whose output 43 For ex is usually consumed by the agencies . ample , commercial enterprises attached on a sub sidiary basis to budgetary institutions are exempt from paying the turnover tax on sales to their parent body; enterprises of the Ministry of Defense are exempt on all sales except for sales of the Military Publishing House (Voyenizdat ) made through the trade network and for sales of enterprises belonging to the Main Administration of Trade of theMinistry; and enterprises of the Ministry ofRailways (except those belonging to Workers' Supply Departments [ ORSy ] ), the Ministry of Communications, the republican ministries for maintenance of public order, and the Committee for State Security are exempt on sales to other enterprises within the parent agency . In addition , consumers' cooperatives are exempt from paying the tax on sales of agri cultural products made on a commission basis. Collective farms are exempt on all of their sales, both of agricultural output and industrial output of their subsidiary enterprises. State farmsand other agricultural enterprises are exempt on sales of their agricultural output (except on sales to their own public dining enterprises). Agricultural output of collective and state farms purchased by pro curement agencies is , of course, subject to tax when resold by those agencies.

6. Payers of the Tax Payers of the turnover tax can only be state enterprises and organizations, or enterprises of consumers' cooperatives and social organizations , which operate on a khozraschet basis and have both an independent balance sheet and a settlement account in a credit institution.44 In 1948 , there were 123,300 payers of the turnover tax, but by 1957 this number had been reduced , through the elimi nation of small payers, to 58,200.45 The number of payers has been on the rise again in recent years due to the increase in direct deliveries of goods from producers to consumers. 46 The identification of turnover tax payers, viewed for the various sectors of the economy as a whole

95

and for particular classes of products within each sector , is highly complicated . As a first step in describing this complex picture, it is necessary to discuss two basic principles which bear on the determination of the payer . One principle requires that each product be taxed only once during its passage from producer to consumer . This policy of one- time imposition holds true so long as a product remains in its original form and retains its identity as an independent product. Products which are usable both in original form and as components or materials for other products, however, may be taxed more than once. For example, mirrors may be purchased by a furniture factory at prices in cluding the tax and sold as part of furniture, at prices which also include the tax. Other products taxed at successive stages of processing in this manner include grain and vodka, flour and confec tioneries, and cloth and garments.47 The tax rate on the final product, therefore, understates thetotal tax component in the price in many instances. In certain cases, taxable products undergoing further processing are exempted ; in other cases, products which are transferred for further processing from one shop to another in the same factory may be taxed . 48 The second principle used in determining the payer is that the tax may be levied only on products of the seller's " own production " or " own procure ment." These concepts have a specialmeaning in the turnover tax system . 49 The products “ of own production ” ( sobstvennogo proizvodstva ) con sists of: ( 1) Products made by an enterprise from its own materials in its own production workshops; (2 ) products manufactured by another enterprise , under contract, from materials supplied by the contracting enterprise; and (3 ) products extracted by an enterprise at its own site and further proc essed by the enterprise. The products “ of own procurement " ( sobstvennykh zakupok) consist of: ( 1) Agricultural products obtained , in accordance with procurement regulations, from state farms, collective farms, private plots , and subsidiary economic units; and ( 2 ) products obtained , at prices which do not include turnover tax , for the purpose of further resale ( e.g., products purchased by wholesale organizations of republican ministries of trade from industrial enterprises ) . Any product purchased at a price which includes the turnover tax is viewed as a product “ of someone else's " ( chuzhogo) production or procurement and there fore is not subject to another levy of the tax unless, as indicated above, it is processed into another product. Generally speaking, payers of the turnover tax may be either the enterprises producing the taxed product or the wholesale organizations which transmit it to the retail network . Transfers of goods within the wholesale network , known as

96

MAJOR STATE REVENUES

turnover (Unutrisistemnyy oborot) , intrasystem The tax generally are not subject to the tax. usually is levied at the point at which a product leaves the wholesale system . Retail organizations do not pay the turnover tax on products acquired either from wholesale organizations or directly from industry. They do pay a small amount of tax , but only on products procured or produced by enterprises attached to the retail network itself. The identity of the payer does not follow a regular pattern and may depend on such factors as the type of product, the availability of an appropriate whole sale organization , the manner in which the product is delivered or contracted for , and the type of price and tax rate in use.

For certain products, producing enterprises pay the tax on all the output, regardless of the manner Some of the more important of distribution . industrial products to which this applies are the Alcoholic beverages ; metal house following : wares; jewelry , cultural items ( sporting goods, musical instruments, etc.) ; most consumer dura bles; electricity ; gas; selected textile , leather, and food products ; consumer products of the chemical industry; all output of local industry ; and all output of enterprises attached to social organizations, including consumers' cooperatives , In other cases, the tax may be paid either by the producer or by the wholesaler . Since the selection of the payer in these cases is based on the type of wholesale system involved , the more important wholesale distribution systems which participate in turnover tax payments are examined briefly below : ( 1) Wholesale networks subordinated to the republican ministries of trade which handle certain categories of goods produced by the light and food industries. Selection of the payer in this system is especially complex and will be taken up below . ( 2) Main administrations attached to republican Gosplans. There are two different types of such administrations, one for vegetable oil, oilcake, and other industrial foodstuffs (glavpishchesnabyt syre ') , and one for petroleum products (glav Payment under this system is nefte snabsbyt) . usually made by the wholesaler .

( 3) Agricultural procurement agencies subordi nated to the State Committee for Procurement attached to the Council of Ministers U.S.S.R. The agencies pay the tax on virtually all procurements , including products orginally purchased by cooper ative organizations and then transferred to pro curement agencies . (4 ) Other systems, which include: The so called specialized networks, which distribute the goods of productive enterprises of nonindustrial agencies (notably the Ministries of Health , Com

munications, and Culture ); the All -Union Agricul tural Equipment Association (Soyuzselkhoztekh nika ), which distributes equipment and supplies to collective farms, state farms, and subsidiary agricultural enterprises; and, formerly , branch administrations for supply and sales (glavsnabsbyty) attached to republican or regional sovnarkhozy , which distributed certain consumer durables, con struction materials, and other taxable products , In all these systems, the tax is usually paid by the producing enterprise.

Wholesale networks subordinated to the repub lican ministries of trade, which were mentioned above, serve as sales agencies for the light and food industries and have an extensive network of warehouses, offices, and supply bases in both producing and consuming areas. In each republic , the system is generally organized into 10 offices which are specialized as follows: 51 (a ) Meat, dairy products , and fish (m yasorybtorg ) ; (b ) confectioneries and groceries (bakale ya) ; ( c ) textiles (tekstil'torg ); (d ) clothing (torgodezhda ); ( e ) footwear (obuvtorg) ; (f) haberdashery goods (galantere ya) ; ( g) cultural articles (kul'ttorg ) ; (h ) household appliances and products (khoztorg ); (i) lumber and construction products ( lesostroytorg ); ( j) jewelry ( yuvelirtorg).

Only the first six of these wholesale trade offices pay turnover tax on their sales ; in the other offices the producing enterprises generally make the tax payment. Even in the first six , however , not all sales are taxed at the wholesale stage . Purchases from local industry and consumer cooperative enterprises are taxed at the producer stage . Purchases from enter prises subordinate to industrial ministries (and formerly to sovnarkhozy) are extensively taxed at the wholesale stage, but there are exceptions which relate to two major types of wholesale sales warehouse turnover (skladskoy oborot) and direct or transit turnover (tranzitnyy oborot). 52 Although warehouse turnover is taxed at the wholesale stage , transit turnover is taxed at this level only when the wholesale organization handles all the accounts and makes the payments. This is accomplished by having the shipping enterprise submit its bill either to the wholesale organization or to the The purchaser in the name of the wholesaler. latter pays the producer, collects from the pur chaser , and pays the tax . In somecases , however , the wholesaler does not participate in the accounts, in which event the producer bills the purchaser

97

THE TURNOVER TAX directly and makes the tax payment. This last case is still considered part of wholesale turnover since the wholesale organization organizes such sales on the basis of general contracts between itself and retailers.

The sparse information available on the share of the various types of turnover tax payers in total tax payments is often obscure and contra dictory. A longstanding controversy among Soviet economists over the proper stage for making the payment contributes to the confusion . In what appears to be the most reliable report, the shares of the various types of payers in total turnover tax payments recently have been as follows: 53

their own independent balance sheet, and collective farms. It is not known whether enterprises and organizations attached to the Ministry of Defense and to the security agencies are included . 7. Types of Prices and Methods of Computing the Tax Computation of the turnover tax is based on the price at which a product is sold . There are several different methods of computing the tax from the price , and numerous types of prices on which the tax is based. The following discussion will briefly outline the types of prices, then describe the various methods of computing the tax .

Percent Industrial enterprises paying at the place of production .. Industrial enterprises paying at the place of sale 54 Supply - and - sales organizations selling petroleum products , gas, electric power, and vegetable oils, and grain procurement agencies . Wholesale trade organizations (of ministries of trade)

20 17

20

43 100

All enterprises and economic organizations which make payments into the budget are listed by the local organ of the Ministry of Finance in the rayon or city of their location in a registration book for payers of the turnover tax and other payments to the budget (kniga po uchetu plateľ These financial organs impose shchikov ).55

stringent requirements on turnover tax payers to report promptly on such matters as changes in location or name, arrangements with superior agencies for centralized tax payments , and the formation of new enterprises. However , enter prises and organizations attached to theMinistry of Defense , to the republican ministries for the protection of public order, and to the Committee of State Security are not required to register.

All prices of state and cooperative trade are planned and approved by governmentalorgans. Only the prices used on the collective farm market ,where collective farmers sell theproducts of their private plots , are determined by the forces of supply and demand, but these sales are not subject to the turn over tax . The government establishes two sets of prices for consumer goods produced by union and republican industry : " enterprise wholesale prices" and " retail prices. These prices, which are published in price lists , serve as guides for trans actions of the state and cooperative trade systems and as bases for the computation of turnover tax For each listed product, the price payments . list includes a detailed description, an identification number , the stipulated price , and the markup or discount which can be applied by wholesale or retail organs.58 The enterprise wholesale price can be con sidered a basic price in the sense that it is a standard price charged by producers for the sale of a product when it leaves the factory and enters the distribution network ( see figure 6-1) . It consists of full production costs and the profit of the

Figure 6-1.--TYPES OF PRICES AND THEIR COMPONENTS Retail price ( in special cases )

In addition to the registration book , each local financial organ maintains a checklist (kontrol'nyy spisok ) of all khozraschet enterprises and organi zations located in its territory regardless ofwhether or not they pay taxes.57 This list is a device for determining whether all potential payers of the turnover tax are entered in the registration book . It is compared annually (as of January 1) with information from a variety of sources, such as credit institutions, procurement organizations, communal economy and housing organizations, and the other departments of the financial organ , such as those devoted to personnel, income tax, and state insurance . The checklist does not include organi zations and institutions supported by the budget, enterprises and organizations which do not have

Budgetary difference Retail price ( ordinary ) ..

Profit Retail markup

Cost

Industry wholesale price

Profit Wholesale markup

Cost

Enterprise wholesale price.. (with turnover tax )

Turnover tax Enterprise wholesale price . ( without turnover tax )

Producer's profit Production cost

98

MAJOR STATE REVENUES

producer ; it does not normally include distribution The cost component of the enterprise costs. wholesale price is ordinarily calculated as an average cost for the entire branch of industry producing a given product. The profit component is calculated as 59 a percentage of the average production cost. The enterprise wholesale price usually excludes the turnover tax charge , butmay sometimes include Whenever Soviet writers refer to the enter it .60 prise wholesale price , they generally qualify it as being “ with turnover tax " or " without turnover tax." The turnover tax is excluded from the enterprise wholesale price in the following two cases: (1) When products , such as textile goods, clothing and knitted goods , footwear, or confectioneries, are distributed by wholesale organs subordinate to administrations of the republican ministries of trade or to planning commissions , and are sold by the producers to the wholesale organs of these administrations ; and (2 ) when goods are sold by producers directly to nonmarket consumers who are exempted from payment of the turnover tax . The turnover tax is included in the enterprise whole sale price, and therefore paid by the producer , primarily when products are shipped by the producer directly to the consumer under the system of transit delivery , without participation of a whole saler in the transaction . Between the enterprise wholesale price and the retail price lies the " industry wholesale price." This is the price at which wholesale organizations sell to the retail network . Only a few products 61 listed in price lists are assigned this price ; in most cases it is derived from the retail price by deducting the“ trade" or retail markup 2 The indus try wholesale price can also be derived by adding the turnover tax charge and the wholesale markup to the enterprise wholesale price . Thus, the in clusion of the wholesale markup and the exclusion of the retail markup are the distinguishing features of the industry wholesale price . An industry whole sale price is established for petroleum and gas products , and other goods purchased primarily by nonmarket consumers. 63 Finally , the retail price consists of all the components which make up the prices charged by the seller to the retailer plus a retail markup added as the last element of retail price formation . Both retail and wholesale organizations operate on a khozraschet basis and their markups therefore consist of the two components of distribution costs and profit. The retail price, less the markup, is used when industrial enterprises sell goods directly to retailers; after the markup is added by the retailer, the full retail price is used for the sale of goods to ultimate consumers.

The price structure of most products therefore consists of five elements : Production cost, profit

of the producer, turnover tax, and wholesale and retail markups. For some products, however, the price includes a sixth elementcalled the “ budgetary difference" (byudzhetnaya raznitsa ). The budgetary difference is paid into the budget in the same manner as the turnover tax , and in effectrepresents a separate tax charge . It is frequently employed, as in the case of oil products, where a fixed rate per ton is levied on all sales, and an additional levy 64 is imposed on sales to particular consumers. Three distinctmethods are used to compute the turnover tax: (1 ) The difference method ; (2 ) the percentage method ; and (3) a fixed rate per unit of quantity.

( 1) The difference method is used when two prices are fixed for a product. The tax is computed as the difference between the retail price - less the retail markup ( and , where appropriate, less the wholesale markup) and the enterprise wholesale price. This method , the most common , is used for as much as 80 percent of all products in state retail trade . 65 It is used extensively for light and food industry output, for which wide assortments of 66 goods and varying rates of profitability prevail .

( 2) The percentage method involves the use of a tax rate defined as a percentage of either the full retail price or the retail price less the retail markup ; i.e., where markups are applicable they can be compensated for either before or after the percentage rate is applied .67 This system is commonly used in heavy industry where a limited assortment of goods is produced by each enter It is also used for all output of local prise . 68 industry and of enterprises attached to social and consumers' cooperative organizations.69 ( 3) The method of a fixed rate per unit of quantity is used for gas and oil products and for products obtained through the agricultural pro curement system . 70 In order to facilitate tax payments , use is some times made of temporary average rates calculated from the payments of the previousmonth ,with sub sequent adjustment for the tax actually due. This arrangement is discussed below in connection with the payment system , 8.

The Payment System

The outstanding characteristic of the turnover tax payment system is the special effort made to expedite the flow of revenue into the budget. To this end, the payments are calculated by the payers themselves, who also authorize Gosbank to transfer the amount of the payment from their accounts directly into budget revenue accounts . The organs of the Ministry of Finance subsequently verify the calculation of amounts due on the basis of periodic

THE TURNOVER TAX reports submitted by payers, and compare these with reports from Gosbank on the amounts trans ferred into the budget. The frequency of payment employed by a given payer is established by the Ministry of Finance , in accordance with the type of products involved or the size of payment . There are six categories of frequency in use , ranging from immediate and daily to quarterly . These categories are described below , and classes of together with the types of reports payers associated with them . 71

(1 ) Payment of the tax upon conclusion of sale. This is an unusual arrangement employed only by the alcohol, liquor, and vodka industry, and , for some sales, by the sugar industry . Under this arrangement, the bills submitted to the purchaser show the amount of the turnover tax due on each sale ; upon payment of the bill by the purchaser , Gosbank automatically credits the budget of the purchaser's territorial unit in the amount ofthe tax. The producing enterprises are responsible for submitting monthly reports to their financialorgans, ( 2 ) Daily payment of the tax .

In terms of the

volume of tax receipts , this is the most important arrangement. It is used by wholesale systemsof the ministries of trade on sales of textiles, clothing, footwear, and groceries, and by certain other The payment is due three days after agencies. In order to facilitate completion of the sale , computations, average rates derived from sales of previous months are widely used, with subsequent adjustment at the end of the month . Organizations making daily payments are required to notify financial organs of their payments six times per month , in addition to submitting a monthly report. ( 3) Trimonthly payments based on current sales. This system is the most common ; it is used by all organizations (other than those in the first two categories) whose average monthly payments in the previous year exceeded 2,000 rubles, as well as by organizations selling confectioneries, salt, margarine, brewery products , wines, cosmetics , petroleum products, and certain other products . The payers are required to report three times a month (by 10 - day periods) as well as at the end of the month . The monthly report is used for adjusting payments made on the average rate basis .

(4 ) Trimonthly payments based on sales of the previous month . This arrangement may be used when the accounting system makes rate calculations on current sales difficult, as in the electric power industry. Each 10 -day payment is calculated as one- third of the previousmonth's payment. Adjust ment for actual sales in the currentmonth is based on the monthly report. (5 ) Monthly payments. This system is used primarily by organizations whose average monthly

99

payments in the previous year were between 100 and 2,000 rubles. Newly established enterprises also use this system for the first three months. Payments are based on actual sales as reported monthly . (6 ) Quarterly payments . Organizations whose average monthly payments in the previous year did not exceed 100 rubles are permitted to use this system . Payment is based on actual sales as shown in a quarterly report. It is noteworthy that for all payers, except those minor payers making quarterly payments , a month is the longest time period for which reports are submitted . Annual reports devoted to tax payments are not required, 72 although payers annual ac counting reports contain data on total turnover tax payments made during the year.73 Financial organs are responsible for verifying the correctness of tax payments . They maintain a detailed schedule (pasport) of rates for each payer, together with various related information . They can require additional data from payers, and can assess additional payments in the event of underpayment. Overpayments are usually credited to the amounts due in a subsequent period . Receipts of turnover tax by the budget are partially offset by amounts paid out of the budget described as “ payments charged to turnover tax" (vyplaty za schet naloga s oborota ). The magnitude of these payments on a national scale was made public for the first time in the 1966 budget handbook , which reports total gross collections of the tax by republic (kontingenty), and total payments charged These payments ranged from 910 to the tax . 75 million rubles in 1950 to a high of 3,418 million in 1961, and totaled 2,717 million in 1965. The source also makes it clear that total turnover tax revenues

as reported in the annual statistical handbooks are net of such payments . Several types of payments , which are described as being charged to “ turnover tax" (and presumably account for at least part of the difference between gross and net receipts ) have been identified . These are as follows: 76 (1 ) Payments made to retail trade organizations for losses sustained as a result of the differential zonal or urban - rural retail prices which exist for certain products . Losses are incurred when pro ducts are sold in a lower price zone (or market) than intended at the timeofpurchase. Differentiated trade markups, with no differences in retailprices, can also result in such losses. 77 (2 ) Payments made to retail tradeorganizations for the expenses of hauling certain goods (grain products , salt, petroleum products ) more than 11 kilometers from the final shipping terminal.

100

MAJOR STATE REVENUES

Hauling costs for less than this distance are allowed for in established trade markups. This payment applies primarily to retail trade activities in rural areas.

total turnover tax receipts were left to be dis tributed among all of the 15 republics in 1956. This share was raised to a high of44.7 percent in 1961 as a consequence of the reorganization of industry and construction on a territorial basis which

( 3) Payments made to plants supplying ethyl ether (efiry), aldehydes, and raw and refined alcohol to the synthetic rubber and polyethylene industry . These products are accounted for in the plants at wholesale prices less turnover tax , but purchases are made from them at special, exempted prices. Payments from the budget charged to turnover tax in these cases are in effect an indirect subsidy to the consuming industries.

resulted in the transfer of enterprises from union to republican agencies. The share of the turnover tax among the total revenues ofthe union budget has dropped , though somewhat unsteadily , to a level under 50 percent during the years shown in the table . As a share of the total revenues of the

As indicated in chapter V , the first two types of payments , at least, appear in thebudget expendi ture classification under division 221 , section 5 . This raises some significant questions pertaining to budget accounting as reflected in published statistics. If the " payments charged to turnover tax" are not included in reported budget revenue , consistency calls for them to be excluded from budget expenditures as well. This in turn raises the possibility of " gross" and " net" versions of budget expenditures comparable to the " gross” and " net " turnover tax revenues . The third payment listed above may also fall under the same expenditure section , since it is described as being charged to the turnover tax although no confirmation of this has been found . It should be noted, in this regard , that some types of price differentials are not connected with the turnover tax. For example , prices atwhich agricul tural products are bought and sold may be higher or lower than the fixed bookkeeping prices used by procurement organizations; this can result in in direct subsidies to certain industrial consumers similar to the alcohol products subsidy cited above. However, a separate bank account for regulating the price effects of such transactions is maintained in Gosbank , and the budget enters the picture only as the final balancing element. 9. Allocation of the Tax to the Budgets The amount of turnover tax to be collected according to plan in the entire territory of the U.S.S.R. each year is divided between the union budget and the state budgets of individualrepublics. The legal provision for this division is included in the annual budget laws which are published in the record of the U.S.S.R. Supreme Soviet (Vedomosti Verkhovnogo Soveta SSSR ) . The distribution of the total turnover tax receipts between the union budget and the combined budgets of all republics, as well as the contribution of the turnover tax to the total revenues of these two sets of budgets , is shown in table 6-6 . As data in this table show , as little as 10.8 percent of the

combined budgets of all republics, the turnover tax has amounted to about 30 percent since 1959 .

Table 6-6 .-- TURNOVER TAX RECEIPTS -- DISTRIBUTION BE TWEEN THE UNION BUDGET AND STATE BUDGETS OF ALL THE REPUBLICS AND CONTRIBUTION TO TOTAL REVENUES: 1950 TO 1965

( In percent) Distribution of total receipts Year

State Union budgets of all budget republics

1950 .... 1955 . 1956 .. 1957... 1958 .... 1959...

87.7 86.0 89.2 78.8 59.8 65.1

1960 .... 1961.. 1962 ... 1963... 1964 .. 1965 ...

64.7 55.3 56.6 59.7 60.6 57.3

12.3 14.0 10.8 21.2 40.2 34.9 35.3 44.7 43.4 40.3 39.4 42.7

Contribution to total revenues

State Union budgets of all budget republics 63.7 48.7 54.0 55.1 54.5 53.6 52.2 48.0 49.1 49.3 51.0 45.8

29.7 24.8 17.6 25.1 36.2 29.9 28.9 32.6 30.9 29.1 28.5 30.6

Source : Based on data in Min . fin . , Gos , byud . SSSR , 1962, pp . 12 , 66-70 , 93 ; Min . fin . , Gos. byud . SSSR , 1966 , pp . 14 , 69-72 , 95 .

The process of determining the portion of turn over tax collections to be retained by individual republics, which is very complex, is based on the role of the turnover tax as the primary budget balancing mechanism throughout the system of budgets . The relative size of expenditures in the union budget vis- a - vis the budgets of republics depends on prevailing policy regarding the degree of administrative centralization . In periods of centralization , when agencies of the central govern ment themselves undertake and finance major eco nomic projects , a larger portion of the turnover tax is channeled into the union budget; in periods of de centralization , the portion allocated to the union budget is reduced , When retention of the total turnover tax revenue collected by any given admin istrative unit is insufficient to balance its budget,

THE TURNOVER TAX subsidies from required .79

the budget of its superior unit are

Each year the budget law specifies the percentage of turnover tax which each republic can retain out of the total collections within its territory. Begin ning in 1958 , several of the republics have been permitted to retain the full amount of turnover tax which they collected: Kazakhstan in the years 1958 Turkmenistan in the years 1961 through 1965, through 1965, Armenia in 1964 and 1965 , and Tadzhikistan in 1963. Except in Tadzhikistan , full retention of the turnover tax was not sufficient to provide a balanced budget in these republics, however , and annual subsidies from the union budget 80 were made . Although a number of factors are involved , high retention rates in themselves suggest unusually high levels of expenditures on measures financed by republican budgets . Most republics submit a part of the turnover taxes which they collect to the union budget, yet they also receive transfers from the union budget in order to balance their budgets. This arrangement is one ofthe tools used by the central government to exercise control the budgetary transactions of individual

republics. The share of the turnover tax among the total revenues of individual republics varied greatly during the years 1950-65. The highest share re corded was in Kazakhstan in 1955 , when turnover tax receipts represented 72.6 percent of the republic's total budget revenues. The lowest share was recorded in Latvia in 1952, when turnover tax receipts represented 2.3 percent of total revenues. Average shares for all the republics during these years ranged between 18 and 36 percent (table 6-6 ). The data for the post- 1957 period should be viewed in conjunction with the fact that republican budgets grew in size at the expense of theunion budget after the reorganization of industry and construction , Thus, turnover tax contributions to republican budgets in this period did not exceed previously attained levels , in spite of the fact that a greater share of turnover tax receipts was retained by the republics.

The process by which a portion of total turnover tax receipts is allocated to republican budgets is repeated at lower levels when republics allocate a portion of their retained tax to oblasts or krays. These latter bodies, in turn, further allocate a portion of turnover tax receipts to their subordinate rayons or other units. 81 10.

The Turnover Tax and the Military Estab lishment

It is of interest to examine the ways in which the turnover tax might affect prices on acquisitions of For this purpose , the military establishment, purchases by the Ministry of Defense can be thought

101

of as encompassing three types: ( 1) Military hard ware; ( 2) producers' goodsof the sort consumed in both military and civilian sectors; and ( 3 ) con sumers' goods and related products . (1) There is no reason to believe that a tax is levied on military hardware. In addition to the absence of any rationale for such a tax , Soviet writers generally state that this is not done. ( 2 ) Producers' goods, by and large, are not taxed in the civilian economy and this may be assumed to hold true for purchases by themilitary establishment. Petroleum products, electric power, and gas are exceptions, however, and are taxed in sales to both market- fund (i.e., retail) consumers and productive users (at differential rates). There is some evidence that, at least for petroleum prod ucts , Ministry of Defense purchases are also subject to the turnover tax . 83

Although it may appear surprising that a budget supported activity such as defense bears the expense of a turnover tax imposition , it should be noted that other budgetary organizations - particularly of the sociocultural type - are extensively subject to such charges.84 Furthermore, the tax on petroleum and gas may well serve as a kind of cost- adjustment factor for these products, inasmuch as geologic prospecting and test-drilling expenses are to a large extent not charged to production costbut are budget supported. Thus, though nominally profitmaking, these industries are indirectly subsidized and it is rational that the cost of this subsidy be distributed among all consumers, including defense . (3 ) Consumers' goods and related materials acquired by organizations of theMinistry of Defense may be grouped into : (a ) Those designed to be sold through theMain Administration of Trade ofthe Ministry of Defense (GUTMO ), and (b ) those designed for issue to servicemen free of charge . GUTMO is considered part of the system of state trade made up of workers' supply departments (ORSy) and similar retail agencies (prodsnaby). 85 These independent commercial organizations are attached to various ministries and agencies and provide retail outlets for the personnel of their parent agencies . Supplies to such retail agencies, including those of union subordination such asGUTMO , come from the market fund through the usual wholesale network and are subject to the turnover tax.86 Furthermore, enterprises and organizations be longing to GUTMO are not exempt from payment of the turnover tax on their output and from the obli gation to file tax reports. From these circum stances, it appears that GUTMO does not enjoy a tax exemption . It should be noted that if the alter native situation were to prevail, i.e., if GUTMO could purchase goods at prices not containing the tax and sell these goods at full retail prices , large profits could result. Such profits would be

102

MAJOR STATE REVENUES

subject to intraministry transfer and could be used to augment budgetary appropriations to the Ministry .

over tax is in part an indirect tax on the personal 89 income of the people .

The prices on consumer - type goods designed for government issue (group b ) are probably free of turnover tax , although no direct evidence on this has been found . As was noted above, purchases by the Main Administration for State Material Reserves attached to the Council ofMinisters U.S.S.R. are not

In 1957-58, a wide -ranging examination of prices, efficiency of investments, planning methods, prob lems of national income accounting , and related subjects included a discussion of the law of value and the nature of the turnover tax . At a session organized by the Institute of Economics of the Academy of Sciences in May 1957 , one of the main speakers, A. G. Kulikov, argued that the turnover tax is in part derived from the income of the people , particularly in the payments for vodka, other alcoholic beverages, tobacco, jewelry , and other similar products . This view was supported by other economists such as A. G. D’yachenko, V. S. Nemchinov , N. N. Kozel'skiy , and V. G. Venzher , but was opposed by Sh . Ya. Turetskiy , M. Z. Bor , G. A. Kozlov, M. A. Adonets , and D. D. Kondrashev ?

subject to a tax charge . Since “ reserves ” include defense reserves , this agency may conceivably act as a procurement agency for theMinistry of Defense. In this case , military acquisitions would be free of tax .

If a specific Armed Forces fund is incorporated in the materialbalances , it too is probably exempted from the turnover tax . Some support for this supposition can be found in the exemption granted to all enterprises attached to the Ministry of Defense, other than those attached to GUTMO and other than on external sales of the Military PublishingHouse . In summary , it appears that Ministry of Defense purchases are priced to include the turnover tax on at least some of those producers' goods that are generally taxed in the civilian sector , and to exclude the tax on nonretail uses of consumer - type goods that are extensively taxed in the civilian sector (both on sales to the population and on sales to budgetary institutions of the sociocultural type ). While the tax appears to be levied on goods sold through GUTMO , this retail trade system is un doubtedly operated on a commercial basis and its purchases would not be reflected in the defense budget appropriation .

II. Current Controversies Concerning the Tax

The relaxation of tight control in the ideological spheres of Soviet life which followed the death of Stalin created an atmosphere more conducive to an uninhibited search for better and more reasonable answers to a variety of economic questions and developments. As part of this search there have been three major discussions concerning the turn over tax which are briefly identified and sum marized here. One such discussion has been concerned with the economic nature of the turnover tax. The traditional view maintains that the payments of turnover tax are derived from the “ surplus products created in the state sector of production by socialist enter prises, that this “ surplus product" constitutes social property , that the turnover tax is not a markup on price and does not therefore come from the personal income of people; hence , it is concluded that the 88 turnover tax is not a tax , On this basis , Soviet writers often argue against “ bourgeois economists and reformists" and their assertions that the turn

The nature of the continuing discussion of these topics indicates a wider admission of the " tax" element in the turnover tax and a weakening of the traditional view . One result of the discussion has been the raising of new arguments for the need to establish prices closer to the level of a theoretical value by raising the prices for producers' goods and reducing or maintaining those for consumers' goods. It is argued that such a reform in prices would make it possible to determinemore accurately national income, the efficiency of investments, and more workable methods of planning. It is possible that the discussion may in the future lead to chang ing the nameof the turnover tax, Several new names have already been suggested: “ the net incomeofthe state " ;91 " deductions from the turnover" ; 92 «“ the centralized net income of the state " ; 93 and “ state income. " 94

A second discussion was prompted by the rapid and continued rise of the profit tax as a proportion of budget revenue and the accompanying decline of the turnover tax , Most Soviet economists have accepted the view that the differences between turn over tax and profits are primarily functional. The turnover tax is transferred to the budget in its entirety; it constitutes themain source of budgetary revenue ; and it provides a smooth channel for the flow of funds into the budget in regular and fixed sums unaffected by fluctuations in production costs . On the other hand , profits are divided between the budget and the enterprise; the portion paid to the budget is not easily predictable because of fluctu ations in costs ; and the portion retained by the enterprise plays a more important role in its planned expenditures on capital investment, the expansion of working capital, and the system of incentives .

Thinking primarily about the stability of the budget and indicating an implicit preference for

THE TURNOVER TAX - PROFITS close control by central state organs over the allocation and application of funds, some economists have argued that the diminishing difference between turnover tax and profits due to the expansion of profits is bound to have undesirable effects . The stability of the budget , these economists say, will not be as high as it could and should be because larger amounts of profits may be retained by enterprises, because the payments in the form of profit deductions are less definite and regular than those of the turnover tax , and because the khozraschet system may be weakened . 95 Because high profitability was being achieved in some producers' goods sectors, A. Zverev , former Minister of Finance, proposed in 1958 that theturn over tax be introduced into them . No definite conclusions seem to have emerged from this discussion . A complete merger of turn over tax and profit deductions is not at present contemplated , as is evident from a statementmade in May 1964 in an unsigned article in the journal Finansy SSSR that “ in the near future the necessity of retaining two forms of distributing net income in the forms of profit and turnover tax ... will persist." 97 Finally , an extensive discussion has centered around the proposal to transfer payment of the turnover tax from wholesale organizations of the republican ministries of trade to the producers. The proponents and opponents of this proposal are divided along institutional lines: economists of the Ministry of Finance advocate the transfer whereas the economists of Gosplan , Gosbank , and the The reasons ministries of trade oppose it. 98

advanced by the proponents of the transfer include the following : Turnover tax payments are derived the net income formed in the sphere of from material production and payments of the tax should therefore be made by organs close to it , i.e., the producers; payment of the turnover tax by producers will increase the responsibility of enterprises in planning it; the transfer will make possible faster accumulation of funds in the budget , simplify the computation , improve the control of financial organs, and even make it possible to reduce the apparatus of the financial organs; the payment of the turnover tax by producers will facilitate the of national income for republics and calculation 99 regions. Opposition to the transfer appears to be based on the considerations that greater credit resources and a larger volume of money would be needed to finance the payment at an earlier stage . The present system , these opponents argue, also permits a more even distribution of tax revenues among regions (some 85-90 percent is collected in the region of sale) thereby facilitating the balancing of regional budgets. Advocates of the change appeared to be prevailing at one point, and even had Khrushchey's endorsement, but as of the beginning

103

of 1967 the longstanding controversies were still unresolved . B. PROFITS

Next to the turnover tax , the largest part of state revenue is that derived from the profits of enterprises and economic organizations. In 1965 , 30.4 percent of total actual budget revenues was derived from this source, and it was expected to 101 Known provide 33.7 percent in the 1967 budget. termi Soviet in " as the “ deduction from profits nology, this revenue is by nature a tax and will be referred to here as the " profit tax . The profits and profit those emanating from economic organizations khozraschet basis . The

tax discussed here are state enterprises and which operate on a profits of consumers'

cooperatives and collective farms are not subject to “ deductions to the budget," although they are subject to " income taxes." These latter taxes are discussed in the next section on " other revenues" of the state budget.

This section deals with various aspects of profits and the profit tax : (1) The determination ofprofits in the enterprise ; ( 2) “ profitability ” (rentabel nosť ), or the rate of profit , and its role as a measure of the efficiency of the enterprise; (3 ) the origin of profits by sector of the economy and branch of industry; ( 4 ) the general distribution of profits between the part paid into the budget and the part retained for use of the enterprise or its superior agency; (5 ) methods of computing the profit tax and its significance as a source of revenue for the various budgets ; and (6 ) specific uses of profits The final part (7 ) retained by the enterprise . contains a brief summary of recent changes in the attitude of party leaders and Soviet economists toward profits , profitability , and the profit tax , and a short description of the reforms initiated in October 1965 . 1. Determination of Profits in the Enterprise The process of profit formation in the Soviet Union starts with the determination of prices by the state authorities . All prices,with the exception of those on the collective farm market, are determined by administrative decision , and in setting prices an allowance is usually made for profit expressed as a percentage of average production costs in the entire branch of industry producing the commodity . (For certain products , such as coal, prices may be set below cost, re sulting in a planned loss.) The profit level is set, in combination with turnover tax rates and distri bution markups, to achieve one or more specific objectives, such as attaining a desired balance between supply and demand , stimulating the produc tion of particular products , encouraging more economical use of materials, or providing incentives

104

MAJOR STATE REVENUES

for the introduction of new technology, in addition to the general objective of obtaining a sufficient accumulation of financial resources. 102 The use of a single average profit rate in the price set for a particular product does not result in a uniform rate of profit for all enterprises producing the product ,however , because production costs differ widely among enterprises. Thus, some enterprises may earn large profits , others may earn only nodest ones, and some may operate at a loss which must be covered from other sources . Even entire branches of industry may operate at a loss as a result ofdeliberate price formation policy . Losses of enterprises are covered by transfers of profits from other enterprises (previously within a branch administration of a sovnarkhoz or between different branch administrations of a sovnarkhoz), by grants from the budget, or by a combination of these methods. The losses of an entire branch of industry or of a sector ofthe economy are probably covered by subsidies from the budget, although intersectoral transfers could have been made in such

Given the key targets, the enterprise possesses the necessary information to calculate the financial results embodied in its production program .' 104 Among the more important calculations is the amount of profits to be earned in the planned year , and for this purpose, special methods have been devised . Prior to 1963, an average relative- cost indicator, expressed as kopecks expended per ruble of marketable output (tovarna ya produktsiya ), was assigned by planning agencies to each superior organization ( sovnarkhoz , ministry ) and passed down to each subordinate enterprise. Under a new system introduced in 1963, each enterprise is as signed two types of cost indicators: (1 ) The total cost of total marketable output, expressed as an absolute ruble amount; and (2 ) a relative indicator expressing cost in either (a ) rubles per physical unit of output, (b ) kopecks per ruble ofmarketable output (the relative indicator still used for all superior agencies), or (c ) a percentage relating to the profitability achieved by the enterprise in the previous year . 105 These relative indicators provide

multisectoral agencies as the sovnarkhozy .

a basis for three distinct methods of calculating the planned profits of an industrial enterprise . 106

Prices are but one factor determining profits , however. The other essential factors are set forth in the enterprise's tekhpromfinplan , which is an elaboration of the key targets (zadaniya ) assigned from above, such as the volume of output, the introduction of new kinds of products and the improvement of old products , the introduction and development of new technology, and production cost indicators. 103

In selecting a relative - cost indicator to be assigned to an industrial enterprise, the superior agencies are guided by the nature of the output. The pattern of relationships between type of output and relative cost indicator which the superior agencies have used, and the method of calculating profits which each relationship provides, is as follows. 107

Type of output

Relative - cost indicator

Method of calculating profits

Homogenous output (e.g., coal, ce ment , peat , oil , sugar , and elec tricity )

Rubles per unit of output

Direct method ( pryamoy schet)

Output which is predominantly com parable to output of the previous year

Percentage relating to the profitability achieved in the past year

Analytical method ( Variant I )

Output which is predominantly not comparable to output of the pre vious year

Kopecks per ruble of marke table output

Analytical method ( Variant II )

The directmethod ofcalculating profits is relatively It consists of the difference between simple . the sale of planned expected from receipts marketable output (in enterprise wholesale prices without turnover tax) and the planned cost of pro duction . Its main shortcoming, in Soviet eyes, is that it does notprovide detail on , and therefore does not reveal, the role played by individual factors in the formation of profit .

The two analytical methods are quite complex , but they have the virtue of highlighting such factors

as price changes, product-mix changes, and cost reductions, thereby facilitating the latter. Variant I is used by an enterprise when 80 percent or more of its output is comparable to its output in the previous year. Variant II is used by enterprises which have less than 80 percent of comparable output, as well as by experimental, repair , and most textile plants . Thesemethodswere introduced in 1963 in an attempt to meet the need for measuring the economic efficiency of enterprises with greater sensitivity and accuracy . Their adoption was a manifestation of the shift of emphasis from volume of output to economic efficiency. 108

105

PROFITS The detailed calculations involved in any of the three methods yield the total planned profits on marketable output. For purposes of financial planning, this total must be converted to profits on sales, as opposed to production , and a series or losses must be profits or of other types of of profits summary calculation A into account. taken illustrating the relationship among these cate gories is presented in tables 6-7 and 6-8 . Such a calculation may be attached to the tekhpromfinplan when it is submitted for approval, but no formal requirement or standard format is known to exist .

Table 6-7 shows the calculation of profits on sales of marketable output. This output pertains only to an enterprise's “ basic activity ," which is defined in terms of major sectors of the economy (industry, construction , agriculture, etc.). Market able output also includes the output of certain closely related auxiliary and secondary activities, such as machinery repair , toolmaking, internal transportation , or electric -power production , when the output is sold outside the enterprise or released to nonbasic activities; the term “ basic activity output " is usually employed synonomously to in clude these related outputs .

Table 6-7 .-- ILLUSTRATIVE CALCULATION OF PLANNED PROFITS ON SALES OF MARKETABLE OUTPUT ( Absolute figures in thousands of rubles )

Profit

Item

Cost

( 1) A.

Sales of marketable output : 1. Total value a . At factory -plant cost .... b . At listed enterprise wholesale price . 2.

B.

Adjustments : 1. Nonproduction expenses... 2.

C.

Components a . Initial stocks? .... b . Output during year .. c . Terminal stocks (deduct)

Differential between listed and expected prices ,

2.

At expected enterprise wholesale price ..

Rate (percent) ( 3); ( 1) x 100

(2)

( 3)

(4 )

5,448 (x )

(x ) 6,741

1,293

23.7

400 5,400 -352

476 6,715 -450

76 1 , 315 -98

19.0 24.4 27.8

+60

(x ) +24

-60

(x )

+24

(x)

1,257

22.8

(x )

Adjusted sales of marketable output : At full commercial cost.....

Amount ( 2 ) - ( 1)

Value

5,508

(x )

(x )

6,765

Not applicable . Includes shipped goods for which collection documents have been submitted to the bank but not yet paid .

Source :

Adapted from Rogovtsev, Finansovoye, 1961, pp . 41-44 .

Table 6-8 shows the calculation of " balance sheet" profits of the enterprise . The basic component is profit on the sale of marketable output (section A - 1 ). Certain components of this profit are subject to special deductions and uses. Section A - 2 of the table provides data on profits or losses on sales of other output and services , which include a variety of activities considered nonbasic , such as those assignable to some other sector of the economy (agriculture, procurement, external trucking , resale of purchased goods, etc.). 109 Section B provides data on a number of other types of income or profit and expenditures or losses . The most prominent among these are: (1 ) The housing and communal economy activities of the enterprise , which ordinarily operate at a

loss; and (2 ) the expenditures (losses) on themain tenance of various buildings and facilities put at the disposal of trade unions on a free - of - charge Other nonsale operations are seldom basis , 110 shown in examples of enterprise financial plans; such activities probably are taken into account in plans only if they arepredicted to be large . Section C consists of a single line showing the net results of the enterprise's economic activities in the three fields of operation , i.e., sale of basic activity and related (marketable ) output, other sales, and oper ations not involving sales . The two categories of “ basic -activity ” and “ balance - sheet " profits arekey statistical concepts encountered in several enter prise report forms and in published national statistics.

MAJOR STATE REVENUES

106

Table 6-8.-- ILLUSTRATIVE CALCULATION OF PLANNED " BALANCE - SHEET" PROFITS AND THE TAX - NORM BASE ( In thousands of rubles ) Source of profit or loss ( Type of activity ) A.

Profits on sales : 1. Marke table output of basic and related activities ( table 6-7) . a . Profits subject to special de ductions or tax rates.... ( 1 ) New types of cultural, personal, and household goods.... ( 2 ) Consumer goods made from waste ... 2 .

B.

D.

1,257 58

21 37

40 32

2. Profitability Measures The profit rate , or profitability (rentabel nost ), employed by Soviet economists in analyzing profits is usually calculated as the ratio ofprofits to costs of production (sebestoimosť ). It is also occasionally calculated as the ratio of total accumulations 113 (profits plus turnover tax) to costofproduction .

-14 22 -35

Operations not involving sales . 1 . Housing and communal economy ( loss ) ...

2.

C.

Sales of other output and services. a . Subsidiary agriculture output.. b . Fuel sold to workers and employees ( loss ) .... c . Other output and services .

Amount

data are provided in form No. 20 , which reports on balance - sheet profits , i.e., the net profits resulting from all activities carried on the so - called basic -activity balance sheet of the reporting unit. The balance sheet itself (form No. 1) shows total profits earned as per this concept, and profits from sales of marketable output. The final utili zation (distribution ) of these profits , however, is shown only in form No. 3 -with a considerable time lag, as pointed out below .

-12

Expenditures on maintenance of trade union , sport , and recreation facilities chargeable to profit ( loss ) ....

-23

Planned " balance -sheet" profits (A.1 + A.2 + B ) ....

1,262

Base profit for calculating the " plan norm " of profit tax ( C - A.l.a ) ......

1,204

Source : Adapted from Rogovtsev, Finansovoye , 1961, pp . 41-44 .

Finally , in section D , the calculation identifies a " base" profit, derived by deducting from planned balance - sheet profits those components subject to special deductions ( see discussion below on retained profits and deductions to incentive funds). This base profit is used to calculate the so - called “ plan norm " of profit deductions to the budget (tax ). This “norm " represents the ratio of the planned total annual profit - tax payment independently allotted earlier to the enterprise by its superior agency to the " base " profit as calculated . The " norm " is used primarily in recalculations of the profit tax designed to adjust the advance tax pay ments made on the basis of plan during the course of accounting periods and bring the payments into accord with profits actually earned.111 Profits actually earned are accounted for and reported in categories analogous to those used in plan calculations . These totals, together with the underlying detail, are reported annually in two of the basic reporting forms of an industrial enter prise : Parts A and B of form No. 12 , and form 112 No. 20 . The most detailed and comprehensive

Such profitability measures have little meaning as an indicator or analytical tool. They are, in effect, a restatement of the percentages used by planners to establish prices. They can be manipu lated by raising prices and the profit margin , or , when the turnover tax is included in the sale price , by raising or lowering the tax while holding prices constant. “ Profitability ” can reflect improvements in the efficiency of the production process in that it measures the extent to which production costs are below the planned level, but it does not measure the effectiveness with which resources are used .

Soviet economists have recently recognized the limitations of the profit - to - cost ratio . Under the management reforms currently being introduced , two new and closely related concepts of profit ability are used . These measure profitability as the ratio of profits, either before or after the newly installed “ payments for capital,” or the enterprise's average annual fixed and working capital. (See section B - 7 for a detailed account of these new measures.) The version using profits after " pay ments for capital" appears to be the critical measure used as a success indicator and a deter minant of incentive awards. 114 A direct result of the structured price - cost profit relationship established in the plans is that profitability has varied widely among and within the various sectors and branches . Among the individual branches of heavy industry , for example , profitability has varied as follows over the last decade : 115

Year

1955 ... 1958 . 1960 . 1964 .

Range of profitability (percent ) -2 -15 3 -20

to to to to

+18.5 +31.7 32 +60

107

PROFITS Among machine - building enterprises subordinate to the Moscow Sovnarkhoz in 1961, profitability varied from 4.4 to 56.5 percent, and among similar enter prises in the Leningrad Sovnarkhoz it varied from 118 10 to 122 percent . During 1964, the profitability of enterprises producing specific products varied widely : 117

Product

Alternating - current electric motors..... Milling machines .. Fertilizers..

Range of profitability ( percent)

-14 to +24 -4 to +30 -61 to +51

As noted in section 1 above , certain enterprises even entire branches of industry - may be scheduled in the plan to operate at a loss. This situation apparently is not a desirable one for enterprise directors, however , nor is operating at a loss when the plan calls for operating at a profit . In order to cope with these possibilities, the directors have learned to recognize various favorable and un favorable aspects of the system :

(1 ) The production of itemswhich have been well standardized is substantially more profitable than the production of items which require, or are subjected to , technical innovations. Thus, in 1961, a number of factories in Moscow producing com modities by means of a technology which remained unchanged for many years achieved a profit ratio of between 35 and 45 percent, while similar enter prises in which production equipment, materials , and processes were changed tomeet more advanced standards showed a profit ratio of only 4 or 5 per cent. 118 An analysis ofprofitability in 52machine building enterprises subordinate to the Central Urals Sovnarkhoz showed that the higher the proportion of new products in the total output, the lower the percentage of profit. Enterprises in which new products amounted to 10 percent or less of total output achieved a profitability of 27 percent; enter prises in which new products amounted to half of the total output achieved a profitability of only 11 percent. 119 (2 ) The acquisition of additional equipment can make it easier for an enterprise to achieve or even to exceed the planned volume of output and thereby to earn larger profits . This is because the investments of an enterprise for additional equip ment are financed by nonrepayable grants from the budget ; the additional capital outlays are reflected in costs only to the extent of the added depreciation charges. Under these circumstances , managers are usually inclined to request funds for additional investments even when the existing capacities ofthe enterprise still permit more intensive use . Fre quently , the returns on additional investments are disproportionately small, causing overall capital efficiency to drop correspondingly . Thus, well

endowed enterprises are able to achieve large profits even when operated inefficiently , while less favorably equipped enterprises may achieve rel atively smaller profits though run with the highest efficiency . ( 3) When an enterprise begins production of an improved or new product which requires the determination of a new price, the enterprise manager often favors the inclusion of high costs in the price because the profit margin to be included in the price is based on a norm of profitability expressed as a percentage of cost. Such situations lead to the paradoxicalresult thathigh costs prepare the way for large profits of an enterprise . ( 4 ) An enterprise may be able to enlarge its profits by concentrating efforts on the production of goods with high profit- earning capacity at the expense of goods with low profit - earning capacity. The requirement that output plans be met in terms of product -mix , as well as total volume, although ostensibly a condition for making incentive- fund deductions from profit,has apparently not succeeded in preventing this type of maneuver. Soviet authors frequently criticize the fact that many enterprises have been able to earn substantial profits by producing obsolete goods with limited or no demand at all. Such goods have piled up in the distribution network and , with the passage oftime, have become even more obsolete and difficult to sell .

3. Origin of Profits by Economic Sector Soviet statistical handbooks publish annual data on total profits earned , by sector of the economy and branch of industry. 120 These data may be described as “ net balance - sheet profits " ; they represent the total balance - sheet profits of all profitable enterprises minus the total balance sheet losses of all unprofitable enterprises . The netting is done on the basis of statistical groupings of individual enterprises, rather than groupings defined in terms of subordination to administrative agencies . As will be shown in the next section , this concept of profits, net of all losses, under states the amount of profits available for other uses in terms of actual plans , since some losses are in reality covered by resources other than profits. Net profits by sector of the economy are given in table 6-9 . The table shows the very rapid growth of total net profits ; they increased from 5.2 billion rubles in 1950 to 37.0 billion in 1965 , or more than six and one - half times . The rate of growth was most rapid during the Fifth Five - Year Plan ( 1951-55 ) when total net profits increased two and one - half times. The average annual rate of increase has declined since that time, although the amount and rate of increase for individual years has varied markedly , as can readily be seen in the table ,

MAJOR STATE REVENUES

108

Table 6-9 .--NET PROFITS , BY SECTOR OF ORIGIN : 1950 TO 1965 (Absolute figures in millions of rubles. Percentage figures may not add due to rounding )

Secto Total .

State sectors .. Industry ..... Construction .. Agriculture and procurement. State farms . Procurement Transportation and communications . Trade...... Supply and sales . Communal economy . Other .... Consumers ' cooperatives .. PERCENT

Total .. State sectors...

Industry ..... Construction .. Agriculture and procurement . State farms . Procurement.. Transportation and communications.... Trade .... Supply and sales . Communal economy . Other .... Consumers ' cooperatives ...

1950

1955

1958

5,221

12,577

5,033 3,211 -481 -238 -238

1959

960

961

1962

1963

1964

1965

20,112

22,966

25,184

26,789

30,599

30,676

34,885

36,960

12,033

19,303

22,093

24,367

26,133

29,819

29,842

34,008

36,062

10,677 818 515 (NA ) (NA ) 3,507 1,300 897 491 1,098

12,515 861 591

14.017 1,099 104 -504 608

18,586 1,076 208 (NA) (NA ) 4,971 1,193 1,246 687 1,852

21,912 1,358 -211 -211

4,435 1,308 1,172 591 1,641

15,297 1,037 339 -361 700 4,724 1,177 1,029 648 1,882

19,600 1,093 -764 -764

1,124 389 96 199 733

6,674 -36 381 -151 532 2,344 1,052 635 358 625

5,273 1,152 1,319 631 1,538

5,936 1,119 1,339 704 1,851

22,548 1,605 100 (NA ) (NA ) 6,521 1,044 1,555 748 1,941

188

544

809

873

817

656

780

834

877

898

100.0 96.4

100.0 95.7

100.0 96.0

100.0 96.2

100.0

100.0

100.0 97.3

100.0

97.6

100.0 97.5

100.0

96.8

97.5

97.6

61.5 -9.2 -4.6 -4.6

55.7 4.4 0.4 -2.0 2.4 17.6 5.2 4.7 2.3 6.5 3.2

57.1 3.9 1.3 -1.3 2.6 17.6 4.4 3.8 2.4 7.0 2.4

60.7 3.5 0.7 (NA) (NA ) 16.2 3.9 4.1 2.2 6.1 2.5

17.2 3.8 4.3 2.1 5.0

4.3

54.5 3.7 2.6 (NA ) (NA ) 17.0 5.9 4.4 2.3 5.8 3.8

62.8 3.9 -0.6 -0.6

3.6

53.1 4.1 2.6 (NA ) (NA ) 17.4 6.5 4.5 2.4 5.5 4.0

63.9 3.6 -2.5 -2.5

21.5 7.5 1.8 3.8 14.0

53.1 -0.3 3.0 -1.2 4.2 18.6 8.4 5.0 2.8 5.0

17.0 3.2 3.8 2.0 5.3 2.5

61.0 4.3 0.3 (NA ) (NA ) 17.6 2.8 4.2 2.0 5.3 2.4

(NA ) (NA ) 3,912 1,354 1,013 523 1,324

2.7

NA1 Not available. Entry represents zero . Derived as a residual. Includes state agricultural economies other than state farms (Nar . khoz . 65 , p . 757 ) . Source : All ruble data except State farms and Procurement : 1950 , 1958 , 1960 , 1962 , 1963--Nar . khoz . 63, p . 637 . 1959, 1961--Nar . khoz . 62 , p . 627 . 1964-65 --Nar . khoz . 65 , p . 757 . 1955 --Nar . khoz . 60 , p . 843 State farms : Zverev , Problemy , 1966 , p . 73 . Percentage figures were computed from the reported ruble data .

Industry stands out as the sector creating the largest share of net profits; its contributio is larger than that of all other sectors combined . (The contributionsof individual branches ofindustry to the total net profits of the sector are shown in table 6-10 .) The transportation and communications sector has contributed the second largest share of total net profits , although the share itself has declined rather steadily since 1950. Within this sector, railroad transportation undoubtedly con tributes two -thirds to three - fourths of total profits . Construction and agriculture and procurement have experienced the widest fluctuations of all Construction operated at a loss until sectors, 1955 , but has been profitable since then . Agri culture and procurement also operated at a loss in the early fifties and again in 1963 and 1964. It is evident, however , that the losses were in curred entirely by state farms, since procurement was earning substantial net profits in several of the years shown. 121

The total volume of profits earned in the economy, as reported in Soviet statistical hand books, is larger in all years than the sum of the individually reported sectors. The difference between these two magnitudes, here labelled the " other " sector , has been substantial during the entire period under review , and for a number of years (1950-53 and 1960-65) it constituted the third largest component of total net profits . The total profits of industry, shown in table 6-10 by individual branch , have more than doubled during the period of the Seven - Year Plan . Machine building andmetalworking have continued to earn the largest share of industrial profits , although the food industry has increased steadily and now repre sents a close second.

As indicated , the data shown in table 6-10 are in terms of the net “ balance - sheet " profits of each branch grouping . Net profit data in terms of the “ basic activity ” concept defined above are also

asbestos ... rnd ,aChemical ubber

1958 1959

1

Source :

1962-64 k49 Nar .,p76-4hoz Nar -5hoz .,p76k1965 59

as Derived .aresidual

asbestos and Rubber . Ferrous metallurgy .

available Not NA N.Z egligible

656 723 121 152 419 550 .. -721 -921 Coal Coal mining -812 -628 .. Oil extract ion 125 110 Oil refinin N)( A g .. 244 Gas 12 5 Peat .. 17 29 Electri 570 652 c thermal power .and band -Machine uildingrking 2,642 3,274 metalwo 665 842 waLogging ,.. oodwork nd paper ing Logging 446 .. 376 Paper .... 31 55 Construction materia ls 125 130 Cement 39 43 ..... Light 2,001 2,320 Textiles . 1,210 1,365 Cotton ginning 66 41 . textiles Cotton 401 435 Sewn goods .. 414 360 .. Food 1,678 2,232 Sugar -35 201 Meat . 257 1.52 35 Fish 33 Milk and 478 358 products .milk Other 2,266 2,547

Total

Branch industry of 1961

1963

1964

1,723 1,328 1,573 1,207 (N)187 A 31,212 1,044 1,032 ,1 02 -1,582 -1,378 -1,404 -820 A )(N-813

21,912 22,548 |110,677 18,586 9,600 12,515 15,297 14,017

1965

-5.9 1.0

6.1 1.1 3.9 -6.8

100.0

1958

.-7 -6.5 1.0

5.8 1.2 4.4

100.0

1959

224 273 331 226 568 416 451 2.3 (N) A 407 0.1 2)( 45 58 24 31 0.2 21 8 0.2 44 875 652 743 782 5.3 5.2 5,011 5,683 6,122 7,029 26.2 24.7 852 6.7 696 6.2 674 801 3.6 386 3.5 268 286 200 0.3 100 0.4 115 84 93 383 295 281 473 1.2 1.0 0.4 140 164 213 0.3 242 3,191 3,421 3,466 18.7 18.5 3,066 10.9 11.3 1,938 1,765 1,669 1,925 N() A )(NA 0.4 0.5 100 )(NA )(NA )(NA N)( A 3.5 3.8 380 )(NA 707 673 3.4 3.3 746 4,443 4,701 5,387 4,643 17.8 15.7 498 453 329 530 -0.3 1.6 2.1 1.4 458 465 703 427 373 0.3 363 541 0.3 205 3.8 565 3.4 1,389 1,132 1,203 21.2 20.4 2,819 2,958 2,714 2,168

1962

.Percentage data ruble reported the figures from computed were

larger slightly be tends .to industry of branches inmost

895 747 156 152 741 862 -818 -812 -780 -797 187 149 N)( A 338 31 16 18 26 525 774 4,269 3,718 864 772 342 363 80 68 189 187 106 67 2,687 2,688 1,515 1,455 73 30 424 375 527 564 2,581 2,986 334 383 191 223 106 106 538 515 1,999 2,695

1960

Amount

1965 1BRANCH TO 958 :OF ,B6-10 Y INDUSTRY PROFITS NET Table .--

100.0

1961 100.0

1962

Percent

5.9 6.5 1.0 1.0 1.1 5.6 5.6 5.3 -4.4 -5.3 -5.8 -4.4 -5.2 -5.6 1.2 1.2 1.1 2.4 )(NA 2.2 0.1 0.1 0.2 0.2 0.1 z)( 3.5 5.5 3.4 26.5 27.0 27.9 4.6 6.2 5.0 2.2 2.1 2.6 0.5 0.4 0.6 1.6 1.2 1.3 0.8 0.7 0.5 19.2 16.5 17.6 9.5 9.0 10.8 0.5 0.5 0.2 3.0 2.0 2.5 3.8 3.7 3.6 18.4 19.5 23.9 2.4 2.4 2.5 2.3 1.2 1.6 1.1 0.7 0.8 6.1 3.5 3.7 11.7 17.6 14.3

5.3

100.0

1960

) bsolute figures to due add not may rubles .Pin ercentage figures of millions (Arounding

N)( A N)( A

)(Z

)(NA

)(NA

3.6 24.0 1.7 2.3 1.9 6.1 13.8

1.4 0.8 16.3 9.0

1.4 0.4

3.8 29.0 3.4

1.2 2.1 0.2

5.3 -7.2

6.8

100.0

1963

(N) A )(NA

)(NA

)(NA

3.4 24.6 2.3 2.1 2.5 6.3 12.9

15.6 8.8

1.7 1.0

27.9 3.7 1.3 0.5

1.2 2.1 0.2 0.1 3.6

5.5 -6.3

7.2

100.0

1964

20.6 2.4 3.1 1.7 2.5 13.1

3.1 0.9 0.4 2.1 1.1 15.4 8.5

3.9 31.2

1.5 2.5 0.3

5.8 -7.0

7.6

the "b,oonly output (isales .e. on industrial of reports profits net .V1p'P1958-61 also olodarskiy 00-101 pasic Volodarskiy romyshlennost --n964 former series categories .)Tfor profit of text discussion shown (Sas here ee activities all sheet balance the on net ",ahe as well s activity

N)( A )(NA )(NA

)(Z

N)( A

)(NA

100.0

1965

PROFITS 109

110

MAJOR STATE REVENUES

available for these same branch groupings for the years 1958 through 1962.122 These data (not shown here ) reveal that for most branches the results in terms of the two concepts closely parallel each other , and that the divergencies for individual branches can be in either direction . For industry as a whole, net basic - activity profits were less than 1 percent larger than net balance - sheet profits in 1961, and less than 1 percent smaller in 1962. This result is somewhat surprising in view of the fact that balance - sheet profits include the normally loss - incurring residential housing oper ations of enterprises; evidently , other nonbasic activities more than compensate for such losses in many cases .

4. The Primary Distribution of Profits The profits earned by Soviet enterprises and economic organizations are utilized in two basic ways: One portion is transferred to the budget, and another portion is retained by the enterprise or its superior organization . This section presents a general description of the overall distribution of profits , including some problems of interpreting the The following two available statistical data . sections give a detailed discussion of each of the two basic forms of utilization . Soviet authors frequently assert that the distri bution of profits is effected in such a way that enterprises are first to meet their own needs from their profits and then to transfer any remaining profits to the budget . 123 In actual practice , however , the distribution apparently is made quite differently. The enterprise is ordinarily allowed to allocate only a small portion of its profits for direct financing of its planned expenditures on capital investment or for increasing its current assets; the principal sources of funds for these purposes are direct allocations from the budget , which are given to the enterprise in the form of nonrepayable grants . 124 The enterprise is usually called upon , therefore , to transfer most of its profits to the budget , even though it receives grants from the budget for financing certain of its needs. There is the further restriction thatevery profitable enterprise or organization is required to transfer a minimum of 10 percent of its profits to the budget, no matter what its financial needs. This two - way flow of funds takes place even under circumstances in which the amount of profits transferred to the budget is larger than the total amount of grants received from the budget. Although data indicating the extent of such mutually offsetting flows are not available , numerous references indicate that their occurrence is widespread and their magnitude sub stantial. Several purposes apparently are served by this arrangement: It reinforces the planning system of the economy by enabling authorities to examine all planned production activities of the enterprise , as well as their allocation of resources ;

it provides an additional opportunity to determine centrally , and more rigorously , the nature, place, and time of major investment expenditures; it permits a redistribution of profits throughout the economy in accordance with centrally determined social goals ; and it provides economic and machinery for use by finance organs in checking the financial discipline of the enterprises.

On the other hand, such two -way flows make the available budget and profit data difficult to evaluate . Knowledge of the net profits earned by a sector and the profit taxes paid into the budget by that sector do not provide information on the total amount of profits actually earned or the amount retained . This is due to the fact that balance sheet losses of some enterprises need not be covered by profits of other enterprises within either the same agency or the same branch of industry . Losses can be covered by other sources, including budget subsidies granted directly to the loss - incurring enterprises in the name of their superior agency . In multisectoral agencies, which the sovnarkhozy were designed to be and which all major agencies are to some extent, there is the possibility that intra -agency flows might also be intersectoral or interbranch . For example, the profits of machine-building enterprises might be used to support unprofitable coal mining enter prises, or even such nonindustrial sectors as agriculture. No definite confirmation has been found that sectoral integrity in respect to profit distribution is maintained in multisectoral agencies, although the general tendency of enterprise groupings by agency and by statistical sector to correspond , as in the specialized “branch adminis trations” of sovnarkhozy, may have produced such a result. Statistical data on the distribution of actual profits between the portion paid into the budget and the portion retained by enterprises and their superior agencies have been published in several recent statistical annuals , but only as percents of “ gross balance- sheet profits. " This term may be used to signify the total balance - sheet profits earned by all profitable enterprises within a given grouping, with no allowance made for the total balance - sheet losses of unprofitable enterprises in that grouping. Since the extent of these total losses were not made known , the reported percent distribution of gross profits could not be applied to the net profit data shown above , 125 However , some ruble data have recently become available which , despite numerous ambiguities in presentation ,make it possible for the first time to quantify total, gross balance - sheet profits earned in the national economy and their distribution by major use , in absolute terms. A compilation of these and other reported and estimated data, plan and actual, in both absolute and percentage terms, is shown in table 6-11 for a series of years .

5

4

2 ).text 3

1

1957 Plan

available . Not NA

Percent :

Source : Rubles :

Total .

.represents zero Entry

8.5

11.8 17.7 6.7 3.8

13.8 7.6 1.8 13.4 6.5 1.8 1.7 7.0

100.0 N)( A 69.5 )(NA 30.5

2.944 1.436 0.402 0.382 1.536

1958-64 --4ar hoz 3539 ar hoz kNar .;N7,p6Actual 50 .7p 58

15.2 6.6 1.8 1.9 7.7

11.9 12.6 5.4 5.7

13.0 5.8 2.1 1.8 7.0

11.6 16.3 6.4 4.6

30.7

69.3

18.02 budget the to deductions and rubles billion 26.48 of profits total for called (C5oviet Srubles ).,p11961 IA 961

)(NA )(NA N)( A )(NA N)( A

)(NA

100.0

210.1

N)( A

)N( A (N) A )N( A N)( A )(NA

22.8

232.9

1962

-plan above from largely come funds these ,tsince .profits data plan indicates 1957-61 in value low or absence heir Lavrov -Plan tate GS;.6,p"1D4 p5964 962 arbuzov ecisions -8 963 1 11962-64 uccessful

billion adiscrepancy is there 10 reported of sum and source in total the between .rubles components

12.6 11.5 5.1 4.6

100.0 66.2 64.1 )(2.1 33.8

3)( .8 )(3.4 )(1.5 )(1.4

between difference the by reduced fore dnd reported pathe total ."estimated budget into aid eductions

. handbooks statistical in 1963 for reported distribution percent with identical data corrected the

100.0 )N( A 66.9 )(NA 33.1

100.0 64.4 62.1 )(2.3 35.6

100.0 N)( A 70.4 N)( A 29.6

4.587 1.985 1 0.545 0.581 2.314

)(NA

N)( A

Actual Plan

30.203 2)( 9.9 1( 9.8 20.191 1)( 962 0)( .6 )(NA 10.012 1)( 0.1

N)( A

100.0 61.1 59.0 2)( .1 38.9

3.696 1.656 0.590 0.515 2.000

)3( .3 3() .5 (1) .5 )(1.6

N)( A

2)( .9 4() .1 )(1.6 1)( .1

)N( A

1961 Actual Plan

(2) .4 )(3.5 )(1.3 0)( .8

Plan

128.531 (2) 7.6 )(17.8 1)( 7.2 21 0.074 )(0.6 N)( A )(9.8 8.457

Actual

1960

21.949 2)( 5.0 1() 5.2 15.248 )(14.7 )(0.5 N)( A 6.701 )(9.7

1959

)(20.0 1)( 2.0 1)( 1.6 )(0.3 8)( .0

Actual Plan

100.0 60.0 58.3 )(1.7 40.0

1.607

2.598 1.428 0.344

5.977

12.858

18.835

1958

100.0 )N( A 68.3 )(NA 31.7

N)( A

N)( A

Plan

1957-63 Computed -Plan data ruble .from

15.686 N( A Paid into budget the .. 311.150 Deductions profit .from N)( A (residual )Other Retained 4.536 profits formation and investment Capital .basic herds livestock of 1.980 Additions . capital working to 1.083 losses . 0.448 planned Covering . funds Live Incen Other uses 1.024 . PERCENT 100.0 .Total N)( A . budget the into Paid profit from Deductions 71.1 r)Other ( esidual )(NA Retained profits 28.9 investment formation and Capital . herds livestock basic of 12.6 Additions working capital .to 6.9 losses 2.9 planned Covering . funds Incentive -Other 6.5 uses .

use of Category

ESTATE :1957 BASIS ,OSECTOR -USE YEAR 1964 NYARNED BOF TO PROFITS THE 6-11 GROSS .-Table

235.7 N)( A (2) 5.6 N)( A 210.1

)N( A (N) A )(NA )(NA N)( A

t1958-61 able )( he estimated .T6-2 totals distributed were basis the on reported the of percentage distributions for years .those

eresiduals indicated otherwise Unless parentheses in .Note ,asums data ruble or percentage corresponding from derived are s as or :stimates

13.1 (7) .9 )2( .9 5.2 4.7

100.0 100.0 66.2 )N( A 65.5 71.7 0)( .7 (N) A 33.8 28.3

4.448 )N( A 2.700 N)( A 0.987 )N( A 1.752 N)( A 51.609 N)( A

34.013 2( 2.517 22.273 )(0.244 )(11.496

Actual Plan

1963

rounding to due add Festimated not .are parentheses in igures rubles of billions A)may figures bsolute ( igures

Plan

11.2 5() .9 2() .2 5.4 4.8

N)( A (N) A N() A )N( A N)( A N)( A N)( A )(NA )(NA 11.4 )(7.8 )2( .8 4.5 4.3

Estimated -Actual 1958-61 1 onhis of ratio average an deriving pby "oprofits budget ayinto aid ctual -e 1962-64 years the for ear ared tbasis (2)atable ctual payments on budget the yprofit -pinto aid ear 6-2 (tbasis able ratio ),asame this applying nd the for totals to of type latter years for

and Plan P966 Zverev -tual Ac 1962-64 roblemy p.71957-61 are data these 8. a1here all as source the by presented ctual distinguished ,t"fAlthough been have hey igures and Plan :1)Tbetween that grounds the on Actual subtotals major and totals he correspond 1957-61 shown figures plan Sannounced (Cwith years those ,for oviet IA 591 961 eselkov pVdata );(2,p.1M11961 ercentage 962 aterial'noye 1962-64 the from derivable distributions distributions percent actual to correspond ;adyears handbooks inannual (3)treported show funds incentive for data given the from derivable values percentage he nd iscontinuity between two of series :the

ruble actual Reported evidently for ifigures nre addition in budget the to payments include ).T(sd1962-64 ee he eductions otext "areported uses there ther

ddeducted 1bA25.5040 illion the between rubles .This rubles billion and total reported asiscrepancy source the in given reported of sum the is entry been has ,components entry this of relationship the making cash (t"pto budget )minto 6-2 with consistent able ayments ore derivable distribution percent the rendering and years other those from

of amount The given rubles 1.1501 this for source the error an evidently is entry ;oby report ther V11.15 (e)p.1Msources rubles ,billion eselkov .g. 962 aterial'noye 91

total on Plan may in1962-64 profits retained and ,aee losses of net be not nd those actual with comparable years previous for data plan or (stherefore

shown 1960 for data plan original which acThe as revised were here ruble devaluation the of onsequence ;the operations inforeign profits reduced plan

100.0 70.5 69.4 . )(1.1 29.5

)(NA 100.0 69.2 68.5 (0) .7 30.8

4.375 2.310 0.853 2.153 51.858

39.108 2( 7.559 27.155 0() .404 )(11.549

Actual

4.070 )N( A 2.820 )N( A 0.990 N)( A 1.603 N)( A 51.532 N)( A

35.762 236.6 (2) 4.747 )(NA 424.504 )(NA 0)( .243 N)( A )1( 1.015 N)( A

Actual

1964

PROFITS 111

112

MAJOR STATE REVENUES purpose . 127 The amount of such grants made by the budgets of union republics, as may be seen in table 6-12, came to nearly 58 percent of the total losses in the years 1962-64. Similar grants under article 30 were also presumably made out of the union budget , as well as direct subsidies from both major budget levels . Other sources for covering shortages in working capital, besides transfers of profits and budget grants , include Gosbank short credit, the inadvertent credit of unpaid term suppliers, and some small “ temporary assistance funds" maintained by superior agencies.

These data throw new light on the available statistics of profits in the state sector of the economy, since they make it possible to determine both total losses and those losses which are actually covered in the profit distribution process. Losses actually covered are shown in table 6-11; total losses are obtainable as the diffference between gross and net balance- sheet profits. These total losses are derived in table 6-12 , which also recapitulates and compares a variety of reported and derived statistical series on the total, the tax share, and the retained share of state - sector profits , Table 6-12 shows that only a small share of balance sheet losses are actually covered by transfers from profitable enterprises -- less than one - quarter in 1962-64. Direct budget subsidies make up another source , but data on them are not made public . This source can only be employed to cover planned losses, however, and may not be used to cover unexpected actual losses . 126 Such unplanned losses during the course of the year result in the failure of enterprises to maintain intact their stock of " own " working capital (or current assets) , and they arrive at the end of the year with a shortage in comparison with their prescribed quota, or “ normative .

Because of uncertainty as to whether shortages of working capital are directly equivalent to account ing losses, the balance of total losses covered by other sources (line 6 , table 6-12) should be The term considered an approximation only . to signify table employed in the profits is available" " the total profits earned in a given year and available for all purposes, including payments to the budget , after deducting that amount actually used to cover losses . The two major categories of use for distributed profits , payments to the budget and retentions by enterprises and agencies, are also shown in table 6-12. The problems of data interpretation sur

Until recently, at least, such shortages have been made up up largely by budget grants for this

Table 6-12 .--ALTERNATIVE CONCEPTS OF TOTAL , TAXED, AND RETAINED PROFITS IN THE STATE SECTOR :

1958 TO 1964

( In billions of rubles. Figures in parentheses are estimates )

Category of profit and source TOTAL PROFITS ( OR LOSSES ) , year -earned basis 1 . Gross profits (table 6-11) ..... 2. Net profits (table 6-9 ) ...... 3. Gross losses (line 1 - line 2 ) ..... 4. Losses actually covered by profits (intra -agency transfers) (table 6-11 ) .. Grants from budgets of republics to 5. cover shortages of working capital ( table 7-2) ...... 6. Losses covered by other sources (approximate ) (line 3 - lines 4 and 5 ) . 7. Available profits, net of covered losses (line 1 - line 4 ) .. TAXED PROFITS 8. Budget revenue, year -paid basis (table 6-2 ) 9. " Paid to budget ," year - earned basis ( table 6-11 ) 10 . " Deductions from profits " ( table 6-11 ) .. Other " Paid to Budget" (line 9- line 10 ) 11 . Previous - year profit tax paid in given year (approximate) (line 8 - line 10 )..... RETAINED PROFITS , year - earned basis 13. Retained profits , gross of total losses (line 1 - line 9 ) ...... 14. Retained profits, net of covered losses ( line 13 - line 4 ) ..... 15. Retained profits , net of total losses ( line 2 - line 9) .. 1 Plan data .

Source :

As indicated on each line .

1958

1959

1960

1961

1962

1963

1964

( 20.0 ) 19.3 (0.7)

( 25.0 ) 22.1 (2.9 )

(27.6 ) 24.4 (3.2 )

(29.9) 26.1 ( 3.8 )

34.013 29.819 4.194

35.762 29.842 5.920

34.008 5.100

1 (0.3)

1 (0.4 )

1 (0.6 )

1 (0.5 )

0.987

0.990

0.853

0.4

1.0

0.9

1.6

2.114

3.496

3.179

(0.0 )

( 1.5 )

( 1.7)

( 1.7)

1.093

1.434

1.068

( 19.7)

( 24.6 )

( 27.0 )

(29.4)

33.026

34.772

38.255

12.5

16.0

18.6

20.7

23.862

25.695

28.731

( 12.0 ) ( 11.6 ) (0.4 )

( 15.2 ) ( 14.7 ) (0.5 )

(17.8 ) ( 17.2 ) (0.6 )

( 19.8 ) ( 19.2 ) (0.6 )

22.517 22.273 0.244

24.747 24.504 0.243

27.571 27.155 0.416

(0.9)

( 1.3)

(1.4 )

(1.5 )

1.589

1.191

1.576

(8.0 )

(9.8)

(9.8 )

( 10.1 )

11.496

11.015

11.537

( 7.7 )

(9.4)

(9.2)

(9.6 )

10.509

10.025

10.684

(7.3)

(6.9)

(6.6 )

(6.3)

7.302

5.095

6.437

39.108

PROFITS

113

rounding the several alternative series for profit tax payments are discussed in detail in succeeding sections. It should be noted , however , that retained profits , after allowance for the total amount paid into the budget on a year- earned basis , can be measured in three ways (analogous to total profits ) depending on whether allowance is made for (1 ) no losses, (2) losses actually covered by profits , or ( 3) all losses.

The announced plan data are often presented in terms of an incomplete listing of major sectors of the economy and are accompanied by plans for profit "deduction ” to the budget. Since cooperatives pay an income tax rather than " deductions from profits ,' this suggests that they are omitted ; at least one source , however, lists planned profit data in a manner indicating that it includes both the state and 131 cooperative sectors.

The data presented in table 6-11 help clarify the meaning of total planned profit figures announced annually in conjunction with the presentation of the budget and the economic plan . The analysis of the planned totals for 1957 through 1961 revealthatthey represent gross profits , including profits to be used for covering losses, and are therefore not comparable to the net profits reported in statistical annuals . Several uncertainties remain in connection with these figures , however .

( 3 ) Although plan data for the years 1957 through 1961 are gross of losses, as shown in table 6-9, there is some question as to whether this applies to plan data for all subsequent years. Two sugges tions that such data are in terms of some version of net profits may be cited .

( 1) The plan data may represent basic - activity rather than balance -sheet profits . This is suggested by the format of typical textbook versions of an enterprise or agency financial plan in which a housing- and - communal- economy loss is covered by an explicit expenditure rather than netted against other profits. 128 Such an interpretation is supported by the announcement of total planned profits in 1963; they were described as " the overall amount of profit in the socialist economy, based on targets for the volume of production and sales of output. . ." 129 In empirical terms, as noted above , the two concepts are closely comparable at least for industry. It may well be that an initial estimate of planned profits derived from the economic plan targets for basic activity output may be considered sufficiently accurate for planning purposes. 130 An nouncements of planned profit totals for the next year are often accompanied by preliminary esti mates for the current year . Since the planned and preliminary data are directly compared , they presumably are in terms of the same concept of profits. Changes in the definition of balance - sheet profits under the reform program currently being intro duced will probably serve to make the absolute difference between the two conceptsmore significant than it now is . Housing losses are to be covered by an explicit distribution of balance- sheet profits rather than serving as a negative component of them ; since other activities are generally profitable, balance - sheet profits should tend to substantially exceed basic - activity profits . (2 ) Planned profit totals are usually described as applying to " the national economy,” but they are believed to be limited to the state sector and to exclude consumer cooperatives, although the latter are included in annually reported “ national econ omy” totals of actual net profits ( see table 6-9 ).

(a ) The description of total planned profits for 1963 quoted above as deriving from targets on the volumeof production and sales of output suggests that the average cost measure_kopecks of cost per ruble of marketable output - cited above as being employed by planning agencies to specify cost targets , may have been used in conjunction with output and sales targets to estimate planned profits . If so , the resulting profit figure would be net of all losses - that is , conceptually comparable to published statistics on actual net basic -activity profits . ( b ) The total profit target of 43.1 billion rubles announced for 1966 was specifically qualified as excluding profits used to cover planned losses.132 Consequently , it is not clear that the planned total and retained profit data shown in table 6-9 for the years 1962-64 are comparable to actual data for those years, or to plan data for the previous years. 5.

The Profit Tax

The determination of who is subject to the profit tax is simple; any state enterprise or economic organization operated on a khozraschet basis with its own independent balance sheet is by definition a payer of profit tax . Exemptions are granted in a number of cases to minor economic organizations which operate outside the main universe of pro ductive enterprises and economic organizations. 133 The process of allocating the amounts of profit tax to be paid starts in Gosplan . In the summary financial plan , Gosplan assigns profit -tax payments to major administrative organs such asministries, departments , and sovnarkhozy. Each of these organs makes similar assignments to its subdivisions (main administrations, combines, trusts), and finally the subdivisions give specific assignments the enterprises and economic organizations Thus, superior organs subordinate to them . exercise a great amount of discretion in distrib uting the burden of tax payments , whereas enter prises are largely passive recipients of these assignments .

114

MAJOR STATE REVENUES

After the financial plans have been confirmed and the planned budget revenues approved, the adminis trative agencies are required to inform the various levels of the Ministry of Finance hierarchy of the amounts of planned profit taxes allocated to the primary units . Responsibility for determining that the primary units actually make payment is vested in the Ministry of Finance and its network of local organs , and the Ministry needs the details of the planned payments in order to carry out this function . At each level, from top to bottom , the administrative agencies send lists of paymentassignments to their coordinate agencies in the financial system . Thus, the planning and allocation of profit - tax burdens is heavily centralized , while the arrangements for and control of actual payment is largely decentralized . The administrative gap which exists between responsibility for allocating the amounts of profit tax payments and responsibility for enforcing payment has provided room for --and thereby invited - serious malpractice . Soviet authors have reported that sovnarkhozy had a tendency to assign large profit -tax payments to certain main administrations known by the sovnarkhozy to be financially weak and lax in fulfilling asignments , and to assign relatively small profit - tax payments to those main administrations known to be finan cially strong and reliable in meeting their respon sibilities. 134 Moreover , the same practice was repeated at lower levels . Themain administrations of sovnarkhozy assigned relatively large payments to weak and unreliable enterprises , and relatively small paymentş to financially strong and dependable enterprises . In this way, the sovnarkhozy or the main administrations were able to use the funds of dependable enterprises with large profits and small tax assignments for redistribution to other enterprises in order to ensure the fulfillment of the overall production plan by which their per formance was judged . By the same token , these sovnarkhozy, which were not responsible for en forcing the profit - tax payments, were indifferent to the state requirements for budget revenues. Enterprises also indulge in malpractices of their own . In attempts to enlarge the sums left at their disposal, they frequently charge to the cost of basic activity expenses which have nothing to do with their basic output, thereby reducing the size of their profits and their payments to the budget.136 In 1961, the finance organs of the R.S.F.S.R , conducted an extensive examination of the economic and financial operations of enterprises in the republic , during which they discovered 71.8 million rubles of un reported or mislabeled profits , including 44.4 million rubles to be paid to the budget.

In order to eliminate these malpractices and other shortcomings of the system , as well as to increase budget revenues from the profit tax , several reforms have been proposed by Soviet

economists . One proposal calls for the decentral ization of the assignment as well as the collection of the tax. According to this proposal, the planning of profit - tax payments should be done by the enter prises, in cooperation with superior administrative organs.138 Other economists have examined the value of introducing a system of fixed rates for determining profit -tax payments, but, on the whole , they are reserved about the advantages of such a 139 system , A related proposal calls for estab lishing fixed rates of profit - tax payments for enterprises which make large profits , and for adopting measures to improve the redistribution of by superior administrative retained profits agencies. 140

Under the new reform system initiated in October 1965 and gradually being introduced since January 1966 , profit - tax payments are assessed at fixed rates expressed as a percentage of the value of total enterprise assets , both fixed and current. ( See section 7 , below , for a brief outline of this reform in its initial stages .)

Payers of the tax employ either a centralized or a decentralized system of payment. Under the centralized system , which prevailed until July 1955 but which now is used by only about 10 percent of all enterprises and organizations, the payer is a superior administrative body or economic organi zation , such as a ministry, sovnarkhoz, or main administration . The superior organization assigns payments of the tax to its subordinate units , which actually pay the tax. The tax account in Gosbank is established in the nameof the superior organization , however , and this organization bears full responsi bility for the payments . The subordinate enterprises have no tax accounts of their own and they make the assigned141payments in behalf of their superior organs. At the present time, organizations which pay profit tax under the centralized system include the Ministry of Railways, the republican ministries of communications , and various special adminis 142 trations.

The decentralized system was greatly expanded in July 1955 by the transfer to it of the vast majority of enterprises which operated on a khozraschet basis and which had independent balance sheets . The change was effected for the purpose of enabling finance organs to inspect the financial operations of enterprises and to verify their observance of financial discipline . It established a direct relation ship between the finance organs and the enterprises for purposes of paying the profit tax , and eliminated the intermediary role previously played by the superior organs. At the present time, 90 percent of all payers, who account for three - fourths of all the profit tax , are included in the decentralized 143 system . The enterprises and organizations pay the profit tax in their own name, have their own

PROFITS tax account in the Ministry of Finance hierarchy, and bear full responsibility for the tax payment. The expansion of the decentralized system has placed a heavy burden of administrative work on finance organs, however, and some officials have advocated a return to the centralized system , arguing that superior administrative bodies should assume greater responsibility for payment of the profit tax . Opponents of such a return assert that these officials aremotivated only by a desire to free themselves from the responsibility of ensuring payment of the tax . 144

Payments of profit tax can be made on the basis of either planned or actual profits. The group of payers who make payments on the basis of planned profits include enterprises and economic organiza tions in the sectors of industry and trade, and they account for a preponderant share of total profit taxes paid . The financialplan indicates the amounts of tax to be paid each month and quarter . Each monthly payment is divided into halves, one to be paid on the 15th and the other on the 27th of the The two payments of the first month in month . each quarter make up 30 percent of the quarterly payment; the payments in both the second and the third months of the quarter each comprise 35 per cent of the quarterly total. All such payments made on the basis of planned profits are recalculated monthly, quarterly , and annually to adjust them to the amounts of profits actually earned . 145

by

Payments are made on the basis ofactualprofits construction , construction - installation , and

construction -repair enterprises and organizations, as well as by subsidiary offices of the oil -drilling industry, subsidiary industrial enterprises attached to budgetary institutions, subsidiary farms attached to state enterprises , organizations, and institutions, export - import organizations of the Ministry of Foreign Trade, and others. 146 These payments are 147 made monthly , quarterly, or annually .

A few payers are not included in either of the two major payment systems because of certain peculi arities in the arrangements under which they pay the profit tax. Thus, the Ministry of Railways makes payment on the 5th , 11th , 17th , 23rd , and 29th day of each month on the basis of profits actually derived from its basic activity . The republican ministries of communications pay the tax once a month on the 27th day, also on profits actually derived from basic activity. Other payers makingpayment once a month on the 27th day include Gosbank , its Main Adminis tration of State Personal Savings Banks and State Credit, Stroybank , the republican organs of state insurance, and the Administration of Foreign Insurance of the Ministry of Finance . 148 Local organs of the Ministry of Financemaintain an account of profit - tax payments for each payer .

115

In addition , these organs keep accounts showing all profit -tax payments made by enterprises and economic organizations (on both a centralized and a decentralized basis) located within their territory of responsibility . These finance organs are charged with ensuring that profit - tax payments are made in the sums determined in financial plans, and on time. 149 Although monitored by local finance organs , profit taxes are credited by the banks to the appropriate budget at the level of subordination of the paying unit. Thus, payments of enterprises and organizations of an all - union ministry are credited to the all-union budget, while payments of enterprises attached to city governments go to the city budget. Sovnarkhoz enterprises , in keeping with their semi- all -union , semi- republican status, were an exception ; after 1958 , 80 percent of their profit tax went into the republican budgets of union republics and the remaining 20 percent into the all union budget . Profit tax statistics are published in several series, as shown in table 6-12. Two major types of conceptual differences contribute to this variety : ( 1 ) Differences between tax payments on a year paid basis and on a year - earned basis ; and ( 2) differences between “ deductions from profits ” to the budget and total “paid into the budget” out of profits . These differences will be examined in turn . (1 ) Most profits earned by an enterprise are distributed currently during the year according to the financial plan . A recalculation of the tax due is made after the end of the year, however, based on a final accounting of profits earned , decisions by the superior administrative level as to incentive awards, the disposition of above - plan profits, the need for retained profits to augment circulating capital, etc. The enterprise balance sheet initially submitted to the superior level undergoes a “ refor mation " as a result of these decisions ( see chapter VIII- A ) . All profits credited to previous year earnings are disposed of, with retained profits becoming part of the enterprise's current assets (oborotnyye sredstva - also termed working capital) . When the process of consolidating the balance sheets of a multilevel agency reaches the top level some months later , however , final decisions as to the appropriate overall level of total current assets frequently require readjustments in the levels previously adopted for individual enterprises. The surplus enterprise funds originating in retained profits of the previous year are subject to removal to the budget, but are now labeled “ excess current assets . "» 150 Budget revenue statistics on profit -tax payments to the budget (table 6-12, line 8 ) are on a year - paid basis ; that is , payments made in the current year

116

MAJOR STATE REVENUES

include not only taxes on current- year earnings but also recalculated profit taxes and removals of current assets deriving from previous- year earnings. Gross profit distribution data on “ deduc tions from profits ” to the budget (table 6-12, line 10 ), on the other hand , are on a year - earned basis and are believed to include recalculated deductions actually paid in the subsequent year. Whether * excess current assets " paid to the budget in the subsequent year are included here has not been determined ; these may fall into the residual " other " payments to the budget out of profits (table 6-12, line 11) . Planned profit- tax payments to the budget are usually announced in two forms; one form represents all payments , including recalculations and excess current assets from previous - year profits , and the other is limited to current-year 151 payments from current- year profits . (2 ) The difference shown in table 6-12 between the total amount " paid into the budget” (line 9) and deductions” to the budget (line 10 ) appears to be made up of a miscellany of small components. This is apparent from enterprise report form No. 3 , Movement of the Charter Fund , which contains data on the distribution of profits . 152 According to instructions issued in 1960 on completing this form , the entry in line 66 designated as “Other payments” from profits to the budget includes: (1) Profits from the sale of consumers' goods made from waste which were to be paid to the budget in consequence of the enterprise's failure to fulfill conditions which are a prerequisite of its right to transfer such profits into its own “ fund of consumers' goods” ; ( 2 ) penalty extractions of excessive allowances for administrative expenditures ; (3 ) amounts rep resenting 75 percent of the actual differences between the markdowns and markups ( skidkami i nakidkami) for electric power released by power stations and enterprises having their own power stations; and (4 ) other payments to the budget from profits of the previous year . These sums are not a part of the regular “ deductions from profits " paid by the enterprise and they account for at least part of the difference between the deductions and the total amount " paid into the budget. " Another part of this difference is probably accounted for by payments into the budget outside of the regular deductions from profits. As identi fied in a 1960 Soviet source, these payments in clude: (1 ) Current assets freed as a result of a reduction in their planned levels (or “normatives" ) ; ( 2 ) current assets in excess ofexisting normatives; ( 3) unused depreciation funds; and (4 ) profits from the sale of materials kept by the enterprise over a long period of time. 53 According to this source , removals of excess current assets and depreciation funds were classified under division 2 of the budget revenue classification , which is titled “ Deductions From Profits . " At some date after 1960 , these

payments were transferred to division 15 , entitled " Excess of Own Current Assets and Planned Free Balances of Depreciation Allowances Earmarked for Capital Investment.” 154 This change of classi fication may have been partially or even totally responsible for the decline since 1961 in the dif ferences between the percentages showing the amounts from profits “ paid into the budget” and The difference the “deductions from profits . ” dropped from 2.1 percent in 1961 to 0.7 percent in 1962 and 1963, although it returned to 1.1 percent in 1964 (table 6-11). The distribution of total profit -tax payments among the various budgets is shown in table 6-13 . During the period 1950-62, the proportion of profit tax going to the all- union budget declined by nearly one -half, while that going to the state budgets of all republics increased from 39 to 69 percent. The beneficiaries of these changes were the republican budgets , which more than doubled their proportion This trend was of receipts from the profit tax. reversed in 1965 with the elimination of the sovnarkhozy . Local budgets generally maintained the same share throughout the period . The data in table 6-13 also show that profit taxes have contributed an increasing share of budget revenues. This is particularly true of the all -union budget, where profit taxes make up 25 percent of revenues, and the republican budgets, where they make up over 40 percent . The largest single contributor of profit tax among the republics was, as one would expect, the R.S.F.S.R., which in 1955 contributed about one- quarter and in 1960 more than one - half of the total profit tax collected in the U.S.S.R. The second largest contributor was the Ukraine, which provided about 8 percent in 1955 and about 17 percent in 1960. 155 The contributions of individual sectors of the economy to the total sum of profit taxes paid are The proportion of profit shown in table 6-14 . taxes which originated in the sectors of industry and construction increased from 51.3 to 61.5 per cent between 1955 and 1965. This increase was largely at the expense of trade, whose contribution declined from 10.5 to 2.1 percent, and of trans portation and communications, whose contribution declined from 21.8 to 17.2 percent.

6. Retained Profits The manner in which total retained profits is determined was discussed in section 4 above, and the various uses of retained profits were shown in table 6-11. This section describes briefly each of the specific uses to which retained profits are assigned. The discussion will concentrate largely on the use of retained profits in industry because that is the sector for which information is most

PROFITS

117

Table 6-13.-- BUDGET REVENUES AND PROFIT TAX , BY BUDGET LEVEL : (Absolute figures in millions of rubles.

1950 TO 1965

Percentage figures may not add due to rounding) State budget of the U.S.S.R. State budgets of all republics

Year All - union budget

Total

(1)

(2)

(3)

(4 )

(5 )

1950 .... 1955 ... 1958 ... 1959 ... 1960 ....

42,276.8 56,434.5 67,235.5 74,014.5 77,078.4

32,478.5 42,807.4 33,416.1 37,785.9 38,845.9

9,798.3 13,627.1 33,819.4 36,228.6 38,232.5

3,176.6 5,923.2 23,214.4 23,985.4 25,021.6

6,621.7 7,703.9 10,605.0 12,243.2 13,210.9

1961... 1962 . 1963.. 1964 .. 1965 .

78,054.1 84,306.2 89,538.0 94,406.9 102,324.5

35,621.1 37,970.5 41,806.5 43,574.8 48,427.3

42,433.0 46,335.7 47,731.5 50,832.1 53,897.2

27,297.6 29,600.8 31,700.4 33,406.7 34,422.7

15,135.4 16,734.9 16,031.1 17,425.4 19,474.5

1950 ..... 1955 ... 1958 ... 1959 .... 1960 ....

4,035.9 10,280.6 13,537.1 15,962.9 18,634.8

2,466.0 5,881.3 4,188.0 4,954.6 6,357.3

1,569.9 4,399.3 9,349.1 11,008.3 12,277.5

838.0 2,948.5 6,886.6 8,429.3 9,399.1

731.9 1,450.8 2,462.5 2,579.0 2,878.4

1961... 1962 .. 1963.. 1964 .. 1965 .

20,743.8 23,861.6 25,695.0 28,730.9 30,873.5

6,762.0 7,391.9 8,754.0 9,950.0 12,163.3

13,981.8 16,469.7 16,941.0 18,780.9 18,710.2

10,702.1 12,727.9 14,253.9 15,359.6 14,771.6

3,279.7 3,741.8 2,687.1 3,421.3 3,938.6

100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

61.1 57.2 49.7 51.1 34.1

38.9 42.8 50.3 48.9 65.9

23.0 27.8 34.5 32.4 50.4

32.6 31.0 34.1 34.6 39.4

67.4 69.0 65.9 65.4 60.6

51.6 53.3 55.5 53.5 47.8

15.9 15.0 15.8 16.5 15.5 15.8 15.7 10.5 11.9 12.8

9.5 18.2 20.1 21.6 24.2

7.6 13.7 12.5 13.1 16.4 19.0 19.5 20.9 22.8 25.1

16.0 32.3 27.6 30.4 32.1

26.4 49.7 29.7 35.1 37.6

11.1 18.8 23.2 21.1 21.8

33.0 35.5 35.5 36.9 34.7

39.2 43.0 45.0 46.0 42.9

21.7 22.4 16.8 19.6 20.2

Total

I.

PROFIT TAX

PERCENT DISTRIBUTION OF PROFIT TAX

1950 ..... 1955 .... 1958 ... 1959... 1960 .. 1961.... 1962 ... 1963... 1964 .. 1965.... IV .

Local budgets

BUDGET REVENUES

II .

III .

Republican budgets

PROFIT TAX AS PERCENT OF BUDGET REVENUES

1950 .... 1955 ... 1958 .. 1959 .. 1960.. 1961.... 1962 . 1963.. 1964 .. 1965 ..

26.6 28.3 28.7 30.4 30.2

Source : Section I Columns 1 , 3 , 5 :

1950-60 --Min . fin . , Gos . byud . SSSR , 1962 , pp . 7 , 69 , 93 . 1961-65 --Min . fin . , Gos . byud . SSSR , 1966 , pp . 10 , 72, 95 . Derived as residuals .

Columns 2 , 4 : Section II Colums 1 , 2 , 3 , 5 :

1950-60--Min . fin . , Gos . byud . SSSR , 1962 , pp . 13, 93 . 1961-65--Min . fin . , Gos . byud . SSSR , 1966 , pp . 10 , 16 , 95 . Column 4 : Derived as residuals . Sections III and IV Percentage figures were computed from ruble data .

118

MAJOR STATE REVENUES Table 6-14 .-- TOTAL PROFIT TAXES PAID , BY SECTOR OF

( Absolute figures in millions of rubles .

ORIGIN :

1950

TO 1965

Percentage figures may not add

due to rounding )

Year

Total

Trans Industry Agricul and porta ture and tion and con procura communi struc ment ] tion cation

95.3

595.0

Communal Trade

Residual

economy

270.7

1950 ... 1955 . 1958 .. 1959 .. 1960 ...

2,047.1 4,035.9 10,280.6 5,270.4 13,537.1 7,278.2 15,962.9 8,868.6 18,634.810,708.8

146.31 247.1 303.71 381.31

2,240.0 2,906.6 3,119.3 3,501.5

1,083.4 884.4 913.2 956.2

250.7 444.3 544.2 595.0 704.5

1961.... 1962 .. 1963... 1964 ... 1965 ....

20,743.812,068.1 1,598.5 | 23,861.614,328.9| 1,736.4 ) 25,695.0 14,989.412,120.31 28,730.917,088.0 / 1,894.71 30,873.5 18,973.1 1,635.0

3,816.8 4,056.7 4,512.1 4,721.0 5,299.5

640.4 795.8 707.2

776.8 831.2 803.5

752.3 658.3

843.2 918.4

2.4 1.4 1.8 1.9 2.0

14.7 21.8 21.5 19.5 18.8

6.7 10.5 6.5 5.7 5.1

4.3 4.0 3.7 3.8

7.7 7.3 8.3 6.6 5.3

18.4 17.0 17.6 16.4 17.2

3.1 3.3 2.8 2.6 2.1

3.5. 3.1 2.9 3.0

777.1 1,096.2 1,676.6 2,163.1 2,382.5

1,843.2 2,112.6 2,562.5 3,431.7 3,389.2

PERCENT 1950 .. 1955... 1958 .... 1959 .. 1960 ..

100.0 100.0 100.0 100.0 100.0

50.7 51.3 53.8 55.6

1961.... 1962 .. 1963 ... 1964 .. 1965 .

100.0 100.0 100.0 100.0 100.0

58.2 60.1

57.5

58.3 59.5 61.5

6.2

3.7

19.3 10.7 12.4 13.6 12.8

8.9 8.9 10.0 11.9 11.0

1 Data after 1960 represent a new series which includes profit taxes paid by pro curement agencies, as explained in the 1966 source ( p . 7 ) . This source also reports figures in the new series for 3 earlier years , namely :

1950 ...

254.2

1955 ...

495.1

1960 ..

980.4

Source : 1950-60 --Min . fin . , Gos . byud . SSSR , 1962, p . 7 . 1961-65 --Min . fin . , Gos . byud . SSSR , 1966 , p . 10 . Percentage figures were computed from

the reported ruble data .

119

PROFITS readily available and because of the importance of the sector . In general, however , retained profits are utilized in much the same way in all sectors, and specific comment on differences between sectors will be made when data are at hand . a . Capital Investment. - In recent years, the largest portion of profits retained by enterprises and economic organizations has been used for capital investment, or for the formation of basic livestock The principal herds in the agricultural sector . source of funds for these purposes is the budget, although additional funds are derived from amorti zation deductions and various other sources . In recent years, profits have provided about 12 to 13 of the funds spent on state capital percent of investment. 156 b . Incentive Funds.-- Despite the considerable volume of discussion in Soviet economic literature on the use and value of incentive funds, only a small part of retained profits is used for this purpose . The volume of money involved in the incentive funds can be seen from the data in table 6-15 , which show contributions made by state enterprises and economic organizations to all incentive funds, by sector of the economy.

Statistical handbooks also report annual expend itures and end- of- year balances for individual types of incentive funds in industry , construction , and the state sector as a whole , from which the volume of contributions to these funds can be derived . 157 These data are shown in table 6-16 . It should be noted that while most contributions to these funds are taken out of profits , contributions to the fund for bonuses for creating and introducing new technology are charged to production costs.

The largest and most publicized of the incentive funds is the “ Enterprise Fund for the Improvement of Cultural and Living Conditions of Workers and for Perfecting Production ," commonly called the enterprise fund. This fund was originally estab lished in 1936 with the title of director's fund; it was suspended during World War II, and revived in 1946 in all industrial enterprises and economic organizations which operated on a khozraschet basis and maintained independent balance sheets . In the following years, similar funds were estab lished in enterprises and economic organizations in all sectors of the economy engaged in material production or in rendering economic services. In 1955 , the fund was renamed the enterprise fund and

Table 6-15 .--CONTRIBUTIONS TO INCENTIVE FUNDS OF STATE ENTERPRISES AND ECONOMIC ORGANIZATIONS , BY SECTOR OF THE ECONOMY : 1959 TO 1965 ( Absolute figures in millions of rubles .

Sector Total..... Industry . Construction .. Agriculture . Procurement.. Transportation and communications .. Trade ... Supply and sales . Communal economy Other .

Percentage figures may not add due to rounding )

1959

1960

1961

1962

1963

1964

2,046

1,916 970 178 259 57

2,097

2,457

1,041 156 205 58

1,951 885 135 217 45

1,527

1,096 161 289 74

824 143 187 16

1,232 282 300 50

3,134 1,598 384 420 46

252 55 60 11 48

213 113 54 12 60

157 246 147 21 66

140 297 107 20 105

139 19 116 19 64

226 48 197 10 112

321 78 150 21 116

100.0

100.0

100.0

100.0

50.6 9.3 13.5 3.0

49.6 7.4 9.8 2.8

45.4 6.9 11.1 2.3

100.0 54.0 9.4 12.2 1.0

100.0 50.1 11.5 12.2 2.0

100.0

53.6 7.9 14.1 3.6 12.3 2.7 2.9 0.5 2.3

11.1 5.9 2.8 0.6 3.1

7.5 11.7 7.0 1.0 3.1

7.2 15.2 5.5 1.0 5.4

9.1 1.2 7.6 1.2 4.2

9.2. 2.0 8.0 0.4 4.6

10.2 2.5 4.8 0.7 3.7

1965

PERCENT Total.... Industry .... Construction . Agriculture . Procurement. Transportation and communications Trade.. Supply and sales .. Communal economy .. Other.. Source :

1959-61--Nar . khoz . 62, 1962-63--'lar . khoz . 63 , 1964 --Nar . khoz . 64 , p . 1965 --Nar . khoz . 65 , p .

p . 628 . p . 648 . 7644 . 775 .

51.0 12.3 13.4 1.5

1 2

: Source

?.:1,527 .ontribution C1963 Expenditure .. Balance .. .ontr7ibution ?.:2,45 C1964 Expenditure Balance C:? ontribution 1965 Expenditure Balance .......

ion . C?.1961 : ontribut . Expenditure Balance C?1962 : ontribution Expenditure .Balance

:C?1,916 .1960 ontribution . Expenditure Balance ..

E1950 .: xpenditure Balance E1952 :. xpenditure Balance . xpenditure .:E1958 Balance . 1959 :C? ontribution Expenditure Balance

item and Year

134 116 166 76 616 402 699 645 456 707 732 431 731 670 492 670 644 518 838 715 641 972 872 741

,by addition derived sot )ithe sources in reported (nThe total

76 37 86 50 269 140 313 289 164 285 304 145 243 264 124 338 299 163 333 322 174 395 376 193 484 455 222

and improve Bonuses ment of and production , services housing construc ,and tion repair

58 79 76 23 347 262 386 356 292 422 428 286 488 406 368 332 345 355 505 393 467 577 496 548 1,034 1,218 550 1,00 2,3759 954 732 .XNrepresents applicable Ezero ot ntry

Total

k-,p.6 p.648-649 3 1hoz 1950 Nar 962 1phoz k1952 Nar .6,p-958-61 29-630 2 7Nar .,p6k1963-64 p64-765 hoz 4 -.7,p61965 75-776 5 p khoz Nar --

2,576

1,893 1,821 1,3 34

1,731 1,257

1,956 1,448 2,097 2,032 1,513 1,951 2,003 1,461

323 246 425 374 1,471 1,316 2,046 1,874 1,488

Total all funds

Expansion

: which Of

fund Enterprise

9 14 18 34 56 44 73 66 51 48 59 40 34 49 25 31 33 23 15 28 10 48 27 31 121 69 83

Total

fund goods : which Of

2 7 10 26 40 35 49 4. 7 37 35 44 28 21 35 14 15 19 10 12 16 6 29 16 19 72 37 54 12 12 8 12 11 9 4 10 3 16 9 10 42 30 22

6 5 7 6 13 6 20 16 10 10 12

62 9 61 16 125 22 128 125 25 126 126 25 113 115 23 112 114 21 120 119 22 142 141 23 158 154 27

Expansion Bonuses Totall of and produc services tion

Consumers

)(In rubles of millions

101 102 2 114 113 3

47 2 47 10 93 3 91 91 3 91 91 3 81 81 3 82 82 3 86 86

-union All construction socialist

15 7 14 6 32 19 37 34 22 35 35 22 32 34 20 30 32 18 34 33 19 41 39 21 44 41 24

18 2 19 18 3 14 14 3 13 13 3 14 14 3 54 51 6 92 86 12 121 116 17

3

)x( (x)1 x)(8 (X)3

34 65 55 44 138 49 133 49 84 98 77 85 90 134 116 .108 239 214 133

32 29 49

initial less balance expenditures (ebalances plus o"C) ear end -yderived annual and fxpenditures wterminal on data reported from ere ontributions

310 94 493 208 379 623 336 666

280 491 582 494 579 503 478 604 458 567 495 434 525 404

)x( (x) )(x )(X

115 106 172 245 344 326 496 482 340 453 492 301 610 569 342 641 589 394 423 423 394 576 443 527 654 485 696

Construc Housing construc Bonuses tion Other tion fund for new ' Services workers f( rom funds tech and bonus above -plan nology Bonuses housing fund ) profits improve ments

: which Of

ORGANIZATIONS :1,B1965 FUND OF TYPE TO Y950 ENTERPRISES ECONOMIC AND INCENTIVE STATE OF FUNDS .-6-16 Table

120 MAJOR STATE REVENUES

PROFITS it now exists , in one form or another , throughout the entire system of khozraschet enterprises and economic organizations .

The fund is formed out of contributions made from planned profits, above - plan profits , and above plan savings --provided the following plans are fulfilled : The plan for production of marketable output in stipulated assortment; the plan for reduction of costs; and the plan for profits . 158 Prior to 1961, a certain percentage was assigned to eac source in order to calculate its payments to These percentages were the enterprise fund , uniformly established for all enterprises and economic organizations subordinate to individual ministries, departments , or sovnarkhozy . Similar enterprises attached to different agencies paid into the fund at different rates, however, because the percentages for the superior agencies varied . This procedure wasmodified in 1961 with the introduction of a new system based on the branch principle , according to which all enterprises and economic organizations within one branch of industry are assigned a uniform percentage of payment. 159 At the present time the percentages for deductions from planned profits range from 1 to 6 percent, and those for deductions from above- plan profit and above - plan savings range from 15 to 60 percent. 160 A major change in the regulations governing the enterprise fund was effected in 1955 by the addition of a stipulation that payments into the fund calculated from profits and savings by means of fixed per centages must not in any single year exceed 5 per cent of the annual wage fund of the industrial production personnel in the enterprise . In 1961, this limit was raised to 5.5 percent for enterprises and economic organizations in some sectors of the economy.161

In 1961, moreover , enterprises in the machine building and metalworking branch of industry were assigned a higher scale of percentages for cal culating deductions into their enterprise funds from profits earned on the sale of new types of engineer From this ing products (izdeliy novoy tekhniki). portion of profits , 10 percent may be paid into the In all cases, the profits which serve as fund. 162 the basis for calculation of the payment into the enterprise fund are those earned from the sale of marketable output, or the specified portion of it, after deducting profits from the sale ofconsumers' goods made from waste. The enterprise fund has been used partly to improve the housing and other living and working conditions of the workers , and partly to “ expand production." The regulation of 1963 stipulates that not less than 20 percent of the fund should be spent on new technology , modernization of equip ment, and expansion of production; 163 not less than 40 percent on housing construction , improvement,

121

and repair ; and no more than 40 percent for bonus payments to individual workers, improvement of cultural and social services for the workers, payments for workers' stay in rest homes and sanatoriums, and for various other types of fi nancial assistance , 164

In general, the incentive role of the enterprise fund seems to be largely ineffective. Two major criticisms have been voiced against this fund . One criticism is contained in a statement of Premier Kosygin that “ about half of the industrial enter prises do not have their own funds formed from profits, and where enterprises do have funds, they are very small in size and the incentive sums allocated from them are insignificant. Almost all types of bonuses and other incentives are paid not from profits but from the wage funds ." 165The other criticism has been leveled against the per centages which measure the amounts of deductions as a proportion ofthe annualwage fund of industrial production personnel and serve as a limit which 166 must not be exceeded . Second in importance among the incentive funds has been the fund for housing construction . This fund was introduced in 1957 when the sovnarkhozy, ministries, and departments were given the right to allow profitable enterprises and economic organi zations to establish such a fund by placing in it up to 30 percent of above - plan profits . The money in this fund can be used for housing construction over and above the planned level of such construction by means of other funds. 167 The third largest fund has been the fund of bonus payments for “ socialist competition . ” The amounts placed in the fund are determined on the basis of decisions made jointly by ministries, departments , sovnarkhozy, oblast (kray ) executive committees, the councils of ministers of autono mous republics, and trade union organizations. Permission to make a deduction to this fund is granted to enterprises which achieve outstanding results ; the deduction is made from above- plan profits or from above -plan savings. In respect to use of the fund , enterprises are now required to spend 60 to 70 percent of the total for payments of premiums to individual workers , and the remainder for the improvement of social-cultural services and household facilities for the workers.168 A consumers' goods fund is established by enter prises from profits obtained through the sale of goods produced from waste materials of their own basic production or from that of other enterprises. Use of the fund , according to instructions issued in 1965 , is as follows: 60 percent is to be used for the expansion of production , improving the quality of product, and the construction and repair of housing facilities undertaken in addition to the plan of capital investments; 35 percent is to be paid as

122

MAJOR STATE REVENUES

premiums to workers participating directly in the production of consumers' goods from waste ; and the remaining 5 percent is to be transferred to the centralized fund of a sovnarkhoz ,ministry , depart 169 ment, or other administrative organ .

A fund providing bonus payments for creating and mastering the mass production of goods of high quality and large assortment was established in 1962 in enterprises of the textile , knitted goods, footwear, furniture, and sewn goods industries. Payments into this fund are made from profits earned through the price differential between the temporary price of improved products established during the first year of serial production and the lower price permanently fixed after the first year of serial production . The extent of such deductions is set for each new or improved product, and is differentiated in accordance with the volume of output, complexity of production , and volume of sales. One part of the money is paid in the form of bonuses to the workers who participated in developing a new product , and the other part is paid to 170 the workers who effected its mass pro duction .

A fund created from profits on the sale of goods of cultural, home, and personal use (kul’turno bytovogo naznacheniya i khozyaystvennogo obikhoda) was established in 1959 to encourage the production and improvement of quality of such products . Part of the total profits (to a maximum of 15 percent of cost, i.e., i.e., a 15 percent “ profitability ratio ” ) obtained from the sale of these products during the first year of their serial production is placed in this fund at the enterprise. One half of the fund is used for a further expansion of production , the other half is spent for housing construction and improvement of the living conditions of the workers. 171 A bonus fund for fulfillment of exportdeliveries is established in enterprises producing goods for export in order to encourage them to produce high quality goods and to deliver the goods on time. Enterprises producing equipment,machinery, tools , and spare parts for export pay into the fund 1 per cent of the value (in wholesale prices) oftheir out put. Enterprises and organizations which produce other industrial products , raw materials , and food products for export pay 0.2 percent of the value of their output into the fund . Themoney in the fund is used as bonus payments to the workers producing the export goods .172 A fund for “ strengthening and expanding the economy” was introduced on state farms farm and other state agricultural organizations in 1953. It is formed from deductions of 8 percentof planned profits and 50 percent of above- plan profits . It is spent , in accordance with a plan approved by organizations, for supplementary con higher

struction , purchases of machinery and equipment, capital repair of production facilities and struc tures, and other such purposes . As was noted above , the fund for bonuses to workers for creating and introducing new technology is not financed from profit, butbymeans of charges to cost. 174 Since this is the only known such case , the amount of annual contributions to incentive funds made out of profits alone can be estimated by deducting this fund from total contributions, as shown in table 6-16 . Estimated contributions to incentive funds from profits in industry are shown in table 6-17 , by type of fund . c . Current Assets and Planned Losses .-- The second largest portion of retained profits has been used in recent years for increasing the volume of the enterprises' own current assets and for covering the planned losses ofother enterprises . As noted in chapter VII, profits are the principal source of additions to current assets of an enterprise , with the budget providing most of the remainder, Profits to be used for covering the planned losses of other enterprises are are transferred to the ministry, sovnarkhoz , department, or other superior organi zation and distributed by that body in accordance with its financial plan . The relative shares of

retained profits used for additions to current assets and for covering planned losses are shown in table 6-11 . According to a 1959 source, a large number of enterprises in various branches of industry , including the highly profitable machine- building Circa 1962, 21.5 branch , operated at a loss. 175 percent of the industrial enterprises subordinate to sovnarkhozy were planned to incur a loss,176 Losses are covered largely by the budget and other nonprofit sources, however , as has been noted , d . Other Uses . --This unspecified residual, al though consisting of only 4.8 percent of profits retained by enterprises in 1964, nevertheless represents the sizable sum of 1.9 billion rubles to be used for “ other” purposes (table 6-11). These purposes include payments into the centralized sovnarkhoz or ministry reserve fund for temporary financial aid to enterprises.177

7. Recent Reforms On January 24 , 1966 , in pursuance of plans to reform various aspects of the economic system which were approved by the party in October 1965, a special interdepartmental commission issued a set of “Methodological Directives Concerning the Transfer of Individual Industrial Enterprises to the New System of Planning and Economic Stimulation in 1966. » 178 The purpose of the reforms, which were introduced in an initial test group of 43 industrial enterprises, is to release the enterprise from excessive planning and controlby the superior

123

PROFITS

Table 6-17.--CONTRIBUTIONS FROM PROFITS TO INCENTIVE FUNDS OF STATE ENTERPRISES AND ECONOMIC ORGANIZATIONS IN INDUSTRY : 1959 TO 1965 (Absolute figures in millions of rubles .

Percentage figures may not add due to rounding )

Fund

Total ? ..... Enterprise fund .... Consumers ' goods fund ..... Fund for bonus payments for socialist competition .. Fund for housing construction . Other .....

1959

1960

1961

1962

1963

1964

1965

1,144 645 48 110 252 89

1,429

1,047

908

935

872

776

425 71 96 306 149

458 49 93 252 56

509 33 86 244 63

462 28 89 231 62

584 16 93 10 73

100.0

100.0

100.0

100.0

100.0

100.0

100.0

40.6 6.8 9.2 29.2 14.2

50.4 5.4 10.2 27.8 6.2

54.4 3.5 9.2 26.1 6.7

53.0 3.2 10.2 26.5 7.1

75.3 2.1 12.0 1.3 9.4

56.4 4.2. 9.6 22.0 7.8

53.7 8.4 8.0 21.9 8.0

767 120 114 313 115

PERCENT Total...

Enterprise fund .... Consumers ' goods fund .. Fund for bonus payments for socialist competition .. Fund for housing construction ... Other ...

lExcludes bonus fund for introducing new technology , which is charged to cost ( see text) . Source:

1959-61--Nar . khoz . 62 , pp . 631-632. 1962-63--Nar . khoz . 63, pp . 650-651 . 1964 --Nar . khoz . 64 , pp . 766-767. 1965 --Nar . khoz . 65 , pp . 777-778 .

organizations and to increase the operational inde pendence of the managers. In general, they deal with the planning system , the use of credits, the definition of “ balance - sheet" profits , the base for calculating profitability , payments to the budget, incentive funds, and a scale of priorities for the utilization of profits .

The principal relevant change in the planning system consists of a reduced number of planning indicators which are to be assigned to enterprises by their superior organs. Enterprises transferred to the new system will receive their plan targets in the form of the following indicators: (1) Total sales of marketable output ; (2 ) physical output targets for major types of products and for export goods , and targets in termsof quality specifications; ( 3) total wage bill; ( 4 ) total profits and the profit rate (newly defined); (5 ) payments to and receipts from the budget ; (6 ) assignments concerning the mastering of production of new types of output, the introduction of new technological processes, and the mechanization and automation of production activ ities; (7) total centrally - planned capital investment, volume of construction and installation work , and centrally - financed fixed assets and capacity to be commissioned ; and ( 8 ) supplies of centrally distri buted materials and equipment. The planned and reported actual balance - sheet profits of industrial enterprises transferred to the new system will be gross of losses incurred by the housing - communal economy. These losseswill still be covered by the enterprise's own profits, butwill appear as an explicit item in the distribution of

earned net profits rather than as an internal (negative) component in the calculation of earned net profits .

Planned profitability will be defined as the ratio of planned balance - sheet profits to the total annual average value of fixed capital and of normed current Fixed assets will be taken at original assets . (undepreciated) value and will include the productive fixed assets of both the basic industrial activity as well as those of other productive activities carried on the balance sheet of a given enterprise ( e.g. , automotive transport, subsidiary farms, and others) . Quarterly “ normatives,” or planned quota levels , will be used to compute the planned average current assets . The actual profitability ratio will be cal culated in an analogous manner to the planned ratio , except that the annual average value of “ normed ” (subject- to - quota ) current assets will exclude as sets obtained by means of bank credit and will be based on monthly data . In this way, profitability will undoubtedly become a far more significant measure of economic efficiency than it is now when computed as the relationship ofprofits to production costs .

The distribution of earned balance - sheet profits is largely predetermined in the new system by a series of standardized rates, particularly for budget and incentive fund payments . (See figure 6-2.) Enterprises and economic organizations trans ferred to the new system will make an entirely new form of payment from profits to the budget , which is to be called “payment for fixed and current

124

MAJOR STATE REVENUES

assets ." For 1966 , this payment was set at 6 per cent of the value of fixed and current assets. The directives further stipulate that sufficient profit for making contributions to the incentive funds and for covering planned expenditures should be left to the enterprise . Moreover, ministries may also re large quire those enterprises which obtain a profit as a result of especially favorable natural, transportation , or other conditions to make regular rent- like payments (fiksirovannyye (rentnyye ] platezhy) from profits to the budget. The ministries may assign such fixed payments after consultation with the State Committee on Prices and theMinistry of Finance .

The payment for fixed and current assets is a charge against profits which has a priority over other deductions and payments from profits made by an enterprise. Its introduction entails several major changes to the existing system of deductions from profits: ( 1) The payment will be made in an amount expressing a percentage of fixed and current assets which will be established for separate groupings of comparable enterprises ; ( 2) the use of fixed percentages differentiated in this way intro duces a system of rates which will also spread the burden of payments more equitably among the enterprises; ( 3 ) adoption of the percentage system of payments from profits to the budget largely eliminates the intermediary role previously played by superior organs in assigning profit - tax payments subordinate enterprises; and ( 4 ) amounts previously paid from profits under the single heading of profit tax will now be paid in two sums, i.e., as payment for fixed and current assets and as a deduction from profits transferring to the budget any profits remaining after making contributions to the various funds and other uses. Enterprises transferred to the new system will establish three new funds: ( 1) The fund formaterial incentives ; (2) the fund for social-culturalmeasures and housing construction ; and ( 3) the fund for the development of production , It is not definitely stated in the methodological directives that these three funds are meant to replace the enterprise fund , although such an intention is implied.179 The fund for material incentives will be formed out of payments from three sources : Deductions from regular profits , a partial deduction from the profits obtained due to price markups for hi ;h quality goods, and the portion of the wage fund allotted to worker bonuses. Normative rates for deductions from profits will be established and expressed as percentages of the wage fund of production personnel. The general size of th material incentives fund will be differentiated by groupings of comparable enterprises. The fund will be used for payment of bonuses to workers, supervisors, and engineering - technical personnel ; for one - time incentive payments to the above groups

of workers and employees for their fulfillment of especially important production assignments; and for the general purpose of providing material incentives to workers . The fund for social- cultural measures and housing construction will also be formed out of deductions from profits , and a part of the profits obtained from price markups on high - quality goods. The deductions from profits will be based on set percentages of the general wage fund of the enter The fund will be used for the purposes prise . indicated in its title . Establishment of the two incentive funds described above does not affect the existence of other special incentive funds, such as the fund for consumers' goods made from waste, the fund for “ socialist competition ,” the fund for bonus payments for the delivery of export goods, and others which will exist side by side with the two new incentive funds.

The fund for the development of production will be formed from a partof the amortization deductions earmarked for a full renewal of fixed production assets, from receipts from the sale of unused property , and from deductions from profits . The deductions from profits will be based on normative percentages of the annual average value of fixed production assets which will be differentiated by groupings of comparable enterprises. The fund will be used to finance capital investments for the introduction of new technology , mechanization and automation , the modernization of equipment, the replacement of fixed assets, and other measures designed to promote the development of production ( such as mastering the production of new types of goods, increasing the productivity of labor, and reducing costs) . Long -term capital investments for such purposes as the reconstruction or expansion of existing pro duction facilities will be financed from the enter prises' own resources, particularly from amorti zation deductions and profits . The additional amounts needed for these purposes will be provided on the basis of credits from Stroybank . Under a similar arrangement, short - term credits needed by enterprises for expansion of their current assets will be provided by Gosbank . The budgetary grants which had already been allocated for capital investment in 1966 by the enterprises to be transferred to the new system will be deposited in Stroybank and converted into credits. This means that the practice of providing nonrepayable grants to enterprises for investment and expansion of current assets will be largely eliminated . The purpose of the change is to force enterprises to exercise maximum care and responsibility in planning new investments and in using their present resources,

125

PROFITS Figure 6-2 .--PROFIT DISTRIBUTION AND FORMATION OF INTERNAL FUNDS AS OUTLINED IN THE METHODOLOGICAL DIRECTIVES OF JANUARY 1966 (Roman numerals indicate priority of payments)

Type and basis of profit payments

External uses

(I)

Internal uses

Norm in percent of fixed and current assets

State budget

Material incentive fund

Wage fund (bonus portion )

( II )

(I) ( IV )

Fund for social and cultural measures and housing construction

Price markup for high quality

( II )

Production development fund

Sale of unused property

( III )

Losses in the housing and communal economy

Fixed rent ( special case ) ( IT) Norm in percent of wage fund Norm in percent of fixed assets

Superior organization for redistribution , etc.

Other sources of financing

( III)

According to the financial plan

( III )

Loan interest

( III)

Capital investment (central plan )

Depreciation allowance for replacement

Stroybank Loan principal

(I ( III)

Other purposes

( III )

Additions to current assets

Gosbank

Special government decision Appropriate components of profit (as before )

( No priority

Special purpose incentive funds

Remainder

Source : pp . 31-35 .

Based on text of Methodological Directives in Ekonomicheskaya gazeta , no . 6 , February 1966 ,

126

MAJOR STATE REVENUES

The directives specify a scale of priorities to be followed by enterprises in the distribution of their profits . According to this scale , enterprises are required to make deductions from profits in the following order: (1 ) Payments for fixed and current assets, fixed (rental) payments, and interest on bank credits; ( 2) payments to funds for material social- cultural measures and for incentives, housing construction, and for the development of the remaining profits , production ; and (3 ) from repayments of loans received for capital invest ments (except those repaid out of the fund for the development of production ), payments for financing centrally -planned capital investments , expenditures for increasing own current assets, planned losses of the housing - communal economy, other planned expenses, transfers to higher organizations of sums envisaged in the financial plan , and deductions for other purposes as specified in various decisions of the government, Any difference between the total amountofprofits and the sum of the payments or deductions listed in the above three groups will be paid to the budget . Special components ofprofits, such as those derived from the sale ofconsumers' goodsmade from waste , profits from the sale of new types of cultural, personal, and household goods, and profits from the sale of goods made from substandard materials , will be fully retained by the enterprise in accordance with existing regulations.

After one year of experience with the work of enterprises transferred to the new system , the methodological instructions of January 1966 were revised and elaborated in greater detail , version of the Methodological Directives was approved on December 2 , 1966 , as a guide to be used by enterprises , associations, and branches of in The basic principles of determining dustry . 180 profit and its distribution remained unchanged except that some additional detail was provided in place of previous general descriptions. One significant modification made in the later set of directives concerns the principal “ success indicators" to be used in judging enterprise per formance. The earlier version had specified the total volume of sales as the sole indicator , in place of the multitude of targets employed under the The revised instructions , prereform system . however , retreat from the use of a solitary indicator, and specify several others in addition to sales production of the most important types of output in physical terms, the amount of balance - sheet profits , and profitability . Another point in the new Methodological Directives deserving special attention is the formal recognition of two types of profitability , both One type , called general planned and actual, profitability (obshchaya rentabel'nosť ), is cal culated as a ratio of the total balance sheet profit

to the annual average value of productive fixed capital and normed working capital, as described above; the other type, called net or " derived " profitability (raschetnaya rentabel'nosť ), is cal culated as a ratio of the planned balance- sheet profit reduced by the sum of ( 1 ) payments to the budget for productive fixed and working capital, (2 ) fixed payments to the budget, and ( 3) interest on bank credit, to the annual average value of productive fixed capital and working capital. 181 The new directives also specify which of the alternative new profitability measures is the " official" one, that is , the one to be used in determining incentive fund contributions, where profitability is a direct factor in the calculations, and as an overall plan fulfillment indicator. This measure will be the second, or “ derived" profit ability , calculated after payment of charges on capital. Profitability will be reported on in terms of both measures , however , as is described in chapter VIII- A . The new set of methodological directives should still be considered a provisional and experimental arrangement which will be further clarified and defined in the light of experience gained under the reform system , C. OTHER BUDGET REVENUES

In addition to the two principal sources, i.e., the turnover tax and deductions from profit, budget revenues consist of a large number of other taxes, collections , and payments. This section reviews these individual taxes and collections and assesses their significance in the entire Soviet financial system . An attempt is made to identify as many distinct revenues as possible in order to character ize more fully the role of the budget in the financial system . In view of the large number of revenues, the description of each is limited to a brief outline of its major attributes. An examination of such aspects as the economic or political rationale of each revenue is beyond the intent of this study . 1. Revenue Groupings and Statistics

The formal budget classification of revenues, a large portion of which is reconstructed in chapter V , illustrates the maximum detail employed in Soviet budget plans and statistical reports . Sta tistical data on budget revenues , however, are not openly published in this detail. Such major sources as the annual statistical yearbooks and special compendiums of budget statistics single out broad groupings and some of the major individual revenues, but a substantial share of total revenues is not distributed by individual revenue source , Statistics on these residual revenues are available only in terms of a broad two - way grouping dis tinguishing revenues “ from the socialist economy" and those " from the population," as shown in table

OTHER BUDGET REVENUES

“ economy," while those paid by individuals are The basis for assigned to the “ population .”

6-2. This two - way “ economy” versus “ population ” grouping does not form part of the formal budget revenue classification , and is apparently designed primarily for public consumption. Its usefulness as an indication of the tax burden is impaired by such devices as the inclusion of the turnover tax and social insurance revenues under the “ socialist economy” rather than the “ population ." 182

The basis on assigned to these In most cases , immediate payer by enterprises or

127

assignment of revenues payable by both organi zations and individuals ,however , is unknown. These may be split on the basis of an accounting of payers, or they may be arbitrarily assigned to one or the other major group .

Such mixed revenues make up a large portion of another set of revenues known as “ local taxes and collections. " Statistical data on the component revenues in this set are available on a national scale through 1965 , as shown in table 6-18 . Local revenues are customarily counterposed to state "

which particular revenues are two groups is not entirely clear. it apparently depends on the of the tax. Thus, revenues paid organizations are assigned to the

Table 6-18 .--LOCAL TAXES AND COLLECTIONS :

1950 TO 1965

( In millions of rubles )

Type of tax or collection

1950

1955

1958

1959

1960

1961

1962

1963

1964

Total.....

674

809

962

1,005

661

681

698

724

740

754

188

292

369

381

374

391

392

384

407

419

70

74

87

88

90

87

92

95

94

100

260

330

422

477

141

148

158

167

176

181

One - time collections at collective farm markets ...

80

49

49

47

46

44

44

44

43

42

Collections on means of transporta tion and on livestock in cities1

76

64

35

12

10

11

12

34

20

12

Admissions tax..

State fees.... Building tax and land rent ..

1965

1 Computed as residual ( identity presumed --see text) . Source :

1950 , 1955 , 1960-65 --Min . fin . , Gos . byud , SSSR , 1966 , p . 70 . 1958-59--Min . fin . , Gos . byud . SSSR , 1962 , pp . 67-68 .

or national revenues . Although the precisemanner in which these two alternative groupings intermesh is obscure , the local revenues have been allocated to the major groups ( economy vs. the population) in table 6-2 on the basis of their content and some simplifying assumptions that are given below . Local revenues are made up of a basic set of five taxes and collections which are permanently assigned to local budgets . State taxes may also be temporarily diverted to local budgets for budget balancing purposes in a given year , as is noted in chapter V. In addition , two state revenues the admissions tax and state fees - are more or less permanently assigned to local budgets , and are associated with local revenues both in the formal classification (see revenue division 11 )183 and in statistical tabulations (table 6-18 ). The five explicit local taxes, together with the two state revenues treated as local revenues, can be characterized in terms of the major groups as follows:

Type of payer Revenue

Organi Individuals zations ( " popu ( " socialist lation " ) economy" )

"Local, "11 per se : Building tax .. Land rent (tax ) ... Collection on means of transportation . Collection on livestock in cities ... One -time collection at collective farm markets ..

X x

X X X X

X

X

X X

X

Other , treated as " local " :

Admissions tax .... State fees ..

128

MAJOR STATE REVENUES

As may be seen ,most of these individual revenues are mixed in terms of the grouping by origin . Only the admissions tax can be fully assigned to the socialist economy," and the two minor collections on means of transportation and livestock , to the “ population ." A distribution ofthe remainingmixed revenues taken together can be made, however , if it is assumed that the residual revenues from the population (after deducting state taxes on the popu lation , state loans, and lottery revenue) are fully attributable to local revenues.184

The following two sections take up the major groupings and their individual revenues in the order shown in table 6-2. As the table shows, the unidentified residual revenues remaining after re assigning the local revenues to the socialist economy group is a large component - approximately 15 per cent of total revenues. A discussion of the probable revenues making up this residual is contained in section 2.b , below . The local taxes and collections other than the admissions tax are described below under revenues “ from the population " (section 3 ), since they are paid by individuals , at least in part. 2. Taxes and Collections From Economy

the Socialist

a . Identified Revenues. - The following indi vidually described revenues are known to belong to the “ socialist economy" grouping from listings in statistical handbooks. ( 1)

Income Tax on Collective Farms

This tax, which was introduced in 1936 , is levied on the income of collective farms and other co operative agricultural associations earned from the sale of agricultural output and services. Proceeds of the tax at first went to both the all-union budget and the state budgets of union republics, but beginning in October 1959 the entire revenue has assigned to the state budgets of union been republics . 185 Prior to a major revision in 1965, the income tax on collective farmswaslast changed by a decree of September 12 , 1957 , and a law of December 18 , 1958. 186 Under these regulations, the tax was levied on the “ adjusted gross income" of collective farms and other agricultural cooperatives. In defining the scope of this adjusted gross, or taxable , income, the following deductions or exclusionswere made: The value of physical output transferred to machine - tractor and other specialized stations as a payment for work done; the value of products used or reserved for use as seed or fodder; expenditures for the acquisition of combustibles, lubricants , fuels , organic fertilizers, electricity, water, and other similar items; expenditures for the mech anized cleaning of the collective farm's irrigation network, the treatment of livestock by a veterinary ,

and the current repair of buildings, vehicles, machinery, and other equipment; amounts deducted for the amortization of fixed assets; receipts for produce and livestock transferred to the govern ment in the form of compulsory deliveries; re ceipts for the sale of livestock or products made slaughtered cattle , to the extent that sums from were allocated for financing capital investment designed to improve and expand the herd; and sums received from state insurance organs as compen sation for destroyed property . Gross income included both monetary receipts and the monetary value of income in kind , In December 1958 the tax rate was reduced from 14 to 12.4 percent. Prior to 1965 , the tax was paid in quarterly installments : an advance payment equal to 15 percent of the annual tax levy was due by March 15 ; a second installment rep resenting an additional 10 percent, or 25 percent including the amount paid as an advance, was due by June 15 ; the third installment of 30 percent and the fourth installment of the remaining 45 percent was due by September 15 and December 1 , respec tively . The tax levy for the current year was based on total taxable income of the previous year ; e.g., the tax paid in 1963 was based on 1962 annual income.

Substantial changes in this tax were stipulated in a decree of April 10, 1965, which became effective on January 1, 1966.187 In accordance with this decree , the tax is now calculated on net income, which is the difference between receipts from the sale of agricultural output and services plus the value of output issued to members of the farm as wages in kind , on the one hand , and the cost of output and services plus deductions to the centralized collective farmer social insurance fund , on the other . A portion of net income equivalent to a 15 percent profitability rate is exempted , and the remainder is taxed at the rate of 12 percent . Profitability ( rentabel'nost') is defined as the ratio of net income to costs '(sebestoimost') , as in in dustry. The exemption is therefore equal to 15 percent of total costs , A separate calculation is made to determine the amount of personal income tax owed by the col lective farm members. This amount is added to the income tax of the farm , and both portions are paid to the budget in one sum . The amount of the personal income tax is determined collectively on the basis of the difference between the total wage fund and a sum representing 60 rubles per month per collective farmer - which is exempted from taxable income. This difference is taxed at the rate of 8 percent . Beginning in January 1966 , the income tax on collective farms was to be paid currently in quarterly installments, on the basis of plan data ,

OTHER BUDGET REVENUES with a final recalculation to bemade at the beginning of the following year from actual data . Additional amounts to be paid as a result of the final recal culation are due by March 1 of the following year . It has been estimated that the combined effects of all changes will reduce the amount of income tax paid by all collective farms by approximately one half. 188 (2 ) Income Tax on Consumers' Cooperatives and Public Organizations This is a tax levied on the balance - sheet profit earned by non - state economic organizations. In addition to consumers' cooperatives, these organi zations comprise enterprises attached to public cultural and educational institutions, health and recreation establishments, sport organizations , fire prevention associations, party and youth organi zations, and other similar organizations -- insofar as they are engaged in production or commercial activities . Within the system of consumers' cooperatives, the tax is paid by enterprises and organizations which operate on a khozraschet basis , submit a complete set of accounting reports , have a settlement account in the bank , and have the right to distribute their profits . In public organi zations, the tax is paid by enterprises or organs which operate on a khozraschet basis and have both an independent balance sheet and a settlement account in the bank , 189 The tax is set at a fixed rate of 35 percent of the net income from production or commercial activities of consumers ' cooperatives and 25 percent of the net income from such activities of economic organs of public organizations. It is paid in quarterly installments. As of October 1959 the proceeds of the tax were assigned to the state budgets of union republics, 190

Exemptions from the tax are granted to enter prises of consumers' cooperatives during the first 2 years of their operation , provided that funded (i.e., centrally allocated ) materials used by them do not exceed 25 percent of the value of their out put. This exemption does not apply to enterprises producing alcoholic beverages, tobacco products , and perfume- cosmetic products containing al cohol. 191 Various enterprises attached to cultural and sport organizations are given exemptions, as well as those attached to party and youth organi zations . The paramilitary organization ofDOSAAF (All -Union Voluntary Society for Cooperation With the Army, Air Force , and Navy ) also had a current 192 exemption which was to expire on July 1 , 1967 .

( 3) Income Tax on Producers' Cooperatives This tax was very similar to the income tax on consumers' cooperatives and public organizations,

129

Enterprises of producers' cooperatives paid the tax according to rates differentiated on the basis of their profitability . This profitability was expressed as the ratio of profit earned from the sale of goods produced or acquired for resale to the full cost of such goods. The higher - level unions and councils of the producers' cooperative system , which earned a profit from activities other than those of pro duction , trade, or supply and sales activities, paid the tax at the flat rate of 20 percent of their balance - sheet profit. 193 The tax was abolished when the producers' cooperatives were eliminated and all personnel and facilities transferred to local sovnarkhozy as of October 1 , 1960 194 ( 4 ) Tax on Noncommodity Operations This tax existed from prewar years until the end of 1957. It was a levy on the gross income earned by state and cooperative enterprises as well as enterprises of public organizations from noncom modity operations (netovarnyye operatsii) such as the preparation of finished products from materials supplied by a customer, the repair and mending of articles, trucking, and various other services (e.g., barber, photographer , or laundry ). The tax was similar to the turnover tax , though in statistical handbooks it was grouped with the income taxes on The entire collective farms and cooperatives. revenue was paid to local budgets, 195

( 5 ) Admissions Tax This tax is levied on the gross income earned from the sale of admission tickets. It originated in 1931 as a form of turnover tax levied on the income of movie theaters. In September 1942, it was redesignated the admissions tax 196 and extended to cover income from admissions to a variety of entertainment and cultural activities such as lectures, exhibitions, museums, theaters , concerts , musicals , circus performances , sports After the war the tax was events , and dances .

gradually restricted in coverage and by 1964 over 98 percent of the receipts were derived from movie theaters alone, 197

The prices of tickets to movie theaters are regulated by the Council ofMinisters ofthe U.S.S.R , which differentiates between urban and ruralareas in both total price and the tax rates. In urban areas , the tax amounts to 55 percent of gross receipts but in rural areas it is only 10 percent. All tax pay Admissions to ments go to the local budget. scientific and educational films shown in schools , military units , and associations of military per sonnel of private , sergeant, and master - sergeant rank are exempted from the tax. Revenue from the admissions tax planned for 1964 represented 0.5 percent of the total revenue of the U.S.S.R. state budget . 198

130

MAJOR STATE REVENUES (6 ) Revenue From (MTS's ) This

Machine- Tractor Stations

revenue was initiated in the mid - 1930's

when the MTS's were converted to budgetary insti tutions, and it disappeared when the last of these stations was disbanded in 1959. 199 Since the MTS's were budgetary institutions, all expenditures were reimbursed from the200 budget and all receipts were paid into the budget. Thus , the revenue from the MTS’s was not a net revenue , and , in fact , because of the low valuation of in - kind payments received from agriculture, budget revenues from MTS's were usually smaller than budget expendi tures on them .

(7) Forestry Revenue This revenue consists of sums received by organs of forestry administration from timber purchasers, especially logging enterprises, in the form of a stumpage fee (popennaya plata ). It is paid by any enterprise, institution , or individualhaving a permit to procure timber in state forests . The fee is also paid by budgetary organizations and even by military detachments, insofar as they purchase timber directly from the state forestry adminis trations . 201 The fee varies according to forest zone, species of tree to be cut, and various other aspects (whether the tree is standing or fallen , whether it is intact or broken by the wind , etc.) . Purchasers make payment of the fee and of charges for other materials at the offices of Gosbank , which then credit the accounts of the forestry administrations that issued the timber procurement permits. In turn , each forestry administration makes payment to its republican budget, under tne designation of forestry income and under a separate division (division 10) of the revenue classification of local budgets . Finally , this forestry revenue is redistributed between the republican and local budgets. Prior to October 1959, a portion of the forestry revenue went to the all-union budget, but the law “ On Budgetary Rights of the U.S.S.R. and Union Republics ” adopted at that time assigned all forestry revenues to the state budgets of union republics, 202 Payments to the budget are made monthly , quarterly , or in one sum at the time the timber procurementpermit is issued , depending on the size of the stumpage fee .

(8 )-Rental Revenue of Local Soviets Property owned by local soviets and rented to various users provides a source of revenue which can go to local budgets . The formalbudget classi fication identifies individual types of property , including apartment houses, nonresidential prem lease, and miscellaneous ises under long - term plots of land (see local revenue division 14 ). Such rental payments can also be handled outside the state budget, either as one of a variety of sep arately budgeted “ specialmeans" (see chapter VI- E ) or as income of khozraschet units .

(9 ) Price Differentialon AgriculturalMachinery This budgetary revenue emerged on the basis of a resolution of the Council of Ministers U.S.S.R. issued on October 31, 1958 , which revised the system of supplying spare parts for agricultural machinery. The resolution instructed Gosplan to establish “ uniform wholesale prices” for these spare parts and to double them , on the average , in comparison with existing industry wholesale prices . The resolution further stipulated that the difference between the old and new prices was to be paid into the budget under an arrangement to be determined by the U.S.S.R. Ministry of Finance.203 The prices of agriculturalmachinery , as distinct from spare parts, were also raised about this time and the difference between the old and new prices was required to be paid into the budget. In each case the payments were recorded under division 12 - first under section 12 204 and later under section 31, 205 both of which were entitled “ other receipts .”

(10 ) State Social Insurance Revenues Although they accounted for only somewhat over 5 percent of budget revenues in recent years (table 6-2), state social insurance revenues are the third largest single revenue source from the socialist economy ( after the turnover tax and profit deduc tions ) and the fourth largest in all (after the personal income tax). This revenue source relates to the state budget in a unique manner , since a separate state social insurance budget is drawn up and administered by the central trade union agency . This budget is consolidated at top levels with the union budget and the budgets of individual republics to form the overall state budget of the U.S.S.R. As will be seen , the integration of social insurance revenues into the regular budgets is rather complex , and involves several unexplained features.

The most important social insurance revenues are the contributions of enterprises, institutions, and organizations based on wages and salaries of workers and employees. These contributions are formally distinct from the wage fund and are accounted for by the employer as a separate expense. They are determined as a percentage of wages or salaries, differentiated by trade union , in ac cordance with the nature of the work and the relative expenditures. These percentages, which are established by the Council ofMinistersU.S.S.R., range from 9 percent for the coal industry trade union to 4.4 percent for agricultural workers and employees. 206 The average rate for the country as a whole 1964 was approximately 6.3 in percent. 207 In addition to payments by employers , small amounts of revenue are obtained from individuals paying part of the price of travel and accomodation permits (putevki) , and various otherminor sources.

OTHER BUDGET REVENUES The separate social insurance budget prepared by the central trade union agency also includes a large appropriation of general revenues from the regular budget. Thus, in the plan for 1959 insurance pay ments themselves made up 97 percent of total social insurance revenues as such , but only 54 percent of the total social insurance budget , with regular budget funds making up 44 percent: Social Insurance Budget :

1959 Plan

(In millions of rubles)

Receipts

Table 6-19.--SOCIAL INSURANCE REVENUES , BY BUDGET LEVEL : 1950 TO 1965 ( In millions of rubles )

Year

State bud get of the U.S.S.R.1

Of which

Budgets budget of union se Union ( residual ) republic

1950 ..... 1955 .... 1956 .... 1957....

1,932 2,613 2,795 3,286

519 870 1,256 2,732

1,413 1,743 1,539 554

1958 .... 1959.... 1960 . 1961...

3,264 3,583 3,739 4,153

3,269 3,740 4,222 4,767

1962 .... 1963.... 1964... 1965....

4,414 4,631 4,949 5,562

5,223 5,697 6,105 6,513

-5 -157 -483 -614 -809 -1,066 -1,156 -951

Expenditures

Total budget ...... 6,388

Total budget ....... 6,388

Social insurance revenue... 3,580 Insurance pay 3,471 ments ... Travel permit receipts .. 43 Other revenue .... 66 Regular budget appropriation .. 2,808

Pensions and grants ..... 6,075 Children's in stitutions , sanatoriums , resorts , and dietetic cater .. 294 ing ... Other expenditures.. 19

Source:

131

Krulikovskaya , Planirovaniye , 1959 , p . 7.

The disbursement of social insurance funds for certain funds for certain types of pensions and grants is carried out by social welfare agencies of the government , as well as by trade union organi zations. Consequently , social insurance revenues are transferred to the union budget and republican budgets in an operational sense, as well as in the accounting sense of consolidation . 208

As reported in the annual statistical hand books , total social insurance revenues in the U.S.S.R , budget have been larger than those shown here --for example , by about 50 million rubles in 1959 and 60 million rubles in 1960 . ? Although reported under the consolidated bud gets of union republics , these revenues can be attributed to republican (central) budgets, since local budgets do not show such revenue . Source : 1950-60--Min . fin . , Gos . byud . SSSR , 1962 , pp . 8 , 69 . 1961-65--Min . fin . , Gos . byud . SSSR , 1966 , pp . ll , 71 ,

Fund

and contributions paid by all collective farms in amounts determined each year by the Council of Ministers U.S.S.R. as a percentageof each collective farm's gross income. Total expenditures from the fund in 1965 were planned to be 1.4 billion rubles, of which 0.4 billion were to be contributed from general budget revenue and 1 billion from collective farm income. 209 An accounting of collective farm contributions is maintained by rayon finance organs, and general supervision over payments to and expenditures from the fund is exercised by a newly established Department of Pensions and Grants to Collective Farmers in the U.S.S.R. Ministry of Finance , 210 No definite information has been found so far as to the relationship between this fund and the state budget. It is quite likely that the fund will be consolidated with the state budget of theU.S.S.R. in a manner similar to the integration of the state social insurance funds, although farm contributions to the fund are banked separately from general budget revenues. 211

This fund was established by a law of July 15, 1964 , which provided a pension system for collective farmers. The fund is formed by state budget grants

b . Other Revenues From the Socialist Economy (Residual). -The amounts of individually reported revenues from the socialist economy add up to less than the reported total for this group . The resulting

There are two major features in the published statistics on social insurance income recorded as regular budget revenue at various levels which deserve notice. Asmay be seen in table 6-19, these revenues have had a consistent tendency to shift from the union budget to the budgets of union republics . This was in keeping with the general trend toward raising the importance of republics in many administrative areas. The other feature of these data is that the figures for budgets of union republics are larger than those for the state budget. This is due to the fact that the figures shown for the budgets of union republics contain regular budget funds transferred from the union budget as supplements to social insurance revenues. 208

(11) Centralized Union Social Security for Collective Farmers

132

MAJOR STATE REVENUES

residual comprises numerous revenues of varying nature and significance . Between 1950 and 1960 , this residual increased from 9.7 to 15.5 percent of total state budget revenue, and it remained at this level through 1965. Soviet sources offer no system atic explanation of the revenues that constitute the residual, but they contain scattered descriptions of individual payments to the budget which obviously are a part of it . This scattered information has been systematized here in an attempt to provide as coherent a picture as possible . ( 1) One major type of revenue in the residual is made up of special-purpose , or earmarked , funds (tselevyye sredstva ). The formal classification of local budget revenues contains a division with this label (No. 60 ), under which sections have been identified for at least two types of earmarked funds local industry profit redistributions and deductions from compulsory property insurance. 212 A local industry profit redistribution bank ac count ismaintained by local finance organs. Whether all funds put into this account are considered budget revenue is not definitely established, but certain uses of these funds , at least, are clearly channeled through the budget. These include expenditures for the construction and expansion of local industry enterprises , 213 and for enlightenment and health 214 purposes.

A fund for deductions from compulsory property insurance payments is used to finance property protection measures . Seven to ten percent of the payments are set aside for such a purpose.215 This earmarked fund is notthe only contribution to budget revenue made by the various types of property and life insurance, however. These insurance programs are administered by Gosstrakh (an agency attached to the Ministry of Finance and operated on a khozraschet basis ), which pays profit deductions to the budget at rates amounting to over one - third of its annual income. 216

A number of other types of earmarked revenues have been identified : some are known to be classi fied elsewhere than in division 60; the classification of others is unknown. A highway construction and maintenance fund for republican and oblast high ways , instituted in 1958 , is financed by a 2 percent deduction from the gross income of automotive These deductions are transport organizations, deposited in a separate Stroybank account, but are recorded simultaneously as both budget revenues and expenditures in the accounts of finance agencies . 217 The construction and repair of local (as opposed to republican and oblast ) automobile roads has long been conducted by the participation of collective and state farms, and industrial , transportation , construction , and other enterprises. Participating organizations can make monetary payments to the road administration or department

of the local executive committee in lieu of contrib uting physical resources, either labor or materials. Such payments, however , together with fines for failure to participate, are accounted for by finance agencies as extrabudgetary funds - i.e., neither 218 budget revenue nor specialmeans. Similar treatment is given to urban housing capital repair funds originating in the rental receipts of apartmenthousemanagements (domoupravleniya ) for nonresidential quarters in use as stores , Of these receipts, 5 storage areas , or shops. percent is retained by the housing managements and 95 percent is deposited in Gosbank accounts for the citywide housing repair fund . A variety of other sources contribute to these funds, all ofwhich are apparently not considered budget revenue. It is clear that the rental payments, at least, are classed as both budget revenues and expenditures (division 190, section 35) at the timethey are deposited in the repair fund and before they are spent. Regular budget means diverted to these housing repair funds are also considered expenditures (division 190, 219 section 2 ) at the time of deposit. Beginning on January 1 , 1962, a special markup on radio and television products was established to finance broadcasting costs . A markup of 15 percent is added to the retail price of radios, radio phonograph sets , radio - tape recorder sets, and products containing radio receivers; 20 percent is added to the retail price of television sets , tele vision - radio -phonograph sets , and other products containing television sets . The markups are paid to republican and local budgets and classified under division 12 , section 13. These markups replaced the system of radio and television subscription fees (abonementnaya plata ) as a means of covering expenditures connected with radio and television broadcasting. 220 Based on reported data on sales of radios and television sets in retail trade and the percentage markups specified for the two groups of products , these payments should have amounted to 142 million rubles in 1963. A special charge for geological prospecting work in the prices for petroleum and gas was to be instituted , according to a decision adopted by the September 1965 party plenum . Petroleum and gas industry enterprises were slated tomake payments into the budget on raw petroleum and natural gas sold to all consumers , without distinction . The money is earmarked for expenditures incurred by the government in geological prospecting. The rates per ton of petroleum or 1,000 cubic meters of gas are to be differentiated according to the natural individual enterprises conditions under which operate ; thus, the differences in profitability due to these natural conditions are an important criterion in the determination of rates . Because higher rates are assigned to the more profitable enterprises operating under favorable natural conditions, these

OTHER BUDGET REVENUES payments are intended as economic rent. For example, the rate per ton of raw petroleum was to be set at 65 kopecks in the Bashkir Autonomous Republic , 1.10 rubles in Azerbaydzhan , and 3.80 rubles in Sakhalin Oblast. The payments into the budget are made on the basis of actual sales for each 10 - day period . ( 2) A second major type of residual budget revenue derives from the receipts of budget supported institutions. One form of such payments consists of the gross receipts or revenues of institutions whose expenditures are fully covered by the budget. There does not appear to be one single position for such revenues in the formal classi fication . The revenues of the now defunct MTS's (see above ), which were treated in entirety as budget revenue, were assigned to their own division (No. 6 ). The receipts of budgetary housing and communal service enterprises (i.e., those not operating on a khozraschet basis ) are rather curiously recorded under “ deductions from profits (local revenue division 2, chapter 190 , sections 1 22 and 24 ) . 3 Since they are offset on the expenditure side (division 190 , sections 1 and 24 ), these receipts constitute gross rather than net revenue, and are mislabeled as profit. Another form of payment from budgetary insti tutions consists of the surplus income from sub sidiary income-producing activities, which may be permitted to operate on a separate , independent budget known as a special-means estimate (smeta spetsial'nykh sredstv) . The control over such special -means budgetsmaintained by finance organs is nearly as close as for budget funds, and per mission to operate on this basis must come from high -level authorities. 224 An extensive and ex panding list of minor activities, however, is operated on this semi- khozraschet basis . Some of the major types of revenues which can be handled in this manner are the following ( see section E , below , for a more extensive treatment): (1 ) Rentals and other income from buildings, structures, and dormitories; (2 ) income from the operation of trans portation facilities; ( 3) income from production activities of subsidiary and training enterprises; (4 ) income of scientific - research institutions and laboratories from contracted work , publications, and experimental animals; and (5 ) income from lectures, concerts, and paid - admission events. 225 Special-means income is usually expended in the earning activity, and only the surplus or net revenue, if any, is paid into thatbudget supporting the parent institution . This revenue is not recorded as profit, but as one of several miscellaneous revenues (division 12, section 16 ). 226 ( 3 ) A third type of revenue in the residual consists of payments connected with the foreign trade of the Soviet Union . An important revenue in this category is the customs duties paid by

133

importing organizations as well as by individual abroad receive goods from citizens if they Although data on the size of customs directly. 227 revenues are lacking, they may be significant. 228 Revenue from foreign trade includes possible accounting profits arising from differences in domestic and foreign prices. These have been estimated by Becker at about 2 billion rubles in 1960, and negligible thereafter . 229 Moreover , repayments of credits extended by the U.S.S.R. to foreign states may also go to the budget and should be included among the components of the residual. 230 (4 ) Other known types of budget revenues in the residual appear to be of minor importance. One such type is usually labeled “ sale of state property , which signifies property devolving on the state under such circumstances as confiscation by courts or administrative organs, inability to identify rightful owners, and failure to claim shipments . 231 Another minor revenue consists of fees charged by state organs for such functions as automobile inspection , registration of trademarks, inspection of weights, standards, and measures , and fishing licenses. 232 Although similar in function , these are distinct from “ state fees," which are discussed below under “ local taxes and collections. " Miscellaneous payments include amounts re covered from pilferage , amounts derived from il legally charged higher prices, overdue obligations to creditors and depositors that have expired , fines, and undoubtedly other irregular payments to the budget. It has been further suggested that proceeds from the sale of materials released from State Material Reserves may be included among miscellaneous revenues . 233 If so , they would also become a part of the residual. Several types of payments into the budget are similar to other revenues, but because of accounting procedures are not considered budget revenue and do not enter the statistical residual. These include windfall gains of retail trade enterprises resulting from differential retail prices. Such price dif ferentials have occurred between rural and urban retail outlets or between territorialprice zones . In the event goods are transferred between zones or markets and are sold at higher prices than intended at the time of acquisition , the windfall is paid into the budget. Since it is recorded in the budget under the turnover tax , however, it does not constitute a new revenue entering the residual. In the contrary event that retail sales are made at lower prices than intended at purchase , the budget reimbursement of the trade organization is con sidered an expenditure (division 222 , section 5 ) rather than a negative revenue . 235 An analogous case of price differentials occurs in the grain and oil - seed procurement sector. Fixed

MAJOR STATE REVENUES

134

accounting prices used by procuremententerprises may be higher or lower than prices paid to producers or received from various types of purchasers. Separate Gosbank accounts for adjusting such dif ferentials are maintained for each agricultural procurement enterprise, with the budget ultimately serving as the balancing agent. Whether this results in a net revenue or expenditure is not clear , however . At the republic level, budget receipts due to such price differentials are ap parently more than offset by markups on agri cultural procurement prices, and are not 236 reported to the union level as budget revenue. The net balance obtaining on a national scale after the inclusion of union budget operations is unknown. 3.

a.

Taxes and Collections From the Population

State

Taxes

(1 ) Personal Income Tax This tax is the most important in the group of revenues officially conceded to be " taxes" on the population and the third largest in the budget as a whole. Its share of all state budget revenues grew from 4.8 percent in 1950 to 6.6 percent in 1965 (table 6-2). As indicated by its name, the tax is levied on income earned by individuals in the form of wages and salaries or from self - employment. Introduced in 1916 and retained by the Soviet regime with many amendments, the tax is basically regulated at the present time by the laws of April 30 , 1943, and May 7 , 1960.

The payers of the personal income tax are divided into four groups which include: ( 1) Workers and employees, together with other persons of comparable status; (2 ) writers and artists; (3 ) physicians, tutors, and other persons having an independent income from private practice; and (4 ) artisans, craftsmen , and other persons of comparable status having an income from self employment (ne po naymu).237 A separate scale of tax rates is established for each group with the first two groups having a more favorable scale The tax payments of those than the latter two . persons included in groups ( 1 ) and ( 2 ) are calculated by the enterprises , organizations , or institutions employing them and are withheld from their wages, salaries, bonuses, special rewards, etc. The tax payments of persons included in groups ( 3) and ( 4 ) are calculated by finance organs and paid in quarterly installments, each representing 25 per cent of the total tax paid in the preceding year. A final computation is made at the end of the year on the basis of income actually earned . The tax rates on the income of workers and employees have recently been changed several times. The scale set in April 1943 was reduced in May 1957 for those workers and employees receiving less than 45 (new ) rubles per month . A far more

enacted in May 1960 comprehensive revision outlined a program of staged reductions in the tax on income of workers and employees which was to have ended in the complete abolition of the tax by 1965. On October 1 , 1960, the amount of income exempted from the tax was raised to 50 rubles per month , and a further increase of 10 rubles in this exemption was scheduled for each of the next 5 years. Thus, from October 1 , 1965, the pay of workers and employees up to 100 rubles a month was to be entirely exempt. Incomes totalling between 100 and 200 rubles per month were to be assigned progressive tax rates for each 20 - ruble step . The tax previously paid on incomes in this range was to be divided into two portions: One portion (whose relative size diminished with increase in income) was to be granted to the payer as an increase in take - home pay, while the remaining portion of thetax previously paid was to be charged as a reduction in salaries. From the viewpoint of the budget , both portions would be lost as revenue. The benefits , however , were to go partly to the worker or employee, and partly to the economic organization in the form of reduced wage costs , which would in effect have been a kind of budget subsidy. The tax on incomes over 200 rubles per month was to be entirely written off as a reduction in salaries and wages. With the help of the pay - reduction device, the tax on income of workers and employees was thus to be totally abolished after October 1 , 1965 . However, only the first two stages raising the exemption to 60 rubles were carried out; the remaining provisions were rescinded on September 22, 1962. The law of May 1960 also contained a provision calling for the elimination of income tax on the second group (writers and artists) after October 1965. This provision was likewise rescinded in September 1962. The tax rates on income of self employed persons (groups 3 and 4 ) established in 1943 have been retained to the present day without change. These rates are graduated in such a way as to discourage self -employment. Exemptions from the income tax are granted to military personnel, except officers and career enlisted personnel, for monetary pay received during their service in military units , institutions, and military training establishments of the U.S.S.R. Ministry of Defense or the republican ministriesof internal affairs . Also , exemptions are granted : For Lenin and (in the past ) Stalin prizes; for in vention awards in amounts up to 1,000 rubles; to persons prospecting for gold , platinum , and other rare metals; for student grants up to 60 rubles per month; to independent craftsmen and artisans, owners of structures, and other persons with an income not exceeding 60 rubles per year ; to invalids of the first and second degree and pensioners with

OTHER BUDGET REVENUES other income from gainful activities or sources not exceeding 300 rubles a year; and to persons whose 238 income is taxed under the agricultural tax . Since 1959, proceeds from the personal income tax are divided equally between the all -union budget and the state budgets of union republics.

( 2)

Agricultural Tax

This is a tax paid by persons having an income from agricultural activities on private plots ofland or independent farms. Introduced in 1923, the tax underwent its most recentmajor revision in a law of August 1953.239 In 1950 , this source accounted for 1.9 percent oftotal budget revenues but subsequently its share declined (mainly due to the revision of the law in 1953) to 0.8 in 1955 and 0.3 percent in 1965 . Since 1959, the entire revenue has gone to the state budgets of union republics. The tax is levied at present only on arable land. The rates are progressive according to the quantity of land and without regard to the intensity of use or the return . The law of April 1953 stipulates a fixed average rate and a range of minimum and maximum rates for each union republic , within which differentiated ratesmay be assigned to individual oblasts and krays by the republican councils of ministers. For example , the average rate for the R.S.F.S.R. is 0.85 rubles per hundredth of hectare per year, but it can vary between 0.30 and 1.40 rubles for individual oblasts and krays . A variety of exemptions is granted to payers of the agricultural tax , but in most cases they have very limited scope and are in the nature of a partial compensation for military service or disabilities. Thus , for example , exemptions are granted for: Independent farms run by families whose onlymale is a first-degree invalid of World War II; inde pendent farms run by second -degree invalidsofthe war if the family includes children under 16 years of age; private plots of collective farmers and inde pendent farms if the man is over 60 years old and the woman over 55 , provided that no othermember of the family contributes any work . On the other hand , several agricultural tax regulations are punitive and discriminatory. Thus, if the members of a collective farmer's family fail to work the stipulated minimum number of labor - days or man - days on the collective farm without valid reasons, the agricultural tax on the family's private plot is increased by 50 percent ; if individual able bodied (trudosposobnyye ) mem bers of a collective farmer's family are not members of the collective farm or if they have been excluded from the collective farm and do not work under the status of hired person (that is , if they are either idle or self- employed), the agricultural tax on the family's private plot is increased by 75 percent;

135

and the land of independent farmers is taxed at rates 100 percent above those set for the private plots of collective farmers. 240

( 3 ) Bachelor and Small - Family Tax This is a tax levied on individuals on the basis of their marital and family status. It was intro duced in November 1941 along with other measures for raising wartime revenues. The tax declined from 1.8 percent of total budget revenues in 1950 to 0.6 percent in 1965 . Since 1959, the entire revenue has gone to the state budgets of union republics. At first the tax on bachelors and small families was conceived broadly as a head tax on all citizens of specified age and status regardless of whether or not they had an independent source of income. The tax was imposed on all men between 20 and 50 years of age and women between 20 and 45 who were single or who weremarried with a family containing less than three children . Since the beginning of 1954, persons without an independent source of income and persons paying the agricultural tax have been exempted. 241 In 1958, all personshaving at least one child and all unmarried women were exempted, which reduced the number of the payers by approximately 85 percent. The payers of the tax are divided into the same four groups as the payers of personal income tax, and for each group separate tax rates are estab lished . Workers and employees as well as writers and artists pay the tax on the basis of their monthly income; incomes less than 60 rubles a month are exempted , incomes between 61 and 70 rubles are progressively taxed in amounts ranging from 41 kopecks to 4.10 rubles, and incomes above 70 rubles are taxed at 6 percent. Persons belonging to the other two groups (private craftsmen and artisans, and other persons having an income other than wages and salaries), pay 6 percent of their annual income.242

(4 ) Tax on Horses Introduced in 1938 , this tax is a levy on horses owned by independent farmers in rural areas. It is paid on each horse 3 years of age and older, regardless of the income earned from the use of the horse. For the first horse the tax levy varies between 27.5 and 50 rubles a year , and for each additional horse between 45 and 80 rubles a year . The rates are differentiated by union republic , autonomous republic , kray, oblast, and even lower levels . The proceeds of the tax go to the state budgets of union republics, where 25 percent are distributed to the republican budget, 25 percent to the oblast, kray, or autonomous republic budgets , and 50 percent to the rayon budgets .

MAJOR STATE REVENUES

136 (5 )

Tax on Livestock in Cities

b . State Loans. - For many years , state loans occupied an important place among the sources of state budget revenues. First issued in 1922, they were used extensively before World War II, and they covered about 15 percent of the country's They military expenditures during the war.246 continued as the third largest source through the mid - 1950's , accounting for a high of 7.6 percent of the budget in 1956 . In 1957 , a major policy decision was made to curtail state loans. They furnished only 1 to 2 percent of budget revenues between 1958 and 1963, and dropped to an insignif icant fraction in 1965 (table 6-2) . The major type of state loan prior to 1958 was the subscription loan, in which individuals purchased bonds by means of regular withholdings from pay at the place of work . 247 Although nominally voluntary, these loans were invariably floated successfully with the aid of much social pressure. Since they usually could not be cashed until maturity (20 years), carried a low yield (often in the form of lottery prizes)which dropped from 4 to 2 percent between 1952 and 1957 , and were subject to arbitrary “ conversions" of interest rates and maturity dates by fiat, these bonds were more in the nature of a tax than a voluntary loan . In April 1957, subscription loans were dis continued, reportedly because a series of retail price reductions and rising debt service costs were lowering net yields to inexpedient levels. 248 Subscription bonds outstanding in the hands of the public at that time - about 26 billion rubles were frozen ; lottery drawings for prizes (in lieu

Table 6-20 .--STATE LOAN REVENUES , BY TYPE : 1950 TO 1965 ( In billions of rubles)

Bond sales to the population Direct sales Year

Total Total

(1)

( 2)

Sub scription loans

( 3)

Three percent lottery loans

Sales to sav ings banks

(4 )

(5 )

Other

(6 )

1950..1 3.104 3.012 1955 .. 3.677 3.672 1956 .. 4.431 4.426 1957 .. 3.526 3.522

2.644 3.025 3.284 1.854

0.060 0.308 0.092 0.117 0.530 0.005 0.142 1.000 0.005 0.068 1.6000.004

1958.. 1.060 1959..11.489 1960 .. 0.914 1961 .. 0.800

0.317

0.084 10.655 0.004 0.160 1.329 (z) 0.061 0.853 (z ) 0.035 0.765 ( 2)

1.056 1.489 0.914 0.800

1962 .. 1.1701.170 1963..11,312 | 1.312 1964 .. 0.lll 0,1ll 1965 .. 0.183 0.183 Entry represents zero .

esss

This tax was introduced in August 1956 as a levy on owners of livestock living in capital cities of union republics, oblasts , krays, and autonomous republics (excluding collective farmers and resi dents of urban centers in the Far North ). The councils of ministers of union republicswere given the right to establish similar regulations for other large cities. The law specified differentiated rates according to types of livestock owned - cattle, pigs, sheep , goats, workhorses and other draft animals ranging from 4 rubles per year for goats and sheep to 150 rubles for workhorses. The law clearly was designed to discourage livestock raising in cities: the rate increased 100 percent for each successive head after the first ( cattle , pigs ) or second ( sheep , goats ), and a 50 percent penalty was added if the owning family contained an able bodied person (other than the housewife) not working in a state, cooperative, or social organization . 244 The purpose of the law was achieved more directly in 1959 by an outright prohibition ofprivate owner ship of livestock in most large cities, which reduced the applicability of the law . It was finally revoked in November 1964. 245

of interest payments ) were discontinued and re payment of principal was postponed for 20 years until 1977 , when repayment is to be undertaken over another 20 -year period. 249 One final 5 -year subscription loan was issued in May 1957 , and revenue from this source disappeared after 1958 (table 6-20 ).

0.064 11,106 0.069 1.243 0.lll 0.183

Z

(2) (z) (z) ( z)

Negligible .

Source : Columns l , 3 , 4 , 5 : 1950-60 --Min . fin . , Gos . byud . SSSR , 1962 , p. 9 . 1961-65--Min . fin . , Gos . byud . SSSR , 1966 , p . ll . Column 2 : All years--Derived as the total of columns 3 , 4 , and 5 . Column 6 : All years--Derived as the difference be tween columns 1 and 2 .

Another type of direct loan from the population is the so so -- called called 3 percent domestic lottery (vyigryshnyy) loan . Unlike the subscription loans, these state obligations are bought and sold only for cash by the State Labor Savings Banks. Income is paid out in the form of prize winnings designed to be the equivalent of 3 percent interest . Two separate loans are currently in circulation . One 20 - year loan was first issued in 1947 and is due to be retired at the end of 1967. A new loan designed to replace the older one was first issued in July 1966 , the concurrent periods being designed to assist in the transition . 250 The 1947 loan was

OTHER BUDGET REVENUES marketed periodically in a series valued at 5 million rubles and consisting of 10- and 20 - ruble obligations maturing in 20 years. Prior to the 1966-67 transition period, lottery drawings wereheld every 2 months, with one supplementary drawing a year in which obligations held at least 9 months were eligible for prizes. Before maturity , one - quarter of the obligations in each series could expect to win prizes ranging from 20 to 10,000 rubles . Winning obligations were redeemed and withdrawn from the lottery , and since a fixed number of selections in each series was made at each draw ing, the winning chances of those remaining in creased with time. The new loan is in most respects similar to its predecessor. In the new issue, 30 percent of all bonds are designed to win , instead of 25 percent as in the old issue. Since the average rate ofwinnings remains at 3 percent , the average size of the prizes will be reduced by eliminating the largest ones. Instead of six regular and one supplementary drawings each year , the new loan will have eightdrawings . Until November 1967, drawings were to be held separately for each loan . Bonds of the 1947 loan can be exchanged for those of the 1966 loan at face value until July 1 , 1968 . The savings banks , acting as agents of the Ministry of Finance, buy and sell the obligations to the public withoutrestriction; however , purchases by the banks are made at nominal value, whereas sales are made at prices set by the Ministry of Finance and range from a minimum of 20.10 rubles to a maximum of 20.50 rubles for 20 - ruble denomi nations, depending on the nearness of the next drawing and (presumably ) the increased probability of winning in successive drawings . The resulting surplus is designed to enable savings banks to cover costs related to loan operations. 251 Since the discontinuance of subscription loans among the population in 1957, and , as will be seen , the change in the status of personal savings bank deposits after 1963, the 3 -percent lottery loan is the sole source of state loan budget revenue, which has dropped accordingly to about 100 million rubles annually (table 6-20 ).

change as a result of the administrative transfer of the savings banks from the Ministry of Finance to Gosbank in 1963. These deposits are now considered a part of Gosbank's resources and serve as backing for Gosbank credits . 253 In creases in these deposits since 1964 have not been used to purchase bonds and thus are no longer considered budget revenue. The overall effect of this change need not be entirely a net loss of budget revenue, however , since there may be a compensating decrease in funds the budget makes available to Gosbank as credit backing. Thus , the loss of the revenue may be offset by a reduction in budget expenditures.

The recent dramatic upsurge in personal savings deposits shown in table 6-21 , particularly in 1965, attests to their growing importance both as a source of Gosbank credit expansion and as a means of 254 The en restraining inflationary pressures.

couragement of personal savings deposits is con sequently a major concern of Gosbank and its savings banks.

Table 6-21.--PERSONAL SAVINGS ACCOUNTS IN SAVINGS BANKS : 1950 TO 1965

(As of end of year , unless otherwise noted )

Year

The relationship between deposit balances in savings banks and the state budget underwent a

Number of accounts (millions )

Total Average balance deposits (billion (rubles) rubles )

( 1)

(2)

( 3)

Increase in deposits during year (billion rubles )

(4 )

1950 .. 1955 .. 1958 .. 1959.. 1960 ..

14.3 32.8 47.0 50.0 52.2

124 163 185 201 209

1.853 5.366 8.719 10.056 10.909

(NA ) 0.531 0.661 1.337 0.853

1961 .. 1962.. 1963.. 1964 .. 1965 ..

52.4 53,5 53.6 55.0 57.4

222 238 260 285 326

11.671 12.745 13.992 15.707 18,727

0.762 1.074 1.247 1.715 3.020

NA The savings banks have also been major pur chasers of state bonds. Until 1964 , the annual increase in the balances of individual depositors in savings banks was used to purchase state obligations and was therefore considered a budget revenue. The transaction was apparently virtually automatic , as testified by the close correspondence between statistics on annual savings banks pur chases of state loan obligations shown in table 6-20 , and on increments in end - of - year deposit balances, given in table 6-21. Savings banks, as institutional purchasers, receive annual interest payments on these obligations. 252

137

Not available .

Source : Columns 1-3: 1950 , 1963, 1964 --Nar . khoz . 64 , p . 595 . 1955 --Nar . khoz. 60 , p . 854 . 1958-62 --Nar . khoz . 62 , p . 492 . 1965 --Nar . khoz . 65 , p . 600 . Column 4 : Derived from column 3 as current year figure minus previous year figure . Previous year data for 1955 and 1958 are from other sta tistical annuals .

In the past, state loans were also sold to other institutional purchasers, such as insurance agen cies , cooperatives , and social organizations. Al though such sales represented 18 percent of state

138

MAJOR STATE REVENUES

loan revenues in 1940, they were a negligible amount by 1952, and have disappeared since 1958 (table 6-20 ).255 c . Lottery Revenue. - At the sametimethat state loans were curtailed in 1957 , a partial replace was instituted in the form of cash - or commodity lotteries. Although state lotteries had been employed as a source of budget revenue as early as 1926 , and helped finance World War II, they fell into disuse after the war. They were revived in 1958 when union republicswere permitted to organize such lotteries , with the State Labor Savings Banks playing a major role in the sale of tickets and the disbursement of winnings. Recent data on revenues from this source show a decline after 1958 (table 6-2). Receipts from ticket sales are deposited in Gosbank as revenue of the Local budgets are state budgets of republics. awarded a share of this revenue, largely to provide an incentive for lottery ticket sales by local 256 agents . The revenue from lottery ticket sales is offset by winnings , which are reportedly set at 50 257 percent. Winnings may be paid either as cash in the form of savings bank deposits or as specified consumer durables in the retail trade system . A 2 percent commission is awarded to the part-time ticket salesman . 258 d . Local Taxes and Collections. - The essential distinction between " local" and " state " revenues , which has a long history in Russia and the Soviet Union , is that local revenues are attached fully to local budgets , while state revenues either do not enter local budgets at all or do so on a shared basis . Overall control over localrevenues remains with central authorities, although local organs usually have some discretionary rights to differ entiate tax rates within prescribed limits or to grant exemptions. Since local revenues are far from sufficient, however, and large doses of various state revenues are needed to balance local budgets , little actual discretion must reside locally. The content of “ local taxes and collections" has varied over time. The currently operative law designates five such revenues: ( 1) The building tax, ( 2 ) land rent, ( 3 ) one -time collections at collective farm markets , ( 4 ) collections on means of 259 transportation , and (5 ) collections on livestock . In addition , two other state revenues have been permanently assigned to local budgets and are frequently associated with this group — the admis sions tax and state fees . As was indicated in section 1 , these seven revenues relate to the " socialist economy” versus “ population" grouping in a variety of ways. Since most local revenues , including state fees, are paid by individuals in some part, only the admissions tax was described above , and the remaining six are treated here.

Available local revenue statistics on a national scale are shown above in table 6-18 . (1 ) The building tax is currently levied on factory - plant structures, warehouses, trade and office premises , residential housing of cooperative organizations, and buildings belonging to individ uals. In general, the tax rate on residential housing of cooperative organizations is 0.5 percent of their gross book (undepreciated ) value; on all other taxable buildings the rate is 1 percent. Exemptions from the building tax are granted to collective farmers for structures on their private plots, to others paying the agricultural tax , and to various servicemen and pensioners ,

( 2) Land rent (zemel'naya venta ) is levied on the land built upon or used for nonagricultural purposes which is allotted to cooperative organizations and to private persons for use in perpetuity and under contracts granting the right of construction . All such land is divided into six classes according to the density of population in a given area , its level of economic development, and similar consider ations, and each class is assigned a rent per each square meter of land . The rates range from 1.8 kopecks per square meter for the first class to 0.4 kopecks for the sixth class, with many variations and combinations pertaining to specially defined areas or the users of the land. 260 This tax is distinct from the rental payment (arendnaya plata ) which local soviets can also charge for leased land , Both types of payment cannot be levied on the same property .

( 3 ) A one - time collection at collective farm markets is a charge paid by collective farms and private individuals for the right to sell their agricultural produce at local collective farm markets. This so - called one - time (razovoy) charge is paid for each trading day at rates which vary from 10 kopecks to 1 ruble . The highest rate is paid for sales made from automotive vehicles , the next highest rate (50 kopecks ) is paid for sales made from carts , a charge ranging from 30 to 50 kopecks is collected for the 261 sale of each head of large livestock , and so on .

(4 ) A

collection

from

owners

of means of

transportation is paid by persons in urban localities owning “means of transportation .” These include conveyances (automobiles, motor cycles, yachts, motorboats, rowboats , and steam boats ) as well as draft animals used in hauling (oxen , mules, camels , reindeer , etc.) and horses (whether for riding, draft, or hauling). The means of transportation are divided into seven classes, for each of which the rates are differentiated by type of urban locality. The annual rates range between 25 rubles for horses in major cities to 50 kopecks per 263motorcycle horsepower in workers' settlements.

FINANCIAL RESOURCES OF KHOZRASCHET ORGANIZATIONS (5 ) A collection from owners of livestock is levied on persons living in urban localities who own productive cattle (cows and heifers over 2 years old ) or mature draft animals (except those used for hauling and all horses, both of which are taxed as “means of transportation " ). The annual rates are differentiated as in ( 4 ), above, and range between 1 and 5 rubles. Owners subject to the agricultural tax are exempt from this levy . (6 ) State fees (gosudarstvennaya poshlina) were not included among “ local taxes and collections” in the 1942 law , and the two are often considered distinct revenues. The formalbudget classification and the statistical handbooks group them together , however, along with the admissions tax discussed above (see chapter V , local revenue division 11, and table 6-18 ). Despite the " state" label, these revenues are assigned directly and fully to local budgets.

State fees are collected from enterprises, insti tutions, organizations, and individuals for certain services performed by state organs. These include the fees of law courts, state arbitration agencies, notary offices or the equivalent local administrative agency , organs registering changes in marital status and other civilian matters (ZAGS) , organs of the militia , visa departments and alien registration departments (OVIR ), finance agencies , and hunting inspection agencies. 264 A number of functionally similar fees paid into the union budget are omitted from this category, and have been assigned to the socialist economy" residual discussed above. D. FINANCIAL RESOURCES OF KHOZRASCHET ORGANIZATIONS The financialmeans controlled by the state budget are supplemented through the resources of two additional financing systems. One of these systems, which consists of funds originating in and used by the khozraschet sphere of the economy, is described in this section . The other system , which consists of funds earned and retained by budgetary insti tutions, is examined in the following section . For the most part, nonbudgetary financial re sources of the khozraschet sphere, in addition to the retained profits discussed in section B , are derived from charges to cost and are earmarked for special - purpose financing. These deductions are frequently organized into formal funds, for which elaborate rulesand procedures specifying formation and use are stipulated . Undoubtedly the most important single resource is the amortization fund , which is a repository of deductions earmarked for renewal and repair of fixed capital. A number of other funds are specially designed as financing devices for particular types of outlays . Most are closely tied to the financing of various costs or other aspects of production, although a few are assigned the role of providing incentive rewards.

139

A number of deductions and funds were estab lished during the sovnarkhoz era (1957-65 ), and the regulations therefore refer to the sovnarkhoz as the superior organization in industry and construction . It is very likely that the funds authorized in these years survived the sovnarkhozy and were reestab lished under theministries, which becamethemain administrative organs after September 1965 . 1.

Amortization Deductions

The fixed capital of state, cooperative ( except collective farms), and public enterprises and economic organizations in the productive sphere of the Soviet economy is subject to amortization deductions which are charged against the cost of output. These sums are earmarked for capital investment and capital repair under a system which lies outside of, but complements and is coordinated with , the system of finance controlled through the budget. Amortization deductions constitute a large source of funds which are directly available to enterprises for the financing of planned projects . In the process of planning capital investment and capital repair , superior administrative organsmay take a portion of the amortization deductions from one enterprise and assign it to another in order to provide funds where they are needed most. Regulations concerning the various factors in volved in the calculation ofamortization deductions, such as the classification of fixed capital265 and the setting of the norms (rates ) of deduction , were revised numerous times in the years prior to None of these revisions eliminated some 1960.266 persistent and serious shortcomings, however . The system of valuing all fixed capital at initial cost was inadequate in view of changing capital costs ; amortization norms were based on the average value of all fixed capital and therefore failed to take into account differences in the type and utilization of the various components; no allowance was made for obsolescence; and the effective life of assets was generally overstated . These and other inadequacies made an accurate estimate of production costs difficult and led to serious inconsistencies between the purposes and A complete results of the amortization system . overhaul of the amortization system was therefore effected in two actions , beginning in 1960. First, all fixed capital of state khozraschet and cooper ative enterprises was revalued as of January 1, 1960 , in current prices , to provide a more accurate Second , the basis for amortization charges. entire structure of norms (rates) was revised as of January 1 , 1963, 268 The new norms take into account differences in the conditions under which fixed capital is economy. They as to take into i.e., they call repair and for

used in the various sectors of the are also established in such a way account problems of obsolescence , for larger deductions for capital the modernization ofmachines and

MAJOR STATE REVENUES

140

machine systems in order to permit shorter terms of service. For the purpose of encouraging better use of fixed capital, the new amortization norms are made applicable to reserve equipment in storage, except those items of fixed capital placed in reserve by the decision of state executive organs. And finally , the new norms are generally higher than the previous norms. 269 The regulation which established the new structure of norms was approved by Gosplan on April 3, 1962, and put into effect on January 1 , 1963. It was a broad, far - reaching measure which introduced a newly defined system of planning, calculating , and using amortization deductions. 270 This system is described below . a . Subjects and Rates. -Types of fixed capital which are subject to amortization deductions consist of the following: (1 ) (2) (3) (4 ) (5 ) (6 )

Buildings structures transmission installations power machinery and equipment production machinery and equipment measuring and regulating instruments and devices

(7) transportation equipment ( 8 ) tools (9 ) production and office equipment and accessories (10 ) draft animals (11) permanent landscaping (plantings mnogoletnyye nasazhdeniya ).

The following types of fixed capital are not subject to amortization deductions: Productive livestock ; library holdings of books; automobile roads in general use; structures of certain urban facilities (blagoustroystva) administered by the executive committees of local soviets; assets placed in reserve (na konservatsiyu ) by decisions of the councils of ministers of the U.S.S.R. or individual republics or by local soviets; and the fixed capital by budgetary organizations, including the fixed capital of scientific - research and design organi zations operating on a khozraschet basis .

and

The term " fixed capital” does not include amortization deductions are therefore not

charged on - the following items: Objects which have been used less than 1 year , regardless of their value; objects whose value is less than the limit established by sovnarkhozy, ministries, and agencies (a generalminimum of 50 rubles per unit is prescribed), except agricultural machinery and equipment which are included in fixed capital irrespective of their value ; specialtools and special jigs or fixtures , irrespective of their value; young stock and stock being fattened for slaughter; special clothing , specialfootwear, and bedding accessories,

irrespective of their value and duration of service ( excluding bedding accessories ofhotels ); individual structural components and sections prepared for construction work ; and parts and aggregates of machinery, equipment, or rolling stock intended for construction , repair , or equipage purposes and considered working capital; equipment and ma chinery counted as finished products in the ware houses of producers or supply and sales organi zations, as well as equipmentrequiring installation which is counted on a capital construction balance sheet; temporary structures and installations not specified in title - lists whose cost is charged to the fixed - limit overhead expenses of construction organizations; machines and equipment which have been installed but not commissioned for use and are carried on an enterprise's capital construction balance sheet; and permanent landscaping (planting) prior to the time it is assigned for commercial use . Approved norms of amortization deductions, as differentiated on the basis of individual types and groups of fixed assets, are uniform for all enter prises and organizations and cannot be further differentiated . Norms are established separately for productive, nonproductive , and residential buildings. If a building is used for both productive and nonproductive purposes, it is classed as a productive building if more than 50 percent of its space is used for productive purposes. Factors causing greater or less wear of fixed capital are taken into account by applying corrective co efficients. Norms of amortization deductions on individual types of fixed capital are established in two sets, one for full replacement, the other for capital repair and modernization. Transportation and other equipment held in reserve but carried on the balance sheet of an enterprise is subject to amortization deductions for full replacement. Residential buildings are subject only to amorti zation deductions for capital repair , The Ministry of Railways makes amortization deductions on freight cars and containers according to differentiated norms. Deductions on the fixed capital of the mining industry (coal, shale, and ore mining, and the extraction of rare or precious metals and nonmetallic minerals ) are defined in a separate section of the regulation of April 3, 1962. Deductions on airplanes, helicopters, and aviation engines of civil aviation enterprises are made in accordance with norms approved by the Main Administration of the Civil Air Fleet attached to the Council of Ministers in agreement with Gosplan and the Ministry of Finance , Amortization deduc tions in the consumers' cooperative system are made and used in accordance with a separate regulation issued by their central board (Tsentrosoyuz ).

Losses resulting from the liquidation of fixed capital not yet fully covered by amortization

FINANCIAL RESOURCES OF KHOZRASCHET ORGANIZATIONS

1

deductions, excluding residential houses , are charged against the income of enterprises and organizations - except when replacement is made in accordance with the plan for the introduction of new equipment (tekhniki). Amortization deductions on new types of fixed capital not listed in the regulation can be established by analogy for most objects. When analogous norms cannot be deter mined, sovnarkhozy (formerly ), ministries, and departments have been authorized to work out proposals for amortization norms and to submit them , together with underlying calculations and justifications , to Gosplan , the Ministry of Finance , and TsSU for approval. Before approval is granted , enterprises and organizations can use the proposed norms for a period not to exceed 6 months . Norms of deductions are expressed as per centages of balance sheet values of fixed assets as established in the revaluation of January 1, 1960. Fixed capital introduced after this date is assessed at its original value. All state , cooperative (except collective farms), and public enterprises and organizations operating on a khozraschet basis specify in their financial plans each year the amortization charges which are to be made on their fixed capital. The total charge is calculated on the value of fixed capital owned at the beginning of the plan period , plus fixed capital to be commissioned during the period , minus fixed capital to be liquidated . Calculations are made separately for each type of fixed capital carried on the balance sheet; the individual charges are summed and the total comprises the amortization deductions to be made for the given year. Special coefficients are used to make adjustments for machinery and equip ment which is utilized more intensively or subject to factors having adverse effects on their durability and efficiency . In most cases amortization charges are cal culated by applying the prescribed deduction rate to the balance - sheet value of each object. The basis for calculations differs in some instances, however. In automobile transportation , for example, rates on rolling stock are expressed per 1,000 kilometers of actual use; for streetcars, they are calculated on the basis of 10,000 kilometers of actual service ,

Amortization deductions are charged not only during the period of economic use, but at times when an item is undergoing repair or standing idle . If an object of fixed capital is, however, placed in reserve by a decision of the Council of Ministers U.S.S.R., councils of ministers of individual republics , or by the executive organ of local govern ments, amortization deductions are not charged . Fixed capital rented out is subject to amortization charges to be paid by the lessor, but capital expenditures on rented fixed capital incurred by the lessee are recouped in the form of deductions equivalent to amortization charges.

141

b . Use . - The total amount of amortization de ductions set aside by each enterprise is divided into sums earmarked for either capital investment or capital repair by means of rates which are pre established for each type of object. Each of these two sums is subsequently divided into two portions. Of the deductions earmarked for capital investment, one portion remains at the disposal of the enter prise as one of several possible sources for financ ing the replacement of fixed capital in accordance with plans approved by superior levels . Enterprises and economic organizations converted to the new system of economic planning and stimulation will transfer 30 to 50 percent of their total deductions earmarked for capital investment to their production development fund. In 1967 , the size of the pro duction development fund is expected to be 4 billion rubles, of which 2.7 billion rubles will be derived from amortization deductions. 271 This portion of amortization deductions is deposited in the local branch of Stroybank or Gosbank .

The remaining part of amortization deductions earmarked for capital investment is transferred to superior organizations (sovnarkhozy ,ministries , departments , or administrations) which then make redistribution to enterprises thatdo not have enough funds of their own for capital investment, This process of redistribution , in addition to fulfilling the function of balancing capital investments, plays an important role in channeling amortization de ductions from new enterprises which have relatively small needs for replacement capital to old enter prises which have relatively great needs for such investment . The superior organizations deposit their receipts in Stroybank on a centralized basis . In respect to deductions earmarked for capital repair , enterprises and economic organizations transfer amounts ranging up to 10 percent of the total portion to their superior organizations for redistribution to enterprises in need of funds for capital repair .272 The remaining portion of the deductions for capital repair is kept at the disposal of the enterprise. It is deposited in the local branch offices ofGosbank or Stroybank where the enterprise The maintains a settlement ( current) account. entire remainder must be deposited , irrespective of the sum earmarked for financing capital repair work in the enterprise's own financial plan . If expenditures on capital repair amount to or exceed 5,000 rubles a year, the enterprise opens a separate ( osobyy) account for capital repair and includes in it any other sums earmarked for this purpose . If such expenditures are less than 5,000 rubles a year , funds for capital repair are deposited in the settlement ( current) account.

At the end of the year , data on the movement of fixed capital and the disposition of amortization charges are reported in form No. 11.273 Among other things, this form identifies amortization

142

MAJOR STATE REVENUES

deductions and outlays for capital repair by indi vidual type of industrial- productive fixed capital, amortization deductions and outlays for capital repair in nonindustrial sectors of the economy, the sum of amortization charges for capital investment deposited in Stroybank , and the disposition of deductions for capital repair . c . Capital Repair . -Amortization deductions retained by enterprises and economic organizations for financing capital repair work constitute a sizable source of funds directly at their disposal. Spending of the funds is regulated under clearly and rigidly defined conditions and only for purposes specified in the economic and financial plans. The regulation currently in force , which was promulgated on April 3 , 1962, prescribes the conditions of use in great detail. The most important stipulations are 274 summarized below . Each enterprise is required to deposit deductions made for capital repair in its separate account twice a month , at dates agreed upon with the bank , but not later than the 15th and the 30th day of each month . If the planned sum of deductions is less than 1,000 rubles a month , the payment is made once a month . The deposit can be effected by a transfer from the enterprise's settlement account to its separate account for capital repair funds. The bank is required to verify that the enter prise transfers to this special account the full sum actually accrued and recorded as such in the accounting report. In case of underdeposit, the amount lacking can be transferred from the enter prise's settlement account to its capital repair fund account at the bank's own initiative . If an enterprise deposits or transfers to its capital re pair fund a sum larger than is actually due, the excess amount is either returned or kept as an These stipu advance toward future payments. lations assure a steady flow of funds from the enterprise to the bank and permit a regular check on the use of the fund .

Amortization deductions earmarked for capital repair must be spent for this purpose only and cannot be used for purposes related to the basic activity of the enterprise or for capital construction . The volume of capital repair must be specified in the annual plans, accompanied by technical- estimate documentation , and approved by the superior organization . The plan for capital repair work is given in both monetary terms and physical quan tities, by quarter. The quarterly plans for capital repair of individual types of fixed capital are largely left to the discretion of the enterprise director, but superior organizations may require that all proposed work be submitted for review and approval. Generally , a capital repair project with an estimated cost of more than 100,000 rubles can be included in the plan for capital

repair only with organization .

the approval of the superior

In addition to those expenditures clearly classi fied as capital repair , the following expenditures are permitted from the capital repair fund: ( 1) Expenditures for the disassembly and as sembly of equipment to be repaired, and expenditures for transportation to and from the place of repair; ( 2 ) expenditures for design and survey work , insofar as it relates to the execution of capital repair and irrespective of the time the repair is actually carried out ( expendi tures are calculated in price list release prices approved by the sovnarkhoz , ministry , department, or other superior organization ); ( 3) the cost of replacing worn - out structural elements or parts of buildings with elements or parts made of sturdier or more durable materials ; (4 ) the cost of full or partial replacement of worn - out mechanisms and instruments which are integral parts of the unit of fixed capital under repair , the cost of replacing individual equipment subassem blies with new and more economical sets which will increase the efficiency of the repaired unit, and expenditures on the modernization of equipment; (5 ) expenditures for replacing old rails with new ones , the construction of gravel em bankments, and other construction work ;

(6 ) expenditures incurred in the acquisition of ship machinery , equipment, and other items used for replacement in the mari time fleet; and (7 ) expenditures related to the maintenance of ships while undergoing capital repair . Amortization deductions earmarked for capital repair can also be used to establish normed stocks of material valuables for capital repair work , i.e., spare parts, components , subassemblies , instruments , and other materials . All expenditures on capital repair must be based on technical- estimate documentation drawn up in current prices and in accordance with norms and valuations established for capital repair work , or in accordance with special valuations approved by Gosbank and republican councils of ministers. Stroybank are required to verify all documents and to ensure proper observance of financial regulations. In order to facilitate the performance

143

FINANCIAL RESOURCES OF KHOZRASCHET ORGANIZATIONS

of these duties, enterprises and economic organi zations are obliged to submit to the banks infor mation (spravki) on their approved plan for capital repair. In addition , they must certify that they possess the proper technical- estimate documen tation , which has been approved for individual projects of capital repair on forms specified by Gosbank and Stroybank . The banks are authorized to withhold payment of expenditures for capital repair whenever questions arise concerning the observance of financial regulations . The specific responsibilities of banking institutions in this respect include the following: ( 1) Verify the full and proper use of amorti zation deductions earmarked for capital repair ; (2 ) verify the nature of finished capital repair work and its execution in accordance with technical - estimates documentation ; (3 ) require that directors of enterprises, eco nomic organizations, and their superior organizations take measures necessary to eliminate any shortcomings discovered; and

(4 ) recover any excess sums obtained by enter prises and economic organizations in im proper ways.

d . Significance .-- The economic and financial significance of amortization deductions can be seen best in terms of their size relative to the total cost of industrial production and as a source of funds for capital investment and capital repair .

Since introduction of the new amortization norms on January 1, 1963, the general level of amortization charges has risen as a proportion of the total cost of production . In industry as a whole, amortization charges were between 3.5 and 3.7 percent of total production costs prior to 1963; by 1965 they rose to 5.0 percentofthe total. A similarmovement upward occurred in a number of the individual branches of industry, but the rate and level of movement were different. As table 6-22 shows, somebranches of industry made a large jump (e.g., coalmining, peat, and logging ), some experienced a fairly significant increase (e.g., ferrous metallurgy and the chemical industry), and a large number of the branches (mostly the light and food industries) generally remained at about the same level.

Table 6-22 .--AMORTIZATION DEDUCTIONS AS PERCENTAGES OF TOTAL PRODUCTION COSTS , BY BRANCH OF INDUSTRY : 1959 TO 1965

Branch

of 1959

1962

1963

1964

1965

industry

Industry ,

Electric

3.5

3.7

4.7

4.9

5.0

20.3 5.7 6.6

21.1

22.0

22.0

6.6 8.0

13.7 16.7.

22.2 12.4 15.0

46.5 24.1 13.4

47.4

49.6 23.5 21.9

12.2 14.9 48.6 27.3

total ...

and thermal power ...

Coal ...

Coal mining Oil extraction . Gas ... Peat ... Ferrous metallurgy Chemical..

5.8 4.0 1.1

Rubber and asbestos .. Machine - building working ...

21.9 14.9 6.4 4.7

8.1 6.0

22.2 8.4

48.5 26.5 22.2 8.7

1.9

6.5 2.1

6.9

1.4

3.9

3.8

4.3

4.5

4.8

3.8

4.3 5.3 5.2

7.6 11.6

7.9 11.9 8.0

7.9 11.9 8.6

9.0 13.7

9.2 14.0

2.2

and metal

Logging , woodworking , and paper .. Logging . Paper .. Construction materials Cement..

See footnotes at end of

4.7 4.3 6.3 10.2

table .

7.0 11.1

7.8 8.8 13.5

144

MAJOR STATE REVENUES Table 6-22 .-- AMORTIZATION

DEDUCTIONS AS

PRODUCTION COSTS, BY BRANCH OF

Branch

PERCENTAGES OF

INDUSTRY :

1959 TO

TOTAL

1965 --Con .

of 1959

1962

1963

1964

1965

industry

0.8 0.9

0.9 1.0.

0.6

1.6 0.3 1.4

1.6

0.5 1.7

1.1 0.5 1.8

0.4 1.8

0.4

0.5

1.9

1.8

4.0

3.3

0.5

2.9 0.5

0.5

0.6

2.9 0.6

( NA ) 1.1

6.1 1.0

9.7 1.6

9.5 1.7

9.5 1.4

0.9 0.5 1.3 0.3

Food ....

1.2 1,9

Sugar .. Meat ....

Fish .. Milk and milk products .

NA

0.8 1.0 0.5

0.8

Light.... Textiles .. Cotton ginning . Cotton textiles . Sewn goods ..

1.0

Not available .

Source :

1959 -- Nar . khoz . 59 , pp . 1962 -- Nar . 1963--Nar . 1964 --Nar . 1965 --Nar .

p.

161-162 . 143 .

khoz . 62 , khoz . 63, p . 135 . khoz . 64 , p . 153 . khoz . 65 , p . 165 .

The proportion of amortization deductions in the total cost structure was extremely high in oil extraction , where it made up almost one - half of the cost . Gas, electric and thermal power, and peat followed with a substantial proportion of amorti zation charges in the cost of their respective output, and coal mining, cement, and logging also had a sizable portion of amortization charges in the total cost of output.

-

The sums of money made available to the economy for financing capital investment and capital repair through amortization deductions increased at a fast pace between 1950 and 1965. In this period , as shown in table 6-23, the total increased almost seven times, and large increases occurred in all sectors of the economy.

Significant changes also took place during the years 1950-65 in the distribution of amortization deductions between capital investment and capital repair . At thebeginning ofthis period, 23.7 percent of the total amortization deductions in the state sectors of the economy were used for capital investment and 75.3 percent were used for capital repair . The share allotted to capital investment

grew during the years, and by 1965 amounted to 48.5 percent , with capital repair receiving 50.3 percent.

Much the same development took place in industry , where the proportion earmarked for in vestment increased at such a rate that by 1963 it surpassed the share of deductions earmarked for capital repair . In transportation and communica tions, which has the second largest amount of amortization deductions, the part assigned to in vestment increased markedly while the partused for capital repair was reduced .

The volume of amortization deductions ear marked for capital investment increased by more than 13 times between 1950 and 1965, or from 671 to 9,230 million rubles (table 6-24 ). At the same time, these investment funds increased more than three times as a porportion of total capital in vestments, from 6.1 percent to 18.9 percent. The volume of amortization deductions earmarked for capital repair increased from 2,100 million rubles in 1950 to 9,575 million rubles in 1965 , despite the fact that the proportion of the deductions so earmarked declined from 75 percent to 50 percent (table 6-23).

Othe r .

. Trade .I R .I R .I R

.I R .I R .I R

Nar -1962 khoz 2 .,p6 53 .,p76 Nar k1965 hoz 5 --80

0.4 1.4 0.6 1.2 0.6 0.4

0.4 1.2

35.0 64.0 24.1 33.0 1.4 2.3 3.5 19.5 3.6 4.0 0.6 0.8 0.4 0.5

R apital investment .ICrepair 69 1.7,p6-kSource Nar 4hoz 958 950 963 : 964 34 2959 1.,p6-k Nar 961 hoz 960 1952

0.5 1.6 0.4 1.4 0.4 1.4 0.5 0.5

1.9 4.7 0.4 0.7 0.3 0.6

17.9 38.5 I 1.3 2.5 R communicationsI Transportation and 0.5 24.0 R

cConsumers .' ooperatives .I R

Commu nal econo my .

.and sales Supply

Procurement .

Construction .

.. Agriculture

Industry ..

23.7 75.3

State sectors I R I R

100.0

p)(USE ercent

Total .

0.8 1.0 0.6 0.6

0.5 1.1 0.5 1.3

0.7 0.5 0.8 0.5

5.3 15.7 3.2 4.5

40.0 59.0 25.8 30.8 2.4 3.4

100.0

3,993 415 1,481 540 81 95 115 132 126 80

2,107 137 849 281 53 36 60 65 67 36

100.0

6,978

3,655

State sectors . Industry ... culture Agri

Total ..

2,743 1,563 103 Transpor comm .and unictati atio681 on ns Cons 182 . truction Procurement ... 31 .. 25 salely and Supp s 57 Trad .. e Comm unal econ omy 50 . 51 Other cCons 28 .' oopeumer rati sves

1958

7,058

1952 3,691

1950 2,771

use and Sector

0.7 1.1 0.6 0.6

0.5 1.1 0.5 1.3

37.5 61.4 25.3 30.6 2.5 3.7 3.4 18.1 3.0 4.3 0.8 0.7 0.8 0.5

100.0

6.3 14.8 2.6 3.9 0.8 0.7 1.3 1.0 0.5 1.0 0.5 1.2

0.6 1.0 0.6 0.6

5.8 14.4 2.8 4.2 0.8 0.7

3.2 5.4

3.2 5.0 6.1 15.4 2.6 4.1 0.8 0.7 0.8 0.5 0.5 1.0 0.5 1.3 0.7 1.1 0.5 0.6

1.4 1.0 0.5 1.0 0.5 1.2 0.7 0.9 0.6 0.6

40.7 59.1 24.8 29.1 3.4 5.6

100.0

40.5 58.3 24.7 29.3

100.0

5,509 878 2,157 664 153 231 149 178 167 122

11,300 11,165 6,090 1,014 2,287 787 169 271 168 192 187 135

10,208

1962

10,086

1961

40.0 59.0 24.7 29.8

100.0

8,991 4,952 747 1,961 611 137 123 133 161 166 104

7,850

4,445 490 1,707 579 116 101 124 142 146 93

9,095

1960

7,943

1959

1.3 0.9 0.7 0.7 0.9 1.0 1.0 0.9 0.6 0.6

0.7 0.6

1.3 0.9 0.7 0.7 0.9 1.0 1.3 1.0 0.6 0.6

1.4 1.0 0.7 0.7 0.9 1.0 1.3 0.9 0.6 0.6

6.0 4.4 . 7.0 11.8 2.9 3.8 0.6 0.5

5.7 4.2 7.2 12.2 2.8 3.7 0.9 0.7 5.8 4.3 7.0 12.3 2.7 3.8

48.5 50.3 27.7 26.2

48.2 50.6 27.6 26.2 48.2 50.7 28.0 26.1

251 363 413 218

18,587 10,128 1,968 3,549 1,250 221

18,805

1965

100.0

16,844 9,159 1,687 3,295 1,112 269 386 230 324 382 201

17,045

1964

100,0

100,0

8,419 1,575 3,011 1,009 212 343 208 291 303 182

15.371

15,553

1963

1950 1965 TO AMORTIZATION ,B :DEDUCTIONS USE AND ECONOMY THE OF SECTOR Y .-6-23 Table Pfigures ) ercentage rounding to due add not may .(Afigures rubles of millions in bsolute

FINANCIAL RESOURCES OF KHOZRASCHET ORGANIZATIONS 145

MAJOR STATE REVENUES

146

Table 6-24 .-- AMORTIZATION DEDUCTIONS DESIGNATED FOR CAPITAL INVESTMENT -- AMOUNT AND PERCENT OF TOTAL CAPITAL INVESTMENT : 1950 TO 1965 ( Absolute figures in millions of rubles)

Year

Total capital invest ment

Amortization deductions designated for capital investment

Amount

Percent of total capital investment

(1)

( 2)

1950 ... 1952 ... 1958... 1959 ... 1960 ...

11,084 14,100 30,012 33,986 36,705

671 1,313 2,861 3,024 3,683

6.1 9.3 9.5 8.9 10.0

1961 ... 1962 ... 1963 ... 1964 .. 1965 ..

38,271 40,150 42,214 45,938 148,722

4,198 4,675 7,587 8,321 9,230

11.0 11.6 18.0 18.1 18.9

Derived on a newly defined basis .

( 3)

See source .

( 1) Bonus Fund for Creating and Introducing New Equipment, Technology , Complex Mechanization , and the Automation of Production . This fund was established in 1960 in both enterprises and the sovnarkhozy to provide themeans for giving bonuses to workers in industry , construction , transportation , communications, geological prospecting, scientific research , and machinery designing as a reward for the creation and introduction of new production equipment and technology. Rates for thedeductions, which are expressed as a percentage of the wage fund of the personnel engaged in the basic activity of an enterprise or organization , are as follows: 275

Branch of industry or type of basic activity Chemical, oil- refining, petro chemical, and machine -build ing and metalworking in dustries

Deduction rate

1

Source :

and the superior organization . In other cases the deductions are transferred in full to the superior organization , which maintains one centralized fund for financing a specified purpose .

Column ( 1 ) : Ferrous and nonferrous 1950 , 1958 , 1960 , 1963 , 1964 --Nar . khoz . 64 , p . 513 . 1952 , 1959 , 1961--Nar . khoz . 62 , p . 434 . 1962--Nar . khoz . 63, p . 452 . 1965 --Nar , khoz . 65 , p . 531 .

Column ( 2 ) :

derived as a residual from re ported data :

1950 , 1958 , 1963 , 1964 --Nar . khoz . 64 , p . 769 . 1952 , 1959, 1960 , 1961 --Nar , khoz . 61 , p . 634 . 1962--Nar , khoz . 63, p . 653 . 1965 --Nar . khoz . 65 , p . 780 . Column ( 3 ) :

Column ( 2 ) divided by column ( 1 ) times 100 .

2. Special -Purpose Funds Enterprises and economic organizations are authorized to establish other funds to finance special aspects of production or special activities. Such funds are based on deductions which are either taken from profits or charged against the cost of output. Funds formed out of deductions from profit have been described above ( chapter VI- B ), there fore the following discussion is concerned only with funds formed from deductions charged against cost. These deductions can be treated in two ways. In certain cases they are split into two parts , one to be retained by the enterprise and the other to be transferred to the superior organization ; thus the same type of fund may exist at both the enterprise

metallurgy, oil extracting, gas , construction materials, and cellulose - paper and woodworking industries, electric power stations , and thermal plants

0.5

Other branches of industry and construction

0.3

Transportation and communi cations and geological pros pecting

0.2

Scientific - research and con struction- and machinery designing organizations of the chemical and chemical machine -building industries

6-10

Scientific research and construction- and machinery designing organizations of other branches

4-8

More than half of the total deductions of in dustrial enterprises is transferred to superior organizations for the formation of a centralized bonus fund , and the remainder is left to the disposal of the enterprises. Scientific - research and construction- and machine -designing organi zations transfer less than half of their deductions to superior organizations,276

FINANCIAL RESOURCES OF KHOZRASCHET ORGANIZATIONS The bonus awards are determined on the basis of the annual economic effect of the innovation.277 If the effect of work on new equipment (or of theoretical, research , or designing and surveying work ) cannot be determined , the amount of the bonus is setat a level ranging up to 20 percent of the annual average wages of the persons engaged in such work . This fund is used by enterprises to pay bonuses to workers for work stipulated in the annual plan for new equipment; the former sovnarkhozy (and presumably ministries after the reform of October 1965 ) used the fund to award bonuses to workers for the fulfillment of the annual plan (of the sovnarkhozy) for the introduction ofnew equipment and technology . Money in the fund not spent during a year can be carried over and used in subsequent years.

( 2 ) Fund

for

Mastering

New

Equipment (Tekhniki). --This fund emerged in connection with a new system introduced in 1961 for financing the work necessary to prepare new machinery and Under the previous equipment for production . system , expenditures for this purpose were charged directly to the cost of the new equipment via a suspense account for prepaid expenses, and the temporary wholesale prices used until full serial production was organized included a markup for such expenses of up to 5 percent of the cost. Reports showed , however , that the costs for mastering new equipment often reached or even exceeded 20 percent of the temporary wholesale Enterprises producing such equipment price . consequently suffered a reduction in their profit ability rate , and enterprises using it were reluctant to buy and introduce it because of the high prices. 278 The fund was designed to overcome difficulties of this nature .

The fund has been established in sovnarkhozy , ministries, and other agencies on the basis of deductions made by enterprises in the machine building andmetalworking industries. These deduc tions are charged to the cost of the civilian output of the enterprises . The rates at which such deductions are made, in percent of total planned factory - plant costs, have been set as follows for certain branches of the machine-building in dustry: 279 Branch

Heavy machine - building Electro - technical Radio - electronic Machine - tool Automobile and ballbearing General machine - building Instrument Other

Deduction rate

3.5 3.0 2.0 3.5 1.0 3.0 3.0 1.5

147

Since January 1 , 1965 , deductions into the fund have also been made by enterprises in the chemical, oil refining, petrochemical, metallurgical, cellulose paper and hydrolysis industries, insofar as they produce civilian goods.280 The enterprises make monthly payments to Gosbank , which maintains a separate account for the fund . 281 The money is redistributed by each ministry or department to its subordinate enter prises, in accordance with their planned and approved expenditures for mastering the production of new equipment, Money received by enterprises from the fund must be spent for the specified purpose . Unspent allocations are returned to the fund , but in certain cases, and with the approvalof the superior organi zation , they can be spent on mastering the production of output other than the one for which the original allocation was made . If expenditures actually incurred in the process ofmasteringnew equipment exceed those approved in the estimate, the overage is not reimbursed from the fund but is charged directly to the cost of output under the designation of nonproduction expenses 282 Enterprises producing ships, locomotives ,main line freight cars, airplanes , and aviation engines for the civilian air fleet, as well as tractors, combines , and types other of agricultural machinery, and experimental models of new equip ment made according to special order , stilluse the old system of financing. That is , they include the cost ofmastering the production of new equipment directly in the price of the product; therefore, they do not make payments into the fund for mastering new equipment. 283 ( 3) Fund of the Sovnarkhoz Chairman (Min ister).- This fund was established in accordance with a regulation approved by the Council of Ministers U.S.S.R. on September 17 , 1964, just one year before the entire sovnarkhoz system was abolished . It is very likely, however , that the ministries which succeeded the sovnarkhozy took over the fund and renamed it appropriately .

As originally designed , the fund is formed by deductions of 0.05 percent made from the general wage fund of all enterprises. These deductions are transferred to superior organizations which are responsible for the fund. Moneys in the fund are used for bonus payments to workers of enter prises and organizations as a reward for the ful fillment of specific and important assignments, and for providing special, one -time help to workers. The general wage fund which serves as a base for calculating the amount of deduction to the fund excludes the wages of workers who are part of the higher administrative apparatus; the latter receive bonus payments from specialbudget allocations.

148

MAJOR STATE REVENUES

Industrial enterprises make payments into the fund from their settlement account; construction projects financed through Stroybank make payments from the settlement account of the construction chief or from other appropriate accounts . Amounts paid into the fund are charged against the costs of output, construction , distribution , or other basic activity of the enterprise .

Money in the fund which is not spent by the end of the year can be carried over and used in the following year. The transactions of the fund are reflected in the balance - sheet of the ( sovnarkhoz) ministry and its administrations .

( 4 ) Other. - A fund for scientific - research and designing work is created from deductions made by industrial enterprises, construction - installation organizations, and transportation , trade , supply and sales, and procurement organizations. These

of deductions for such a fund is confirmed by occasional brief references in Soviet sources, but these sources offer no specific information about conditions under which such deductions are made and used . It is known that the deductions for worker training are reported in quarterly and annual reports on report form No. 4 -K.289 The fact that these deductions are charged against cost is confirmed by another source . 290

A final special - purpose fund which is known to exist, but about which there is little information , is the fund based on deductions made to a superior organization for the support of its administrative costs . Such deductions had been made to support the administrative structure of sovnarkhozy , their administrations, and combines branch (ob " yedineniya), in amounts determined by the superior organization . Such deductions were charged to the cost of output. 291

deductions are charged against the cost of output or service and transferred each month to the superior ministry of the paying enterprise or organization . The ministry redistributes the funds to its subordinate scientific - research and designing organizations according to their estimates and the volume of work actually completed . If an enter prise which makes deductions for scientific research and designing work is itself engaged in this kind of work on projects having significance for the entire branch of industry, its deduction for the ministry is reduced by the amount of the expenditures on its own projects .286 No systematic information concerning the size of these deductions has been found . One source mentions that the sum of deductions for scientific - research and designing work in the Moscow Sovnarkhoz did not exceed 0.2 percent of the cost of marketable output; another source reports that such deductions “ usually do not exceed 0.15-0.2 percent." 287 These figures are probably applicable to the former sovnarkhozy as a whole, although it is not known whether a single flat rate or rates differentiated by sectors and branches were employed in levying the charge. A source published since the demise of the sovnarkhozy and the attachment of branch - oriented research organizations to the new ministries or their main administrations cites a range of 1 to 3 percent of the cost of productive enterprises' finished output for these research deductions. 288 This represents a very large increase if it is an average rate for all industry . However, it may apply only to the machine -building industry , with which the source is mainly concerned . Another special -purpose fund is one intended for financing worker (cadre ) training. The existence

3. Bank Credit An additional source khozraschet enterprises

of funds available to is bank credit. This

source is not considered in the consolidated financial plan , but is controlled by separate credit plans (see chapter IV ) . In the Soviet system , bank credit is of relatively little significance as a source of long - term investment funds, although short- term loans, which provide a major share of working capital , achieve large magnitudes. 292 This can be seen from table 6-25 , which shows the end -of-year balances of short -term and long - term loans issued by Gosbank and Stroybank .

Short- term credit is issued to an organization by that banking system which keeps its basic accounts. This means that Stroybank issues short term credit primarily to the contract construction sector, and Gosbank provides such credit for all other sectors. Of the total short- term credit outstanding at the end of 1960 (42.7 billion rubles ), Gosbank provides 96 percent, or 41.2 billion rubles. 293

Short - term credit is given for less than 1 year , and most of it for much shorter periods. 294 Interest on short - term credit traditionally has been low , but a policy of increasing this charge was adopted in 1966 , in conformity with the general spirit of the October 1965 reform program . Short -term interest rates charged by Gosbank in various periods (as well as interest paid on deposits) are as follows (in percent): 295

FINANCIAL RESOURCES OF KHOZRASCHET ORGANIZATIONS

Table 6-25 .-- SHORT- TERM AND LONG - TERM BANK CREDIT, BY TYPE OF LOAN : 1950 TO 1965 ( In millions of rubles .

Sector and type of loan

149

SECTOR AND

Balances at end of year )

1958

1960

1964

17,328

33,153

42,741

63,203

68,012

6,980 574 43 226 605 2,583 757 5,490 113

13,184 1,506 375 276 1,067 4,030 1,718 11,228 144

14,722 2,986 666 318 1,569 5,613 3,276 13,997 260

21,105 4,285 871 502 3,044 7,615 5,142 20,792 718

23,575 4,590 365 577 3,356 7,810 5,285 22,070 749

Total , by type of loan ..

17,328

33,153

42,741

63,203

68,012

Loans against material valuables..

10,829

24,669

31,658

47,244

51,092

Production stocks ... Unfinished production .. Finished products ... Stock of equipment in construc tion . Goods..

2,898 472 724

7,498 682 1,766

8,396 843

1,895

12,005 1,151 2,871

13,287 1,489 3,448

154 6,357

527 13,708

18,687

1,125 28,631

1,140 30,035

4,447

9,538

11,938

18,125

18,633

1,123 414

2,145 1,271

3,161 2,588

4,717 4,351

4,853 4,353

224

488

1,309

1,461

1,693

4,994 1,505

6,857 1,627

8,281 2,802

11,865 4,094

12,141 4,779

1,987

3,984

3,794

6,014

6,018

658 710 619

2,173 983 828

2,378 389 1,027

4,404 893 717

3,890 1,319 809

296 323

440 388

511 516

289 428

242 567

1950

1965

SHORT - TERM LOANS Total , by sector ..

Industry . Agriculture . Of which , collective farms. Transportation and communications . Construction .. Supply and sales .. Agricultural procurement Trade ... Other .

Of which : In retail trade.... In supply and sales organi zations. In procurement organizations Other material valuables... Loans for settlement purposes (against settlement documents transit , and others ) . Loans for other purposes .

528

in

LONG - TERM LOANS Total .

Collective farms. State and cooperative enterprises Individuals ( for homes ) .. Urban . Rural .

1 Including home - construction cooperatives . Source :

Nar . khoz . 65 , pp . 786-787 .

MAJOR STATE REVENUES

150

1936-1955

1966 (temporary )

1964-1965

1955-1963

Interest paid to banks Planned loans . Loans for temporary needs Settlement credit Overdue loans .

4.0 4.0 2.0 6.0

2.0 2.0 1.0 3.0

2.0 2.0 1.0 5.0

Interest paid by banks Settlement accounts ..... Current accounts of collective farms Deposits of individuals,

1.5 3.5 3.0-5.0

0.5 1.5 2.0-3.0

None 1.5 2.0-3.0

In 1965 , short- term credit made up nearly half (47.1 percent) of the total working capital (or current assets) in the national economy, an increase from 40.5 percent in 1950. 296 As table 6-26 shows, in 1965 bank credit made up over two -thirds of the working capital of agricultural procurement agen cies, and over half in trade (foreign and consumer oriented) and supply and sales (industrialmaterials and equipment marketing ). Other (nonbank ) cred itors were a significant source in several sectors , particularly construction and transportation and communications. In the former , this source is largely made up of liability to the investors who normally advance as much as 25 percent of the construction costs to provide working capital. Inadvertent credit on the part of suppliers can also arise in the event of purchasers' inability to pay for delivered goods (see chapter IX - C for a discussion of the share of bank credit in actual payments for goods and services).

Total ... Industry .. Trade .... Supply and sales ... Agriculture (state ) Of which , state farms . Construction ( contract ) Procurement (agricultural ) . Transportation and communications Other ... NA

For introducing new equip ment ... For expanding consumer goods production and other purposes .

Amount (millions of rubles)

685

671

681

969

1965

Percent distribution by source ( total = 100 ) Own and equivalent assets

Bank credit

Other creditors

Other sources

137,168

38.3

47.1

11.5

3.1

53,653 32,552 13,010 11,859 10,319 9,387 7,153 3,171 6,383

45.7 29.3 126.5 50.0 50.7 53.6 225.6 244.1 (NA )

42.6 61.1 158.2 34.5 35.0 21.2 268.2 212.4 (NA)

8.6 8.9 114.8 5.9 5.5 21.7 24.9 235.3 ( NA )

3.1 0.7 10.5 9.6 8.8 3.5 21.3 28.2 (NA )

1 Data are for 1963. Den'gi i kredit, no . 5 , 1965, p . 66 . 2Data are for 1961. Vestnik statistiki, no . 11 , 1962 , pp . 84-85 . Nar , khoz . 65 , pp . 761-763 .

None 1.5 2.0-3.0

Volume End -of- year issued balance

Not available .

Source :

About

2.0 6.0 1.0 8.0

The “ loans for other purposes” shown under short- term credit in table 6-25 include medium term types of credit granted to enterprises for introducing new equipment or technology, and for expanding secondary consumers' goods production , Gosbank is the main source of this credit, whose term ranges from 1 to several years. These loans have been relatively insignificant in volume asmay be seen from the following data for 1965 (in millions of rubles). 297

Table 6-26 .--WORKING CAPITAL IN THE ECONOMY , BY SECTOR AND SOURCE : (End of year )

Sector

About

SPECIAL MEANS OF BUDGETARY INSTITUTIONS Long - term credit is relatively undeveloped in the Soviet Union . Most of this type of credit out standing at the end of 1965 was held by collective farms (table 6-25 ), and a major part of that held by other organizations is chargeable to home building cooperatives. The recipients and volume of long -term bank loans issued for capital invest ment purposes during 1965 were as follows ( in millions of rubles): 298 State enterprises and organizations.... 1,599 Collective farms 1,422 Individuals (including homebuilding 638 cooperatives ) 62 Consumer cooperatives .. Loans to pay for equipment 1,600 These loans comprised only 11 percent of the 48.3 billion rubles of capital investments made in that year.

Current plans for economic reform call for a fundamental change from the policy of financing capital investments primarily by nonreimbursable budget grants to financing by repayable interest bearing loans and retained income. Some recent proposals regarding the nature of bank operations in the future have even suggested a radicaldeparture from the traditional role of Soviet banks to one resembling the classical risk taking role , with primary dependence on interest for earnings . 299

Long - term bank credit is to be gradually introduced in conjunction with the economic reform , which is to be completed in 1968.300 It is expected that about 80 percent of investment in industrial fixed assets will eventually comefrom nonbudgetary sources, that is , bank credit and enterprises' own resources. However, existing enterprises do not as a rule resort to bank credit; the first 243 enterprises converted to the new system planned to obtain only 9 percent of their investment funds in this manner. Bank credit willbe used primarily in entirely new construction projects, where it is expected to provide some 70 to 75 percent of the financing. 301

Although no public recognition of the possibility has been encountered, bank loans can evidently be made to state budgets . This is apparent from table VIII - D - 1 , which lists a standard finance agency account (No. 053) for short -term bank loans and a memorandum account (No. 120 ) for long -term loans . These accounts are used by local and republican budgets , but evidently not by the union budget. As noted in chapter IX - A , the manner in which Gosbank handles budget revenues and ex penditures on a current basis can give rise to a technical form of short - term bank credit .

E. SPECIAL MEANS OF TUTIONS

151 BUDGETARY INSTI

Budgetary institutions by their very nature are not engaged primarily in commercial, income deriving activities, and their operations are there fore financed basically out of the state budget. This does notmean , however , that budgetary institutions receive all their funds from the budget and that they have no other income. They do receive money from sources other than the state budget which they use outside of the area controlled by the budget . Such extrabudgetary income and expenditures form a system which is in many respects as rigid as the budget system itself and which is regulated under rules issued by top - level finance or government agencies. The extrabudgetary funds maintained by budgetary institutions are not reflected in any way in either income or expenditure accounts of the budget and thus constitute a third area of public financial operations - that is , in addition to budgetary finances and the resources of the khozraschet sector . Extrabudgetary funds ofthe budgetary institution include amounts received from other organizations or individuals for a specified purpose and for which the receiving institution has no freedom ofdisposal beyond the specified purpose . These funds include amounts called commissioned sums (summy po porucheniyam ) paid for carrying out certain mea sures or activities in behalf of the payer . They also include deposited sums (depozitnyye summy), which are amounts entrusted to an institution for safekeeping (see chapter VI- C ), and other ear marked funds such as parents' payments to schools for the support of special facilities on programs. Each type of such receipts is recorded in an individual account.

No doubt the largest proportion of extrabudgetary funds consists of the so - called special means (spetsialnyye sredstva) such as : Earnings from the production of subsidiary activities of work shops, earnings from special services rendered , and payments received from persons or institu tions using the property of an organization ( i.e. , rentals ). This section describes the conditions under which funds for special means are estab lished and used , and notes briefly the overall significance of special means in the finances of budgetary organizations. 1.

The Sources of Special Means

Rules regulating the formation , use,accounting , and reporting of special-means funds are issued by the Ministry of Finance U.S.S.R. for institutions financed out of the union budget, and by the councils of ministers of the individual republics for insti tutions financed out of the republican and local 302 For institutions financed from the budgets. 302 union budget, no information on the regulations

152

MAJOR STATE REVENUES

specifying the formation and use of specialmeans has been found . The situation is somewhat better in respect to institutions financed from republican two sets of and local budgets , however, for two instructions defining the types of incomewhich can be used for the formation of special means and specifying the purposes for which individual special means can be used are available for the R.S.F.S.R. One set lists the types of special means which institutions financed from the republican budget can maintain , and a second set gives similar specifi cations for institutions financed from local budgets. 303 It is highly probable that these two sets are applicable to their respective budget levels in the country as a whole , and they are discussed below in this sense .

Institutions financed out of republican budgets fall into two groups: ( 1) The republican ministries and central institutions which constitute the chief credit administrators under republican budgets ; and ( 2 ) the institutions ( administrations, trusts, etc.) subordinate to these central organs and made up of second- and third -order credit admin istrators. 304 In the first group , special-means funds can be established from the following sources: Rental and other types of income from buildings and structures ; payments received for the review of cases under departmental arbitration ; proceeds from the operation of transport facilities ; ten percent deductions from the fund for the development of agriculture; part of fines imposed upon violators of hunting regulations; payments received for the registration of pedigreed dogs; payments to the central fund for training trade personnel; deductions of 0.3 percent of direct expenditures made by repair -construction organizations of the housing - communal economy; deductions made by command electric power stations and transmitted to the Main Adminis tration of Power (Glavenergo ); deductions from the gross income of water supply and sewage enterprises; and receipts obtained for providing accounting advice (ekspertiz) . In the second group (institutions subordinated to the ministries or other central organs of a republic ), special-means funds can be established from the following sources: Rentals and other types of income from build ings and structures; the operation of transport proceeds from facilities ; income obtained from the production activities

of educational-auxiliary and subsidiary enter prises and economies not possessing the rights of a juridical person ; deductions from the profits of subsidiary enter prises possessing the rights of a juridical person (in certain instances); income of laboratories , scientific research , experimental, and educational institutionsfrom the performance of special work , from pub lications, and from the utilization of experi mental animals ; income of museums and exhibitions from ad mission fees, payments received by tour guides, and the sale of reproductions and copies of archive documents ; income from lectures, performances, concerts , social events , sports events , and from pay ments for the use of sports equipment and cultural supplies (inventarya ); receipts from the lending of books; income received by educational establishments from economic and other organizations and students for courses and training programs; payments income of tourist stations from received by tourist guides; income of health establishments from the sale of dentures or audio and visual aids, from payments received for X - ray pictures, exami nations, and other medical care , and from payments received for abortions. The types of income which can serve as a source of special-means funds of institutions financed from local budgets are much the same as the above list for institutions financed from the republican budget. Additional sources of funds for local institutions, which are not listed above, include: Payments by parents for the support of children in extended day schools and for music lessons; compensation received for work perfomed by boarding - school students and other students in enterprises, state farms, collective farms, and subsidiary workshops and farms; and contributions to the “ educational assistance fund” (fond vseobucha ) from collective farms, cooperative organizations, trade unions, and miscellaneous other school- related sources, as well as from the budget itself. 305 Special -means funds cannot be used to support activities which constitute the primary function of a given institution. 306 They can be expended only for the purposes specified in the regulations issued by the Ministry of Finance U.S.S.R., or by the republican councils of ministers, which in general means that they are used to meet the expenses of the activity from which they originate . A large part of the goods or services produced by those activities is sold at cost, and surpluses or net earnings are not an explicit objective. As a general rule any such surplus is subject to pay ment into the budget (revenue division 12, section In certain prescribed 16 ) by the institution .

SPECIAL MEANS OF BUDGETARY INSTITUTIONS

instances, however , net earnings may be used in other ways, such as for the expansion of the productive activities or services from which they were earned , for the improvement of the general conditions under which a particular activity takes place , for the modernization of equipment used in a particular activity , and occasionally for bonus payments to personnel engaged in such activities. 2. Special-Means Estimates Each budgetary institution having one or more types of special means is required to draw up an estimate of income and expenditures for each type and submit it to a superior organization for review and approval . This process takes place at the same time that the state budget is being prepared . The procedures followed in preparing special means estimates follow the practice in the budgetary system in that chief credit administrators can establish special-means funds,under supervision of the responsible organ in the financial hierarchy . Second- and third - order administrators establish special-means funds and prepare estimates under the primary supervision of the chief credit administrator . In drawing up estimates for special-means funds, income is identified only in general terms, but expenditures are classified by the articles defined in the budget classification . 307 In practice , in dividual estimates are combined into a joint estimate by institutions which have several special means funds. The joint estimate lists the in dividual sources of special means and a general characterization of the expenditures. 308 Special-means estimates submitted by primary level institutions are reviewed by each recipient administrator and combined into a summary estimate in which income is identified by individual sources and expenditures by articles of budgetary classification . 309 The superior credit admin istrators draw up estimates for special-means funds under their own direct administration and submit them , together with estimates of subordinate institutions and supporting calculations, to the appropriate organs of the financial hierarchy atthe time specified for submission of draft budgets for the forthcoming fiscal year. In addition , the chief credit administrators draw up and submit state ments ( spravki) specifying the portion of their overall limits for capital investments within the state plan, for capital investments outside the plan , and for the planned wage fund which is to be financed out of their special-means estimates. 310

At the union and republican levels, the summary estimates of institutions subordinated to chief credit administrators , as well as the special-means estimates of the latter, are approved by the U.S.S.R. Ministry of Finance and by the republican finance

153

ministries , respectively . The approval of special means estimates of institutions supported by the union budget is due within 3 weeks after the approval of the U.S.S.R. state budget; at the republic level approval is due within 2 weeks after the approval of the republican state budget. In the sphere of local budgets the summary special means estimate 311 is prepared by the finance organ simultaneously with the draft budget and is sub mitted to the executive organ of government (e.g., the ispolkom ) for final approval. Approved special-means estimates return along the same paths . In addition , superior credit administrators of institutions having such income notify the local Gosbank branch of the approval and specify the annual totals for income and expenditures, including wages, for control pur poses.312 With these actions, the process of drawing up , submitting, reviewing, approving , and com municating the approval of the special -means esti mates is complete . All special-means funds are kept in current accounts at the same offices or branches ofGosbank in which the institutions keep their budgetary funds. Rural soviets , which keep budgetary funds in savings banks, also keep the special-means funds of their subordinate institutions in savings banks, Each budgetary institution maintains in Gosbank only one current account for all types of special means, and it is therefore required to keep analytical accounts which make possible the identification of incomeand expenditures by type. Budgetary institutions draw up and submit to their superior organizations semiannual and annual accounting reports on the execution of the special 313 means estimates. Chief credit administrators verify the annual reports of subordinate institutions, draw up a report on their own specialmeans, and prepare a summary annual report which they sub mit to the appropriate organs of the Ministry of Finance . Lower finance organs consolidate various reports from budgetary institutions located in the territory of their jurisdiction and submit a single report to the superior organs within their hierarchy , together with the report on execution of the budget . Ultimately , the Ministry of Finance U.S.S.R. draws up an overall summary report on specialmeans. 3. Net Earnings and Transfer Prices Activities financed on a special-means basis normally are not expected to earn a surplus , since their output is generally released to the parent institution at planned cost. Surplus earnings may arise, however , as a result of superior production cost performance or from sales to other consumers. The following compilation shows the prices at which the production of subsidiary units (both special means and khozraschet) is transferred or sold , depending on the type of consumer . 314

MAJOR STATE REVENUES

154

Transfer price or valuation

Consumer

Type of subsidiary

Shops themselves and parent institution

Cost

Other

Selling price (proda zhnaya stoimost !)

Subsidiary farms on special -means basis attached to children's homes and boarding schools , children's centers , children's sanatoria and forestry schools , child reception and distribution centers , teaching establishments having children's institutions , homes for invalids , hospitals for lepers , or institutions for psychiatric treatment

Parent institution

Planned cost , provided it does not exceed retail price less the trade markup

Subsidiary farms (probably on khozraschet ) attached to Workers ' Supply Departments , enterprises , teaching institutions , or medical or other estab lishments

Public dining halls of the parent institution

Actual cost plus a pro fit markup of up to 5 percent of cost

Subsidiary farms ( probably on khozraschet) attached to hospitals

Parent hospital

Cost , if not higher than retail price

Other hospitals and food stores

Retail price minus trade markup

Own workers and employees

Full retail price

Production shops (operating on a special -means basis) of budgetary institutions

As a general rule any excess of special-means income over expenditures is required to be paid into the budget . This requirement does not apply , of course , to those subsidiary farms or production enterprises attached to budgetary institutions which are operated on a khozraschet basis and are subject to regular khozraschet principles ; i.e. , they draw up a financial plan and their net income, called profit, is subject to “ deductions into the budget . Soviet writers often fail to distinguish between subsidiary units on khozraschet and those on special means, and the imprecise descriptions cause much confusion .

4. Restrictions on Expenditures As noted above, expenditures from the special means funds are strictly regulated and the freedom of budgetary institutions to use them is sharply limited. One general rule stipulates that special means can be spent only for those purposes which were defined when the funds were formed . Any particular fund, therefore, cannot grow into a substantially different fund , nor gradually extend itself into operations beyond the specified functions, i.e., each fund must be spent completely within its own area and no part can be transferred to support activities of another fund . Thus, income from renting buildings or other structures, for example, cannot be transferred in any part to improve the

transport facilities operated by a budgetary insti tution . Expenditures from a special-means fund can be planned only to the extent of expected income, and its balance can never be negative. If expected income should not materialize, expenditures from the fund must be reduced . If the income turns out to be larger , the amount exceeding planned expendi tures can be retained and used on the basis of a supplementary estimate . 315 The wages paid out of special means must fall within the limits assigned by ministries, depart ments, or other agencies, in accordance with the state plan for the development of the national economy. Only in special cases and with the prior permission of appropriate governmental organs can wages exceeding the specified limit be included in the special -means estimate. At the same time, it is forbidden to make allowance in the special means funds for payment of supplementary wages to employees who are engaged in the basic and regular activity of an institution. 316 Capital construction is as a rule financed from regular budget allocations and is not included in the special-means estimates. Under exceptional circumstances, regular budget allocations can be added to amounts to be spent from special means, but the totalmust not exceed the limit assigned to

SPECIAL MEANS OF BUDGETARY INSTITUTIONS the institution for its total capital investment expenditure . On the other hand, amounts for capital investments specified in the special-means esti mates may be included in the plans of executive committees of local soviets , within the limit assigned to them in the national economic plan and under the heading of decentralized sources of capital investment. 317 With explicit permission , net earnings may be reinvested in the special-means activity . For example , subsidiary farms attached to budgetary institutions may use up to 50 percent of their net special-means income for capital investment. Sub sidiary farms and training -production workshops attached to certain medical and children's institu tions -- children's homes , boarding schools for deaf, dumb, and blind children , homes for children of invalids, training -experimental farms of general education schools , homes for invalids, vocational boarding schools for invalids, psychiatric hospitals , dispensaries, and labor reception and distribution centers (trudovyye kolonii i priyemniki) -may use the entire net special-means income for capital investment. This expenditure, which is limited by the approved special-means estimates, is con sidered to be outside the central capital- invest ment plan . 318 5.

The Significance of Special Means

With few exceptions, Soviet sources dealing with the financial system note the existence of special means only superficially . They give brief and general descriptions of the basic principles governing the formation and use of special-means funds, but do not offer any factual information which would indicate the overall use of special means within the U.S.S.R. or its territorial sub divisions, or which would provide detail on the sources of incomeor the categories of expenditures.

155

Nor do they indicate the number of budgetary insti tutions which avail themselves of the right to form and operate special-means funds.

In the absence of such information , it is difficult to assess the significance of specialmeans in the finances of budgetary organizations and in the economy as a whole. However, judging by the large number ofbudgetary institutions, the vastly diversi fied nature of their activities, and the scope of their general expenditures financed from the budget, one can speculate that the funds of special means may very well be quite substantial. This spec ulation is supported by the presence of such bits of evidence as the elaborate system for planning and approving estimates, the tightly organized system of cross - checks between chief credit admin istrators, banking agencies, and the finance organs, and the progressive consolidation of reports ultimately reaching theMinistry of FinanceU.S.S.R.

One source states that urban vocational -technical schools had an “ income" of 97 million rubles in 1962 from their production activities. 319 In the same year , according to the source , trade schools for the mechanization of agriculture made a “ profit” of 9.5 million rubles. And finally , training institutions used part of their income from pro duction activities for investments outside the capital investment plan in the construction of production -training facilities and the acquisition of equipment and furnishings (inventar'); these ex penditures amounted to 24.1 million rubles for the country as a whole. This information involves a number of ambiguities; “ income” is not identified as net or gross, and the use of the term “ profit" may imply khozraschet activity . Nevertheless, the figures suggest that special -means activities in training institutions alone significant reach amounts .

NOTES TO CHAPTER VI

1 Margolin , Planirovaniye, 1960, p . 82. 2 In the Consolidated Financial Plan , costs of production are not shown as expenditures; they are netted out against an offsetting amount of gross earnings. Contributions to the centralized funds (i.e., amortization and special- purpose funds) are shown as revenues and their use as expenditures. This corresponds to the form employed in financial plans of enterprises since 1959, as noted in chapter IV . For example , the complete sovnarkhoz financial plan shown in chapter IV contains a single item for covering basic - activity losses of industrial enterprises, citing the budget as the source. (“ State subsidy ,” in contrast to “ intraindustry subsidy, " signifies budget financing, as is made clear in Molyakov , Finansiro vaniye, 1965, p.70.) 4 For what is believed to be the first time in any annual set of speeches and articles discussing newly introduced budgets and plans, information made public on planned 1966 profits explicitly indicates that planned retained profits include those to be used to cover losses (Garbuzov, “ Budget,” 1966 , p . 8) . 5 See Holzman , Soviet, 1955, for a thorough history and analysis of the turnover tax through the Stalin era . He cites a report that by 1941 there were 800 regulations on the tax in effect. Anchishkin , Nalog , 1962, p . 19. 7 Smirnov , Ekonomicheskoye, 1963, p . 258 .

8 For some fairly extensive data on the origins of the tax by economic sector in Kazakhstan , 1958-1961, see Tulebayev, Voprosy, 1963, pp. 108-109. The representativeness of this Republic for the Soviet Union as a whole is doubtful, however , particularly since no tax revenue from the grain procurement sector is shown . This is due to the fact that grain procured in this Republic is released only in other republics (Shirkevich , Mestnyye, 1965, p . 134 ).

9

The average level of procurement prices on grain purchases from all nonstate farm suppliers under went a seven - fold increase between 1952 and 1958 (Stolyarov, 0 tsenakh , 1963, p . 106 ). 10 Smirnov , Ekonomicheskoye , 1963, p . 260 .

11 Voluyskiy and Lomakina , “Which Form ,” 1962, p . 7 . 12 One source reports that in 1961 the tax collected on the output of heavy industry amounted to 18 percent of total turnover tax receipts , or more than double its 1950 share (Sitaryan , “Movement, " 1963, p . 15 ). Elsewhere , the same author reports that heavy industry's share was 7.6 percent in 1950 and 13.8 percent in 1958 (Sitaryan , Natsional'nyy, 1961, p . 37) . The apparent inconsistency between the 7 percent claimed for 1957 and the 10 percent cited in a 1962 source, on the one hand (see table 6-3) , and the figures of 13.8 percent and 18 percent for 1958 and 1961, on the other hand, may be due to the exclusion of consumer durables from the former data , although this has not been confirmed . 13 Finansy SSSR , no . 4 , 1965, p . 44. 14 Broyde , Finansirovaniye, 1960, pp . 100-101 . 15 Smirnov, Ekonomicheskoye, 1963, p . 80 . 16 Finansy SSSR , no. 7 , 1966 , p . 80 . 17 For example, the increase in retail prices preparatory to discontinuance of rationing in 1946 , together with extremely low confiscatory grain procurement prices, resulted in tax rates on grain products as high as 98 percent of the retail price, or a markup of 49 times (Smirnov, Ekonomicheskoye , 1963, p . 235 ) . 18 Kovylin , Nalog, 1963, p . 54 . 19 Ibid ., p . 55 . 20 Bachurin , Ekonomicheskoye, 1957, p . 60. 21 Kantor, “ Some Problems,” 1956 , p . 40 . 22Kantor, Tsenoobrazovaniye, 1964, p . 51 . 23 Kovylin , Nalog, 1963, p . 54 . 24 Smirnov , Ekonomicheskoye, 1963, p . 114. 25 This price concept is defined in section 7 , below . 26 See Kovylin , Nalog, 1963, p . 160 ; Smirnov , Ekonomicheskoye , 1963, p. 115 ; Stolyarov , O tsenakh, 1963, p . 100 .

156

NOTES TO CHAPTER VI

27 Garbuzov, “ Budget,” 1966 , p . 12 . 28

Smirnov , Ekonomicheskoye, pp. 81 , 109-110 , 113-114. pp . 81, 113-114 . One of the few sources to present extensive recent data on tax rates, the author criticizes his colleagues'selectivity in citing only rates on luxury- type goods (p . 108 ). 29 Anchishkin , Nalog , 1962, p . 22. 30 Ibid . 31 Stolyarov, O tsenakh, 1963, p . 113. 32 Smirnov , Ekonomicheskoye , 1963, p . 89. 33 The format can vary with the type of product. Balances for food products, for example , do not contain items 3a - 3c , for reasons indicated in the text below . Balances for producers' goods generally follow a different pattern , but may contain a “market fund ” item if the product is also sold in retail trade ( e.g., construction materials purchased by individual home builders). Even for the same class of product , various sources treat the allocation distribution somewhat differently, as to both content and the arrangement. See Linetskiy , Ekonomika , 1962, pp . 80-82; Ponomarev and Strelkov, Spravochnik , 1964, p . 105; Ryauzov and Titel’baum , Statistika, 1961, p . 27 ; Ryauzov et al., Statistika, 1966 , p . 141 ; Skovoroda, Osnovy , 1963, pp . 75 77 , 84-87 ; Vasil'yev , Ekonomika, 1963, p . 125 . 34 Zhadanov , Planirovaniye, 1962, pp . 25-70, passim . 35 See Ponomarev and Strelkov, Spravochnik , 1964, p . 105, for the regulation defining the content of this category . 36 In 1959, these minor wholesale sales amounted to about 7 percent of total retail turnover, divided roughly equally among the three types . By 1963, the sales to collective farms had declined sharply and the total was reduced to 5 percent (Ryauzov and Titel’baum , Statistika, 1961, p . 61; TsSU , Sovetskaya torgovlya, 1964 , p . 56 ) . 37 Zhadanov , Planirovaniye , 1962, pp . 45 , 59 . 38 Miroshchenko and Tur, Poryadok, 1961, p . 18 ; Zhadanov , Planirovaniye, 1962, pp . 6-7 . 39 Ryauzov and Titelbaum , Statistika, 1961, p . 27 . 40 Ryauzov , Statistika, 1966 , p . 141. 41 Skovoroda, Osnovy, 1963, p . 87. 42 One source , giving an extensive listing of exemptions, purports to use this classification , but does not clearly identify all the cited exemptions in its terms, and does not clarify the nature of type C (Miroshchenko and Tur, Poryadok , 1961, pp . 17-18, 45-61). Assignment to types here is based on information from this and other sources (Aleksandrov, Gosudarstvennyy, 1961, pp . 85-87 ; Kovylin , Nalog, 1963, pp . 85-95 , 109-110 , passim ) . 43 Soviet turnover tax policy thus encourages the proliferation of subsidiary industries under various special- purpose agencies.

44 Aleksandrov , Gosudarstvennyy , 1961, p . 66 . 45 Anchishkin , Nalog , 1962, p . 22. 46 Mikhonichev, “Unresolved ," 1964 , p . 46 . 47 Smirnov , Ekonomicheskoye , 1963, p . 97. 48 An extensive enumeration of the latter type of products is given in Miroshchenko and Tur, Poryadok , 1961, p . 14 . 49 Aleksandrov, Gosudarstvennyy, 1961, p . 66 ; Miroshchenko and Tur, Poryadok , 1961, pp. 10-11. 50 A more detailed listing is given in Miroshchenko and Tur, Poryadok , 1961, p . 4. See also Allakhverdyan , Finansy, 1962, p . 213; Kantor, Tsenoobrazovaniye, 1964, p . 54 . 51 Vasil'yev, Ekonomika, 1963, p . 224. 52 See TsSU , Sovetskaya torgovlya , 1964, p . 59 , for statistics on the distribution of wholesale turnover of the ministries of trade by type of sales and specialized office. 53 Voluyskiy and Lomakina , “ Which Form , ” 1962, p . 7 . These data were reported in 1962, but may actually refer to the plan for 1957 (Uryupin , “ On Payers, ” 1957, p . 20). The controversy over the proper payment stage is discussed in section 11 . 54 The only known taxpaying arrangement which fits this category is that employed for vodka products sold by the vodka and liquor products branch of industry. The tax is extracted from the purchaser's payment by his Gosbank office and diverted to the budget of the purchaser's locality, but the producing enterprise is credited with the tax payment and is required to report on it. Vodka produced by the wine industry is taxed at the producing enterprise , i.e., at the place of production (Aleksandrov, Gosudarstvennyy, 1961, p . 91 ; Zhadanov, Planirovaniye, 1962, p . 50) .

157

MAJOR STATE REVENUES

158

55 Kovylin , Nalog, 1963, p . 175. 56 Ibid . , This immunity may not apply to enterprises attached to the Main Administration for Trade of the Ministry of Defense, since such enterprises are obliged to file tax payment reports ( see section 8 , below ). 57 Ibid ., p . 176 ; Miroshchenko and Tur , Poryadok , 1961, p . 89. This checklist may well be the most comprehensive , if not the only , listing of all commercial organizations in a given locality maintained by any agency .

58 Kovylin , Nalog, 1963, p . 5 . 59 Ibid ., p . 7 . 60 The enterprise wholesale price without turnover tax is commonly used by enterprises to calculate their marketable (tovarnaya) and gross (valovaya ) output, both planned and actual (ibid ., p . 6 ). 61 Ibid . , p . 3 . 62 The retail markup is frequently called the “trade discount" (torgovaya skidka ) since it is usually deducted from a fixed retail price . 63 Kovylin , Nalog, 1963, p . 6 . 64 Broyde, Finansirovaniye , 1960, p . 105 . 65 Kondrashev, Tsena, 1963, p . 335. 66 Kovylin , Nalog , 1963, p . 24 . 67 Anchishkin , Nalog, 1962, p . 24. 68 Among the products for which it is used are : rubber footwear, construction materials, salt, and margarine (Allakhverdyan , Finansy, 1962, p . 215) ; products of the metallurgical and chemical industries, and musical and haberdashery goods (Odintseva and Lasevich , “ Systemization ,” 1964 , pp . 6-7) ; and auto mobiles, motorcycles, watches, and electric power (Anchishkin , Nalog, 1962, pp . 22-23) . 69 Kovylin , Nalog, 1963, p . 24 . Anchishkin , Nalog , 1962, p . 22 ; Miroshchenko and Tur, Poryadok , 1961, p . 22 .

71 Based on Aleksandrov, Gosudarstvennyy , 1961, pp . 82-85 ; Kovylin , Nalog , 1963, pp . 58-84; Miroshchenko and Tur, Poryadok, 1961, pp. 36-44. 72 Kovylin , Nalog , 1963, p . 97 . 73 Enterprises and organizations of the Ministry of Defense (except those attached to its Main Adminis tration of Trade), of the republican ministries for the maintenance of public order , and of the Committee of State Security, which (as indicated above) do not pay the turnover tax, are not required to submit turnover tax reports to financial organs ( ibid ., p . 98 ). 74 Sorokin , Organizatsiya , 1962, p . 32. 75 Min . fin . , Gos. byud. SSSR , 1966 , p . 15 . 76 Miroshchenko, Gosudarstvennyye , 1964, p . 61,261; Mokhov, Vyplaty , 1965, p . 61.

77 Those losses have a counterpart in analogous “ windfall " gains resulting from the reverse situation . All windfall gains are subject to payment into the budget and are entered in Division 1 as turnover tax. The net direction of these two offsetting flows is not known. The elimination of urban - rural price differentials in 1966 noted above will thus have two separate effects in the future : ( 1) A reduction of gross turnover tax receipts by eliminating the additional tax on all rural sales of the products in question ; and ( 2) the elimination of both tax receipts and payments out of the tax due to the use of prices inappropriate to the market. 78 See the discussion of residual revenues in section VI- C , below . 79 Aleksandrov , Gosudarstvennyy, 1961, p . 440 . 80 See Min . fin ., Gos, byud . SSSR , 1966 , p . 8 , and chapter VII- A .

81 A detailed description of this process is given in Kudryashov, Raspredeleniye , 1962, passim . 82 For example , see Smirnov , Ekonomicheskoye, 1963, pp. 264, 266 .

83 For most sales of petroleum products , the agency that handles the account and is required to make the tax payment is the petroleum sales office located in the purchaser's area , even though the shipper may be located in another area . For interrepublic shipments made under direct contracts with the Ministry of Defense , Ministry of the Maritime Fleet, Ministry of Railways , and Main Administration of the Civil Air Fleet, however, the shipper bills in his own name and pays the turnover tax ( Aleksandrov, Gosudarstvennyy, 1961, p . 100 ; Kovylin , Nalog , 1963, p . 149) . 84 See the discussion of taxable sales and allocation funds above .

NOTES TO CHAPTER VI

159

85 Vasil'yev , Ekonomika, 1963, p . 60 . 86 Miroshchenko , Gosudarstvennyye , 1964, p . 105 . 87 While the volume of GUTMO sales is not known, data on total sales in 1963 by ORS- type retail organi zations together with sales by 12 major systems entering this total leave a residual of 2.31 billion rubles , most of which can probably be attributed to GUTMO (TSSU , Sovetskaya torgovlya, 1964, p . 58 ). Assuming an average tax rate of 30 percent of retail price (see tables 6-4 and 6-5) , such an exemption could yield about 0.7 billion rubles of “profit," or about 5 percent of the defense appropriation planned for 1963. 88 Atlas , Politicheskaya, 1962, pp . 307-308 ; Tulebayev, Voprosy , 1963, pp . 75 , 77, 79. 89 Allakhverdyan , Finansy, 1962, pp. 199 , 204-206 ; Atlas , Politicheskaya, 1962, pp. 307-308 . 90 Smirnov, Ekonomicheskoye, 1963, pp. 276-278 . 91 Bachurin , “ On the Question, ” 1954 , p . 36 . 92 Suchkov , Gosudarstvennyy , 1952, p . 157 . 93 Bor , “Law ,” 1957, p . 111. Smirnov , Ekonomicheskoye, 1963, p . 313 .

95 Uryupin , “ On Payers,” 1957, p . 20 . 96 Zverev , Voprosy, 1958 , p . 119 . 97 Finansy SSSR , no. 5 , 1964, p . 85. 98 An extensive summary of the discussion is given in Smirnov , Ekonomicheskoye , 1963, pp . 290-306 . 99 Ibid ., pp . 291-292. 100 Voluyskiy and Lomakina, “Which Form ,” 1962, p . 8 . 101 Garbuzov, “ Budget,” 1967, p . 9 . 102 Korkmazov, Khozyaystvennyy , 1963, p . 6 . 103 See Giffler , Collection , (forthcoming), for the translation and discussion of a complete tekhpromfinplan . 104 The present study does not directly address the question of how costs are determined , despite its bearing on profits. Three major report forms dealing with industrial costs (Nos . 5-7) are described in chapter VIII- A . Soviet cost accounting practices, however, do not diverge radically from Western practice, with two major exceptions. These are the understatement of capital costs due to the financing of invest ment by nonrepayable budget or other extra -enterprise grants, and the exclusion from enterprise costs of some similarly financed “ operational” expenditures (research and development, cadre training, test drilling for oil , etc.) . In these two areas, major steps have been taken recently toward more orthodox treatment of such expenditures. (See section B - 7 , below , for the newly introduced " payments on capital, and section D of this chapter for special- purpose charges to cost.) 105 Yefimov , Ekonomicheskaya, vol. II, 1964, cols . 530-531;Zhevtyak , Finansy predpriyatiy , 1964 , p. 112. 106 Construction and geological prospecting organizations employ for this purpose the so -called normative method, in which profit is directly stipulated in the plan as a percentage of the standard or " estimate " value ( smetnaya stoimost ) of output. An analogous method in which profits are planned in termsof a percentage “ profitability ratio " applicable to the cost of all sales is used in bakeries and other small enterprises with relatively simple output assortments . Yefimov , Ekonomicheskaya, vol. II, 1964, cols . 420-425 , 530 ; Zhevtyak , Finansy predpriyatiy , 1964, pp . 111-112 . 108 For a detailed exposition of the three methods, see Glusker, Metodologiya, 1963, p . 127; Mitelman , Finansirovaniye , 1964, pp . 315-318 ; Yefimov , Ekonomicheskaya ,vols . II, 1964, cols. 419-426 ; Zhevtyak , Finansy predpriyatiy, 1964, pp . 110-125 . 109 See the annual report on sales (form No. 12, section B ) shown in the appendix as figure VIII- A - 9 . 110 SeeMillionshchikov, Otchisleniya, 1964, p . 22 , for a detailed listing of the facilities and the types of expenditures covered. 111 Yefimov , Ekonomicheskaya , vol. II, 1964 , col. 229 .

1

112 See chapter VIII - A for a discussion and examples of these and other enterprise report forms. In the plan , the ratio between planned profits and planned costs is termed the

113 See table 6-5 , above . “ norm " of profitability .

114 However , a new statistical series on profitability first published in the latest statistical annual is in terms of the version employing profits before “ payments for capital” (Nar. khoz. 65 , p . 760). The statistical series covering the years 1964-65 is given by branch of industry . It employs previously available data on fixed and working capital, including a version of the latter termed “material current assets” which differs somewhat from the " own current assets " required in the official measure .

MAJOR STATE REVENUES

160

115 Bachurin , “ Problems.” 1959 , pp . 71 , 84 ; Plishevskiy, Natsional'nyy , 1964, p . 145 ; Timoshevskiy , Zakon , 1964 , p . 17 . 116 Gatovskiy , “ Role," 1962, p . 68 . 117 Belousov , Puti, 1964, p . 43. 118 Gatovskiy , “ Role ,” 1962, p . 68. 119 Pravda , June 1, 1965 , p . 2. 120 Beginning in mid - 1966 , data on profits earned and profit plan fulfillment have been reported for various irregular periods in the current press. Profits are reported both by major sector of the economy and by individual industrial ministry. See Ekonomicheskaya gazeta, no. 33 , 1966 , p . 5 ; no . 49, 1966 , p . 20 ; no . 1, 1967 , p . 33 ; no . 11 , 1967 , p . 13; no . 14 , 1967, p . 14 . 121 State agriculture other than state farms, which is included here with procurement, is not believed to account for substantial profits or losses. As will be seen in table 6-14, agriculture was paying substantial profit taxes despite being unprofitable as a sector. 122 Volodarskiy , Promyshlennost', 1964, p . 101. The profits are labeled " on sales of industrial output" in the source .

123 Aleksandrov , Gosudarstvennyy , 1961, p . 126 ; Azarkh , Spravochnik , 1959, pp . 117-118 ; Guyda, “On Perfecting," 1963, p . 48 ; Miroshchenko, Gosudarstvennyye , 1964, pp . 7 , 139 ; Zhevtyak , Finansy, 1963, p . 222. 124 Aleksandrov, Gosudarstvennyy , 1961, pp. 127-128; Allakhverdyan , Finansy , 1962, pp. 223-224. 125 Attempts to estimate gross profits by matching the percent distribution data with ruble data reported elsewhere for such components as profit tax paid to the budget or incentive fund contributions encounter the difficulty that the percentage data apply to profits on a year - earned basis whereas the ruble data are on a year -paid basis . Other difficulties which surround the use of profit tax data are discussed below . 126 Article 30 of the budget expenditure classification is assigned to these subsidies (see chapter V) . 127 These grants are assigned to the separate budget expenditure article No. 29 ( see chapter V ). Beginning in 1964, an experimental use of Gosbank six -month credit for covering such shortages was initiated ; the October 1965 reforms called for a system of two - year credits (Pessel , “ Bank , ” 1966 , p . 23 ). 128 See expenditure item 11 in the sovnarkhoz financial plan shown in chapter IV. This interpretation of plan data was first proposed by Nimitz , SNIP 1956-1958, pp . 73-81 . 129 Garbuzov, “ Decisions," 1963, p . 7 . 130 Although data on the enterprise's annual profit plan , shown for reference purposes in its annual report form No. 20 (see figure VIII- A - 15) , are in the "balance- sheet " concept, this plan target is determined in the enterprise itself after receiving its basic plan targets , and presumably after national profit plans have been set. 131 Allakhverdyan , “ Some Questions,” 1965, p . 86 . 132 Garbuzov , “ Budget," 1966 , p . 8 , footnote. Theplanned total, including profits to be used to cover losses, was set at 46.0 billion rubles, implying that 2.9 billion rubles of losses were to be covered by profits. This may indicate a recent tendency to increase the share of losses covered directly by profits and to reduce the share covered by budget grants . 133 These consist primarily of subsidiary enterprises , shops, and other operations attached to academic, medical, and similar institutions. See details in Azarkh, Spravochnik , 1959, p . 76 ; Millionshchikov , Otchisleniya, 1964, pp . 40-41. 134 Litvin , “Our Method," 1962, p . 57 ; Mar'yakhin , “On the Distribution ,” 1962, p . 45 ; Millionshchikov , " How to Distribute," 1962, pp. 49-50 ; Skuratovich , “Reserves,” 1965, pp . 58-59; Zhevtyak , Finansy, 1963, pp . 236-239. 135 Guyda , “On Perfecting, ” 1963, pp . 48-49; Litvin , “ Our Method ," 1962, p . 57. 136 Pisarev , “ Improve ," 1962 , p . 51 . 137 Mar’yakhin , “ On the Distribution , " 1962 , p . 44 . 138 Ibid ., p . 45 . 139 Guyda, “On Perfecting,” 1963, p . 49 ; Litvin , “Our Method ,” 1962, p . 57. 140 Millionshchikov , “ How to Distribute ,” 1962, pp . 51-52. 141 Guyda, "On Perfecting," 1963, p . 54. 142 Allakhverdyan , Finansy, 1962, p . 227. 143 Aleksandrov, Gosudarstvennyy , 1961, p . 127 ; D’yachenko , Finansovo , vol. II, p . 171. 144 Mar'yakhin , “On the Distribution ," 1962, p . 44.

NOTES TO CHAPTER VI

145 Aleksandrov, Gosudarstvennyy, 1961, p . 131. 146 Ibid ., p . 128 ; Azarkh , Spravochnik , 1959, p . 120 . 147 Aleksandrov , Gosudarstvennyy , 1961, p . 140. In July 1963, the Ministry of Finance decided that during the years 1963-65 state farms should make profit - tax payments on the basis of actual profit , in quarterly intervals (Semenov , “ Planning,” 1963, p . 76 ). It is not known whether this arrangement still exists . 148 Aleksandrov , Gosudarstvennyy , 1961, pp . 140-141.

149 Ibid. , pp . 141-143. 150 Shchenkov, Bukhgalterskiy , 1963, pp. 33, 105, 129. 151 The latter types of plan data are shown for 1957-61 in table 6-11 as “ deductions.” 152See figure VIII - A - 8 . The profit distribution data in this form apply to total profits earned in the previous year but distributed partly in the report year. The lag of 1 year in reporting on profit distribution appears to have recently been reduced to six months. See the discussion of form No. 3 in chapter VIII - A . 153Molyakov, Finansirovaniye , 1960 , p . 16 . 154Molyakov , Finansirovaniye , 1965, pp . 20-21. 155Min . fin ., Gos. byud . SSSR , 1962, p . 13. 156Garbuzov , “ Successful," 1964, p . 8 . 157 End -of - year balance plus expenditures , less previous-year balance, equals contributions. 158 Allakhverdyan , “ Some Questions,” 1965, p . 88. 159Garetovskiy , “New Elements, ” 1963, p . 37. 160Garetovskiy, Pooshchritel’nyye, 1964, passim ; Millionshchikov, Otchisleniya , 1964, pp . 98-136 . 161Garetovskiy , “New Elements , " 1963, p . 37. 1621f the volume of such output amounts to 10-15 percent of total output , the payment must exceed 6 percent of the annual wage fund of the industrial- productive personnel; the limit is raised to 6.5 and 7 per cent if the special output represents 15-25 or over 25 percent of the total output, respectively (Bereznyy and Zhdanov, Spravochnik , 1964, p . 682). 163In 1964, 120 million rubles were spent on new technology and the expansion of production from all enterprise funds of industry (Kosygin , “On Improving,” 1965, p . 3) while 607 million rubles were spent from these funds for all purposes (Nar, khoz . 64, p . 766 ) . The 120 million rubles represented 19.8 percent of the total amount spent from the enterprise funds of industry. 164Garetovskiy , “New Elements," 1963, p . 40. 165Kosygin , “On Improving," 1965, p . 3 . 166Allakhverdyan , “ Some Questions, " 1965 , p . 89. 167D'yachenko, Finansovo, vol. II, 1964, pp . 548-549. 1681 Ibid ., pp. 235-236 . 169Ekonomicheskaya gazeta , no. 11, March 17 , 1965, p . 11. The previous regulation issued in 1960 fixed the first two uses at 70 and 25 percent, respectively , Orlovskiy, Yuridicheskiy , 1963, pp. 134-137 . 170D'yachenko, Finansovo , vol. II, 1964, p . 554. 17 ]Ibid ., pp . 554-555 . 172Molyakov, Finansirovaniye, 1965 , pp . 89-90 . 173D'yachenko, Finansovo, vol. II, 1964, p . 555. 174 Molyakov , Finansirovaniye , 1965, p . 60. This fund is described in section D , below , together with other special- purpose funds charged to cost.

175 Bachurin , Zakon , 1959 , p . 324. 176 A " Role ,

figure of “ about 20 percent” is frequently mentioned, without specifying the year ( e.g., Gatovskiy , 1962, p . 68) ; this is presumably based on the 21.5 percent cited in Kondrashev , Tsena, 1963, p . 236 .

177 Volodarskiy , Promyshlennost', 1964 , p . 102. 178 Ekonomicheskaya gazeta, no . 6 , February 1966 , pp . 31-35 . 179 One source explicitly states that a decision was made to establish these three funds in place of the enterprise fund (Komsomolskaya Pravda , December 15, 1965 , p . 2) . 180 The text is published in Ekonomicheskaya gazeta , no. 50 , December 1966 , insert, pp. 1-16 , and also in Finansy SSSR , no. 1, 1967, pp . 71-96 . A separate set ofMethodological Instructions had been approved on September 30, 1966 , for enterprises of automotive transport. This text is also published in the first ref erence cited above .

161

162

MAJOR STATE REVENUES 181 Articles 17-18 of the December 1966 Methodological Instructions. 182 For a realistic characterization of major revenues in this regard, and an attempt to measure the tax burden statistically , see Holzman , Soviet, 1955, particularly chapter 10 . 183 Elements of the formal revenue classification referred to in this section are tabulated in chapter V. 184 This assumption appears to be generally valid , although there are indications that state loans are not entirely ascribable to the “ population ,” but come in small part “ from the economy. ” 185 Kaliteyevskaya, O byudzhetnykh , 1963, p . 28 . 186 The text of the decree is in Yumashev and Zhaleyko , Sbornik , 1959, pp . 500-503; an abstract of the law is in Hazard and Shapiro , Soviet, 1962, pp . 49-50 . 187 Vedomosti. . .SSSR , no . 15 , 1965 , pp . 348-351. 188 Payevskiy , “New System ,” 1965 , p . 76 . 189 Aleksandrov, Gosudarstvennyy, 1965, p . 126 . 190 Kaliteyevskaya, O byudzhetnykh , 1963, p . 28 . 191 Miroshchenko, Gosudarstvennyye, 1964, pp . 179-180 . 192 Aleksandrov, Gosudarstvennyy, 1965, p . 127 . 193 Shavrin , Gosudarstvennyy, 1957 , pp . 47-48. 194 Romashkin , Zakonodatel'nyye , 1961, p . 42. 195 Larionov , Dokhody, 1954, pp . 93-94 . 196 Nalog so zrelishch - also translated as “ entertainment ” or “amusement” tax. 197 Miroshchenko, Gosudarstvennyye, 1964, p . 127 ; Zakharov, Byudzhet, 1965, p . 118 . 198 Miroshchenko , Gosudarstvennyye, 1964, p . 127 . 199 Some MTS's existed in 1960 but no budget revenue from them was reported . This revenue had been recorded under division 6 (Suchkov , Gosudarstvennyye , 1952 , p. 27 ). 200 Shavrin , Gosudarstvennyy , 1957 , p . 52; Suchkov, Gosudarstvennyye, 1952, p . 159. 201 Miroshchenko, Gosudarstvennyye, 1964, p . 211. 202 Kaliteyevskaya, O byudzhetnykh , 1963, p . 28 . 203 Malin , Spravochnik , 1959, p . 369. 204 Molyakov , Finansirovaniye, 1960 , p . 26 . 205 Molyakov, Finansirovaniye, 1965, p . 31. 206 Syrovarov, Finansovaya , 1966 , p . 142.

207 Derived from the ratio of total social insurance revenues (table 6-2) to the product of the average annual pay of workers and employees ( 1,082 rubles) and their total annual average number (73.258 million) (Nar. khoz . 64, pp. 546 , 554). 208 Min . fin ., Gos. byud. SSSR , 1962, p . 4 ; Min . fin ., Gos. byud. SSSR , 1966 , p . 7 . 209 Aleksandrov, Gosudarstvennyy, 1965, p . 367. 210 Ibid ., p . 160 . 211 Ibid ., p . 367. 212 Sections for special bonus payments for the extraction of oil, extraction and processing of shale , and for deliveries of raw cotton and wool are also contained in this division ( sections 5 through 8 ) and in division 36 of the central classification , but these appear to represent transfers from the union budget rather than new revenue . 213 The connection between these funds and budget revenues can be traced through the accounting procedures of local and republican finance organs. See chapter VIII - D and Dedkov and Yakimov , Bukhgalterskiy , 1965 , pp . 305 , 333 . 214 See the budget expenditure classification , division 200 , section 41, and division 203, section 23, in chapter V. 215 Zverev , Natsional'nyy, 1961, p . 260. 216 Profit tax rates between 1957 and 1960 varied from 27 to 43 percent on income ranging from 600 to 870 million rubles (ibid ., p . 261) . 217 Dedkov and Yakimov , Bukhgalterskiy , 1965 , pp . 307 , 345 . 218 Ibid ., p . 58 .

NOTES TO CHAPTER VI

219 Ibid. , p . 306 . 220 Lasevich and Mindel', Tseny, 1963, pp . 118-120 . 221 TSSU , Sovetskaya torgovlya, 1964, p . 92. 222 Aleksandrov, Gosudarstvennyy, 1965, pp. 135 , 147 . 223 A separate division (No. 10) for these receipts , in force in 1957, was apparently eliminated in the 1958 revision of the local budget classification ( Shavrin , Gosudarstvennyy, 1957 , p . 205). 224 The U.S.S.R. Ministry of Finance, in the case of institutions supported by the union budget, and repub lican councils of ministers, in the case of those supported by republican or local budgets (D'yachenko , Finansovo , Vol. II, 1964, p . 366 ) . 225 Finogeyev and Flit, Vnebyudzhetnyye, 1964, p . 115 . 226 Another minor revenue consists of amounts placed in the temporary custody of budgetary institutions (depozitnyye summy) - . g ., money entrusted by patients to hospitals for safekeeping, money deposited with courts until the review of litigation , money deposited with notary offices for the transfer to a person under specified conditions — which are held on deposit account of the custodian institution and if unclaimed within a specified period are paid into the budget (Boguslavskiy , Bankovskiy , 1960, p . 281) .

227 Aleksandrov, Gosudarstvennyy, 1965, pp. 153-154 . 228 A recent source (ibid ., p . 148) describes customs duties as the most important revenue in a grouping of miscellaneous revenues which includes, among others, state fees (90 billion rubles in 1960) and collective farm payments to the new centralized social security fund (planned to be 1 million rubles in 1965) . Duty rates were revised in 1961 but their multiplicity and detailed commodity definitions make it difficult to estimate revenue (see Min . vnesh , torg ., Tamozhennyy, 1962). 229 Becker, SNIP 1958-1962, Part I, 1965 , pp. 158, 161. Becker apparently includes customs duties in this total, following Nimitz ( SNIP 1956-1958, 1962, p . 88) , who considers them comparatively unimportant.

230 CIA , 1960 Budget, 1960 , p . 60 . 231 For details , see Aleksandrov , Gosudarstvennyy, 1965 , pp. 150-152. 232Ibid ., pp . 158-159. 233CIA , 1960 Budget, 1960, p . 60. 234 See section A. The urban -rural price differential was abolished in 1966 , for which an allowance of 400 million rubles wasmade in the budgets (Garbuzov, “ Budget ,” 1966, p . 12). 235 Mokhov, Vyplaty, 1965, p . 60.

236 Dedkov and Yakimov, Bukhgalterskiy , 1965, p . 393. 237 Collective farmers do not pay a personal income tax since the collective farm income subject to tax includes the portion distributed to members. 238Ukaz of April 1943, cited in Yumashev and Zhaleyko, Sbornik , 1959, p . 472, and Burmistrov , Spravochnik , 1963, pp. 3-15 . Ruble figures are in post- 1960 terms. 239 See Yumashev and Zhaleyko, Sbornik , 1959, pp . 465-471 , for the text of the law . 240Aleksandrov, Gosudarstvennyy, 1965 , pp. 175-176 . 241Mar'yakhin and Burmistrov, Nalogi, 1957, p . 96 . 242 Burmistrov , Spravochnik , 1963, pp. 87-99 . 243 Yumashev and Zhaleyko, Sbornik , 1959, pp. 492-493. 244 The text of the law is given in ibid ., pp. 498-499. 245 Vedomosti. . .SSSR , no . 46 , 1964, p . 815 . 246 Pravda , April 19 , 1957 , p . 1 . 247 Annual subscriptions amounted to about 2 to 4 weeks pay . For a thorough characterization and history of state loans, see Holzman, Soviet, 1955,pp. 200-208. A complete listing of bond issues showing volume and maturation period is given in D’yachenko , Finansovo , vol. I, 1961, pp. 301-305 .

248Zverev, Natsional'nyy , 1961, p . 248 . 249 Ibid. , p . 249 . 250 A detailed description of the new loan and the transition is given in Nakhmanovich , “ New ,” 1966 . 251 Yeremeyeva, Osnovy, 1965, p . 48. Whether winnings (interest payments) are included in these costs has not been established. Differential prices are also intended to encourage retention of the obligations for longer periods. 252 Zverev , Natsional'nyy , 1961, p . 246 .

163

164

MAJOR STATE REVENUES 253 Yeremeyeva, Osnovy, 1965, p . 27 . 254 While the increase in deposit balances can be cited as evidence of inflationary pressures, rather than as a restraint on them , such deposits do represent a reduction in liquidity vis - a -vis hoarding ; the average duration of deposits has increased from 397 days in 1958 to 570 days in 1964 (Yeremeyeva , Osnovy, 1965 , p . 21) . The 1940 percentage is derived from data reported in Min . fin ., Gos . byud. SSSR , 1962, p . 9 . 256 Division 31 in local budgets provides for such “ deductions.” in central (republican ) budgets .

The same division is probably to be found

257 Yeremeyeva, Osnovy , 1965 , p . 50 . 258 Lottery revenue represents gross ticket sales, with winnings and attendent costs charged to budget expenditures ( judging from detailed descriptions of savings bank operations), although one source (ibid ., p . 50 ) also speaks of a “ net budget revenue” after deducting expenses, and another source (Zverev ,Natsional'nyy, 1961, p . 250) appears to limit budget revenue to the 50 percent remaining after winnings . 259 The text of the law , which is dated April 10, 1942, is given in Yumashev and Zhaleyko, Sbornik, 1959, pp . 482-492. 260 See details in Burmistrov, Spravochnik , 1963, pp . 127-128. 261 Ibid . , p . 148 . 262 Urban localities include workers', suburban (dachnyye), and resort(kurortnyye) settlements, as well as cities. 263 Burmistrov , Spravochnik , 1963, p . 144 . Aleksandrov , Gosudarstvennyy, 1965, pp . 154-159 . The respective Soviet terms, osnovnyye fondy and osnovnyye sredstva, are used

265 Or " fixed assets " . interchangeably .

266 D’yachenko , Finansovo, vol. I, 1961, p . 39. 267 The fixed capital of collective farms was not revalued until 1962, and the fixed capital of budgetary institutions still has not been revalued . All revaluation has been at replacement rather than original value. 268 The new norms are given in Filippov, Novyye, 1963, pp . 159-235 . 269 D’yachenko , Finansovo, vol. I, 1961, p . 39 . 270 The text of the regulation is published in Lyul’ko , Stoimost , 1963, pp . 172-188. 271 Allakhverdyan , Soviet, 1966 , p . 142. 272 Rogovtsev, Finansovoye, 1966 , p . 136 . 273 See chapter VIII - A and appendix A. 274 The text of the regulation appears in Lyul’ko , Stoimost’, 1963, pp . 180-185. 275 Molyakov, Finansirovaniye , 1965 , pp . 80-81. 276 Ibid ., p . 81 . 277

A scale of awards is shown in ibid ., p . 81 .

278 Novikov and Ryumin , “ Analysis ,” 1962, p . 80. 279 Brazhnik and Shcheglov, Spravochnoye , 1964, p . 371. 280 Yefimov , Ekonomicheskaya , vol. III, 1965, col. 634. 281

Finansy SSSR , no. 7 , 1965, p . 87.

282 Brazhnik and Shcheglov, Spravochnoye, 1964, p . 372 . 283 284

Ibid ., pp . 372-373; Finansy SSSR , no. 7 , 1965, p . 87. Yefimov , Ekonomicheskaya , vol. III , 1965, col. 638 .

285 Molyakov, Finansirovaniye, 1965, pp . 79-80 . 286 Rogovtsev , Planirovaniye, 1965 , pp . 52-53. 287

Ibid., p . 52; Bashin , Planirovaniye, 1966 , p . 8 .

288 289

Tyamshanskiy , Ekonomika , 1967, p . 168 . A sample of this form is shown in Smirnov, Bukhgalterskiy , 1963, p . 341 .

290

Tatur , Khozaystvennyy, 1964, p . 152. Brazhnik and Shcheglov, Spravochnoye, 1964, pp. 280-281,

NOTES TO CHAPTER VI 292 For an excellent account in English of bank credit policy in Eastern Europe in general and the Soviet Union in particular , see Garvy , Money, 1966 .

293 Gosudarstvennyy bank, 1961, p . 124. 294 This can be seen from the fact that in 1963 the total end -of-year balance was 56.0 billion rubles (Nar. khoz . 63, p . 658) , whereas the total volume of all short- term credits issued during the year was 489 billion rubles (Den’gi i kredit, no . 9, 1964, p . 4.) .

295 Den’gi i kredit, no. 12, 1966 , p . 25. 296 Nar, khoz . 65, p . 762. 297 Ibid ., p . 786 . 298 Podshivalenko , “Economic, " 1966 , p . 13. 299 For example, see Pravda , December 29, 1966 . 300 Podshivalenko , “ Economic ,” 1966 , p . 13 . 301 Ibid . Although expressed in tentative terms, this should be a well-informed estimate since the author is Deputy Chairman of Stroybank which will do most of the crediting . 302 Finogeyev and Flit, Vnebyudzhetnyye, 1964, p . 5 . 303 Ibid ., pp . 112-122 . 304 See chapter VIII- B for a discussion of budgetary levels and credit administrators. 305 Finogeyev and Flit, Vnebyudzhetnyye, 1964, pp. 121-122. 306 Ibid ., p . 8 . 307 Ibid . , p . 13. 308 See chapter VIII - B and figure VIII- B - 5 . 309 See example in Finogeyev and Flit, Vnebyudzhetnyye , 1964 , pp . 16-17 . 310 Ibid ., p . 61. 311 See example in ibid ., pp . 64-65 . 312 For an example of this notice (spravka) , see ibid ., p . 72. Moreover, a listing of notices sent to the Gosbank institutions is submitted by superior credit administrators to the local organ of the Ministry of Finance hierarchy, irrespective of the level of budget involved. (See an example in ibid ., p . 75.) 313 See chapter VIII - B .

314 Finogeyev and Flit, Vnebyudzhetnyye , 1964, pp . 47-48 ; Molyakov, Finansirovaniye , 1966 , p . 253. 315 Finogeyev and Flit, Vnebyudzhetnyye , 1964, p . 80 . 316 Ibid . , pp . 32-33. 317 Ibid ., pp . 33-35 . 318 Ibid ., pp . 34, 47 . 319 Zelenko, “ Raise ,” 1963, p . 4 .

165

VII. DEFENSE AND OTHER MAJOR STATE EXPENDITURES The comprehensive treatment given to Soviet state revenues in chapter VI is not given here for state expenditures. The more limited treatmentof expenditures in this chapter is due to three reasons. One, the subject is vast and would defy exhaustive treatment in a single monograph - let alone a single chapter. It involves the description and analysis of state financing of all sectors of the economy industry, construction , education , public health , defense , administration , etc. -as well as the con sideration of expenditures by object, or end use capital investment, capital repair , etc. Two, extensive treatment has been given to numerous aspects of the subject by Western analysts, mostof which could not and need not be reproduced or summarized here . And three, the limitations of time did not allow for an extensive probing for information and understanding which is not already available . This does notmean that state expenditures are largely neglected in this study. Chapter IV treats them as a component of the national economic financial plans; chapter V discussed in detail the classification of expenditures within the system of budgets ; and chapter IX treats expenditures as financial transactions within the banking system and the financial- administrative hierarchy. This chapter is intended to provide an overall, statistical picture of state expenditures, with some special attention to the central theme of defense outlays. Section A provides a brief, overall view of state expenditures, by budget level and end use , and to some extent by budgetary and nonbudgetary source . Section B discusses the data available on defense expenditures and makes a detailed examination of information on the content of the Ministry of Defense's estimate .

A. SUMMARY OF STATE EXPENDITURES

1. Consolidated State Financial Balance Sheet

As noted in chapter IV , Soviet financial and planning agencies have several national " balance sheets " which are used to depict the financial status of the Soviet State . The expenditures side of one of these , the Consolidated State Financial Balance Sheet, has been reconstructed for 1960 the only year for which a total has been reported and is shown in table 7-1 (see chapter VI for the revenues side of this account) . Many of the components of this balance sheet, particularly in the

nonbudgetary (enterprise " own ” funds ) column, are not reported and must be estimated , filled in with plan figures, or left blank. Therefore the table is useful primarily for generalorientation , and not for explicit demonstration of the size and interrelation ships of the individual components.

Budgetary expenditures make up the over whelming proportion of total expenditures in most categories, as might be expected . The 77.3 billion rubles of planned budgetary expenditures comprised 80 percent of the total ; in the category “ Financing the National Economy,” planned budgetary expendi tures represented 65 percent of all expenditures, and in Social and Cultural Measures the budget was responsible for 99 percent of all planned expendi tures (but for only 88 percent of actual expendi tures!). In only three categories - Transportation and Coinmunications, Investment in Working Capi tal and Capital Repairs--did planned nonbudgetary expenditures make up the major part of the total,

Budgetary ( actual) expenditures were distributed among all categories: 44 percent for Financing the National Economy, 32 percent for Social and Cultural Measures, 12 percent for explicit Defense, and the remaining 12 percent for other purposes, including 5 percent for surplus . Nonbudgetary expenditures were concentrated in relatively few categories: according to the plan figures which are available , an overwhelming proportion of the total went to Financing the National Economy, and only a small portion to Social and CulturalMeasures.

2. Summary State Budget Expenditures The changing structure of Soviet state budget expenditures between 1950 and 1965 is shown in table 7-2 . Perhaps the most noteworthy change is the shift in the roles of the union budget and the (consolidated) republic budgets. In 1950 the union budget, which provides financial support for the national government, was nearly 77 percent of the total State Budget of the U.S.S.R., but in 1965 it was only 42 percent. The drop in this proportion occurred largely during the years 1956-58 and represented a striking change in the level at which many activities were financed . The consolidated budgets of the republics, which comprise the budgets of both republican and local governments , increased in size more than six times during the period 1950 65 (compared with an increase of only 35 percent in the union budget), and by the latter year represented 58 percent of the total U.S.S.R.budget .

167

MAJOR STATE EXPENDITURES

168

Table 7-1 .--CONSOLIDATED STATE EXPENDITURES AND SURPLUS : ( In billions of rubles.

1960

Figures may not add to totals due to rounding ) Total

Enterprise own funds 1

State budget

Expenditures and surplus

Plan

Total ...

Expenditures .

Actual

Actual

Plan

Plan

Actual

297.0

(NA )

77.3

77.1

219.7

(NA )

94.3

(NA )

74.6

73.1

19.7

(NA )

26.2

3 ( 26.4 )

18.1

4 > 14.5

8.2

(NA )

(NA ) 2.1 5.5

( NA ) (NA ) ( NA )

Including : Investment in fixed capital , within the state plan .... Investment in fixed capital, outside the plan ... Investment in working capital Capital repairs

Financing the national economy..

(NA ) 2.8 7.0

3 (5.2 ) 35.0 (NA )

(NA ) 0.7 1.4

430.6 4 > 2.3 471.4

555.1

_ ( NA )

535.6

34.1

19.5

( NA )

27.9 5.1 (NA ) (NA )

(NA ) (NA) (NA ) (NA )

5.7

(NA )

15.2 3.2 ( NA ) (NA ) 2.5

12.7 1.8 (NA ) (NA ) 3.2

3.1 2.8 10.5

(NA ) (x ) (NA )

2.9 2.8 9.0

15.6 4.4 0.3 3.6 2.6 0.2 3.2 4.2

0.3 (x ) 1.5

(NA ) (NA ) (NA ) (NA ) ( NA ) (NA ) (NA ) (x ) (NA )

124.9

628.3 612.6 65.9

24.7

24.9

70.2

3.4

10.2

69.8

9.8

(NA ) ( NA ) (NA ) ( NA ) (NA ) (NA )

(NA ) (NA ) (NA ) (NA ) (NA ) (NA )

9.6 (NA ) 1.1 (NA ) (NA ) 3.6

10.3 4.8 0.1 6.5 2.8 0.5 9.3 8 (1.5) 1.1 90.7 8 ( 0.4 ) 8 (1.1)

(NA )

2.7

4.0

Of which , by sector : Industry and construction .... Agriculture ... Procurement (agricultural ) ... Trade (domestic and foreign ) . Transportation ..... Communications.. Housing and communal economy . Council of Ministers ' Funds.. Residual , national economy...

Social and cultural measures .. Enlightenment... Public health .. Physical culture . Social security .. Social insurance .. State aid to mothers . Defense (explicit ) . Internal security .. Administration .... Loan service ..., Resources furnished to banks Expenditure residual....

12.7

Surplus.. NA 1 2 3

(NA ) (NA ) (NA ) (NA ) (NA ) (NA ) 19.6 (NA ) 11.1 (NA ) (NA ) 13.6

Not available .

X

Not applicable .

4.8

Entry represents zero .

2.3 1.0

(NA ) (NA ) (NA ) (NA ) (NA ) ( NA )

(NA ) ( )

Entry is estimated .

Derived by subtraction or addition of other relevant columns. Margolin , Planirovaniye , 1960 , p . 82 . Actual totals of 25.7 and 5.1 billion rubles in " estimate" prices for within - plan and outside plan capital investments (CIA, Soviet Budget for 1962, p . 6 ) are converted to current prices by an approximate conversion factor of 1.027, derived as the ratio of planned within - plan investments of The actual 25.55 billion " estimate " rubles to the 26.24 billion current rubles of planned financing . ., p . 8 ). (ibid rubles is in current capital working in own increase 4. Budgets of republics only ( i.e., excluding the union budget ) . See table 7-3, articles 13 , 15 , 24 , 5 25 , 28 , and 29 . Including reserve funds assigned in the planned budget to councils of ministers , most or all of which are actually expended on the national economy . 6 Nar . khoz . 65 , p . 783 . 7 Difference between the derived total and the subtotal for Financing the national economy is assumed to apply to Social and cultural measures . 8 Becker, Soviet, 1964 , p . 8 . 9 Nar . khoz . 65 , p . 781 .

Source :

Plan data --Adapted from reported data compiled in CIA , Soviet Budget for 1962 , pp . 5 , 6 , 8 , and 20 Actual data , Budget -- Tables 7-2 , 7-4 .

Trade .

Budget level

U.S.S.R. Union Republics U.S.S.R. Financing economy national .the Union Republics .and construction U.S.S.R. Industry 2Union Republics U.S.S.R. which Of s........ , ovnarkhozy 3U.S.S.R. procurement . and Agriculture Union Republics U.S.S.R. ... communications and Transportation U.S.S.R. 2Union Republics . U.S.S.R. Transportation U.S.S.R. .. Communications U.S.S.R. Housing communal .and economy Republics U.S.S.R. neconomy , ational Residual 5U.S.S.R. including "TResidual rade 5Union R5 epublics U.S.S.R. Social cultural measures .and Union Republics U.S.S.R. Enlightenment Union Republics U.S.S.R. health Public Union Republics U.S.S.R. . culture Physical Union Republics U.S.S.R. Social security Union Republics social ,out state of which Of U.S.S.R. insurance resources Republics State aid mothers to large of U.S.S.R. families mothers single .and U2 nion Republics of ,at table footnotes end See

. Total

Category

2,034.8 2,412.9 1,421.6 991.3 2,260.8 152.1 1,899.8 45,008.5 47,043,3 4,095.8 2,947.5 21,418.5 8,579.2 12,839.3 8,603.0 2,81.6.9 5,786.1 4,065.3 627.9 3,437.4 49.0 6.2 42.8 5,728.3 2,155.3 3,573.0 3,300.3

529.7 529.7

5,844.7 4,246.4 1,598.3 1,073.4 1,946.4 1,702.3 244.1 1,854.5 91.9 898.0 2,601.1 3,674.5 3,331.0 343.5 14,717.2 6,761.7 7,955.5 6,876.2 2,455.0 4,421.2 3,074.6 640.7 2,433.9 57.6 6.6 51.0 2,562.6 1,513.2 1,049.4 869.8

490.8 490.8

3,713.0 2,840.1 872.9 705.0 1,571.5 1,420.2 151.3 1,549.6 21.9 535.8 1,422.0 2,127.0 1,889.9 237.1 11,672.5 5,356.8 6,315.7 5,666.6 1,937.0 3,729.6 2,134.7 225.6 1,909.1 27.9 4.8 23.1 2,207.1 1,553.2 653.9 518.3

365.7 365.7

64,275.0 30,226.3 34,048.7 29,027.5 9,053.5 19,974.0 13,673.9 3,330.0 10,343.9 8,932.9 43,997.6 22 06,1 43,791.5

7958

53,953.8 39,845.9 114 , 07.9 23,314.5 18,105.0 5,209.5 10,950.9 8,825.3 2,125.6

1955

41,323.7 31,732.1 9,591.6 15,793.0 13,529.8 2,263.2 7,845.7 7,379.6 466.1

1950

4,760.5

486.4 486.4

4,219.9 496.1 496.1

3,722.8

499.9 499.9

479.3

479.3

5,222.5

2,570.6 4,338.0 2,307.6 2,030.4 27,186.9 8,162.7 19,024.2 11,330.9 2,533.0 8,797.9 4,946.4 564.6 4,381.8 59.2 13.2 276.0 7,154.1 1,842.0 5,312.1

1962

82,154.2 34,116.8 48,037.4 36,218.9 10,722.0 25,496.9 15,363.6 4,358.4 11,005.2 19, 20.7 7,529.6 569.0 6,960.6 1,745.3 2,750.8 1,446.3 31, 04.5 2,544.7 206.1 3,852.5 4,977.1 6,722.4 4,348.3 2,374.1 28,966.7 8,408.6 20,558.1 12,434.7 2,882.9 9,551.8 4,892.2 250.1 4,642.1 52.4 7.9 44.5 7,670.8 1,830.4 5,840.4

1961

376 , 09.7 30,733.4 45,576.3 32,570.2 7,892.8 24,677.4 15,813.6 3,922.7 11,890.9 10,054.0 6,098.5 397.7 5,700.8 1,767.4 2,665.3 1,264.8 1,400.5 2,479.0 186.3 3,654.8

1960

1965 TO 1950 LEVEL :AND CATEGORY EXPENDITURES ,B.-Y 7-2 BUDGET Table

73,126.2 70,399.1 31,557.3 30,094.9 38,841.8 43,031.3 34,124.9 32,372.8 10,064.5 10,337.3 23,787.6 322 , 08.3 14,881.7 15,587.5 3,974.7 3,918.0 10,963.7 11,612.8 9,950.3 9,391.7 43,518.8 4,754.0 4101,0 229.4 43,417.8 4,524.6 3,205.9 3,591.2 2,685.6 2,812.7 1,503.5 1,519.6 .] 1,182.1 1,293 2,539.6 2,638.1 146.0 174.6 2,751.1 3,214.6 45,329.7 4,164.9 48,535.6 7,756.1 4,613.6 4,542.0 3,142.5 3,993.6 24,936.7 23,118.6 7,549.7 7,818.7 15,299.9 17,387.0 310 , 05.4 9,412.4 2,225.3 1,915.2 8,080.1 7,497.2 4,777.1 4,406.3 684.0 700.2 4,076.9 3,722.3 57.8 63.9 6.8 10.3 53.6 51.0 6,483.0 6,072.8 1,802.7 2,043.4 4,680.3 4,029.4

1959

)(In of rubles millions

466.1

466.1

5,688.8

86,998.9 35,967.0 51,031.9 38,799.3 11,270,1 27,529.2 17,291.9 4,760.4 12,531.5 9,345.3 7,797.7 697.9 7,099.8 2,157.6 2,723.8 1,429.6 1,294.2 2,508.9 214.9 3,963.3 4,859.0 7,016.6 4,382.2 2,634.4 30,966.6 9,147.0 21,819.6 13,706.5 3,649.3 10,057.2 5,214.2 276.3 4,937.9 42.4 6.3 36.1 8,131.2 1,808.9 6,322.3

1963

101,161.2 42,715.4 58,445.8 44,915.0 15,179.9 29,735.1 20,989.5 7,887.3 13,102.2 9,882.7 6,772.4 503.1 6,269.3 2,272.4 2,828.9 1,371.5 1,457.4 2,585.3 243.6 4,226.0 7,825.8 10,098.2 5,418.0 4,680.2 38,164.9 11,439.4 26,725.5 17,510.4 4,733.5 12,776.9 6,623.3 342.2 6,281.1 45.3 7.1 38.2 9,050.4 1,882.7 7,167.7

6,504.3 461.6 461.6

6,096.0

467.2 467.2

1965

92,230.0 38,784.7 53,445.3 40,602.3 12,288.4 28,313.9 18,867.8 5,986.1 12,881.7 9,778.3 8,667.1 829.8 7,837.3 1,787.6 2,775.0 1,392.7 1,382.3 2,553.4 221.6 3,795.0 4,709.8 6,497.4 4,079.8 2,417.6 12.8 3,33 9,870.2 23,442.6 15,103.6 4,238.3 10,865.3 5,622.3 300.8 5,321.5 39.9 7.2 32.7 8,577.6 1,821.7 6,755.9

1964

SUMMARY

169

8

1 2 3 4 5 6

.directly residual implied

81 5hoz .,;p6k70 Nar 965 71-950

.all other components minus Total

U.S.S.R. minus . Republics

. zero Entry represents

8 service oan ,Of lwhich

. expenditures Residual

. Administration

Defense

central the to transferred Assets Security USocial - nion All ized .Fund Farmers Collective for

insurance social State

Category

7521Source .,6pSbG-3-74 6-68 0-21 9-31 966 pos SSR yud f: 6in Min 955 960-65 950 62S1958-60 .,76 58-19 51pbG-7-29 3 962 p1–72 yud os fSSR Min in

1,400

3,936.8 3,822.4 114.4

SU.S.S.R. 4,185.8 U2 nion 4,053.2 Republics 132.6 U.S.S.R. 500 Union

10,735.9

1,655.4

1955

1,249.4 420.9 828.5

8,284.1

1,270.5

1950

U.S.S.R. 1,388.3 508.2 Union Republics 880.1

U.S.S.R. U7 nion U.S.S.R. 7Union

U.S.S.R. U7 nion

Budget level

400

700

700

3,672.7 2,672.4 1,000.3

4,420.0 4,070.4 349.6 800

3,875.6 2,848.6 1,027.0

1,082.3 234.6 847.7

1,093.2 236.8 856.4

1,1 15.1 231.1 884.0

1,196.6 237.9 958.7

3,269.4 2,992.7 276.7

11,594.7

3,209.9

1961

9,298.7

2,811.2

1960

9,372.6

2,669.4

1959

9,363.0

2,443.2

1958

100

."to 1961 fter ahealth PtEfrom oublic nlightenment institutions educational higher attached clinics of shift the to due earlier published figures from

the icomponents ncluding ,other its of sum basis on Union budget to wholly ascribed be can tU.S.S.R. entries hese ,specified the for though Al k18here ,.6-444 hoz Nar 963-64 ;p6-36 20 961-62 958–60 ):1added 955 zrubles eros (of bnearest illion tenth aReported the to

MAJOR STATE EXPENDITURES

expenditures differ these of hey Tre classification latest with accordance in source 1966 the in reported as shown a"for health ublic PE.the nd nlightenment Figures

.union republics fncluding obudgets )(iof local consolidated -Summation epublics ;RUnion budget .; U.S.S.R the of budget Consolidated .-.for Budget U.S.S.R. the separately give sources hich w,other stations agricultural ractor and tmachine -for expenditures include otals 1950–60 years the For residual the included consequently are which expenditures procurement exclude 1959 and 1958 ntries for eS.in "Agriculture tate The

100

4,481.0 3,444.2 1,036.8 3,925.9 3,049.3 876.6

2,269.5 1,402.7 866.8 3,237.9 2,090.2 1,147.7

100

1,280.1 331.7 948.4

1,108.9 296.7 812.2 1,094.7 278.4 816.3

1,085.9 251.2 834.7

800

12,780.2

437.3

4,036.6

1965

13,280.1

3,502.2

1964

13,868.8

3,406.2

1963

12,644.8

3,437.3

1962

:1950 .LEVEL Con -1965 BUDGET ,BTO EXPENDITURES AND CATEGORY Y .-7-2 Table

170

SUMMARY - DEFENSE

171

This shift in level of financing was a direct consequence of the dramatic change in the ad ministrative structure which took place during the years 1956-58 and which shifted much ofthe admin istrative -managerial functions from the center to republican and regional agencies. It reached a peak in 1961 when the budgets of the republics were nearly 60 percent of the total U.S.S.R. budget . The shift was especially marked in the category Financing the National Economy, where expend itures of the republic budgets represented 14 per cent of U.S.S.R. budget expenditures in 1950 , but rose to 76 percent in 1961 and dropped to 66 percent in 1965. Expenditures from the republic budgets for Social and Cultural Measures were 54 percent

whereas the 3 times.

of total U.S.S.R. budget expenditures in 1950; they rose to a peak of 71 percent in 1962 and dropped to 70 percent in 1965 .

B. DEFENSE EXPENDITURES

Table 7-3 gives a detailed distribution by object of the expenditures from consolidated budgets ofthe republics for the years 1950-65. Although all objects shared in the increased volume of expendi tures , Capital Investments in Khozraschet Organi zations and Enterprises Within the State Plan for Capital Work (article 24) and Pensions and Grants showed the greatest proportionate increases.

The relationship between budget revenues and expenditures at each of the levels is shown in table 7-4. Figures for both revenues and expenditures given in this table are net ; that is , revenue figures do not include sums transferred from another budget level, and expenditure figures do not include sums transferred to another level. The "net transfers” shown in the table represent a balance of the sums transferred to and from each level . Thus, the surplus at any level is computed by adding the net transfers to revenues and subtracting expenditures . The existence of a positive balance , or surplus , at all levels for all years ( except republican budgets in 1961) suggests careful planning and great fiscal responsibility . If these surpluses are compared with the net transfers, however , it becomes obvious that surpluses at the republican and local levels were achieved only by net transfers in - at the expense of the union (central) budget, which shows a net transfer out in all years after 1950. Thus, the lower level budgets ( republican and local) not only increased rapidly in size and as a proportion of total budget activity during the years shown, but they needed transfers of funds from the central budget in order to cover their outlays andmaintain a positive balance . This table shows, too , that by far the largest portion of the increase in the lower budgets during the years 1950-65 was at the republican level , which grew more than 10 times

local budgets

increased only about

Soviet budget handbooks report a budgetary " remainder" (ostatok ) each year which apparently Part of is kept in a fund outside of the budget. 2 the surplus at the end of one year is utilized as revenue in the following year , and the balance is kept in the fund . At the end of the year the excess of revenues over expenditures is placed in the fund and a new " remainder " is derived . It is no doubt this " remainder " fund which was used to absorb the negative balance or “ excess ” shown for the republican level in 1961 (table 7-4).

Soviet defense spending has understandably been the object of much analysis and speculation by Western observers, despite a dearth of published information . Statistical data on defense ex penditures made public by Soviet authorities is limited to a single figure represented as the total amount allocated to defense in the annual consoli dated state budget. For a given year , this figure appears in two forms- planned , as contained in the budget approved by the Supreme Soviet before the beginning of the year, and actual, as reported in the annual statistical handbook published after the end of the given year.3 Both formsofthese figures for the years 1950-67 are shown in table 7-5 , to gether with percentage shares of the respective budget expenditure totals . The annual budget allocation to defense is a datum that is necessarily fraughtwith significance. As the only regularly released indicator of the level of military activity , it is attentively noted in many places-- as Soviet censors must be well aware. The datum is issued in complete isolation , unac companied by any itemization or supplementary data such as force levels or related major programs. Furthermore, since the data given on all other elements of the budget are highly aggregated, ill defined , and encumbered by large gaps or residuals , the defense expenditure figure is not readily sus ceptible to checks for consistency. The possi bility must therefore be entertained that the announced figure is not a valid one , but has been chosen in consideration of the impression thatmay be produced by its absolute level, its share of the total budget, or changes in these measures from previous years. Actual expenditures, in both absolute and relative terms, are equal to or slightly lower than planned for all years except 1950 and 1961. The Korean War may well have been re sponsible for actual expenditures being larger than planned in 1950, and in 1961 a well publicized revision of the defense budget upward wasannounced in midyear .

2 3

... quotas

tions .

[3]Design and survey work ..

construction ... in investments ]C[1apital 5. installa buildings of repair C1and ][ apital 6.

A,abof ](1cquisition 4. clothing nd edding

organi commercial of investments )C(2apital 4. State the within enterprises and zations

qto -][2uota under ppropriations Acover 9. . capital working own in deficits

working capital in expansion Fown ][2inancing 8.

organi commercial investments of [2apital )C 5. in included not enterprises and zations 2)( . work for Plan capital State the

4 ).,p 965 03 1Bukhgalteriskiy

. zero Entry represents

1950

)2(

448.1

551.6

577.6

(? ) 30.5

1,443.4 |1,367.4 1,236.9 1,245.0 917.1

1,464.7 3,495.5 3,178.71 1,570.3 2,113.6 902.4

725.6

7pSource p960-65 4-75 yud 966 Min f-in os 1b,.SG 955 1950 :SSR 1.7,pSbG fin Min -1958-59 SSR 962 yud os p2-73

chapter V. described in articles classification of official the .;the 1960 after instituted pparently a1962 source in listed Not 8Gclassification 2onstituted (the oloshchapov I956 probably tchet in 1955 article 25 No. cD).,p1U "was work survey and esign ).inwere 27 and articles those eunder "(26 xcept investment c apital included expenditures when such 1959 around dropped Dexcept ,it Yakimov (in 55 No. is wannot here consolidations assigned umber s Pand "iedkov grants ensions

titles with line given of cthe aon omparison basis supplied h been ave ,given source in headings ngroup ot and numbers Article

8,849.4 9,764.4112,401.7 9,146.6 8,281.2 7,770.4 8,489.9 7,825.81 2,574.61

1,022.0 446.01

737.1

1,753.5

852.8

7,363.6 ,995.2 6,123.416,583.5 |6 5,613.9 3,874.7 5,005.6 3,432.5 941.5

437.7

253.6

) 2 (

567.5

279.7

141.5

) ,360.0 1 ,001.51,132.4 |1,004.7 1,213.7

1 /,268.2 24.811,980.511, 23,633.3 0,855.211,925.3 2,351.7 0,203.9

1,783.3 1,562.1 ]1 ,632.71 1,807.4 1,531.61 1,439.6 1,213.2 1,347.81 647.3

414.6 3,073.3

395.5

654.8 554.7

)1,377.1 1,317.7 1,043.6 1,274.9 1,189.5 937.3 415.4 484.6 436.2 420.4 421.3 390.0

331.7 689.4

6,462.1 6,604.2 5,882.41 3,680.41 4,421.7 7,786.38,172.31 8,924.111,188.2 7,240.41 619.3 1,379.2 1,274.7 1,199.0 1,062.01,134.7 996.6 526.7 805.0 924.3 96.6 92.7 89.2 92.9 94.1

38,841.843,031.31 9,591.614,107.93 |48,037.4 151,031.953,445.

1965

389.9 406.0 397.7 434.2 2,827.9 3,235.2 3,092.6 2,805.1

34.1

437.8

316.5 627.0

1964

201.4 348.9 154.1 375.2 2,622.0 2,235.3 1,273.9 544.1

13.9

390.1

298.7 584.5

1963

184.5 687.1

(2)

317.7

841.6 365.4

638.9 286.6

485.8 154.7

324.6 606.2

271.5 589.2 311.4 561.1

1962

292.8 557.1

1961

87.4

1960

78.6 84.9 75.8 85.7

1959

203.1 345.7

1958

130.2 299.1

1955

trips .and official assignments 4 ]T[ emporary . ,o]E[5nob education on j-t xpenditures .he esearch rsstudents -,of cientific training 96.4 acquisition .. book library awork , nd 188.91 c hil medical food E,(ion J nxpenditures 9. cultural and social other ,and dren's 584.1 equipment ]A[1cquisition of 2. ..... supplies and 161.8 the included in investments not )Capital 13.

][' ommercial COrganizations

for State .Plan work capital

capital for Plan .... work

P.and 4][ ensions grants

. Residual

uniforms

)... institutions

Institutions Budgetary o3.and ][ .ffice overhead expenses

Object

MAJOR STATE EXPENDITURES

1

Total .

. S.)[8tipends

. ][1 W ..ages

Article !number

millions )(In rubles of

1965 BBUDGET :1EXPENDITURES OBJECT SELECTED TO Y950 ,Table REPUBLICS OF .-7-3

172

: Source

Revenues .. transfers .Net Expenditures . Surplus

Revenues transfers Net .. Expenditures Surplus .

Republican

Revenues transfers Net Expenditures .Surplus

)( onsolidated c Republics

Revenues transfers Net .. Expenditures . Surplus .

Local

Union

Expenditures R : eported

Revenues . enditures Exp Surplus

U.S.S.R.

level Budget

subtraction derived by .

6,621.7 124.4 6,569.0 177.1

3,176.6 -127.4 3,022.6 26.6

203.7

953.1

1950

1958

f1950 Min -G b 1S ,97.87p 42966 in 955 5-96 SSR 960-65 os yud p G f0962 Min -1958-59 in os 1Sb p 756 SSR yud p 9 2 .,97 3-94

23.1

749.4 2,382.5

1955 1959

)(In rubles of millions

expenditures .transfers interbudgetary minus E net plus revenues : quals Surplus

408.5 85.6 -130.0 320.4

1961

reported : sources following the data from derived or in are figures All

1960

0.1

1962

LEVEL :1SURPLUSES 1965 TO 950 ,B Y E A XPENDITURES ND REVENUES BUDGET .-7-4 Table

4 . 29.1 617.4

16,734.9 19,474.5 17,425.4 16,031.1 15,135 12,243.213, 10,605.0 7,703.9 2,124.3 2,233.9 1,403.1 214.0 2,908.2 1,293.8 644.6 1,871.7 957.3 4 21,146.5 19,088.2 18,510.0 16,564.817, 14,405.1 12,948.4 11,113.5 7,842.8 208.9 136.1 442.3 452.3 75.1 429.3 541.8 571.1 252.1

33,406.7 34,422.7 2 |23,985.4 31,700.4 7,297.6 9,600.8 5,923.223,2 5,021.6 4,013.1 1,438.9 2,933.2 3 79.5 949.8 365.0 1,-193.6 2,228.4 1,583.9 37,299.3 34,357.1 29,011.5 32,521.9 30,550.5 22,935.2 |2 25,893.4 8,626.2 6,265.1 56.6

53,897.2 4 |5 0,832.1 6,335.7 7,731.5 3 3,819.4 6,228.6 8,232.5 2,433.0 113,627.1 9,798.3 5,057.5 53,445.3 58,445.8 51,031.9 45,576.348, 43,031.3 38,841.8 34,048.7 14,107.9 9,591.6 1,046.7 508.9 221.7 617.4 1,000.2 541.9 312.3 572.5 98.2

43,574.8 41,806.5 33,416.137 42,807.4 32.478.5 48,427.3 , 51.0 -2,243.6-4, -4 -3,185.7-5 -5,057.5 -3,613.4 -579.0 3.0 , 4,116.8 0,226.3 5,967.0 9,845.9 31,732.1 31,557.330 |3 43,175.4 38,784.7 0.1 2.4 2.9 2.1 1,61 1,49 3,04 1,43 1,17 34.86.7 3,3194.4 8.8 2,73

,309.7 73,126.276 70,399.1 64,275.0 41,323.753, 101,621.2 92,230.0 82,154.286, 3,952.2 2,152.0 2,480.7 3,615.4 1,744.4 703.3 2,539.1 2,960.5 2,176.9

177,078.478 74,014.5 67,235.5 56,434.5 42,276.8 |84,306.2 94,406.9102, 89,538.0

1965

levels Republican and Union R (c ),a ;f reported are levels Local for nd igures onsolidated U.S.S.R. Figures Revenues :epublics

4,347.1 3,613.4 3,185.7 2,243.6 3,455.6 -3.0 5,416.2 579.0 451.0

1964

).interlevel only transfers (total out total less in interbudgetary :E quals Net

1963

DEFENSE

173

174

MAJOR STATE EXPENDITURES

Table 7-5 . - DEFENSE EXPENDITURES - PLAN AND ACTUAL : 1950 TO 1967

Actual

Plan Year Billion rubles

1950 .... 1955... 1958 .. 1959.. 1960 ..

(1) 7.94 11.21 9.63 9.61 9.61

9.255 1961 (Original) 1961 (Revised ) . / 212.40 1962... 13.41 13.89 1963... 1964 . 13.29

1965 .... 1966 ... 1967..

12.79 13.43 14.5

Percent of total budget

Billion rubles

Percent of total budget

18.6 19.9 15.3 13.6 12.9

( 3) 8.28 10.74 9.36 9.37 9.30

11.9 16.0 16.7 16.1 14.5

(x ) 11,59 12.64 13.87 13.28

(x ) 15.2 15.4 15.9 14.4

12.8 12.7 13.2

12.78 213.4 (NA )

12.6 12.6 (NA )

(2 )

(4 ) 20.0 19.9 14.6 13.3 12.7

NA Not available . X Not applicable . ?Announced by Khrushchev in a speech on July 8 , 1961. Pravda , July 9 , 1961 , p . 3 . 2 Preliminary data , from 1967 budget presentation speech . Trud , December 16 , 1966 , p . 2 . Source : Column 1 - From budget presentation speeches made by the Ministers of Finance and reported in major newspapers and in review articles in the January issue of Finansy SSSR , for respective years . Columns 2 , 4 - Calculated on the basis of planned budget totals as reported in the respective issues of Finansy SSSR noted above and actual budget totals in table 7-2 . Column 3 — Table 7-2 .

The movement of budgeted defense outlays in general can be said to have been consistent with other Soviet statements regarding military forces, including the announcements of manpower reduc tions between 1955 and 1960 and the 1961 sus pension of earlier plans for reducing the force levels to 2.4 million men . 4 But is such consistency meaningful ? Even the direction of change in the announced totalmay be questioned, not to speak of the degree of change or the appropriateness of It has been suggested , for example , coverage . that the sharp rise in spending from the original 1961 budget to the 1962 plan budget may have been illusory, and and that it merely represented a " surfacing ” of expenditures - i.e ., a transfer from other explicit or residual budget entries containing hidden defense expenditures to explicit “ defense . If the announced defense figure need not have any connection with reality and may be chosen for the effect created by its appearance, the question

may be raised whether anything is to be gained by pursuing it further . The answer must be affir mative for several reasons . ( 1) Comparisons of what the defense figure is purported to represent at a given time with definitions at other times or with definitions of other categories may yield use ful insights . ( 2) A partial integrity may be maintained in the reported defense figures in that manipulation of the total is achieved by means of real accounting changes which have effects on other accounts . This sort of change would probably be resorted to only at infrequent intervals, and there fore may be susceptible to detection by examining changes in the nondefense accounts . (3 ) Even if the announced ruble total has no relation to any real defense accounts or subaccounts , an examination of defense accounting practices may be useful in determining how defense expenditures are handled in nonbudgetary systems such as the national income balance . In view of the numerous other studies devoted to this problem , no attempt has been made here to produce new estimates of Soviet defense expendi tures . 6 The Soviet claim as to the meaning of the published figures will be examined, as will the limited information located in Sovietpublications on financial practices of the Ministry of Defense ; though meager, the latter are of help in assessing Soviet contentions.

1. Soviet Descriptions of Budget Defense Expenditures Soviet discussions of defense expenditures in the budget are infrequent and generally limited to brief These descriptions in textbooks on the budget. textbook descriptions tend to be repetitious, although minor differences in wording and content do occur . One of the more recent and extensive descriptions of the content of budget defense expenditures is the following. ?

Resources for the defense of the country are allocated in the estimate of the Ministry of Defense U.S.S.R., and are used for the main tenance of land forces, the navy, the air force, air defense forces , and rear - echelon and supply organs of all branches of the Armed Forces and types of troops. A number of economic organizations and industrial enter prises are under the control of the Ministry of Defense . The estimate of the Ministry of Defense antici pates expenditures for: Payments for armaments , ammunitions, equip ment, fuel and lubricant supplies, food , clothing , personal equipment, and other articles needed to ensure the battle and political training and battle readiness of troops ;

DEFENSE

maintenance and personal support (khozyay stvennobytovoye ustroystvo) of military units ( chasti); maintenance of military educational institutions (Suvorov and Nakhimov schools, secondary and higher educational institutions, and military academies), networks of hospitals , other medical institutions and sanatoria , officers' homes, clubs, sports installations, etc .; issuance of monetary allowances (dovol'stviye ) to servicemen and wages to workers and em ployees of military units and commands ( soyedineniya );

financing capital construction and industrial enterprises of the Ministry ofDefenseU.S.S.R. This excerpt may be taken as an authoritative statement of the content of the defense figure in the Soviet budget. As such , two questions may be directed toward it : (1 ) Have statements ofthis type changed significantly over time, thereby supporting the thesis of a change in the classification and content of defense expenditures; and (2 ), is the content of defense expenditures as implied by this statement reasonably complete and adequate ? Other available descriptions are usually briefer than the above , and minor changes in wording occur from The significance of the instance to instance . following observations therefore is not clear, and they should be taken at this point only as possible indications, In respect to changes over time, the following points can be made. ( 1) Texts issued during the 1950's frequently contained explicit statements that defense was financed exclusively out of the union budget and not out of republican budgets . Such statements were last noted in sources published in 1958 and 1959.8 More recent sources, and partic ularly the one quoted above, appear to refer only to the consolidated budget of the U.S.S.R.? Also , the basic “ Law on Budgetary Rights of the U.S.S.R. and the Union Republics” lists defense among the expenditures of the union budget and omits mention of defense in connection with the republican It should be noted that although the budgets .10 Ministry of Defense is formally a union - republican type of ministry, this designation ,which dates from World War II when efforts were made to enlist nationalistic sentiments , has reportedly not been implemented in practice . 11 It seems doubtful, therefore , that Soviet practice in this respect has changed and that republican budgets support any defense activities. ( 2) The sources published in 1958 and 1959 cited above contain statements which may be interpreted as referring to the prices at which defense supplies are acquired . One states that “ the level of military

175

procurements (postavki) is determined by pro duction expenses (zatraty na proizyodstvo ) for articles of militarynecessity , " and the second holds that for all procurements the Ministry of Defense " settles its accounts with full coverage of costs to the national economy ((raskh odov raskhodov narodnogo khozyaystva )” . 12 Thus, both sources implicitly deny the possibility that defense procurements are made at subsidized prices. Similar statements have not been noted in later sources .

( 3) Instead of “ industrial enterprises ” being financed out of the Ministry of Defense estimate as noted in the quotation from Aleksandrov above, the 1958 source refers to “ industrial repair enter prises.'n 13 This difference in wording suggests the addition ofmanufacturing activities to the Ministry since 1958 .

( 4 ) Among the social and cultural measures listed by the 1958 and 1959 sources cited above is the maintenance of scientific - research institutions ; no mention of these institutions has been found in analogous texts of later date .

Concerning the completeness of coverage, it is noteworthy that the description quoted above has the appearance of a comprehensive list of the items in the Ministry of Defense estimate , which in turn is equated with group III of the budget classification . This suggests that those types ofdefense outlays not listed are not in the budget figure . In addition to the omissions cited in the listing above as possible changes, the following omissions may be noted .

(1) No mention is made of the financing of defense industry, with the exception of industrial enterprises attached to the Ministry itself. As is evident in chapter II, most defense industry is clearly subordinated to agencies other than the Ministry of Defense . Thus, any formally labeled subsidies to these industries, as well as such indirect subsidies as free investment funds, re search and development financing , production “ mastering, " and other types of “ operational” funding which are common practice in engineering industries, are implicitly omitted .

( 2 ) No mention is made of expenditures on a number of programs of a military nature or having military aspects , such as civil defense , foreign military aid , military stockpiling, nuclear energy , and space . 14 As is the case with defense industry, it is likely that such programs are administered by agencies other than the Ministry of Defense . If this is true, the limitation of “ defense” expenditures in the budget to those made by the Ministry itself — which is indicated by the formal title of the expenditure group in the budget

MAJOR STATE EXPENDITURES

176

expenditure classification , as well as by the passage cited above - places great importance on the admin istrative aspects of the overallmilitary effort ; i.e., expenditures of organizations and activities sub ordinate to top - level agencies other than the Ministry of Defense may be presumed to be auto matically excluded from the reported defense total. No procedure that would mitigate this presumption has been encountered in Soviet financial practice , such as awarding a budget grant or credit to one agency for subsequentunilateral transfer to another agency .

( 3) Pensions and social welfare grants to servicemen and their families are not mentioned . This omission is partially substantiated by non defense accounts: as shown by the budget expendi ture classification in division 207 (chapter V ) , veterans, conscriptees, and their families obtain such benefits under the social security expenditure group . However, officers reportedly receive pensions and grants through the Ministry of Defense estimate .

2. Financial Practices in the Ministry of Defense

The identification of defense expenditures with the Ministry of Defense noted above implies that the defense total in the state budget is identical with the Ministry's estimate . This section presents the information currently available on both the content of the Ministry's estimate and the practices followed in financing its subordinate units . a . The Classification of Ministry of Defense Expenditures . - The official budget expenditure classification presented in chapter V yielded no to group III detail specifically attributable Defense, and its only component, division 208– Ministry of Defense . Some isolated fragments of the expenditure classification employed in the Ministry of Defense estimate have been located , however , and are shown in table 7-6 . These fragments are assumed to be from that part of budget expenditure classification applicable to division 208 (or its equivalent, if none is actually used in the budget itself ).

Table 7-6 . - IDENTIFIED COMPONENTS OF THE EXPENDITURE CLASSIFICATION USED IN THE MINISTRY OF DEFENSE ESTIMATE (Figures in brackets denote page number in source ) Section no .

Article no .

1 2

2

Title and use

Title unknown . May be designed for monetary allowances and wages . Title unknown . Used to support workers and employees who obtain special and guard clothing by free issue (also applies to workers and employees supported under $ 10 Art . 25 , and $ 32 Art. 119 ) ( 146 ) . Title unknown.

6

Apparently designed for expenditures of the Food Supply Service.

Title unknown . Used for expenditures on : Payments to military units for food products produced by their kitchens and delivered to provisioning organs against " planned supply " quotas (at urban retail prices of the appropriate zone , less urban trade discount ) ; vegetables are delivered at purchase prices [ 117 , 120 ]; Food products saved ( except bread and breadcrusts) and turned over to " planned supply " at state retail prices of the appropriate zone , less urban trade discount [ 108 ]; Repair of dishware and equipment by civilian organizations (see § 35 Art . 155) [56 ]; Financing " loans " for initial investment in new kitchen economies on a repayable basis [ 118 ].

5

Title unknown .

Communal expenses ( kommunal'nyye raskhody) [ 35 , 36 , 333 ).

13

Fuel supply [ 36 , 333 ].

14

Procurement and repair of furniture , barracks equipment, and fire -fighting property [ 36 , 333 ].

15

Current repair and maintenance of military (voinskiye ) buildings and structures [ 35 , 36 , 333 ). Title unknown .

18

Capital construction and capital repair of military buildings and structures [ 333 ] . Title unknown .

6

10

Apparently designed for current expenses of Barracks Maintenance Service .

12

DEFENSE

177

Table 7-6 . - IDENTIFIED COMPONENTS OF THE EXPENDITURE CLASSIFICATION USED IN THE MINISTRY OF DEFENSE ESTIMATE --Continued (Figures in brackets denote page number in source )

Section no .

Article no .

25 20

Title and use

Title unknown .

Used to support workers and employees ( see § 1 Art . 2 ) .

Title unknown . 62

32 119

Equipment ( tekhnicheskove imushchestvo ) of Barracks Maintenance Service [ 333 ] . Title unknown . Title unknown .

Used to support workers and employees (see

1 Art . 2 ) .

Title unknown .

35 155

Source :

Title unknown .

Used for expenditures on repair work done by district (okrug ) repair enterprises of the Food Supply Service ( see § 2 Art . 6 ) [56 ].

Safronov , Spravochnik , 1966 .

Although these fragments do not resolve any major questions of defense accounting, they do extend our understanding of the system . It is apparent that this classification does not employ either of the two standard sets of articles designating the object of budget expenditures which in chapter V have been labeled set “ A ,” for use by budget - supported institutions, and set “ B , " for khozraschet organizations. The large number of articles (numbers up to 155 are used ) are grouped into 35 or more sections, and they appear to be applicable only to the Ministry of Defense's Although section titles are not estimate . 25 available , they appear to parallel organizational subdivisions of the Ministry of Defense, at least to some extent. Thus, section 2 deals with food probably and supply represents expenses, allocations to the Food Supply Service ( sluzhba prodovol’stvennogo snabzheni ya). Similarly , section 5 appears to apply to another personnel support branch , the Barracks Maintenance Service (kvartirno - ekspluatatsionnaya sluzhba). It is note worthy, however, that capital construction and capital repair of buildings and structures for this service (as opposed to their current repair and maintenance ) are in a separate section (6 ), while equipment acquisition for the same service appears to fall into section 20 . 16 This suggests that section 6 is devoted to capital repair and capital construction expenditures on buildings and struc tures of numerous ( if not all ) types. Section 35 may designate expenditures on equipment repair work performed by by specialized enterprises , although it is not clear whether the repair enter prises operate on khozraschet and sell their services or whether their expenses are covered directly . As will be seen below , both alternatives are conceivable . Another category of personnel supplies notmentioned here --clothing and personal equipment (veshchevoye imushchestvo ) —for which a separate supply service exists , is presumably financed under its own section ,

b . Financial Practices and Organizational Units of the Ministry of Defense. - Direct descriptions of financial practices in the Ministry of Defense are rarely published , One of the most detailed and informative of such recentdiscussions is presented below in full. 17 ( 1 ) Expenditures of the Ministry of Defense U.S.S.R. are planned to a considerable extent on the basis of fixed norms for monetary expenditures and material supply . The majority of these norms are approved by the U.S.S.R. Government, though for certain types of needs (for example , operating expenses for the main tenance of equipment of forces, etc.), norms are approved by the Ministry of Defense U.S.S.R.

( 2)

The organization of the finances of khozraschet industrial enterprises of the Ministry of Defense U.S.S.R. is analogous to the organization of the finances of enterprises in other branches of industry . The financing of capital investments, in crease of working capital, and other planned needs is carried out first out of intra economy resources (profits , amortization , The growth in stable liabilities, etc.) . necessary additional resources for de veloping the economic activities of enter prises are provided by the estimate of the Ministry of Defense, which contains ap propriate allocations for these purposes. Contract construction organizations of the Ministry of Defense U.S.S.R. also operate on khozraschet.

( 3) The financing of capital investments under the estimate of the Ministry of Defense takes place in accordance with the state plan for capital investments,

178

MAJOR STATE EXPENDITURES (4 ) In determining defense expenditures, the party and the Government take into con sideration the international situation , the territorial size and length of boundaries of the Soviet Union , the economic capa bilities of the country, the current develop ment ofmilitary technology, and goals for improving the material and living con ditions of servicemen and providing them with social and cultural services.

(5 )

The estimate of the Ministry of Defense U.S.S.R. is reviewed by the Ministry of Finance U.S.S.R. from the standpoint of its correspondence to party and Government directives and the substantiation of its calculations.

(6 ) Financing under the estimate of the Ministry of Defense is characterized by the feature that payment for a considerable portion of deliveries (armaments , ammunition , equip ment, fuel, food , clothing, personal equip ment, etc.) is carried out in a centralized manner by the Ministry of Defense, or partially by military districts (okrugi) and units (for example , payments for the repair of military equipment) . Thus, individual troop units independently make only minor maintenance (melkiye khoz yaystvennyye expenditures and issue monetary pay to personnel. ( 7) All resources in the Ministry of Defense estimate are expended strictly according to designation and under systematic financial control. Financing and control over proper expenditure of resources is carried outby a special financial service . Financial services are to be found in military units, educational institutions, military commis sariats , military commands, military districts, etc. These services are directed by the Central Financial Administration of the Ministry of Defense U.S.S.R. The primary level consists of the financial service of individual units . The financial departments of commands, districts , etc., serve the primary level as supply organs , distributing credits among troop units in accord with the approved estimate and controlling the use of funds. This quotation spells out the general outlines of the Ministry of Defense's financial operations, though it is lacking in detail. Financing of the Ministry seems to be keyed to both the overall economic plan (“ the economic capabilities of the country" ) and to major elements of the overall plan , e.g., the state plan for capital investments . " Review of the Defense Ministry's estimate is made by the Ministry of Finance to assure “ cor

respondence to party and Government directives,” but systematic control of the Defense Ministry's financial operation is explicitly conducted by a financial service directed by that Ministry itself . Although the Ministry of Defense is essentially a budget- supported agency , various alternative systems of financing are employed for its numerous types of units and activities. As noted in the passages quoted above, some industrial and con struction enterprises of the Ministry operate on a khozraschet basis , and even primarymilitary units enjoy an independent financial status to somedegree . On the other hand, it is also pointed out (paragraph 6 ) that much military supply is centrally financed and consequently disbursed on a " free issue” basis . To the extent that the ultimate source of funding for Ministry of Defense activities and procurements is its " estimate " (i.e., the budget) and the transfer prices or costs involved are comparable to those outside the Ministry , such variations in the financing of individual units is of little import as far as overall defense expenditures are concerned . Insofar as outside sources of funding may be employed , however , and the pricing, costing, or accounting of acquisitions and activities diverges from normal civilian practice , such variationsmay be significant. It is from these points of view that available infor mation on various types of units or facilities sub ordinate to the Ministry will be examined . In terms of the manner of their financing, they may be grouped as follows: (1) Units operating on a " full" khozraschet basis ; (2 ) units operating on a “ limited ” khozraschet basis ; ( 3) “ self- financed " units ; (4 ) units financed by “ operational credits" ; (5 ) com munal facilities of military units ; and (6 ) economic activities ofmilitary units . (1 ) Full -Khozraschet Units . - Units of the Minis try of Defense which are referred to as “ khozraschet” actually appear to be of at least two types. One is the full -fledged khozraschet enter prise , analogous to its civilian counterpart and financially self- supporting (in the Soviet context), as described in paragraph ( 2 ) above . It is assigned a stock of fixed and working capital, has an independent balance sheet, employs fixed wholesale prices, and is expected to make a profit. The prevalence of full- khozraschet enterprises attached to the Defense Ministry is uncertain . In the retail-trade field they are the major organi zational form , since military trade organizations (voyentorgi) and their enterprises are on full khozraschet, with all perquisites including the right to bank credit. 18 The voyentorgi and their enter prises are subordinate to the Main Administration for Trade of the Ministry of Defense (GUTMO) . In addition to stores, public dining facilities, personal service shops, and other retail outlets for civilian employees, servicemen , and their families, the voyentorgi operate khozraschet dining rooms for

DEFENSE officers who are issued a monetary allowance for their subsistence. In its entirety , GUTMO appears to be a large system incorporating manufacturing as well as agricultural production and procurement activities. As indicated in chapter VI - A , the annual retail sales volume of GUTMO may be in the area of 2 to 3 billion rubles. However, in view of its khozraschet basis of operation , GUTMO probably requires little if any budget support, even for capital investmentpurposes. Furthermore, there is serious doubt whether such budget financing would be incorporated in a “main ” Ministry of Defense estimate and would appear in the “ defense" ap propriation - it is more likely that financing of GUTMO would occur through a separate financial plan , as is the case with its counterparts, Workers ' Supply Organizations (ORSy,prodsnaby) , attached to civilian budget- supported agencies. Such services as transportation , repair , and guard activities are provided by regular military forces; although some price benefits to GUTMO may well result, they are probably comparable to similar benefits received by the Workers' Supply Departments attached civilian agencies . Full- khozraschet enterprises also occur in the contract construction activities of the Ministry of Defense . Residential and urban construction , as well asmilitary construction , is done by enterprises of the Ministry. Someof this work is performed for outside agencies , presumably at the standard " estimate ” prices established for construction work . On the other hand , much military - related construction probably is carried out by agencies other than the Ministry of Defense. Construction of defense industry enterprises is clearly a function of civilian construction agencies . 20 The extent of full khozraschet in Defense Ministry construction enterprises is difficult to assess. A frequently mentioned type of construction organization , the “ military - construction detachment " (voyenno stroitel'nyy otryad), is referred to as being on khozraschet,21 but it is uncertain whether the full type or the limited type described below is intended .

Manufacturing activity ( other than that of trade organizations) is also known to be conducted in khozraschet enterprises of the Ministry . Con struction materials, prefabricated wooden houses, barracks and apartment furniture and furnishings, uniforms, clothing , and personal equipment are among the products manufactured , These items tend to be related to personnel support and to involve relatively simple technologies, although Most truck production has also been noted.22 manufacturing activity related to defense appears to be conducted in civilian agencies outside the Ministry of Defense . As remarked in chapter II, the administrative reorganization of March 1965 created seven ministries engaged in defense pro duction . Research , development, and experimental facilities also are probably attached to these in dustrial ministries - in 1963 their predecessor state

179

committees were given the task of coordinating and financing the research , designing , and experimental work for their branches of industry, regardless of the agencies to which the performing units were attached .

Agricultural activity performed on a khozraschet basis takes place in state farms belonging to the Ministry . Again , the scope of such activity is difficult to assess, but it may be extensive . Sales of state farm output to the Ministry of Defense may be at standard “ delivery " (asdatochnyye ) prices ; the sale prices apparently are designed to cover accounting costs, at least.23 The exemption from turnover tax cited in chapter VI- A for Ministry of Defense output presumably applies to all agri cultural output other than that of trade organi zations.

( 2 ) Limited - Khozraschet Units, -There are re ported to be numerous khozraschet enterprises in the Ministry of Defense engaged in the repair and maintenance ofarmaments,military equipment, and other military property .24 In contrast to the full khozraschet units described above , these enter prises are not intended to make a profit ; they sell their output at prices set at the level of planned cost . They presumably are assigned a quantity of fixed and working capital and maintain some kind of separate balance sheet, but not the “ independent” balance sheet of the full - khozraschet units. They do not enjoy the right to short- term bank credit for current operations, 26 and therefore probably maintain the same type of " current" account in Gosbank that other military units and institutions have , rather than the “ settlement" account of the full - khozraschet units. Top manage ment positions in limited -khozraschet units, as in full -khozraschet units , appear to be held by mili tary personnel; units on limited khozraschet, however, may have a substantially larger share of military personnel among their employees than the full -khozraschet units . 27 Automobile - road maintenance and repair is another field in which limited -khozraschet units appear to be numerous. This work on roads assigned to military units had been carried out until 1960 mainly by regular forces of the military units themselves. 28 Subsequent resort to civilian contract construction organizations proved unsatis factory , and Road Maintenance Sections employing civilians were organized for this purpose by military units. These sections try to utilize local construction materials and measure their success in lowered costs rather than profits . Someor all of the so -called “military - construction detachments ” mentioned above may also operate in similar fashion . ( 3) Self - financed Units .-- A third type of unit within the Ministry of Defense is referred to as

180

MAJOR STATE EXPENDITURES

operating on a “ self- financed” basis (sodersha shchiysya na samookupayemosti). Units ofthis type include “ building - repair groups” which may be organized by military units for the capital repair and direct construction of barracks ,housing facili The ties, and bath -and - laundry enterprises. 29 essentials of this type of organization are not entirely clear. Neither khozraschet nor budgetary , these units do not have their own balance sheet and they are serviced in administrative and financial matters by the military unit to which they are attached . They have a separate plan and their personnel, composed according to preestablished staff schedules, appear to be largely civilian. The principle of samookupayemost has been defined as the limiting of total expenditures to total income received ; i.e., no support from sources other than income. 30

Thus, the " self - financed ” units closely resemble the “ special-means” activities of budgetary institu tions discussed in chapters III and VIII - B . A flow of income in the case ofbath - and - laundry facilities serving civilian workers and employees as well as servicemen for a fee is readily understandable, but the source of financing for the building - repair groups might be expected to be the Defense Ministry estimate itself, which would provide the necessary limitation . It is possible that these units provide services for localcivilian - administered — as well as military - housing . (4 ) Units Financed by Operational Credits. This type of unit is also somewhat obscure , but it appears to refer to fully budget - supported units The term engaged in productive activities. “ operational credits,” which has several meanings in Soviet financial practice , is believed to mean here budget allocations for the full operating expenses of productive enterprises.31 This system is employed for a variety of agricultural, forestry, and land reclamation enterprises at the present time, but was best known in its use for the former machine - tractor stations , The actual activities financed in this manner by the Defense Ministry are not known , but they probably run the gamut of industry , construction , transportation , etc. Ref erences to this system made in discussions of the manner of releasing materials and supplies from other units of the Ministry usually link it with the khozraschet system , in that both are required to pay for such goods , rather than receiving them on a free - issue or preferred - rate basis . 32 This indicates an endeavor to maintain a full and separate accounting of the activities financed by “ operational credits.” (5 ) Communal Facilities of Military Units. Instead of contracting for the services of outside civilian agencies , a military unit can have its own garrison facilities of a public - utility (or “ com munal” ) type , such as electric power, water

supply , and sewage disposal. These facilities employ civilian labor, and require a separate estimate for operating expenses. They are referred to as units “ supported on the account of section 5 " of the Ministry's estimate . 33 As noted above, this section is believed to be devoted to the Barracks Maintenance Service, which approves the estimates and staffingofthese facilities. Since the furnishings, equipment, and supplies are provided by the supply organs of this service to military units free of charge (in contrast to the reimbursement required from khozraschet enterprises or units financed out of “operational credits" ), it is likely that much of the expenditures of these facilities may also bemet by free issues. The estimates of such facilities would therefore understate actual expenses, and they may cover only the wages of civilian employees. (6 ) Economic Activities of Military Units. — The types of units described above, although of varying degrees of independence and self - support, all appear to have largely civilian work forces (with the possible exception of those financed by “ operational credits" ) and to be distinct from ordinary military units belonging to the Armed Forces and supported by " general financing. " This term is believed to apply to direct financing under sections of the overall Ministry estimate such as those given in table 7-6 , and to exclude units financed by “ operational credits " and facilities “ supported on the account of section 5."

Units supported by general financing also carry on economic activities of a productive or non military nature involve arrangements which differing from direct financing by means of credits in the basic estimate . Such activities include the use of servicemen for work on state and collective farms to meet seasonal needs, for guard services , and for other such purposes . The extent of such work is probably substantial - for example , about one- half of all military freight carried by ships of civilian organizations is handled by the personnel of military units .34 It is difficult, however, to gauge the extent to which this involves outside income for the military units . State farms and agencies receiving seasonal armed guard services are known to pay for them , and they may also provide some support and maintenance for the troops outside of the military facilities. The internal provision of food supplies is another economic activity of basic military units. The supply of food to the military units appears to come from three sources: (1 ) The central Food Supply Service of the Ministry ; (2) direct purchases by military units from local suppliers ; and (3 ) production by the military units themselves . Expenditures of the Food Supply Service are covered by appropria tions in the Ministry's estimate --as noted in table 7-6 , probably under section 2--and are

DEFENSE

used to pay for food products of two types: (a ) Those obtained from suppliers on the basis of warrants (naryady), and (b ) those delivered by subsidiary agricultural and kitchen “ side economies" against planned supply (planovoye delvol'stviya ) quotas. 35 These distinctions are believed to have an important bearing on the prices at which food products are procured . Primary military units can make settlements

with local food suppliers directly , with permis ance Departments sion of the Food Supply and 36 Fin of the military district. It is reported that " food provisions supplied supplied to to the Ministry of Defense U.S.S.R." are paid for at the following prices:

Grain products

Macaroni products

.at wholesale prices (with turnover tax) of the appropriate zone of destination ...at urban retail prices of zone of destination lessur ban trade discount

Meat products ( except canned ) shipped to Khabarovskiy and Pri retail urban ...at morskiy krays . prices of zone III less urban trade discount

181 Other meat products and all other types of provisions .

.at urban retail prices of zone II less urban trade discount.

Seasonally procured foods (potatoes and vegetables ) are acquired at wholesale or standard purchase prices. However , these prices may apply only to food procured from local suppliers. Acquisitions by the Food Supply Service when obtained directly from civilian procurement agencies may be subject to the turnover tax, but probably not when obtained from the State Material Reserve stocks, and clearly not when obtained from khozraschet state farms of the Ministry itself ( see chapter VI- A ) . The latter may be a major source. Production by military units, which commonly maintain greenhouses, pig farms, and similar kitchen " side economies, " appears to be largely self - supporting with the use of military labor . That portion of the output from these economies delivered under planned supply quotas were reportedly credited by the Food Supply Service at retail prices, apparently to provide some income to these units for their maintenance and These economies make a significant expansion . contribution to the maintenance of military personnel; they reportedly produced 24,000 tons of meat in 1965.37

NOTES TO CHAPTER VII 1 See , for example , Moorsteen and Powell, Soviet, 1966 , and the numerous RAND publications in this field , especially Nimitz , SNIP 1956-1958, 1962; Becker , SNIP 1958-1962, Part I, 1965; and Becker , Soviet, 1964. 2 Min . fin ., Gos. byud . SSSR , 1966 , pp . 74 , 96 . 3 Preliminary data on expected budget execution are often cited at the sametime that the succeeding budget is submitted for approval, but in the case of defense this may be merely the original budgeted amount ( see entries for 1966 in table 7-5 ) . 4 Godaire, “ Claim ,” 1962, p . 43. 5 CIA , The Soviet Budget for 1962, pp. 12-13. 6 The following studies are particularly useful: CIA , 1960...Budget, 1960 ; CIA , Soviet Budget for 1961, 1961, and the analogous report for 1962; Godaire , “ Claim ," 1962; Nimitz , SNIP 1956-1958, 1962; Becker, Soviet, 1964. The findings of the latter, an especially thorough and careful study, have been slightly revised in Becker, SNIP 1958-1962, Part I, 1965 . ? Aleksandrov, Gosudarstvennyy, 1965, pp . 382-384. 8 Allakhverdyan and Lyubimov, Finansy , 1958 , p . 284 ; Plotnikov, Gosudarstvennyy , 1959, p . 321 . 9 See also Allakhverdyan , Finansy , 1962, pp . 310-311. 10 Dundukov , Zakony, 1962, pp . 5 , 9, 10-12. The U.S.S.R. Supreme Soviet adopted this law on October 30 , 1959; analogous laws were subsequently adopted in individual republics by the end of 1961. 11 Tsilulin , Istoriya, 1966 , p . 206 . 12 Allakhverdyan and Lyubimov , Finansy, 1958 , p . 284; Plotnikov , Gosudarstvennyy , 1959 , pp . 321-322. 13 Also compare Allakhverdyan and Lyubimov, Finansy , 1958, p . 283, with Allakhverdyan, Finansy, 1962, p . 310 . 14However, “ air defense forces" (voyska protivovozdushnoy zaschity) are typically listed in such statements , and “missile forces ” (raketnyye voyska) have been mentioned (Allakhverdyan , Finansy , 1962, p . 310). 15 In the mid - 1920's, the Soviet military budget contained 9 groupings, apparently comparable to the present sections, and 79 articles (Sosnovy, “ Soviet,” 1964, p . 487). 16 The combining of capital construction and capital repair into one, presumably primary-level , article runs counter to the practice of separate accounting of capital repair and capital construction grants from the budget to both budgetary and khozraschet units in the standard sets of articles . See the discussion of articles 15 , 16 , 25 , and 42 in chapter V. 17 Aleksandrov, Gosudarstvennyy, 1965, pp. 382-384. (Paragraph numbers have been added for refer ence purposes .) This citation is a continuation of the passage quoted above; with the exception of two polemical introductory paragraphs which have been omitted , these two passages constitute the entire discussion of defense finances in this prominent text on the Soviet budget. 18 Safronov, Spravochnik , 1966 , p . 177 . 19For example , the Military Construction Administration of the Moscow Military District has been involved in constructing the new suburban city of Sergeli near quake-damaged Tashkent (Krasnaya zvezda, January 14, 1967) .

20See figure 2-7 . 21 Safronov, Spravochnik , 1966 , p . 191 . 22Tyl i snabzheniye , no. 7 , 1965, p . 20. The enterprise noted in this source may be engaged only in assembly. 23State farms in the Far East which are subordinate to the Pacific Fleet reportedly earned a profit of 600,000 rubles in 1965. Tyl i snabzheniye, no . 3, 1966 , p . 43.

24Dutov, “Making,” 1966 , p . 9 . 25For the distinction between " separate ” and “ independent” balance sheets in civilian units , see the discussion of form No. 1 of an industrial enterprise in chapter VIII- A , and the distinct types of activities of budgetary institutions for which accounts are provided in chapter VIII - B .

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NOTES TO CHAPTER VII

26Dutov , “Making,” 1966 , p . 10. 27The military component of the work force is apparently large enough that the practice of fixing its size and rank by direct order of superior levels will affect the applicability of the new economic manage system , which calls for freedom in determining the labor force and wage bill. (Ibid .) ment reform 28Tyl i snabzheniye, no. 9 , 1965, p . 70 . 29Safronov, Spravochnik , 1966 , pp . 33, 34 , 152. khozraschet or budgetary units .

Bath and laundry services can also be organized as

30Shumov, Finansirovaniye, 1966 , p . 41. This definition is given in connection with the housing and communal activities subsidiary to industrial enterprises. 311n addition to the meaning ascribed here, two other distinct usages for the term “ operational" (operatsionnyye) are known : (1) As a general term for the current basic activity expenses of any budgetary institution, whether or not " productive " in the Soviet context; and (2 ) non - capital expenditures of enter prises which are nevertheless not treated as being chargeable to costs of production , but are financed by special - purpose allocations from the budget (as in Article 31 of the object classification ) or from centralized agency funds. 32For example , see Safronov, Spravochnik , 1966 , pp . 20-21. 33Ibid ., p . 23. 34Tyl i snabzheniye, no . 7 , 1965, p . 66 . 35Safronov , Spravochnik , 1966 , pp . 108-109. Other expenses besides procurement are also covered , such as livestock feeding and slaughter, food storage, containers, and processing. 36Ibid ., pp. 109-110 . Settlements are are also made with local civilian enterprises for bread -baking, preparing hot food , storage , etc. 37Tyl i snabzheniye, no. 5 , 1966 , p . 40 .

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VIII .

ACCOUNTING

AND REPORTING PROCEDURES FOR FINANCIAL

The aim of this chapter is to depict the manner in which financial data are developed in primary operational units and passed on to various govern mental agencies for processing or use, Central to this aim are the systems of accounting records and reports found in the various sectors of the economy. Two major aspects of these accounting systemswill be emphasized here: (1 ) The specific primary reports and concrete items of data which they produce; and ( 2 ) the interconnections between successive stages of the systems (the accounts as such , the journals, registers, and other books in which they are kept, the primary level reports and their consolidations ). Pursuit of this aim to the full est extent possible is neither desirable nor feasible , in view of the voluminous and extremely detailed information available for many areas. At the same time, however , a relatively extensive exposition of the material is necessary in order to depict realistically both the kind ofdetail available and the extent of standardization that has been achieved in Soviet practice .

The relation between the underlying accounts and reports discussed here and specific types of published financial data is taken up in other chapters concerned with those data . A descrip tion of the handling of specific types of transactions in the accounts is beyond the intent of this chapter, although extensive and detailed information of this nature is often published . Economic aspects of accounting and questions of accounting theory have 2 likewise been largely omitted here .

In terms of sectors of the economy, primary attention is focused on the khozraschet sector and its major component, industry (section A ). Other sections of this chapter are concerned with the sphere of budgetary (budget - supported ) institutions (section B ), the banks ( section C ), and the budget administering Ministry Finance hierarchy Ministry of of Finance (section D ). A final section (E ) presents brief descriptions of the accounting systems in several other sectors of the economy and concludes with a short discussion of four topics of concern to the general subject of accounting and reporting in the Soviet Union - the system used for the preservation of accounting documents and reports , the central ization of accounting and reporting, the mechan ization of data processing , and the 1965 Work Plan of TSSU for financial data .

DATA

A. KHOZRASCHET ORGANIZATIONS Although the khozraschet sector covers a broad spectrum of activities as diverse as industrial enterprises, state farms, railroads, and retail stores , there exists a large area of standard ization in financial accounting and reporting, justi Significant fying its treatment as a whole.3 differences perforce arise, due to the diversity of operations, and an attempt will be made to illus Major trate the extent of such differences. attention is paid here to the key industry sector and , to lesser extent, capital construction , Although the industry sector is naturally more widely discussed in Soviet economic and pedagogic literature, there is an uneven but continuing flow of texts and reference works on most other sectors.

1.

Background

The usual treatment of data management in the enterprise by Soviet writers distinguishes three types of recordkeeping (uchet): Accounting or bookkeeping; operational or technical; and sta tistical. The distinctions and boundaries between these types are not precisely defined. Accounting records pertain to the traditional types of book keeping accounts and the primary documents from which entries are made. Accounting usually employes value terms, though in such cases as detailed accounts for materials , output, and labor costs , it may also record physical units . Oper ational-technical records deal with narrow pro cesses or operations, serve the purposes of current operational management, and usually employ physical terms. The scope of statistical record keeping is obscure - perhaps the most cogent defi nition would be that it encompasses those records which are used in compiling “ statistical reports. " Some authors do not distinguish statistical records, holding that statistical reports are based on both accounting and operational records. 5 Operational reports on day - to -day activities aremade internally within the enterprise . Statistical and accounting reports are sent outside the enterprise to other units, and it is in this sense that “ reporting* (otchetnost ) will be used here. Since both statistical and accounting reports rely at least in part on the same records and in some cases report on the same variables, the distinction between them lies elsewhere. In large part, it lies in the destination of the reports .

185

186

ACCOUNTING AND REPORTING PROCEDURES

Statistical reports are submitted primarily to the local and regional offices of TSSU and to the enterprise's superior agency. Accounting reports , which are submitted to the superior agency (and in some cases to TsSU ), are of special interest to the branch banks providing credit and theMinistry of Finance hierarchy administering budget revenues and expenditures. The basic purpose of both types of reporting is commonly described as facilitating control over the fulfillment of plans, but a major distinction appears to lie in the particular plans to be met. TsSU is the main pipeline for trans mitting data to Gosplan and to governmental and party agencies whose major concern is the so called national economic plan compiled by Gosplan .

The authority of the central organs is not limited to issuing directives and detailed instructions which have the power of law . These organs also exercise administrative controlover accounting departments in enterprises. The accounting department is an independent subdivision which may not be placed under any other part of the enterprise. It is headed by the chief accountant who , in administrative matters, is directly subordinated to the plant director , although in proceduraland methodological matters related to accounting and reporting he is responsible to the chief accountant of the ap administration , ministry , or other propriate Selection and release of the superior organ . 8 chief accountant is carried out by the enterprise director with the consent of the chief accountant

It is indicative of the secondary role played by financial matters in the national economic plan that this plan in summary form does not contain 6 purely financial indicators . However , it does include such finance - related targets as cost re ductions, wage funds, capital investments , and, of course, value of output (though not of sales, until the current reforms), and it is precisely in these areas that " statistical" and " accounting reports tend to overlap . The main financial variables such as profits , taxes and other budget revenues, amorti zation funds and other sources of financing capital investments, quotas for current assets , or bank credit plans, are not included -- these are the primary concern of the Ministry of Finance and the banks. Therefore, it is not surprising that the handful of financial reports labeled " statistical" that is , approved by TsSU - contain only a small number of key variables such as bank account balances , profits and profit - tax payments , overdue bank loans, and wage payments , and only oneminor report is sent to TsSU itself. (See the “ F " series of reports , below .) We shall be concerned here primarily with accounting records and reports ; statistical reports will be treated only to the extent that they show financial data or resemble account ing reports .

of the superior organization . If there is a dis pute between the enterprise director and the chief accountant it is resolved by the superior organization .

Responsibility for nationalcontrol over account ing is exercised jointly by TsSU and the Ministry of Finance. Although TsSU is supposedly the main agency for organizing the so - called national economic recordkeeping system ,many instructions and regulations pertaining to accounting records and reports are issued by the two agencies jointly . The Ministry of Finance, which has an Adminis tration for Accounting and Reporting , appears to be dominant in the field of accountingmethodology and accounting reports , whereas TsSU is clearly dominant in regard to statistical reports and primary record documents in such areas as material stocks, fixed assets , labor and wages, and cash records. 7 Superior administrative organs also have residual authority for regulating accounting and reporting procedures, but only within pre scribed limits .

practices , within the limits set by superior organi zations, to maintain accounting books, and to submit accurate and complete reports on time.

The chief accountant has a considerable amount of power and in many respects is intended to act as an agent of the superior organization and control agencies. Thus, all contracts and agreements dealing with the release of goods or other val uables from the enterprise must be signed by the chief accountant . If he receives instructions which violate some law , regulation , or accounting and reporting practice , he is to notify the di rector in writing that such action would con stitute a violation , If the director orders the chief accountant in writing to carry out these instructions , the accountant is obligated to do so but must report it to the head of a superior organization and appropriate party - state control organs. The chief accountant is obliged to refuse to carry out a criminal act, and to inform the superior organization and party - state control organs, and , in appropriate cases, the financial organs concerned.9 Beyond this , he is responsible for general supervision over the work of the accounting department, It is his responsibility to institute proper accounting procedures and

Thus, the chief accountant is in a position in which his loyalties and responsibilities are divided between the enterprise director and the superior organization . It is , in fact, difficult to ascertain how much control an enterprise director has over his chief accountant. The director has the ultimate responsibility for the enterprise and any chief accountant who wishes to keep his position must presumably work out a modus vivendi with the enterprise director . On the other hand , the size of the chief accountant's bonus is determined by the head of the superior organization , who also exercises control over the selection , release, and transfer of chief accountants .

KHOZRASCHET ORGANIZATIONS The central authorities, then , control enterprise accounting in two ways : By keeping tight control over methodological and procedural matters , and by maintaining a voice in the appointment and activities of chief accountants .

In order to place Soviet accounting in proper perspective, note should be taken of its relatively small role in providing necessary information for operational decision -making by enterprise manage ment. In the Soviet economy many entrepreneurial functions are taken away from the enterprise and scattered among various organs in the admin istrative hierarchy . Insofar as accounting is concerned , this means that data must be readily transmitted to other agencies. The needs of enterprise management for detailed data in con trolling operations tend to recede in importance . The following statement of the main tasks of accounting is typical of the Soviet viewpoint:

187

actions. As might be expected , such classifications of accounts have undergone extensive standard ization in the Soviet Union .

The use of a standard classification applicable over nearly the entirekhozraschet sector is a recent development, dating only from 1960. Steps toward standardization , however , have a lengthy history. The basic outline of the balance sheet used by industrial enterprises today was reportedly estab lished as early as 1938 , and a unified classification accounts for all sectors of industry was adopted in 1940.12 A new classification for all - union and republican industry was introduced at the beginning of 1955, and in 1956 classifications of accounts were put into effect for a number ofnonindustrialsectors with widely dispersed activities -- automotive trans port, supply and sales organizations, and capital construction . 13

1. Maintain control over plan fulfillment; 2. ensure the preservation of socialist property ; 3. control the proper remuneration of labor; 4. struggle for the economical use of resources ;

5. promote the introduction and advancementof khozraschet. The relative unimportance of internalmanagerial functions and the dominance of central control functions leads to a tendency for controlling agencies to issue directives and set standards which can be easily applied and which will have some validity for most situations likely to arise . This , however, limits the possibilities for each enterprise to adapt to its own conditions .

Despite the somewhat differing role of Soviet accounting, “ the formal essence of capitalist book keeping has been applied to the Soviet enterprise with no difficulty whatsoever ," as Campbell has 11 pointed out. Such familiar tools as the debits and credits of double - entry bookkeeping, balance sheets , assets and liabilities, income and expenses , profit and loss, etc., are all to be found in Soviet practice.

2. The Standard Classification of Accounts

Fundamental to any accounting system and the financial data to be derived from it are the basic bookkeeping accounts in use . The “ classification ” of accounts (plan schetov ) used in a single account ing unit or group of units consists of a list of account titles and number designations, each with a predefined scope and interrelationship with other accounts in terms of a comprehensive set of trans

The administrative reorganization of industry and construction in 1957-58, which eliminated numerous sector - specialized and ministries created the territorial sovnarkhozy , provided a further step toward the standardization of accounts. By the beginning of 1960 , a broadnew classification had been developed and introduced by the Ministry of Finance . This ambitious scheme was designed to accommodate virtually the entire khozraschet sector , regardless of the branch of industry or sector of the productive sphere , and irrespective of agency subordination . The flexibility needed for such broad coverage was achieved partly by antici pating the needs of many types of activity in the initial list of accounts, and partly by allowing agencies to make limited insertions or changes with the approval of the Ministry of Finance.

The universality intended for this “ uniform " (yedinyy) classification may be seen from the list of sectors (or agencies) cited in the initial regu lation whose khozraschet enterprises or organi zations were to use the scheme: industry ( i.e., all manufacturing and extractive activities); construc tion ; state agriculture; geologic prospecting; de signing; auto , rail , sea, river , and civil air trans port; communications; supply and sales; domestic trade; and agriculture procurement.14 In addition , modified versions of the same basic classification have been adopted or proposed for consumer co operatives, kolkhozy, interkolkhoz construction organizations, and various other enterprises. Such sectors as banking and foreign trade, although operating on khozraschet , have their own entirely distinct account classifications. The so -called public (obshchestvennyye) organizations, such as party or trade union organizations and sports societies, also have specially designed classifi cations and are not covered by the uniform classification ,

188

ACCOUNTING AND REPORTING PROCEDURES

As far as is known , the same classification of accounts is used in both civilian and noncivilian aspects of a sector at least no indication of a restriction to civilian uses has been found . There is some confirmation of this in the aircraft in dustry ( including military aircraft production ) which appears to employ the same standard accounts and submit the same financial reports as industrial enterprises in general.15

a . Levels of Aggregation . - In order to judge the degree of standardization of accounts within the various sectors and enterprises, it is necessary to distinguish the various levels of aggregation used in Soviet accounting. Soviet discussions consistently refer to three such levels : ( 1 ) Synthetic (sinteticheskiye ) or summary accounts (also known as first -order accounts ); (2 ) subaccounts ( sub scheta ) or second - order accounts ; and ( 3 ) analytic ( analiticheskiye ) or detail accounts,

Summary accounts record transactions in value terms only . Because of the diversified activities recorded in them , further subdivision varies. Some are divided into subaccounts and detail accounts, some only into detail accounts, and a small group has neither detail accounts nor subaccounts, 16 Subaccounts are similar to summary accounts in that they record data only in value terms. They cover only a portion of the transactions recorded in a summary account; for example , the summary account Raw Materials and Supplies has five sub accounts, each of which contains data on similar types of materials. Detail accounts are designed to give comprehensive data on a narrow type of transaction or a given inventory item . Data are usually in both physical units and value terms, though in some cases value terms only areused .

The uniform classification concerns only the first two levels - the summary accounts and the subaccounts . Detail accounts are introduced by enterprises and superior organizations , in many cases on the basis of regulations issued by TSSU , the Ministry of Finance, and even Gosplan dealing with such areas as costs, materials, cash opera tions, and fixed assets . A list of all summary account titles and numbers that have been en countered in the literature is shown in table 8-1 .

The initial list issued in 1959 reportedly contained 69 summary accounts, as compared with 94 in the previous classifications of 1954-56.17 Most of the accounts listed in this table are used in common by all khozraschet sectors , although some are designed for use in only one or a few sectors. These latter accounts were either provided initially or added for specific sectors or agencies in the subsequent modifications permitted by the Ministry of Finance . For a few of the designated numbers in the tables , alternative titles are shown ; these represent instances in which severaldifferent agencies were permitted to add special summary accounts for use in their own particular type of activity . For example, Account No. 48 represents Income From Operations of Communications Facilities, Sales ofGoods in Retail and Small Whole sale Trade, Planned Value of Hauling Work in rail road transport , and Gross Receipts in river trans portation . The sectors in which each summary account is used are specified in table VIII - A - 1, in which the standard accounts are cross classified by each of eight sectors. This table also lists standard subaccounts and single - entry memoran dum accounts , and the sectors in which they are Sectors listed in table VIII- A - 1 are rep used , resentative and not exhaustive of the khozraschet sectors; they were chosen because of their impor tance in the economy and because information for them is available . There are, however, a number of other sectors for which information on accounts is available in various degrees of completeness.18

and

b . Grouping of Accounts. The standard first second - order accounts listed in the official

regulation are grouped into 11 sections based only on broad areas of use, such as " production ex penses, " " settlements," " funds and reserves," etc. (see section titles, table 8-1) . These accounts may also be grouped by economic function , technical type, relationship to the balance sheet, or other criteria , Classifications of the accounts in such terms are not made in the official regulation, and numerous authors have proposed somewhat diver gent schemes , An attempt is made here to summarize such alternative groupings . Since a description of the individual accounts is inap propriate , it is hoped that this summary of alter native groupings will serve as an indication of the general characteristics of the major accounts,

189

KHOZRASCHET ORGANIZATIONS Table 8-1.--STANDARD SUMMARY ACCOUNTS FOR THE KHOZRASCHET SECTORS

No. 1

01 02 03 04 04 05 06 06 07 08 09 10 11 12 13 14 17 18 18 19 19 20 21 22 23 24 25 25 26 27 28 29 29 30 31 33 34 35 36 37 38

39 40 41 42 43 44 45 45 46 46 47 48 48 48 48 49 49 49 50 51 52 53 54 55 56 57 57 60 61

Account title Section I. Fixed Assets Fixed assets Depreciation of fixed assets Capital repair Section II. Production Stocks and Equipment Roads and road construction Products of agriculture Raw materials and supplies Fuel Petroleum products Construction materials and equipment to be installed Spare parts Young animals and animals being fattened Procurement of agricultural products Procurement and storage expenses Inexpensive and short - lived items Depreciation of inexpensive and short-lived items Revaluation of material valuables Section III . Production Expenses Expenses of river transport operation Shipboard operation expenses Crop husbandry Animal husbandry Expenses of loading and unloading work in transport Basic production Semifabricates of own manufacture Expenses in operation of communications facilities Auxiliary production Rejects in production Shop expenses General production expenses General plant expenses Overhead expenses Operation of construction machinery Nonindustrial production and operations Other production and operations Non capital construction work Prepaid expenses Construction and acquisition of fixed assets Finished construction and acquisition of fixed assets Formation of basic herd Geologic prospecting work Income and expenses of motor transport operation Income and expenses of transport and loading and unloading operations Section IV. Finished Products, Goods , and Sales Road maintenance and repair Finished products Goods Trade markup and turnover tax Nonproduction expenses Distribution expenses Services rendered by motor transport Goods shipped , work and services performed Sales Wholesale sales Intrasystem release of goods Income from operation of communications facilities Sales of goods in retail and small wholesale trade Gross receipts Planned value of hauling work Sales and intrasystem release of packing, materials , work performed , and services completed Income and fees from operation of river transport Income from hauling Section V. Monetary Assets Cash Settlement account Income accounts Account in the bank for price differentials Zon procured agricultural products Special account for capital investments Other accounts in banks Other monetary assets Account in Gosbank for transfer operations Funds in operational cashiers ' offices Section VI. Settlements Settlements with suppliers and contractors Settlements on advances and partial payments for orders

No. 1

Account title

61 Settlements on advances 62 Settlements with debtors on claims 62 Obligations of communication organs to clientele on transfer operations 62 Settlements on hauling and loading and unloading work 62 Settlements with stations regarding collections 64 Settlements with purchasers and customers 64 Settlements with customers 65 Settlements on purchases of agricultural products 66 Settlements with residential and nonresidential tenants 66 Settlements on unused (neotovarennyye ) fuel coupons and settlement with subscribers on preventive repair service 66 Settlements with clientele 67 Settlements on clearing mutual claims 68 Settlements on operational advances 68 Settlements with depositors 69 Settlements on (with organs of] social insurance 70 Settlements with wage workers and employees 71 Settlements on employee expense accounts 72 Settlements with wage workers and employees for uniforms 72 Settlements regarding shortages and waste 73 Settlements with the budget 74 Settlements with cooperative organizations 75 Settlements on payment for equipment 76 Settlements with various debtors and creditors 77 Intra -agency settlements 78 Orders for subscriptions 78 | Income from shipboard operations 78 Settlements on collections for hauling 79 Intraenterprise settlements 79 Settlements on individual dwelling construction Section VII . Diverted Assets

80

Diverted assets

Section VIII. Shortages and Losses 82 Shortages and losses due to spoilage 85 86 87 88 89 89 89

Section IX . Funds and Reserves Charter ( basic ) fund Amortization fund Special funds Reserve for forthcoming payments Income of future periods Reserve of own current assets Capital Zinvested in roads and road structures

Section X. Bank Credits and Financing Short -term bank loans Special loan account for commodity turnover Long -term bank credits Financing capital investments Financing the formation of basic herds Financing geologic prospecting work Special -purpose financing and receipts Local income and expenses of a railroad line Local income and expenses of railroad stations Deductions for redistribution of /retail and wholesale trade discounts 98 | Income from future periods

90 91 92 93 94 95 96 97 98 98

Section XI. Financial Results 99 Profit and loss Single -Entry Memorandum Accounts i Rented fixed assets 2 Raw materials and supplies accepted for processing 3 Goods and material valuables accepted for responsible custody 4 Equipment accepted for installation 5 Registered prenumbered ) forms 6 Opened budget credits in banks 7 Difference between bookkeeping and retail prices for missing goods and material valuables 7 Goods accepted for commission sales 8 Debts of insolvent debtors written off as loss 9 Bills for work not accepted by the bank for payment 10 Bills presented (to debtors) in terms of degree of completion 10 Conventional valuables (stamps, stamped envelopes , etc.) 11 Fines , penalties, and forfeit of payment 12 Claims presented to debtors for payment of fines, penalties , and forfeits

1 Repeated numbers apply to accounts employed in different sectors as shown in table VIII - A - 1 and its footnote 4 . Source : Same as for table VIII - A - 1 .

ACCOUNTING AND REPORTING PROCEDURES

190

Figure 8-1 shows the structure of the uniform system , with accounts grouped by function and type. The accounts are divided initially into those making up the main double- entry system and a distinct set of single -entrymemorandum accounts. Double entry (balansovyye) accounts may in turn be divided into three major groups . One group , Economic Means and Sources, contains a number of subdivi sions for data on fixed and current assets and

sources of capital of an enterprise , A second group , Economic Operations, deals with accounts per taining to actual operations, including such items as production costs , indirect costs , etc. This group is divided into a number of subgroups which deal with various aspects of operations. A third group in cludes accounts which contain data on the financial condition of the enterprise at the end of a given period .

Figure 8-1 .--STANDARD BOOKKEEPING ACCOUNTS CLASSIFIED BY FUNCTION AND TYPE Functional Groups Types and Accounts

Inventories

Capital

Economic means and sources

Type I - Assets : Fixed assets (01) ; stocks of materials and supplies (05-09, 12, 21) ; finished products (40 , 41, 45); cash on hand and bank deposits (50-51, 54-56). Type II - Liabilities: Charter fund (85 ) ; amortization fund ( 86 ); investment capital (93-95) ; and other special-purpose funds (87, 96 ).

Settlements

Type I - Assets (Receivables): Settlements with customers (64); and employees (71, 82 ). Type II - Liabilities (Payables): Settlements with suppliers and contractors (60, 65, 75 ); employees (70) ; the budget ( 73) ; and banks ( 90 , 92) . Type III Assets and/or Liabilities (Receivables and Payables ): Advances paid and received (61); offsets of mutual claims (67) ; social insurance (69) ; intra-agency and intraenterprise settlements ( 77, 79); various debtors and creditors (53, 74, 76).

Offsets

Type I - Assets (Contraliability ) : Diverted assets (80 ) . Type II Liability (Contra- asset) : Depreciation of fixed assets (02); depreciation of inexpensive and short- lived items (13) ; trade markups and turnover tax (42) .

Type I - Assets : Double -entry accounts

Suspense accounts

Basic expenses and cost calculation Economic operations

Prepaid expenses ( 31 ). Type II - Liabilities : Reserve for forthcoming payments (88).

Type I - Assets : Capital repair (03); production (20, 23, 29) ; capital investment ) . (33-36 outlays

Expenses Indirect costs

Type IV Assets: Procurement and storage costs (10, 11) ; rejects (24) ; overhead -type costs (25-28, 30) , nonproduction expenses (43, 44 ) .

Type V Assets or Liabilities: Sales (46) ; intrasystem release of goods (47) ; revaluation of material valuables (14 ) .

Comparison

Type VI Assets or Liabilities : Profit and loss (99 ).

Financial results

Paralleling double - entry accounts

For control over obligations

Not paralleling double -entry accounts

Single- entry memorandum accounts For intra enterprise control

Materials accepted for processing (2) ; goods in responsible storage (3) ; price differentials on missing materials (7) ; bad debts written off, etc. (8-10). Rented fixed assets ( 1); equipment accepted for installation (4 ). Registered Gorenumbered) forms (5) ; opened budget credits (6 ) .

Note : See text for discussion of types, and table 8-1 for the full title of all summary accounts (numbers shown here in parentheses ) . Source : Adapted primarily from Poklad, Kurs, 1963, p . 62 ; Vaysman , Uchet, 1964 , pp . 47-63.

KHOZRASCHET ORGANIZATIONS All summary accounts which were created in the 1959 classification of accounts for the khozraschet sector are shown on the right side of figure 8-1, with an indication as to whether they are asset or liability accounts. 19 The summary accounts are also classified into six types which can be assigned , according to their relationship to thebalance sheet , to the usual dual groupings of “ balance - sheet" or " real" accounts and “ income and expense" or “ nominal” accounts (although Soviet authors do not employ this breakdown ). Real accounts are those which have a balance at the end of an accounting period that is carried forward to the next accounting period . Thus, the data of these accounts are directly shown in the balance sheet. Real accounts include types I, II, III, and VI. Type I is an asset account with a debit balance, and type II is a liability account with a credit balance. Type III accounts usually have double balances, i.e., both debit and credit balances at the same time. 20 These accounts are used to record unrelated transactions. For example , one account can record transactions with both debtors and creditors - that is , for both accounts payable and accounts receivable . This results in the ac counts being split, and no attempt is made in practice to obtain an overall balance. This type of account developed as the result of an attempt by Soviet authorities to limit the total number of summary accounts, and there have been suggestions that they be divided into distinct, homogeneous units.21 Type VI is assigned to the Profit and Loss account, which may have a credit or debit balance .

Nominal accounts, which include types IV and V , do not appear in the balance sheet. Type IV consists of asset accounts in which expenditures of an indirect nature are temporarily recorded . When books are balanced these accounts are written off to various real accounts . Type V includes those accounts which can have either a debit or a credit balance, but in both cases they are written off to real accounts . The group labeled “ Basic expenses and cost calculation" is shown in figure 8-1 as type I, since unexpired costs and outlays on balance are entered in the balance sheet to reflect work in process, although most costs during the period are of course written off to Sales and ultimately to Profit and Loss.

Single - entry memorandum (zabalansovyye ) ac counts form a separate subsystem in the classifi cation . These accounts are designed primarily for purposes of maintaining surveillance and control in selected areas, such as items of property currently in use by the enterprise but not belonging to it, specially controlled preregistered documents , certain kinds of settlements , etc. Balances on these accounts are not reflected in the balance sheet, and there is no direct interconnection between the

191

double - entry accounts and the single - entry memo randum accounts (although in some cases they deal with similar transactions in parallel fashion ). Single - entry memorandum accounts therefore simply record incoming items on the left or debit side and outgoing items on the right or credit side . 3. Systems of Accounting Registers The adoption of a standard classification of accounts was accompanied by the development of a companion system of standard accounting registers , Known as the “ journal or books of account. order" system of books, its introduction into practice following approval by the Ministry of Finance was considerably slower and less complete than that of the standard classification ofaccounts . While use of the standard classification of accounts is obligatory in most khozraschet sectors, some discretion in the choice of the system of books is apparently within the province of the enterprise and its superior organization . Promotion of the “ progressive " journal-order system has made it predominant in large- and medium - sized enter prises, but two older systems of accounting registers continue in widespread use . These two , the "memo-order" system and the “ journal -general ledger ” system , will be outlined before the journal order system is described in more detail.

a . The Memo -Order System . - Thememo- order (memorial'no -ordernaya) system of bookkeeping, variants of which originated as early as the late 1920's, was systematized and sanctioned as the major form immediately after World War II. 22 The wartime and postwar influx of inexperienced and poorly trained accounting personnel prompted the use of a system designed to minimize the need for accounting skills . A key role in this system is played by the memo order, which states the nature andmonetary value of a transaction and provides instructions as to the accounts to be debited and credited (i.e., the accounting formula ). This information is entered either on a separate document or on the primary document itself in a stamped - on format), and signed by the chief accountant or his deputy.23 A memo order can also be drawn up from inter mediate documents such as grouping (gruppi rovochnyye ) or cumulating statements (nakopitel nyye vedomosti) which summarize a number of primary documents dealing with homogeneous types of transactions, but all entries in journals and books must follow accounting formulas ordered by a few of the most highly qualified accountants in the department. Memo orders are numbered sequentially , starting with number one at the beginning of each month . They are entered in both the registration journal (registratsionnyy zhurnal - a chronological journal, or log, of transactions) and the general

192

ACCOUNTING AND REPORTING PROCEDURES

ledger (glavnaya kniga -- a systematic register). In addition , entries are made in the detail accounts . The memo- order system is characterized by the wide use of statements summarizing the entries in a related group of accounts. They are used to verify daily or detailed entries made in journals and accounts , to compile the balance sheet and other accounting reports , and to provide information for managerial purposes. Three different types of such statements are compiled : Two for detail accounts and one for summary accounts , Turnover statements (oborotnyye vedomosti) of detail accounts are compiled periodically , usually

once a month .

Entries indicate the titles of the

detail accounts, unit prices, balances at the begin ning of an accounting period , totaldebits and credits to each account, and final balances at the end of the period . These statements are used for the verifi cation and the cross - check of entries and totals in both accounts and registers. Totals from the turn over statement of auxiliary material, for example , should agree with the totals of auxiliary materials as indicated in the pertinent summary accounts . The statements are also used to show the move ment of inventory and the amount of finished production . Their usefulness is particularly enhanced in that they give data in both physical and monetary units ( figure 8-2).

Total .... Source :

5,000 102,000

5,000 200

--

3,000 8,000

5,200

3,000 800 3,800

--

5,000 4,000

5,000 400

5,400

Balance on September 1

3,000 6,000

Rubles

Total

of Number kilograms

Kopecks

Total

Credit Rubles

Kopecks

Debit

Number of kilograms

Turnover for August

Rubles

Total

Number of kilograms

|Kopecks

Rubles

Rubles

1

Copper .. Cast iron ..

Balance on August 1

Total

3,000 600

3,600

Adapted from Vedernikov , Osnovy , 1961, p . 70 .

Balance statements (sal'dovyye vedomosti) of detail accounts are compiled monthly , usually for materials accounts. They are also used to check detail and summary accounts against each other . Data on total transactions for a report period are not given in this statement; only the balances of accounts at the beginning and the end of each accounting period are shown . These statements usually contain data in both physical and monetary units.24

All documents dealing with cash are entered in the cash book . These documents, primarily the cash receipt order (prikhodnyy kassovyy order ) and the cash expense order (raskhodnyy kassovyy order ), relate only to small amounts . Cash for

The turnover statement of summary accounts , which is prepared monthly, contains the initial debit or credit balance for each account, the total debit and credit transactions for the report period , and the final balance for each account. This statement, resembling the “ trial balance" in U.S. practice , has a two - fold role: As a source of information for compiling balance sheet and other reports, and as a basis for cross -checking entries and totals in individual accounts and registers. Information for this statement is obtained from the general ledger, but it is cross -checked with the registration journal and turnover statements of detail accounts.25

is As noted above , the memo - order system gradually being replaced , although it is still used by many small- and medium - sized enterprises. 27 It has the advantages of simplicity and flexibility , as well as providing much opportunity for cross checks and economizing on skilled personnel. How ever, as Soviet commentators have pointed out, it also has many drawbacks:

large expenditures (wages, bonuses, etc.) is obtained from the settlement account in Gosbank . All cash transactions are handled by the cash department of the enterprise , which is subject to special regulation and supervision by the Ministry of Finance.26

(1 ) The preparation of a vast number of memo orders is time consuming; ( 2 ) each transaction is reflected in as many as 7 or 8 registers;

soədoyil

Title of detail account

Kopecks

Price per kg .

Number of kilograms

Figure 8-2 .-- SAMPLE FORMAT OF TURNOVER STATEMENT OF DETAIL ACCOUNTS

193

KHOZRASCHET ORGANIZATIONS

( 3 ) enterprises with a large volume of business must use a new general ledger each month , which makes it difficult to obtain annual totals of summary accounts to complete annual reports ;

ledger, which combines both chronological and systematic registration that is , the functions of both the registration journal and the general ledger of the memo- order system .

Figure 8-4 .-- THE JOURNAL-GENERAL LEDGER SYSTEM (4 ) compilation of themany turnover statements and the cross - checking work are time consuming; (5 ) much of the work has to be done at the end of the month when accounting personnel have a great amount of other work ,

Cash orders

Cash book

Primary documents

Grouping and cumulative statements

A schematic diagram of thememo-order system is shown in figure 8-3. Memo orders

Detail accounts in books

Figure 8-3.-- THE MEMO-ORDER SYSTEM Journal -general ledger

Cash orders

Primary documents

Turnover statements of detail accounts

Balance sheet and other reports

Grouping and cumulative statements

Cash book

Detail accounts on cards

Memo orders

Daily entry Cross checking Monthly posting Source : Sumtsov , Kurs, 1960 , p . 242 .

General ledger

Registration journal

Turnover and balance statements of detail accounts

Turnover statement of summary accounts

Balance sheet and other reports

Daily entry Cross checking Monthly posting Source : Sumtsov, Kurs, 1960, p . 244 . b . The Journal-General Ledger System . - The journal- general ledger (zhurnal- glavnaya) system is a modified version of the memo -order system . It is used by enterprises and organizations which have a relatively small number of summary accounts , such as sovkhozy, kolkhozy, and co operatives. Memo orders also play an important role in the journal- general ledger system (figure 8-4). They are compiled on the basis of primary documents or cumulative and grouping statements in the same manner as in the memo- order system . These orders are posted daily to the journal- general

Turnover statements of detail accounts are compiled in the same manner as in the memo order sytem , but a turnover statement of summary accounts is not compiled . Data from the turnover statement of detail accounts are cross - checked with entries in accounts in the journal- general ledger. The balance sheet and other reports are drawn up on the basis of data from the journal general ledger . Increasing attention to accounting in all sectors and the tendency to expand the number of accounts is resulting in a decline in the use of this system . For example, theminimal47 -account classification currently employed by those kolkhozy which have converted to the monetary system of labor re muneration calls for 94 debit and credit columns in the journal - general ledger, making itunwieldy.28

c . The Journal- Order System . - The journal order system is probably the most widely used today, particularly in the larger industrial enter It evolved from multijournal systems prises.29 dating from World War II and a predecessor system for industrial enterprises in 1949. designed Numerous revisions and variants for other sectors were in use until the Ministry of Finance approved , as of January 1, 1960, a “ uniform " system com patible with the new classification of accounts.30

194

ACCOUNTING AND REPORTING PROCEDURES Figure 8-5.-- THE JOURNAL-ORDER SYSTEM

Although the system is described as applying to all sectors of the national economy, the initial instructions and standard registers were designed for use only in industrial, construction , and supply and sales organizations. In subsequent years the system was extended to be applicable in geologic prospecting organizations, state farms and other agricultural enterprises, design and survey organi zations, local housing economies, and automotive transport operations. 31 Further extensions are 32 likely to be forthcoming in other sectors.

The system is embodied in a set of standard or model accounting registers and documents designed to satisfy all needs of an accounting department. In addition to registers universally applicable to all sectors, the set includes special registers designed for sectors having nontypical accounts, as well as several optional variants . The standard registers and documents are known as journal orders, aux iliary statements, work tables, and detail sheets. Model forms and standard numbers have been adopted for these documents . The initial (three sector) list of these standard registers, together with the summary accounts or areas to which they pertain and the sector of use , are shown in table VIII - A - 2 .

The 17 basic journal orders, which play a central role in the system , are designed to accommodate all 69 or more accounts in the standard classifi cation , in various- sized groupings of related ac counts. Thus , one journal order can be devoted to a single account, while another may be designed for as many as 19 summary accounts , Associated with each journal order are one or more auxiliary statements, and specially designed or general purpose work tables may also be provided .

The journal- order system was designed to elim inate the drawbacks of the memo - order system cited above . Memo orders themselves are not employed , and data from primary documents are entered directly into the prearranged journal orders, which which thus thus simultaneously serve the purposes of both memo orders and chronological journals of original entry (see figure 8-5).

Detail accounts are maintained largely in aux iliary statements or in the journal orders them selves. Detail accounting on cards is more the exception than the rule , being retained only in the areas of fixed assets , materials in storage, and finished output. A deliberate attempt was made in designing the system to eliminate the lag in detail accounting, which in many cases is simultaneous with summary or control accounting. Detail ac counting also is more closely tailored to the needs of external reporting .

Primary documents

Detail account cards ( some areas)

Cash orders

Auxiliary statements and work tables

Cash book

Journal orders

Turnover and balance statements for detail accounts

General ledger

Balance sheets and reports

Daily entry Cross checking Monthly posting Source : Adapted from Sumtsov , Kurs , 1960 , p . 249. It should be noted that the incorporation of pre established detail accounts in many of the registers of the journal- order system tends to fill some of the gap created by the above -mentioned absence of such accounts in the standard classification . For example , the two overhead -type summary accounts employed in industry (no. 25 - Shop Expenditures and no . 26 - General Plant Expenditures) have virtually no further breakdown in the standard classification of accounts (see table VIII- A - 1 ) . General regulations on cost accounting in industry indicate the breakdown of these and other expense categories on a level of detail similar to that shown in accounting reports (figure VIII - A - 6 ).33 The formats of the relevant bookkeeping forms (aux iliary statements 12 and 15) reveal a similar but somewhat revised and more detailed itemization of these and other types of expenses. 34 The standard registers thus appear to extend the standard ization of accounts , but the extent to which devia tions from model forms and general accounting regulations are practiced by individual agencies is obscure . Such practices may increase with the reversion to the ministerial system of admin istration in 1965-66 . In order to reduce the number of entries, journal orders as a rule record only the credit entries to selected summary accounts, together with the accounts debited . Total debits to a given account are accumulated from other journal orders in the general ledger. Detail accounts generally record both debits and credits simultaneously .

KHOZRASCHET ORGANIZATIONS

Journal orders can be divided into three broad groups . The first group consists of seven journal orders (nos. 1 , 2 , 5 , 6 , 7 , 9 , and 17) , each of which records credits to a single summary account, in correspondence with debits to a large number of accounts . Thus , journal order No. 1 shows credit entries for account No. 50, Cash , and debit entries to as many as 36 accounts . An example of the for mat used for journal orders in this group is shown below .

Which are Debited

2

Accounts :

Accou No. nt

Account No.

Account No.

No Account

in

Total

Others

3

1

Date

Account No.

Item no .

No Account

Credit Transactions of Account No.

Account No.

The relationship between summary accounts (maintained in journal orders ) and detail accounts or other systematic records (maintained in auxiliary statements, work tables, or tables integrally contained in the journal orders) varies from case to case, and is often quite complex , The following brief characterization of the major registers may give some indication of this com plexity , but is not intended as a full and systematic description of the system such as could be gleaned from the detailed Soviet expositions available.35

195

4

5

6

7

8

10

9

11

Totals

Detail sheets (listki-razshifrovki) are used for these as well as other journal orders to provide detailed data on the transactions .

The second group consists of seven journal orders (nos. 3 , 4 , 8 , 12, 13, 14 , and 15 ) in which credit entries of 16 summary accounts are kept. In this group, credit entries to two or more

summary accounts are indicated in each journal order, plus the numbers of accounts to which corresponding debit entries are to bemade . Journal orders in this group are designed for credit accounts which are closely related and which are inter related with relatively few debit accounts , so that only a small number of accounts to be debited need be indicated . The format of journal orders in this group is as follows:

Credit acc't . No. debit accounts :

Credit acc't . No. debit accounts :

Date , nature of the trans action , and number of the document

Etc. No.

No.

No.

The third group consists of only three dis tinct journal orders (nos. 10 [10/1, 10a], 11 , and 16 ), but each is designed for reference to a large number of summary accounts . Post ing to these journal orders as a rule is not made from primary documents , but from aux

Total

No.

No.

No.

Total

iliary statements and other journal orders . Totals from the auxiliary statements are posted The to the journal orders once a month . format of the journal orders in this group , 36 which is based on the matrix - entry principle, is as follows :

ACCOUNTING AND REPORTING PROCEDURES

196

Carried from other journal orders

Accounts credited Accounts debited and detailed accounting items

No.

( 1)

(2)

No.

( 3)

No.

No.

(4 )

(5 )

Total

No.

(6 )

No.

Total

( 7)

(8 )

Account No.

Total... Account No.

Total... Total for the journal order ....

Another feature of the journal -order system is the use of auxiliary statements and work tables . Auxiliary statements (uspomogatel'nyye vedomosti) are registers which contain detailed data on voluminous or complex transactions that would be difficult to enter directly in the journal orders. At the close of an accounting period these statements are totaled and posted to the appropriate journal orders.

There are four major groups of auxiliary statements . The first group consists of auxiliary statements nos. 1 , 2 , 3 , 4 , 14 , and 18/1, which are designed to summarize information for accounts which have a relatively low volume ofactivity .

Auxiliary statements in the second group are designed primarily for use in analytic accounting and are subdivided into groups “ a ” and “ b ." Group " a " consists of auxiliary statements nos , 5 , 7 , 8 , 17 , and 18, which contain detailed data on regular accounts . Group “ b ” consists of auxiliary state ments nos . 10 and 11, which are designed for the accounts concerned with materials, fuels, and other production supplies.

The third group consists of auxiliary statements nos. 12, 13, and 15, which are designed to facilitate the grouping of production - expense data . The notable feature of these statements is that they are designed to make use ofthe matrix - entry principle . This reportedly facilitates the analysis of pro duction expenses on which corrective measures leading to cost reduction can be taken ,

The fourth group consists of only one auxiliary statement, no. 16. This statement is designed to

accumulate data necessary for the compilation of journal order no . 11, and to permit control over payment received for goods shipped or for work and services completed . Work tables(razrabotochnyye tablitsy)are forms in which data from primary documents describing homogeneous transactions are entered . At the end of an accounting period, the entries are totaled and used for compiling journal orders, auxiliary statements , or reports. Work tables are used especially with journalorders which contain entries for accounts that have a large volume of activity . Data from primary documents are thus grouped first in the work tables, then transferred to journal orders. The general ledger contains a separate , loose page for each summary account . At the end of every month entries in all journal orders are totaled and the results are posted to the appropriate account in the general ledger. Entries in the general ledger are made from journal orders only . The journal -order system was not designed for a high degree ofmechanization . Its looseleaf design permits either hand entry or keyboard accounting machine methods, but is quite unsuited for use in punched -card systems. Until the present, this has not been a serious drawback . Even the leading enter prises have generally introduced punched cards only for selected areas of accounting - labor, wages , materials, and finished products - and not as fully integrated systems.37 Although a series of instruc tions on model systems ofmechanized accounting have been issued in recent years, including some for punched -card systems, the limited availability of the necessary equipment has held the use of such systems largely to an experimental level. 38

KHOZRASCHET ORGANIZATIONS

4.

Accounting Reports of Primary Units

As noted above, the term “ reporting” as used here is restricted to external reports and does not cover the so - called operational reports intended only for internal use . For purposes of the rather limited financial analysis occurring within primary khozraschet units (as opposed to other operational needs), the extensive external accounting reports are generally adequate and obviate the need for further internal reports. The primary reporting unit is typically the enterprise , an organization directly conducting productive or other economic activity . In industry, the enterprise may be known as a plant, factory , mine, or quarry, but it must be operating independ entaly with assets assigned to it, i.e., khozraschet basis. Departments or shops operating on an internal or partial khozraschet basis do not submit independent reports , nor domost component " firms” of the recently formed combines or as sociations (ob ” yedineniya ). On the other hand , unchartered organizations deriving their existence from a chartered trust may be reporting units if they have the enterprise's equivalent of indepen dence in the form of separate plan assignments, more or less permanently assigned fixed and cir culating capital, a settlement account in the bank , and an independent balance sheet. The various primary reporting units observed in examinations of the construction, trade, and railroad sectors below may serve to illustrate typical variants for most other sectors of the khozraschet sphere .

External reporting of primary units is generally subdivided into so - called " statistical" and " ac counting" (or financial) reports. Pre - 1960 dis tinctions between a government-wide minimum set (obshchegosudarstvennyy minimum ) of statistical reports established by TSSU and a loose conglom erate known as intra -agency (vedomstvennaya) reporting are now seldom made. TSSU U.S.S.R. establishes a union - wide (obshche soyuznyy ) min imum set of indicators and forms, which can be supplemented in case of special need by reports approved by republican TsSU agencies. Unsanc tioned intra - agency or “wild ” reports have osten sibly been eliminated . All state , cooperative, and social organizations are enjoined from requiring , and primary units from submitting, " statistical" reports whose forms and destinations have notbeen established by either central or republican TsSU agencies ; the same authority for “ accounting" reports is held jointly by TsSU and the Ministry Violations of this injunction are of Finance , 39 often mentioned but their extent is obscure . While the distinction between the two sets is not clear- cut, “ statistical” reports are essentially concerned with plan - fulfillment control over National Economic Plan targets, while “ accounting"

197

or financial reports are concerned with control over indicators in various financial plans, such as the state budget and the “ income and expenditure balances” or financial plans of top -level economic agencies.40 “ Statistical” reporting covers a broad range of topics, including sector - specialized tech nical or engineering data , industrial supply and procurement data , and work norms, as well as key national economic plan indicators, such as output, costs, labor and wages, and capital investment, which are of interest from a financial viewpoint. All statistical reports are submitted to the primary unit's superior agency, and most ( but not all) also go to an appropriate element of the TsSU hierarchy for processing and transmittal upward in the hierarchy or for submission to superior administrative units of the line agency and other functional agencies or executive govern mental bodies. It is noteworthy that only one brief report in a small set of financial statistical reports ( see the “ F ” series , below ) is submitted to TsSU . Statistical reports generally have a periodicity of under one year, ranging from five- day reports submitted by telegraph or teletype to quarterly reports submitted by mail. Cumulative data in some cases are incorporated in these same current (tekushchiye ) reports so that the December report, for example , can also be an annual one. However , in those important areas such as output, employ ment and costs, where accounting records serve as the basis for both , the annual statistical report is merged with the annual accounting report dealing with the same topic . Such combined reports , to gether with a number of purely financial reports and a miscellany of special-purpose reports, con stitute a set known collectively as “ the annual This more or less formal set of reports report. based on accounting records can be taken to define “ financial reporting,” although the annual report is not generally characterized as being either “ sta tistical” or “ accounting, " and a number of other financial-type reports are not included, as pointed out below .

The so - called periodic (monthly or quarterly ) accounting reports are sent to the superior admin istrative agency of the reporting unit, and usually to the branch bank and local finance agency with which it deals . Although submission to the TSSU hierarchy at the primary level is vaguely called for, it does not appear to be done on a regular basis , and consolidation of both the periodic ac counting reports as well as the entire set of annual reports (except for one on output ) is carried out by superior agencies, as will be seen in section 6 below . The present section is devoted to a brief de scription of the forms and contents of the primary reports themselves.41 (Consolidated reports are taken up in section 6.) The forms described here

198

ACCOUNTING AND REPORTING PROCEDURES

under (a ) make up what might be termed the “main set" of primary unit financial reports. Other types of financial reports are briefly touched upon under (b ), including the formal “ F ” (financial) series of “ statistical" reports , and other special- purpose re ports to banks and finance agencies. The relation ship between primary level reports and the under lying accounting registers and documents from which they are compiled is considered in (c ). a . The Main Set of Reports. This set is made up of the “ annual report" group, containing summary and specialized financial reports as such , the combined “ statistical" and “ accounting" reports , and reports on minor activities of the enterprise . Also included are all the periodic “ accounting" reports and the several current statistical reports whose annual versions enter into the " annual report." The numbers, titles, and periodicity of these reports are shown in table 8-2 . This table is limited to the industry sector , which hasbeen given the most detailed attention , In addition to industry, selected other sectors of the economy have also been examined in order to illustrate the degree of intersectoral uniformity in the khozraschet sphere. For these other sectors - namely, construction , railroads, and do mestic trade - the description is limited largely to an examination of each sector's primary reporting unit and its organizational location , and an indenti fication of its “main set” of financial reports ,

(1 ) Industry. Following is a description of the main set of industry reports listed in table 8-2. Those forms noted with an asterisk are given in translation in figures VIII- A - 1 through VIII- A - 10 (appendix A ). Balance Sheet and Supplements * Form No. 1. Balance Sheet for Basic Activity of an Industrial Enterprise. This is the main financial report of the enter prise, particularly in conjunction with the sup plement ( form No. 2 ) and internal reference data . Although primarily showing the balances on accounts as of a given moment in time, the balance sheet also contains much cumulative data from the beginning of the year . This is accomplished in two ways. One is by means of accounts designed for that purpose , such as profits earned (line 94 ), payments into the budget out of profits (line 03), or capital con struction completed (line 59), which are written off after review by superior organizations (see below ). Another device is the insertion of data for reference purposes (e.g., lines 183, 187 ). Two points in time are shown in the balance sheet the beginning of the year, and the end of the year or quarter reported on . For monthly reports , the beginning of year column is not normally completed.

A comment on the scope of the “ basic activity balance sheet" is warranted . An in dustrial enterprise frequently is engaged , to some extent, in nonindustrial activity . To this end , separate units may be organized within the enterprise and enjoy varying degrees of autonomy. The activities of these units can be reported in one of three ways . The simplest method is to include the data on these units in the regular reports submitted by an enterprise , An example of this would be reporting of con struction activities in section D. Alternatively , the parent enterprise might decide to put these units on a balance sheet, with the permission of its superior agency . In connection with this , there are two types ofbalance sheets - separate (otdel'nyy ) and independent (samostoyatel'nyy). Separate balance sheets can be used by such units as subsidiary agriculture, housing, communal economy, transport, and other non industrial activities, and are submitted to the plant management. The data on these balance sheets are transferred to form No. 1, and the separate balance sheets are not sent to agencies outside the enterprise. (Because of the in clusion of these separate balance sheets , form No. 1 is occasionally termed a consolidated (svodnyy) report.)42 On the other hand, the balance sheet prepared by a subdivision “ on an independent balance sheet" is not integrated with the balance sheet of a parent enterprise , but is submitted to an outside agency. This type of balance sheet is submitted by such units as capital construction departments (see form No. 35 - KS under Construction , below ), and workers' supply departments. Capital invest ments may also warrant the use of the in dependent form No. 35 - KS, rather than section D of the basic activity balance sheet, even if the construction work is contracted out. Extensive and detailed Soviet discussions are available which contain both line -by - line definitions of the balance sheet and numerical examples of how it is to be completed.43 Com ments here will be limited to some basic problems of terminology and translations. ( 1) . The two sides of the balance sheet are termed here “ Assets" and “ Liabilities," although the Russian aktivy and passivy are merely arbitrary side designations. In terms of function , they might be more meaningfully rendered "Uses" and " Sources. " ( 2 ). Soviet usage has failed to arrive at a consistent substitute for the term “ capital" ; sredstva (means) and fondy ( funds) are used inter changeably , and on both sides of the balance sheet . The entries on the asset side of the balance sheet have been rendered " assets" here whether the Russian term used is sredstva (forms 35- and 36 -KS, below ) or fondy (form No. 1). ( The indecision is officially recognized in form No. 11, below , which uses both terms for fixed capital or assets. ) The confusion is

199

KHOZRASCHET ORGANIZATIONS compounded when " fixed capital"

(osnovnyye

“payments for capital." ( The term “working capital" has been avoided here because of its ambiguity as to whether the gross or net form is meant. )

fondy) is combined with “ current (or circu lating) assets " (oborotnyye sredstva), as in official literature on the newly instituted

Table 8-2 .-- ACCOUNTING REPORTS OF INDUSTRIAL ENTERPRISES

Form no .

1*

2* 2 - KV

Title

Balance Sheet and Supplements Balance Sheet for Basic Activity of an Industrial Enterprise ... Supplement to the Balance Sheet.... Supplement to the Quarterly Balance Sheet....

Periodicity

M , Q, A M , Q, A

Specialized Financial Reports

3* 4 - A , -B

10 * 11 * 12 * 20 *

Movement of the Charter Fund .. Calculation of Deductions to the Enterprise Fund ( 4 - A is for profit -making and 4 - B for loss- incurring enterprises ) . Movement of Means of Financing and Special Funds.. Movement of Fixed Capital (Fixed Assets ) and Amortization Fund.., Sales of Output....... Profit and Loss ,

A

A A A A A

Costs and Expenses 1 - S2

5* 6*

7*

Report of an Industrial Enterprise on Fulfillment of the Marketable Output Cost Plan .... Production Expenses (Without Intraplant Turnover ) Cost of Marketable Output . Cost Calculations for the Most Important Types of Products .... Production Services and Administration Expenses .

M A A

Q, A A

Output

l - pl 1P - 8

5 - PS

Report of an Industrial Enterprise on Fulfillment of the Production Plan ..... Report of an Industrial Enterprise on Fulfillment of the Production Plan ..... Report on Fulfillment of the Plan for Subcontracted (kooperirovannyye ) Deliveries ..

M A м

Labor and Wages 2-12 2T - 9

Report of an Industrial Enterprise on Fulfillment of the Labor Plan .... Report of an Industrial Enterprise on Fulfillment of the Labor Plan ...

M A

Ancillary Activities 3 - DD 3 - DS 4 -K 7 -N 19

Report on the Maintenance of Children's Homes..... Report on the Maintenance of Kindergartens (Nurseries) . Report on the Training of Cadres.... Report on Fulfillment of the Plan for Scientific Research , Experimental , and Design Work ..... Basic Indicators of Housing and Communal Economies .

Q, A Q, A Q, A Q

Electric Power

24 -E1 25 -E ?

Electro -Balance Sheet and Composition of Power Equip ment..... Report on Work of a Power Station (Power Generating Installation ) of an Enterprise ..

A

A

M. Monthly . Q Quarterly . A Annual . Translations of these forms are given in figures VIII -A - l through VIII- A - 10 . 1 These are current " statistical" reports submitted to TsSU and not formally con sidered " accounting" reports . Source : Bogdashevskiy , Uchet, 1963 , p . 486 ; Shchenkov , Bukhgalterskiy, 1961 , pp . 335-338 .

ACCOUNTING AND REPORTING PROCEDURES

200 Unlike

the

entirely

equivalent

terms

osnovnyye sredstva and osnovnyye fondy, a distinction must be made between oborotnyye sredstva and oborotnyye fondy. The latter , a term from Marxian literature, usually is re stricted to productive circulating capital, and does not include distributive capital (fondy obrashcheniya ) —the two together are equiv alent to oborotnyye sredstva. * Form No. 2. Supplement to the Balance Sheet. This form , which is submitted together with the balance sheet, gives additional detailed information on certain items in that report, Part A contains a detailed breakdown of “ Other diverted assets ” (line No. 05 of the balance sheet ) . Part B itemizes normed current assets . Form No. 2 - KV . Supplement to the Quarterly Balance Sheet . As the title denotes, this is a supplement to the balance sheet which is submitted quarterly . It has sections dealing with such items as sales of marketable output, profit and loss, payments to the budget, special- purpose fi nancing, special- purpose receipts , special funds, and the movement of amortization funds, Together with the balance sheet, this report constitutes the main body of quarterly financial reporting. Specialized Financial Reports * Form No. 3. Movement of the Charter Fund . This report shows changes in the charter fund of the enterprise during the year. Part I of the report deals with those aspects of the enter prise's activity which increased the fund , part II deals with activities which diminished the fund. The informational supplement at the end of the report gives detailed information on the distribution of profit for the previous year. A recent Soviet source 44 indicates that a regu lation issued on July 1, 1965 , by theMinistry of Finance and TsSU calls for reporting on the distribution of profits at the end of the second quarter of the following year, not at the end of the following year , as has been the practice . This will speed up reporting on distribution of profits by 6 months. Form Nos. 4 - A and 4 - B . Calculation of Deduct ions to the Enterprise Fund . These forms contain detail on profits earned during the year , preliminary deductions made on the basis of planned profits, and the final amounts due as calculated on the basis of Form 4 - A is designed for actual results . enterprises planned to operate at a profit, and 4 - B for those planned to operate at a loss. (In the latter case , the deductions are based on the achievement of planned cost reductions.) These

" calculations ” do not form part of the regular set of annual reports and are seldom mentioned in that connection , but they are included in the supplementary material attached to the annual report whenever the reporting unit is permitted to have an enterprise fund. “ This fund and deductions from profit to it are discussed in chapter VI- B . * Form No. 10. Movement ofMeans of Financing and Special Funds. This report contains data on receipts from the various sources of financing such as thebudget, state subsidies, and profit deductions, and on the disposition of these funds. Similar infor mation is given on the special fundsmaintained by the enterprise . This information is neces sary to analyze two balance sheet entries Expenditures not covered by special funds and special - purpose financing (line 48 ), and Special funds, special- purpose financing, and special purpose receipts (line 134 ). 46 * Form No. 11. Movement of Fixed Capital (Fixed Assets ) and Amortization Fund , This report provides detailed information on the acquisition and retirement of fixed assets (both industrial -productive and nonindustrial) during the year . It gives data on the amorti zation and capital repair of fixed assets , by type. * Form No. 12. Sales of Output. Section A of this report contains plan and actual data on sales of marketable output. Detailed information is given on the various factors affecting sales, such as planned factory (fabrichnozavodskaya ) cost, the difference between planned factory cost and actual cost, extra -production expenditures, turnover tax, profit , and loss , Reference information at tached to section A gives data , in both plan and actual figures, on proceeds from the sales of all marketable output in enterprise whole sale prices, on the itemization of sales costs, and on actual sales of marketable output (in goods made from waste ) . cluding consumer Section B contains data on sales from ancillary activities, such as subsidiary agricultural work , nonindustrial services, and the pro cessing of purchased products and com modities. Turnover tax on sales is also given in section B. *Form No, 20. Profit and Loss. Section I of this report lists those activities which resulted in profit for the enterprise , and section II itemizes losses - both in actual figures. Reference information presents plan data for the report year on the total volume of profit and loss , the balance of profit and loss, the utilization of profits, and sources for covering anticipated losses .

KHOZRASCHET ORGANIZATIONS

Costs and Expenses Form No. 1 - S . Report of an Industrial Enter prise on Fulfillment of the Marketable Output Cost Plan , This “ statistical" report is a monthly version of the annual accounting report, form No. 6 (see below ). It is divided into six sections, Section I, Fulfillment of Plan for Reducing Cost of Marketable Output, contains data on the planned and actual cost. Section II, Cost of All Marketable Output by Cost Articles (po kal kulyatsionnym stat’yam ), is completed on a quarterly basis only . It provides a breakdown of cost of production by component, e.g., raw materials and supplies and general plant expenditures, in both planned and actual figures. Section III, Impact of Price Changes on the Use of Raw Materials, Supplies, Pur chased Semifabricates, and Fuel, and (Impact of] Tariff Changes on the (Use ] of Electric Power and Hauling, gives data on changes re sulting from price and tariff changes. Section IV , Losses Due to Spoilage and Nonproductive Expenditures, is completed on a quarterly basis only. Section V , Unit Cost of Important Products, lists the more important items produced by an enterprise, gives their output in physical units, and provides a comparison Section VI, of planned and actual costs . Production Expenses Without Intraplant Turn over , is completed for the first three quarters and closely resembles the annual form No. 5 It shows total actual expenses by (below ). element cumulatively from the beginning of the year. Enterprises subordinated to local soviets do not complete this section.47

* Form No. 5. Production Expenses (Without Intraplant Turnover). This is an annual report which itemizes the elements of expenditure, giving planned and actual figures for each element. This grouping by elements is employed only for total enter prise expenditures as a whole , and differs from the " articles" or " items" (stat’i) used for all cost calculations on a more detailed level, The form also gives a as in form No. 6 . reconciliation of totalproduction expenseswith costs of gross output. Form No. 5 has important uses in setting quotas or normatives for the enterprise's current assets , and is also used in calculations of national income and other national accounts.48

* Form No. 6. Cost of Marketable Output. This accounting report is , as noted above, the annual version of the monthly report, form No. 1 - S . It contains data on fulfillment of the cost plan and shows planned and reported actual costs as well as expenditures per ruble of marketable output. It consists of four sections: (1) Cost of Actually Produced Total and Com

201

parable Marketable Output by Item of Expendi ture; ( 2 ) Fulfillment of Cost Reduction Plan for Marketable Output; (3 ) Dynamics of Expendi tures per Ruble of Marketable Output in Com parable Prices; and (4 ) Losses Due to Spoilage and Waste .

Ministries ( and formerly , sovnarkhozy ) issue special instructions to the enterprises on methods of calculating increases or decreases in the cost of marketable output resulting from changes in prices for materials and supplies and tariff rates for power and shipping. 49 Reference information included in section ( 1 ) contains the total effect of these changes. A supplement to form No. 6 , Reference Information on Profitability of Most Important Kinds of Industrial Production , lists and codes product types and gives the following infor mation for each : Output in physical units ; wholesale price without turnover tax; planned and actual unit costs ; and value ofmarketable output in wholesale prices, at planned cost, and at reported cost . This form is compiled by enterprises in all branches of heavy industry for a “ union -wide minimum " list of products established by TSSU and the Ministry of Finance , 50 The list can be supplemented by ministries and agencies. A separate report on form No. 1 -SP , Reference Information on Sales of Industrial Products (By Group ), is provided for light and food industries. (Unnumbered report ). Cost Calculations for the Most Important Types of Products, This is a quarterly and annual report sub mitted on forms differentiated by branch of industry in accordance with cost calculation practices in each branch , The agencies determine a list of products for which cal culations must be submitted by enterprises. An obligatory minimum list of items is set by TSSU and the Ministry of Finance U.S.S.R., however. Presumably , each agency can add items to this list. The 1960 instructions contain a list of 77 product groups , in such areas as ferrous and nonferrous metals and ores, fuels, industrial chemicals, construction materials , and basic food and textile com modities ; a 1966 Source indicates that the minimum list has been increased to 96 titles.51 This list is apparently not the same as the " union -wide minimum " referred to above in connection with the supplement to form No. 6 . Each report presents the cost calculations for a particular product designation , giving the wholesale price for that product and indicating planned and actual output. Planned and actual costs are given by item of expenditure (stat’ya ) in a breakdown similar to thatused in form No. 6 , section 1. These items include direct costs

202

ACCOUNTING AND REPORTING PROCEDURES (e.g., materials and basic wages), and overhead costs (shop expenditures, etc.). For three items of expenditures - basic materials , semi fabricates obtained from cooperating enter prises, and basic wages of production wage workers - a more detailed breakdown is given at the end of the report. This type of detail may only be reported by plants employing the standard cost method of calculation (norma tivnyy uchet).52

* Form No. 7. Production Services and Admin istration Expenses. This report differs from other reports in this group in that it does not deal with direct production costs, but with indirect service and support costs . It consists of four sections:

I, Shop Expenses ; II, Equipment Operation and Maintenance Expenses; III, General Plant Expenses ; and IV , Administrative -Managerial Expenses Registered With Financial Organs. The first three sections contain plan and actual data , the fourth section gives both actual expenditures and those expenditures registered with financial organs in accordance with the annual estimate .

Output Form No. 1 - P . Report of an Industrial Enter prise on Fulfillment of the Production Plan . This is a “ statistical" report on fulfillment of the production plan which is submitted monthly , except in December . It is nearly identical to form No. 1P - 8 (see below ), which is an annual report .

This report is divided into three main Section I deals with gross output sections. (valovaya produktsiya ) in enterprise wholesale prices. Gross output is made up of the " value of finished products produced in basic , sub sidiary, secondary, and auxiliary shops and released outside [ the basic activity ] (na storonu ) ; the value of semifabricates released to the outside; the value of industrial- type work completed under contract to the outside; and changes in inventories. . . of semifabricates of own production and of products of auxiliary » 53 It has two parts, one for plan shops. ..." data , the other for actual data . Section II contains data on marketable output (tovarnaya produktsiya ) in enterprise wholesale prices. (Marketable output includes the value of pro ducts and services designated for out- of -plant sales .) 54 This section has three parts . One contains plan data for various items, the second gives figures for actual production in enter prise wholesale prices, as accepted in the plan , and the third gives actual production figures in existing enterprise wholesale prices. Section

III itemizes various products and indicates the volume of production in physical units. This section is divided into two parts: one contains data on planned output for a given period; the other contains data on the actual volume of production . Form No. 1P - 8 . Report of an Industrial Enter prise on Fulfillment of the Production Plan , This report is an annual version of themonthly statistical report (No. 1 - P ) which provides more detailed information on gross and marketable output. It has three sections. Section I deals with gross and marketable out put in enterprise wholesale prices without turn over tax, in both plan and actual figures. Section II provides detailed information on the composition of gross output in enterprise wholesale prices without turnover tax, in both current prices and constant prices of July 1, 1955. Section III gives detailed information on the volume of production in physical units , in both plan and actual figures. All figures are given for the year , the fourth quarter , and December , Form No. 5 - PS . Report on Fulfillment of the Plan for Subcontracted (kooperirovannyye ) Deliveries. This form is submitted monthly with form No. 1 - P to superior organizations and to TsSU . It provides data on fulfillment of deliveries to enterprises in other economic regions. Enterprises and economic associations which do not fulfill such delivery plans are considered not to have fulfilled their plans and they are not entitled to bonus payments . Moreover, according to a decree of the Supreme Soviet dated April 24 , 1958 , these enterprises and associations are subject to economic and even criminal punishment. 55

Labor and Wages Form No. 2 - T . Report of an Industrial Enter prise on Fulfillment of the Labor Plan . This is a monthly “ statistical" report on labor which has an annual counterpart , form No. 2T - 9 . It has four sections: I, Number and Wage Fund of Personnel; II, Number and Wage Fund of Industrial- Production Personnel by Category and of Personnel of Nonindustrial Organizations of the Enterprise ; III, Num ber , Accessions, and Separations of Industrial Production Wage Workers, and IV , TimeUtili zation of Industrial- Production Wage Workers. Form No. 2T - 9 . Report of an Industrial Enter prise on Fulfillment of the Labor Plan , This is an annual report similar in content to It has four sections: I, No. 2 - T . form Average Registered Number of Personnel;

KHOZRASCHET ORGANIZATIONS II, Wage Fund; III, Composition of Wage Fund of Industrial- Production Personnel; and IV , Other Money Payments to Workers and Em ployees Not Included in the Wage Fund , and Social Insurance Contributions. 56

Ancillary Activities The following four reports pertain to various ancillary activities of the enterprise, as denoted by the titles. Form No. 3 - DD . Report on the Maintenance of Children's Homes . Form No. 3 - DS . Report on the Maintenance of Kindergartens (Nurseries ). Form No. 4 - K . Cadres .

Report on the Training of

203

Form No. 25 - E . Report on Work of a Power Station (Power Generating Installation ) of an Enterprise . This is an annual “ statistical" report which provides data on the active and idle power stations of the enterprise , their capacity , and their actual output. 59 In construction , as in ( 2 ) Other Sectors. industry, there are several types of primary re The most common is the primary porting units. contract construction organization , usually a con struction administration ,60 As a rule these admin istrations do not have a charter fund , but operate on an independent, khozraschet basis and submit reports to superior organizations.61 They contract for construction work and take full responsibility In 1965, for the completion of such projects . contract construction organizations accounted for 89 percent of all construction -and - installation work in the country.62

Form No. 19. Basic Indicators of Housing and Communal Economies . Form No. 7N . Report on Fullfillment of the Plan for Scientific Research , Experimental , and Design Work . This is a quarterly accounting report sub mitted by enterprises with serial production engaged in research and experimental and design work , as well as by those scientific research organizations, machinery designing bureaus, and their subsidiary economies which use the khozraschet classification of accounts. The report gives data on the amount of financ ing by source : “ special- purpose financing basic activity (tselevoye finansirovaniye ), means (i.e. , charges to cost), budget alloca tions, and customer fees. It also shows expenditures on work performed, and the value of work completed and not completed . 57 The industrial activity of subsidiary units attached to nonindustrial organizations is included in the latter's reports . However , these non industrial parent organizations submit an additional annual report - form No. PP , “ Short Report on the Work of Subsidiary Industrial Enterprises Carried on the Balance Sheet of a Nonindustrial Organi zation " -containing a limited number of indicators on subsidiary industrial activity . For a description of this form , see footnote 165 below . A variant of this form is apparently used in construction (see form No. 3P - PP , table 8-3).

Electric Power Form No. 24 - E . Electro - Balance Sheet and Composition of Power Equipment. This is an annual “ statistical" report which is submitted with other accounting annualreports. It gives the amount of electric energy produced and used by the enterprise and the composition of the enterprise's power equipment. 58

Another type of primary unit which reports on construction activities is the investor (zastroy shchik ) , who either carries out construction work on the basis of his own resources - i.e . , on force account (khozyaystvennyy sposob )—or lets the work out to a contractor (podryadchik ). If an enterprise carries out only a minor amount of construction work on force account, it can report this in section D of its balance sheet for basic activity . If the volume of construction is large,however, an enter prise can form a capital construction department (otdel kapital'nogo stroitel’stva--OKS) or even an administration (UKS) for still larger amounts of work . These units usually have an independent settlement account and prepare an independent balance sheet and other reports , The main set of accounting reports submitted by these construction organizations is given in table 8-3. The principal reports , the two balance sheets and their supplements , are listed first, followed by all other reports in numerical sequence according to the form number. Form No. 35 -KS. Balance Sheet for Capital Investments . This report (see figure VIII- A - 11) is sub mitted by enterprises which have construction work done for them on a contract basis or by contractors who complete construction for themselves. In the assets part, the value of each item for which investment was made is indicated . This includes the value of both finished and unfinished capital construction , the cost of design and estimate documents , domestic and foreign equipment acquired , There is also an and prepaid expenses. itemization of the means of financing “ Finished work and acquisition of fixed assets" provided for in the state plan , as well as of financing received outside of the state plan .

204

ACCOUNTING AND REPORTING PROCEDURES

Work done on account force with independent balance sheet )OU(, KS

Table 8-3 .-- ACCOUNTING REPORTS OF CONSTRUCTION ORGANIZATIONS

1 - KS

capital Own investment

X

(2)

X

Periodicity

M , Q, A

M , Q, A

X

--

X

X

--

--

X

--

A А

--

X

A

X

X

A

X

X

A

--

X

X

X

А

X

X

X

A

X

X

X

A

X

X

X X X X

Q, A

--

--

X

X х

X

x

X

x4

X

A Q. A

A A

A

X X

Q, A

A A ii

ii

X X

A

A A

ii

X X

X x4

ii*

iii

32 - A ( or 2 -B ) Deductions to the Director's Fund of Con struction - Installation Organization ... 2 - KS Report on Movement of Special - Purpose Financing and Special Funds .. 2KS - 21KS Report on Fulfillment of the Capital Invest ment Plan ...... Supplements to Form No. 2KS - 21KS : Report on the Status of Construction and Commissioning of Enterprises and Shops Built with Imported Equipment .. Reference Information on Capital Investment Plan Fulfillment and Commissioning of Fixed Assets in a Territorial Breakdown ( also used with 3KS -21KS .... 3KS - 21KS Report on Capital Investments Not Provided for in the Capital Work Plan .... 3T - 26KS Report on Fulfillment of the Labor Plan in Construction .... 3 Movement of the Charter Fund . 3 - DD Report on the Maintenance of Children's Homes ... 3 - DS Report on the Maintenance of Kindergartens (Nurseries ) . 3P - PP Short Report on the Work of Subordinate Industrial Enterprises which are on the Balance Sheet of Construction Organizations.... 4 -K Report on the Training of Cadres .... 5 - KS Report on Availability and Movement of Fixed Capital (Fixed Assets) and the Amortization Fund..... 7 -KS Report on Financing Capital Investments . 12 - A Short Report on the Work of Subordinate Pro duction Units Which are not Segregated on an Industrial Balance Sheet .... 15 - KS Report on Profit and Loss . 19 Basic Indicators of Housing and Communal Economies .... 28 - KS Report on the Cost of Construction and Installation Work ..... PE Report on the work of a Power Station (Elec tric Generating Plant) on a Balance Sheet of an Industrial Organization ...

Investor (zastroyshchik )

xi

2 -K

Balance Sheet for Capital Investments .... Balance Sheet for Basic Activity of a Contract Construction Organization ... Reference Information --Administrative Managerial Expenditures Registered with Finan cial Organs (Supplement to 35 - KS and 36 -KS ) .... Supplement to the Annual Balance Sheet for Basic Activity of a Contract Construction Organization .... Supplement to the Quarterly Balance Sheet of Contract Construction Organizations..... Report on Fulfillment of the Contract Work Program .

x²

35 -KS * 36 - KS *

Title

ii

Form No.

and Contracted minor force work account

Basic y activit c)( onstruction

Type of organization Contractor ( podryadchik )

--

X

A

A

Not Applicable . M Monthly hly .. Q Quarterly . A Annual . Translations of these forms are given in figures VIII - A - ll and VIII - A - 12 . Section " D " of No. 36 - KS may be completed instead . Minor force account work is indicated in section " D " of the investor's basic activity balance sheet ; if the 3 work is contracted out , investment data can be indicated either in section " D " or in form No. 35 -KS . Presumably one is submitted by profit -making enterprises and the other by loss - incurring enterprises . 4 Not submitted if work is performed on a contract basis (Zhebrak , Kurs , 1960 , p . 381 ) . * 1 2

Source : Astashkevicher , Bukhgalterskiy , 1963, pp . 304-306 ; Millionshchikov, Otchisleniya , 1964 , pp . 45-46 ; TSSU and Min . fin . , Instruktsiya ... po kapital'noma stroitel'stvu , 1960 , p . 20 ; zlobin , Bukhgalterskiy, 1963, p . 143 .

KHOZRASCHET ORGANIZATIONS In the liabilities part, fixed capital and the depreciation of fixed assets are itemized , and the sources for financing capital investments are given in detail . There is also a line for “Other sources" of financing. This category includes such sources as amortization deduct ions on fixed construction assets, profits of former years, receipts from liquidation of fixed assets, receipts from auxiliary activities, and the gratis transfer of materials and services.64 Finally, this part contains data on loans and other creditors. The reference in formation at the end of the report gives ad ditional detailed data on certain items in the body of the report, Form No. 36 - KS. Balance Sheet for Basic Activity of a Contract Construction Organi zation . This form (see figure VIII A - 12) is completed only by the contract construction organization . It has two major parts , one for assets and one for liabilities, each of which is divided into four sections. In the assets part, section A enumerates fixed assets and other noncir culating assets. Section B shows production supplies and liquid capital, and section C itemizes the overdue accounts receivable and other debtors. Section D is completed only by contract construction organizations whose capital investments are not indicated in Form No. 35 - KS.

In the liabilities part, section A enumerates sources of financing such as the charter fund , depreciation deductions, bank credits , and profits . Section B itemizes accounts payable and bank loans. Section C lists short -term bank notes payable and other creditors. Section D , as in the assets part, is completed only by contract construction organizations whose capital investments are not indicated in form No. 35 -KS. Other reports listed in table 8-3 cover various aspects of construction . It should be noted that a number of the forms - 3 , 3 -DD , 3 - DS, 4 - K , and 19 are identical to the formsused by industrial enter prises. Three forms ( 2KS - 21KS, 3KS - 21KS , and 3T - 26KS) have combined numbers as a result of action taken in 1960 to avoid duplication of report ing for the fourth quarter and the month of December by combining the monthly statistical report with its corresponding annual report, 65 Railroad transportation in the Soviet Union is under the jurisdiction of the Ministry of Railways , This all -union ministry controls not only the rail roads as such , but also many enterprises engaged in such a variety of other activities that it ap proaches a miniature economy. When activities other than the basic one are conducted in khozraschet units , financial reporting follows the pattern established for those activities. For example, full -fledged industrial or construction

205

enterprises report in the manner described above . These khozraschet units are attached at various levels in the hierarchy of the Ministry. Themajor levels are ( 1 ) the central ministry itself and its specialized chief administrations , (2 ) the first order operational components of the railroad net work known as roads or lines (dorogi), and (3) their major components , the road divisions (otdeleniya dorogi). 66 The divisions are considered the lowest unit conducting a full complement of operations comprising the “ basic activity ” of railroads. At tached to the divisions, as well as to the roads, are a variety of primary reporting enterprises and economic units associated with the basic activity and operating on a khozraschet basis .67 Some of these have a final output defined in various quan titative and qualitative measures and are financed by receiving payment on invoices for completed work ( e.g., locomotive and car depots, freight, passenger , and sorting stations operating on in dependent balance sheets, and washing stations). Other enterprises providing services of an in dustrial or nonindustrial type to the basic rail roading activity, such as local machine shops, artificial ice plants, loading and unloading offices , and other enterprises of local significance , are financed by their sales of products and services. third group of primary units does not have A sales or measurable output, but are financed on the basis of planned expenditures in the overall operat ing budget. Such units , which include maintenance sections (distantsii) for track , buildings and struc tures , signaling and communications, and power supply sections , can nevertheless be on a limited version of khozraschet including an independent balance sheet and the right to bank accounts .68 Similar operations as those enumerated above can also be carried out on a non khozraschetbasis. In this case, primary documents are sent directly to the division or the road where the accounts are kept and reports compiled. The divisions and roads are consequently primary reporting units as well as intermediate level consolidating units. Superior levels can be considered primary re porting units in another sense , in that certain types of operations are financed and accounted for 69 centrally . For example, the revenues of stations are centralized at the ministry level and redistri buted among roads and divisions; the roadsmaintain direct accounting of basic materials (which are procured centrally by main storages and issued to subdivisions), the car park , capital and medium repair of rolling stock , capital repairs of track , revenues from hauling, etc .; bottom level units account for wages, fixed assets, a variety of costs , and financial results , The set of financial or accounting reports shown in table 8-4 covers units from the bottom level khozraschet enterprises to the road level, and consequently includes some consolidated as well as primary reports . 70 The list of reports is limited to those dealing with the basic railroad activity of

ACCOUNTING AND REPORTING PROCEDURES

206

hauling, and does not include separate reporting on other activities. In addition to the No. BO - 1 Balance Sheet, for example, khozraschet enterprises and economic units submit a balance sheet for capital investments; in addition to these two, a road submits a separate balance sheet for revenues from hauling, as well as for other sectors of economic activity such as contract construction .? A report on hous ing and communal economy indicators (form No. 19) is also submitted , as in other sectors . Table 8-4 .--ACCOUNTING REPORTS OF RAILROADS Form no . BO - 1

BO - 2 BO - 3

BO - 8 BO - 9 BO - 10

BO - 11 B0-12 B0-13 BO - 14 BO - 16

BO - 17 BO - 18

19 BO - 19 B0-20

B0-21 BO -22 BO -28

BO - 30 B0-31

Title

Balance Sheet for Basic Activity of Railroads ..... Movement of the Charter Fund .... Report on Availability and Move ment of Fixed Capital (Fixed Assets) . Report on Stocks and Expend itures of Materials .. Profit and Loss... Report on Local Income and Expenditures.. Report on Operating and Finan cial Activity ? .... | Report on Movement of the Basic Activity Amortization Fund . Report on Fulfillment of the Capital Repair Plan .. Report on Sales and Release of Industrial Production Output... | Report on Sales and Release of Nonindustrial Production Work and Work and Services of Non industrial Economies.. Supplement to the Balance Sheet . Report on Expenditures for Depot Repair of Cars .. Basic Indicators of the Housing and Communal Economy . Report on Operating and Finan cial Activity ? | Report on Plan Fulfillment by Power Stations3. Report on Plan Fulfillment by Pumping Stations3 .. Report on Overhead Expenditures ? Report on Plan Fulfillment and Cost of Loading and Unloading Work..... Report on Additional Bonuses Charged to the Wage Fund .. Report on Movement of the Spe cial- Purpose Financing Means.. Explanatory Note .. Calculation of Deductions to the Director's Fund 4

Periodicity

M , Q, A A

A A Q, A

Q, A Q, A A

Q, A Q, A

Q, A Q, A Q, A

The organizational structure of the domestic state trade system includes establishments dealing with procurement and wholesale and retail trade. In the retail sector, the primary units are stores, shops, etc., directly engaged in selling to the public . The primary wholesale units are depots (bazy), storerooms, etc., which usually sell only to the The primary procurement units are retail units . procurement depots and points (punkty). All of these primary units are described generically as trade enterprises. Units on the next higher level are In retail referred to as “ trade organizations." trade they include trade combines (torgi), ORSy , public dining trusts, and others. In wholesale trade, trade organizations consist of offices (kontory) and wholesale trade administrations; in the pro curement sector, they consist of agricultural product procurement organizations.73Main admin istrations are also mentioned as belonging to this level of organization.74 The next steps in the hierarchy consist of republican trade ministries and, since the end of 1965, the Ministry of Trade U.S.S.R.

Usually trade enterprises have their own ac counting offices which perform necessary account ing work and compile reports . However , account ing work is also done on a centralized basis . Under this arrangement, enterprises send primary docu ments to the accounting office of their superior organization , which performs the accounting work and returns the necessary information to the enter prises. In this system , the superior organiza tion submits reports for the organization as a whole , subordinate enterprises do not submit their own reports , The reports submitted under this pro cedure are considered to be primary, despite the fact that they are submitted by superior organi zations. 75

A

M , Q, A Q, A Q, A Q, A

Q, A A

A Q, A

Q, A

A Annual . Q Quarterly . M Monthly . 1 Submitted by railroad line administrations . 2 Submitted by divisions , economic units , and subsidiary enterprises . 3Submitted only to railroad administrations . 4Ivliyev, Statistika, 1960 , p . 296 . This form has number 4 - A (or 4 - B ) in industry . Source : Vinnichenko , Bukhgalterskiy , 1963 , pp . 241-254 .

Primary accounting reports in trade are given in table 8-5. They are designed to give a com prehensive picture to superior organs on the activities of enterprises and organizations and can be divided into three major categories: (1 ) turn over of inventory, consisting of form No. 4 ; ( 2 ) operational and administrative -managerial ex penditures , consisting of form Nos. 5 , 5 - A , 5 - B , 6 , 7 , and 33- ZAG ; and ( 3 ) financial condition and profits , consisting of form Nos. 1, 1 - A , 2 , 3, 9 , 13 , 15 , 17, 18 , and 27. The remaining forms deal with miscellaneous activities. The accounting reports in trade give data on many activities common to other branches in the economy, e.g., financial performance, operational costs, etc. However , the internal structure of the reports differs appreciably from the reports of enterprises in other branches of the economy. b . Other Financial Reports . --The main set of accounting report forms listed above by no means exhausts the reports containing financial data which are submitted by industrial enterprises. There are

207

KHOZRASCHET ORGANIZATIONS a number of special - purpose reports which may be sent only to various functional agencies, to the superior administrative agencies of the enterprise , or to the statistical administrations. Some ofthese have been formally approved by TsSU and are described below as the " F " series. A miscellany of other reports do not have TsSU's sanction, but are required by certain agencies such as the Ministry of Finance or the banks. Another financial reportnot listed above has been introduced in conjunction with the October 1965 reforms (see section 7 , below ). This report has not been identified as “ statistical" or “accountings and probably falls into both categories. Table 8-5 .-- ACCOUNTING REPORTS OF DOMESTIC STATE TRADE ORGANIZATIONS

Form no .

Title

Form no .

25

26

27

29

33 - ZAG

Title

Report on Expenditures and Cost of Agricultural Pro duce.. Consolidated Report on De ductions to the Fund of a Trade Enterprise . Tabulation of Deductions to the Trade Enterprise Fund .. Tabulation of Deductions to the Enterprise Fund of a Subsidiary Agricultural Economy... Procurement of Agricultural Raw Materials....

Periodicity

A

A

Q, A

A A

Periodicity

1

M, Q, A

Q, A Q, A A

Q, A Q, A

S Semiannual . M Monthly . Q Quarterly . A Annual . I Form No. 5 - A is submitted by organizations with annual sales of over 200 tons ; form No. 5 - B is used for annual sales of less than 200 tons . 2 Statistical report . 3Two versions of this form are submitted : a consolidated report and a report for primary level (nizoviye ) enterprises. ( Ponamarev and Strelkov , Spravochnik , 1964 , pp . 66 , 68.) Source : Bakanov , Osnovy , 1961, p . 464 ; Belousov, Bukhgalterskiy , 1963 , pp. 464-465 ; TSSU , Al'bom , 1962, p . 423 .

A

Q, A

Q, A

Q, A

S, A

Q, A A А

3

Balance Sheet for Basic Ac tivity of a Trade Enter prise .... 1- A Supplement to the Balance Sheet.... 2 Report on Profit and Loss.. 3 Movement of the Charter Fund 3 - DS Report on the Maintenance of Kindergartens (Nurs eries) ..... 4 Report on Sales and Release . Deductions to the Enterprise 4 -A Fund .... Report on Costs of Distri 5 bution in Trade and Public Dining..... 5 - A , -B1 Reported Calculations for Expenditures on Delivery , Storage , and Wholesale Sales of Potatoes , Vegeta bles , and Fruits ... 5-12 Report on Fulfillment of the Labor Plan in Trade ... 6 Report on Administrative Managerial Expenditures.... 7 Report on Expenditures for Procurement of Potatoes and Vegetables... Report on Financing Capital 9 Investments...... 10 Report on Expenditures and Cost of Animal Products .... 113 Report on Production Enter prises... 13 Report on Waste and Short ages and Audit - Control Work Report on Cash Turnover ... 15 Movement of Financing Means 17 and Special Funds.. Movement of Fixed Capital 18 ( Fixed Assets ) ..... Basic Indicators of the 19 Housing and Communal Economy ... 24 Report on Receiving and Wholesale Sales of Pota toes , Fruits , and Vegeta bles..

Table 8-5 .--ACCOUNTING REPORTS OF DOMESTIC STATE TRADE ORGANIZATIONS--Continued

Q, A Q, A Q A

( 1) “ F ” Series. A series of five so - called sta tistical reports contain the letter " F " in their designation . With the exception of No. 4 - F , they are apparently designed to provide superior or ganizations and other agencies with rapid in formation on a very small number of financial indicators .

Form No. 1 - F , Financial Dispatch (Finansovoye doneseni ye), is a monthly report mailed by industrial enterprises and contract construc tion organizations to their respective superior organizations within two days after the end of the month . If the report is not mailed within three days, it must be sent by telegraph . The report contains data in thousands of rubles for several indicators: the balance on the settlement account in the bank , payments of profit deductions to the budget , overdue bank loans, overdue payable and receivable in voices, and overdue wages resulting either from a lack of funds or from wage fund limitations.

A

A

S, A

Form No. 2 - F , Financial Dispatch , is a monthly report mailed by aa builder (stroyka or zakazchik ) to his superior organization within two days after the end of the month . If the re port is not mailed within three days , it must The report contains be sent by telegraph . data in thousands of rubles for such indicators

208

ACCOUNTING AND REPORTING PROCEDURES as balances in bank accounts , deposits made to the bank in the form of profit or amortization deductions, bank withdrawals since the be ginning of the year, accounts payable, and wages overdue. Form No. 3 - F , Reference Information on Over due Wages, is a monthly report to the bank mailed on the first of themonth for the previous month . It is submitted by industrial enter prises and organizations having settlement and current accounts, and gives the amount of any overdue wages, plus reasons for being overdue. Form No. 4 - F , Report on Precious Metals and Stones on Exhibit, is an annual report mailed by museums and institutions to their superior organization and to the statistical admin istrations. The report gives data , in physical units , on the amountofpreciousmetals , stones, and pearls in possession of the institution at the end of the year . Form No. 5 - F , Report on Fulfillment of the Profit Plan , is a quarterly report mailed by enterprises and organizations to their superior organizations not later than the 13th of the month following the report period . The report is limited to four figures, in thousands of rubles: total balance sheet profit or loss and total profit or loss on (basic activity ) sales , both planned and actual. Although the form itself specifies only the superior organization as a recipient , it is reportedly also sent to the oblast statistical administration . There is also a recent indication that both monthly and quarterly consolidated versions are submitted by superior organizations to TsSU.78 Briefas this form is, it is sufficient and may serve as the basis for the profit data published in the statistical handbooks,

(2 ) Miscellaneous Reports . Several special purpose reports are required by the Ministry of Finance. These are numbered and standardized to a considerable degree, but apparently have not been approved by TsSU , and are not considered a part of the set of accounting reports. They are submitted only to finance organs, and include : Form No. 5 , Calculation of Deductions From Profit to the Budget (For an Enterprise ); 79 Form No. 10 , Reference Statement on Fulfill ment of the Profit Plan by Khozraschet Enterprises (For a Trust); Table 11 , Reference Statement on Settlements With the Budget Regarding Various Payments . In addition, there are numerous forms for the “ Report on Turnover Tax, " which are not numbered

and are specially designed for the methods of calcu lation used in various sectors (see chapter VI- B ).

The banks also require special reports from enterprises in addition to the formal set of account ing or statistical reports. These include state ments on inventories ofmaterial currentassets for purposes of securing short - term bank credit; a Reference Statement on Accrued and Due Wages, for obtaining the release of bank - controlled pay roll money;82 and a Reference Statement on Funds Received From [ a given 7Budget, for verifying bank records on the issuance of such money . The enterprise's formal “ technical- industrial financial plan ” (tekhpromfinplan ) and its financial the " balance of income and ex component, penditure, " should also be mentioned . This annual plan has a column showing actual results for the previous year, and might therefore be considered a kind of report. Its significance is reduced by the fact that it is a secondary type of report compiled later than , and on the basis of, the formal account ing reports . On the other hand, it is one of the few , if not the only , statement of the entire enterprise economy, including those activities ordinarily on independent balance sheets , such as capital con struction and workers' supply departments . It does not include expenditures made on bank credit , nor expenditures charged to special- purpose means unless these include budget appropriations, at least in part.83 c . Sources of Data for Accounting Reports. - A major objective in designing the standard classi fication of accounts introduced in 1960 was to facilitate the compilation of balance sheets and re ports . This effort was only partially successful, particularly for the balance sheet. Many of its entries are not defined in terms of first - order summary accounts but in terms of subaccounts , parts of two or more summary accounts , or even special groupings of detail accounts . According to one authority , less than one - quarter of the entries in the balance sheet can be obtained directly from the general ledger --the remaindermust be obtained from one or more of a variety of journals , auxiliary statements , and work tables. 84 Most of these en tries, however , are derived from a single standard register in the journal- order system . This may be seen from a tabulation of the links between balance sheet entries and specific accounting registers shown in table 8-6 . Although relatively few sources on accounting and reporting contain systematic in formation of this nature, nearly all balance sheet entries have been accounted for by explicit links, and the remaining entries are no doubt similarly tied to one or more standard registers. As a result of such report - oriented design of the registers, enterprises are expected to be able to compile the monthly balance sheet (without special data processing techniques) within 11 days, and to submit it by the 15th of the followingmonth.35

KHOZRASCHET ORGANIZATIONS

209

Table 8-6 .--STANDARD ACCOUNTING REGISTERS USED IN COMPLETING THE BALANCE SHEET IN INDUSTRY Standard Balance accounting sheet register entry from which (Line no.) data obtained

Camments

Standard Balance account ing sheet register entry from which (Line no .) data obtained

Comments

ASSETS 02 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

GL (01) JO 11- 15 JO - 8 (NA) Balance sheet GL- 99 (x ) AS -10( 10A ) AS -10(10A) GL( 06 ) AS- 10 ( 10A ) GL (08) GL( 12) (x ) JO -6 (6A) GL(20,21,23)

S- A /C 80-1 S - A /C 80-2 Detail accounts of S -A/C 80-3 and 80-4 (Same as line 04) S -A /C 77-1 Blank line for reserve Equals the total "Assigned capital" shown on line 85 in the ( independent) balance sheets of unchartered subordinate units Taken from the initial entry in the balance sheet for January 1 of the report year Difference between balances at beginning and end of period Total for section A Computed as line 105 (cols . 3 and 4 ) minus line 11 (cols . 1 and 2, respectively) In some cases information is obtained from the Inven tory Book with adjustments for price changes (Same as line 13) Vaysman cites As 10 or 10A as the source (Same as line 13)

Subtotal Expenditure for incompleted capital repairs of build ings and equipment in Auxiliary Production Account are included in line 53 22 (NA) Completed from auxiliary statement containing data on expenditures of nonindustrial economies 23 (NA ) (Same as line 22 ) 24 GL(31); AS15 Balance on A /C 31 plus debit balances of detail accounts under A /C 88 25 GL(40); other Balance on A/C 40 plus line 26 26 A /C 41 is used primarily by trade and distribution AS - 16 ( 16A ) enterprises; in industry, it can be used for pur chased products sold in complete sets but not included in gross or marketable output2 27 (NA) 28 (NA ) Sum of balances on S -A/C 05-3 and A/C 09 plus appro priate part of balance on S-A /C 05-5 29 Contents of this line vary by branch of industry . (NA) Power stations enter here data from S -A / C 64-2 30 Total for section B GL (50 ) 31 32 GL(51) 33 JO - 3 S- A/C's 55-2 and 55-3 34 GL (56) 35 Total for group I 36-38 JO - 11 Per Vaysman , p. 262. According to Shchenkov, p: 76, these entries are extracted from AS- 16 ( 16A, 17) 39 JO -6Z Shchenkov (erroneously(? )) states that data from S -A /C 61-1 in AS-7 is used here AS - 8 40 S -A /C 76-3 JO - 9 41 S - A /C 79-1 42 JO- 7,8,9 ; For somewhat conflicting lists of the numerous AS - 7,8,9,17 ; accounts and subaccounts involved in this entry , WT-3,72, GL(69) see Vaysman , p. 263 and Shchenkov , p . 77 . 43 Total for group V 24 Alternative to line 130, depending on whether debit GL(531 or credit balance is obtained 45 JO - 8 S -A /C 77-3 46 Completed by sovnarkhoz, ministry , or agency 47 AS - 8 S - A /C 76-2 48 JO - 8 Consists of debit balances on detail accounts under A /C's 87 and 96 49 10/1(10A) S -A /C 86-1. Alternate entry to line 136 50 GL( 82 ) 51 (NA ) 52 Sum of A/C 03 ( Capital Repairs) and expenditures on GL( 54) unfinished repairs of buildings and structures by force account methods, shown in detail accounts under A /c 23 (Auxiliary Production ) 53 other GL (03) ; 54 JO - 3 S- A /C 55-1 7 55 S-A /C 61-1 56 (x ) Total for group XIV 57 (NA) Includes expenditures on scientific research work not approved in the established manner

58 59-64 65 66 67 68-71

AS - 18 /1 (NA ) AS - 18 /1 AS- 18

73-76 78-80 81 82 83

AS - 10 ( 10A ) AS- 7 (x ) (NA ) (x )

Total for section C Total for group I Balance at the beginning of the year plus expenditures since the beginning of the year less amount written off to A /C 34 Total for section D Balance total

LIABILITIES Balance on A/C 85 plus assets assigned to subordinate GL(85) ; others economies having independent balance sheets. (See line 08) 85 (NA) 86 GI( 02) JO- 13 87-88 Detail account of S-A/C 85-2 89 (x ) Blank line for reserve GL (92) or 90 JO -4 (4A ) 91 JO- 8 S-A /C 77-1 92 Per Vaydulicala, p . 264. Shchenkov, p.73 cites the balance AS - 7 and JO -4 (4A ) sheet and JO's 2 and 13 as sources for this entry Balance 93 Taken from the initial entry in the balance sheet for sheet January 1 of the report year 94 GL(99) End of year balance minus beginning of year balance (same as line 10 ) (x ) 95 Total for groups I-VI 96 GL(69) and WT- 3 or 5 AS - 15 97-98 If debit balance exists , it is transferred to prepaid expenditures 99 SS -7 S-A /C 61-2 100 AS - 7 JO - 13 101 102-103 (NA) 104 Total for group VII 105 (x ) Total for section A 106-112 JO - 4 (4A) Appropriate bank account statements are also used (x ) 113 Total for section B 114 GL( 13) Appropriate bank account statements are also used 115-119 JO-4 (4A) 120 (x ) Total for group I 121 (NA ) Completed by sovnarkhoz, ministry, agency 122-124 JO -6 ; AS-5 125 JO -62 or GL(65) 126 JO - 8 S -A/C 73-1 JO - 8 127 S -A/C's line 42 73-2 and 73-3 ; debit balance is entered on 129 (x ) Total for group III 130 See line 44 for comments GI( 53) 131 JO- 8 S -A /C 77-4 132 JO - 8 S - A /C 77-2 133 AS.7 Shchenkov assigns AS-8 to this line 134 JO - 12 Data is obtained from detail accounts of summary A/C's 86 and 96 in JO - 12 135 (NA) 136 JO -10 /1( 10A ) S -A/ C 86-1, if credit balance obtains (see line 49) 137 JO- 10 /1 (10A ) S -A /C 86-2 138 JO- 10 /1 (10A ) S -A /C 86-3 139 JO-4 (4A) 140 JO-6 (6A) 141 (x ) Total for group X 142 (NA ) 143 Total for section C 144-148 JO - 16 149 JO - 12 150 (NA) 151 JO - 13 152 (NA ) 153-154 JO - 4 ( 4A ) 155-159 JO- 6 , AS- 8 160 Total for section D 161 (NA) 162 Balance total (x ) 84

NA Not available . X Not applicable. A/ C Account number. S-A /C Subaccount number . 1 Standard accounting registers of the " Journal order" system are designated as follows : GL--General Ledger, with first-order account number shown in parentheses . JO-- Journal Order , with form number (alternative in parentheses). AS --Auxiliary Statement, with form number (alternative in parentheses) . WT--Work Table, with form number . 2 Andreyev and Cherkasskiy , Ekonomicheskiy, 1965, p. 51 . Source : Shchenkov , Bukhgalterskiy , 1963, pp . 72–77 ; Vaysman , Uchet, 1964 , pp . 262-265. The concentration of a series of related accounts in one or a few registers is also designed to facili tate completion of the other standard reports . A partial tabulation of the relation between registers and reports completed by industrial enterprises is shown in table 8-7 . In addition to facilitating the preparation of reports , the recently introduced system of standard registers having aa fixed

relationship to standard reports should also simplify verification and auditing procedures in terms of ( 1 ) internal checking of accounts , ( 2 ) verifying for consistency between reports and registers as well as among reports them selves, and (3 ) comparing accouting records of separate organizations participating in a given transaction . 86

210

ACCOUNTING AND REPORTING PROCEDURES Table 8-7 .--STANDARD ACCOUNTING

Form number

2

REGISTERS USED IN COMPLETING SELECTED REPORTS OF AN INDUSTRIAL ENTERPRISE

Standard accounting registers from which data obtained2

Report title ( abbreviated ) 1

JO - 4 (4A) , -10A ,

Supplement to the Balance Sheet

-15 , -16 ; AS- 15 ; Inventory Book

2 - KV

Supplement to the Quarterly Balance Sheet ..

JO - 10 / 1 ( 10A ) , -11 , -12 , -15 , AS - 8 , -13 , -15

1-S

JO - 10 or 10A ,

...Cost Plan .

-10/1 2 - T

WT 4 or 5

..Labor Plan (monthly) .....

2T - 9

...Labor Plan

3

( annual )

..Charter Fund

3 - DD

... Children's Homes

3 - DS

...Kindergartens

-4

WT- 1 , -3 , ( or 5 ) JO - 13 , -15 JO - 12 O

JO - 12

4 -K

.. Training of Cadres

OO

5

... Production Expenses

O o

6

Cost of Marketable Output

JO - 10 , AS - 14

7

... Production Service and Administration Expenses

AS - 12 , -15 or JO - 10A

...Cost Calculations ( per product) .

JO - 10A

JO - 12 ; AS - 15 JO - 10 , -10A, -10/1 ; AS - 12 , -15

-10A ,

(Section

10

JO - 12

...Financing and Special Funds

11

...Fixed Capital and Amortization

12

Sales of Output ..

II)

JO - 10 , -10/1 , -13; AS - 12 , -15

O

JO - 11 ; AS - 16 , -17

19

...Housing and Communal Economies

AS - 13

20

Profit and Loss

J0–15 ; AS - 13

1 2

See table 8-2 for full titles of reports . Standard accounting registers are designated as follows : Journal Order , with form number (alternative in parentheses) . JO AS Auxiliary Statement, with form number . WT Work Table , with form number .

Source :

Astashkevicher , Bukhgalterskiy , 1963 , pp . 299-303; Poklad , Kurs, 1963,

pp . 340-341 ; Shchenkov , Bukhgalterskiy , 1961 , p . 354 ; Vaysman , Uchet, 1964 , pp . 274-275 .

KHOZRASCHET ORGANIZATIONS 5.

Submission , Review , and counting Reports

Approval of Ac

A basic "Resolution on Accounting Reports and Balance Sheets of State , Cooperative (Excluding Kolkhoz), and Public Enterprises and Organi zations” outlines procedures for the submission and approval of accounting reports at all levels . 87 The primary khozraschet reporting units submit monthly, quarterly , and annual reports to : (a ) their superior organizations; (b ) Gosbank and Stroybank; ( c ) designated TsSU organs; and (d ) local organs of the Ministry of Finance . The monthly and quarterly reports are submitted within 15 days following the end of the report period and annual reports not later than January 25. 88 Of the four recipients of accounting reports , only the superior organizations receive all reports consistently . The other agencies receive these reports subject to a number of quali fications indicated below , Superior organizations, with the consent of financial organs, have the authority to excuse a submitting monthly subordinate enterprise from balance sheets to the localbranch bank if it receives The role of TsSU as a no credit from the bank . recipient of accounting reports from the primary unit is somewhat uncertain . The usual textbook descriptions of report submission consistently give the impression that the TsSU apparatus receives the bulk of, if not all , primary accounting reports . The official decree on accounting reports cited above, for example , gave TsSU the authority to of such " establish the manner of submission reports to its various subordinate organs. But TsSU has never availed itselfofthis right, according to one oblast statistical administration worker. As a result , primary units can apparently refuse to forward these reports to the oblast TsSU organs , and “ primary accounting balance sheets and reports are not received by statistical organs from enter prises and organizations. 89 The only require ments firmly established by TSSU are the sub mission of the brief form No. 5 - F , described above, and the quarterly processing of consolidated ac counting reports. Finally , enterprises which make payments to the budget of deductions from profit in a decentralized manner and enterprises and organizations which are financed by local finance organs submit monthly, quarterly , and annual accounting reports to The remaining enterprises and those bodies. s, the approval of a ministry of with organization finance of a union republic , may be excused from submitting accounting reports to local finance organs. In addition , local finance organs do not receive monthly reports.90 Those statistical reports which are considered as part of accounting reporting differ from the ac counting reports in dates of submission and routing . For example , industrial sovnarkhoz enterprises submitted form Nos. 1P - 8 and 2T - 9 on January 16

211

to the statistical administration located in the same oblast as their sovnarkhoz; in addition , enterprises located in an oblast differing from that of their soynarkhoz submitted these reports to the sta tistical administrations located in both oblasts. These reports are also submitted to the state sta tistical inspectorate of the local city or rayon and to all the agencies to which accounting reports are submitted. On the other hand , industrial enter prises submit quarterly form Nos. 3 - DD , 3 -DS, and 4 - K only to their superior organization .91 The intermediate level organizations - main administrations, combines, trusts, etc. -submit their consolidated monthly , quarterly, and annual accounting reports to : (a ) ministries, central institutions (and formerly , sovnarkhozy ), depending on their subordination; (b ) Ministry of Finance U.S.S.R. or of union republics; (c ) TsSU or its local organs; (d ) Gosbank and Stroybank organs. The submission dates for organizations at the inter mediate level are determined by their top - level organizations.

The top - level organizations, such as the former sovnarkhozy ,ministries, and central institutions of the U.S.S.R. and union republics, submit con solidated quarterly and annual accounting reports to the appropriate U.S.S.R , or republic organs of: (a ) TsSU ; (b ) the Ministry of Finance; (c ) Gosbank and Stroybank , and (d ) Gosplan . The annual reports are also submitted to the appropriate Council of Ministers. In the case of ministries and central institutions organized on a union - republican basis , reports are submitted to both the all - union and republican councils of ministers. The top - level organizations submit their quar terly reports not later than 40 days following the end of the report period and annual reports not later than April 1 of the following year . The Ministry of Finance and TsSU establish submission dates, within the indicated time limits , for ministries and central institutions of the U.S.S.R .; in addition , they can extend submission periods by 10 days for quarterly reports and 5 days for annual reports in the case of ministries and institutions having a multistage organization or whose subordinate units are dispersed over wide areas, Republican counterparts of these agencies have analogous rights , including the granting of five - day extensions for quarterly and annual reports . With the approval of the Ministry of Finance and TsSU at the appropriate level, superior organi zations at intermediate or top levels can be ex empted from the need to submit consolidated ac counting reports, in full or in part . The intermediate- level organizations review and approve annual reports of their subordinate enter prises and organizations within a 15 -day period from the date of receipt. The top - level organi

212

ACCOUNTING AND REPORTING PROCEDURES

zations review and approve annual reports of their subordinate organizations within a 20 -day period from the date of receipt. Moreover , within these periods, reviewing organizations send their deci sions on these reports to the submitting organi zations and to the appropriate Ministry of Finance, Gosbank , and Stroybank office.

Two days prior to the time that intermediate and top - level organizations begin review of the reports of their subordinate organizations, they must notify appropriate finance, Gosbank , Stroybank , and TsSU These agencies have the right to partic organs. ipate in the review and also : (a ) to request additional data from the superior or subordinate organiza tions concerning any item in the report; and (b ) to examine supporting accountingmaterial in the place of origin of the reports. They also have the right to state their objection to reports within 15 days The objections are from the date of receipt. addressed to the reviewing organization ; if the latter disagrees, it must notify the finance organ or an appropriate bank of the disagreement within a 10 -day period from the receipt of such a dis agreement. Failure to do so is taken to mean that the reviewing organization has agreed with the objections. If a finance organ or a bank receives a notice of disagreement from the reviewing organization , it has 10 days in which to bring this disagreement for decision to the appropriate council ofministers or executive committee , depending on the subor dination of the organization in question. All items in the reports which have been changed during the course of review must be reported to all addresses to which the reports have been sent. Only those items on which the finance organ and the bank have agreed can be processed further. Review and approval of an annual report precip itates a number of decisions . At the time of re view , the reviewing organs make necessary cor rections and notify submitting organizations of these corrections. The latter adjust their records and notify , in writing , all other recipients of the reports of these changes. The so -called “ trans formation " of the balance sheet (reformatsiya balansa ) also takes place in connection with the distribution of profit or the covering of losses. The superior organs decide on the distribution of undistributed profit. This portion of the profit is usually distributed among such items as pay ments to the budget, bonuses, payments to the enterprise fund, and transfers to the charter fund . If an enterprise has a loss , the superior organi zation may decide to write it off to the charter fund . There is some ambiguity, however , as to the actual time that the distribution of profit takes place . Some sources indicate that the decision on the distribution of profit is made at the time of review

and approval of the enterprise's annual report (i.e., early February ).93 Another source states that the distribution of profit usually takes place in April or May following the report year. 94 The change in the balance sheet resulting from the distribution of profit is indicated in thebalance sheet for the month in which the actualdistribution took place. After the distribution occurs , the figures in the balance sheet indicating preceding year profit or loss are written off. A more detailed report on the distribution of profit is submitted with the semiannual report following the report year . 95 6. Consolidated Reports of Superior Organi zations

Much less description is available in Soviet sources of consolidated and other reports of than of primary level superior organizations than reporting. This is not surprising; fewer organi zations and people are involved and training needs are smaller. Furthermore, many primary report forms are designed to double as forms for superior level reports . This weak link in information is unfortunate , however, since it obscures the picture of data flows in the area between primary reporting and final data publication.96 Two significant aspects are involved : (1 ) The relationship between consolidation in terms of administrative agencies versus that in terms of statistical sectors, and ( 2 ) the degree of aggre gation . In view of the comprehensiveness with which primary units are covered and the existence of a specialized statistical agency employing formal industry and product classifications, there is a temptation to assume thatmajor types of data are consolidated in various cross sections, with con sistent and detailed groupings. Available evidence, however, suggests a surprising lack of uniformity and detail. This is partly due to a significant change in consolidated reporting which occurred with the institution of sovnarkhozy and the reorganization of TsSU . Prior to that time, the consolidation of primary - level reports was the responsibility of superior agencies, who prepared the consolidations and submitted reports to interested agencies.97 On the basis of these reports , TSSU proceeded with further interagency consolidations. This procedure applied to both accounting reports and so - called statistical reports , that is , those required and stan dardized by TsSU . (Another set of so -called intra agency ( vedom stvennyye ) reports submitted by primary units for administrative and control pur poses to their immediately superior organizations were not normally consolidated for reporting out side the agency and may not have reached even the top agency level.) Since the reorganization of 1957-1960 , the expanded set ofprimary - level reports designated as statistical is submitted to both the immediately superior administrative level and the regional sta 98 Consolidations of these tistical administration .

213

KHOZRASCHET ORGANIZATION

reports are then prepared by the statistical administrations and furnished to the superior administrative organizations of the primary units and to other interested agencies, as well as being used for further tabulations at higher levels within the TsSU hierarchy. This practice applies to nearly all current (tekushchiye) statistical reports , with the notable exception of No. 1 - S on production costs . 99 This report, as well as the periodic (periodicheskiye ) accounting reports and the entire set known as the “ annual report,” are consolidated by the superior organizations themselves and sub mitted to TsSU and other recipient agencies.100 As a consequence , the sectoral or " branch " breakdowns employed in the consolidation of various reports are known to differ ? 01For example, reports on cost (Nos. 1 - S , 5 , 6 , and 7 ) were consolidated monthly and annually for a sovnarkhoz branch whole and for separate administration as branches, machine building being distributed into 10 subbranches. Reports on output and labor, on the other hand , which are consolidated directly by TsSU on the basis of primary enterprise reports (Nos. 1 - P , 2 - T ), distribute machine building and metalworking into over 30 subbranches. Over 20 food industry subbranches are recognized in out put reporting whereas in cost reporting, only 4 plus " others" are recognized . A similar situation is found in light industry reporting . Some accounting reports may only be consoli dated for the agency as a whole . For example, branch administrations of sovnarkhozy probably compiled one consolidated balance sheet for their basic activity . Since the “ basic activity” is defined

in broad sectoral terms such as “ industry , " the organizational structure of the sovnarkhoz, which varied from instance to instance , determined the Sovnarkhoz - wide content of the consolidation . consolidations may only have been possible for such broadly defined basic activities. Thus, despite voluminous consolidated reporting on the part of 102 many types of information superior agencies , available at the primary - level units may become submerged in relatively gross aggregates .

In an attempt to shed further light on the manner of data consolidation , a compilation of consolidated reports is presented in table 8-8. The data apply primarily to (former ) sovnarkhozy or ministries whose basic activity is industry. Basically , con solidated reports in industry can be classified into three major groups. The first group consists of reports which are analogous to the enterprise reports . They retain the same form numbers, titles, and basic format . However, it must be pointed out that they are not completely identical with the enterprise reports. Some analogous consolidated reports have special supplementary sections and modified formats . Although often implied , it is not certain that all primary - level reports are consolidated progressively to the top level. Such comprehensiveness is more likely for the initial superior levels (or middle levels ) made up of trusts , combines , branch administrations (of former sovnarkhozy ), main administrations , and similar organizations . With the exception of the balance sheet , the reports shown under Group Iare known to be consolidated in terms of branches of industry as well as by agency .

Table 8-8 .-- CONSOLIDATED REPORTS OF SUPERIOR AGENCIES FOR INDUSTRY

Reporting agency

Form number and title (or description )

Type of report

Middle level ( branch adminis tration , trust , etc.)

Top level ( sovnar khoz , ministry )

Monthly

Group I

x1 X X (NA )

X X (NA )

xi X X X X

x1 x X X X

Quarterly ( 1.--Balance Sheet) ... 2 -KV.--Supplement to the Quarterly Balance Sheet.. 1 - S .--Consolidated Report on the cost of Industrial Output . Other unidentified reports

& **

Reports analogous to those of primary units , consolidated for sectors of the economy and for branches of industry .

X X

--

1 - S .--Consolidated Report on the cost of Industrial Output ...... Other unidentified reports ...

Annual ( 1 .--Balance Sheet) ...... 5 .--Production Expenses . 6 .-- Cost of Marketable Output . 12 .--Sales of Output2 Other unidentified reports..

See footnotes at end of table .

214

ACCOUNTING AND REPORTING PROCEDURES Table 8-8.--CONSOLIDATED REPORTS OF SUPERIOR AGENCIES FOR INDUSTRY--Continued

Reporting agency

Type of report

Form number and title (or description )

Monthly

Middle level (branch adminis tration , trust , etc.)

Top level ( sovnar khoz , ministry)

(NA)

Quarterly

Group II Accounting Reports...... Nonanalogous reports , 3 - Branch .--Extract From Quarterly Annual consolidated for sec tors of the economy 3 -SV .--Reference statement on industrial enterprises not ful or for branches of filling cost plans (by branch administration ) ... industry . 4 -SV .-- Information on fulfillment of plans for financial results of industrial enterprises ( similar to No. 2 -KV ) ... 9 -SV .--Extract from form No. 1P - 8 on fulfillment of the gross output plan .... 10 - SV.--Extract from enterprise forms No. 1 , 2 , 10 , 11, and 20 by branch of industry (similar to No. 3 -Branch )

X

(NA )

X

(NA )

X

(NA )

X

(NA )

X

Monthly

(NA )

Quarterly Annual

( NA )

(NA )

(NA )

X

(NA )

х

(NA )

X

( NA )

X

(NA )

x

(NA )

х

(NA ) ( NA )

X x

X

х

х ( NA ) (NA )

X X X

( 3 ) --Report Balance of Income and Expenditure ( compared with plan ) .. 1 -Sv .--Consolidated Report on Profit and Loss (by sector of economy ) .... 2 -SV.--Consolidated Report on Status of Own and Equivalent Cur rent Assets (by sector of economy) Group III 5 SV .--Report on Status and Use of the Reserve for Rendering Nonanalogous reports Temporary Financial Aid ... consolidated for 6 -SV .--Report on Status and Use of the Reserve of Own Current entire agency . Assets 7 - SV .--Consolidated Report on Available Fixed Assets and Outlays on Their Capital Repair ..... 8 - SV .--Reference Statement of Expenditures on Bonus Payments for Fulfilling Important Tasks and on Rendering One- Time Aid to Enterprise Workers.... 11 -SV.-- Information on Auditing Work4 . 14 .--Consolidated Report on Staffs and Administrative and Manage ment Expenses ( including personnel registered with finan cial agencies) ... 21.--List of Enterprises and Production Units ( showing gross out put , physical output of major products , annual average number of workers , and fixed assets ) . | ( 3 ) --Consolidated Indicators on Housing and Communal Economy" ( 3 ) --Explanatory notes...

Not applicable . NA Not available . Applicability presumed on the basis of inconclusive evidence ; coverage or detail unknown . Compiled separately for planned -deficit enterprises . Form number , if any , unknown . Submitted by Ministry of Trade organizations (Belousov , Bukhgalterskiy , 1963 , p . 521 ) ; applicability to sovnarkhozy and other agencies engaging in trade activities is unknown . Submitted to the Ministry of Finance and republic statistical administration as an adjunct to the annual report (Shchenkov, Bukhgalterskiy , 1961, p . 404 ) . Source : Poklad , Kurs , 1963 , pp . 343-347 ; Shchenkov , Bukhgalterskiy , 1961, pp . 400-406 ; Yefimov , Ekonomi cheskaya , 1964 , pp . 934-936 . 1 2 3 4

The other two groups of reports are not analogous to those of primary units. Group II reports relate to a single sector of the economy, whereas Group III reports apply to an entire agency. Most of the

information on these two groups pertains to the top - level agency as a whole ; intermediate - level organizations probably do not submit many of these reports .

KHOZRASCHET ORGANIZATION

A number of the reports in Group III can only be submitted by the top - level agency . This applies, for example, to the report on the financial reserve for temporary aid to enterprises (No. 5 - SV), or the statement on top- level administered bonus payments (No. & SV ) . Noteworthy also is the appearance of the Balance of Income and Expend iture as a formal report of the top - level agency. This is in contrast to its absence in enterprise (and probably intermediate level) reporting , and is explainable by the fact that it is only the consoli dated planned balance which is obligatory and con trolled by the Ministry of Finance - lower level balances are not approved directly by the Ministry of Finance . Considerably less information has been located concerning consolidated reporting in other sectors. In construction , for example , information is limited to general statements to the effect that, “ as a rule , consolidated reports and balances are compiled on the same forms and in the same volumeas reports of lower construction organizations.

In railroad transportation , consolidation up to the level of the road or line occurs with little reporting outside the Ministry of Railways . Banks granting short -term credit are sent accounting reports periodically , but the Ministry of Finance hierarchy first obtains reports only from the level of a road . This is due to the high degree of centralization of railroad revenues.104 At this level and at the Ministry level itself, reports are presented outside the agency in the pattern described in section 5 above .

The multiactivity nature of the Ministry of Rail ways is illustrated by the nine separate consoli These are dated balance sheets it compiles. 105 for : ( 1) The basic activity (hauling) of railway transport (including consolidated balance sheets for the basic activity of railroad lines [ operations ] , the Financial Administration , the Directorate of Inter national and Tourist Transportation of the Main Passenger Administration , the Guard Admin istration , the Central Communication Station , and also balance sheets of Main Administrations for received and transferred fixed capital acquired in a centralized manner for railroad lines) ; ( 2) the basic activity of industrial enterprises; ( 3) thebasic activity of procurement organizations ; (4 ) the Main Administration of Workers' Supply ; (5 ) the fulfill ment of the expenditure estimates of budget ary organizations; (6 ) scientific - research insti tutes ; (7) other organizations; (8 ) capital investment; and (9 ) the basic activity of construction and design organizations. Consolidated reporting in domestic state trade follows a pattern similar to that in industry . One group of reports consists of those analogous to primary unit reports. A second group consists of

215

nonanalogous reports, of which eight have been identified .106 Of these, five have numbers and titles similar to those in Group III of table 8-8: these are Nos. 1 - SV , 2 - SV , 7 - SV , 14 , and the Balance of Income and Expenditures. However , three appear to be peculiar to the trade sector . These are Nos. 6 - SV and 11 - SV (also shown in the table) and a “ Table of Basic Indicators of Economic Activity ." 107

7. Effects ofRecentReformson Accounting and Reporting The elimination of the sovnarkhozy and the introduction of new indicators to measure the efficiency of enterprises precipitated changes in the accounting and reporting field . Since this field is in a state of flux at the present time, it is difficult to state precisely the total effect of the changes . Nevertheless, it is possible to give some concrete examples of the changes which have already taken place as well as to indicate the areas of probable change . As noted above, a considerable amount of standardization was achieved during the sovnarkhoz era, at least partly as a result of the fact that each regional sovnarkhoz encompassed a wide variety of economic activities, and the sameactivity sector could be represented in numerous sovnarkhozy. With the return to the ministries and the branch principle , this strong impetus for standardization will be considerably weakened, which may well result in somewhat greater differentiation of ac counting procedures among various industrial ministries and intermediate agencies. Those aspects of the reformswhich are intended to give enterprises greater operational responsi bilities will also affect accounting to some degree as a resultof increased attention to internal analysis requiring additional detail data , on a daily basis , by the enterprise management and the use of new " performance indicators” such as profits and the return on capital investment. In order to effect these changes, the Ministry of Finance U.S.S.R. and TsSU U.S.S.R. prepared a new instruction "On Changes in Accounting and Reporting of Industrial Enterprises in Connection With Improvement in Planning and Strengthening of Economic Stimulation of Industrial Output. "n 108 108 The text of the instruc tion is not available, but the changes will apparently affect accounting procedures dealing with , among other things, payments on fixed assets , sales (especially since the volume of sales is to become the main planning variable rather than gross out put), and profits and deductions from profit for the formation of various funds. Although the new methods were introduced on January 1 , 1966 in only 43 large enterprises scattered among 17 ministries, by the summer of 1967 over 5,500 enterprises producing nearly a third of all in

216

ACCOUNTING AND REPORTING PROCEDURES

dustrial output and over 45 percent of industrial profits had been converted to the new system of planning and economic incentives.

ments on bank credit,housing losses, and additional receipts due to price rises), and (6 ) Availability and Movement of Fixed Capital.

The changes generated by various reforms are not confined to industry alone but have affected other sectors of the economy. In construction , for example , Gosstroy U.S.S.R. undertook an experi ment at the beginning of 1965, involving selected construction organizations scattered throughout the country , designed to test new planning methods and new performance indicators. As a result , some construction organizations introduced a new summary account and a new report, form No. 4 " Reference Statement on Fulfillment of Tasks and Profitability .” 110 The final outcome of this

Part 1 of the supplement contains an interesting alternative calculation of profitability . The defi 112 nition normally associated with this reform relates total balance - sheet profits to total pro ductive capital (i.e., fixed plus current assets ) . A portion of profits equivalent to 6 percent (the temporary initial rate) of total productive capital is to be paid into the budget. This “payment on capital” (plata za fondy) is thus treated as coming out of profits and resembles a tax. However , supplement part 1 also contains a second calcu lation of profitability in which profits are taken net of the payment on capital, the fixed rental - type payments , and interest on bank credit. This calcu lation of profitability consequently treats all these capital- related charges as profit - reducing ele ments of cost, or interest, and is significant in three ways: ( 1) It may be the first official recognition , albeit tenative and unpublicized , of the value creating properties of capital in the economic accounting and non - Marxian sense ; (2 ) it creates a possible danger of confusing the two types of profitability in future Soviet statements , inasmuch as unique labels have apparently not been assigned to each concept as yet ; and ( 3) it, rather than the first concept, is to be used in determining plan fulfillment and the amount of profits deducted to the material incentive fund and other funds of the enterprise.113

experiment is not known , but accounting and reporting procedures in construction generally will doubtless be modified somewhat. In industry , changes in the standard report forms that have been observed so far are small . At the pre sent time, the enterprises transferred to the new planning system submit the same monthly and quarterly reports as before . In addition , they submit a new form No. 1 -OP— “ Performance Indi cators of an Industrial Enterprise Transferred to the New Method of Planning and Economic Stimu lation " 111 which satisfies the needs of superior organs for data on the new indicators for judging This monthly the performance of enterprises . mailed report is divided into four sections and a supplement . Section I, Volume of Sales of Output , contains data on sales in two sets of enterprise wholesale prices - planned and actual. Section II, Awards From the Material Incentive Fund , contains data on bonuses from other sources paid to the workers and miscellaneous employment and wage data . Section III, Fixed Productive Capital [ or Assets ) and Current Assets Employed in Calcu lating Payments on Capital, contains 13 indicators used to determine the amount due to be paid into the budget. The value of fixed productive assets used in this calculation encompasses all those carried in the balance sheet, including the non industrial as well as industrial activities , with certain exceptions . Section IV contains detail data on payments to the budget from profits (line 03 of the balance sheet) consisting of three types: payments on fixed and currentassets, fixed (rental type) payments , and surplus (svobodnyy ostatok ) profits . In addition to the four sections, a supplement consisting of six parts is completed every quarter and sent together with the monthly report for the third month of the quarter . The six parts of the supplement are as follows: ( 1) Profitability in Re to Productive Capital, ( 2) Sources for Formation of Incentive Funds, ( 3 ) Movement of Incentive Funds, ( 4 ) Break - down of the Item Other Profits and Losses in Section II of Form No.

2 -KV, (5 ) Reference Information (regarding pay

The routing of the reports will apparently remain unaffected . For example , form No. 1 -OP is sub mitted to the superior organization and to the local statistical administration , Gosbank branch , and financial organ, which is essentially the same routing as that prior to the reforms. Elimination of the sovnarkhozy will have an effect on consoli dated reports to the extent that ministries rep resent a return to the branch principle as compared with the territorial principle of the sovnarkhozy . The consolidated reports of the ministries will tend to be more homogeneous in that a narrower range of sectors or activities should be involved . No return to the presovnarkhoz practice of leaving the consolidation of statistical reports to ministries is to be permitted , however - the statistical ap paratus is to retain primary responsibility for consolidation and to supply the ministries and other agencies with the data they require . 114

B. BUDGETARY INSTITUTIONS Organizational units whose primary source of financial support is the state budget are known as budgetary institutions (byudzhetnyye uchrezhde niya ). They encompass a vast network of institutions and organizations in such varied sectors as edu cation , public health , research and development ,

BUDGETARY INSTITUTIONS defense, and governmental administration , at all governmental levels from the lowest to the highest. This broad category of organizations is frequently counterposed , in official as well as informal literature, to the other broad category -- khozraschet organizations — which was treated in section A , above. Such a two - way grouping of state organiza tions is over - simplified and misleading in many respects , as was pointed out in chapter III. None theless , a high degree of uniformity in the area of accounting and financial reporting has been a chieved for both groupings, and particularly for the budgetary institutions. Although some differences in accounting and re porting exist between functional sectors, as will be seen , the major procedural differences within the overall category derive from two other factors : The level of government or budget to which the functional agency is attached , and the administrative level within the agency hierarchy. The first factor relates primarily to the distinction between central budgets A number of procedural and local budgets.115 differences between budgetary institutions attached to these two levels stem from the fact that ex penditures from central budgets are made by opening credits for the spending units in the banks, whereas the expenditures of local budgetary insti tutions are made out of funds actually transferred from the budget bank account and deposited in the spending units' bank accounts .

Other differences in accounting and reporting procedures are stipulated in terms of the level of " credit administrator” (rasporyaditel kreditov ). For agencies financed out of central budgets , such as ministries , state committees, and (until recently ) sovnarkhozy , there are three levels: Chief, or first-order credit administrators (overall heads of agencies) ; second -order credit administrators (administrations, trusts, combines, departments, etc.) ; and third -order administrators (primary spending units ). Budget credits are opened by the Ministry of Finance in the name of the chief credit administrator only --he is responsible for further disbursement of credits to subordinate units , subject to stringent controls by the banking 116 system . For agencies financed out of local budgets, funds are actually transferred from the budget deposit accounts to the “ current" accounts of chief credit administrators who then distribute them directly to third -order administrators; there is no intervening level .

1.

The Standard Classification of Accounts

The present standard classification of double entry accounts for budgetary institutions went into effect at the beginning of 1961.117 As in the case of the standard khozraschet classification , it was clearly designed for comprehensiveness. This is th extensively , in terms of the kinds true

217

of institutions, as well as intensively , in terms of the types of operations within one institution . As far as is known , budgetary institutions in all sectors of activity, without exception , employ the standard classification of accounts. (Possible divergencies in usage by the defense sector are noted in chapter VII.) This internal comprehensivness is relatively recent, dating only from the end of 1955 when a pred ecessor classification of accounts was introduced . Prior to that time separate balance sheets had been prepared for execution of the institution's own budget or “ estimate " (smeta ) covering expenditures out of state budget funds and its " estimate" for non budgetary resources. 118

The standard accounts of the present system can accommodate all activities of a budgetary insti 119 tution . These activities, which can be carried on a single balance sheet and employ the standard set of accounts, include: ( 1) The main activity of the institution , which is financed out of a separate " estimate " linked to the budget of the government unit with which the institution is affiliated ; (2 ) operations involving expenditures for special purposes financed out of other government budgets ; ( 3 ) the operation of productive shops and unchar tered subsidiary enterprises or units attached to the budgetary institution , the maintainance of children's institutions financed jointly by parental fees and budget funds, and the conduct of research and experimental work under contract for compensation ; (4 ) activities financed out of “ special means” and other nonbudgetary resources ; and (5 ) capital investment.

The standard classification consists of summary or “ synthetic ” accounts (designated by two- digit numbers) , second -order (three- digit) sub - accounts, and single - entry memorandum accounts , as shown in table VIII - B - 1 . Detail or “ analytic ” accounts are not provided , as they are not in the khozraschet classification of accounts . The majority of the summary accounts deal with the main activity of any budget institution , that is , executing the “ estimate " for expenditure of budget appropriations. These accounts are limited to such aspects as material and monetary assets, settle ments, expenses , fixed capital, and financing. The value and movement of fixed assets, including those rented out, are recorded in account 01. They are carried at original cost since no accounting of amortization deductions or depreciation is made in budgetary institutions. All materials , whether en route or in storage, are indicated in accounts 02, 06 , and 07 (including those purchased with the “ special means” of unchartered subsidiary units ). Monetary assets consist of opened budget credits (account 09) in the case of central budget insti tutions, budget appropriations deposited in the " current" bank account (account 10 ) in the case of local budget institutions, cash (account 12) , and other monetary assets (account 13) .

218

ACCOUNTING AND REPORTING PROCEDURES

Intra -agency settlements are recorded in account 14 , which deals with the transfers of resources between credit administrators at dif ferent levels. Accounts 15, 16 , 170-173, 177, 178 , 18 , and 19 record settlements with suppliers and contractors, the budget, labor unions ( for deductions for social security), workers and employees, stipend recipients, etc. Accounts 200 , 203, and 21 record actual expenditures charged to regular budgetary funds, funds received from other budgets , and speicial means. Account 22 records fixed capital in fixed assets ; the balance of this account offsets the balance of the fixed assets account (01). Account 23 , financing , is used only by chief credit administrators. Open budget credits are credited to account 23 (debit 09) until recalled (closed ) or used to write off budget expenditures after the annual report is accepted . In certain legally prescribed cases , and under close surveillance by finance agencies, budgetary institutions may conduct certain income- yielding activities in addition to their basic budget-financed function . From the accounting and reporting view point, these activities fall into a number ofdistinct types . One consists of enterprises and organi zations which , though subsidiary (podsobnyye ) to primary budgetary institutions, have been given an allotment of fixed and circulating capital and permitted to employ the khozraschet system of accounting and reporting treated in section A of this chapter. 120 Large subsidiary agricultural units or industrial enterprises are typical examples of this type . Such units submit an independent balance sheet and are treated as full- fledged primary units . Their relationship to the budget appears to parallel that of their counterparts attached to economic agencies, and the parent budgetary institution becomes a superior adminis trative agency .

If

not

" chartered "

and

therefore

not

an

independent primary unit, the subsidiary activity can be treated in one of two ways.121 With the permission of its superior organization , a budgetary institution can maintain a separate (otdel’nyy) balance sheet for such a subsidiary unit. 122 Pre sumably this involves a transfer of capital from the parent institution to the subsidiary balance sheet analogous to that which occurs between chartered khozraschet enterprises and their subordinate unchartered but independent enterprises . 123 Such subsidiary units maintained on “ separate ” (but not “ independent” ) balance sheets continue to use the standard accounts and balance sheet for budgetary institutions, and do not employ the khozraschet system of accounts and reports. The use of separate balance sheets for sub sidiary units does not appear to be common , how ever . Usually these subsidiary units are carried on the general balance sheet for the budget insti

tution . Although separate books or detail accounts are maintained for each subsidiary unit, a number of summary accounts, such as fixed assets and materials, are used in common with the rest of the parent institution . In addition , some accounts in the standard set are available especially for use by the subsidiary units. These accounts record the units ' output (03), livestock herds (05), production expenses (08 ), sales (28 ), income (40 ), and profit and loss (41). A suspense account for distributing overhead costs is provided in account 210. Thus, a limited form of khozraschet accounting takes place in budgetary institutions. As will be seen below from their reports , however , budgetary institutions are required to furnish much less information on these subsidiary activities than are the khozraschet organizations. A large variety of other income - yielding activi ties are conducted by budgetary institutions. In come from these activities, known collectively as “ special means, ” is strictly segregated from budgetary funds ; a separate “ estimate " is prepared for each activity , paralleling that for budget ex penditures. Special-means income includes not only that from the sale of any “material” output, but also rental income from property (including residential housing); income from various paid services to the public ; tuition fees in higher educational institutions; admission charges at concerts , etc .; and income from museums, numerous other types of activities . 124 Accounting for these other “ special means” is accomplished in the standard classification in accounts 111, 211, and 40 . Certain accounts in the classification for budg etary institutions are designed for nonbudgetary resources which do not qualify as “ specialmeans.' These resources include : funds belonging to other units received for authorized expenditures (ac counts 110 and 176 ) , funds contributed for local highway construction (115 ), sums on deposit (177) , and bonuses and others (accounts 114 , 216 , and 240 ) . Fees received from parents for maintaining kindergartens are children's nurseries and recorded in accounts 172, 236 , and 237 .

Capital investments of budgetary institutions are reported either on the regular balance sheet of budgetary institutions (form No. 1) or on form No. 35 -KS, Balance Sheet for Capital Investments , which is also widely employed by khozraschet enterprises, 125 The latter report can be used only with the approval of a superior organization , and if it is used the budgetary organization must use the khozraschet classification of accounts for recording capital investments . 126 Institutions reporting their capital investments on form No. 1 must use several accounts intended for this purpose in the classification of accounts for budgetary institutions (04, 15 , 201 , and 213). The value of

BUDGETARY INSTITUTIONS design and estimate documentation assigned to a unit for use in construction is segregated in special asset and equity accounts 420 and 430.127 Scientific - research organizations completely financed by budget funds use the same accounts as other budgetary institutions; those operating as khozraschet enterprises use the corresponding set of accounts and reports . However, somebudgetary scientific - research organizations prepare a com bined estimate to cover work done on a contract basis for which they are compensated , together with their budgetary expenditures. Such organi zations may also have subsidiary industrial and experimental operations. For transactions related to such activities, the general -purpose accounts 03 and 41 are used, and the following special accounts are provided : 113, 114 , 144, 174 , 175 , 080 , 084, 213 , 241 , 281 , and 282 . In addition , institutions of the Ukrainian Academy of Sciences are known to use accounts 060-1,069,081,094 , 179 25 , and 242.128 In addition to the set of interrelated double entry accounts, the standard classification contains a distinct group of single - entry memorandum Most of these are (zabalansovyye) accounts . designed to record materials located at a given institution but legally the property of another institution . Since single entries are made in these accounts , there is no linkage between them and the double - entry accounts, nor among the memorandum accounts themselves. As a rule , memorandum accounts are not reflected in the balance sheet. The exception is account No. 1 , Rented Fixed Assets , and even in this case the figure does not enter into the regular balance of a balance sheet , but is placed after the final balance entry as a supplementary entry .

2. Systems of Accounting Documents The system of accounting journals, ledgers, and other records is less elaborate for budgetary institutions than for khozraschet enterprises. This is due to several factors: single - entry accounting is still widely used by budgetary institutions; no official journal-order system for budgetary units has been developed as yet ; and many primary budgetary units are too small for elaborate systems,129 Double - entry accounting is obligatory for all chief and second- order credit administrators down to the level of rayons or rayon - subordinated cities, and such third -order administrators as scientific research institutes, higher and specialized sec ondary educational institutions, boarding schools, and centralized accounting offices.130 Other credit administrators may use double - entry accounting with the permission of superior bodies .

219

Budgetary institutions using double - entry ac counting employ one of the three accounting systems (journal- general ledger , memo order , or journal order) used in the khozraschet sector. In terms of general design , these systems are analogous to the khozraschet systems described above and will not be discussed here in any detail. The memo order system is the most widely used by budgetary Permission of superior organiza institutions. tions is required before either the journal-general ledger or the journal- order system can be used.131 The journal - general ledger system is a simplified one for use by small units . The journal- order system , which predominates in khozraschet ac counting, is used only by individual, large, budget supported units . A standardized system of books and documents for the journal-order system has not yet been issued by theMinistry of Finance, although development of such a system for centralized ac counting offices was underway in 1964.132

Single -entry accounting is used by small insti tutions which have a limited amount of funds and a small volume of transactions. These institutions may be third - level credit administrators or chief credit administrators financed out of local budgets which have been instructed by their superior organs 133 This system is to use the single - entry system . quite simple, since each transaction is entered in only one account, and the general ledger, turnover statements , and memo orders are not used. 134

The major accounting forms used in both double and single - entry recordkeeping at budgetary insti tutions are listed in table 8-9 . 135 Several of the forms(Nos. 292, 294 , and 296 ) are produced in both book and card format, and each institution uses the format stipulated by its superior agency . The purpose and contents of most of these forms are clear from the titles, and they will not be discussed here in detail. One form , however No. 294, Record Book of Credits (Appropriations) and Expenditures - deserves a brief description . This document is used by both central and local budgetary institutions, whether on double- or single- entry accounting, to record the receipt of a budget credit or appropriation and the expenditures chargeable to such financing. It may thus serve to illustrate the kind of detail in which records are maintained , and also to clarify several important concepts of appropriations and expenditures.

As noted elsewhere, local budgetary institutions make disbursements out of cash deposited in " current" or checking accounts in local Gosbank branches . The record of withdrawals from the current accounts in Gosbank is maintained in a separate book (form No. 292) . The detail in this book , however , is only in terms of each bank account, and although separate current accounts

220

ACCOUNTING AND REPORTING PROCEDURES

Table 8-9 .--MAJOR STANDARD ACCOUNTING FORMS USED IN BUDGETARY INSTITUTIONS

Type of accounting Title

Doubleentry X X

X X X X X

Ti

Cashbook.... Book of amounts on de posit ... 275 Registration journal [ for memo orders] ..... Journal- general ledger.. 277 Card register.... 279 282 , 283 Multicolumnar ( multi purpose ] cards.... General ledger .. 291 292 Book of current accounts and settlements ... 292a [ Card version of no . 292 ] Record book of credits 294 [ appropriations ] and expenditures..... 294a ( Card version of no . 294 ] 296 Book for materials , food products , and fixed assets ..... 296a [ Card version of no. 296 ] 296b ( Variant for inexpensive and short - lived items) . Book for recording spe 297 cial means.... Book of budgetary [ cur 298 rent ] accounts and actual expenditures of children's institutions . 301 Book for recording set tlements in financing subordinate institutions [ local budgets] ... 302 Book of detailed records on settlements in financ ing subordinate insti tutions ( central budgets ] 310 Registration book of bookkeeping transactions K -6 73

Single entry

i i i

Form no .

X X

X X

X

X X

X

X X

X

X

X

No. 09, Opened Budget Credits , which is used by central budget institutions. Local budgetary insti tutions using the double - entry system have no regular double - entry account for appropriations (assignovaniya ). This is in keeping with general practice in Soviet budgetary accounting, which , in contrast to U.S. governmental practice, does not integrate accounts “ budgetary” representing planned or estimated revenues and expenditures with “ proprietary” accounts representing actual transactions and events . Appropriations are never theless recorded here outside the double - entry 138 system . In central budget institutions, opened credits are recorded in a double - entry account (09) , since they are the nearest approximation to deposits in the current accounts (10 ) of local budget institutions. Column 5 is used primarily to record the redeposit of cash previously withdrawn but not spent. In certain cases, nonbudgetary funds can also be treated as “ restored ” credits . This applies, for example , to the payments of parents for main taining children in preschool institutions. Such payments are deposited in the samecurrent account as budget funds, in the case of local budgetary institutions, or are entered as debits on the " opened credits ” account, in the case ofcentral institutions , Since both budgetary funds and parents' fees are merged in one account, the expenses of the insti tution are covered without distinction as to the source of financing. Although these parents ' fees are generally considered non - budgetary revenues, any balance remaining at the end of the year on 139 these accounts is treated as budget revenue .

6

X

The disposal of credits is recorded in columns and 7. Column 6 is used for the return to the

X

X X

Source : Compiled from instructions for double and single- entry accounting in budgetary insti tutions, published in Dedkov and Yakimov , Bukhgalterskiy , 1965 , pp . 22–128 . For abridged examples of these and other types of standard accounting documents , see ibid . , pp . 74-78, 112 , and Smirnov , Bukhgalterskiy , 1963, passim . are maintained for broad types of funds (see account No. 10 and its subaccounts in table VIII - B - 1) , no detail by category of expenditure is maintained. 136 A more detailed accounting of expenditures is maintained in form No. 294 ( figure 8-6 ) . A separate sheet is opened for each article of the object classification of budget expenditures, under 137 the appropriate division , chapter , and section . Column 4 represents the debit side of account

budget of an unexpended balance at the end of the year, or the removal of credits at any time. Cash (kassovyye ) expenditures (column 7 ) constitute withdrawals from the current (or checking) account in the bank , whether in the form of currency, as for wages or advances, or in the form of a transfer to the bank account of another organization . This category resembles the concept of “ checks issued " by disbursing offices in U.S. Treasury practice. The available credits or appropriations remaining at the end of a given period are shown in column 8 , which represents the balance of columns 4 to 7 . Actual (fakticheskiye ) expenditures (accountNo. 20 ) are recorded in columns 9-14 of form No. 294 on a cost or accrual basis . They are exemplified by such transactions as materials consumed , ser vices performed , or wages accrued, rather than cash disbursements. Thus, the expenditures under a given article of the budget classification are recorded in both cash and actual terms.

In Soviet budgetary practice, no accounting is kept of obligations . Budgetary institutions in principle cannot incur obligations unless funding,

221

BUDGETARY INSTITUTIONS Figure 8-6 .--FORM NO . 294. RECORD BOOK OF CREDITS (APPROPRIATIONS) AND EXPENDITURES

Model Form No. 294 Division

Record Book of Credits (Appropriations) and Expenditures Article Section Chapter

Debit (received )

Credit (disposed )

Actual expenditures

Cash ex Balance of Date res credits penditu Reduced Description Restored (month Entry Opened or closed ( checks, trans of credits credits (appro and no . credits payment action pri (appro (appro day ) author (appro priations ) priations) priations)| izations ations) drawn )

Credit ( expend itures reduced , written off)

Debit (expenditures made )

Of which , lettered subclasses Total

Amount

3

4

5

6

8

2

7

1

9

10

15 11

12

13

14

Dedkov and Yakimov , Bukhgalterskiy , 1965, p . 76 .

in the form of opened credits or appropriations, are available. The institutions are thus obliged to operate on a “ cash ” basis, since bank credit is not available to them . In making purchases they make extensive use of “letters of credit” (involv ing a prior deposit of funds), and bank - certified payment instruments . Thus, the seller has a prior assurance of funding , as opposed to the practice in the khozraschet sector, where the seller's nonnegotiable draft or “payment demand” maymeet with an insolvent purchaser.140 Expenditures actually made are written off at the end of the accounting period (column 15 ) and debited either to budget financing (account No. 230 ) in the case of chief credit administrators, or intra - agency settle ments (account 140 ) for lower -level administrators. It is evident from form No. 294 that opened credits or appropriations and cash expenditures are detailed only to the level of articles in the object classification , whereas for actual expenditures, a further breakdown into letter subclasses is possible . Such further detail is also maintained in the annual report (form No. 2) , which is based on this accounting book . 3. Accounting Reports Budgetary counting, and here will be ports , with a reports .141

institutions submit statistical, ac operational reports. The discussion devoted primarily to accounting re brief initial reference to statistical

Most characteristics ascribed to statistical reports in the khozraschet sector are also valid for statistical reports of budgetary institutions. They are comprehensive in scope, giving data on most of the various activities of the institution . As in the khozraschet sector , too , there is no clear distinction between statistical and accounting re ports ; normally statistical reports give data in physical units , but some also contain financial data . These reports are submitted to both superior organizations and the appropriate branches of TsSU , on forms approved by the latter agency . Their periodicity varies, as in the 'khozraschet sector, from monthly to annual. One notable exception to the practice of submitting annual reports at the end of the calendar year is that most annual reports of educational institutions are submitted at the end of the school year .

The forms used for the accounting reports of budgetary institutions are designed and approved by the Ministry of Finance. The same forms reportedly are used by both central and local budget institutions, though some differences in usage occur. 142 Central budget institutions some times report on letter -designated subclasses of budget expenditure articles , as in form No. 2 (see below ) , but local budget institutions do not classify their expenditures in this detail . In addition , all local budget institutions and primary centralbudget units report in rubles and kopecks, while chief and second - order administrators under centralbudgets submit consolidated reports in thousands of rubles.

222

ACCOUNTING AND REPORTING PROCEDURES

Accounting reports are designed to provide information on the receipt and disposal of budget appropriations and on all other financial activities of the institution — whether budget- supported or not. The activities of all unchartered subsidiary units are reflected in the reports of budgetary insti tutions. Chartered subsidiary units, however , use the classification of accounts and report forms

assets assigned to the unit (line 1). No work ing capital is recognized , beyond a record of material inventories and monetary assets , even for subsidiary productive activities. Table 8-10 --ACCOUNTING REPORTS OF BUDGETARY INSTITUTIONS

Periodicity designed for khozraschet enterprises and organi zations. 143

The distribution of reports , in contrast to that for the khozraschet sector , is limited . Second and third - level credit administrators submit re ports only to their superior organizations, and chief credit administrators submit their reports only to the appropriate finance agency. This limited distribution undoubtedly stems from the fact that the accounting reports of budgetary institutions are primarily designed to facilitate controlover budget appropriations. As remarked earlier , an elaborate system of documentation and checks is in operation for the transmittal of budget appropriations down ward from chief credit administrators through the banking system , which enables the banks and the finance agencies to maintain close control over budgetary institutions, and eliminates the need for a broad distribution of financial- accounting reports to many agencies,144

a . Report Forms. - The formsused by budgetary institutions in preparing accounting reports are both fewer in number and simpler in design than the forms used by khozraschet enterprises and organi zations . This is a direct reflection of the fact that the financial activities and reporting of budgetary institutions are less complicated than those of their khozraschet counterparts , and that accounting and reporting procedures are more standard in the budgetary sectors .

Form no .

1*

1-A 1 - MM

1 -MK

2* 1

3* 1

3 - DS 3 -SL / M

4* 4-A

This section contains a brief description of the forms and contents of the reports . 145 The numbers, titles, and periodicity of these reports are shown in table 8-10 . Those forms noted with an asterisk are given in translation in appendix A.

4 -B

sections (production , income, and profit or loss) are designed to accommodate subsidiary productive activities or other sources of special means. However , there is no " charter " fund to represent the capital “ belonging " to the institution . The entry for capital (line 42) is merely an offset equalling the total fixed

5*

6* 11

Balance Sheet for Execution of the Expenditures Esti mate ... Reference Statement No. 1 on the Movement of Budget Financing ... Data on Account Balances... Monthly Report on Execution of the [ Budgetary ) Expend itures Estimate .. Quarterly Report on Exe cution of the ( Budgetary) Expenditures Estimate .. Report on Execution of the ( Budgetary ] Expenditures Estimate ... Report on Fulfillment of the Staff and Enrollment Plan .... Report on Maintenance of Kindergartens (Nurseries) . Report on Maintenance of Sanatoria - Forestry Schools and Seven - Year Music Schools ..... Report on Execution of the Special - Means Estimate .... Report on Receipts and Ex penditures of Means Ob tained by Road Departments ( Administrations ) From Collective Farms , State Farms, and Industrial , Transport, Construction , and Other Enterprises and Economic Organizations Participating in ( Local ] Road [Construction and Re pair] Work .... Reference Statement on Re ceipts and Expenditures of the Educational Assistance Fund ..... Report on Movement of Fixed Assets.. Report: on Movement of Mate rial Valuables .. Profit and Loss ..

Central

Local

Q, A

Q, A

Q, A A

Q, A A

M

Q, A

A

Q, A

A

A

Q, A

A

Q, A

S, A

S, A

A

A

S, A

S, A

A

A

A A

A A

.

* Form No. 1. Balance Sheet for Execution of the Expenditures Estimate . Since a comparison of revenues and expenses and a measurement of the stock of capital is usually a minor concern to the budgetary institution , its balance sheet is a much less important report than that of a khozraschet enterprise. This is reflected in its shorter length and simpler structure . Several of its

Title

S Semiannual . Q Quarterly . M Monthly . A Annual. * Translations of these forms are given in Appendix A. 1 The se forms have standardized variants for individual sectors ( see text ) .

Source : Dedkov and Yakimov , Bukhgalterskiy , 1965 , pp . 243-244 , 262-263 ; Smirnov, Bukhgalterskiy , 1963, pp . 310-317 .

BUDGETARY INSTITUTIONS

A distinction in scope of coverage should be noted between the balance sheet (together with reports Nos. 5 and 6 on fixed assets and material stocks), on the one hand, and other basic reports such as Nos, 2 , 3 , and 4 , on the other . The balance sheet relates to the entire economy of a budget institution , including sub sidiary productive units , special means, and other nonbudgetary funds, whereas the other reports deal separately with such aspects as financing from the parent budget, from other budgets , from special means, etc. As noted above, however, even the balance sheet can be incomplete if independent balance sheets employing the khozraschet system of accounts are maintained for capital investments or for chartered subsidiary enterprises . * (Unnumbered report.) Reference Statement No. i on the Movement of Budget Financing . This statement is submitted with the balance sheet by second- and third -order credit admin istrators in order to enable superior admin istrators to verify their records on allotments of budget credits or appropriations. Form No. 1 - A . Data on Account Balances . The balance sheet is compiled only by insti tutions employing double -entry accounting . Those maintaining single - entry accounts sub mit instead form No. 1 - A . This report , which is based on accounting forms 292 and 296 , shows balances in both budgetary and non budgetary accounts as of the beginning and end of the year . Form No. 1 -MM . Monthly Report on Execution of the (Budgetary) Expenditures Estimate . This form is submitted only by local budgetary institutions. It closely resembles its quarterly and annual versions (Nos. 1 - MK and 2) in comparing the approved estimate, appropri ations, cash expenditures, and actual expendi tures for each article of the object classification of budget expenditures.146 A second part of the report is devoted to a statement of beginning and ending balances, deposits , and withdrawals from all " current" bank accounts related to budget funds. Central budgetary institutions need not make a comparable monthly report since the banks are responsible for detailed accounting and reporting on their equivalent " budgetary ” accounts (see section C , below ) . Form No. 1 -MK . Quarterly Report on Execution of the (Budgetary) Expenditures Estimate . The first two parts of this form 147 are similar to the two parts of No. 1 -MM . In addition , part III gives some brief data on fulfillment of the plans for staff personnel and enrollment in educational institutions or the number of patients in medical institutions. It thus antic ipates the annual report on form No. 3 .

223

Form No. 2. Report on Execution of the (Budgetary ) Expenditures Estimate . Although not specified in the title, this form is limited to the estimate for budget financing, as in the case of Nos. 1 -MM and 1 -MK . A separate report is submitted for each section of the expenditure classification (usually ) and for each individual budget from which appro priations were obtained in the event that more than one budget is involved. Form No. 2 is used by both central and local institutions for their annual report , and by central institutions for their quarterly report. The data for forms 1 -MM , 1 - MK , and 2 are obtained directly from the standard accounting form 294 shown in figure 8-6 . Thus, as may be seen in figure VIII - B - 3 , opened credits or appropriations and cash expenditures are itemized in accordance with budget expenditure articles, while the institution's budget (" estimate ") and actual expenditures show additional detail within articles. Such further itemization is permis sible only for articles 1 — wages, 3 - office and overhead expenses, 5 - educational, research , and related expenses, and 18 - other expend itures148 The detailed items within articles are designated by letters, but are not uniform for all budgetary institutions. It is apparently for this reason that a number of variants of form No. 2 have been standardized for separate activity sectors. Differentiated form numbers and titles have been identified for the following sectors:

2-1. State administrative organs, courts , and prosecutor's offices 2-2. Cadre training institutions 2-3. Scientific -research institutions (see figure VIII- B - 3) 2-4 . Health and social security institutions 2-5. Elementary , incomplete secondary , and secondary schools , boarding schools, children's homes, and other institutions The difference in detail may be illustrated in the case of wages. In addition to the total for article 1 , form 2-1 lists: (a ) Basic wages of staff personnel, (b ) personal and other supple ments to basic position salaries (osnovnyye oklady) , and (c ) wages of non - staff person nel.149 Form 2-2 lists : (a ) Pedagogic person nel, (b ) other personnel, and (c ) registered administrative personnel, 150 Form 2-3 lists : ( a ) Basic wages of staff personnel, (b ) wages of pedagogic personnel, and (c ) honorariums for academicians and corresponding members Form 2-5 lists teachers . ( figure VIII- B - 3 . Local budgetary institutions report subarticle data only on wages of nonstaff personnel and payments for apartments and communal ser 151 vices granted to personnel free of charge .

ACCOUNTING AND REPORTING PROCEDURES

224

* Form No. 3. Report on Fulfillment of the Staff and Enrollment Plan . Together with form No. 2 , this is the basic report of a budgetary institution , in essence constituting a report on its operational plan . In addition to data on the number of various types of employed personnel, the data under enrollment (kontingenty) may include such capacity and capacity -utilization indicators as number of institutions, number of students or patients, graduates, patient-days, etc. Since indicators for various sectors differ consider ably , there is a large number of variants of form 3 , as shown in the following list of form numbers and sectors. 152 3-1. 3-2. 3-3. 3-4 . 3-5 .

3-5Shl. 3-6 . 3-7 .

3-8 .

3-10 .

3-12 .

3-13 . 3-18. 3-19 .

State administrative organs, courts , and prosecutor's offices Higher educational institutions Scientific -research institutions ( see figure VIII - B - 4 ) Health and social security institutions Elementary , incomplete secondary , and secondary schools, and schools for workers and rural youths Boarding schools Design organizations 153 Technicums, vocational schools (uchilishcha ), cadre training schools, and coursework measures Training of scientific cadres in higher educational and scientific - research institutions Boarding facilities attached to schools Children's homes [ under central and local education agencies ) , boarding schools for deaf, dumb, and blind children , and other schools with special schedules Child reception and assignment centers and children's rooms Agricultural institutions Other institutions and measures

The wage fund for certain categories of per sonnel in “ enlightenment" and health institu tions are also reported . This is reflected in the title of form 3-3, which differs from the standard to read “ ...staff, enrollment, and wages plan . .." as in figure VIII - B - 4 . The importance of the No. 3 series of reports stems from the procedure for releasing budget ap propriations. The quarterly portion of an annual appropriation , as shown in the detailed budget breakdown (rospis') of the Ministry of Finance , is automatically released in full only for the first quarter. Thereafter , release of the appropriation is controlled by the ap propriate financial agency and is contingent on fulfillment of the institution's operating plan , which is judged in large part by the quarterly

report on form No. 3 , as well as on form No. 2 (or 1 -MM and 1 -MK in the case of local institutions) .154 Whether the above listing of sectoral variants of forms 2 and 3 is exhaustive is The gaps in numeration suggest uncertain . that other variants may be used in such un mentioned budget- financed sectors as internal security and defense. Form No. 3-19 , for “ others ," may be used for unmentioned sectors since it is used to report on plans financed out It is note of special-means estimates.155

worthy that form No. 3 -DS (for kindergartens and nurseries ), which contains a similar set of data , is outside the regular series of No. 3 forms. Form 3 - DS is widely widely used by khozraschet as well as budgetary organizations . On the other hand , for certain other activities conducted in both khozraschet and budgetary sectors, a separate report is prepared in each sector. For example , cadre training activities in khozraschet enterprises, whose financing is in part charged to production costs, are re ported on form No. 4 - K , rather than on form Nos . 2-2 , 3-7 , and others in the set for budgetary institutions. 156 Similarly , chil dren's homes attached to enterprises and orga nizations other than the republican ministries of enlightenment or the local departments of public education submit form No. 3 - DD rather than Nos. 2-5 and 3-12, or compile a unified estimate for budget financing and for work done under contract for a fee. Again , only those scientific - research institutions that are fully budget - financed submit the budgetary set of forms, including Nos. 2-3 and 3-3; those that are at least partly financed out of special purpose allowances charged to the basic activity expenses of productive enterprises or by fees for work done under contract, submit form No. 157 7 -N . Form No. 3 - DS . Report on Maintenance of Kindergartens (Nurseries ). This form is submitted by both budgetary institutions and khozraschet organizations which have children's preschool facilities maintained by budgetary appropriations and parents' fees. The report resembles a com bination of forms 2 and 3: part A shows sources of funds and expenditures , planned and actual; part B contains staff and enrollment indi cators.158 Form No. 3 -SL / M . Report on Maintenance of Sanatoria - Forestry Schools and Seven - Year Music Schools . This report is similar in content and purpose to form No. 3 - DS . 159 * Form No. 4. Report on Execution of the Special Means Estimate .

BUDGETARY INSTITUTIONS This form provides both planned and actual data on income from and expenditures of special means. A separate form may be used for reporting on each source, or several sources can be reported on one form . Data for the completion of this reportare obtained from form No. 297. Various versions of this form differ somewhat in content. The example shown in figure VIII- B - 5 , apparently designed for a higher educational institution , is more elab orate than others designed for a single source of special means.160 All, however, show approximately the same detail as contained in the column heads of figure VIII- B - 5 , including a breakdown of expenditures comparable to the budget expenditure articles.

Form No. 4 - A . Report on Receipts and Expend itures of Means Obtained by Road Departments (Administrations) From Collective Farms, State Farms, and Industrial, Transport, Con struction , and Other Enterprises and Economic Organizations Participating in Road Work . Part I of this form contains data on assets (money or materials ) received and expended by road departments in lieu of actual physical participation by the listed organizations in the construction and repair of local automobile roads. Part II shows fulfillment of the plan for physical participation by zations.

these organi

Form No. 4 - B . Reference Statement on Receipts and Expenditures of the Educational Assistance Fund . This form , like No. 4 - A , reports on an exceptional type of “ specialmeans. " The ed ucational assistance fund (fond vseobucha) is formed by contributions from collective farms, trade unions, and other organizations, as well as appropriations from the state budget , and is used to provide material assistance to needy school children. 161 The report is submitted by schools and public education departments financed out of primary- level budgets .

* Form No. 5. Report on Movement of Fixed Assets. Part I of this annual report shows the value of fixed assets, by type, at the beginning and end of the year ; part II summarizes the sources of acquisition and manner of disposal during the year, Since no account of depreciation is kept in budgetary institutions, and capital re pairs do not alter their value , fixed assets are carried at original cost throughout their lifetime. The itemization by type in part I differs slightly among various examples of form No. 5,162 but generally conforms to the categories appearing as subaccounts under account 01. In addition to buildings , struc tures, and installed equipment, certain other

225

categories are treated as fixed assets re These gardless of the value per unit. 163 include library and museum stocks; special furniture for research , medical, educational, or similar purposes; linen ,bedding, and special clothing; mature draft and producing livestock ( regardless of size); and means of transport. Other ( specified ) articles are considered fixed assets if their life exceeds one year (e.g. , kitchen utensils, tools , instruments , special apparatus ), or if they are valued at 50 rubles or more per unit (office furniture or main tenance equipment). Remaining articles are recorded under one of the material stocks accounts . Surprisingly , no separate accounting or re porting of fixed assets is carried out by type of activity ; even the fixed assets of subsidiary productive enterprises are not segregated . The scope of this report thus coincides with thatof the balance sheet ( form No. 1), whose line 1 entry should match the total in form No. 5 . According to one source , the standard sectoral classification of fixed assets issued by TsSU is obligatory for all ministries and central agencies, including budgetary , and is to be applied to all assets , including those of sub sidiary and auxiliary operations, carried on the balance sheet. 164 No confirming evidence has been found that the regular reports of budge tary institutions contain such data . However , such data might be reported in a special statistical report entitled “ Short Report on the Work of Subsidiary Industrial Enterprises Carried on the Balance Sheet of a Nonindustrial Organization ,” form No, PP-Annual. 165 * Form No. 6. Report on Movement of Material Valuables, This report contains information on changes in the stock of materials held by an institution . Part I shows beginning- and end -of-year stocks, and expenditures during the year of materials and food products (accounts 060-068 ). Part II shows the value of inexpensive and short- lived items (accounts 070, 071) expended during the year . Part III indicates types of sources for and the disposition of these products. As with form No. 5 , entries include data for subsidiary activities as well as the basic activity . Both forms 5 and 6 are compiled from accounting records kept on standard form No. 296 (or 296 - a ). Form No. 11. Profit and Loss . This annual report is prepared for unchartered subsidiary activities attached to budgetary institutions and employing accounts 08 (pro duction ) and 28 (income). These activities include contracted work performed directly by budgetary scientific - research institutions, as well as the activities of their subsidiary units. An example of this form has not been located .

ACCOUNTING AND REPORTING PROCEDURES

226

The regular set of accounting reports de scribed above does not exhaust the full extent of financial reporting. In addition to the explanatory notes accompanying the set of quarterly and annual accounting reports , which contain irregular infor mation varying with the institution's performance, the statistical reports required or supervised by TsSU may also contain financial data . An example of this type of report was encountered above in form No. PP - Annual for subsidiary unchartered Similar reports may be industrial enterprises. required for other productive subsidiary activities , such as agriculture or transportation . However, no mention of such reports (including No. PP Annual) has been found in specified connection with sub sidiary activities of budgetary institutions, as opposed to nonindustrial organizations in general. Statistical reports on the basic activity of budgetary institutions, although mainly devoted to nonfinancial data, may also contain financial sta tistics . Form No. 5 - NK , Report of a Scientific Institution , is a case in point . In addition to sta tistics on personnel and scientific projects in parts I and II of this annual report , part III is devoted to the financial aspects of scientific research and shows total financing by source ( state budget, basic activity , payments for contracted work, and other) , and both total and budget- financed expendi This tures by budget classification article . 166 report may be exceptional, however ; other sta tistical reports in the same NK series ( science and culture) do not contain such data on finances. Another type of financial reporting arises from the needs of banks to verify their accounts on budget expenditures against those of the recipients of budget credits. These are described below . b.

Account Verification

Statements to Banks.

Budget appropriations whose expenditure is made possible by opening credits on “budgetary” bank accounts , rather than by an actual transfer of funds to " current" bank accounts , call for a special verification system . This credit -opening procedure applies to appropriations for : (1) Expenditures of budgetary institutions supported by central budgets ; (2 ) central budget expenditures on “ financing the national economy, " usually made to khozraschet organizations ; and ( 3 ) the financing of capital in vestments , so - called operational measures , and similar objects which are commonly financed jointly by " own " resources and budget funds, whether outof central or local budgets , and whether in budget supported or khozraschet units. For cases 1 and 2 , "Reference Statement (spravka) on Funds a Received From the Budget ," as of October 1 and January 1, is submitted to the bank in triplicate within 5 days after the report date . 167 The state ment identifies the budget bank accounts , the budget expenditure divisions, the articles of the object classification (in case 2 only ), Gosbank's reporting code for the given item , the balance of opened

credits as of the end of the report period , and cash expenditures cumulated from the beginning of the year. After comparison with its own accounts and verification of their agreement, the branch bank returns two certified copies to the credit adminis trator within three days . One certified copy is attached to his quarterly or annual report to the superior administrative organization . These are used to verify the accounts of superior organi zations, who also submit similar statements (cover ing transfers to subordinate units as well as direct expenditures) for verification and certification purposes to the appropriate bank agencies on the level with which they deal . Certified copies are attached to the summary reports of the top -level agencies. This triangular system of verification ( 1) hori zontally between units of the bank hierarchy and of the administrative agency hierarchy at each succes sive level , (2) vertically within each of these hierarchies, and (3 ) through an overall comparison of the separate summary reports of these hier archies by the Ministry of Finance apparatus, is virtually the reverse of the procedure for opening and distributing budget credits described in chapter IX . A similar verification procedure is used in case 3 , the financing ofcapital investments ,168 However , the verification instrument is more elaborate in this case, as in the analogous credit -opening instrument described in chapter IX (Expenditure Schedule Financing Plan , figure IX - A - 3 . Labeled the " Reference Statement on Funds Received and Deposited [ in the Stroybank or Gosbank in stitution ] for Financing Capital Investments and Other Measures, " the verification instrument has columns for total funds obtained from the bank and total deposits made by the credit administrator the latter with a breakdown by source (profits , amortization deductions, or other ). Lines specify the object of financing : Centrally planned capital investments in construction (budget articles 15 and 24); operational expenditures (article 31 ) ; capital repair (articles 16 and 24 ) ; expansion of own working capital (article 28); and others. Unlike the analogous credit opening instrument shown in figure IX - A - 3 , the share of budget financing is not specified in this document , as it is designed to verify only those transactions involving the credit administrator directly - i.e. , his deposits and withdrawals. This statement is used only for an annual verification . It is submitted to the appropriate Stroybank or Gosbank branch by January 5 or 10 , certified , and returned by the bank within 3 days . A copy is sent immediately to the superior credit administrator. A similar process, involving analogous statements for direct use of funds by superior administrators and summary statements for transfers to sub ordinate units , takes place at succeeding levels . Top - level republican agencies submit their state ments by February 15 , and national agencies by

BUDGETARY INSTITUTIONS - GOSBANK March 1. Copies of these certified statements are attached to the summary annual reports of both the banking and administrative agencies to the Ministry of Finance U.S.S.R.

A different verification procedure is employed by scientific -research organizations operating on a khozraschet basis.169 These organizations obtain budget funds from a “ budgetary ” bank account, but make expenditures out of their settlement account. Since bank control over the use of the latter type of account is less stringent, only one -third (or one mor ' s share) of the quarterly budget allot ment is transferred initially from the budgetary account to the settlement account. The research organizations are required to submit a monthly "Reference Statement on the Amount of Budget Financing of Scientific Research and Experimental Work ," which reports on actual expenses incurred and actual transfersmade to the settlement account. On the basis of this document, the bank makes a compensating transfer between the two accounts to return unused funds or to cover additional expenses .

4.

The Submission , Review , and Approval of Reports

The accounting reports of primary budgetary institutions, in contrast to those of khozraschet organizations, are submitted only to superior organizations. Monthly, quarterly , and annual re ports of third - level credit administrators under local budgets are submitted to their chief credit administrators. 170 The latter consolidate the reported data of their subordinate institutions with the data resulting from their own operations, and submit monthly, quarterly , and annual reports to local finance agencies . Central budget institutions of all levels submit only quarterly and annual reports. Third - level credit administrators submit reports to either second- level or chief credit administrators . Second - level credit administrators submit consoli dated reports to chief credit administrators who, in turn , submit consolidated reports either to the ministry of finance of a union republic or to the Ministry of Finance U.S.S.R. The submission dates for chief credit adminis trators are determined by the appropriate finance agency, and chief and second - level credit admin istrators determine submission dates for their respective subordinate institutions. The datesmust be so determined that the ministries and central institutions of the U.S.S.R. can submit their quarterly reports not later than 40 days following the end of the quarter and their annual reports not later than March 31. The timing of consoli dated quarterly and annual reports by chief admin istrators at the republican level is arranged by finance agencies so that the latter have sufficient

227

time to make their reports to the Ministry of Finance U.S.S.R. and to the republican councils of ministers. It is noteworthy that the accounting reports of top -level budgetary institutions are passed on only through the reports of finance agencies; TsSU apparently relies entirely on its own statistical reports . Second - level credit administrators and chief credit administrators on local budgets review the annual reports of their subordinate institutions within 10 days of receipt. Chief credit adminis trators review annual reports of their subordinate institutions within 15 days from the date of receipt . Reviewing organizations must inform the reporting institution and the appropriate finance organ 2 days The finance organs prior to beginning review . have the right to participate in the review of reports , to request additional information , and to examine supporting data and reports at the place of origin . Finance organs send their comments on the reports to the reviewing organizations within 15 days from the date of receipt. If the reviewing organizations do not report disagreement, these comments are considered to have been accepted . C. GOSBANK This section presents a detailed survey of selected aspects of Gosbank's complex and many faceted data system , 172 The central importance of the Gosbank apparatus in the Soviet financial system can be illustrated by an enumeration of its major functions: ( 1) It is the chief agency for carrying out settle ments among enterprises and organizations throughout the economy; ( 2) it is the only source of short- term credit for most of the economy, and as such it is a major source of working capital in the productive sphere, and for the collective farm sector is the only source of long -term credits; (3 ) it is responsible for drawing up and carrying out national and regional cash plans, and together with other agencies is involved in planning the Balance of Income and Expenditures of the Popu lation - consequently , it maintains virtual a monopoly on cash (currency or coin ) operations, and regulates the amount of cash in circulation ; (4 ) it controls the release of payroll money to individual primary units in accordance with their economic plans (or budget appropriations) and with current plan fulfillment performance;

(5 ) it is responsible for the " cash " execution of the state budget (in which capacity it handles almost all budget funds except those transferred to Stroybank for capital investment uses), it auton omously performs a number of revenue collection

228

ACCOUNTING AND REPORTING PROCEDURES

and distribution functions under annual Ministry of Finance instructions, and it monitors the expendi tures of funds by recipients of budget grants. An immense volume and variety of statistical data is provided by the Gosbank accounting and reporting system , which is designed to facilitate these functions and to provide a means of control over the performance of both individual branch banks and the Gosbank system as a whole . At the same time, despite this unique position as a highly centralized agency through which a very wide range of the economy's transactions are funnelled , and despite its widely advertised responsibility for “ control by the ruble , " Gosbank's statistical infor mation system is a relatively sterile and uninform ative one from the viewpoint of the economic information imparted and the opportunities for analysis afforded . This is a reflection of the nature of Gosbank's control function , which has been primarily that of surveillance over the pro priety and correspondence -to -plan of the econo my's monetary transactions for the purpose of signalling incipient difficulties. Although Gosbank has a vague responsibility for control in the sense of exerting an influence over its clients' activities, such control is largely limited to determining the amount of short-term credit made available , a function that is highly circumscribed by regulations and affords little freedom of action to either the bank or the clients . And the bank's right to exert " payment discipline," i.e., the imposition of sanc tions on financially irresponsible enterprises by such means as refusing certain types of credit or requiring the use of specific payment machinery , As a consequence , is also rather formalistic . Gosbank's analysis of enterprise activities is quite shallow ; despite virtually unlimited opportunity , the type of information it develops on individual enter prises for analytic purposes outside its own im mediate responsibilities - or for the use of other agencies -- is limited to resumé of information extracted in part from enterprise reports.

This failure on the part of Gosbank to exert meaningful influence over its client enterprises is understandable in view of the enterprises' own lack of freedom of action and the existence of other agencies with similar responsibilities, especially superior administrative agencies and the Ministry of Finance. Where the responsibilities overlap , the interests and influence of the other agencies are often paramount. For example, short- term credit from Gosbank is intended to supplement the " own" working capital of the enterprise , but the bank's power to control the availability of capital is severely limited by the fact that the Ministry of Finance approves the working capital quotas set for each enterprise and type of asset. In activities for which Gosbank has a direct responsibility , usually defined explicitly in a formal plan , e.g. , carrying out the cash and credit plans, executing the

budget , and checking on wage - plan performance , the Gosbank statistical system takes preeminence or shares a major role with the statistical and ac counting system of other agencies.

1. General Accounting and Reporting Practices a . Accounting . Gosbank institutions follow a classification of accounts that is comprehensive and standardized for the entire system , from branch banks to the Directorate of the national organi zation . The current classification , which was developed in 1957 , 174 encompasses the so -called balance - sheet accounts . These consist of two levels: First -order accounts , designated by two digit numbers, and second -order accounts , des ignated by three - digit numbers. The individual or personal (litsevyye) accounts of clients (organi zations ), which are keyed to the second -level balance - sheet accounts , are organized in a variety of ways, depending on their function: By sector, agency, or type of loan for deposit or loan accounts; by budget revenue or expenditure classifications for budgetary accounts; etc. In some cases inter 175 vening levels of subaccounts are also employed. The first- and second - order balance - sheet ac counts that have been identified are compiled in The first - order accounts are table VIII - C - 1. 176 but the list of available in a single source , second - order accounts , which is incomplete, was compiled from scattered references in the above and in other sources published in various years. Therefore, where the possibility of change over time seemed large, as in specific agency names, the date of the source is given after the account title . Much detailed information on the nature and use of many balance sheet accounts listed in the table and on many types of individual accounts is available from Soviet sources . 177 The discussion below is centered on a few of the more important types of accounts . In a number of cases, sets of related Gosbank accounts are organized in a gross or extensive manner to show cumulative totals over a period to time rather than balances at a given moment. For example, the revenues of central budgets are not written off during the course of the year, and their accounts (09 and 10) show only cumulative totals . Expenditures are not charged to revenue accounts, but are similarly cumulated until the end of the year . For control purposes, of course , such pairs of accounts must be netted in order to reflect actual conditions at a given point in time. Similar treatment is given to other funds designated for particular purposes. Thus, budget resources in tended for capital investments (i.e., " assets for the financing of..." ) are shown in accounts 170-172, resources (or while expenditures of these financing ..." ) are recorded in accounts 180-182.

GOSBANK In other instances , the use of such paired accounts is replaced by the use of one account which records the availability of resources as credits and their use as debits , thus maintaining a running control in a single account. For example , both the revenues and expenditures of local budgets , as opposed to the central budgets, are recorded on one basic account (130 ).

In interpreting the account titles as shown in the standard classification , it should be borne in mind that the second - order accounts within one first - order account may employ both systems, Thus, the capital repair account (68 ) contains both a single- type account (680 ), used for the deposits of amortization deductions earmarked for repair as well as the expenditures on repair , and paired accounts (682 and 683) which record separately assets for , and expenditures on , the capital repair of housing subordinate to local governments, As is the case with all Soviet systems of ac counts , a formal set of single - entry memorandum (zabalansovyye) accounts has been standardized in addition to the main set of double- entry accounts. The Gosbank system has an unusually large number (41) of such accounts , which are designated by four 9901 through 9971. digit numbers ranging from These accounts, which are not given in table VIII- C - 1 , are designed to record variousdocuments valuables (e.g., settlement documents in and process of collection , loan instruments in credit operations, currency reserve analyses, or budget " credits” ) in order to provide additional detail on amounts which are also recorded in the double entry accounts , or to record items not considered relevant to Gosbank's balance sheet. 178

229

lies in the fact that statistical reports are designed primarily as instruments of control over the ful fillment of various Gosbank plans. They are there fore compiled in appropriate form and submitted rapidly to superior Gosbank levels in order to be of use in operational decision -making . Accounting reports are frequently in greater detail and are submitted at longer intervals after the end of report periods. They report data in terms of the total activity of accounts, rather than on the end of- period balances as is common in statistical re ports . With the exception of a budget execution report to the Ministry of Finance, they are employed for more leisurely analyses of the work ofGosbank institutions as a whole , rather than in relation to one or another specific plan . No examples and little description have been found for Gosbank accounting reports . They are usually submitted by mail and contain data in rubles 180 and kopecks." ( Statistical reports show amounts in thousands or hundreds of thousands of rubles. ) Gosbank branches submit the following accounting reports monthly : 181 (1 ) A “ turnover” statement of account activity (oborotnaya vedomosť ) (form No. 60 or 60 - a ); (2 ) a statement of balances on interbank re mittance accounts ;

(3 ) a report on cash holdings; and (4 ) a report on cash execution of the budget . Quarterly reporting contains additional statements on account Nos. 903 and 904 (on debtors and cred itors), and additional data on interbank remittances Statements of account ac and cash holdings. tivity for June and September include additional data on bank administration expenses.

b . Reporting. – This activity in Gosbank , as elsewhere, is labeled either " statistical" or " ac The distinction between the two types counting. " of reporting is somewhat artificial, since both rely heavily on bookkeeping documents and accounts. For purposes of statistical reporting, however, some data are recorded separately from book keeping accounts . Furthermore , in addition to utilizing information in Gosbank's records, sta tistical reporting is sometimes based directly on materials submitted by clients - balance sheets, information on inventories used as collateral for bank credit, statements of accrued wages , etc. The forms for accounting reports are approved jointly by the Ministry of Finance and TsSU , whereas those for statistical reports are approved by TSSU alone. 179

Unlike the situation in khozraschetorganizations and budgetary institutions, the so -called statistical reports of Gosbank are generally more important than the accounting reports as sources of financial data , The essential distinction between the two

annual accounting following major items:

report

contains the

(1 ) Statement No. 1. Annual Turnover State ments ; ( 2) Turnover Statement on Closing Entries , on form No. 60 or 60 - a , plus items analogous to item ( 2) of the monthly reports and to quarterly reports on debtors and creditors; ( 3) Statement No. 2. Profit and Loss (account No. 980); ( 4 ) Statement No.3. On Execution of the Admin istrative -Managerial Expenses Estimate; (5 ) Statement No. 3 - a . On Capital Investment and Capital Repair Outlays; (6 ) Statement No. 4. On the Movement of Fixed Assets; (7 ) Reference Form No. 779. On Overdue Loans and Uncollected Interest of Over Six Months Duration ; No. 780 on January 1 (8 ) Reference Form balances of payment demands in File No. 1 ( see chapter IX , below );

230

ACCOUNTING AND REPORTING PROCEDURES ( 9) Statement on Embezzlements (khishcheniy) and Miscalculations (proschety )

An annual report on the cash execution of the state budget is submitted separately . The monthly turnover statement is the basic accounting report. Submitted 5 days after the end of the month , it shows total activity for all first order accounts , balances for all second - order accounts, and activity of the separatememorandum accounts , In addition , the statement includes data on cash vault audits and other account verification data . Reports analogous to those of branch banks are submitted by each of the higher Gosbank levels; they are combined at each level and terminate ultimately in the specialized administrations of the Gosbank Directorate . Summary accounting reports at the top level are prepared on punchcard equip ment by the Directorate's machine data processing “ factory. " The summary annualGosbank accounting report is submitted to the Council of Ministers for approval. It is also submitted to TSSU for further processing, as is evident in table VIII - E - 1 , item 11 - b . Gosbank statistical reporting employs a unique terminology not found in ordinary enterprises and institutions. For example , most statistical report forms, or their patterns of entry identification , if submitted by wire, are known as " schemes" ( skhemy). Within the reports , types of data are often designated by “ divisions" (razdely), while such groupings of clients as branches of industry or agencies and their subdivisions are designated by “ symbols” (simvoly). The latter may also be used to codify types of operations, such as cash trans actions. In order to facilitate reporting procedures, each individual client's account carries a unique symbol number for each scheme in which the account is reported . This symbol number is distinct from the account number used in the standard classi fication of accounts . The identification and description of individual statistical reports is made difficult by the unavail ability of any listings oftitlesor complete examples of the forms themselves. The discussion of re porting which follows is based on general de scriptions of Gosbank statistical procedures, including references to particular reports and oc casional excerpts from the forms. 182 A list of those reports that have been identified is given in table This list reflects the reporting system 8-11. existing during the sovnarkhoz period . Changes since the elimination of the sovnarkhozy primarily affect the " branch reports," as is noted below . Many of the statisticalreports deal with specialized topics and funtions. Some of themore important of these functions are discussed in the following sections, in terms of both accounting and reporting.

General statistical reporting is contained in a Balance Sheet (scheme No. 1), which is designed to give an overall picture of bank activity. It is too aggregated, however, for many analytic pur poses, since detail is restricted to the second order level of bookkeeping accounts and a limited number of groupings in such other dimensions as types of credit. Also , it only reports balances at the end of the month , and not total activity.

2. Settlement and Collection Services There are a large number of Gosbank clients' accounts dealing with the fundamental banking function of settlement and collection . The following comments , however , will center on two major groups: The basic accounts used by economic units to make deposits and payments; and the additional accounts of economic units used in special payment arrangements , particularly the decentralized offset accounts . The basic accounts of economic units are ofthree modal types: The settlement (raschetnyy) account of a khozraschet unit ; the budgetary account of a unit supported by, or receiving grants from , a central budget; and the current (tekushchiy) account of a unit supported by a local budget. These accounts carry with them well - defined rights and limitations in regard to Gosbank settlement and crediting practices, and in some ways the right to open such accounts determines the legal and 183 financial status of the economic unit. Gosbank will open a settlement account only for enterprises or organizations which operate on a khozraschet basis , have been assigned their own circulating cap ital (or “ currentassets " -oborotnyye sredstva), and prepare an independent balance sheet. The number of such units has dropped nearly 10 percent since before World War II, and varied from 225 to 240 thousand between 1956 and 1961, as may be seen in table 8-12. This table , which shows the total number of Gosbank clients and types of accounts for selected years, indicates that the number of settlement accounts exceeds the number of khozraschet clients . Although as a general rule each enterprise may have only one such account, so - called settlement sub accounts may be opened for subordinate non khozraschet units located elsewhere. 184 Also , top level economic agencies such as ministries or the former sovnarkhozy, which, though budget sup ported, may nevertheless have settlement accounts for such purposes as redistributing 185 current assets or supply -and - sales operations. The right to a settlement account is frequently accompanied by the right to obtain short - term credit from Gosbank , and as table VIII - C - 1 shows, second level accounts paralleling the settlement accounts are provided for such loan accounts . The right to credit is not automatic , however . Furthermore, the

231

GOSBANK Table 8-11 .--GOSBANK STATISTICAL REPORTS IDENTIFIED AS IN USE DURING THE SOVNARKHOZ PERIOD

Title or content

Designation A.

Scheme no . 1

TELEGRAPHIC REPORTS M

Balance Sheet " Branch Reports " on

Short - Term Credit

Fuel and Power Industry Metallurgical and Chemical Industry Light and Food Industry Agriculture, State Committee for Procurement U.S.S.R. ( 1961 ) Ministries of Railways and Communications Ministry of Maritime Fleet [ and others ? ] Trade Organizations Local Industry Supply and Sales Organizations Procurement and Agricultural Product Processing Enterprises Logging , Paper , and Woodworking Enterprises

2 3 7 8 9 10 11 12 14 15 16

Periodicity

M M M M M M M M M M M

Control Over Wage Fund Expenditures

17 18 60

Wage Expenditures of Industrial and Other Enterprises ( Overdue indebtedness to workers and employees for wages ) Wage Money Issued to State Agricultural Enterprises, Khozraschet Organizations , and Budgetary Institutions

M M Q

Long - Term Loans and Capital Investments

20 21

(Data on long - term loans; equivalent to form 741 , below ) (Capital investment financing , by source of funds , major agency , sector , and five classes of objects ) Cash

30 (NA )

(NA ) M

Turnover

(Volume of cash inflow and outflow , by type , as in the Cash Plan ) (Brief report on selected cash flows)

M 5 - day

Gosbank Operations

40 (Number of Gosbank personnel and their wages) B.

Q

OTHER REPORTS

Form no . 14

( Report to Ministry of Finance on financing capital investments and other measures out of the budget--see table 8-15 ) (Similar to scheme No. 1 ; may be quarterly balance sheet) (Statistical report on " File No. 2 , " overdue settlement documents , by " branch report" groupings )

707 (NA )

709

(Analysis of " File No. 2 , " by object of payment )

721

( Overdue short - term credit balances , by "branch report " groupings , and overdue long - term balances, by borrower group ) ( Long - term loans issued to and repaid by collective farmers and summaries for other borrowers? ! , by purpose ) (De tail on long - term loans to individuals, by purpose and agency through which loans are made )

741 742

757

On Gosbank Control Work Regarding Crediting

774

( Settlements by offsets of mutual claims )

M

Monthly .

Source :

Q

Quarterly .

A

Annual .

NA

Not available .

Compiled from Ryauzov and Tertus , Bankovskaya , 1961 , passim .

M

M A Feb. 1 )

M (NA )

M July 1 , October'i January 1

232

ACCOUNTING AND REPORTING PROCEDURES Table 8-12 .-- NUMBER OF GOSBANK CLIENTS AND THEIR ACCOUNTS : 1941 TO 1961

(Data are in thousands and refer to beginning of year) Type of client or account CLIENTS Total ...

Khozraschet enterprises and organiza tions..... Collective farms.. Budgetary institutions and organiza tions not receiving credit...... Home construction loan holders. Credit institutions.... ACCOUNTS Total..

Settlement..... Decentralized offset ' Short- term credit... Long - term credit.... Capital repair financing . Current, of collective farms .. Current, other ... Budget execution and deposit ... Credit institution operations... Capital investment financing .. Letter of credit, separate , and other types of accounts for settlement purposes..

1941

1946

1951

1956

1957

1958

(NA)

(NA)

(NA )

1,497.7

1,494.5

1,533.0

1,472.2

1,188.5

1,141.5

267.0 235.6

257.6 218.5

261.1 128.8

240.7 85.8

230.9 83.3

225.0 76.9

226.2 68.5

238.3 56.2

236.2 45.5

341.5 (NA ) (NA)

353.6 (NA ) (NA)

525.5 ( NA ) (NA)

430.5 399.9 340.8

418.8 458.1 303.4

419.5 449.4 362.2

419.4 373.3 384.8

405.3 366.3 122.4

418.5 321.4 119.9

(NA )

4,064.6

4,131.9

4,182.4

4,580.6

4,382.2

4,217.8

292.8 61.9 589.4

284.4 48.2 623.6

273.4 44.6 579.7

276.7 42.4 564.4

63.1 276.9 556.0 1,076.4 896.6

64.0 170.7 545.5 1,006.8 931.4

49.8 154.4 540.8 995.2 967.3

50.3 149.4 519.0 923.7 885.7

283.9 39.8 566.3 736.4 75.7 149.0 494.4 816.4 71.6 154.5

279.0 37.5 560.6 638.4 79.3 124.6 507.7 731.3 75.0 165.3

251.5

457.3

577.2

1,169.0

994.2.

1,019.1

( NA )

(NA )

295.7 (NA ) 259.7 (NA) 73.4 245.8 487.8 683.1 1,562.4 (NA )

282.3 (NA ) 190.4 (NA) 81.5 222.0 472.1 737.3 1,023.4 . (NA)

292.8 (NA ) 421.9 (NA ) 103.7 162.8 676.3 938.9 1,849.6 (NA)

(ND)

(ND)

(ND)

1959

1960

1961

ND #No data" (per source) . Entry represents zero . NA Not available . 1 Including accounts in clearing houses (Mutual Settlement Bureaus) until 1958 . Source : 1941-51 --Popov , Gosudarstvennyy, 1957, p . 251. 1956-61 --Gosudarstvennyy bank, 1961, pp . 120-121 .

possessor of a settlement account may permit the account to be overdrawn , whereupon the bank sets up the so -called File (kartoteka) No. 2 of past- due claims. Such claims are automatically paid up, as funds accumulate, in a preestablished order of In this manner, an enterprise may priority . 186 force its suppliers to provide it with credit, at least until a creditor or the bank decides to impose sanctions, which range up to a form of bankruptcy (neplatezhesposobnost ). The delinquent enterprise can usually expect to be bailed out by its superior agency, particularly if the latter's physical output program forms a component of the national economic plan . Budgetary (or budget - execution ) accounts are opened for any unit awarded a budget “ credit " — that is , budgetary institutions wholly maintained by central budgets or khozraschet enterprises obtain ing budget grants under the “ Financing the National Economy" expenditure division , as indicated above in section VIII- B . When the recipient is a wholly supported budget institution , a single account is opened and expenditures under each article of the budgetary object classification are controlled by the bank in accordance with the institution's When the credit is granted to a " estimate .” khozraschet organization , a separate account is opened for each expenditure article of the ap 187 Individual budgetary accounts propriate set. are located under Gosbank balance - sheet account Nos. 11 or 12 .

uses. It re The current account has many many uses. sembles the settlement account in that it can serve as a basic deposit -and -payment account. As such it is used by a wide variety of non - khozraschet or nonstate organizations: Budgetary institutions fi nanced out of local budgets (account No. 13 ), collective farms (No. 40 ), trade unions (No. 69), and social, party , and other organizations (No. 70 ), including a miscellany of non - khozraschet but 188 In addition to its role as self - supporting units . t the basic deposi account of a unit , the current account is also widely used as an auxiliary account for special means , deposits , or other nonbudgetary assets of all budgetary institutions (see account No. 14 ), for the use of the nonindependent, non basic activities of khozraschet enterprises , for earmarked assets of collective farms (Nos . 401 403) , etc. In addition to these “ basic " accounts, several types of accounts are used in special payment In fact, they overshadow the arrangements . settlement account of khozraschet enterprises, which was originally intended to be used for all current receipts and expenses.189 Although still occupying a central role juridically and symbol ically , the settlement account is used directly for less than 12 percent of the noncash payments for goods and services of khozraschet units , and for not more190than 25 percent both directly and in directly . The other types of accounts used include the " special " loan accounts , which are

GOSBANK

often used directly for payments and for deposit of receipts, and the so - called “ decentralized offset" (scheta po detsentraliz or clearing accounts ovannym zachetam ). The latter were instituted in 1954 , and by 1958 had replaced a previous system of clearing houses operated by Gosbank and known as Mutual Settlements Bureaus (BVR ). This net work of bureaus had been designed to expedite settlements among member enterprises and to pre vent the financial difficulties of purchasers from interfering with the operațions of suppliers with a minimum of bank credit. Three types of bureaus were organized : ( 1 ) Intracity; ( 2 ) interbranch , located at Gosbank regional offices , and (3) central, located in Moscow . 192 The eight centralbureaus ( TsBVR ) specialized in clearings between cities and within each of the following sectors: ( 1) Machine building, ( 2 ) chemicals, ( 3 )metallurgy , ( 4 ) aircraft , (5 ) petroleum , (6 ) food, (7 ) railways, and (8 ) defense The central bureaus did not handle industry. 193 intracity (except for Moscow ) or intersector settle ments. The system proved cumbersomeand slow enterprises with many intercity economic ties belonged to dozens and even asmany as 100 different bureaus in order to clear their invoices.

In the system which replaced the bureaus , each participating enterprise has a decentralized offset account in the branch bank which keeps its settle ment account. Incoming “ payment demands” 194of other enterprises for delivered goods and services are immediately charged to this account, and out going claims against other enterprises are im After a brief period mediately credited to it . ranging from 3 to 7 days, the incoming and out going claims are offset against each other, and the balance, if in favor of the enterprise , is transferred to its settlement account; if the balance is against the enterprise , it is covered either by a transfer from the settlement account or from a special loan account ( if the enterprise has one ) or, as a last resort , by bank “ settlement" credit. The supplier is thus assured of receiving payment. 195 Despite the decentralization of these accounts , some of the sector orientation of the Mutual Settlement Bureaus was retained at first. Partici pants were organized into groups similar to the previous TsBVR's, as may be seen under account Defense industry was No. 72 in table VIII - C - 1 . subsumed under the account for machine-building , rather than forming a separate group . 196 With the exception of the group for heavy industry (721), for consumer goods industries (724 ), and for inter branch supply and sales agencies (727), participants cleared their payments only with othermembers of the same group , as in the TsBVR . The rationale behind such groupings became less valid after the elimination of sector - specialized ministries and their replacement by the territorial soynarkhozy . By 1961, the number of groups had been reduced to two - one for all industry and the other for all trans portation organizations. 197

233

Other special-purpose payments accounts , such as checking accounts or letters of credit , are located under balance - sheet accounts 74-77 . A description of these accounts and the accompanying payment instruments is found in chapter IX .

Statistical reports dealing with settlement and collection operations include form No. 707, which appears to be a quarterly version of scheme No.1; form No. 709 , on overdue payments (File No. 2 ); and form No. 774 , a report on decentralized offset and other clearing arrangements . These reports and the type of data they contain are discussed in chapter IX .

3. Enterprise Groupings in Short - Term Credit and Settlement Accounts The manner in which individual enterprises are grouped in Gosbank accounts and reports dealing with settlement and short-term credit operations represents a blending of two distinct principles of classification - by branch and by agency. The recent history ofGosbank practices in this regard parallels the history of the territorial administrative agencies, the sovnarkhozy. Under the presov narkhoz system , Gosbank balance sheet accounts were assigned to each ministry , either union- or republic -wide . In certain statistical reports , principally those dealing with short- term credit , a further subgrouping of enterprises was employed which distinguished such nonbasic activities as supply, sales, workers' supply (ORS), and subsid iary agriculture , and also disaggregated the basic 198 For other reports , activity to a limited degree . however, all enterprises of the entireministry were grouped together . This meant that a wide variety of activities would be combined whose scope depended on the makeup ofthe agency at the time,

The sovnarkhozy were deliberately intended to encompass a broad spectrum of industrial branches, together with much of the construction industry, as well as the usual secondary or service activities typical of large Soviet agencies . In view of the variations in the composition of sovnarkhozy and in their organizational subdivisions, the previous system of grouping accounts by agency proved to be As a consequence , a completely impracticable . major revision of Gosbank accounts for economic agencies and enterprises was introduced in 1957.

First -order accounts 20 through 61 are set aside for major industry groupings and sectors of the economy (see table 8-13). Each grouping or sector is assigned a pair of numbers, with even numbers signifying settlement accounts and odd numbers denoting short -term credit (or “ loan” ) accounts . Each first-order grouping contains all enterprises subordinate to agencies appropriate to that group ing. For enterprises subordinate to the sovnarkhozy which engaged in the activities under a number of

ACCOUNTING AND REPORTING PROCEDURES

234

first -order accounts , a special subsystem classi fying sovnarkhoz activities was devised and incor porated in the accounts. Each sovnarkhoz enter prise was assigned to a second -order accounton the basis of its basic activity , regardless ofthe branch administration to which it belonged . For the sovnarkhoz economy, at least, the accounts thus re flected activities grouped on the same principle as used for TsSU reports, i.e., by enterprise basic activity rather than by agency subordination . There was also some correspondence with the subgroup ings employed for the sovnarkhoz sector in the budget classification described in chapter V , asmay be seen in table 8-14. wherethe Goshank and budget classifications of accounts are compared . Neither of these two classifications is known in entirety , not even the overall number of accounts . From the information available , however , it appears that although there are numerous divergencies, the two classifications resembled each other closely in general structure and were quite compatible . Table 8-13.-- SECTORAL GROUPINGS IN FIRST - ORDER SETTLEMENT AND CREDIT ACCOUNTS OF THE GOSBANK SYSTEM

No. 1 20 , 22, 24 , 26 , 28 ,

30 , 32 , 34 , 36 , 38 , 40 , 42 , 44 , 46 , 48 , 50 , 52, 54 , 56 , 58 , 60 ,

Account title

21 Fuel and power industry 23 Metallurgical and chemical industry 25 Machine -building industry 27 Defense industry 29 Construction and construction materials industry 31 | Logging and paper industry 33 Light industry 35 Food industry 37 [ Reserved numbers ( 1959 ) ] ; Other branches of industry ( including local] ( 1966) 39 Agriculture and procurement 41 Collective farms (current and loan accounts ) 43 Transportation and communications 45 State trade 47 Consumers ' cooperatives 49 Foreign trade 51 Local industry ( 1960) ; Communal economy and Personal services ( 1966 ) 53 [ Reserved numbers? ] 55 Industrial cooperatives ( 1959--eliminated in 1960 ) 57 Supply and sales 59 Other enterprises and organizations 61 | Centralized operations of sovnarkhozy

lEven -numbered second digits designate settle ment accounts , odd - numbered second digits desig nate loan accounts .

Source :

Table VIII - C - 1

A distinct 11 - branch classification similar to the sovnarkhoz classification was used by Gosbank for enterprises of local industry. 200 Details of this grouping have not been identified , but it may have paralleled the industry grouping in the local budget

classification

of

revenues

and

expenditures

(chapter V ). Enterprises belonging to economic agencies other than sovnarkhozy (i.e., state committees and the remaining ministries) continued to be assigned to second -order accounts on the basis of agency subordination . That is , all enterprises of a given agency, such as the Ministry of Construction , were assigned to a single account (No. 281). An exception to this principle was in effect for three activities common to all major agencies: Trade, subsidiary agriculture, and supply and sales. Organizations basically engaged in these three activities were separated from their parent agency and assigned to appropriate second -order accounts (see accounts 44-45 and 56-57 in table VIII- C - 1) . A significant divergence may be noted between the Gosbank and TSSU classifications of defense industry . Published versions of TsSU's overall classification of industry do not mention defense industry, but Western analysts frequently assume that it is contained in the “machine - building and metalworking " category. 201 The presence of a separate first- order account for defense industry in the Gosbank classification (No. 26-27 ) makes it seem likely that such a branch was also recognized for sovnarkhoz industry . No direct confirmation of this has been found , and it may not apply after the return of industry from the sovnarkhozy to central agencies ( state committees and ministries) be ginning in 1963, For purposes of reporting on short-term credits , greater detail in enterprise groupings than that furnished by the second -order accounts provided . These so -called branch report schemes, which were numbered 2 through 16 during the sovnarkhoz period (table 8-12), grouped sovnarkhoz enterprises further by the principle of an abstract sector ; enterprises of other agencieswere grouped according to the next lower level of organizational subdivision , i.e., main administrations , trusts, etc. The only example available on this branch report type of classification for sovnarkhozy is limited to the following branches of light 202industry , each of which is assigned a “ symbol" : Symbol Footwear; leather; artificial leather and technical fabrics; dye extracts . . Fur and sheepskin ... Felt .. Rawhide (kozhevenno -syrevyye ) plants and bases Knitwear

01 05 06 07 08

These groupings appear to correspond with those employed by TSSU in some cases, and to diverge in others; thus a rigorous correspondence may not be maintained. 203

235

GOSBANK Table 8-14 .--COMPARISON OF GOSBANK AND BUDGET CLASSIFICATIONS OF ACCOUNTS FOR SOVNARKHOZ INDUSTRY : 1957 TO 1965

Gosbank no . 1

Budget classification 2 no .

Branch of sovnarkhoz industry

(x ) 200 , 210 201 , 211 203 , 213 (* ) 204 , 214 (* )

Coal....... Coal and shale ... Petroleum and gas ... Peat... Other branches of fuel . Electric power stations .. Electric power stations, power networks, and heat networks.

1 (x) 2 ( x) 3 (x) 6

220 , 230 221 , 231 222 , 232 (x )

Ferrous metallurgy Nonferrous metallurgy . Chemicals.. Chemicals (1965 ) and rubber ( 1962 )

4 5 (x) 8

240 , 250 (x )

Machine building .. Machine building and metalworking.

( x) 7

(x ) 300 , 310 302 , 312

Logging , woodworking , and paper.. Logging .... Paper and woodworking.

9 (x ) (x )

Construction ... Construction materials.. Other branches of heavy industry ...

10 11 20

(NA ) (NA ) (x )

....

30 (x) (x )

(x ) 320 , 330 321 , 331

Textiles and other branches of light industry . Light industry . Textiles....

340 , 350 341 , 351 (NA ) (NA )

Food products .... Meat and milk products . Fishing.... Other branches of the food industry

(x ) 21 22 23

440 , 450 (x )

Trade organizations.. Workers ' supply administrations.

(x) 32

560 , 570 (x )

Supply and sales organizations . Materials and equipment supply ( 1965) and sales ( 1962) ...

(X ) 31

( x) 58 ?, 592 60 , 61

Other organizations (centralized operations of sovnarkhozy ) . ( Other sovnarkhoz enterprises and organizations). Centralized operations of sovnarkhozy ..

40 (x ) (x)

Not available . X Not applicable . Even -numbered second digits designate settlement accounts, odd - numbered second digits designate loan accounts . The numbers apply either to articles in Division 2 of the revenue classification , or to chapters under Divisions 1 to 102 of the expenditure classification ( see chapter V ) . NA

Source :

Table VIII - C - 1 .

The reorganization of industrial management agencies initiated in October 1965 once again brought about changes in Gosbank's accounting and reporting . As might be expected, the changes primarily concerned Division VIII of the account

classification and balance sheet dealing with credit 204 and settlement operations (see table VIII- C - 1) ? Only two changes were made in the first -order accounts of this division . Account No. 36-37 was assigned a new title and function , “ Other branches

236

ACCOUNTING AND REPORTING PROCEDURES

of industry," which includes the ministries of public health and the committees for the press and cinematography. Local industry was also trans ferred to this account and its former account, No. 50-51, was reassigned to a sector expected to grow in importance—“ Communal economy and personal services . " Since elimination of the sovnarkhozy, second order accounts are again based on the agency principle ; separate accounts are set up for each union and republican ministry and agency. In the new system , an additional digit in the individual enterprise account number is employed to designate whether an enterprise belonging to a joint union republican type of agency is attached to its union or to its republican counterpart. In previous systems, such information had to be determined from other sources and reported as supplementary data . The innovation is intended to facilitate the use of quarterly credit plans for each republic separately . The overall number of second - order settlement and loan accounts was increased from 126 to 178 , including 86 for ministries and agencies of union subordination and 92 for republican agencies. The sequence in which branches and agencies are listed in the new Gosbank classification reportedly conforms to that adopted in national - economic plan tables by Gosplan and TSSU . As before , symbols used in branch reporting as a rule reflect organi zational units below the ministry level (main administrations and administrations ). For main administrations in certain industries (logging and fishing are cited as examples), a further detailing of enterprise types is also reported by symbols .

Major changes have been instituted in the re porting on short -term credits . Separate “ schemes" for each branch report have been eliminated , and each balance - sheet account (presumably first order ) has been allotted a full set of 99 two - digit symbols (01 to 99 ) for designating organizational subdivisions as well as a variety of indicators dealing with short-term credits by type and with overdue payments . Unused symbols may be used by republic - level offices for their own purposes. A radical change has also resulted from the introduction of an additional branch -principle dimension which will operate in conjunction with agency -defined accounts . A total of 32 two -digit sectoral designations (priznaki) have been set up , 18 for branches of industry and 14 for other sectors of the economy. These designationswill be used to gether with the two - digit symbols to provide ag gregations of data both by organizational sub division and by abstract sectoral groupings of enterprises. It is noteworthy, however, that the industry detail provided by this system is less than that available under the sovnarkhoz system - 18 versus 24 branches of industry . The sectoral

designations will not be employed in reports of individual Gosbank branches, but will be compiled in the machine data -processing stations of re publican or oblast offices of Gosbank , with economy wide accumulation by the Computing Center of Gosbank's Directorate . In addition to the increased detail for enterprise groupings and the extension of the principle of " pure” sectoral groupings to all agencies, further detail is to be reported on various types of short term credit. Since certain types are often peculiar to sectoral groupings, they could not conveniently be reported by organizational units in the previous system .

4. Reporting on Wage Expenditure Controls Gosbank control over wage- fund expenditures results in the submission of three separate reports . These differ in terms of the types of employing units covered and the type of information reported , The most general in scope ( scheme No. 18 ) covers all enterprises, organizations, and institutions having settlement or current accounts in Gosbank , whose wage payments are overdue on the first of the month.206 Each Gosbank institution maintains a time schedule of cash issued for wage payments, by individual client. The bank is therefore aware of which clients have overdue payments , and can require the necessary statements from those clients for its report. During the sovnarkhoz period, at least, the report was compiled in termsof the usual second -order agency -branch groupings and sep arated overdue payments to capital construction workers and for stipends. Gosbank also exercises a direct preaudit control over the cash payroll disbursements of two large categories of clients, with a differing controlbasis for each . One group consists of units having formal production plans. Their wages are released according to plan fulfillment performance. For each percent of underfulfillment of the output plan , 1 percent of the planned wage fund is not considered “ due” (ne prichitayetsya ) to the enterprise andmay not be released by Gosbank . For each percent of overfulfillment, on the other hand , additionalwages amounting to somewhat less than 1 percent of the wage fund are considered due and may be released 207 Actual work -time performed and wages accrued or earned (nachisleno) may be larger or smaller than this releasable amount, thus giving rise to either " savings" or overexpenditures of wages . The monthly Gosbank report on these complex calculations, scheme No. 17, is based on Statements of Accrued and Due Wages submitted by Scheme No. 17 groups enterprises the clients . in accordance with the second - order Gosbank accounts ,208 Gosbank exercises a different type of control over the wage fund of state farm and other state

GOSBANK - FINANCE AGENCIES agricultural enterprises, economic organizations 209 and budgetary insti not engaged in production , tutions. For state farms, wage money is released by Gosbank in accordance with approved plans for For budgetary and non quarterly wage funds. productive economic organizations , payroll money is differentiated into that for: (1) Staff members whose number and planned wages have been pre viously registered with , and approved by, the Ministry of Finance hierarchy; (2 ) personnel listed on employee rolls but not subject to registration with finance agencies ; and ( 3 ) unlisted personnel. Wages for the first group are issued in the amount accrued ; for the second group , in the amount accrued subject to an approved monthly total wage fund; and for the third , within the limit of a quarterly planned fund for this purpose . A quarterly Gosbank report (scheme No. 60) , used for all three types of organizations , is also based on statements submitted by the organizations. Scheme No. 60 is simpler than No. 17, as it is limited essentially to data on the approved quarterly wage fund , accrued wages, and overexpenditures, with agency detail only for the state farm group .210

237

Exemptions from Gosbank wage control appear to exist for a variety of reasons. The bank's interest is primarily in the cash released from its vaults . Organizations such as retail trade and public dining enterprises are permitted to retain a controlled portion of their cash intake for covering cash expenses , and therefore do not require pay roll money from the bank. Their wage expendi tures are subject to postaudit on the basis of reports on expenses. Similar considerations may apply to the postal service and Civil Air Fleet operations. Fishing and timber rafting operations may be exempted because of their mobility and lack of continuous access to a given branch bank , Security evidently is the reason for exemption in the case of party , defense, and internal security organiza tions, Individual military units have accounts in Gosbank , and certain Gosbank units accept deposits of military servicemen which can be withdrawn at any branch bank.213 As noted in chapter VII, however, the Ministry of Defense also has an ex tensive financial service network which handles payrolls. D. FINANCE AGENCIES

Gosbank control over payroll cash is extensive , but not universal. Circa 1960 , Gosbank controlled the wages of the following numbers of enterprises 211 or organizations (in thousands ): Industry Trade .. Transportation Communal economy . State farm and other state agri culture Budgetary and economic (khoz yayst vennyye ) organizations .

49 11.2 9.3 5.6 16.6

341

However, Gosbank control does not extend to : ( 1 ) Party and Komsomolunits and organizations supported by their budgets ; ( 2) organizations with a staff under five persons maintained on the budgets of trade unions or voluntary societies ; ( 3) institutions and organizations of the Min istries of Defense and Internal Affairs, and U.S.S.R. and Republican Committees of State Security ; (4 ) primary - level retail trade, public dining, and procurement enterprises; (5 ) enterprises engaged in fishing and primary fish processing, and timber rafting;

(6 ) Civil Air Fleet organizations and postal and telegraph service units ; and (7 ) collective farms.

The finance agencies, which comprise the various components of the Ministry of Finance U.S.S.R., are primarily responsible for supervising the execution of the budget. They exercise control over budget revenues and expenditures, all opened budgetary credits and appropriations, and mutual settlements among the budgets as well as over the cash in Gosbank and Stroybank and numerous funds and reserves . 214 Another major responsibility of the Ministry of Finance hierarchy is to maintain control over the level of administrative staff personnel and administrative-managerial expenses of khozraschet enterprises, as well as over the total 215 staff and budgets of budgetary institutions.

As noted in chapter II, finance agencies operate at two broad levels, central and local. Central organs are those dealing with union and republican budgets, and local organs are those dealing with autonomous republic , oblast, kray, rayon, city , and rural budgets. Local departments of finance contain two separate accounting offices dealing with budget revenues. One, known as the “budget" accounting office , maintains bookkeeping accounts ( expenditure as well as revenue) on the budget executed by its own finance department. For example , in an oblast finance department this office maintains accounts for the central oblast government budget. The other , known as the “ state revenue" accounting office, maintains records on accruals , receipts, writeoffs , etc., by individual payer , for all budget revenues in the region , regardless of the budget to which the revenue is assigned . In rural soviets, urban settlements , and some small cities, no separate department of finance exists ; budgetary accounting and reporting is carried out by the

ACCOUNTING AND REPORTING PROCEDURES

238

executive committees of the soviets , which employ greatly simplified data systems. In themain tenance by the Ministry of Finance hierarchy of social security accounts on pensions and grants , a separate system of standard accounts and reports is employed 217 Like the primary operational units , the finance agencies employ double - entry accounting, the journal- general ledger accounting system , and a standard classification of accounts . Accounting procedures and documents arehighly standardized. There are, however , differences in accounting and reporting procedures employed at the two levels of agencies , as can be seen in theprimary documents , accounting registers, classifications of accounts , and report forms used . The following discussion of accounting and reporting procedures used by finance agencies distinguishes, when possible ,

these differences.

This

discussion

is directed

primarily to procedures used in the “ budget" accounting office at each level of the hierarchy .

1. Accounting Procedures a . Primary Documents . - A list of the primary documents used by finance organs is given in table 8-15.219 These are themajor accounting formsused to effect receipts to and expenditures from the budget, and to maintain control over financial operations. Although primary to finance agencies , some of these documents have been described elsewhere in this report as external reports of budgetary institutions (form Nos. 1 -MM and 1 -MK , section VIII- B ) or as bank payment instruments (form Nos. 12 , 13, and 15 , chapter IX ). These primary documents serve as the basis for memo orders used in posting to budget- execution accounts .

Table 8-15 .--PRIMARY DOCUMENTS USED IN BUDGET - EXECUTION ACCOUNTING

1 -MM 1 -MK 5

6 , 6 -S, 6 - T

9

10 11

12 13

14 15

16

17

Title

..... Monthly Report on Execution of the Budgetary Expenditure Estimate ...... Quarterly Report on Execution of the Budgetary Expenditure Estimate .... Calculation of Funds to be Transferred to the Current ( Settlement) Accounts of Institutions , Organizations , and Enterprises . ( Indi cates amount of funds received by each institution . ) .. Authorization to Gosbank for Transfer of Funds From Local Budget to Credit Administrators . (Forms 6 - S and 6 - T are used when funds are to be transferred to several credit administrators on one form . ) ...... Notification of Changes in Opened Credits . (From finance organ to chief credit administrator . ) . Authorization for Closing Credits . (Notice from finance organ to Gosbank . ) ... Notification of Mutual Settlements . (Notice issued by a superior finance organ to its subordinate finance organ when an enterprise [ institution , organization ] is being transferred to the latter's jurisdiction . The statement indicates budget appropriations and payments to the budget of an organization in question and account numbers to be debited and credited . ) .. Expenditure Schedule--Financing Plan . ( Indicates investments and sources of financing by quarters . ) ... Expenditure Schedule for Financing Institutions Maintained by the Budget . (Notice from a finance organ to Gosbank to open credit in the name of an indicated institution for a specified sum . ) .... Monthly Report of Stroybank and Gosbank Institutions on Financing Capital Investments and Other Measures From Budgetary Means . Expenditure Schedule for Financing Economic ( khozyaystvennykh ) Organizations . (Notice from a finance organ to Gos bank to open credit in the name of the indicated organization for a specified sum . ) ..... Listing of Expenditure Schedules . ( Indicates chief credit adminis trator , amount of credit , and bank . ) Notification of Changes in Amount of Financing . (Notice sent to credit administrators . ) ....

See footnotes at end of table .

Level of use

HH

Form no .

L

L R

R

L, R L, R

R L, R

R R L

239

FINANCE AGENCIES Table 8-15 .--PRIMARY DOCUMENTS USED IN BUDGET - EXECUTION ACCOUNTING --Continued

Form no .

Level of use

Title

19

Gosbank Statement ( vypiska ) of Current Account ..

L

Republican finance organs use the following additional documents :

1 . 2 .

3. 4 .

Payment authorizations; Bank statements (vypiski) of budget income and expendi ture accounts and current accounts , with appropriate documents attached ; Monthly Gosbank report on cash execution of the budget ; Statement ( spravka ) of changes in appropriations and on amounts transferred in mutual settlements with other budgets .

Local finance organs use the following additional documents :

L R

Statement (spravka ) of Gosbank institutions on amounts received and expended for financing capital investments and other measures in executing authorizations of Stroy bank institutions ;

2 .

Checks , payment authorizations , and other documents con nected with execution of the budget .

Used by local finance agencies . Used by republican finance agencies .

Source :

b.

1 .

Dedkov and Yakimov , Bukhgalterskiy , 1965 , pp . 298 , 338 .

Classification

of Accounts . --The

classi

fication of accounts currently being used by Soviet finance organs for budget transactions (table VIII - D - 1 ) was developed in the mid - 1950's and has been modified severaltimes since. Designed for the use of local, republican , and union finance organs, it has some accounts which are used by finance organs on more than one level, and others which are restricted to the finance organs of one level . There are nine sections, which consist of summary and subaccounts , and a memorandum account section . The summary accounts are designated by a two -digit figure, and the subaccounts and memo randum accounts by a three- digit figure. Section I - Monetary Assets - contains accounts which show money held in Gosbank and Stroybank for capital investments , special- purpose financing , and money en route , i.e., money transferred by one finance organ to another but not received by the latter until the following month . Section II Expenditures - contains accounts which indicate cash expenditures from the various budgets and amounts temporarily deposited to cover them . Section III -- Loans Issued - contains one account showing short -term loans given to lower budgets. Section IV - Revenues - contains accounts which show revenues received by the bank , revenues which

have not been assigned to any section of the budget , and amounts temporarily diverted from central to local budgets . Section V - Loans Received - lists accounts which give data on loans received from higher budgets and banks. Section VI - Settlements contains accounts which give data on transactions between budgets . Section VII - Assets Transferred and Received - contains accounts showing transfers to and from other budgets . Section VIII - Funds contains accounts for data on funds and special purpose means, and Section IX --Results - contains one account to which accounts dealing with execution of the budget are closed out at the end of the year . Memorandum accounts record special- purpose re serves of local budgets , long -term bank loans, appropriations and opened credits for expenditures paid through Gosbank , and opened credit for financ ing capital investments. c . System of Accounting Registers. --Finance agencies use the journal- general ledger accounting system , which differs from the system used in the khozraschet sector only in regard to the registers designed to record detail accounts (table 8-16 ).221 Memo orders are first entered in the Book of Summary Accounts ( form No. 1 - F ), which is a general ledger combining chronological and system atic entries and the only register designed for

240

ACCOUNTING AND REPORTING PROCEDURES

summary accounts . After entry in this form , the memo order is posted to one of the appropriate registers discussed below . Table 8-16 .--ACCOUNTING REGISTERS USED BY FINANCE AGENCIES Form no .

Title

Book of Summary Accounts... Book of Current Accounts, Funds , and Reserves . 2 -F Book of Monetary Assets.... 3- F Book of Credits , Current Accounts of Credit Administrators , and Cash Expenditures .. 4 -F Book of Settlements With Other Budgets Book of Revenues..... 5-F 5 -MF Statement of Revenues and Expenditures 6 - MF | Record Book of Appropriations and Opened Credits .. 7 -MF Record Book for the Reserve Fund of the Council of Ministers of a Union Republic .... 1- F 2- F

Level of use

L, R L R

L, R L, R L R

R

R

L--Used by local finance agencies . R --Used by republican finance agencies . Source : Dedkov and Yakimov , Bukhgalterskiy , 1965 , pp . 299 , 321-325 , 339 , 356-359. No. 2 - F - Book of Current Accounts , Form Funds, and Reserves - is used by local finance organs to record : Monetary assets of the budget , excluding those on deposit in Stroybank and Gosbank for financing capital investments and other meas ures, and those deposited in the current accounts of credit administrators (account Nos. 011, 015, 018); the redistribution of local industry assets from profits (account Nos. 016 , 080); assets for financing automobile road construction from the 2 percent profit deductions of auto transport (account Nos. 017a , 083); money temporarily carried as revenue of the local budget (account No. 042); and results In of executing the budget (account No. 090 ). addition , two memorandum accounts, Nos. 110 and 120 , are recorded in this register. Form No. 2 - F - Book of Monetary Assets - is used by the finance ministry of a union republic , It contains data on assets of the republican budget in Gosbank , Stroybank , and en route (account Nos. 010 , 013, and 018 ) , assets from the redistribution of local industry profits (account Nos. 016 and 080), assets for financing automobile road construction obtained from the 2 percent profit deductions of auto transport (account Nos . 017a, 083), amounts temporarily transferred to cover the expenditures of a union republican budget , and results of ex ecuting the budget (account No. 090 ) . Memorandum account No. 120 is also recorded in this book . Form No. 3 - F - Book of Credits , Current Ac counts of Credit Administrators, andCash Expend itures - is used by local finance organs to record

budgetary assets held in Gosbank and Stroybank for financing capital investments and other meas ures (account No. 013), the current accounts of credit administrators in Gosbank (account No. 014 ), cash expenditures of local budgets (account No. 020 ), appropriations for current local budget expenditures paid through Gosbank , and opened credits for financing capital investments and other measures through Stroybank and Gosbank (memo randum account Nos . 130 and 140 ). Cash expendi tures of local budgets shown in this book include the repayment of long - term loans from banks and payments of loan interest. Form No. 4 - F - Book of Settlements With Other Budgets - is used by both local and republican finance organs. It contains data on short - term loans received from superior budgets and issued to lower budgets, mutual settlements among various budgets , and transfers from one budget to another (account Nos. 060, 061, 062, 071, 072, 073). Form No. 5 - F - Book of Revenues - is used by local finance organs to record revenues paid into local budgets (account Nos. 040 and 041). All receipts are recorded in accordance with the budget classification , i.e., by division , chapter , and section , Form No. 5 -MF_Statement of Revenues and Expenditures - is a monthly statement (vedomosť ) used by the republican finance organs. Separate statements are prepared for revenues and expendi tures , These statements are compiled from monthly reports of Gosbank and Stroybank on receipts and cash expenditures of budgets, in terms of bank reporting symbols, and they serve as subsidiary ledgers for account Nos. 020 and 040.

Form No. 6 -MF - Record Book of Appropriations and Opened Credits - records the opening and losing of credits (memorandum account Nos. 130 and 140) and budgetary allotments . It shows the initial appropriations, for the year by quarter , as shown in the detailed schedule (rospis') of the budget approved by the minister of finance of the republic. In accordance with the “ proprietary” type of ac counting employed in the Soviet Union , such “ budgetary" categories as appropriations or planned expenditures are not reflected in the double entry accounting system ; they are not even assigned a formal single - entry memorandum account, although their recording in this book is a virtual equivalent, It should be noted that the term used for appropriations (assignovaniya ) in the title is dropped in the body of the form for another term - naznacheniya, apparently to distinguish planned expenditures from funds appropriated and actually deposited to the accounts of spending units . The term assigno yaniya in connection with local budgets signifies the latter concept. The form is also used to record operations on the formal single -entry memorandum accounts dealing with

FINANCE AGENCIES opened credits for expenditures paid through Gosbank (No. 130 ), which covers the current support of budgetary institutions, and with opened credits for financing capital investment and othermeasures through Stroybank and Gosbank (No. 140 ). For each chief credit administrator ( i.e., ministry, central agency, or, formerly, sovnarkhoz), a separate account is opened for each division under the " financing the national economy" group for which credits are opened , and for each section under the Within each " sociocultural measures" group . account, selected major budget expenditure articles are also segregated. An interesting provision in the instructions for the use of this book indicates that it is possible for the republican ministry of finance to open credits directly in the name of individual subdivisions ( administrations or as sociations) for which separate accounts are also maintained . Form No. 7 -MF - Record Book for the Reserve Fund of the Council of Ministers of a Union Repub lic - records the utilization of reserve funds estab lished by councils of ministers of union republics . At the end of each month a turnover statement is compiled for a group of subaccounts embraced by a single summary account. The totals of this statement are compared with the total of an ap propriate summary account found in form No. 1 . This turnover statement serves to check on the accuracy of postings and facilitates the compilation of reports , since many reports require data found only in detail accounts .

(Unnumbered report.) ecution .

241

Report on Budget Ex

This report is divided into two sections, Income and Expenditures. 224 All items in both sections are designated in terms of the budget classification. The Income section enumerates the sources which contribute to the budget, including deductions from profits of enter prises and organizations, short-term loans from higher budgets, unused resources from the previous year , and borrowed cash . The Expenditures section itemizes expenditures, by type of activity. Form No. 1. Balance Sheet for Execution of Republican and Local Budgets . This is the basic financial report on budget ary operations prepared by the local finance agencies, and is analogous to the balance sheets prepared by khozraschet and budgetary organi zations. All entries are identified by second order account numbers. The data for com pleting this report are obtained from the Turn over Statement of Balance Sheet Accounts , which is prepared at the end of the accounting period. Form No. 2. Report on Budget Revenues and Expenditure. This report gives a summary review of the flow of funds to and from the budget directly executed by the finance organ . Section I enumerates income, by division , chapter, and section of the budget classification ; section II lists expenditures in similar detail, including articles .

2. Reporting by Finance Agencies Finance agencies submit detailed reports on all aspects of their activities to their appropriate superior organs. There There is is a considerable differ ence in the types of reports submitted by local and central finance organs, and reporting at the two levels is discussed separately .

a . Reporting of Local Finance Agencies. - Local finance agencies consist of ministries of finance of autonomous republics and departments of finance in the executive committees ofkrays, oblasts , okrugs, cities, and rayons. Since the Ministry of Finance is organized on the union - republican principle , each unit has a dual responsibility - horizontally , to the executive governmental agency at its level, and vertically , to the finance agency at the next higher level. Each agency submits reports to its superior agency on the execution of the budget for which it 222 is responsible. The superior unit consolidates reports of its subordinate organs, adds data from its own operations and, in turn , submits reports to its superior agency . A list of such reports sub mitted by local finance organs is given in table 8-17 . 223

Form No. 2a . Report on Revenues and Expend itures by Type of Budget . This form is similar in purpose to form No. 2 , but it includes all subordinate levels of Both budgets within the given territory. revenues and expenditures are listed by budget classification . Form No. 3. Report on Execution of Special Means Estimates. This report gives data on the disposition of special means. It is completed on the basis of data obtained from the reports of chief credit administrators . Form No. 3a. Report on Receipts and Expendi tures of Assets Received by Road Departments (Administrations) From Collective Farms, State Farms, and Industrial, Transport, Con struction , and Other Enterprises and Economic Organizations Participating in Road Work . This report provides information on the degree of participation of collective farms, state farms, and other enterprises and organizations in the construction and repair of roads.

242

ACCOUNTING AND REPORTING PROCEDURES Table 8-17 .--REPORTS ON BUDGET EXECUTION BY LOCAL FINANCE ORGANS

Form no .

(NA )

Perio dicity

Title

M

Report on Budget Execution ....

1

Balance Sheet for Execution of Republican [A.S.S.R.] and Local Budgets .

2

Report on Budget Revenues and Expenditures .

А

2a

Report on Revenues and Expenditures by Type of Budget ..

A

3

Report on Execution of Special -Means Estimates..

Q, A

3a

Report on Receipts and Expenditures of Assets Received by Road Depart ments (Administrations) From Collective Farms , State Farms, and Industrial , Transport , Construction , and Other Enterprises and Economic Organizations Participating in Road Work .....

Q, A

4

5

5 -K

110

Q , A

Report on Fulfillment of the Network , Staff , and Enrollment Plan of Institutions on Republican [A.S.S.R.] and Local Budgets

A

Report on Actual Expenditures Charged to the Wage Fund for Nonstaff (Non registered ) Personnel of Institutions on Republican [A.S.S.R.) and Local Budgets ...

A

Report on Execution of the State Budgets of Autonomous Republics and Local Budgets ...

Q

Report on Receipts and Expenditures From Self -Taxation (samooblozheniye )..

А

Supplementary Reports

(NA )

(NA )

(NA )

Data on Asset Balances of Budgetary Institutions in Settlements , in Materials , and on Fixed Assets ...

A

Statement ( spravka ) of Expenditures Charged to Additional Revenues Dis covered and Received During the Course of Budget Execution ....

A

Statement of Receipts and Expenditures of the Educational Assistance Fund .

Q, A

Attachments Q , A

(NA )

Explanatory Note ...

(NA )

Statements ( spravki) , Certified by Gosbank or Stroybank Institutions, of Money Asset Balances of the Budget Contained in Current Accounts in Banks

A

Statement, Certified by Gosbank , of Deductions From State Nontax Revenues Into Local Budgets ..

A

(NA )

(NA )

M

Taxes and

Statement , Certified by the Bank , of Budget Indebtedness on Long - Term Loans at the End of the Year ..

Monthly .

Source :

Q

Quarterly .

A

Annual .

NA

A

Not available .

Dedkov, Razvitiya , 1962 , pp . 122–130 ; Dedkov and Yakimov, Bukhgalterskiy , 1965 ,

pp . 372–373 ; Goloshchapov , Byudzhetnyy , 1963, pp . 236-251 .

Form No. 4. Report on Fulfillment of the Net work , Staff, and Enrollment Plan of Institu tions on Republican and Local Budgets. This report is based on data obtained from reports of credit administrators and lower finance organs .

Form No. 5. Report on Actual Expenditures Charged to the Wage Fund for Nonstaff (Non registered) Personnel of Institutions on Repub lican and Local Budgets . This report gives data on wages paid to per sonnel employed by local institutions in addition

FINANCE AGENCIES to the regular, registered staff. Wages are grouped in such termsas thenational economy, education , health , social security, administra tion, and others. Wages of nonstaff personnel in enterprises and economic organizations are not included .

Form No. 5 - K . Report on Execution of the State Budget of Autonomous Republics and Local Budgets . This report is divided into four sections: Section 1 - Revenue -- gives sources of income in terms of the budget classification; section II - Expenditures - indicates their distribution in terms of the budget classification except for articles, for which only selected totals are shown; section III - Expenditures from the Wage Fund for Nonstaff (Nonregistered )Personnel of Budgetary Institutions provides data on ex penditures for the employment of personnel in addition to registered staffs, in termsof group ings similar to those used in form No. 5 ; and section IV - Information on the Network , Staff , and Enrollment Plan of Budgetary Institutions gives data on the actual number of schools , local by operated etc. classes, beds, agencies. 225

Form No. 110. Report on Receipts and Expend itures from Self - Taxation . This report is compiled by rayon finance organs from form No. 4 submitted by the rural soviets. Other finance organs compile this report on the basis of data obtained from subordinate finance agencies.

Less information is available on the supple mentary reports and attachments to the annual report listed in table 8-17. The report on Asset Balances of Budgetary Institutions, which is based on reports of both chief credit administrators and inferior finance agencies, shows available stocks of materials and food products and accounts re ceivable , This information is used to allow for excess stocks in current financing. Data on fixed assets is limited to their total balance - sheet value , with a subtotal for residential housing and dormitory facilities. The Statement ofExpenditures Charged to Additional Revenues, groups the ex penditures by sector of the national economy or by socioeconomic measure; the object designation of expenditures is specified only for capital in vestments (articles 13 and 25 ). The Explanatory Note attached to quarterly and annual reports discusses the performance of the reporting agency , points out deviations from the plan , if any, and indicates future corrective measures. Since budg et transactions are actually made automatically by the banks, it is not surprising to find that bank certifications of numerous statements are also attached to the annual report.

243

b . Reporting of Republican Finance Agencies. The ministry of finance of a union republic sub mits monthly, quarterly , and annual reports which are based on data from a wide variety of sources. 226 In addition to data on the execution of the republican budget maintained by the ministry itself, other data are obtained from the reports of inferior finance agencies, from republican offices of the bank systems, and from ministries and other operational agencies . A list of the monthly, quarterly, and annual reports submitted by the ministry of finance of a union republic is given in table 8-18. Several of the more important reports , designated by an asterisk in the table, are discussed below . Per tinent information located on the other reports has been cited after the title of the form in the table .

(Unnumbered report.) Report on Execution of the State Budget of a Republic . This is the principal summary report on budget activities at the republic level. In themonthly version , which is submitted by telegraph , revenues and expenditures are indicated by budget classification . Profit deductions are listed by sector of the economy from which derived , and profits transferred to the union budget are shown separately . Expenditures are shown by sector of the economy, although capital investment expenditures are shown separately . Expenditures charged to the reserve fund of the council of ministers of a union republic are indicated in this report, but expenditures charged against the reserve fund of the U.S.S.R. Council of ministers are shown only in the annual report form No. 1 , which is discussed below . In the quarterly version of this report , section I lists revenues by budget classification . Deductions from sovnarkhoz profits were in dicated by sector of the national economy, but sovnarkhoz profits transferred to the union budget were not included in the overall total shown in the report. Section II enumerates expenditures by budget classification . It in cludes such items as financing the economy, social- cultural measures,maintenance of state administrative organs , and financing court Sovnarkhoz expenditures were in organs. dicated by sector of the economy.

Section III contains data on expenditures for health and education , by section of the budget classification , and by a limited grouping of budget articles showing wages, food, equip ment, and capital repair of buildings and structures. Social security expenditures are indicated by section of the budget classification , but administrative expenditures are indicated only by type of budget; only wages are shown

244

ACCOUNTING AND REPORTING PROCEDURES separately . Section IV contains data on the network , staff, and enrollment of institutions financed from the state budget of a union republic, by the following sectors : Agri culture, education, health , state social in surance, social security , and administration .

A reference information section attached to this report contains data on the deductions from profits and expenditures of industry sub ordinated to local soviets , and on expenditures communal- housing for agricultural and activities.

Table 8-18 .--REPORTS ON BUDGET EXECUTION BY REPUBLICAN MINISTRIES OF FINANCE Form no .

Title

(NA ) *1

Report on Execution of the State Budget of a Republic ..

Periodicity M , Q A

Expenditures on the Financing of Capital Investments , Increases in Normatives , Covering Shortages of Own Working Capital, and State Subsidies in the State Budget of a Republic ...

A

Expenditures on Social- Cultural Measures in the State Budget of a Republic . (Shows expenditures for technical supervision of construction and capital repair of schools, medical institutions , maintenance of centralized account ing offices attached to national education and health departments , and expenditures financed by accumulations of local industry . ) ...

A

*k

Execution of the Revenue and Expenditure Schedule of a Republican Budget ..

A

5

Execution of the Revenue and Expenditure Schedule of Republican Budgets of Autonomous Republics and Local Budgets . (Contains data obtained from form No. 2. Expenditures covered by accumulations of local industry are reported under articles 12, 13 , and 18 of the budget classification .).

A

6

Revenues and Expenditures by Type of Local Budget. (Contains aggregated data obtained from form No. 2 - a submitted by local finance organs . The balance of budgetary means at the beginning and the end of the year are indicated in aggregate figures .) .....

A

2

3

-

Revenues and Expenditures of the State Budget of a Republic .......

7

8

*9 (NA )

10

11

11 - a

Revenues and Expenditures of Republican Budgets of Autonomous Republics and of Local Budgets . (Also contains data on the transfer of means out of republican budgets as well as amounts transferred to these budgets . ) .... Balance Sheet on Execution of the State Budget of a Republic . (Contains data found in all the accounts of the classification . The data on the budgets of autonomous republics and local budgets are obtained from the balance sheets submitted by local finance organs . ) . Fulfillment of the Network , Staff, and Enrollment Plan of Institutions on the State Budget of a Republic.. Report on Expenditures From the Wage Fund for Nonstaff Personnel of Institu tions on the State Budget of a Republic .... Report on Expenditures From the Wage Fund of Institutions on the State Budget of a Republic . (Contains data derived from article No. 1 of the budget classification . ) ..... Execution of Estimates for Special Means of Institutions on the State Budget of a Republic. (Contains data on tasks assigned and executed . Data are also obtained from form Nos . 3 and 4 submitted by local finance organs .) .. Report on Contributions and Expenditures of Means Obtained by Road Departments (Administrations ) From Collective Farms , State Farms, and Industrial, Trans port , Construction , and Other Enterprises and Economic Organizations Partici pating in Road Work ....

12 110

Execution of Estimates for Maintenance of Kindergartens and Nurseries . Consolidated Report on Receipts and Expenditures From Self - Taxation ( samooblozheniye ) . Attachments

(NA )

Explanatory Note .....

(NA )

Statement of Expenditures Charged to the Reserve Fund of the Council of Ministers of a Republic ..

See footnotes at end of table .

A

Q, A A Q

A

Q, A

Q, A A A

Q, A A

FINANCE AGENCIES

245

Table 8-18 .--REPORTS ON BUDGET EXECUTION BY REPUBLICAN MINISTRIES OF FINANCE -- Continued Form no . (NA )

(NA )

(NA ) (NA )

(NA ) (NA) (NA ) (NA )

M

Periodicity

Title

Statement of Expenditures Charged to the Union Budget and Reserve Fund of the Council of Ministers U.S.S.R. and Statements From Republican Bank Offices Confirming These Expenditures... Statements From Republican Bank Offices on Balances of Monetary Assets at the End of the Year for the Republican Budget of a Republic , Republican Budgets of Autonomous Republics, and Local Budgets .... Statement of Expenditures Charged to Additional Revenues Discovered in the Course of Budget Execution .... Statement of Deductions From Profits and Expenditures for Financing Sovnarkhoz Enterprises and Organizations ... Statement of Expenditures From Republican Budgets for Supplements to the Purchase Prices of Agricultural Products ... List of Changes Introduced Into the Budget in the Course of Its Execution . Data Reconciliation Table Between the Gosbank Report on Revenues and Expendi tures of the Republican Budget and Form No. 4 ...... Statement of Receipts and Expenditures of the Educational Assistance Fund Under the State Budget of a Republic ....

Monthly . Q Quarterly . A Annual . These forms are discussed in the text .

NA

A

A A A

A A A

Q, A

Not available .

Dedkov and Yakimov , Bukhgalterskiy , 1965 , pp . 387-399 ; Goloshchapov , Byudzhetnyy , 1963 , pp . 251-254 .

Form No. 1. Revenues and Expenditures of the State Budget of a Republic . This report contains data on transactions with the union budget as well as on the reserve fund of the council of ministers of the republic . The report has a reference information section con taining data on profitdeductions and, formerly , on the financing of sovnarkhoz enterprises , by branch of industry. Form No. 4 , Execution of the Revenue and Ex penditure Schedule of a Republican Budget . This report contains data on financing the national economy, by ministry and agency and by article of the budget classification . Ex penditures for education , health , and adminis tration are given according to section and Revenue data are given only by article . division of the budget classification .

Form No. 9. Fulfillment of the Network , Staff, and Enrollment Plan of Institutions on State Budget of a Republic . This report is compiled by summing data given in annual form No. 3 ( submitted by sovnarkhozy , ministries , and other central institutions) and in annual form No. 4 ( submitted by local finance organs). Numbers of and expenditures on administrative managerial personnel of state administration are indicated separately in the budgets of republics, automous republics, and local organs .

3.

The Submission of Reports

Both local and central finance agencies sub mit monthly, quarterly , and annual reports.227 Local organs submit all reports to their superior organizations, but their annual reports are also submitted to the republican councils of ministers or to the executive committees of local soviets . For example , the consolidated annual reports of a rayon finance organ are submitted to both the oblast finance department and the executive committee of the rayon soviet. A commission of the soviet reviews the reports , which are then approved by the full soviet . Submission dates for the local finance organs are determined by their superior organizations.

Annual reports of republican finance agencies are submitted to both the republican councils of ministers and the Ministry of Finance U.S.S.R. The republican council ofministers reviews the reports and submits them to the republican supremesoviet for review and approval.

Annual reports on the union and state budgets of the U.S.S.R. are compiled on separate forms. The annual report on the state budget is compiled by the Ministry of Finance U.S.S.R , on the basis of the report on the union budget (which the Ministry also compiles) , the reports of union republics, and reports on the state social security insurance budget which are prepared by the central trade union organization . This annualreport on the state budget

246

ACCOUNTING AND REPORTING PROCEDURES

is submitted to the followingU.S.S.R. agencies : The Council of Ministers, Gosplan , and TsSU . The Council of Ministers approves the report and submits it for approval to the Supreme Soviet of the This report was also submitted to U.S.S.R. Sovnarkhoz U.S.S.R. and the Supreme Economic Council during the period of their existence.

The first type consists primarily of residential housing and communal economy organizations administered by municipal or other local govern ments. It also includes such miscellaneous areas as the All -Union Agricultural Equipment Associa tion , and land reclamation work . For sectors of this type, accounting systems are patterned after the standard khozraschet system to a large extent.

E. OTHER SYSTEMS This section concludes the description of accounting and reporting with some comments on several disparate subjects related to this general field . Part 1 briefly considers the accounting and reporting systems used in types of organizations not covered by the major systemsdescribed above namely , other state khozraschet enterprises , co operatives, and public organizations. Part 2 describes the elaborate system for regulating the storage and preservation of the voluminous ac counting documents and reports . Part 3 discusses recent efforts to centralize accounting and report ing, particularly in budgetary institutions. Part 4 deals with the mechanization and computerization of economic data processing, a problem of increasing importance in the Soviet Union as the growing plexity of the economy and insistence on administrative centralization have sharply in creased the amount of data generated for planning and control purposes. The last part (5 ) contains a brief discussion of the 1965 Work Plan of TSSU , which provides some additional information on the link between the data generating systems and the final compilation of financial statistics. A trans lation of the section of the plan dealing with financial and price statistics is presented in appendix A.

1. Accounting and Reporting in Other Sectors Although much information is available on the accounting systems used in other types of organi zations, procedures are in general similar to those described above and only a few examples are discussed to highlight some of the differences. The comments are limited to the classifications of accounts used and the accounting reports submitted. a . Other State Khozraschet Organizations- The uniform classification of accounts and the attendant bookkeeping systems described in section A , above , are used by state khozraschet enterprises in most of the productive sectors of the economy. There are, however , several important sectors which employ other systems. These are essentially of two types - first, activities that are widely scattered among many administrative agencies or government organs, particularly at local levels , and therefore lack a national organization for approving standard systems; and secondly , activities that are national in scope and administratively centralized , but whose accounting and reporting requirements differ radically from those of other sectors.

Housing facilities are operated under a wide variety of administrative and financial arrange ments . One such arrangement, in which the " captive” facilities are attached to khozraschet enterprises, has already been covered in section A ; standard account No. 29 is used for these and other nonbasic activities, and the main set of reports of the parent enterprise includes one on the housing and communal economy (No. 19 ). Parent budgetary institutions may also operate subsidiary housing facilities means" accounts .

and carry them on “ special The remaining facilities of this

sector (aside from private housing) are attached to urban and other local governments . Housing organizations subordinated to a local soviet are administered by a housing administration ( zhilishchno - ekspluyatatsionnaya kontora, or zhili shchnaya kontora - housing management office or housing office) which , as a rule , is a khozraschet organization and submits reports for subordinate housing organizations. 228 These housing adminis trations use the journal - general ledger accounting system . They have their own accounting and re porting procedures, and since January 1 , 1960 , have been using a classification of accounts developed for them by the Central Accounting Office of the Ministry of Communal Economy R.S.F.S.R. 229 This classification , consisting of 24 summary accounts, 21 subaccounts , and 4 single entry memorandum accounts , was patterned after the unified classification of accounts (section A ) ; only 5 summary accounts differ from the latter classification .

Housing administrations submit quarterly and annual reports . The annual accounting reports listed below by number and title were approved by the Ministry of Finance and TsSU of the R.S.F.S.R.230

1 - ZhKh. Annual Balance Sheet as of January 1 2 - ZhKh. Characteristics of Dwelling and Non dwelling Funds 3 - ZhKh . Movement of the Charter Fund 4 -ZhKh . Fulfillment of the Capital Repair Plan 5 -ZhKh . Statement of Incomeand Expenditures 6 - ZhKh. Report on Profit and Loss 7 - ZhKh. Report on Labor Enterprises of the urban communal economy, which are administered by local soviets , provide a

OTHER SYSTEMS

of services to urban communities in cluding : Sanitation , sewage,water , gas, electricity , baths, laundries, transportation , etc. They operate on either a khozraschet or a budgetary basis. A classification of accounts for the khozraschet enter prises, effective as of January 1 , 1960 , was issued by the Ministry ofCommunalEconomy R.S.F.S.R231; the budgetary organizations presumably use the classification system described in section B. The khozraschet enterprises apparently submit the same accounting reports submitted by khozraschet enter prises engaged in similar activities in other sectors of the economy. For example , enterprises engaged in park construction and landscaping submitmany of the same types ofreports submitted by construction enterprises . 232 variety

With Capitalist Countries ” and “ Report on Fulfill ment of the Currency Plan ” are labeled as operational reports. Accounting reports submitted by foreign trade associations deal with general financial conditions, imports , and exports (table 8-19 ). They are sub mitted annually, quarterly , and monthly. The annual report is the most comprehensive; the quarterly report consists of several individual reports ; and the monthly report consists only of Table 8-19 . - ACCOUNTING REPORTS SUBMITTED BY FOREIGN TRADE ASSOCIATIONS

Form No. The second type of khozraschet activities not covered by the main system described in section A includes such centralized systems as the banks, the state insurance system , and the foreign trade sector. Accounting and reporting in these sectors is so specialized that no attempt is made to model it after the basic pattern , and entirely unique systems are set up . This may be seen from a closer examination of the foreign trade sector . (Gosbank is treated in section C.)

A separate uniform classification of accounts, differing completely from the classification used in other khozraschet sectors, is employed by foreign trade associations. Developed and controlled by the Central Accounting Office, the classification consists of 154 summary accounts , grouped in 17 sections, and 7 single - entry memorandum accounts . The summary accounts have 500 three- digit desig nations with unused slots for future insertions. The accounts are designed to accommodate mechanized accounting procedures.

1- A 3 18 18 - A

Perio dicity

Balance Sheet of an Association . M , Q , A Reference Supplement to the Balance Sheet .. Report on Profit and Loss ... Movement of the Charter Fund... Report on Fulfillment of the Expense Estimate ... Report on Fulfillment of the Estimate for Administrative Expenses Abroad ..... Status of Foreign Accounts Payable and Receivable .... Explanatory Note ....

Q, A A QA A

A QA A

Imports

Supplement No. 2 2 2-B

Supplement No. 3

24

3-E

4 21

25

M

Statement on Movement of Goods Shipped [ to Importers ] ... Report on Acquisition and Trans fer of Imported Goods ..... Statement on Inventories of Imported Goods .. Statement of Settlements with the Ministry of Finance U.S.S.R. on Import Operations . Report on Overhead Expenses for Imported Goods ....

QA A A

QA

A

Exports Statement on Inventories of Export Goods in the U.S.S.R. A and Abroad.... Report on Sales of Export Goods . 22, A Report on Overhead Expenses in the U.S.S.R. for Exporting A (Re -exporting ) Goods ..... Report on Overhead Expenses Abroad for Exporting (Re A exporting ) Goods .... Report on Sales of Goods and Materials on the Domestic Market ... Q, A

22 The foreign trade associations , like other khozraschet enterprises , submit operational, sta tistical, and accounting reports . The aggregation of data from all three types of reports provides statistics on foreign trade. Financial data are reported primarily, but not exclusively, in ac counting reports . For example, such reports as “ Report on Receipts (Payments ) in Convertible Currency (svobodnaya valyuta ) and on Clearings

Title

General Reports 1 Supplement No. 1

29 The primary foreign trade organizations are called associations (ob” yedineniya ), and each of these deals with certain types of imports and exports . Accounting procedures used by the as scciations are established by the Central Accounting Office of the Ministry of Foreign Trade ,233 but accounting reports are approved by the Ministry of Finance and TsSU . The accounting systems used are the memo -order , journal- order, or other systems described in section A , modified to meet the needs of the associations.

247

A Annual . Monthly . Q Quarterly . 1 Submitted for the second and third quarters

only . Source :

Grachev , Uchet , 1962, pp . 281-284 .

248

ACCOUNTING AND REPORTING PROCEDURES

the balance sheet (form No. 1 ). The monthly report is submitted to the Central Accounting Office of the Ministry of Foreign Trade, the Foreign Trade Bank , and the Foreign Currency (Valyutnoye ) Administration of the Ministry of Finance. The quarterly and annual reports are submitted to all the above agencies and also to the Financial Administration of the Ministry of Foreign Trade and to TsSU . Consolidated quarterly and annual reports are compiled by the Central Accounting Office of the Ministry of Foreign Trade on the basis of reports submitted by the associations. These are the same types of reports as those submitted by the associa tions but in more aggregate terms. The consoli dated annual report also contains a report on income and expenditures of the Ministry. Consolidated quarterly reports are submitted to the Foreign Currency Administration ofthe Ministry of Finance , the Foreign Trade Bank , and TsSU ; consolidated annual reports are submited to all of the above agencies and to Gosplan . b . Cooperative Organizations. This section will briefly examine the accounting system of three types of cooperative organizations: Collective farms, interkolkhoz organizations, and consumer cooperatives. On October 24, 1959 , the Ministry of Agriculture U.S.S.R., with the consent of TsSU , issued two separate classifications of accounts for use by collective farms. 234 One classification , consisting of 29 summary accounts , was developed for collective farms which pay for labor by means of the labor - day. 235 The second classification , consisting of 47 summary accounts , was designed for collective farms which have converted to the money -wage system of payments. It resembles very closely the state farm classification of accounts . In May 1966 , the Central Committee of the Communist Party and the Council of Ministers U.S.S.R. passed a resolution urging all collective farms to adopt a system of the guaranteed wage payments, beginning July 1 , 1966. 236 This resolu tion also precipitated the adoption of the longer version of the classification of accounts by all collective farms. The two classifications differ considerably with respect to wage and cost calcu lation , and only the longer classification has a profit and loss account. Primary documents used by the collective farms reportedly have been considerably standardized ; since 1963 there has also been considerable standardization of primary documents between the collective farms and the state farms. 237 The journal general- ledger ac counting system is widely employed by collective farms, though the journal-order system also is being introduced. The collective farms submit numerous diversi fied reports to various agencies .

These reports

are not confined to financial data but also provide information on virtually all the activities of the farms. The introduction of the khozraschet- type classification of accounts on a wide scale in 1966 altered considerably the type of reports submitted . In general, annual reports of the collective farms have been changed to resemble more closely those submitted by the state farms. 238 Interkolkhoz organizations are cooperative bodies formed by collective farms to perform a The member farms provide variety of services. the necessary initial capital and become share holders in the cooperative, which operates on a khozraschet basis . 239 The classification of accounts used by interkolkhoz organizations is patterned after the classification used by state farms, with some minor modifications. Reports are less standardized than accounts and apparently monthly and quarterly reports are not standardized at all. A set of annual reports was approved by TsSU on December 8 , 1960, apparently designed to give comprehensive and standardized data on all interkolkhoz organizations. However , criticisms have been voiced concerning the standard accounts and reports . These organizations are engaged in very diversified activities and it is difficult to develop standardized procedures which will adequately serve all types oforganizations under all conditions . Consumer cooperauves are khozraschet organi zations comprising over 43 million member share holders. They engage primarily in rural retail trade , but also conduct other activities such as procuring agricultural products and raw materials , operating public dining halls , and even some manufacturing.240 They are organized on a terri torial principle , with an administrative hierarchy reaching from the local cooperative to a central all -union organization . These cooperatives have a classification of ac counts designed specifically for them , consisting of 63 summary and 6 single - entry memorandum accounts . It is used in conjunction with the book and - journal (knizhno -zhurnalnaya ) bookkeeping system , which is a modification of the journal general ledger and memo -order systems. The organizations submitmonthly , quarterly , and annual reports . c . Public Organizations - Public organizations include many types of bodies whose primary activities are social, intellectual, or political, such as trade unions, scientific and technical societies, the Communist Party, and sports organi zations. Their involvement in any economic activ Only two of these types of ity is secondary . organizations will be discussed here. The trade unions have diversified sources of income, including membership dues, cultural and

249

OTHER SYSTEMS

sports activities, movies, receipts from the state social security budget, contributions from economic organizations, and others. This income is expended for sports and cultural activities, administrative and organizational expenses , administration of the state social poses.241

security

program ,

and other pur

Trade unions have unique accounting procedures Their classification of accounts , and reports . consisting of 27 summary accounts and 18 sub accounts,242 is used in conjunction with the journal general ledger bookkeeping system . Monthly , quarterly , and annual financial reports are sub mitted on forms approved by the All -Union Central Council of Trade Unions. The reports of primary units are successively consolidated by superior organs, ultimately reaching the All -Union Council. Extensive networks of scientific and technical societies have been established to disseminate scientific and technical knowledge, as well as to work on concrete technical and scientific problems. In 1960 , the Presidium of the All -Union Council of Scientific and Technical Societies approved a classification of accounts consisting of 18 balance sheet summary accounts and 8 single - entry memo randum accounts , which differ from both the khozraschet and the budgetary systems of ac counts . 243 A standardized report for submission to superior organizations has also been approved . 2. Preservation Reports

of Accounting Documents and

The retention of various primary documents , accounting records, and reports is closely regulated by state archival organs, with very limited Such discretion permitted to primary units .

control enables superior organs to check on the performance of subordinate units , preserve state for materials provide and state secrets, archives. 244 Accounting registers and documents are kept in the accounting office of the enterprise or other primary organization during the course of the year, or in special spaces or drawersassigned for short term storage. After the annual report is compiled and books are opened for a new year, the registers and documents of the previous year are transferred to the enterprise archives. During the year docu ments can be released from the accounting office to other sections of an enterprise only under the direction of the chief accountant; they can be released for investigative or court purposes only upon written request and with approval of the director of the enterprise. When original docu ments are removed , they are replaced by photo static or other duplicate copies. In case docu ments disappear or are destroyed, the director of an enterprise is required to inform the proper authorities . 245

In enterprise archives, documents and registers are stored in specially designed folders. Supporting documents are kept separately from the registers which contain data extracted from them , and all documents related to a given journal -order or other register are grouped together. An archival refer ence note is attached to a group of documents credited to a given summary account. The reference note usually has the following format: 246

REFERENCE NOTE

(For the archive) Journal Order No.

196

Account No.

Documents of sheets

(Name of the account) from No. to No. number

Accountant

The director of an enterprise or organization designates a commission of experts (ekspertnaya kommissiya) which reviews material in the archives . The commission consists of three to five individuals , including the head of the archive or his equivalent and other qualified workers of the given institution . 247 The commission must review documents and indicate their disposition not less than once a year .

General responsibility for document- retention policy and procedures rests with the Main Archives Administration . It issues detailed listings of the types of documents , records, or reports stemming from the work of enterprises and agencies, and specifies the length of time each type is to be retained in archives . Excerpts from two such listings are available , both restricted primarily to accounting or business documentation . The first was issued in 1957 , at which time the Main Archives Administration was attached to the Ministry of Internal Affairs (MVD ) . The second was issued in 1960 , at which time the Administra tion was reattached to the Council of Ministers U.S.S.R., thus remaining with the central govern ment after the MVD was converted into a number of republican agencieswithout an all -union counter part.248 Two recent (1964, 1965) and authoritative sources have continued to publish excerpts from the 1957 list. 249 A comparison of the two lists shows a large area of agreement, although some rearrangement and relabeling, as well as the omission of permanently retained items from the later list, makes detailed comparison difficult. 250 Table VIII - E - 1 contains items drawn from both listings, selected for purposes of illustration . In those few cases in

250

ACCOUNTING AND REPORTING PROCEDURES

which a change in the retention period for a given type of document is apparent, the latter (1960) listing is used . According to the instructions attached to the 1957 list, documents selected for destruction by the commission of experts in each organization during its periodic review were to be listed and submitted to the appropriate (central or local) archives administration body, whose final permission was required before destruction could be completed . 251 Since both unclassified and secret documents were said by the instructions to be covered in the retention schedule, this procedure apparently applied to both types. In addition , within certain categories (designated “ EK ” —Expert Commission ), those documents having scientific or reference value could be singled out and retained beyond the normal period .

A change appears to have taken place in retention procedures in 1960 when theMain Archives Admin istration was reattached to the Council of Ministers. Documents are now considered in two groups: Those needed in practical use for periods up to 5 years and subject to destruction after that time without the permission of an archival institution ; and those which should be retained permanently in appropriate Since the 1960 list of documents and archives . retention periods covers permanent retention only indirectly , the permanent retention documents listed in table VIII - E - 1 are taken from the 1957 listing. For certain documents in somecategories (see items 6 and 16 table VIII - E - 1 ), the designation “ EK " may be employed , indicating a retention period of 10 years and a requirement of special permission from archives authorities for destruc tion , as with all documents retained over 5 years. Whether the “ EK ” designation has any relation to security classifications has not been determined . 3. The Centralization of Accounting and Re porting The centralization of accounting has received considerable attention during the last decade. A program has been undertaken to transfer the accounting work of numerous small- and medium sized enterprises , organizations, and institutions in a given locality to centralized accounting offices (tsentralizovannyye bukhgalterii). It is expected that such offices will make better use of accounting equipment, reduce costs , and improve the quality of data . A resolution issued by the Council of Minis ters U.S.S.R. in November 1964 outlined the goals and methods adopted for the centralizing process, in both the khozraschet and the budget- supported sectors . 252 In the khozraschet sector the drive to centralize accounting is a recent development of only a few years duration . It is based on the above resolution and on a model regulation governing centralized

accounting offices for enterprises and economic organizations issued by the Ministry of Finance in 253 1965 . According to these documents , virtually all enterprises and organizations will be affected by centralization in some fashion . Large- and medium - sized enterprises will retain their own accounting office, but where feasible the accounting offices of various component shops and subdivisions are to be eliminated and all accounting work per formed by the main enterprise accounting office. The accounting offices of small enterprises and those with a small volume of accounting work are to be eliminated and their accounting work centralized accounting offices by performed by attached to superior organizations or agencies. By the beginning of 1967, this move had apparentlymet with limited success, for only 607 centralized ac counting offices servicing khozraschet enterprises and organizations had been established . 254 Two types of centralized offices have been developed. The most prominent is the large centralized accounting office which operates on a khozraschet basis and has its own independent balance sheet, its own settlement account in the bank , and a separate expense estimate . The second type, which has a smaller work volume, is not on khozraschet but is integrated with the superior administrative organization it serves. It does not have its own balance sheet or settlement account in the bank , but it does have a separate expense estimate . All centralized accounting offices serv ing the khozraschet sector are supported by charges against the enterprises and organizations which they serve . 255

These centralized offices are organized on a branch principle , each one servicing enterprises and organizations engaged in similar activities. They are created and administered by executive committees of local soviets , as well as by ministries , sovnarkhozy (formerly ), agencies, trusts , combines, etc. Their chief accountants are hired and removed by superior organizations, though these accountants are governed by the same regulations as the chief accountants of regular khozraschet organizations. enterprises and organizations being The serviced send their primary documents to the accounting offices for processing. After the pro cessing is completed, the accounting offices supply their customers with thenecessary accounting data , and , at least in some cases, also complete and submit reports for the customers. The cen tralization accounting offices have the authority to mechanize their work , but in practice it is usually done manually. Some work is contracted out to the so - called machine data- processing stations and bureaus (see below ) . The centralization of accounting work for bud getary institutions dates from the mid - 1950's when

251

OTHER SYSTEMS

some union republics began organizing centralized This trend was given ad accounting offices. 257 ditional impetus in 1958 when the Ministry of Finance U.S.S.R. issued a methodological in struction for the work to be performed by these centralized offices, and again in 1964 by the above mentioned resolution of the Council of Ministers . The latter resolution instructed the councils of

Centralized accounting offices serving budgetary institutions may be organized by and attached to four types of local bodies : The executive com mittees or departments of city and rayon soviets and rayon hospitals ; rural, workers' settlement, rayon, or city soviets ; rayon departments of public education which provide accounting and other services to schools; and large individual institutions having so - called multicustomer (kustovyye) ac counting offices, 260

ministers of union republics, sovnarkhozy, state committees, ministries , and agencies to centralize the accounting work of all institutions (regardless of size) supported by city and rayon budgets in 1965-66 , and to begin establishing large centralized offices to serve the accounting needs of institu tions operating on oblast, kray , and republican

The rapid pace at which centralized accounting is progressing, particularly since 1964 ,may be seen from the data in table 8-20. Budgetary institutions in the social and cultural field are a major target of the campaign . The 4,306 centralized accounting offices for these institutions as of July 1 , 1964, were specialized as follows: 261

budgets . Primary budgetary institutions send their ac counting documents to the centralized accounting offices, which perform all the necessary account ing work and compile and submit reports for the institutions. The activities of all the institutions serviced by a given centralized office are reported in a single set of reports . 258 These reports are signed by the head of the organization to which the accounting office is attached and by the chief ac countant of the centralized office . 259

2,068 1,831 407

Public education . Public health Cultural activities .

As of October 1 , 1965 , the accounting work of 133,000 budgetary institutions had been centra lized .262

Table 8-20.--CENTRALIZED ACCOUNTING OFFICES , BY TYPE OF ORGANIZATION SERVED : 1960 TO 1966

Date

Total

1960 ... 1962 . 1963.. 1964 .

1964 1965

( July 1 )..... (October 1 ) .

1966

( April

NA

Budgetary institutions

1 ) ...

Rural and workers ' settlement soviets

Enterprises and economic organizations

1,826 5,485 6,093 7,127

(NA ) (NA ) (NA ) 3,743

( NA ) (NA ) (NA ) 3,120

(NA ) ( NA ) (NA ) 264

9,268

4,306

291

(NA) 18,698

8,356 10,383

4,671 ( NA ) 7,914

(NA ) 401

Not available .

Source : p . 17; no .

Den'gi i kredit , no. 10 , 1964 , p.4 ; no .

7,

3 , 1966 , p . 91 ; Finansy 1966 , p .

The extent to which accounting is mechanized in these offices is still low . Less than 5 percent of the offices specializing in work for the budgetary and khozraschet organizations were employing the services of machine data processing facil ities as of the beginning of 1967. 263

SSSR , no . 7 , 1964 ,

93 ,

4.

The Mechanization and Computerization of Data Processing

a . The Level of Mechanization . - The attempt to achieve greater productivity productivity by centralizing accounting is being complemented by efforts to

ACCOUNTING AND REPORTING PROCEDURES

252

mechanize accounting and other data processing work . As with centralization , however, serious mechanization efforts are only recent and are still limited in scope . These efforts have been spurred by several new developments . One has been the success achieved abroad in the use of mechanical punchcard and electronic computer data processing systems; another has been the recent upsurge of interest in mathematical economic planning models which extends, at least in some quarters, to rather visionary concepts of a cyber The netic system of economic management. expansion of the economy in both size and com plexity , and the concomitant growing requirements for accounting personnel under conditions of very limited mechanization , have in themselves made a 264 need for mechanization evident.

A relatively low productivity in Soviet accounting may be assumed, although comparisons between the U.S.S.R. and other countries in relative amounts of accounting work and labor productivity are difficult to make in a meaningful way. TheU.S.S.R. and the United States are rather similar in terms of the share of accounting personnel in the total labor force - 1.83 percent in the U.S.S.R. (1959), and 1.93 percent in the United States ( 1960). 265 However, such an overall comparison of personnel obscures the effects of the differing structures of the two economies; the U.S. economy is undoubtedly made up to a larger extent of accountant - intensive activities , such as credit, banking, insurance, and trade. There are the further considerations that preoccupation with financial control and verifi cation in the Soviet Union tends to reduce pro ductivity , while the widespread standardization of accounting and reporting systems described above may tend to increase it . 266 The low level of mechanization that has long been characteristic of Soviet accounting is reflected in the following sporadically reported statistics on the number of units of mechanical data processing equipment available per 100 persons engaged in accounting work: 267

1949 .. 1957 1961 .. 1963 .. 1965 (7 - year plan) 1965 (actual)

.

1.1 7 11-12 12-13 40 220

Even these low levels appear to be an overstate ment of equipmentactuaily available to accountants . Both the equipment and the personnel to which the ratios relate are described as “ accounting " (schetnyye), but the equipment in question is believed to include all mechanical data- processing equipment regardless of whether used in accounting or other work . This is suggested by data on the respective totals for men and machines .

The number of persons engaged in accounting in the narrowest sense (bukhgalterskiy uchet) in the 1959 census was 1.8 million , 268 and in early 1965 was reported to be 2.2 million persons (or almost 30 percent of all administrative-managerial per sonnel). 269 The total number of persons dealing with economic data , including planners, econo mists , statistical workers, and other workers in the administrative field in addition to accounting personnel, was reported in 1964 to be about 4 million . 270 On the other hand , the number of units of mechanical calculating and accounting equipment available in recent years has been reported as follows : 271

1959 .. 1960 .. 1961 . . 1962.. 1963 .. 1965 (Plan )

.

185,000 188,000 190,000 260,000 300,000 500,000

A comparison of these data strongly suggest that the above - cited ratios of machines to persons relate global data on the stock of equipment to The former must accounting personnel only . 272 include equipment used in planning, research , and engineering work .

statistical,

Themost recent data available on the composition of the equipment stock indicates its relatively low technological level, as may be seen from the following (in thousands of units ):273

Item Total.... Adding machines.. Calculators . Ten -key ... Full-keyboard, semiautomatic Full -keyboard, automatic .. Billing machines . Bookkeeping machines . Punch - card equipment . Tabulators.... Sorters , punches, verifiers , etc .. Other ...

1959

1962

184.4

260

81.7 72.3 13.0 35.4 23.9 6.3 2.9 21.3 3.4 17.8

> 100 100 (NA ) (NA ) (NA ) 7 5 (NA ) < 4 (NA ) 22

Since tabulators are key items of the set of equipment needed for punchcard systems, it is evident that only about 4,000 such installations The number of billing were available in 1962. and bookkeeping machines is also very small . A major reason for the low level ofmechani zation has been the failure to develop a domestic industry for the manufacture of such equipment , The sizable increase in stocks of equipment has been largely achieved by imports , particularly from

OTHER SYSTEMS East Germany. The 7 -year plan called for new manufacturing facilities to be constructed by 1965 with a capacity to produce 100,000 calculators, 100,000 adding machines, and 15,000 bookkeeping and billing machines per year , 274 but the under fulfillment of the planned mechanization ratio in dicates that this was not accomplished . Domestic production in 1962 (the most recent available year) was only 30,000 units. 275

b . Data Processing Organizations. - With the aim of obtaining maximum use from the limited quantity of accounting and calculating equipment available, the Soviet Union has generally followed a policy of concentrating this equipment in separate and specialized facilities, rather than allocating it to enterprises and other operational units . These specialized facilities are usually designed to perform a variety of accounting , calculating, and other data processing work . They frequently serve the needs of more than one organization , although they may also be attached to a single consumer of their services.

Four basic types of data processing organiza tions are currently in existence: Machine data proc essing bureaus (mashinoschetnyye byuro.--MSB's) ; machine data processing stations (mashino schetnyye stantsii- MSS's ; machine data proc essing factories ( fabriki mekhanizirovannogo scheta or ucheta -- FMS's or FMU's; and computing centers (vychislitel'nyye tsenty - VT's).276 These organizations are differentiated by their equipment MSB's are and the type of work performed . equipped with adding, calculating, accounting, and billing machines. MSS's and FMS's , in addition to these , have tabulators, sorters , key punches , and verifiers, which enable them to do a greater range of work, particularly with punchcard systems. MSS's and FMS's (or FMU's) are equipped basically alike, the distinguishing feature being that the FMS's are generally larger installations and may have the additional capacity to do a portion of their work, such as sorting, adding, and punching, at the place of origin of the documents while performing such operations as collating and tabulating cen trally.277 Computing centers are generally equipped with mechanical computing equipment. The larger centers also have electronic computers , but the centers attached to low -level organizations usually do not. The centers are designed to work on complex planning, technical, or scientific problems involving a large volume of computations and suitable for high - speed equipment. In addition to these frequently encountered types, a number of other data processing organizations have been mentioned in Soviet literature , such as computing bureaus (vychislitel'nyye byuro), and mechanized accounting offices (mekhanizirovan nyye bukhgalterii). 278 Little discussion of these

253

types can be found, and they may only be variations of the organizations enumerated above.

The operational data processing organizations , like numerous other Soviet organs, have a dual subordination . In administrative matters they are attached to various enterprises , organizations, agencies, and ministries , but in methodological matters they are under the control of TsSU . In terms of their clientele , data processing organi zations may be single -customer organizations serving only the organizations to which they are attached , or multicustomer (kustovyye) organi zations serving outside customers on a contract basis as well as their parent organizations. The single - customer organizations are attached to large enterprises and organizations which have enough work to utilize the mechanized equipment fully . Multicustomer organizations are attached to either superior administrative bodies or individual enter prises, and they serve many small- and medium sized enterprises or organizations.

Certain multicustomer organizations are oper ated on a khozraschet basis.279 These khozraschet organizations either have a charter fund or operate on the basis of a regulation approved by superior They have their own settlement organizations . accounts in the bank and independentbalance sheets. The non -khozraschet multicustomer organizations and the single -customer organizations are more closely attached to their parent organizations , and they do not have their own balance sheets .

The scattered and incomplete data given in table 8-21 indicate a sizable increase in the number of machine data processing organizations since 1954. The largest part of this increase came in the early 1960's , especially in the MSB's . By 1966 , over 40,000 enterprises and organizations were being serviced by machine data processing organi zations.280

These organizations have not been distributed evenly throughout the economy. Until recently , it had apparently been the policy to furnish such facilities mainly to selected agencies with the most voluminous data problems. Thus, the Ministry of Railways in 1964 had 33 FMU's , 34 MSS's , and 190 MSB's; Gosbank in 1965 had 53 FMS's and MSS's . 281 On the other hand, the Ministry of Finance in 1962 had only 2 MSS's and 5 MSB's. 282 This means, of course , that much of the computational work in the Ministry of Finance is performed manually . For example , the calculation and compilation of consolidated budget schedules and financial plans in republican ministries and lower finance organs is performed manually in the majority of cases, although such work is mechanized at the union level. 283

254

ACCOUNTING AND REPORTING PROCEDURES Table 8-21 . - MACHINE DATA PROCESSING ORGANIZATIONS : 1954 TO 1965

Year1

1954 ... 1959 . 1960 . 1961 .. 1963 . 19642 1965 (Plan ) ..

Total

2,500 3,500 3,700 4,600 5,300 6,100 6,500

MSB's

(NA ) > 2 , 300 > 2,500 3,400 ( NA ) 4,700 (NA )

distribution follows: 288

MSS's and FMS's 488 < 920 1,000 1,200 (NA ) 1,400 (NA )

NA Not applicable . The exact date to which these figures per tain usually is not reported . 2 For the end of 1964. Another source , Isakov, Mekhanizatsiva...statisticheskikh , 1965, p . 14 , states that the figure of 6,100 installations was reached in 1965 . Source : 1954 - Feshbach , Soviet Statistical System .. Since 1957, 1962, p . 79 ; Starikov, Vnutrizavodskiye, 1964, p . 142 . 1959 — Isakov , Mekhanizatsiya... statisticheskikh , 1965 , pp . 13-14 . 1960 - Starikov , Vnutrizavodskiye, 1964 , p . 142 . 1961 - Gruntfest and Isakov , Schetnyye , 1963, p . 12 . 1963, 1965 — Isakov , Mekhanizatsiya ... planovykh , 1964 , p . 13 . 1964 - Belousov, Uchet, 1966 , p . 21 .

TsSU itself, despite its role as the central statistical agency, had relatively few data pro cessing facilities directly subordinated to it until about 1964. In 1959, a gradually accelerating program was begun for the creation of a TsSU operated system of rayon machine data processing stations (RMSS's). RMSS's are designed to be interagency facilities, serving the needs of all consumers in a given rayon . The formation of RMSS's becameespecially rapid after the November 1964 Council of Ministers resolution dealing with the centralization and mechanization of accounting ( cited above), which gave TsSU responsibility for organizing such stations in rayons and cities with large volumes of work . As a result, TsSU's share in the total of FMS's and MSS's in the country rose from 5 percent in November 1964 to 30 percent at the beginning of 1966.284 By September 1966 , nearly 700 rayon MSS's were in operation . 285 To gether with city -wide stations, they were located in about one - third of all rayons in the country, with full coverage as a goal. Most of them are operated on a khozraschet basis ,286 and by the end of 1966 all were expected to be ready for such operation . The TsSU hierarchy also has MSS's or computing centers in all union republic , oblast, and kray centers, 287 In terms of the number of units of mechanical calculating and accounting equipment, the percent

among

sectors

in

1964

Total. Industry. Transportation and communications Agriculture Financial and banking institutions. Construction . Trade . Other

Gos

was

as

100 60 14 6 6 4 4 6

has much more of this type of equipment

than the Ministry of Finance . In 1962 the Ministry had only 3,000 units of equipment, where as Gosbank had 10,000 units ; in 1964 theMinistry had increased its holdings to 13,000 units , but by 1965 Gosbank had 21,000 units - in addition to 4,000 cash registers in the savings banks. 289

c . Computer Centers and Networks. - An aware ness in official circles of the potentialities as well as the development , of electronic data processing in the fields of economic information has been rather slow in coming. Realistic measures in this area have been taken only in the last few years, and some basic questions of policy appear to be still awaiting resolution . The limited availability of computers themselves is one reason for this . The number of electronic digital computers in the Soviet Union has increased from " several hundred " in 1960 to not more than 3,000 , according to an estimate in early 1966 , 290 but most of these are devoted to engineering and scientific applica tions. Although nearly 2,000 organizations were reported in late 1965 to be employing electronic computer services, only about one - tenth of the operations dealt with recordkeeping and reporting, planning, and other economic information prob lems. 291

TsSU appears to have relatively few electronic computers. A number of the larger machine data processing facilities located at various levels in the TsSU hierarchy , including two large installations attached to the central office in Moscow , were scheduled in 1963 to be converted to computing centers,292 although as mentioned above this does not necessarily signify that they are equipped with electronic computers. Gosplan's Main Computing Center, on the other hand , is one of the largest in the country and in early 1966 was equipped with four digital computers.293

Another major reason for the lack of progress in developing an up - to - date data processing tech nology has been the absence of concerted direction and organization , which may in turn reflect policy indecision or interagency conflict at top levels. The lack of central leadership in introducing pro cessing technology was pointed out by the party and government in May 1963; however , the action taken ,

OTHER SYSTEMS in typical Khrushchevian style , was the establish ment shortly thereafter of a series of new organi zations responsible for various (poorly delineated) aspects of the problem . These organizations, and are attached, agencies to which attached, are as which they they are follows: 294

Organization Main Administration for the Introduction of Computing Equipment (tekhnika ) Into the National Economy

Parent agency State Committee for the Coordination of Scientific Research U.S.S.R.

Interagency Scientific Council for the Intro duction of Mathematical Methods and Computing Equipment Into the National Economy

Main Administration for the Introduction of Computing Equipment Into the National Economy

Main Administration for Computing Work (Glavmekhschet )295

TsSU U.S.S.R.

Scientific Research Institute for Designing Computing Centers and Economic Information Systems (NII TSSU replacing a former re search laboratory an mechanization )

TsSU U.S.S.R.

Departments for the development and intro duction of modern data processing equipment

Gosplan U.S.S.R. and Supreme Economic Council

Concern with such problems, at leastperipherally, can also be expected on the part of the several ( frequently reorganized) “ laboratories on math ematico - economic methods " attached to univer sities and the Academy of Sciences and located in Moscow , Leningrad , and Novosibirsk. Despite this plethora of organizations (or perhaps because of it), it could be charged in 1965 that the country lacked an agency devoted to a deep and continuing concern with the problem of creating a state system for collecting and processing information needed in managing the economy. 296

One of the several groups examining such prob lems on a one - time basis developed a project for of Computer State Network Unified a Centers. 297 This network was to consist of low level (nizovyye) centers obtaining data directly from enterprises, pivotal (opornyye ) centers, and a main center . The network was to function as a closed system from enterprise to center based on a unified mathematical model of the entire economy. It

reportedly took no account of the existing structure

255

of the administrative chain of command or of managerial autonomy at any of its links. The proposal thus appeared to bypass the existing agencies. It may have also prejudged a current controversy in favor of a “ cybernetic ” school which advocates the use of sophisticated and detailed mathematical planning models , as opposed to the Birman -Liberman school which advocates a larger degree of managerial and plan -formulating auton omy at the enterprise level . The establishment of such an elaborate type of network on an experi mental basis was proposed for the Estonian Re public in 1965. 298 It called for the creation of 16 multicustomer centers in the Republic with telegraphic connections to individual enterprises and organizationson the one hand and to a republican computer center on the other. This network was to be used for transmitting data to superior organs and various instructions downward to enterprises . The republican computing center wasalso to supply the necessary data to appropriate ministries and agencies and to all-union computer centers. How ever , no further mention of this proposed experi ment has been found , and it apparently was dropped .

The September 1965 Party Plenum appears to have initiated a more conservative (and more realistic ) policy of promoting a gradual evolution of such a computer network , based on an expansion of existing agency - wide and TsSU facilities, and with no commitment to any of the competing proposals for changes in the basic economic planning and management system . Although no such pronounce ment was issued by the Plenum itself, this policy is indicated by the tenor of post- Plenum com mentaries,299 and by an official policy statement of the party and governmentwhich followed in March 1966 . This resolution formally announced the intention to create a state network of computer centers for collecting and processing economic information and resolving economic planning and administration problems, but it also anticipated the continued formation of branch- and agency 300 specialized centers . The resolution assigned areas of responsibility in the overall process to key agencies. Gosplan is responsible for the summary planning of all aspects of the problem , including the production of data processing equipment, but does not appear to have been assigned substantive responsibility for the design and formation of the system . The direction of work on creating and operating the state network of centers was given to TsSU . Its specialized research institute was called upon to produce a preliminary design (avanproyekt) of the state network . The Academy of Sciences evidently is intended as the main agency for developing the theoretical base for a unified system of optimal planning , accounting, and management of the economy.

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ACCOUNTING AND REPORTING PROCEDURES

The Ministry of Instrument-Making, Automation , and Control Systemswas given the task of creating automated management and control systems for enterprises and technological processes. It is ex pected to assist in the design of planning, management, and information processing systems for individual agencies and branches, which itmust approve together with Gosplan and TsSU . A new agency attached to the Ministry - the All-Union Designing and Installation Association (usesoyuz noye proyektonomontazhnoye ob " yedineniye) - was set up to design , install , and service automatic management and control systems. This agency is to have a territorial network of administrations and sections, and is to operate on a khozraschet basis. The Ministry of the Radio Industry is also involved , as a major producer of electronic equip ment and computers, and other agencies are to have a role in the technical aspects .

Actual progress in the formation of the state network and attendant systems indicates that a more pragmatic and cautious approach has replaced earlier schemes. Experimental networks are being developed in the Latvian and Moldavian Republics and in Moscow to collect information directly from enterprises and transmit it to superior centers. The Latvian system , for example , is intended to en compass current information and normative (plan ning) data for basic sections of the republic's economic plan and budget, and foresees automated planning and management in several industrial and construction branches by the end of the current 5 - year plan . 301

According to one report, the preliminary plan ( avanproyekt) for the nationwide state network calls for the immediate creation of 85 computer centers to be located in each republic and in large oblasts . 302 The next step will be the formation of These will be based on RMSS's of rayon centers. the present TsSU system , initially with only me chanical and punchcard equipment and eventually Firm plans for the with electronic computers. eventual shape of the state network and other systems are not yet available , if they exist, but recent developments indicate that a substantial and systematic effort to introduce computer technology in economic data processing , planning, and manage ment is being made .

5. Financial Statistics in the TsSU Work Plan The descriptions of various financial data sys tems contained in this chapter have been devoted largely to the handling of data in primary -level operational units . Where possible, such descrip tions have been extended to encompass upper levels of agency -wide, sectoral, or functional groupings of units . No attempt has been made to pursue particular classes of financial statistics, such as

profits or capital investments, beyond these group ings to their ultimate national levels as represented by openly published statistical handbooks. This was not done for two reasons : (1) Such attempts are more conveniently made in terms of such data classes themselves, rather than in terms of data generating and transmitting systems, which is the focus of the present chapter ; and (2 ) available information linking the data generating systems with final compilations of financial data are under standably sparse, since it is especially in this area that Soviet actions to obscure and withhold information take place .

In view of the relative lack of source material dealing with this link in the data chain , the infor mation described below takes on special signif icance. This information is found in the work plan of TsSU for the year 1965. 303 Table VIII - E - 2 presents a translation of the portion of this plan devoted to financial and price statistics. To place this portion in perspective , it should be noted that it occupies only 16 of the 278 pages in the plan as a whole . Although a detailed analysis ofthe material in this table is not intended here, the general characteristics of the information and some of the kinds of insight afforded by this relatively unique source should be pointed out. 304

The information is organized in terms of units of work defined briefly by the title of the resulting TsSU reports or a short description of the work to be done by TSSU . For each item the table shows the periodicity (i.e., the time period covered ), the manner of data submission - mail or wire - on the part (apparently) of primary units, 305 the under lying documents to be used by TSSU U.S.S.R. as sources of data for preparing each item , the data breakdowns or dimensions in which the item is to be prepared, and the deadline within the year 1965 for each item , usually differentiated by groupings of republic TsSU's and TSSU U.S.S.R. It should be pointed out that this work plan applies to the national (i.e., U.S.S.R.) level of the overall TsSU hierarchy , and does not apply to work done or reports issued by republican or other agencies of the TsSU system , except insofar as they serve as sources for reports compiled by TSSU U.S.S.R.306 The table unfortunately does not specify the recipients of the reports . It may be assumed , of course , that the U.S.S.R. Council of Ministers , Gosplan , and top party units are included, but how much further these reports are disseminated is not apparent. That they are not generally available to a broad range of consumers is suggested by an item in the section of the work plan dealing with “ statis tical information ” : that is , data made available to the public . The item calls for TSSU to make statistical materials available to research and educational institutions as agreed upon by the

OTHER SYSTEMS Academy of Sciences U.S.S.R. and the Ministry of 307 Higher and Specialized Secondary Education . This tends to confirm other indications that the re lease of information to scholars has been very limited until recently .

Individual items in the work plan can provide insights on the manner in which particular classes of data are made available to top levels . This has relevance to both the overall process of compiling annual financial plans and to the nature of the data available for publication in statistical handbooks . For example, it is evident in section I of table

257

VIII - E - 2 that the Ministry of Finance, Gosbank , and other financial agencies make consolidated reports directly to the top (U.S.S.R.) TsSU level on the fulfillment of their plans, rather than to local or intermediate TsSU levels . The limited detail and frequency of certain financial data reporting is also evident. For example , statistics on industry sales , in contrast to data on output, were to be available only on a quarterly basis and only as totals for major branches of industry (see items 16-19 ). Again , profit -and -loss data by subbranch of industry were to be compiled only for the huge “machine building and metalworking” branch on an annual basis (item 41) .

NOTES TO CHAPTER VIII For example , the use of accounting reports described in this chapter for defining published data on profits is discussed in chapter VI- B on profits. 2 For these aspects of Soviet accounting, see Campbell, Accounting, 1963; Horwitz , Economic , 1962. Although these works predate recent developments in such areas as fixed capital depreciation policy and standardization of accounting systems, their observations retain much validity for the present. 3 The banks and foreign trade agencies, while operating on a khozraschet basis , employ unique ac counting and reporting procedures , and are not included here. (See sections VIII - C and -E .) 4 Two Russian terms are commonly used for this activity . Bukhgalterskiy uchet, which has the broader connotation and is more closely related to statements and reports, is translated here as “accounting" ; schetovodstvo connotes a more limited reference to books and registers and is translated as “ book keeping. A similar relationship is found in the analogous terms for personnel; the bukhgalter is more responsible , ranging in authority to the chief accountant (glavnyy bukhgalter - sometimes translated as " comptroller") , while the schetovod (bookkeeper or account clerk) occupies a lower professional rank . In some usages, the two terms are used interchangeably , as in formaschetovodstva and forma bukhgal terskogo ucheta ( system of accounting (books 7) . 5 Sumtsov, Kurs, 1960, p . 11.

6 Glusker, Metodologiya , 1963, pp . 28-33 . 7 Goloshchapov, Spravochnik , 1965, pp. 178-179, 209-210. 8 Dmitriyev , Bukhgalterskiy , 1963, p . 77 . 9 Ibid . , pp . 9-15 . 10 Poklad , Kurs, 1963, pp. 13-14 . 11 Campbell, Accounting, 1963, p . 13 . 12 Shchenkov, Bukhgalterskiy, 1963, pp. 40 , 44 . 13 Goloshchapov, Spravochnik , 1957, pp . 30, 48 , 54-55. 14 The initial list of accounts and the agencies and sectors in which it was to be used are published in Goloshchapov, Spravochnik , 1965, p . 25 , in the form of a circular letter from the Ministry of Finance . The official book of instructions for its use is not available , although numerous texts discuss the scheme in detail. 15 Andrianov , Organizatsiya , 1963, pp . 662-687. Numerous account titles (without numbers) and major reports mentioned in this source correspond to standard practice , with the exception of two accounts which may be additions— “ Special expenses ” and “ Transport and procurement expenses” (p . 669) . 16 Vedernikov, Osnovy , 1961, p . 53. and Settlements on Social Insurance.

The last group includes the accounts entitled Settlement Account

17 Bezrukikh and Granovskiy, “Uniform ," 1960 , p . 3 . 18 These other sectors are: supply and sales (Merkushev, Bukhgalterskiy, 1964); procurement (Gunya and Polikarpov , Osnovy, 1965); oil supply (Zusman , Bukhgalterskiy , 1964);design organizations (Dityakovskiy , Bukhgalterskiy, 1963) ; maritime transport (Golubev, Bukhgalterskiy , 1964); logging (Andreyev, Bukhgal terskiy , 1962) ; public dining ( Ayzikovich , Bukhgalterskiy, 1961) . 19 Attachment of an asset or liability label to a summary account is based on its normal, overall function (Vaysman , Uchet, 1964, pp . 48-58), and does not preclude the possibility that some subaccounts may normally have an opposite balance . 20 In Russian , an extended balance - razvernutoye sal’do. be struck for these accounts .

A net balance ( svernutoye sal'do) can also

21 Veysman , Teoriya, 1962, p . 83. 22 See Gofman and Kapelyush, Ocherki, 1966 , for a detailed history of rival systems of accounting registers (formy schetovodstva) in Russia and the Soviet Union .

23 Ibid ., p . 71 . 24 Veysman , Teoriya, 1962, p . 59. 25 Ibid., pp . 60-62 . 258

NOTES TO CHAPTER VIII 26 See Golubev , Bukhgalterskiy , 1964, pp . 337-345 , for the text of the still operative regulation issued by the Council of Ministers in 1949.

27Gofman and Kapelyush , Ocherki, 1966 , p . 75 28 Vaysman , Uchet, 1964, p . 13 . 29In 1963 , 64 percent of the industrial enterprises subordinate to R.S.F.S.R. sovnarkhozy used this system (Finansy SSSR , no. 2 , 1965, p . 18) . The extent of its use in other sectors is not known, but appears to be expanding steadily . 30Goloshchapov, Spravochnik , 1965, pp. 34-46 . 31Ibid., p . 35 . 32 Adaptations of the uniform system have been designed for highway management organizations (Vaysman , Uchet, 1964 , p . 293 ff.), and urged for the trade and public dining sectors, which still use earlier journal-order systems introduced in the period 1952-58 (Gofman and Kapelyush , Ocherki, 1966 , p . 90) . In addition , a variation of the uniform system for small enterprises and organizations using a reduced classi fication of accounts was issued by the Ministry of Finance in 1960 (Goloshchapov, Spravochnik , 1965, pp . 47-54 ), and a supplementary instruction was issued in 1963 adapting the system to keyboard accounting machines (ibid . , pp. 54-60) . 33 The text of the basic regulation on the planning, accounting, and calculation of industrial costs , issued jointly by Gosplan , the Ministry of Finance , and TSSU , is published in Goloshchapov, Spravochnik , 1957 , p . 310 , and subsequent editions of the same source. The texts of new regulations for the machine building and metalworking , ferrous metallurgy , and meat processing industries issued in 1964 are not available (Goloshchapov , Spravochnik , 1965, p . 289). 34 For a complete list of the detail accounts or “ articles ” ( stat’i) used for “ Shop expenses” and “General plant expenses” in these statements , along with descriptions of each account, see Brazhnik and Shcheglov , Spravochnoye , 1964, pp . 213-228 . Other expense categories such as “ Nonproduction expenses” (account 43) and “ Expenditures on mastering new types of products ” ( subaccount 31-1) appear to be similarly standard ized , judging by abridged versions of these statements shown in recent textbooks (ibid ., pp . 229-230 , 280 ) . Although a complete set of unabridged facsimiles of the standard registers is not available , extensive samples are shown in numerous texts (e.g., see Vaysman, Uchet, 1964 , pp. 144-153, for auxiliary state ment No. 12) . 35The following is based primarily on Shmyhel', Yedyna, 1962, pp . 9-16 , 25 , 33, 156. See also Vaysman , Uchet, 1964, especially pp. 26-35 . 36The matrix - entry or chessboard (shakhmatnyy) principle requires the format of the statement to be such that accounts to be credited are arranged horizontally and accounts to be debited are arranged vertically. An entry in any square indicates which account is to be debited and which is to be credited . 37Gofman and Kapelyush, Ocherki, 1966 , p . 112. 38For a list of such instructions, see Goloshchapov, Spravochnik , 1965, p . 76. Mechanization of ac counting and reporting in all sectors of the economy is discussed further in section VIII- E , below . 39 TsSU , Al’bom , 1962, p . 3. This reference album source contains copies of forms and submission instructions for all “ statistical” reports of primary -unit industrial and construction organizations and some other economic organizations approved by TsSU as of the beginning of 1962 (except those dealing with deliveries and sales) . 40D'yachenko , Finansovo , vol. II, 1964, p . 166 . 4 Readers interested in the most recent versions of these forms,which diverge in a small number of items from those described here, and in further details on the effect of recent management reforms on enterprise reporting , may wish to consult Shchenkov , Otchetnost', 1966. This revised edition of a useful 1958 source was obtained too late for full incorporation in the presentstudy .

42Shchenkov, Bukhgalterskiy, 1963, p . 10 . 43 See especially Andreyev and Cherkasskiy , Ekonomicheskiy , 1965; Shchenkov , Bukhgalterskiy, 1963; TsSU and Min . fin ., Instruktsiya...promyshlennymi (see fn . 50) . 44Bukhgalterskiy uchet, no . 9, 1965, p . 77 . For further information on this new report form , see Shchenkov , Otchetnost', 1966 , pp. 175ff., where it is designated “ Form No. 3 - Semiannual." 45Millionshchikov , Otchisleniya , 1964, p . 109. An example of form 4 - A is shown on pp . 110-112 . 46Poklad , Kurs , 1963, p . 340 . 47 Ibid ., p . 136. An example of the form is given in TsSU , Al’bom , 1964, pp. 440-444. 48 Shchenkov , Otchetnost', 1958 , p . 97. 49Dmitriyev, Bukhgalterskiy, 1963, p . 350. 50TSSU i Min . fin ., Instruktsiya...promyshlennymi, 1960 , p . 77 .

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260

51 Ibid ., p . 79 ; Shchenkov, Otchetnost , 1966, p . 137 . 52 See the example in Shchenkov , Bukhgalterskiy , 1961, pp . 366-368; see also Poklad, Kurs, 1963, p. 343. 53 Baklanov , Statistika , 1965 , p . 34. For a more detailed explanation of gross output, see Giffler , Collection , [ forthcoming ] . 54 Poklad , Kurs, 1963, p . 325 . 55 Shchenkov , Otchetnost', 1958, p . 48 . 56 Detailed analyses and translations of forms 2 - T and 2T - 9 may be found in Feshbach , Soviet Statistical System ...Since 1957 , 1962, pp . 15-25 . 57 Bogdashevskiy , Uchet, 1963, pp . 486 , 494-495 ; Dedkov , Razvitiye, 1962, p . 120 . 58 Astashkevicher , Bukhgalterskiy , 1963, p . 303; TsSU : Min . fin ., 1961 annual report. 59 Ibid . 60 Other forms of the primary contract construction organization are the construction section and some construction trusts. (Kartsev , Osnovy, 1962, p . 14.) 61Zlobin , Bukhgalterskiy, 1963, p . 398 . 62 Nar. khoz . 65 , p . 543. Construction - and - installation work excludes capital repair of buildings , oil well drilling , and designing - and -surveying work . 63 Yevropin , Osnovnyye , 1961, p . 24 . 64 TsSU i Min . fin ., Instruktsiya ... po kapital’nomu stroitel’stvu, 1960 , p . 17 . 65 Ibid ., p . 5 . 66 For an informative organizational chart of the entire Ministry , see Ivliyev, Finansy , 1963, pp . 9, 435 . 67 Ibid., p . 179. 68 Ibid ., pp. 154, 191 . 69 Ibid ., p . 395 . 70 For a brief description of each report, see Vinnichenko , Bukhgalterskiy, 1963, pp. 241-255 . 71 Ivliyev, Statistika, 1960, p . 376 . 72 Ryauzov and Titel'baum , Statistika, 1961, p . 12; Vasil'yev , Ekonomika, 1963, p . 432. 73 Ryauzov and Titel’baum , Statistika , 1961, pp . 12-13. 74 Belousov, Bukhgalterskiy , 1963, p . 524. 75 Bakanov, Osnovy, 1961, pp . 75, 316 . 76 TSSU , Al'bom , 1962 , pp . 660-664. 77 Vestnik statistiki, no . 2 , 1966 , p . 75 . 78 TSSU , Plan , 1965 , p . 244. 79 Millionshchikov , Otchisleniya, 1964, p . 74. 80 Ibid ., p . 87 . 81 Vaysman , Uchet, 1964, p . 274 . 82Merkushev , Bukhgalterskiy , 1964, p . 182. 83 Shchenkov, Bukhgalterskiy , 1963, p . 227 . 84 Ibid., p . 73 . 85 Vaysman , Uchet, 1964 , p . 237. 86 An extensive tabulation of specific types of verification is contained in Vaysman , Uchet, 1964, pp . 237-246 , 349-369. 87Goloshchapov, Spravochnik , 1965 , pp. 447-453, 88 Sovnarkhozy had the right to establish differentiated presentation dates for monthly and quarterly reports within the 15- day limit. Monthly accounting reports are not submitted for the month of December and quarterly reports for the fourth quarter, since data for these periods are included in the annual report. The dates and deadlines cited in this section appear to be generally applicable throughout the economy, particularly for industry and construction activities. For minor variations and additional detail in rail road reporting, see Vinnichenko, Bukhgalterskiy , 1963, p . 255 , and Ivliyev, Statistika, 1960, p . 295 .

89Vestnik statistiki, no . 2 , 1966 , p . 75 . 90Millionshchikov , Otchisleniya , 1964, p . 41 ; Vinnichenko , Bukhgalterskiy , 1963, p . 240 .

NOTES TO CHAPTER VIII 91 Shchenkov , Bukhgalterskiy , 1961, p . 336 . 92In the R.S.F.S.R., these reports are submitted to the Board of Directors of Gosbank, while in the remaining union republics they are submitted to the respective republic Gosbank offices (kontory). Shchenkov , Otchetnost', 1958 , p . 23. 93Shchenkov, Bukhgalterskiy , 1961, p . 339 . 94Brazhnik and Shcheglov, Spravochnoye, 1964, p. 43. The latter dates may apply only to top -level redistributions , by which time some of the profits have been assigned as current assets of inferior organizations. 95See the discussion on form No. 3 of an industrial enterprise , above . 96Considerable information on the nature of unpublished consolidated reports prepared by TSSU U.S.S.R , is available in its work plan for 1965 (TSSU , Plan, 1965) . An excerpt from this plan dealing with the financial reporting of both khozraschet and other agencies is shown in appendix A , and discussed in section E , below . The reader is also referred to Shchenkov , Otchetnost', 1966. This revised edition of a useful 1958 source, obtained too late for full incorporation in the present study, confirms the high degree of carryover in reporting from sovnarkhoz to post- sovnarkhoz conditions anticipated here , and provides some additional detail . 97Vaynshenker , Voprosy , 1963, p . 144. 98 TSSU , Al’bom , 1962, p . 4ff. 99 Some “ statistical" reports, particularly those in the “ technical- production " class which seem designed to replace the former intra-agency reporting, are not submitted to TsSU , and any consolidation must be done by superior units ( ibid . , passim ). 100Vaynshenker , Voprosy , 1963, p . 145. This responsibility for consolidation is believed to remain with the administrative agency even though the actual work of tabulation may be performed by local TsSU data processing facilities as a paid service. 101 Ibid., pp . 145-146 . 102 For example, the 1964 annual report of the Chernomorskiy Sovnarkhoz on all types of activity amounted to over 180 different formsand approached 400 sheets . This does not include numerous reports terminating at branch administrations and not consolidated further . Bukhgalterskiy uchet, no. 10 , 1965 , p . 32. 103Zlobin , Bukhgalterskiy , 1960 , p . 451. 104 Ivliyev, Statistika, 1960 , p . 374. 105 Ibid ., p . 377 . 106 Belousov , Bukhgalterskiy, 1963, p . 521. 107 Ibid . , pp . 521-523. 108 Bukhgalterskiy uchet, no . 2 , 1966 , p . 62. 109 Ekonomicheskaya gazeta , no . 35, 1967, p . 9 . 110 Ibid ., pp . 23-24. See Butov , “ Organizations, " 1966 , p . 25 , for a description of this form . Also see 111 Ibid ., p . 66 . Shchenkov, Otchetnost', 1966 (obtained too late for full incorporation in the present study ) for excerpts of this new form and for additional detail on the effects of the reform . 112 See the official Methodological Directives abstracted in chapter VI- B , for example. 113 Gaabe , Teoriya, 1966 , p . 214 refers to the first as the “ general (obshchiy )” and the second as the “ so -called adjusted ( skorrektirovannyy)" indicator of profitability ; the most recent set of Methodological Directives for enterprises converted to the new system , issued December 2 , 1966 , refers to them respectively as “ general” and “ derived ( raschetnaya )" profitability (Ekonomicheskaya gazeta , no . 50 , December 1966 , Insert p . 3) . 114 Butov , “ Organization ,” 1966 , p . 20 . 115 Central budgets consist of the union or “ federal" budget and the analogous top -level republican budgets of the 15 union republics ; local budgets comprise all others, including those of autonomous republics ( see chapter V ). This distinction is also encountered in connection with the state budget revenue and expenditure accounts (or " classification ”) treated in chapter V , and the machinery of disbursements and payments described in chapter IX . 116 See chapter IX for further details on the distribution of credits. Soviet sources disagree as to whether the credit administrator is the agency or institution itself (see the official instruction in Dedkov and Yakimov , Bukhgalterskiy, 1965, p . 3) or the individual head (Goloshchapov , Byudzhetnyy , 1963, p. 8) .

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ACCOUNTING AND REPORTING PROCEDURES 117 It was issued in Instruction No. 323 of the Ministry of Finance , September 17 , 1960. This discussion of the classification is based primarily on that Instruction , as published (with revisions) in Dedkov and Yakimov , Bukhgalterskiy , 1965, pp. 22-91. A separate instruction on procedures for single - entry accounting was issued December 7 , 1961 (ibid ., pp. 91-128) . 118 Dedkov , Razvitiye, 1962, p . 72. The use of two distinct balance sheets reportedly created problems in accounting for transactions involving both activities, 119 With exceptions that are noted below . A distinct classification of accounts employed by the Ministry of Finance for budget execution purposes is taken up in section D , below . 120 Such organizations are usually described as chartered (ustavnyye), or as “ operating on the basis of a charter ," although permission to operate in this fashion can also be granted on the basis of a blanket regulation ( polozheniye) rather than a specific charter. 121 Pricing policies encourage the subsidiary production of such items as food products , furniture , and simple utensils and wares for theuse of the parent institution . Sales to the parent institution by unchartered units are at cost (Finogeyev and Flit, Vnebyudzhetnyye , 1964, p. 47) ; sales by subsidiary khozraschet units are exempted from the turnover tax (chapter VI - B ) . 122 Dedkov and Yakimov, Bukhgalterskiy , 1965 , p . 24 . 123 See section A and the khozraschet enterprise's balance sheet, figure VIII- A - 1, lines 08 and 85 . 124 See chapter VI- E for an extensive listing of these activities. 125 Mastalygina , Bukhgalterskiy , 1962, p . 198 . 126 Goloshchapov , Byudzhetnyy, 1963, p . 157. 127 In the khozraschet classification , these are kept as detail accounts under the regular summary accounts for fixed assets ( 01 ) and capital (85 ). See the khozraschet balance sheet, lines 72 and 151, figure VIII- A - 1 . 128 Sobornikov,Bukhgalterskiy , 1966 , pp . 4-12. Other institutions may also employ these accounts, which are not listed in the original instruction . 129 Some units do not have an accountanton their staff, in which case their accounting is done by a superior institution or enterprise. Central accounting offices , attached to various departments of city and rayon governments or large institutions and serving a large number of small units , are currently being promoted ( see section E , below ).

130 Dedkov and Yakimov , Bukhgalterskiy , 1965, p . 23. 131 Ibid ., p . 26 . Finansy SSSR , no. 10 , 1964, p . 4. Recent interest in mechanical data processing, and the inappropri ateness of the journal-order system for the more advanced methods may have slowed this development. 133 Dedkov and Yakimov , Bukhgalterskiy , 1965 , p . 91.

134 Smirnov, Bukhgalterskiy , 1963, p . 286 . 135 For the format of the major standard accounting books and documents , see Dedkov and Yakimov , Bukhgalterskiy , 1965, particularly pages 74-78 and 238-240 . 136 Ibid . , pp . 44 , 76 . 137 See chapter V for the formal budget classification of expenditures, including the set of articles in the object classification designed for budgetary institutions . This formal classification thus serves as an extension of the standard classification of bookkeeping accounts shown in table VIII- B - 1 .

138 Dedkov and Yakimov, Bukhgalterskiy , 1965, p . 42 . 139 Ivanitskiy , Osnovy , 1961, p . 69. 140 The payment demand, with its associated bank credit availability , appears to be used to exact pay ment from budgetary institutions in some cases, however, as noted in chapter IX . 141 See section A , above, for a discussion of the three types of reports. Operational reports of budgetary institutions are prepared for use only within the institution's sector ; thus the operational reports of medical institutions, which contain detailed data on such subjects as the numbers and types of patients , the incidence of diseases, and the number and length of treatments , are circulated within the public health sector only . Consolidated versions of these reports are submitted to TsSU at the oblast, republic , and union levels (Yezhov , Statisticheskiy , 1965, pp . 377-378 .

142 Smirnov, Bukhgalterskiy , 1963, p . 327 . 143 Dedkov and Yakimov, Bukhgalterskiy , 1965, p . 24 . 144 For a detailed description of the transfer of budget funds, as well as of the difference in procedures for local and central budget institutions, see chapter IX . Special reports to banks for verification of budget expenditures are described below in paragraph ( b ) .

NOTES TO CHAPTER VIII 145 Instructions Nos. 314 and 315 on the compilation of annual accounting reports by local and central budgetary institutions, issued November 6 , 1959, and subsequently revised by the Ministry of Finance , are contained in ibid . , pp . 243-287 . 146 Smirnov , Bukhgalterskiy , 1963, pp. 311-312 . 147 For examples of 1 -MK, see Goloshchapov, Byudzhetnyy , 1963, pp. 223-224; Smirnov, Bukhgalterskiy , 1963, pp . 313-316 ,

148Dedkov and Yakimov , Bukhgalterskiy , 1965 , p . 53. 149 Ibid . , p . 12. 150 Smirnov , Bukhgalterskiy, 1963, p . 332. 151Dedkov and Yakimov , Bukhgalterskiy, 1965 , p . 254. 152Smirnov, Bukhgalterskiy, 1963, p . 336 . 153Goloshchapov, Byudzhetnyy , 1957 , p . 248 . 154 Ivanitskiy , Osnovy, 1961, p . 72 . 155Dedkov and Yakimov , Bukhgalterskiy , 1965, p . 280 . 156 For examples of forms 4 - K and 2-2, see Smirnov, Bukhgalterskiy , 1963, p . 341 . 157 “Report on Fulfillment of the Plan for Scientific - Research , Experimental, and Design Work ” (see section VIII- A ) . This report is also submitted by serial production plants having laboratories performing such work , as well as research institutes and design bureaus and their attached experimental and subsidiary enterprises (Dedkov , Razvitiye, 1962, p . 120 ). An example of this form has not been located . 158 Smirnov , Bukhgalterskiy, 1963, p . 342. 159Dedkov and Yakimov, Bukhgalterskiy, 1965 , pp. 261, 286 . 160For other examples, see Finogeyev, Analiz , 1962, pp . 97-99 ; Goloshchapov , Byudzhetnyy, 1963, p . 231 ; Mastalygina, Bukhgalterskiy , 1962, p . 288. 161Finogeyev and Flit, Vnebyudzhetnyye, 1964, p . 96 . 162In addition to the example shown in figure VIII- B - 6 , others may be found in Goloshchapov, Byudzhetnyy , 1963, p . 233 ; Mastalygina, Bukhgalterskiy , 1962, p . 281.

163Dedkov and Yakimov, Bukhgalterskiy , 1965, p . 33. 164Mastalygina , Bukhgalterskiy, 1962, p . 179. 165TSSU i Min . fin ., 1961 annual report. This form contains an elaborate code for classifying the re porting unit (similar to that in figure VIII- A - 8). The report calls for data on the number and wages of annual average personnel (distinguishing industrial- productive personnel and wageworkers), the value of output ( in enterprise wholesale prices), the value of industrial- productive fixed assets , and the presence of prime movers or electric motors . Output is also reported by product in physical units. However , the instructions to this form exempt from reporting some of the more common subsidiary industrial activities of budgetary institutions, including experimental shops of research organizations, training shops of general educational institutions, certain electric power installations, and (nonindustrial) service - type enterprises . 166T SSU , Al’bom , 1962, p . 635 . 167A detailed instruction on this verification procedure, and an example of the form , is available in Dedkov and Yakimov, Bukhgalterskiy , 1965, pp. 287-290 . 168A separate instruction for this procedure is also available in ibid ., pp . 291-294 . 16Nevdokimov, Finansiroyaniye , 1962, pp . 74-76 . 170Reports for the fourth quarter and for the third month in each quarter are supplanted, respectively , by the annual and quarterly reports. For the “ Regulation on Accounting Reports and Balance Sheets...” of budgetary institutions, which was issued on April 25 , 1961, and revised in 1964, see Dedkov and Yakimov, Bukhgalterskiy, 1965 , pp . 3-22 . 171Institutions operating under rural settlement budgets and keeping separate records submit reports to rural soviets (ibid. , p . 247) . 172Similar surveys of Stroybank and Vneshtorgbank, originally intended to be included here , have not been completed for lack of time and readily available data . Although Stroybank's operations are not as extensively reported as Gosbank's, several specialized monographs on the subject are available ; e.g., Sher and Tolstykh, Uchet, 1961 ; Ferberg, Ekonomicheskaya, 1964. The lack of data is especially severe for Vneshtorgbank . 173A current resumé (pasport) of economic and financial indicators, extracted from the voluminous material submitted by the client as well as from the bank's own accounting records and statistical reports, is maintained by a branch bank for each enterprise and organization receiving credit. After the end of the year these resumés are retained in bank archives for reference purposes (Ryauzov and Tertus, Bankovskaya, 1961, p . 104 ) .

263

264

ACCOUNTING AND REPORTING PROCEDURES 174 The classification put into operation on October 1, 1957, reflected the major industrial reorganization of that year which instituted the sovnarkhozy (Boguslavskiy , Bankovskiy, 1960 , p . 16 ). Aside from changes in individual agencies, the only known major revisions since then occurred in the beginning of 1966 as a result of the return to the ministerial system . These changes are discussed below . 175 Examples of the use of personal account numbering codes are given in chapter IX -D . 176 Nazarkin , Uchet, 1959, pp . 25-39. Of the several gaps in numeration in this listing , only numbers 36 , 37 , and 80 have been identified as reserved (Boguslavskiy, Bankovskiy, 1960, p . 25). 177 Two texts from the 1959-60 period are especially thorough : Nazarkin, Uchet, 1959 ; Boguslavskiy, Bankovskiy, 1960. 178 A listing of these accounts can be found in Nazarkin , Uchet, 1959 , pp . 28-29. 179 Ibid ., p . 312; Ryauzov and Tertus, Bankovskaya, 1961, p . 89. 180 Nazarkin , Uchet, 1959, p . 313. 181 Ibid . 182 The basic source for material on Gosbank statistical reporting used here is Ryauzov and Tertus, Bankovskaya, 1961. 183 Chapter III surveys the variety of economic units in terms of such aspects . 184 Pronin , Raschetnyye , 1958 , p. 7. This source contains a detailed exposition of settlement and current accounts, although it may be out-dated in someregards. A later Gosbank instruction on these accounts (No. 28, March 23 , 1960) has been issued, but the text is not available . 185 Boguslavskiy , Bankovskiy , 1960, p . 83 . 186 See chapter IX for a listing of these priorities, as well as a description of payment instruments and other machinery . 187 The budget expenditure object classification is described in chapter V. 188Orlovskiy , Yuridicheskiy, 1963, p . 320 , describes the latter holders of current accounts as “ enter prises maintained on an estimate out of profits , deductions, etc." . See chapter III for an examination of this in -between type of unit whose existence is seldom recognized. 189 According to the 1931 resolution on working capital of khozraschet enterprises (Gorlanov, Finan sirovaniye, 1959 , p . 43). 190 See chapter IX - C . The data are for 1958 and are partly from a sample survey. 191 See Hodgman , “ Soviet”, 1960 , for an analysis of the role of bank clearing systems in terms of monetary control over enterprises and the money supply . 192 In their peak year of 1954, the more than 700 bureaus had a volume of 80 billion rubles , of which 21 , 54, and 25 percent, respectively ,were accounted for by the three types ( Atlas , Razvitiye , 1958 , pp . 300-302).

193 Gosudarstvennyy bank , 1961, p . 116 . 194 That is , nonnegotiable and nonassignable drafts drawn by suppliers on purchasers and collected by the bank. See chapter IX for a description of these and other payment instruments and their operation. 195 The purchaser's branch bank actually sends the payment to the supplier's branch bank immediately upon arrival of the claim , without waiting for the end of the offset period . The bank credit involved in this step is not formally recognized . On the other hand, if the purchaser cannot cover an unfavorable clearing balance and is ineligible for further settlement credit , the payment already made to the supplier is with drawn by the bank and a past- due indebtedness arises, as with claims against an overdrawn settlement account. Such past- due payments amounted in 1962 to 4 percent of the total volume on decentralized offset accounts (Shvarts , Beznalichnyy, 1963, p . 138 ).

196Gorlanov , Finansirovaniye , 1959, p . 141 . 197Barkovskiy , “ Development,” 1964 , p . 1.

A three -group system was tried in 1960 .

198Ryauzov and Tertus, Bankovskaya, 1956 , pp . 114-122, 134. 199The Gosbank classification was reported to contain 24 industry groupings in addition to those for other sectors (Ryauzov and Tertus, Bankovskaya , 1961, p . 109) . The number 40 , highest in the budget classification , doubtless includes reserved slots , 200Ibid ., p . 109. 201For example , see Becker , Soviet, 1964, p . 41. As he points out, a set of forms and indicators for preparing the 1959-1965 Seven - Year - Plan , published in 1957, called for military hardware, including warships, aircraft, equipment, instruments, radio products, and munitions to be located in various sub branches of that category (Gosplan, Formy, 1957 , pp . 13-15) . 202Ryauzov and Tertus, Bankovskaya, 1961, p . 128 .

NOTES TO CHAPTER VIII 203TsSU industry groupings may be found in Elias, Soviet Practice, 1961, pp. 14-15 , and more recently , in Yezhov , Sistema, 1965, pp. 96-103. 204A description of the changes, introduced as of April 1 , 1966, is given by Khlynov , “ Changes,” 1966 , pp . 62-64 . 2051n terms of pairs of accounts, the new classification thus provides for 43 union and 46 republican agencies. 206 Ryauzov and Tertus, Bankovskaya, 1961, pp. 209-210 . 207Additional wages are released at differentiated rates, per percentage point of gross output plan over fulfillment, ranging from 0.6 percent of the planned wage fund for industrial- productive personnel in most nonextractive industries to 0.85-0.90 percent in the coal industry . See Mayer , Zarabotnaya, 1963, p . 242 . 208For an example of this report in the sovnarkhoz period , see Ryauzov and Tertus, Bankovskaya, 1961, p . 205 . 209Galimon, Kontrol', 1962, p . 31 , employs the term “khozraschet organizations” for this type and describes them as “ organizations having the functions of administration , planning, [ and ] distribution , and other nonproductive organizations.” 210 An example of scheme No. 60 is given in Ryauzov and Tertus, Bankovskaya , 1961, p . 208. 211Gosudarstvennyy bank , 1961 , p . 35 . 212Goloshchapov, Raschety , 1965, p . 325 , who cites Gosbank Instruction No. 24 of June 18, 1960. See also Galimon , Kontrol', 1962, pp. 11-40 , for some additional detail. 213Boguslavskiy , Bankovskiy , 1960, p . 89. Account 890 is provided for interbank settlements on such withdrawals ( see table VIII - C - 1 ). The deposits, carried on account 711, must be a minimum of 3,000 rubles.

214Goloshchapov, Byudzhetnyy, 1963, p . 12 . 215This function is discussed in chapter X , and will not be treated here. The reporting of primary units on this subject was covered in sections A and B above (e.g., report No. 7 of an industrial enterprise and No. 3 of a budgetary institution ) . 216Instructions for procedures in these units are available in Dedkov and Yakimov , Bukhgalterskiy, 1965 , pp . 411-468 . 217The instruction on this system

is published in ibid ., pp . 137-192.

218 For a description of recordkeeping and reporting by local “ state revenue” offices, see Miroshchenko, Gosudarstvennyye, 1964, pp. 262-270 . 219 The information in this table is taken from two official Ministry of Finance instructions intended for republican and local finance agencies. Although much similarity probably exists between accounting practices for the two “ central” budgets (union and republican), some divergenciesmay also be expected . 220 This discussion of the classification of accounts is based on official instructions found in Dedkov and Yakimov , Bukhgalterskiy , 1965, pp . 302-321 , 343-356 , for accounts used in local and republican budgets. There is little information available on the accounts used by union finance agencies. 221 The discussion in this section is based on ibid ., pp . 321-325 , 357-359 , 370-371 . 222 The discussion in this section is based on Dedkov and Yakimov, Bukhgalterskiy , 1965, pp . 376-379, 384-386 ; Goloshchapov, Byudzhetnyy , 1963, pp . 241-244 , 247-250 . 223 In addition to the reports listed here , the accounting office for state revenues in each finance agency prepares periodic operational reports on receipts , amounts due, and revenue plan fulfillment data . For a listing of these reports , see Azarkh , Spravochnik , 1959, pp. 112-115 . Rural soviets also report on forms different from those listed here. 224 An example of the form is given in Goloshchapov, Byudzhetnyy , 1963, pp. 237-239 . 225 An example of the form is shown in ibid ., pp . 241-244 . 226 This discussion is based on limited information available in Dedkov , Razvitiye, 1962, p. 132 ; Dedkov and Yekimov, Bukhgalterskiy , 1965, pp. 394-396 , 398 ; Goloshchapov, Byudzhetnyy, 1963, pp . 251-252.

227 This discussion is based on information in Dedkov, Razvitiye, 1962, p . 121; Goloshchapov , Byudzhetnyy , 1963, p . 25 . 228Klusova and Seglin , Sbornik , 1963, p . 178 . 229Glukhov and Chibrikov , Spravochnik, 1960 , pp . 12 , 14-15. The accounting and reporting procedures discussed here are applicable in the R.S.F.S.R. However , other union republics undoubtedly use identical or very similar procedures. 230 Ibid ., p . 185 .

265

ACCOUNTING AND REPORTING PROCEDURES

266

231 Galuzevskiy , Uchet, 1960, p . 13; Maslakov, Finansy, 1960, pp . 10 , 152; chapter V. 232 Gul'binovich , Analiz , 1960, pp. 10-11.

233 This discussion of foreign trade is based on Grachev, Uchet, 1962, pp . 17 , 18 , 29, 282-288 . A list of standard accounts is given on pp . 20-25 . 234 Ovsyannikov and Kolevich , Bukhgalterskiy, 1961, p . 30. 235 The labor-day (trudoden') is a unit of work measurement formerly used extensively on collective farms. Work was divided into categories , in terms of its complexity and difficulty , and farm members were compensated on the basis of the number of labor - days they earned (D’yachenko, Finansovo, vol. II, 1964, p . 427 ) . 236 Sel’skaya zhizn, No. 144, May 18, 1966 , p . 1. The guaranteed wage payment plan provides that col lective farmers be guaranteed a certain minimum compensation for their labor and that the balance of their income be derived from the profits of the farm . (Khmelev , Bukhgalterskiy , 1963, pp. 207-210 .)

237 Poklad, Kurs, 1963, pp . 422-423. 238 Vestnik statistiki, no . 11 , 1966 , p . 48 . 239 See Reed , Interkolkhoz, 1966, for a general description of these organizations. Information on ac counts and reports is primarily from Valovoy, Razvitiye 1962, pp . 166-172, 177 ; Den’gi i kredit, no 2 , 1962, p . 65. 240 This discussion is based on Izbitskiy , Bukhgalterskiy, 1963, pp. 4-5, 13-22 . 241 This discussion is based on information in Borisov, Finansy , 1961, pp . 28-86 , 153-154, 156 . 242 Sanatoriums of the trade unions use a different type of classification of accounts (see Syrovarov , Finansovaya, 1960 . 243 Belov, V pomoshch ', 1963, pp . 341-344, 397-398 . 244 Shmyhel' , Yedyna, 1962, p . 157. 245 Brazhnik and Shcheglov , Spravochnoye , 1964, p . 436 . 246 Goloshchapov, Spravochnik , 1965, p . 47 . 247 Ponomarev and Strelkov, Spravochnik , 1964, p . 72. 248 Brazhnik and Shcheglov, Spravochnoye , 1964, pp . 25-29 . 249 Goloshchapov, Spravochnik , 1965, pp . 21-24; Ponomarev and Strelkov , Spravochnik , 1964 , pp . 71-76 . 250 The 1957 list, in contrast to the 1960 list , shows retention periods separately for central and sub ordinate bodies , includes documents to be retained permanently (some of which are implied in the later list), and groups the documents by broad category or area of use . The earlier list was clearly intended for all levels of organizational units, from ministries to primary units, and for all financial types, including budgetary institutions and economic organizations as well as khozraschet enterprises. The applicability of the 1960 list is unclear ; reference is made only to enterprises. 251 Ponomarev and Strelkov, Spravochnik , 1964, p . 72. 252 The text of the resolution , entitled “On Measures to Eliminate Serious Defects in the Organization of Accounting and to Strengthen Its Role in Exercising Control in the National Economy,” is contained in Goloshchapov, Spravochnik , 1965, pp . 5-9.

253 Bukhgalterskiy uchet, no. 8 , 1965, p . 58. 254 Bukhgalterskiy uchet, No. 3 , 1967 , p . 12 . 255 Finansy SSSR , no . 6 , 1965 , p . 94. 256

Bakanov , Osnovy, 1961, p . 75 .

257 Bukhgalterskiy uchet , no . 8, 1965 , p . 3 . 258 Dedkov and Yakimov , Bukhgalterskiy , 1965 , p . 194. 259 Slukhay and Yatsura , Tsentralizatsiya, 1964 , p . 100 . 260 Ibid ., p . 3. 261 Finansy SSSR , no . 10 , 1964 , p . 4 . 262 One centralized office handles 25 to 30 institutions, or even 70 to 80 in such large cities as Moscow and Leningrad. In the R.S.F.S.R., about 20 percent of local budget- supported institutions were serviced in this way in 1965 (Bukhgalterskiy uchet, no . 5 , 1965, p . 71). 263 Bukhgalterskiy uchet, no . 3 , 1967, p . 12 . Such facilities are no doubt even less available to the 'offices attached to rural and settlement soviets ,

NOTES TO CHAPTER VIII 264 See Campbell, Accounting, 1963, chapter 10 , for a detailed survey of many aspects of the mechani zation of Soviet accounting from prewar years through the 1950's . Feshbach , Soviet Statistical System ... Since 1957 , 1962, appendix II, also contains valuable data for the postwar period before 1960. The role of electronic computers in the Soviet economy is the subject of an excellent general analysis by Miller , “ Computers," 1966 . 265 According to the 1959 census, the Soviet labor force (excluding that in private agriculture) numbered 99,130,000, of which 1,817,000 were bukhgaltery and schetovody engaged in accounting work as such (TsSU , Itogi, 1962, pp. 96 , 165, 166 ). In the United States, the 1960 labor force numbered 73,081,000 of which 1,413,000 were “ accountants and auditors” and “bookkeepers" (U.S. Bureau of the Census, Statistical Abstract, 1966 , pp. 219 , 232, 236 ). The total labor force figures for both countries include the armed forces, but the accounting personnel include auditors in the United States and exclude them in the U.S.S.R. Machine data processing personnel ( rabotnikimekhanizirovannogo ucheta ) numbering 22,000 are also excluded in the U.S.S.R. 266See Campbell, Accounting, 1963, pp . 245-251 , for a detailed examination of comparative data. He assumes that the volume of accounting work in the Soviet Union is much smaller than in the United States , and that Soviet bookkeeping productivity is therefore comparatively very low . 267 Ibid ., p . 237; Gruntfest and Isakov, Schetnyye, 1963, p . 12; Oligin -Nesterov, Effektivnost', 1965, p . 178; Finansovyye , 1964, p . 109 ; Isakov , Mekhanizatsiya ... statisticheskikh, 1965 , p . 5. Electronic computers and arithmometers (outmoded hand -operated lever - set calculators ) are excluded. 268 See note 265 , above . 269Den’gi i kredit, no. 3, 1965, p . 3. numbered 1.9 million .

Excluding those on collective farms, total accounting personnel

270 Isakov, Finansovoye, 1964, p . 100 . 271Data are for beginning of year, except for 1965 which is a plan figure for the end of the 7 - year plan . Gruntfest and Isakov, Schetnyye, 1963, p . 12 ; Isakov, Mekhanizatsiya... statisticheskikh , 1965 , p . 13; Ivanov and Shchedrin , Organizatsiya, 1963, p . 19 ; Muminov, Primeneniye , 1965 , p . 12 ; Starikov , Vnutrizavodskiye, 1964, p . 142 . 272For example, ratios computed in this manner for 1959 (185,000 - 1.8 million x 100 = 10.3) and 1965 (2400,000 - 2.2 million x 100 = 18.2 ) are in line with the reported ratios given above. 273 Data are for beginning of year and exclude electronic computers and arithmometers ( see note 267, above). Feshbach , Soviet Statistical System ... Since 1957 , 1962, p . 82; Gruntfest and Isakov , Schetnyye, 1963, p . 12. See Feshbach for additional inventory data by type of machine, for the years 1946-58 . 274 Campbell, Accounting, 1963, p . 240. 275Belousov, Uchet, 1966 , p . 22. 276Zastenker and Fel'dman , Ekonomika, 1966 , p . 5. The variation in the nomenclature of machine data processing factories (literally , mechanized accounting or mechanized recordkeeping factories) does not appear to be significant. 277Yezhov, Statisticheskiy , 1965 , p . 661. 278E.g., Bukhgalterskiy uchet, no . 5 , 1960 , p . 13. 279Zastenker and Fel'dman, Ekonomika, 1966 , pp . 9-10 . 280Bukhgalterskiy uchet, no. 4 , 1966 , p . 3. 281 Isakov, Mekhanizatsiya ...statisticheskikh,

1965, p . 461; Bukhgalterskiy uchet, no . 9, 1965, p . 5 .

282 Finansy SSSR , no . 5 , 1962, p . 88 . 283 Alikhashkin , Mekhanizatsiya, 1964, pp. 3-4. 284 Rapoport, “ First, " 1966 , p . 69 . 285 Vestnik statistiki, No. 12, 1966 , p . 66 . 286Ibid . In mid -1966 , the RMSS's were serving 8,622 clients, including 1,912 collective and state farms, 550 sel’khoztekhnika bases and stores, and 424 central accounting offices (Rapoport,“ First,” 1966, p.69. 287Ekonomicheskaya gazeta , no. 13, 1966 , p . 25 .

288Ekonomicheskaya gazeta , no. 16 , 1964, p . 4 . 28 °Finansy SSSR , no . 5 , 1962, p . 89; VTSSPS, Spravochnaya, 1965, p . 139 . 290The Soviet figure for 1960 is cited by Feshbach , Soviet Statistical System ...Since 1957 , 1962, p . 80 . The 1966 estimate is from Miller, “ Computers," 1966 , p . 331. 291Ekonomicheskaya gazeta , no . 43, 1965, p . 19 .

267

268

ACCOUNTING AND REPORTING PROCEDURES 292Vestnik statistiki, no. 9 , 1963, p. 70. The two central installations have similar - sounding names (tsentral'naya mashinoschetnaya stantsiya and Tsentral'naya stantsiya mekhanizirovannogo scheta ) and their respective specializations are not readily available . 293Loskutov, Vychislitel'nyye, 1966 , p . 27 . Two of these computers were English ( Amidac - 2400 and Elliot- 503) and two were Soviet (Ural - 2 and Ural - 4 ). 294 Isakov, Mekhanizatsiya...statisticheskikh , 1965, p . 17 ; Vestnik statistiki, no . 9 , 1963, pp. 69-71. 295 Replaced the Administration for the Organization and Mechanization of Recordkeeping ( Soyuzmashuchet). The acronym Glavmekhschet was also identified as the Main Administration for Mechanized Data Processing (or Accounting - Glaynoye upravleniye mekhanizirovannogo scheta) in Vestnik statistiki, no . 9, 1963, p . 69, but since no furthermention of such an organization can be found in this or other sources, it is assumed that the organization does not exist. 296 Sulim , “Unified ," 1965, p . 23. 297 Yedinaya gosudarstvennaya set’ vychislitel'nykh tsentrov - YeGSVTs. identified by the source ( ibid .) .

The originating group is not

298 Ekonomicheskaya gazeta , no . 16 , 1965 , p . 43 . 299 For example, see Sulim , “Unified ,” 1965 , p . 23. 300 The resolution “On Improving the Organization of Work on the Creation and Introduction Into the Economy of Computing Equipment and Automated Management Systems” was announced in Izvestiya , March 20 , 1966, p . 2. See also interviews on the subject with Academician V.A. Trapeznikov in the same issue (p . 5 ), and with V.N.Starovskiy, head of TsSU , in Ekonomicheskaya gazeta , no. 13, 1966 , p . 25. A collection of articles on various aspects of the problem are contained in Aleksandrov , Statistika , 1966 . 301 Ekonomicheskaya gazeta, no. 44, 1966 , p . 18 . 302 Sovetskaya Estoniya , October 19, 1966 , p . 4 . 303 TSSU , Plan , 1965 . 304 A similar work plan for the TsSU system is available for the year 1956 - i.e ., prior to the major reorganization of TsSU in 1957. A portion of this plan dealing with labor statistics is shown in Feshbach , Soviet Statistical System , 1960, pp. 117-128, and a portion dealing with household budget surveys is contained in DePauw , Soviet...Survey, 1965, pp . 69-75 . 305 Since most items in this portion of the work plan were to be submitted by mail, this column was eliminated in the translation , and the information shown elsewhere (see note 1 to the table) . 306 The deadlines specified for groups of republics in the “Completion time...” column apparently apply to republican administrations for their reports rather than to TsSU U.S.S.R. for its reports covering the specified groups of republics. The differentiated deadlines are probably designed to stagger the work load of TsSU U.S.S.R., and to take advantage of the more rapid availability of reports from the smaller republics . 307 TsSU , Plan , 1965 , p . 258. The 1960 charter of the newly reorganized TsSU apparently introduced this as a new TsSU responsibility , as pointed out in Feshbach , Soviet Statistical System ...Since 1957 , 1962, p . 6 .

IX .

THE MECHANICS OF FINANCIAL TRANSACTIONS

This chapter provides a description of the procedures and instruments employed to carry out monetary transactions in the Soviet economy. Of the many facets of this topic , budget appropri ations and payments through the banks receive major emphasis . The first section deals with the enabling procedure for budgetary expenditures, that is , the series of steps required before appropri ations in the ratified budget can be converted into funds for use by spending units . Payments into the budget, which generally do not require elaborate enabling procedures, are not detailed here . The remaining sections deal with actual payments by spending units, on both commercial and budget account. In view of their overriding importance , primary attention is devoted to noncash payments made through the banking system . The principal methods of payment, including the types of instru ments employed , are described in section B. Bank statistics on the volumeofpayments, both regularly reported and derived from special sample surveys, are dealt with in section C. Finally, the standard ization and content of payment instruments and other bank documents are discussed in section D. Selected standard forms and statistical materials relating to these topics are presented in appendix A. A. BUDGET APPROPRIATION PROCEDURES Between the ratification of the various budgets by the respective soviets or “ organs of state power, " and the actual expenditure of funds by spending units, there is interposed a rather involved series of steps with numerous variations . The version of the budget ratified by a legislative organ is much too aggregative and nonspecific to serve as the document triggering actual spending. As was noted in chapter IV , budget compilation and ratification flow essentially in a top - to - bottom direction . While preliminary drafts of agencies' ‘financial plans” (for khozraschet activities) and " estimates” (for budget - supported activities) are prepared in aggregate form prior to ratification of the state budget, it is only after ratification that fully detailed plans and estimates are prepared . These are submitted to the appropriate organs of the Ministry of Finance for approval and compila tion into a complete and final version of the budget . This version , known as the budget schedule (rospis' byudzheta ), is broken down into the full detail of the budget classification , by quarter of the year. It serves as the operationalbudget plan , on the basis of which spending takes place and budget execution The budget schedule for a given is controlled . territorial unit is approved by the appropriate

Ministry of Finance organ of that unit- that is , no The budget higher - level approval is required. schedule is usually completed within a month after ratification of the budget by the Soviet organ . 1 The machinery of budget appropriations differs radically between centralbudgets (i.e., the all - union budget and the republican budgets) and local (all other ) budgets. This is due to differing ways of banking budget funds and the differing roles of the banks. As noted in chapter VIII, one basic account recording all revenues and expenditures of each local budget is maintained in a single bank office, thus enabling the local finance department to main tain easy surveillance over the current balance in the budget account and to carry out disbursements by a direct transfer from it to the accounts of grant administrators. For the all - union and republican budgets, how ever , no such actual centralization of revenues takes place- any branch bank may have accounts for central budget revenues and entirely unrelated accounts for central budget expenditures. Central surveillance is, of course , maintained over the relationship of budget-wide revenues and expendi tures on the basis of reports from each branch bank to the central office ofGosbank and , ultimately, to the Ministry of Finance. In a given branch bank , however, expenditures from central budgets are controlled , not by the amountofcentral budget funds available in that bank , but by special limits known as budgetary “ credits ” (kredity). These so - called credits confer upon the spending unit receiving them the right to make expenditures chargeable to the state budget. As such , budget credits are not recorded as assets or liabilities on the balance - sheet accounts of banks or recipient khozraschet organizations , but only on single - entry memorandum accounts. 2 Expenditures charged to these credits are , of course , not loans, but are without exception nonrepayable grants . In a purely technical sense , the budget “ credits ” do constitute a form of credit between the bank and the budget , since the revenues of central budgets collected by a given branch bank are retained on revenue accounts in that bank until the end of the year when actual centralization takes place by means of inter bank remittances. Continual reporting on budget revenues and expenditures by each bank permits authorities to maintain a running overall com parison , but there is no formal transformation of revenue deposits into expendable deposits entailing money instruments. Expenditures in a given branch 269

270

THE MECHANICS OF FINANCIAL TRANSACTIONS

bank during the course of the year are thus nominally made on interbank credit, and an overall current budget deficit would apparently be covered automatically by bank credit in a real as well as a nominal sense . 3 Credits are opened for each quarter ; unused balances may be carried over from quarter to quarter, but are ordinarily returned to the budget at the end of the year . Credits from the central budgets are opened in the name of the heads of agencies , who act in the capacity of “ credit The (rasporyaditeli kreditov ). administrators" chief, or top - level , credit administrator can spend directly to maintain the central apparatus or to carry out centralized measures relating to the entire agency, or he can reassign the credits to subdivisions of his agency serving as lower - level Central budget credit credit administrators . administrators can be of three levels , with the third or lowest having no reassignment rights . In the enabling process, therefore, the Ministry of Finance as the budget - administering agency needs to authorize spending by an operational agency at only the top level, and further disburse ment of budget credits involves only the bank hierarchy and the spending agency hierarchy. The opening of central budget credits in the bank is authorized by the Ministry of Finance (U.S.S.R. or republican ) by means of a document known as an expenditure schedule (raskhodnoye raspisaniye). Three variants of this document are in currentuse : ( 1) Form No. 13, Expenditure Schedule for Fi nancing InstitutionsMaintained by the Budget (figure IX - A - 1) . This document closely follows the " estimate " for the agency and itemizes the appro priations in terms of the budget classification of expenditure objects , or " articles, " described in Capital investment appropriations chapter V. (except for minor items under article 12), are disbursed separately by means of form No. 12 (see below ).

(2 ) Form No. 15, Expenditure Schedule for Financing Economic (khoz yaystvennyye ) Organi zations (figure IX - A - 2 ). This form differs from form No. 13 in that only one article of the budget classification is involved . Thus, if appropriations to a given agency are made under several articles in the khozraschet set, separate forms would be needed for each article . ( 3 ) Form No. 12, Expenditure Schedule - Fi This form is in nancing Plan (figure IX -- A - 33). ). essence a comprehensive annual financial plan showing, by quarter, both budgetary appropriations and all other sources of funding for particular programs. Used primarily for capital investments provided for in the state capital investment plan , this form is also used for all other measures which

are financed jointly by both " own" (nonbudgetary) funds and budget appropriations, such as research and development, cadre training, and other so called operational expenditures not charged to Form No. 12 is used to open production costs. credits for both khozraschet and budget- supported agencies. A single large agency, such as a sovnarkhoz , might employ several such documents for its capital investment program , e.g., one for its “ productive” activities and another for its educational institutions. first- or credits from Transfer of budget credits second - order administrators to second- or third order administrators under appropriations made on forms No. 13 and 15 is carried out by another instrument, a bank document called a budgetary authorization (byudzhetnoye porucheniye - figure IX - A - 4 ). This document carries the right to spend money , but is not in itself a money instrument and does not entail the interbank remittance procedures employed for monetary instruments as such . Credits for capital investments opened by the Ministry of Finance are transmitted by means of form No. 12 to the central office of the appropriate bank , usually Stroybank . The agency receiving the credits in turn distributes them , according to plan , to its lower administrative levels. This is accom plished by means of several documents: Form No. 5 – Financing Limit (limit finansiro vaniye - similar to form No. 12, sent to the intermediate bank office ); Form

No. 7- Annual Plan of Capital Work ;

Form No. 1 - Title List of Capital Work (a list of types of expenditure and subprojects for each construction project ); and Form No. 6 - Certification Designs and Estimates Have Approved .

(spravka ) That Been Properly

These documents are made available to successive levels of the administrative and bank hierarchy in such a way as to permit controlby the bank . Limits of own funds to be deposited and budget credits to be opened for each investment project can be aggre gated and checked with the original authorization approved by the Ministry of Finance on form No. 12 .

Appropriations under local budgets , as noted above , do not ordinarily require credit - transmitting procedures. Although recipients are still known as credit administrators (first- or third - order only) , grants are disbursed by a direct transfer of funds between accounts on the basis of payment authorizations drawn by the local finance organ . Capital investments and similar appropriations are again an exception ; a procedure similar to that for

BUDGET APPROPRIATION PROCEDURES - THE SYSTEM OF PAYMENTS central budget credit administrators is employed for such appropriations in local budgets . B. THE SYSTEM OF PAYMENTS 1. General Features The system of financial payments in the Soviet Union is characterized by a number of prominent features which carry the strong imprint of basic and longstanding attitudes toward financeasplaying a distinctly secondary role in planning and decision making processes. At the same time, the financial system is organized to perform two basic functions crucial to the carrying out of economic plans - a control and accounting function , and what might be called the “ lubricating" function of providing a medium for softening the disruptive impact of erroneous or insufficient physical planning, or of actual performance that deviates in either direction from plans. These two major functions might appear to be in fundamental conflict, since they call for rigidity and severity on the one hand and And , flexibility or even laxity on the other . indeed , such conflicts are apparent in the insti tutional arrangements. Most of the changes in the more technical aspects of the financial system since it took its basic shape in the early thirties have been designed to promote an effective compromise of these two basic functions ,

A third function of promoting efficiency , or strengthening “ economic management” (khozra schet), is frequently cited by Soviet commen tators, but this role of the financial machinery has not yet been able to emerge from the dominance of physical planning . It is only in recent years that serious thought toward giving substance to this role has taken place, and the currentexperiment in certain industrial enterprises of assigning a greater role to financial success and to the final consumption results is virtually the first significant step in this direction . Before embarking on an examination of the financial payments machinery, several of themajor features of the system should be highlighted. (1 ) A highly restricted and closely supervised use is made of money in the form of “ cash ," a term used here for the Soviet concept of hand - to hand money (nalichnyye den'gi) consisting of paper currency and coin , as opposed to bank deposit or “ noncash " money (beznalichnyye den’gi). It has been estimated that only 8 to 10 percent of the pay ments passing through Gosbank are made in cash , despite the fact that cash flows are largely channeled through Gosbank. 4 Gosbank's cash turnover is directed into two major streams - takehome pay of workers and employees , made entirely in cash , and accounting for over 80 percent of cash outflow , and state

271

and cooperative retail trade deposits , which com prise about 90 percent of cash intake.5 This concentration of cash flows facilitates the planning of cash circulation and the coordination of the “ Cash Plan " with the “ Balance of Income and Expenditure of the Populations and other related plans.

( 2 ) A corollary to the restricted use of cash is , of course, the great reliance on book transfers of bank deposit money for payments among enter prises and organizations. Aside from the payment of wages, enterprises can generally use cash only for small payments , and the quantity of money available to enterprises outside of the bank accounts is closely controlled by Gosbank. The concentration of most interorganization payments through a centralized system of banks provides the latter with the opportunity for close surveillance over the propriety of such payments , and their conformity to economic plans. ( 3) In principle , commercial credit , advance payments , or financing on book account between enterprises and organizations is prohibited , and The credit is provided solely by the banks. extensive use of bank credit and the intimate involvement of the banks in the liquidity position of each enterprise is deliberately designed to make the bank more sensitive to theday - to - day perform ance of the enterprise . (4 ) Elaborate and relatively arduous document control devices are incorporated in the system . The problem of the volume of paper work involved in payment transactions has recently prompted attempts to alleviate the work of handling tens of millions of payment instruments daily through out the Gosbank system .

2. Noncash Methods of Payment Noncash money in the Soviet Union consists of entries in bank accounts which are similar to demand deposits (checking accounts) in the United States. Major differences exist, however , not only in the much more limited convertibility of Soviet money into cash and the many more controls imposed on the objects of expenditure, but also in the instruments and procedures by means of which deposit money is manipulated . ? The general methods used to manipulate it , which are described individually below , can be classified into three major groups, using as a basis the identity of the party initiating payment: ( 1) Payment is initiated by the payee , i.e., the supplier of goods and services, or by the shipper on behalf of the supplier.8 The payee prepares a pay ment demand (platezhnoye trebovaniye) and sends it to his branch bank for collection (na inkasso ) . The payer's bank , upon receipt of the payment demand and acknowledgement of its acceptance by the payer, transfers the amountofthe payment from

272

THE MECHANICS OF FINANCIAL TRANSACTIONS

the latter's bank account to the payee's bank account. This general procedure, in several

payer's bank , which arrival of the claim .

variants , is known as the acceptance method (akseptnaya forma) of settlement.

signified and the amount written off the payer's account, one copy is attached to the daily statement of account which the bank furnishes its customer . Another copy is returned to the supplier's bank with the interbank remittance advice (avizo). After crediting the supplier's account, this copy is returned to him with his statement. The last copy is employed as a posting medium in the payer's bank . Before falling due , i.e., while awaiting the acceptance deadline, it is kept in a so -called File No. 1 .

A (2) Payment is initiated by the payer. variety of instruments may be used, depending on the circumstances , including several forms of payment authorizations , letters of credit , and checks. ( 3) Payment takes place without the consent of the payer . It may be initiated by a third party , such as a superior administrative organization , a judicial body, or a finance organ , or by the bank itself . Such payments are generally made only in special The instruments used are known as cases . collection authorizations or directives. The payment method to be used is subject to agreement between payer and payee and is specified in contracts unless particular methods are prescribed by regulations for a given type of transaction .

a . The Acceptance Method (Payment De mands) . The acceptance method , in all its vari ations, is used only for payments for goods and In this sphere, however, it is the services . predominant method used , accounting for about 80 percent of the total volume of such payments made It can be used for both intercity through Gosbank . and intracity10 settlements. The normal procedure in the use of the accept ance method may be outlined as follows. After shipment of goods or performance of services, the supplier draws up an invoice - payment demand (schet- platezhnoye trebovaniye - figure IX - B - 1) . This instrument combines an invoice with a pay ment demand , which is a nonnegotiable and non assignable draft drawn on the purchaser.11 Since it is a multipurpose document used for accounting purposes by the payer , the payee, and their respec tive branch banks, it is drawn up in six copies (for intercity settlements) . The first four copies are sent to the supplier'sbranch bank for collection , one copy is sent directly to the payer as an invoice , and the last copy is retained for the supplier's records. Submission to the bank for collection is to take place only after the goods have been shipped or services performed and the invoice sent to the purchaser ; submission more than 1 month later requires special permission of the bank . In order to be used as security against settlement credit, the invoice - demandmust be submitted within 3 days after the date of shipment. The bank serving the supplier retains one of its four copies as evidence of security for bank credit given to the supplier “ against settlementdocuments in transit . " Three copies are then sent to the

informs the payer of the After acceptance has been

If the payer does not have a balance in his account when the bill comes due , it is transferred (“ File to File No. 2 for overdue obligations. No. 2" is frequently used by Soviet writers as a euphemism signifying an enterprise in financial Documents are removed from this difficulty .) file and paid by the bank as funds accumulate in the payer's account in accordance with a system of priorities (listed below ) which is based on the economic nature of the payments regardless of their due dates. The acceptance of payment demands is usually tacit, i.e. , unless the payer advises the bank to the contrary within a prescribed timelimit, the demand 12 is considered accepted . Acceptance may be either (1 ) prior to actual payment, ( 2 ) subsequent to actual payment, or ( 3) waived entirely. The last variant, still considered part of the “ accept ance method ” because the same payment document is employed , is used only in limited cases. 13 As the following sample survey data show , subsequent acceptance has superseded prior acceptance asthe predominant type in total payments made under the acceptance system.14

Percent distribution Type of acceptance

1958 Total....

Prior ... Subsequent. Waived .

1961

100.0

100.0

62.8 31.5 5.7

42.0 55.1 2.9

Under the system of prior acceptance , the buyer's bank holds thepayment demand in File No. 1 for several days in order to give him an opportunity to check the actual shipment against the invoice and , in justifiable cases, to give notice of refusal to accept. This system is employed for all intercity and for both inter- and intracity settlements ,15 settlements involving the following organizations: ( 1) Ministry of Foreign Trade (both purchases and sales );

THE SYSTEM OF PAYMENTS

(2 ) Main Administration of State Material Re serves (for goods placed in stockpiles );

( 3 ) budgetary organizations, including those of the Ministry of Defense , the Ministries of Internal Affairs, and the Committees of State Security; (4 ) organizations performing capital construc tion (purchases and sales); (5 ) construction design and

organizations (sales );

(6 ) collective farms (purchases and sales ). The period in which prior acceptance must be made after receipt of the payment demand by the payer's bank is 3 days for intercity settlements and 2 days for intracity settlements.

Under the system of subsequent acceptance , used primarily for intracity settlements , the pay ment demand is normally paid immediately upon its arrival in the payer's bank and the payer is 17 allowed 3 days in which to refuse acceptance . Upon notification of the payer's refusal to accept, the bank returns the payment without consent of the supplier . Notification of refusal to accept is made by telegram in the case of prior acceptance, and by form No. 870 in the case of subsequent acceptance . Each refusal must contain the justification for such action . The bank is responsible only for the legality of the justification; questions of substance are referred to arbitration boards or the courts.

While these procedures give formal protection to the buyer , in practice relatively little use has been made of the right to refuse acceptance , In the past this was a reflection of the " seller's market" situation obtaining in the economy; purchasers found it advantageous to retain virtually any goods coming their way, whether or not specifications and contract conditions were met . Refusal to accept demands in full were usually justified by the fact that the goods were not ordered or had already Recent Soviet commentary been paid for . 18 indicates that despite the disadvantageous position of the purchaser and the difficulties of rejecting shipments of inferior goods (particularly consumer goods), considerable use is now made of the right to refuse payment. Refusals to accept payment demands in full or in part constituted about 2 per cent of the total Gosbank volume of payments under the acceptance system in the years 1960-64 . This level represents the considerable sum of 10.9 billion rubles in 1964. 19 On the other hand, some of those refusals are reversed by arbitration agencies and some are justified by billing errors such as billing for goods already paid for , billing for shipments not ordered , use of improper prices, etc.

273

Refusals justified on the basis of poor quality, failure to meet specifications, or damage in transit probably constitute a small portion of the total. One reason for difficulty of refusal is the short acceptance periodaº and the fact that the period is measured from the timeof arrival ofthe payment demand at the payer'sbank , rather than of the goods themselves. Theoretically , goods must be shipped prior to submission of a payment demand to the suppliers' bank, but delays in shipment may leave insufficient time for inspection . It may even result in the arrival of the goods after the acceptance deadline has expired and the bill is paid . This reportedly occurs in the majority of cases of intercity deliveries to trade organizations.21 There is a provision in the regulation (article 33 of Instruction No. 2 ) enabling a purchaser to submit a counter-payment demand against the supplier to recover a paymentalreadymade , provided that fail ure of the goods to meet specifications is certified within 10 days of receipt of the goods. However , little use of this provision has reportedly been made. 22 Soviet sources make conflicting statements as to whether budgetary organizations may use the acceptance form for intracity payments . Instruction No. 2 itself is apparently self-contradictory on this score . Article 5 of the Instruction indicates that budgetary and trade union organizations may not employ the acceptance method (only payment authorizations or checks ) for intracity payments for goods, although it is permissible for services; on the other hand , as noted above , article 12 / b rules that budgetary organizations may employ the prior acceptance method for both inter- and intracity payment demands on both (by implication ) goods and services ,

Authorizations. The payment b . Payment authorization (platezhnoye porucheniye - figure IX B - 2 ) is a general - purpose document drawn up by the payer which orders the bank to make a noncash transferral of funds from the payer's to the payee's account . It can be used for virtually any kind of payment, and after the acceptance method is the In a 1961 most common method of payment. sample survey, payment authorizations accounted for 20.7 percent of the volume of payments for goods and services and 97.8 percent of all other noncash payments made through Gosbank . 23 Settlements initiated by payment authorizations are frequently termed “ remittances" (perevody) while when intercity transactions are involved, 24 payments between customers with accounts in the same bank are referred to as “ transfers" (perechisleniya ). Payment authorizations are used the instruments of payment for goods and services under a variety of circumstances of which the more important are prepayments by budgetary

274

THE MECHANICS OF FINANCIAL TRANSACTIONS

organizations to intracity suppliers of goods and services, and planned payments by purchasers of regularly supplied goods, e.g., delivery of flour to bakeries. These instruments are also used for various other payments besides goods and services. The specific types of settlements for which payment authorizations may be used, according to the 1960 Instruction already cited , are as follows : ( 1 ) Payments received ;

for goods and services already

accepted by the bank for execution even though the organization's bank account balance is insufficient or nonexistent at the time, Such authorizations are kept in File No. 2 for overdue payment documents until funds becomeavailable , whereupon the documents are executed under payment priority rules. Authorizations for other types of payments of khozraschet organizations, aswell as all authori zations of budgetary, party , Komsomol, trade union , and social organizations are accepted by the bank only if a sufficient balance of funds or budget credits appears on their accounts .

(2 ) payments for uninvoiced deliveries; ( 3 ) planned payments for goodsand services; (4 ) retirement of indebtedness;

(5 ) payment of reclaims for poor quality , for feits , fines, and penalties due to failure to observe contractual conditions; (6 ) deposits and funds for capital construction and capital repairs;

(7 ) prepayments for goods in intracity deliv eries, for hauling and related work by truck transportation organizations, and (with permission of bank authorities ) prepayments to intercity sup pliers for goods shipped by truck or wagon; ( 8 ) prepayments for communications services, rent, and guard services of the Ministry of Internal Affairs; (9 ) revenue payments to the budget, payments of state insurance and social insurance premiums, transfers into savings banks (wages, collective farmer income, royalties, and other payments due individuals), and transfers to trade organizations of withholdings from wages for goods purchased on consumer credit ; ( 10 ) transfers between superior and subordinate organizations related to: the redistribution of current assets; temporary financial assistance; subsidies to cover losses; deductions from profit; etc .;

(11) transfers to non -khozraschet subdivisions for wage payments and operating expenses; (12) transfers of funds to accredited agents; and

The certified (aktseptovannyy) payment authori zation is a variation of this method of payment. The ordinary payment authorization does not guarantee an immediate transfer of money to the payee, as the payer's account may at any one time be temporarily short. In such a case the authori zation is either held by the bank in File No. 2 until funds become available (for khozraschet organizations) or is not accepted by the bank for handling (for budgetary institutions ). transaction should require a guaranteed settlement, however , a payment authorization that has been certified by the bank may be employed . Upon submission of a certified authorization by a payer , the bank transfers the amount from his basic account to a separate account. The certified pay ment authorization itself is usually transmitted directly by the payer to the payee, who must then deposit it in his own bank . This form of payment , which in function is similar to a certified check , is used primarily for occasional transactions such as payments to communications agencies for postal money orders (perevody), postal shipments , and C.O.D. settlements, and to transportation organi zations for nonrecurrent settlements .

remittance The specific - purpose (tselevoy perevod) is another variation of the payment authorization . It is used by superior organizations , such as ministries and sovnarkhozy , which have the right to redistribute the profits and working capital of enterprises and make bonus payments . In order that such redistributed funds not be used for meet ing general obligations but only for the purpose specified in the authorization (such as payment of overdue bank loans or overdue accounts with suppliers, the most common reasons for making enforced transfers), the funds are retained in a separate account (bank account No. 750 , entitled “ Remittances Not Paid Out" nevyplachennyye perevody ), and their use is controlled by the recipient's bank .

(13) advance payments (when permissible ). Payment authorizations may not be used to invest funds directly into capital construction from basic activity accounts, i.e., bypassing sepa rate bank accounts specially designed for this purpose. Authorizations of a khozraschet organi zation for payments of types ( 1 ) through (6 ) are

c . Letters of Credit -The letter of credit (akkreditiv ) , which resembles its Western counter part, is used for payments for goods and services in intercity settlements. On the basis of an application submitted by a payer and specifying the amount of the credit (not less than 100 rubles ),

THE SYSTEM OF PAYMENTS

275

1 its duration (25 to 45 days), the nameof the supplier (payee), and a general identification of the goods or services, the purchaser's bank authorizes the supplier's bank to pay bills submitted by the supplier. In addition to the invoice, the supplier is required to submit to his bank evidenceof shipment or other conditions specified by the purchaser.

development of decentralized clearing systems, however, reportedly brought about its decline,29 and at the present time it has virtually disappeared . The volume of payments through separate accounts dropped from over 6 billion rubles in 1950 to 20 million in 1956 , and by the time of the 1961 sample survey made up only 0.01 percent of intercity payments for goods and services (see table IX - C - 2).

This form of guaranteed payment is required by regulations for certain kinds ofdeliveries, although just which deliveries cannot be determined from available Soviet sources. It may also be used for occasional purchases and in situations where an agent of the purchaser receives the goods at the supplier's location . According to one source, it is the main form of payment used by budgetary organizations in intercity settlements.25 It is

e . Settlement Checks.– A sharp distinction is made between “monetary” (denezhnyye) checks and “ settlement" (raschetnyye ) checks. Each type of check must be labeled as such and its respective area of use strictly observed;monetary checks can only be cashed for currency or coin , while settlement checks can be used only to effect debit and credit entries in bank accounts . In

also employed as a type of sanction against payers who are habitually tardy in meeting their bills . The use of letters of credit may be imposed by the banks on enterprises with above - quota stocks ofmaterials and supplies.

general, settlement checks can be made out only to specific organizations having a settlement or current account in a bank , and not to individuals . As with all Soviet payment instruments , they have no negotiability or assignability properties.

The funds set aside in a separate account in the payer's bank to guarantee payment may be drawn from the payer's basic account, but bank credit is used to provide the majority of such deposits.26 Letters of credit occupied an important place in intercity settlements for goods and services in the prewar period . Their use has steadily declined, however, and in the 1961 sample survey they accounted for only 0.6 percent of intercity payments for goods and services.27 In addition

Settlement checks have been a relatively little used form ; they accounted for only 2 percent of payments for goods and services in the 1961 A drive to increase the use sample survey. 30

to the disadvantage of immobilizing liquid assets for long periods, the complexity of the procedure makes this form of payment unpopular with banks and its current use appears to be mainly that of a sanction . d . Separate Accounts for Freight Shipments. A form of payment similar in function to the letter of credit is based on the Separate Account for Freight Shipments (osobyy schet po gruzooborotu ). This account 28 is opened on the application of a payer in a branch bank of a city where the payer makes frequent settlements with one or more suppliers, and where he has a purchasing agent. The latter is empowered to accept the invoices of suppliers for goods and services, and he may be issued a limited checkbook (see below ) or given authority to withdraw cash from the bank in order to pay transportation charges when these are not carried by the supplier . The separate account, like the letter of credit, is covered either by a deposit of the payer's own funds or by credit from the bank . It must be used continually ; if not used for a month it is closed out by the bank. Prior to 1957 this form of settlement was used mainly by heavy industry in a limited number of cities and in transactions involving the (now defunct) The centralized ministeral sales agencies .

of checks, however, primarily to ease the paper work of banks, is currently in progress. Their use is restricted to payments for goods and services, 31 which excludes their use for capital construction or capital repair settlements (for which special-purpose bank accounts are set up in order to maintain close control). Until recently , budgetary institutions were not permitted to use settlement checks unless they were certified by the bank . Four types of settlement checks are currently in use : Ordinary (uncertified ), certified , limited checkbook , and unlimited checkbook . A major drawback which makes the ordinary check unpop ular with both the payer and the payee is that in the event of an overdraft the bank will not under take the service of collecting on the check as it does for payment authorizations and payment demands drawn on commercial organizations. This feature makes the ordinary check an inconvenient instrument for the payee, since overdrawn checks are returned to him and he must either redeposit them or seek other forms of payment. Under Soviet conditions, overdrafts are not unlikely ; the payer may have a sufficient bank balance at the time the check is drawn , but by the time the 10 -day time- limit for depositing checks is up , his balance may have been consumed by claimants' payment demands which may be met immediately by his bank and without his prior knowledge. In view of the small balances generally held in settlement accounts and of the fact that overdrafts subject signers of checks to " severe responsibility ” 32 the unpopularity of ordinary checks is understandable .

276

THE MECHANICS OF FINANCIAL TRANSACTIONS

Certified checks, literally, “ checks accepted by the bank, ” avoid some of the drawbacks of the ordinary check , since they are guaranteed by funds which the bank withdraws from the organiza tion's basic account and deposits in a separate account. Budgetary organizationsmayuse certified for intracity purchases of goods and services. Also , as a disciplinary measure against a habitually tardy payer , a bank or supplier can require the use of certified checks as the instru ment of payment. This form of check , however , has little appeal to the payer. Since a payment authorization must be submitted to the bank with the check to be certified , payers generally prefer to use the simpler method of paying by means of a certified payment authorization , as described above .

Limited checkbooks are a form of payment in amount which there is a specified maximum against which checks may be written . Within the limit (not less than 100 rubles) imposed by the bank when it issues the checkbook , payment is guaranteed to the payer . Limited checkbooks are issued for two types of settlements: ( 1) Payments for goods and services, and ( 2) payments for transportation and postal shipment charges . Separate accounting of each type is maintained in Gosbank . Limited checkbooks issued for payments for goods and services are used for intracity settle ments and for intercity payments where the goods or services are received by an agent of the purchaser. Such agents may be issued checkbooks and authorized to make payments directly . Theuse of this form ofpaymentmay be at the request of the paying organization , or it may be imposed by the bank as a sanction against tardy payers . The same checkbook can be used for settlements with different suppliers. The check (figure IX - B - 3) is given directly to the supplier and must show the number and date of the invoice or other document on which payment is made.33 Guarantee of payment is ordinarily secured by a deposit of the organi zation's own or borrowed funds. No deposit is necessary for organizations which have a special loan account; returned checks are automatically charged to this account . In an effort to increase the use of checks, the need for a deposit was re cently waived for those organizations participating in decentralized clearing arrangements . 34 Limited checkbooks to be used in payments for transportation services are issued to organizations which make frequent payments for any of several means of shipment - railroad , maritime, river , civil air , truck , or post. A separate limited checkbook is issued for each type of carrier . These checkbooks require a deposit, either of an organi zation's own funds or of a bank loan , in a separate account. Limited checkbooks for C.0.D. deliveries may not be issued on credit.

The unlimited checkbook , used only for trans portation services, can be issued to organizations having a special loan account, those organizations enjoying the right to obtain bank loans against settlement documents in transit, and other organi zations which have special permission of the bank . These checkbooks do not require a prelim inary deposit and they carry no limit on the total The bank automatically charges such amount, checks to a credit account when they are deposited . f . Collection Authorizations. The forms of payment described above are made with the consent of the payer , whether payment is initiated by the payee or the payer himself. There is a form of payment, however , which can be carried out by the bank without the payer's consent. Such pay ments employ an instrument known as a collection authorization (inkassovoye porucheniye ), and are made on the basis of various types of executive (ispolnitel'nyye) documents: Court orders, arbi tration board decrees, notary public endorsements of contractual documents, trade union resolutions 35 regarding wage disputes, etc. The executive document is submitted to the payer's bank together with the collection authorization which specifies the payer and payee , the amount, the bank accounts to be debited and credited , the executive document, and the legal basis for the action. For some purposes a collection authorization may be submitted on the basis of an incontestable legal right. In such cases no executive document need be attached and the collection authorization itself is termed a directive (rasporyazheniye ) . Redistribution of the working capital and profits of subordinate enterprises by ministries, sov narkhozy, chief administrations, and other agencies granted such powers is effected by means of a directive . In addition , banks can remove funds from an organization's accounts , without contest , for purposes of collecting payments on bank loans or similar obligations . Overdue payment instruments being kept by the bank in File No. 2 for lack of funds are also treated as executive documents empowering the bank to make payment as the enterprise's funds accumulate . A system of priorities based on the economic nature of the claim is used to determine the order in which various overdrafts , executive documents , or incontestable directives are honored . In those enterprises having a decentralized offset account, incoming payments for goods and services must first be used to satisfy claims on this account before becoming available to satisfy claims on the settlement account. All claims chargeable to an enterprise's settlement account are assigned to groups with the following descending order of priority . 36 (1 ) Wages and equivalent payments to workers and state social insurance and employees , payments;

277

THE SYSTEM OF PAYMENTS -PAYMENT STATISTICS

( 2 ) payments to the budget; ( 3 ) payments for goods and services 37 - also , payments made to balance clearing settlements; (4 ) deposits of profits and amortization deduc tions in account for financing capital investments and capital repairs; (5 ) payments claims; and

on bank loans and other bank

Together with estimates of total payments made through Gosbank , given in the same source, these are as follows (in billions of rubles) :

Year

1940 .... 1950 ... 1958... 1959 .. 1960 .... 1966 ...

Gosbank1

Stroybank

95 260 2473 (NA ) 2650 1,040

(x )

57.1 (NA )

92.7

(6 ) all other payments. Over and above this priority system , an amount of up to 5 percent of the average daily deposits on the enterprise's settlement account is held in reserve to be used at the enterprise's discretion for pressing needs (neotlozhnyye nuzhdy). As a sanction , the bank may reduce the amount of such payments to 2 percent. Impending payrolls may also be reserved.

NA Not available . X Not applicable . I Data cover all noncash settlements , including those not reported on a regular basis , except repayments of bank loans by enterprises and organ izations. Data are estimates based on the 1958-1966 structure of payments as obtained from sample sur veys in September of 1958 and 1961 and comprehen sive surveys covering 1965 and 1966 Septembers . ? Estimated from reported ratios for 1966/1960 (1.6 ) and 1966/1958 (2.2 ) .

Source : C. BANK

STATISTICS ON

THE

VOLUME

AND

Poskonov , Kreditno , 1967, pp . 179-181 ,

277 .

METHODS OF PAYMENTS 1. Regularly Reported Statistics Systematic statistical reporting on the volume of noncash payments passing through the banks is relatively incomplete . Extensive bank reporting is , of course , conducted on such matters as cash turnover, loans, balances held in various accounts, interbank transactions, wage disbursements , exe cution of the budget, and the financing of capital ( These reports are investment and repair . discussed in chapter VIII - C .) Data on the payments of khozraschet organizations related to current operations, as opposed to capital or budgetary accounts, are also regularly reported . Available data on total payments are shown in table 9-1. The data shown in table 9-1, however , appear to suffer from two major limitations as indicators of the overall volume of noncash money flows. First, only the Gosbank system evidently produces regular information on the volume of payments . This is indicated by a 1961 source which shows that Stroybank reports periodically on the balances held in various payment accounts but not on the total 38 activity of these accounts. Furthermore, an ex tensive search of Soviet literature has disclosed no attempt to estimate the total volume of payments in the economy or the share channeled through banks other than Gosbank . Although Gosbank accounts for a preponderant share of total bank payments, in cluding all cash flows and many noncash trans actions of other banks, Stroybank's sharemust still be considerable since it handles most capital invest ment transactions and maintains the settlement accounts for construction enterprises. On the other hand , a recent source for the first timehas reported data on total payments made through Stroybank .

Table 9-1.--NONCASH PAYMENTS FOR GOODS AND SERVICES REGULARLY REPORTED BY GOSBANK -- TOTAL VOLUME AND SHARE OF CLEARING SETTLEMENTS : 1940 TO 1964 ( Absolute figures in billions of rubles)

Year

Total volume

All clearing settlements Amount

Percent of total

1940 .... 1945... 1950 .... 1953 ... 1955 ...

55.6 56.1 153.8 189.6 219.5

6.0 9.6 48.4 83.6 101.6

10.8 17.1 31.5 44.1 46.3

1956 .... 1957.... 1958... 1959... 1960 ....

236.9 258.7 283.5 325.4 384.0

111.1 121.2 134.0 148.6 159.6

46.9 46.8 47.3 45.7 41.6

1961.... 1962 .... 1963. 1964 ...

415.5 455.2 490.3 525.1

171.7 192.9 212.3 225.3

41.3 42.4 43.3 42.9

Source : 1940-55--Popov , Gosudarstvennyy , 1957, p . 247. 1956-60--Gosudarstvennyy bank , 1961 , pp . 128 129 . 1961--Barkovskiy , Organizatsiya , 1962 , p . 65 . 1962 -- Total : Borodin , Finansy , 1963 , p . 166 . Amount : Shvarts , Beznalichnyy , 1963 , p . 139 . 1963 -- Total: Den'gi i kredit , no . 9 , 1964 , p. 4 . Percent : Den'gi i kredit , no . 7 , 1964 p. 5. 1964 --Konnik , Den'gi , 1966 , p . 85 .

THE MECHANICS OF FINANCIAL TRANSACTIONS

278

Whether the Stroybank data represent estimates based on sample surveys, such as those made by Gosbank and described below , or reflect regularly reported data on total payments is not known. It is doubtful whether the data for the two bank systems are addable , since much Stroybank payment activity is conducted through Gosbank by means of corre spondent accounts.

methods of payment, which account formost but not all payments for goods and services. The data are submitted in two separate quarterly statistical reports . 39 One , form No. 707 , covers payment demands (other than those charged to continuous clearing accounts) and payments from accounts re quiring a prior deposit of funds-- i.e. , letters of credit , separate accounts, limited checkbooks

A second limitation of the regularly reported statistics lies in the fact that data reported by Gosbank on payment volume cover only selected

with deposits , and certified checks and payment authorizations. The total reported volume shown in table 9-1 is distributed by method of payment, including continuous clearing arrangements , in table 9-2.

Table 9-2 .--PERCENT DISTRIBUTION OF REPORTED NONCASH PAYMENTS FOR GOODS AND SERVICES IN GOSBANK , BY METHOD : 1940 TO 1964

Method of payment

Total reported payments... Acceptances (payment demands) other than in continuous clearing ... Continuous clearing systems. Letters of credit and separate accounts . Limited checkbooks (with deposit) .... Certified payment authorizations and checks ... Source :

1940

1953

1958

1962

100.0

100.0

100.0

100.0

100.0

55.9 38.8 1.5 2.5 1.3

51.0 46.6 1.2 0.2 1.0

56.7 41.7 1.0 0.3 0.3

55.2 42.9 1.0 0.6 0.3

78.2. 10.5 7.5 2.7 1.1

1964

1940 , 1953--Popov , Gosudarstvennyy , 1957, p . 247 . 1958 --Gosudarstvennyyy bank , 1961, pp . 128-129 . 1962-- Lavrov , Finansy , 1964 , p . 287 . 1964 -- Konnik , Den'gi, 1966 , pp . 85-94 .

The second Gosbank statistical report form No. 774 deals with the volume and effectiveness of various types of bilateral, multilateral, and “ de centralized " clearing arrangements, both con Table 9-3 presents the tinuous and occasional. percentage distribution of all clearing settlements by type of system . This distribution is applicable to the total ruble amount of such settlements shown in table 9-1. Gosbank branches do notmaintain the “ periodic paired settlements on accounts for balance " (i.e., continuous bilateral clearing arrangements conducted by the participants), since only the balance is paid by means of bank instru ments , but the partner in each arrangement who keeps the basic account and initiates the payment of balances is required to report regularly to his bank on the account's total activity.40 Table 9-3 also contains a compilation of available data for each system on the share of actual offsets - that is , the proportion of the total volumeof settlements made up by offsetting mutual claims among partici pants, rather than by payments from other bank deposits or by bank credit . As can be seen, the de centralized offset system is relatively “ efficient" in this sense , whereas the occasional interbranch or interministry clearings are not. The latter probably rely heavily on a special form of Gosbank " settle ment credit . " Regularly reported data thus exclude most pay ment authorizations, unlimited checks, and limited

checks issued without deposit (except those charged to decentralized offset accounts)41 Consequently , the total volume of regularly reported payments shown in table 9-1 excludes some 15 to 20 percent of all actual payments for goods and services and includes a minor portion of other payments, as will be seen . A further limitation ofthe reported data is the lack of a systematic breakdown by sector of the economy. Some payments apparently are not distributed by sector or agency, while others are grouped according to various Gosbank summary accounts, which differ widely in their treatment of The number of " decentralized offset" sectors . 42 groupings and their corresponding Gosbank sum mary accounts have also changed over time, having been gradually consolidated from at least seven in 1959 to two in 1962, as described in chapter VIII- C . As far as is known , no attempt is made to distribute the total reported payments in sectoral terms, Pub lished data , largely sporadic , are restricted to distributions by method of payment and type of clearing system , as shown in tables 9-1, 9-2, and 9-3.

2. Sample Survey Statistics The regularly reported data on payments , de signed mainly for the analysis of settlement credit needs and of the efficiency of clearing arrange ments , are conceded to be inadequate for thorough analysis of the payment machinery --which is a

PAYMENT STATISTICS

279

Table 9-3.--CLEARING SETTLEMENTS IN GOSBANK--PERCENT DISTRIBUTION AND SHARE OF ACTUAL OFFSETS , BY TYPE : 1940 TO 1963 Distribution of total set tlements by type of system

Proportion of settlements within each type covered by actual off sets

Type of clearing system

All clearing systems.

1940

1953

1958

1960

1940

1953

1958

1960

1962

100.0

100.0

100.0

100.0

43.9

44.5

67.7

73.0

75.6

(NA )

97.2

87.4

0.5

43.4

44.9

34.1 68.4

73.9

76.9

78.9

1963

Continuous Mutual settlements bureaus.

Decentralized clearing ... Periodic paired settlements on balance .

97.2

97.0

(NA )

0.6

1.1

1.4

(NA )

71.6

73.7

58.1

(NA )

(NA )

(NA ) .

0.8

0.2

0.1

(NA )

59.4

58.1

69.9

( NA )

( NA )

0.8

(z )

0.1

31.5

31.0

33.0

(NA )

(NA )

2.8

8.6

1.0

1.4

40.1

20.7

23.5

(NA )

(NA )

(NA )

(NA )

Occasional Paired and grouped ( one bank )...... Intraoblast.... Interbranch (ministry ) ....

NA Not available .

60.0

39.0

1.8

Intrabranch (ministry)

Z Negligible .

Entry represents zero .

Source : 1940 , 1953--Popov , Gosudarstvennyy , 1957, pp . 248–249 . 1958 , 1960 --Gosudarstvennyy bank , 1961, pp . 130-131 . 1962 , 1963--Khlynov , Operatsii, 1965, p . 123; Shvarts , Beznalichnyy , 1963, p . 139 .

major responsibility of Gosbank. For a number of years, efforts to compensate for these deficiences relied on two large - scale sample serveys of Gosbank payment flows. The first covered the week of June 16-21, 1958; the second covered the two weeks of September 18-30 , 1961. 43 Both of these were permit cross surveys designed to classification of payments in numerous dimensions, including: Methods of payment; instruments of payment; purpose (goods or services, and other , with some detail); sectors and types of payers; intracity or intercity ; urban or rural; types of bank accounts charged; and size ofpayments .

So far as is known , the results of these surveys have not been published in comprehensive form . Selected data are cited frequently in Soviet litera ture on banking, however, and although meager in quantity they provide valuable insights into the workings of the noncash payments machinery . Examples of the published statistics are shown in tables IX - C - 1 to IX - C - 3 .

A recent source reveals that a more extensive effort to make up for the deficiencies of the reg ularly reported payments data was instituted in 1965 in the form of comprehensive surveys ( rather than sample surveys) for the entire month of Sep tember. Data in this source on selected findings of such surveys for September 1965 and 1966 were not available in time for incorporation in the

present report. The payments pattern disclosed in these later surveys does not appear to diverge substantially from the pattern indicated by those of 1958 and 1961, however, and the following observa tions, although based on the 1958 and 1961 surveys, are felt to remain largely valid . The 1958 and 1961 sample surveysrevealed that the regularly reported data omit a substantial volume of payments for goods and services. This can be seen in the following survey data showing the extent to which various categories of payments were covered by regular reports (in percent of total pay ments within each category).45

Category of payment

All noncash payments.. Intracity payments... Payments for goods and services.. Payments for other than goods and services .

June 1958

September 1961

62.6 51.5 82.2

56 43.7 81.1

1

1

1These are usually described as including pay ments to the budget , to credit institutions , and to superior organs for redistributing current assets , deposits of amortization deductions and other funds for capital investment , etc. They apparently in clude payments made by superior organizations in redistributing assets, but not interbank remittances or transfers of budget " credits . "

280

THE MECHANICS OF FINANCIAL TRANSACTIONS

The failure of the regular reports to cover nearly 20 percent of payments for goods and services is apparently due to the omission of most payment authorizations , which are used for a substantial share of such payments, particularly in intracity transactions, (See table IX - C - 2 .) Intracity transactions also tend to contain a much larger proportion of payments for other than goods and services ( see table IX - C - 3 ); consequently intercity transactions are more fully covered in the regular reports , as is implied by both surveys.

The surveys reveal the very substantial involve ment of bank credit in effecting payments , and the relatively small direct role played by the settlement (raschetnyy) account, traditionally thought of as the basic account for all current transactions of khozraschet enterprises. This is readily apparent in the following tabulation from the 1961 survey in which all payments are distributed by major type of account (in percent ). 48

Type of account Although the regularly reported volume of payments is intended to cover only goods and services, about 1 percent of other payments are also included . These apparently enter through the decentralized offset accounts which , though de signed primarily for goods and services payments , may also be charged with “ collection authori zations" and " directives" for fines, penalties, forfeits , and even redistribution of assets by superior organizations.

Total... Settlement . Special loan .. Other loan .. Decentralized offset . Budgetary , capital investment financing , and other ..

Amount of payments

Number of documents

100.0

100.0

26.3 25.9 4.8 21.5

38.7 16.9 5.3 11.3

21.5

27.8

Gosbank credit normally is not available for capital investment transactions , for payments of The coverage of " all noncash payments " and “ intracity payments" differs considerably between the two surveys, with the extent of underreporting probably due to the somewhat larger proportion of " other payments" in the 1961 survey (table IX - C - 3), which fell on the last days of the third quarter , whereas the 1958 survey was taken in the middle of June .

The series on total reported noncash payments by Gosbank shown in table 9-1 is themost compre hensive one available on a regular basis , and is often cited as indicative of changes in noncash money circulation. The variance in its coverage of the total volume of payments , however , raises a question as to its validity as such an indicator, which has occasioned some concern on the part of Soviet analysts.47

khozraschet units other than for goods and services , or for use by budgetary institutions. Thus , when the scope of payments is restricted to those of khozraschet units for goods and services, the surveys show a surprisingly large share of bank credit participation . Some Soviet writers place this share at 73 percent in 1961 and 85 percent in 1958.49 These figures represent the sum of pay ments made directly from loan accounts and clearing accounts. Data from the 1958 survey on the share of payments by khozraschet organizations for goods and services made from loan and offset accounts are shown in the following tabulation . 50 The share of these accounts varies considerably among sectors, and is largest in the consumer goods and distribution sectors.

Account charged for payment for goods and services (in percent)

Sector Total ( 1)

All khozraschet organs. Heavy industry... Consumer goods industries. Transport and communications . Supply and sales agencies . Trade ...

Loan

(2 )

100.0

44.6

100.0 100.0 100.0 100.0 100.0

13.5 13.1 25.6 19.7 82.4

Offset

( 3)

Settlement Subtotal and other ( 2 ) + ( 3) ( 1) - (4 ) (4 )

(5 )

40.4

85.0

15.0

55.7 74.6 22.4 70.6 15.0

69.2 87.7 48.0 90.3 97.4

30.8 12.3 52.0 9.7 2.6

PAYMENT STATISTICS- STANDARDIZATION OF PAYMENT DOCUMENTS

The extent of bank credit involvement in payment transactions has recently become the subject of some debate among Soviet analysts . One holds that about 50 percent of the payments of khozraschet organizations for goods and services in 1958 were financed by bank credit. 51 This proportion allows for the fact that payments from clearing accounts ultimately derive partly from actual offsets of opposing claims, partly from settlement and special loan accounts in covering the balance at the end of each clearing period, and as a last resort, when such accounts are overdrawn , from special settle ment credit . The bank accounts charged directly for such payments , and the estimated ultimate share of bank credit are shown in table IX - C - 4 . This analysis still does not take into account the very short -term credit (usually not recognized as such by Soviet analysts ) occurring within the 3- to 7 - day period between closings of the decen tralized offset accounts ,52

D. STANDARDIZATION OF PAYMENT DOCUMENTS Gosbank carries general responsibility for stan dardizing the form of payment instruments and other documents relating to transactions with all banks . This function is generally accomplished by means of model (tipovyye) forms attached to the numerous instructions issued by Gosbank on operational matters. A large number of such forms, for instance, were instituted in conjunction with the banking reforms of 1954-56 ; over 50 uniquely numbered model forms in use since then have been identified. Many of these were designed for highly specific types of transactions and they differed only in minor degree from a basic model. In 1960, a concerted attempt apparently was made to reduce the number of variants and rely more on general- purpose forms. A summary tabulation of 30 numbered documents currently in use is shown in table IX - D - 1.53 In addition to the numbered series shown in the table , various other more -or - less standardized documents are used in transactions relating to banks. These are prescribed by other agencies, such as the Ministry of Finance ( e.g., expenditure schedules and primary cash operation documents) and TsSU (waybills ), are printed and issued by the banks themselves (checkbooks or clients ' statements of account), or are not closely regulated (accounting information submitted by enterprises for verification purposes ). Even the numbered forms, however, are not fully standardized . All such "model" documents, including the primary record forms issued by TsSU , are presented as recommendations - each major agency, sovnarkhoz, or even individual enterprise can modify them to suit its own needs,

281

subject to minimal requirements.54 They are then prepared to order either by local printers or by regional departments of TsSU's publishing house (“ Statistika" ). This leeway in the makeup of the forms has inhibited the use of mechanical data processing in both banks and enterprises . 55 The minimal requisites for the format of pay ment instruments are primarily those needed by the banks for their own accounting or control oper ations. As can be seen from the four basic docu ments shown in appendix A (figures IX - B - 1 to B - 4 ), these requisites generally include the name, address , location , and branch bank of the payer and payee , the respective bank account numbers to be credited and debited, 56 the carrier's receipt or waybill number (unless transportation is arranged by the purchaser ), the number or other identification of the contract, the customer's order (zakaz) or the supply authorization (naryad), and the purpose (naznacheniye ) of the payment or specification of goods (in the case of the invoice - demand). For intercity transactions, the bank initiating payment also enters the number of the interbank remittance (IBR )57 note , or advice document (avizo), which is distinct from the enterprise's payment instru ment and is drawn up by the bank in three copies for use in an elaborate verification system involving parallel reporting by both the sending and receiving banks to a third regional or national control office, A major exception to these requisites apparently is in force for security reasons. According to the 1954 Gosbank instruction on settlement and current accounts , the purpose (naznacheniye) of payments should not be indicated in checks or payment authorizations issued by enterprises, organiza tions, or institutions subordinated to the Ministry of Defense , the Ministry of Internal Affairs, the Committee for State Security , and the defense industry agencies, or by party and Komsomol orga nizations. 58 This instruction does not deal with payment demands but it is probable that a similar exemption was applied to the requirement for an accompanying invoice and an itemized listing of goods.

The latter supposition is supported by a 1960 dis cussion of the acceptance method of payment which mentions " differences” (osobennosti) from normal procedure in drawing up paymentdemands and in the acceptance dates used in transactions with enter prises of the Ministries of Defense and Internal Affairs, and the defense industry.59 Available versions of the operative Gosbank Instruction on noncash settlement procedures (no. 2 , May 28 , 1960) , omit article no . 42 in the section on the new combined invoice - payment demand , which appears from the context to deal with exceptions to the requirement for listing goods. 60 It may therefore be surmised that for settlements made by defense and other agencies with special security status,

282

THE MECHANICS OF FINANCIAL TRANSACTIONS

the specification of goods and services normally contained in the invoice -payment demand or in an attached invoice either is not channeled through the banks at all or is sent separately under special conditions. If so , this would represent a change from World War II procedures. The civilian practice of attaching a copy of the invoice to the payment demand (which itself contained a brief description of the goods or services), in addition to the invoice copy sent directly by the supplier to the purchaser , was instituted in 1936 in order to

ensure that a copy of the invoice arrived in good time. Through the early stages of World War II, however , suppliers' invoices drawn on military agencies were sent through channels bypassing the banks, which contributed further to the great difficulties that wartime dislocations created for bank settlement operations. Consequently , be ginning in 1942 or 1943, invoices drawn on military agencies as well as on the war industry com missariats were transmitted through the banks together with the payment demands.61

NOTES TO CHAPTER IX

1 Yevdokimov , Finansirovaniye , 1962, p . 4 . 2 This also applies to the accounts of budgetary institutions financed out of local budgets. Budgetary institutions financed out of central budgets , however , do recognize budget credit as assets and record them on their double - entry account No. 09 (see chapter VIII- B ) . 3 See Boguslavskiy, Bankovskiy, 1960 , pp. 276-277 , for a description of the closing of budget accounts in the banks at the end of the year . 4Shvarts . Beznalichnyy , 1963, p . 105. The estimate wasmade by the source for 1960 and is considered by him to be still appropriate for 1962. The share of cash payments showed a decreasing trend in the 1958-1965 period, when Gosbank payments in cash grew by only 56 percent whereas noncash turnover in creased by 100 percent. Cash transactions outside the banks diminished even more in importance, mainly due to the reduction in the size of the collective farm market, so that the overall increase in cash turnover for the 7 -year period was reportedly about 45 percent. (Poskonov, Kreditno, 1967, pp. 158-159.) 5 These percentages are cited in both a 1959 source (Batyrev, Organizatsiya, 1959, p . 9 ) and a 1964 source (Lavrov, Finansy, 1964, p . 396 ). Whether the increased monetization of the collective farm economy had no effect on these percentages, or whether both sources refer to the same year can only be conjectured . 6 A sample survey made in 1961 showed that noncash payments in amounts under 25 rubles comprised .04 percent of the volume of payments , but accounted for 10 percent of payment documents (Gindin , “ Improving ," 1962, p . 14 ). 7 These instruments and procedures are described in general terms in many Soviet texts on money, finance, and credit. A long and detailed Gosbank Instruction on noncash settlements and related bank credits (Instruction No. 2 , May 28 , 1960) is published in Yefimochkin , Khozyaystvennyye, 1962, pp. 309-362, with substantial omissions, a few ofwhich are contained in the version published in Ponomarev and Strelkov , Spravochnik , 1964 , pp . 288-303. A recent detailed discussion of documents and procedures may be found in Khlynov, Operatsii, 1965. 8 The term “ supplier" (postavshchik ) designates the party fulfilling a supply contract or order. Typically , the supplier is a sales ( sbyt) or supply - and - sales (snabsbyt ) organization which can be attached to an agency directly administering production activities (e.g. , a ministry or sovnarkhoz) or to a higher -level government organization (e.g., a Gosplan , Council of Ministers, or central sovnarkhoz ). The shipper may be the ware house of the sales office carrying out the contract , or it may be the producing enterprise itself, as in the case of the so -called “ transit” (tranzitnyye) or direct shipments between producer and consumer. Transit shipments may take place either with or without the participation of sales offices in the payment transactions. 9 This figure is an estimate based on the results of sample surveys conducted in 1958 (80.1 percent) and in 1961 (76.9 percent). In the latter year, this method accounted for 60.7 percent of the number of docu ments . See table IX - C - 2 and Ikonnikov, Denezhnoye, 1962, p . 294. The sample surveys as well as regularly reported data on the volume and distribution of payments are discussed below . 10 Intracity settlements may involve more than one branch bank in an urban area. 11 A standard invoice - payment demand was made mandatory in 1961 (Vysshaya partiynaya shkola , Finansy , 1962, p . 186 ). Previously , a separate invoice (schet - faktura ) and payment demand (platezhnoye trebovaniye ) could be used in conjunction with each other. The invoice as a separate document (figure IX - B -4 ) is still used when the invoice -demand does not provide enough room , or for other methods of payment. 12 An exception is made for rural soviets , whichmust signify acceptance in writing within 15 days . 13 Its use is obligatory for public utilities sold at fixed rates and certain other transactions, and it may be used at the option of the contracting parties for intracity sales of petroleum , vodka, and bakery products . Articles 31 and 32 of Instruction No. 2 , cited above, give a detailed listing of uses. 14 Barkovskiy, Organizatsiya , 1962, p . 54. 15 Except those in which acceptance has already been indicated - by an agent of the buyer to whom the goods have been released - and recorded in receiving and releasing documents. (See Article 12 of Instruc tion No. 2.) 16 In a rare instance of uncoordinated censorship , the version of Instruction No. 2 printed in Ponomarev and Strelkov, Spravochnik , 1964, p . 290 , contains group (2 ) but withholds most of group ( 3), whereas in Yefimochkin , Khozyaystvennyye , 1962, p . 312, the situation is reversed . These two references indicate that security -related organizations employmethods of payment common to the entire economy. Differences in documentation , however , are noted below . 283

284

THE MECHANICS OF FINANCIAL TRANSACTIONS 17 This period can be extended to 7 days for payers whose branch bank is not located in the same locality; rural soviets are allowed 15 days. 18 Syromyatnikov, Denezhnoye , 1962, p . 89. 19 Of this amount, 3.7 billion rubles worth of goods were retained by would -be purchasers and kept in their “ responsible custody" (otvetstvennoye khraneniye) (Ikonnikov, Denezhnoye, 1962, p . 287; Kazantsev, “ Pay, " 1964 , p . 5 ; Kazantsev , “ Ways, " 1965 , p . 169). 20 Where particular attention to the quality of goods and services is desired , the acceptance period is apparently lengthened . Boguslavskiy, Bankovskiy , 1960, pp . 109 , 111, gives the acceptance period for organizations of the State Material Reserves Administration as 7 days, and mentions that enterprises of the Ministries of Defense and Internal Affairs and of defense industry have acceptance periods diverging from the normal (probably longer). No mention of such abnormal acceptance periods can be found in pub lished portions of Instruction No. 2 . 21 Sovetskaya torgovlya , No. 8, 1964, p . 46 . 22 Syromyatnikov, Denezhnoye, 1962, p. 89. Such a counter demand is to be honored by the bank without contest. 23 The latter figure is estimated from their reported share in total payments (44.9 percent) and the share of goods and services in total payments (68.6 percent). See tables IX - C - 2 and IX - C - 3 . 24 Although the term perevod is generally associated with an interbank payment authorization somewhat resembling a bank money order in function , the interbank mechanism used is the same as that for all other interbank transactions, and relies on a remittance advice document (avizo ). 25 Smirnov, Bukhgalterskiy , 1963, p . 171. This probably applies to ordinary sociocultural budgetary institutions, which make intercity purchases only rarely . 26 On January 1 of the years 1960-62, Gosbank loans outstanding for this purpose amounted to between 83 and 97 percent of the balance of letters of credit still in force (Ikonnikov, Denezhnoye, 1962, p . 291) . 27 Table IX - C - 2 . See also table 9-2 . 28 Not to be confused with another type of enterprise account, also called osobyy schet, which is used for deposits earmarked for capital repair, such as amortization deductions. 29 Ikonnikov, Denezhnoye, 1962, p . 291. clearing systems.

See chapter VIII, section C for a description of decentralized

30 Gindin , “ Improving,” 1962, p . 12. Table IX - C - 2 shows the distribution by type of check . 31 Finance organs can use such checks to refund budget revenues in any amount; payments for transporta tion services have a 5 -ruble minimum , although the normalminimum for other uses is 10 rubles. 32 Overdrafts on settlement checks checks subject subject the drawer to criminal liability , according to Popov, Gosudarstvennyy, 1957, p . 107. 33. Defense and security agencies may be exempted from this requirement, as noted below . 34 Gindin , “ Improving," 1962, p . 12. Special loan and decentralized clearing or offset accounts are discussed below . The practice of securing limited checks by offset accounts apparently was introduced simultaneously with the combining of offset and special loan accounts in some cases. This latter action was announced in a Gosbank letter of December 31 , 1961, the text of which is not available (Goloshchapov, Spravochnik , 1965 , p . 351). 35 Available extracts of the 1960 Gosbank Instruction No. 2 on noncash transactions do not include the articles on these payments . A detailed earlier discussion of executive documents may be found in Pronin , Raschetnyye , 1958 , pp. 102 ff). 36 Ikonnikov, Denezhnoye, 1962, p . 308. 37 Until 1954, these were assigned last priority, often resulting in a total cessation of such payments . Their priority was raised to help prevent the chain - reaction effect of insolvency on successive purchasers and suppliers . 38 Ryauzov and Tertus, Bankovskaya , 1961, p . 163. 39 Ibid ., p . 161. 40 Ibid . , p . 173. 41 Payments to coal industry enterprises by local supply and sales organizations, which are made by means of payment authorizations, areapparently included in form No. 707 on the basis of special statements from the shippers (Khlynov, Operatsii, 1965, p . 33 ). Also , some payment authorizations are reflected in clearing accounts , since all types of instruments - except those based on a prior deposit of funds - can be charged to these accounts ; in a 1961 survey , nearly 90 percent of the volume in these accounts was effected by payment demands, over 10 percent by payment authorizations, and an insignificant amount by other instruments ( Ikonnikov, Denezhnoye, 1962, p . 305 ).

NOTES TO CHAPTER IX 42 See Ryauzov and Tertus, Bankovskaya , 1961, pp . 162, 166-181; Ryauzov and Tertus, Bankovskaya, 1956 , pp. 161-162. 43 Gindin , “ Improving," 1962, p . 11; Ryauzov and Tertus, Bankovskaya , 1961, p . 165: Many references to these surveys mention only the months and years , but all are believed to refer to the shorter periods listed . Although other sample surveys have been taken on various limited aspects of the payment system , these two are the only ones of such a comprehensive nature that are known . The 1961 survey is reported to have covered 740 banking institutions and 48.5 percent of all Gosbank noncash payments , with a sample size of 14.5 billion rubles and 4 million documents . The 1958 survey sample covered payments totaling 0.4 billion rubles. 44 Poskonov , Kreditno , 1967. See pp . 179 , 180, and 183. 45 Gindin , “ Improving,” 1962, p . 11; Ryauzov and Tertus, Bankovskaya, 1961, p . 165 . 46 Den’gi i kredit, no. 7 , 1964, p . 6 . 47 Soviet authors tend to discount the lower level of 56 percent obtained for 1961; thus, in stating the general extent of coverage, figures ranging from “ 59-60 to “ 60-65 ” percent are usually cited . Recent sources appear to have raised this level to “ about 2/3" (Den’gi i kredit, no. 9 , 1964, p . 4 ), or even 60-70 percent — that is, “ 30-40 percent not reported " (Lavrov, Finansy , 1964, p . 288 ). 48 Khlynov , Operatsii, 1965, p . 122. A description of the settlement and other major types of accounts can be found in chapter VIII - C . The so - called “ decentralized offset” account is something of a misnomer . Although it is the successor of the defunct “Mutual Settlements Bureaus” of Gosbank, which were bona fide clearing houses for interenterprise claims, this account is kept for each participant in his local branch bank and is used to offset claims on the enterprise for goods and services (on current operations) against its claims on other participants . The enterprise's individualaccount thus serves to isolate payments for goods and services from the basic settlement account , and to facilitate such payments, both by giving them prior claim to the enterprise's receipts and by means of a special “ settlement credit." In essence, however , each individual payment from this account entails the same sort of enterprise - to -bank and bank -to -bank transactions as a payment from a settlement account, and no clearing in the usual sense takes place . 49 Gindin , “ Improving," 1962, p . 14 ; Ikonnikov, Denezhnoye , 1962, p . 298 . 50 Ibid . 51 Shvarts , Beznalichnyy , 1963, p . 174. 52 In 1963, with a total decentralized offset account volume of 200 billion rubles (Khlynov , Operatsii, 1965 , p . 122) and a 79 percent rate of actual offsets (table 9-3), the daily outstanding volume of such de facto credit on the nonoffset portion would have amounted to about 400 million rubles (assuming 305 bank days per year and an average duration of such credit of 2-1/ 2 days ). See Shenger , Ocherki, 1961, pp . 168-169 for a similar analysis . 53 According to Goloshchapov , Spravochnik , 1965 , p . 356 , these forms (with the exception of the last three which were obtained from other sources) are obligatory for transactions of economic organizations with banks. They have been published by TsSU in a 1962 album which was still operative , with some revisions in 1964, as of February 1965. Although this album is not available, versions ofmost of these forms have been located in other sources, as indicated in table IX - D - 1 . Translations of selected major forms themselves are also presented in figures IX - B - 1 to IX - B - 4 . 54 Khlynov, Operatsii, 1965, pp . 142-146 . 55 Considerable attention has been given to this question recently, and more appropriate and rigidly standardized forms can be expected in the near future. At least one form , the invoice - payment demand for export operations (883- K Eksport) has already been designed to facilitate machine tabulation (Grachev , Uchet, 1962, p . 46 ) . 56 The numeration of the basic bank accounts of all khozraschet organizations is keyed to the standard second - order Gosbank accounts described in chapter VIII- C identifying the sector and agency of the client. For example, in figure IX - D - 1, the payer's account number 14 250 03 signifies a type of loan (14 ), a loan account of a sovnarkhoz machine-building plant (250 ), and the individual account (03); the supplier's account number 240 721 02 signifies a sovnarkhoz machine -building plant (240 ), a decentralized clearing account in the industry group (721), and the individual account (02).

57 Mezhfilial'nyye oboroty (MFO ) . 58 Instruction No. 14 , December 4 , 1954 , Article 55 , published in Romashkin , Zakonadatel'nyye, vol. 1 , 1961, pp . 706-707. A revised edition of this instruction (No. 28 , March 23, 1960) has not been located . 59 Boguslavskiy, Bankovskiy, 1960, pp . 108 , 111. 60 Yefimochkin , Khozyaystvennyye, 1962, p . 317. Popov, Gosudarstvennyy, 1957, pp . 105 , 113-114.

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X.

CONTROL AND

AUDIT OF FINANCIAL STATISTICS

The financial operations of Soviet enterprises , economic organizations, and budgetary institutions are subject to various types of scrutiny and control. Two broad groups of control mechanismsmay be distinguished . The first involves the use of financial data - in the plans prescribing specific actions and goals, in the monitoring and approval of current transactions (i.e., " control by the ruble ” ), and in the review and analysis of reports on actual performance . The second is concerned with the veracity and reliability of the reported data and its supporting information . The controlmechanismsof the first group have been described in the preceding chapters under specific topics dealing with the planning system , the responsibilities of individual administrative agencies , the operations of banks, and the methodology of accounting and reporting. This chapter is concerned primarily with the second group of control mechanisms, those dealing with the verification of financial data . The first section describes the controls and superior administrative audits performed by agencies , the finance and banking hierarchies , and several other agencies which participate in control and audit work on a limited basis only . The second section comments briefly on the reliability of Soviet statistical information . A. CONTROL AND AUDIT ACTIVITIES 1. Superior Administrative Agencies These agencies, which include ministries , departments, main administrations, and , in the past, sovnarkhozy, are responsible for the super vision of primary - level enterprises, economic organizations, and institutions. This overall work of supervision and control is known in Soviet terminology as intra -agency control (Unutrivedom stvennyy kontrol ) . It includes the supervision , control, and audit of the financial operations of subordinate organizations. The financial control presently exercised by superior agencies is authorized by a decree issued This decree (with the supplementary in 1936 . regulations adopted since 1936 ), requires that all heads of ministries, departments , and adminis trations at union and republican levels , as well as appropriate officials at local levels , organize a system of financial control over subordinate enter prises, construction units , other economic organi zations, and institutions. Actual control work is carried out by special groups of inspectors attached to ministries and agencies, and by members of

control and audit units which are under the super vision of the accounting departments at various levels within each agency.1

The agencies receive numerous reports from subordinate enterprises and institutions on their financial activities and problems. In addition, the superior agencies are required to audit the documents of subordinate organizations engaged in economic activities not less than once a year,and to audit those organizations not engaged in economic activities at least once every 2 years. Presumably the superior agencies are free to institute an audit or inspection at any time they feel it necessary to prevent financial or other economic malpractices. There is no central organ which coordinates the intra -agency audit work of the numerous superior administrative agencies , either among the agencies themselves or with the work of other control and audit organs. The number of audits carried out by organs of all agencies is not known.

An audit consists of such common procedures as verifying documents , checking the completeness and accuracy of entries, and checking for the observance of laws and regulations. Audits may cover any or all of the many transactions in which an enterprise or institution is involved , but they are concentrated on payments to the budget, the use of allocations from the budget, the use of money transferred to various funds, expenditures on capital investment or capital repair , and the use of the wage fund.

Some Soviet writers argue thatagency audits are not particularly effective because they are per formed by auditors representing an organ which would bear a large share ofresponsibility for short comings discovered in the financial work of sub ordinate enterprises or institutions. For this reason , agency audits are sometimes viewed as lacking the necessary impartiality and thoroughness to make them truly effective instruments for impos ing financial discipline . A special system of intra - agency control and audit is maintained within the group of khozraschet enterprises , institutions , and economic organi zations which are part of the Ministry of Defense. The functions of control and audit are assigned to special verification commissions which are re quired to audit once every year the financial economic operations of each enterprise, institution , and organization attached to military units . The work of these commissions has been criticized as being too formalistic , too hasty, carried out by

287

CONTROL AND AUDIT OF FINANCIAL STATISTICS

288 unqualified purpose.

personnel , and

done without a clear

2. Ministry of Finance The control and audit functions exercised by the finance and banking organs are the most pervasive in scope and the most fundamental in nature of all such functions performed. These organs occupy a central position in the enforcement of and adherence to legality in financial operations, and it is their re sponsibility to search out practices which conflict with laws or regulations and to take the measures necessary to ensure full compliance with the statutes .

The functions of control vested in the Ministry of Finance were defined in a statute of the Ministry approved by the Government in 1950. The actual exercise of these functions has been assigned to a special department within the Ministry. Prior to 1956 this department was called the Central Control and Audit Administration and it performed its duties through a network of local bodies directly subordinate to it. In 1956 local bodies which had been outside the structure of the Ministry were transferred to it , the finance ministries of union republics were assigned a larger role in financial matters, and the word “ central” was dropped from the Administration's name. The organization of financial control and audit organs, as it emerged in 1956 and in which form it has survived to the present time, is described below .

A Control and Audit Administration is organized within the framework of the Ministry of Finance at all but the lowest level of government. The duties of each Administration are to see how accurately financial laws and regulations have been followed and to ensure the fulfillment of budget plans. The Administration still retains considerable autonomy within the Ministry and itplans and conducts its own work . Control and Audit Administrations perform work in three distinct areas. First, they conduct inspec tions and audits of documents in the ministries , departments , state committees, and other adminis trative organs at their respective levels. Second , they exercise supervision and control over the finance ministry or department immediately below their own level, particularly in matters regarding fulfillment of the state budget. And third , the Control and Audit Administrations at the union , republican , and oblast levels audit the operationsof Gosbank (especially in regard to fulfillment of the budget) and the organs of state insurance . Before the start of each quarter, the Control and Audit Administration of the Ministry of Finance U.S.S.R , is required to draw up a plan of audits and submit it to the Collegium of the Ministry for

approval . These quarterly plans are made with the cooperation and agreement of control and audit officials of Gosbank and Stroybank . The plans aim at broad coverage in the audits to provide a com prehensive and thorough check of financial operations and to eliminate the need for additional and separate inspections by other agencies which might be interested in particular subjects . Another important feature of the quarterly audit plans is the arrangement for the distribution of work . The plan specifies the inspections and audits to be carried out by personnelof the Control and Audit Administration of the Ministry of Finance U.S.S.R.aswell as those to be carried out by counterparts at the republican level.

After approval of the plan by the Collegium of the Ministry, the assignments are transmitted to control and audit administrations at the republican level, which in turn pass on assignments to the control and audit administrations of oblast and kray finance departments . These latter organs, finally , inform the control and audit administrations in rayons and cities of the centralized audits as signed to them . Thus the control and audit admin istration at each level has a quarterly plan of inspections and audits drawn up to include both centralized assignments received from above and its own program of audits established in the light of its own responsibilities .

The frequency of inspections and audits called for by regulations varies according to the sector of economic activity and the importance of individual types of financial operations. Audits of financial documents of enterprises and construction sites are to be made not less than once a year ; audits of organizations not directly engaged in economic operations, as well as audits of budgetary institu tions , are to be made not less than once every 2 years; audits of finance organs in regard to fulfill ment of the budget are to be made not less than once every 2 years ; and verification of adherence to model staffing schedules and administrative expense estimates is to be made not less than once 7 Since every 2 years. in 1964 the organs of the Control and Audit Administration of the Finance Ministry carried out only 60,000 audits in the 700,000 enterprises, evidently the required fre quency is not observed . 8

In order that controller -auditors can command the necessary respect and conductthemost effective inspection and audit of financial operations, they have been given the following rights: º ( 1)

To examinemonetary transactions, account ing books, accounts, plans, estimates, cash available , material valuables, and other pertinent documents ;

CONTROL AND AUDIT ACTIVITIES ( 2) to demand explanations from officials on all aspects of transactions subject to audit; ( 3) to take inventories of material valuables , total or partial, and in necessary cases to seal up cash booths (kassy) , cash depart ments (pomeshcheni ya ) , warehouses, store rooms, or archives ;

(4 ) to seek and obtain the assistance of spe cialists in determining the quality and of materials , semifabricates, quantity of finished products , services, or work done, and in examining the actual expenditures of materials, the state of buildings and struc conditions regarding and other tures,

289

The registration is designed to prevent inflated staffs and expenses; thus each reported staff and expense level is compared by the finance agencies with an elaborate system of “model” staff schedules, specifying personnel positions and salary levels , which has been prepared for a wide variety of organizations. Gosbank will not release funds for wages and other expenses subject to controlunless The such registration has been documented . approval of these staff and expense reports has been an important element of the finance hierarchy's control and audit work - particularly in respect to budget - supported institutions. The brief discussion below points out the recent changes in the system and the consequent decline in the role played by the finance organs .

materials , equipment , and work ; (5 ) to obtain from offices of Gosbank and Stroy bank the necessary summaries and docu ments connected with the operation of enter prises, institutions, and organizations where an audit is being conducted; (6 )

to obtain from other enterprises , in stitutions , or organizations information or documents on operations and settlements effected between them and the audited unit ;

( 7)

in cases permitting no delay, to transmit documents of the audit to investigatory organs and a subsequent report to the official who ordered the audit ;

(8 ) to adopt or to propose to superior organi zations measures deemed necessary to eliminate shortcomings discovered in finan cial work , to eliminate deliberate violations of financial discipline, and to enforce adherence to laws and regulations.

The scope of these rights indicates that the auditors are free to examine every document concerning the financial transactions of the organization under review . Specialization and experience provide the necessary additional ingredients to make their work effective . As noted above, the Ministry of Finance is required to conduct checks of primary level units at least once every 2 years on the observance of discipline regarding personnel staff levels and administrative expenses. Primary units are also required to make periodic reports on thesematters ( see chapter VIII ) . In addition to such post- audit types of control, however , the Ministry exercises a preventive, preliminary type of controlby requiring primary units to register their current staff schedules and administrative expense estimates annually with the finance agency at the appropriate level. These documents are usually approved previously by superior administrative agencies.

The number of organizations subject to this As of registration is being steadily reduced . 1960 , according to the official instructions on such registration, most state and cooperative enter prises and budgetary institutions were required to Organizations exempted from this register 10 obligation included all those subordinate to the Ministry of Defense and the Committee for State Security , all party, Komsomol, and trade union organizations, all collective farms, all lawyers' Budgetary associations, and various others.11 institutions supported by rural, settlement, rayon , or city budgets were also exempted if their schedules and estimates were submitted to finance organs at the time ofcompiling the annual budget.12 The new sovnarkhoz statute approved in Sep tember 1964 exempted sovnarkhoz enterprises from the obligation to register , although the approval of superior agencies and conformity to model staff schedules was still required . Enterprises attached to territorial construction administrations were exempted beginning in 1965, as were wholesale and The retail trade and public dining enterprises. basic statute for state production enterprises approved in October 1965 exempted all such enter prises from the obligation to register their staff schedules and administrative expense estimates , and eliminated any need for approval other than that of the enterprise director , although adherence to model staff schedules is still required . 14 Enterprises converted to the new system of planning and management are given a plan target for labor in the form of an overall wage fund limit, within which they apparently are free to determine their own staffing requirements. Although the methodological instructions for con verted enterprises ( see chapter VI - B ) are not specific on this score , it would appear that model staffs and Ministry of Finance controls are to become virtually inoperative for these enter prises. 15 At present, enterprises of the following sectors are exempted from registering staff and administrative expense estimates with finance

CONTROL AND AUDIT OF FINANCIAL STATISTICS

290

organs: Industry ; construction ; agriculture ; trans portation ; communications; retail and wholesale trade ; and public dining. In addition , institutions and organizations financed from rural, settlement, rayon , and city budgets are exempted . Thus , approximately 70 percent of the 800,000 enter prises and institutions existing in the country in 1966 were exempted from such registration . 16

Changes in staff schedules and administrative expense estimates of organizations still subject to registration become operative only after the regis tration is completed . Primary units have until May 1 of each year to complete the registration , which culminates in a document sent by finance organs to the banks authorizing the release of funds. In khozraschet enterprises , only centralized plant wide administration personnel and their wage , travel, and other directly related expenses are registered (see figure VIII- A - 6 ); guard personnel, 17 if any , are registered in a separate statement. In budget- supported institutions and in those admin istrative agencies supported by charges to sub ordinate enterprises, all regular personnel and the entire estimate , itemized by appropriate budget expenditure classification articles, are registered . Funds allotted by khozraschet enterprises to ad ministrative expenses illegally or in excess of prescribed limits are extracted from the enter prise as a penalty and considered budget revenue. In the case of budgetary institutions, budget grants are reduced correspondingly . 3.

The Banks

An important element ofthe controlwork doneby the banks is the permanent supervision of all signif icant financial transactions — which is made easy because all such transactionsmust be made through the banks. In the respective areas of their special ization , Gosbank and Stroybank receive copies of financial plans, documents , estimates , limits , norms, reports on required deposits , payments to the budget , authorized grants received from the budget or other bodies, specified time schedules, and other similar information . The banks there fore occupy a position of central importance in the exercise of control. In addition to these standard and current re sponsibilities, the banks are authorized to conduct audits directly in enterprises, organizations, and institutions whenever they discover inconsistencies or conflicts in the reports or documents submitted to superior organs . The banks are not, however , expected to organize systematic and regular audits of enterprises and institutions for the purpose of checking on adherence to laws and regulations. Such systematic and regular audits are the responsibility of intra -agency control organs and the Control and Audit Administrations of the finance organs. The banks supplement these audits in areas where their

own work is directly and intimately involved and where audits by their own staffs are especially appropriate. Their particular responsibility lies in the day -to - day examination and verification of transaction documents . As noted above , the banks themselves are subject to audits performed by the Control and Audit Admin istrations. In addition , each bank has its own special auditing apparatus which is an independent body, outside the structure of the accounting organs. This body regularly and systematically checks on the work of the bank itself . At present, Gosbank institutions also audit expenditures from the wage funds of 420,000 enterprises, institutions, and organizations. 18 The audit of the documents of Gosbank made by its own apparatus is largely aimed at checking the accounting books, the cash operations, and the credit and settlement operations. Standard checks are made on the proper fulfillment of directives issued by the government and the board of the bank , the organization of accounting, the correctness of accounting entries, the veracity of accounting and statistical reports , the observance of proper pro cedures, and the comprehensiveness of services rendered to the economy.

It is standard practice for every audit performed by Gosbank (and by all other organs) to be concluded with an audit statement (akt revizii) as a document recording the major findings and results. Usually the audit statement contains a combination of the following observations: A note on commendable practices, if any, which deserve recognition ; a description of shortcomings , deficiencies , mal practices, or outright violations of laws and regula tions ; the identification of officials responsible for shortcomings or of persons whose work contributed a decisive share to favorable achievements ; and measures necessary to correct any shortcomings and to ensure proper financial work . The control and audit functions performed by Stroybank are somewhat broader than those of Gosbank because of the former's special role in construction and investment activities . The offices of Stroybank are obliged to check on and determine the degree of fulfillment of many requirements , including the requirements that: Material as well as monetary resources are used efficiently and in accordance with specified purposes; specified projects and approved estimates are adhered to ; construction organizations seek ways to reduce construction costs and to mobilize all internal resources ;wage funds are correctly used ; standards for outlays of materials are observed ;measures are taken to eliminate stocks of materials and equipment in excess of standard limits ; material and monetary resources are not dissipated on numerous jobs and sites or frozen in unfinished

CONTROL AND AUDIT ACTIVITIES construction ; and that construction agencies seek to prevent delays in completion dates.

4. Other Agencies a . The People's Control Committee. - This organ received its present title on December 9 , 1965 , but it has existed under various names since the early days of the Soviet regime. A series of changes effected in the last 10 years started in August 1957 when the State Control Ministry was abolished and the Soviet Control Commission estab lished in its place.19 In July 1961 the word “ Soviet " in the title was changed to “ State " in an attempt to indicate its area of responsibility more specifically , i.e., governmental, especially central affairs. In December 1962 the State Control Commission was renamed the Party - State Control Committee in a reform which abandoned the long -standing dual system of control organs functioning side by side 21 and merged them into a single system . Finally , in December 1965 the control system was divided again ; the newly named People's Control Committee was made responsible for control functions in the state sphere and a separate network of control reestablished within the party .22 organs was Despite the frequent changes in name, however, the functions of the successive control organs have remained essentially the same at least during the last decade . The following discussion of the structure and functions of these organs uses the title “ control committee" for all periods, re gardless of the exact title at any particular time. Control committees have been established at all levels of the governmental hierarchy and have formed a part of the regular governmental apparatus. As a rule , each committee consists of a chairman and a number of members, all of whom usually occupy other positions in the government or the party . The system does not provide for staffs conduct systematic control large enough to activities. Instead, the committees must depend to a great extent on the work done by a network of informal control groups and “ posts ” organized in enterprises, construction projects, institutions, state and collective farms, and various other organizations . In 1964 therewere more than 260,000 such groups and some 500,000 “ posts . " More than 5 million volunteers were participating in the work of these units at the end of 1965.24

A decree of August 1957 specified the following functions of the control committees: To check on the fulfillment of government decisions concerning major questions of the national economy; to study the structure of the government apparatus and the problems of its operations ; to supervise the obsery ance of the strictest economy and the correctness and expediency of financial and material ex penditures ; to help in overcoming any manifestations of departmental or localist tendencies ; and to fight

291

against bureaucracy and red tape.25 In general, control committees have been urged to organize their work in such a way that “bureaucrats , parasites, bribetakers, thieves, speculators, and frauds should feel the inevitability of punishment and tremble before the great force of the Soviet public. " 26 The type of work done by the control committees is demonstrated by the following illustrative mal practices discovered in 1963: The charging of illegally high retail prices in the trade network of Moldavia ; flagrant violations of rules concerning official travel expenses ; the disregard for regu lations in the construction of a cultural palace , resulting in substantially increased costs ; the illegal construction of an ice hockey stadium which was financed by funds charged to capital repair ; the improper use of wage funds; and illegal payments of large sums of royalties by a publishing house . 27

The

control

committees have been

granted

seemingly impressive rights , including the au thority to give instructions to heads of ministries and other agencies, to deal with and eliminate shortcomings , and to require explanations and documentation regarding matters under investi gation . In reality their power is limited and resistance to their activities by officials is quite The Party - State Committees Committees strong . of the Khrushchev era in particular were criticized for interfering with the authority of properly elected or appointed officials. The change of the Party - State Committee into the People's Control Committee in 1965 was accompanied by the replacement of many chairmen , and in fact appears to have curtailed the authority , functions, and responsibilities of these committees . Administration b . The Central Statistical ( TSSU ). -The principal responsibility of TsSU is to collect and process statistical data. One aspect of carrying out this responsibility is the verification of data submitted by the reporting units , for which the agency has its own system of inspectors and auditors . TSSU officials are entitled to demand supplementary information and clarification in all cases when reports are not properly made out or when they contain discrepancies or inconsistencies.

The control and audit work which TsSU performs evidently is concentrated on verifying the complete ness and correctness of only that data reported to Since little financial data as such are TSSU . reported to TSSU ( chapter VIII- A ), it appears likely that TsSU inspectors make little systematic effort to determine whether or not reporting units have observed the laws and decrees which regulate their financial operations. As a rule they leave this latter type of verification to the inspectors of other agencies — the Ministry of Finance, the banks, or the superior administrative agencies .

292

CONTROL AND AUDIT OF FINANCIAL STATISTICS

planning chief agency, c . Gosplan . - The Gosplan , apparently takes no part in control and audit work . A close scrutiny of its apparatus and work indicates that the agency has no auditors and does not conduct audits in enterprises , institutions , or other organizations . Thus the agency cannot be considered a participant in the system established to control and audit financial statistics. 5.

The Effectiveness of Control

The network of organs established in the Soviet economy to audit and control financial operations is densely woven , and its mechanism is well adapted to provide effective control. Every enter prise, economic organization , and institution is constantly exposed to a great number of agencies , inspectors, and devices which scrutinize its activities and monitor its performance. All activities are carefully reviewed in the process of drawing up production plans and estimates ; the fulfillment of assignments is constantly checked ; the propriety of each financial transaction is verified in the accounting department of the enter prise and in the banks; and audits are performed by superior organizations, by the Controland Audit Administrations of the finance ministries, by the banks, and occasionally by persons acting in behalf of the Committees of Feople's Control. Reports submitted by primary units at periodic intervals are studied by the superior administrative and finance organs. In addition, malpractices often are detected and exposed by zealous party function aries, officials of trade union and youth organi zations, and by individual workers and employees outside the regular network of official control organs.

Thus, the means available to Soviet officials for detecting and exposing violations of laws and regu lations are formidable. Any scheme to engage in the illegal manipulation of material and financial resources on a large scale and over an extended period of time would require the collusion of officials in key positions in several different agencies. The chances of organizing such collusion are slim , and the potential of the Soviet control system to detect deviation or wrongdoing must be considered to be very high . The fact that a high potential exists does not necessarily mean that it is always used, however. The rigidities, often the vagaries, of planning have made it necessary to make use of special rulings, exemptions, and flexibilities — which are decried by the officials . The evidence available shows that gidities and the laxities are accepted and both the that at times either or both assume large pro portions . In some respects , the conflict between rigidity and laxity is considered an instrument to promote the growth and progress of the Soviet economy.

The many public complaints of financial in discipline and violations of legality , as well as the exhortations to observe the laws, should not be viewed as evidence of a serious inability to detect, suppress , and prevent violations through the existing control system . If the officials decide that the situation prevailing at any one time represents a threat to the accepted balance between rigidity and laxity , they can tighten the screws with great speed .

B. THE RELIABILITY OF STATISTICS Prior to 1956 statistical information on the Soviet economy was both scarce and fragmentary , and most of the information available was favorable to These the performance of the Soviet system . circumstances provoked numerous studies by Western observers in the years following World War II, for the purposes of assessing the meaning and reliability of Soviet statistics and thereby to provide a basis for accepting , modifying, or 28 rejecting Soviet claimsof economic performance . Much attention was devoted to the problem of reliability of statistics, centering around the following questions: (1) are the reported figures deliberately falsified to support the claims of propaganda ; ( 2) if so , is this false information the only source of data available to Soviet officials at large ; and ( 3) does a secret but accurate system of data exist which is available only to the highest Soviet officials ?

After a number of intensive studies, the consensus reached among a majority of Western students of the Soviet economy is that the existence of a secret system of accurate data is highly unlikely . It is argued that such a system would be costly and cumbersome, and probably easily detect able because of the vast operations needed to maintain two systems of reporting and data processing . In the absence of any serious evidence to the contrary, the conclusion is that most likely only one system of accounting and reporting is maintained in the Soviet Union. This conclusion has shifted the focus of interest to the procedures used for collecting and processing statistical infor mation , and to the nature, meaning , and reliability of the published results.

Such examination was much facilitated after 1956 when a change of policy opened the gates to the publication of a large amount of statistical data . Since that time, a statistical handbook has been published each year , at first in modest scope but successively expanded. Compilations of statistical data on specialized areas , such as the budget, industry , trade , foreign trade , and other subjects , have also been published. All in all, a vast amount of statistical information has become readily available since 1956 .

THE RELIABILITY OF STATISTICS The experience derived from the use of these published data indicates that they are to be taken seriously and that in general they very likely approximate the actual state of affairs. Most Western scholars believe it extremely unlikely that the published data are deliberately falsified , and that they can be used for most purposes--after consideration of a number of qualifications. One

such

qualification

concerns

the

com

pleteness of the published data . It is well known that little information is released about certain subjects and that evaluation of the data actually available is therefore difficult . Defense is perhaps the outstanding example of such areas. Soviet sources publish only one figure annually on the amount budgeted directly for defense , with no breakdown or elaboration . Such a practice certainly leaves gaps in the information picture, but it cannot be considered an action equivalent to direct falsi fication .

A second qualification concerns the problem of definition . Some published data are so ill-defined that it is extremely difficult to determine their meaning, even as an approximation . The most notable example of this problem was the Soviet practice of calculating grain harvests on the basis of “ biological ” yield rather than “ barn ” yield . Thus, the grain harvest for 1952 was initially claimed to have been 130 million tons ( biological yield ), but in later years, after much discussion and criticism by both Soviet and Western analysts, this figure was officially scaled down to 92 million tons (presumably barn yield ) . 29 A third qualification stems from the un certainties arising over the completeness and veracity of data as reported to Soviet officials . There is strong evidence that the published data are to some degree distorted due to padding of reports at the enterprise or institution level. The practice of padding (pripiski ) results from the of the system such that managers of enterprises and directors of institutions, together with certain of their employees, often have high personal stakes in presenting a picture of effective work and therefore in concealing failures. At times it may be of great consequence to them to conceal even successful performance because it may invite attention , special inspections, the revision of production or wage norms, or the transfer of equipment and financial resources to other enterprises. Soviet authorities have been engaged in a chronic battle against padding because its effects are as misleading to them as they are to outside observers of the economy. In May 1961 the U.S.S.R. Supreme Soviet issued a decree “On Criminal Liability for Padding and Other Distortions in Reports on Plan Fulfillment" 30 which seeks to curb these practices

293

and specifies imprisonment up to 3 years for persons guilty of such deeds. A decree of July 1961 transforming the Soviet Control Commission into the State Control Commission specified that the “ eradication of padding in state reports , fraud, and deception ” were among the main tasks of the State Control Commission . 31 These measures seem to have had a limited effect, if any .

The continued recurrence of padding can be traced through numerous cases reported in Soviet journals and newspapers , but it is difficult to estimate their true nature , effects, and pervasive ness . The reported cases, which are usually described in broad terms, can be illustrated by the following examples: Attempting to hide poor work ; claiming a higher percentage of plan fulfill ment than that actually achieved ; or illegally seeking to obtain bonus payments and increased wages. Occasionally , officials of superior organs are criticized for lenient attitudes toward padding or even for condoning manipulation of data in various reports .32 32 The accuracy of Soviet data is obviously impaired by such practices but the extent of distortion is unknown even to Soviet authorities, The problems of data evaluation are further compounded by the effects of the frequentadminis trative reorganizations which often change the scope or coverage ascribed to certain data. The merger of a number of branches of industry , the split of a sector into several units , the transfer of enter prises between different jurisdictions, or other such changes may completely revise the universe of a series of figures . These qualifications to the use of Soviet data do not mean that the figures are useless . Many problems can be eliminated or at least reduced by an extensive study of the official instructions and regulations which set guidelines for the collection and processing of data , as well as of textbooks, handbooks, and other such literature which make use of the data. A great number of the forms used in accounting and reporting are avail able , either in complete reproduction or in part, and they often throw light on the derivation and scope of reported figures. The use of such materials goes a long way toward reducing the elements of ambiguity and uncertainty . In general, it must be assumed that the statis tical information published in the Soviet Union after 1956 possesses a degree of credibility high enough to accept it as useful in evaluatingthe performance of the Soviet economy. 33 The information available on some areas is extensive and detailed ; certain other areas can be illuminated only through broad and intensive studies ; and the final few areas, particularly those related to national security , have long been virtually inacessible through published data .

NOTES TO CHAPTER X

1

D'yachenko , Finansovo , vol. I, 1961, p. 245 . Bukhgalterskiy , 1950 , pp. 9-10 .

For the text of the 1936 decree, see Goloshchapov,

2 Rogov , Organizatsiya , 1965, p . 14 . 3 Voznesenskiy , Finansovyy, 1965 , p . 27 . Vaysman, Uchet, 1964, p . 367. See also the lead editorial in Ekonomicheskaya gazeta , November 19, 1960 . 5 Dutov , “Use, " 1966 , pp. 10-11. 6 Allakhverdyan , Soviet, 1966 , p . 350 . Rogov , Organizatsiya , 1965, p . 14 ;D'yachenko , Finansovo , vol. 1, 1961, p . 390 , and vol. II, 1964, p . 281. Voznesenskiy , Finansovyy, 1965 , p . 27 . The total number of “ enterprises” cited here evidently includes budgetary institutions, although conflicting statistics and ambiguous frames of reference for such data in Soviet literature make them difficult to interpret . As noted below , for example , another source gives the total number of enterprises and institutions in 1966 as 800,000. See also chapter III, footnote 26 . 9 Rogov, Organizatsiya , 1965, pp. 8 , 31-32. 10 The text of the instructions on “ Registration of Staff Schedules and Estimates of Administrative Managerial Expenses of Institutions, Enterprises , and Organizations with Finance Organs” is published in Goloshchapov, Spravochnik , 1961, pp. 274-286 .

11 Lavrov, Gosudarstvennyye, 1961, p . 151. 12 Article 31 of the 1960 instructions. 13 Rusin and Eydinova, Gosudarstvennyy , 1965 , p . 190 . 14 The text of the statute is given in Ekonomicheskaya gazeta , no. 42, October 20 , 1965 . 15 A large - scale multiagency program of work on the preparation ofmodel staffs, including those for industrial enterprises, is nevertheless currently in progress . See Feshbach , Current (forthcoming), for additional information on these and other aspects of control over staffs and administrative expenses. 16 Kuszin , “Reduce, " 1966 , p . 14. Note that the number of “ enterprises” was reported elsewhere to total 700,000 in 1964. See footnote 8 .

17 Rusin and Eydinova, Gosudarstvennyy, 1965 , p . 190. 18 Den’gi i kredit, no . 6 , 1966 , p . 6 . 19 Texts of the resolutions issued by the Council of Ministers U.S.S.R , are given in Romashkin , Zakonodatel’nyye , 1961, pp. 116-120 . 20 The text of the decree is given in Hazard and Shapiro, Soviet, 1962, part II, p . 77 , and in Pravda, July 23, 1961, 21 The text of the statute defining the functions of the Party - State Control Committee is in Malin , Spravochnik , 1964, pp . 303-309 . 22 The changes and their purpose were explained by Brezhnev to a party plenum held in December 1965. See Pravda, December 7 , 1965. Further details are given in Partiynaya zhizn ’, no. 24, 1965 , pp . 26-34 .

23 Tsikulin , Istoriya, 1966 , p . 350. 24 Pravda, December 13, 1965 . 25 The text of the decree is given in Romashkin , Zakonodatel’nyye , 1961, p . 118 . 26 Pravda, January 18 , 1963. 27 Details are provided in Malin , Spravochnik , 1964, pp . 310-338. 28 For examples, see Naum Jasny's article “ Soviet Statistics” in The Review of Economics and Statistics , vol. XXXII, no . 1, February 1950 ,pp. 92-99, and a rejoinder by Alexander Gerschenkron and Daniel Marx, Jr. entitled “Comments on Naum Jasny's 'Soviet Statistics' " in The Review of Economics and Statistics, vol . XXXII, no. 3 , August 1950 , pp . 250-252. A more recent study of this nature is one by Gregory Grossman entitled Soviet Statistics of PhysicalOutput of IndustrialCommodities– Their Compilation and Quality , 1960. As noted in the foreword by G. Warren Nutter , “many observations and conclusions are widely applicable to Soviet economic data in general."

294

NOTES TO CHAPTER X 29 See full discussion in Nove, Soviet, 1961, p . 310 . 30 Vedomosti....SSSR , no . 22, 1961, p . 495 . 31 Hazard and Shapiro, Soviet, part II, 1962, p . 77. 32 Pravda , December 14, 1965. Describing their experience in respect to the reliability of Soviet statistical data, Richard Moorsteen and Raymond P. Powell stated in their recent book : “ The statistics utilized are in general detailed, and they have been collated, adjusted for differences in coverage, and checked for internal consistency as far as possible . That official data processed in this fashion merit considerable confidence is a conclusion to which the whole body ofresearch on the Soviet economy has led ” (Moorsteen and Powell , Soviet, 1966 , p . 15 ).

295

APPENDIX

SUPPLEMENTARY

Figures

and

designated chapter

or

tables

and

FIGURES AND

in

grouped

section

A

this

TABLES

appendix

according

to

are the

to which they pertain .

297

FINANCIAL PLANS

299

Table IV - 1.- CONSOLIDATED FINANCIAL PLAN OF THE NATIONAL ECONOMY

I. 1 .

FINANCIAL RESOURCES

Profits

3.

Industry Agriculture Transport and communications Construction Geologic prospecting Supply and sales Procurement Trade and public dining Communal economy Banks State insurance Other enterprises and organizations 2 .

Turnover tax

3.

Income from foreign trade

4 .

Income from forestry

5 .

Contributions of enterprises and institutions to the state social insurance fund

6 .

De ductions for scientific - research work and cadre training

7.

Amortization deductions

4.

Expenditures on geologic -prospecting work Expenditures on capital repair Of which , on account of amortization

5 .

Increase in normatives of own working capital

Industry Agriculture Transport and communications Construction Geologic prospecting Supply and sales Procurement Trade and public dining 6 .

Resources furnished to banks, for :

Long - term credits Short- term credits 7 .

Increase in state material reserves

8.

Operational expenditures in agriculture

9.

Operational expenditures in transport and communications

Of which , for capital repair 8 .

Pri jeeds from sale of retired fixed assets

9.

Income tax on collective farms and cooperative organizations

10 .

Operational expenditures in the communal economy

10 .

Other revenue from the socialist economy

11 .

Deductions to enterprise funds

11 .

Revenue from

12 .

Other expenditures of the socialist economy

13.

Expenditures on social and cultural measures

the population

Taxes and collections Increase in savings bank deposits Sale of state bonds Other revenue

Enlightenment Public health

Total resources II .

Physical culture Social security Social insurance State pensions to mothers with many children and unmarried mothers

FINANCIAL EXPENDITURES

1.

Capital investments according to the state plan

2.

Capital investments on account of special allot ments from the state budget and other sources Of which , for : Forming basic herds Acquisition of minor , transportation , and other equipment for organizations supported by the state budget Work on public services of cities, workers ' settlements , and rayons Development of local industry and other needs on account of special sources of financing

14.

Expenditures on defense

15.

Expenditures on maintenance of organs of state administration

16. 17 .

Expenditures on state loans Reserve funds of the Council of Ministers U.S.S.R. and councils of ministers of union republics To tal expenditures

Source : Allakhverdyan , Finansovoye , 1966 , pp . 207-208 ; Lyando , Voprosy , 1963, p . 115; Margolin , Planirovaniye , 1960 , p . 40 .

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

300 Table

IV - 2 .-- BALANCE OF MONETARY INCOME POPULATION

AND EXPENDITURES

OF

THE

INCOME Receipts

A.

state

and cooperative enterprises and organizations

1. 2.

Wages

3. 4.

Receipts from sales of agricultural products Pensions and grants Stipends

5.

B.

from

Monetary income

from

collective

farms

6. 17 .

Receipts from the financial system Other income (bonuses not included and others )

8.

Money received by money orders and letters of credit ( less sent out and deposited ) 2

Receipts from 1.

2 .

in wage

sales of goods and services to

amounts

the population

Receipts from sales of agricultural products on farm markets

Receipts for performing

travel expenses ,

fund ,

services and other

the collective

income 4

income

Total

EXPENDITURES1 A.

Expenditures and savings

1 .

2 . 3 . 4.

B.

in

state

and cooperative enterprises and organizations,

Purchases of goods a . b .

in state and cooperative trade in consumer cooperatives at local market prices

C.

directly from

collective farms

Payments for services and other expenditures Obligatory and voluntary contributions and savings Money sent out by money order and deposited for letters of credit ( less amounts received ) 2

Expenditures

on

purchases of goods and payments for services from

the

population

1 .

Purchases of

2 .

Payments for services and other expenses4

agricultural products on

the collective farm market3

Total expenditures Change in money holdings of the population also migration of money )

(for republics

and oblasts-

1 Amounts shown as total for all population and separately for workers and employees , and for peasants , except in case of B.I and B.2 . 2 Applicable to balances for republics , krays , and oblasts 3 Not given for workers and employees . 4 Not given for peasants . Source : Batyrev and Kaganov , Organizatsiya , 1964 , pp . 82–83 .

FINANCIAL PLANS Table

301

IV -3.- CASH PLAN OF GOSBANK U.S.S.R.

INTAKE

Trade receipts Railroad , water ,

and air

transport receipts

Taxes and collections Apartment rentals

and payments for communal services

Local transportation Deposits

in

receipts

collective farm accounts

Receipts from Ministry of Communications enterprises Receipts from

savings banks

Entertainment enterprise receipts Personal service

enterprise receipts

Share contributions to housing Other

cooperatives

intake

Excess of outgo over

intake (release of money

into circulation )

OUTGO Wages Purchases of

agricultural products and materials

Withdrawals from

collective farm

accounts

From savings accounts , for purchases of nonagricultural products , for other purposes

Loans for

individual housing pawnbroker operations

and

construction , household acquisitions ,

Support for Ministry of Communications enterprises Support for Pensions ,

savings banks

grants , and insurance claims

Travel and business expenses Excess of

Source :

intake over

outgo

(removal of money

Batyrev and Kaganov , Organizatsiya ,

from

circulation )

1964 , pp . 128-129 .

and

302

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES Table IV -4 --FINANCIAL PLAN OF A SOVNARKHOZ FOR 1965 ( In rubles )

Number and title of entry

Total for year ?

INCOME AND RECEIPTS 1. Turnover tax ... 2. Profits , total... Of which , from : a . Sales of marketable output of industrial enterprises.. b . Sales of consumers ' goods made from waste .. c . Subsidiary agriculture... d . State farms .... e . Procurement organizations. f . Automotive transport units having indepen dent balance sheets (not included in the enterprise's balance sheet) ..... g . Other sales and services ... h . Supply organizations.. Sales organizations.. j. Leather and hide bases on independent balance sheets .... k . Workers' Supply Departments ( ORS'y) ...... 1. Contractor, construction -and - installation , and drilling organizations .. Geologic -prospecting organizations ... n . Designing and surveying organizations... 0 . Timber rafting and hauling organizations p . Measures introducing new technology .. 3. Profits of the previous year ..... 4. Profits and savings from construction , installa tion , and drilling work performed on own account.... Profits and savings from geologic- prospecting work performed on own account .... 6. Savings on capital investments due to price reductions resulting from individual govern ment decisions.... 7. Savings on geologic- prospecting work due to price reductions resulting from individual government decisions ..... 8. Savings from capital repair performed on own account .... 9. Amortization deductions , total.. Of which , for : a . Financing capital investment work .. Financing capital repair .... Outlays on forming basic herds of draft and productive livestock .... 10. Receipts from sales of retired property .... 11. Other sources of financing capital investments. Increase in indebtedness for completed geologia prospecting work ..... 13 . Increase in stable liabilities . 14. Reserve for payment of one -time awards for length of service .... 15. Receipts of inexpensive and short - lived articles and spare parts charged to assets for capital construction .... 16. Gosbank loans for covering seasonal shortages in accumulations..... 17. Exemptions from the turnover tax 18. Deductions for scientific research and experi mental work included in costs of production ... 19. Receipts on contracted work performed by scientific - research organizations .... 20. Deductions for maintaining the apparatus of the sovnarkhoz and its administrations..... 21. Excess of own working capital...... 22. Price differential on agricultural machinery and parts ..

Number and title of entry

Total for year ?

EXPENDITURES AND DEDUCTIONS

2,800,000 2,724,868

2,524,157 14,250 520 7,219

1,578 -2,820 13,223 -2,340 21,327 19,393 92,840 13,495 22,026 4,225 20,282

9,963

16,422 879,321 383,698 494,281 1,342 14,467 6,556

-76,076 155,089 8,413

21,450 50,252 400,000

1,068,597

1,509,600 1. Outlays on capital investments provided for in the state plan ( in prices of July 1, 1955 ) 2. Increase in capital outlays , including drill ing work , due to price increases on materi 8,725 als and equipment...... 3. Changes in working capital of construction -25,780 ( increase + , decrease = - ) ..... 4. Outlays on preparing model designs, all -union norms , technical specifications, etc ...... Outlays on compiling technico - economic supporting and other materials on the 762 development of sectors of the economy.... 6. Outlays on forming basic herds of draft and 1,342 productive livestock ... 494,281 7. Capital repair of fixed capital .. 251,790 8. Increase in normatives of own working capital 9. Replenishment of shortages of own working capital.... 10. Losses in basic activity of industrial enter prises, covered by state subsidy .... 26,147 11. Losses in housing and communal economy... 66,832 12. Deductions to enterprise and ORS heads ' funds 13. Expenditures on upkeep and maintenance of buildings , quarters , structures , gardens, parks , and pioneer camps transferred to trade union organizations for use free of charge (excepting that portion covered by special funds ) .... 19,711 ||14 . Deductions to the fund of the head of con struction , installation , or design - and 1,308 survey organizations ... 20 15. Deductions to the state farm fund... 156 16. Deductions to the state farm insurance fund.. || 17 . Deductions to the fund for strengthening and 42 expanding the state farm economy ... 18. Deductions to the fund for strengthening and expanding subsidiary agriculture... 19. Deductions to the fund for consumers ' goods 14,250 made from waste ..... 20. Operational expenses--total. 88,633 Of which : a . Geologic-prospecting work ..... b . Increase in value of geologic-prospect ing work due to price increases .. 83,702 Scientific -research work ..... 1,500 d . Inventors... e . Fish -breeding measures . 1,431 management Forest work ... f. g . Land management work .... h . Control of subterranean fires . i . Road maintenance..... j . Transporting and packing k . Hauling grain forage... 1. Transportation operations.. 2,000 Other operational expenditures .. 157,815 21. Other outlays financed out of the budget --total Of which : 157,815 a . Payments of length -of - service awards .... b . Settlements with fishing collectives on accepted property ..... 22. Repayment of Gosbank loans-- total .. 88,104 Of which : a . For introducing new equipment,mechanizing and modernizing production technology , and expanding consumers' goods production b . For seasonal shortages of accumulations ..

88,104

303

FINANCIAL PLANS

Table IV - 4 --FINANCIAL PLAN OF A SOVNARKHOZ FOR 1965--Con .

Number and title of entry

Total for year )

INCOME AND RECEIPTS 23. Appropriations from the budget-- total....... Of which , for : a . Capital investment under the national economic plan ..... b . Increase in normatives of own working capital ... Covering shortages of own working capital ... d . Covering planned losses (state subsidy) . e . Operational expenses Geologic - prospecting work . Scientific -research and experimental work ...... Other operational expenses.... f . Other outlays ( entry 21 of the expendi ture side of the financial plan ) ...... Forming basic herds of draft and produc tive animals ..... h . Expenditures of bonuses . i . Capital repair ..... j . Covering planned losses of the housing and communal economy .... k . Preparing model designs , all-union norms, technical specifications, etc ... 1 . Compiling technico - economic supporting and other material on the development of sectors of the economy .

TOTAL INCOME AND RECEIPTS .......

Total for yeari

Number and title of entry EXPENDITURES AND DEDUCTIONS

856,646

669,900

16,931 12,000 4,931

157,815 12,000

23. Expenditures on the account of turnover tax exemptions... 24. Expenditures on maintaining the apparatus of the sovnarkhoz and its administrations 25. Expenditures on cadre training in con struction ...... 26. Profits of the current year paid into the budget in the following year . 27. Expenditures on bonuses . Of which : a . Workers of the shipbuilding industry .. b . Under separate government decisions ... 28. Payments into the budget-- total.. Of which : a . Turnover tax ..... b . Deductions from profits of the current year ... C. Deductions from profits of the previous year ... d . Assets from reduction of working capital normatives... e . Free balances of amortization deduc tions intended for capital invest ment.... f . Price differential on agricultural machinery and parts...

5,839,467

TOTAL EXPENDITURES AND DEDUCTIONS.....

8,960,475

8,960,475

400,000 800 4,470 12,000 12,000

2,800,000

1,966,645 4,225

1,068,597

BASIC INDICATORS

1. Marketable (industrial - see 2a ) output in enterprise wholesale prices.... 2. Marketable output at full cost .... 3 . Costs per ruble of marketable output (in kopecks )....... 4. Contract construction and installation work program .... 5 . Plan for design -and- survey work ... 6 . Volume of timber rafting ( in thousand m²) .

24,475,000 21,951,000

89.69 2,000,000 400,000 600

7. Quota of own working capital ( for all types of activity except capital construction ) . 8. Quota for stable liabilities (for all types of activity except capital construction ) .. 9. Quota of working capital in capi tal construction .

Beginning of year

End of year

4,535,765

4,787,555

475,190

399,114

(x )

1 The plan also contains targets for each quarter (except for the " Basic Indicators" ) which are omitted here . Source : Molyakov, Finansirovaniye , 1965 , pp . 22-29 .

192,968

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

304

Figure VIII- A - 1 .--FORM NO . 1.

BALANCE SHEET OF AN INDUSTRIAL ENTERPRISE

Form No. 1

Approved by the Ministry of Finance U.S.S.R. and TsSu U.S.S.R. for the [ _ annual, monthly report

Code No. Sovnarkhoz , Ministry Branch (Administration )

Trust Enterprise Enterprise Address Year

Enterprise7 Started Operation

BALANCE SHEET FOR BASIC ACTIVITY OF AN INDUSTRIAL ENTERPRISE AS OF 1

196

( In Rubles)

Date of Preparation ......

196

Submitted ..

196

Received .

196

Approved ( verified ) ..

196

Included in Summary...

196

305

KHOZRASCHET ORGANIZATIONS

Figure VIII- A - 1.--FORM NO . 1.

BALANCE SHEET OF AN INDUSTRIAL ENTERPRISE --Con .

Line no .

Assets

Beginning of year 1

A. Fixed and Noncirculating Assets 01

I. Fixed assets (01) . II . Diverted assets : 1.

Payments into the budget of deductions from profits (80) : a . Previous year . b . Report year . Bonus payments made for socialist competition (80 ) .... 3. Other diverted assets ( 80 ) .... Intrasystem settlements in redistributing current assets and profits ( 77)

III .

02 03 04 05

06 07

IV . Assets assigned to [unchartered subordinate ] enterprises [on independent balance sheets ] ( 85 ) V. Losses ( 99) :

09 10

11

Total for section A.....

12

Own and equivalent current assets on hand.. Quotas (Normativy)

2. 3. 4. 5. 6.

End of year (month ) 4

Raw materials , basic materials , and purchased semifabricates (05 ) Auxiliary materials (05 ) ... Fuel (06 ) .... Packaging (05) .. Spare parts for repairs (08) . Inexpensive and short- lived items ( 12 )

18

Total for items 1-6 .

19

Including materials en route ....... 7. Unfinished industrial production and semifabricates of own produc tion ( 20 , 21 , 23) ... 8. Unfinished nonindustrial produc tion (29) -.. 9. Unfinished agricultural production (20 , 29) .. 10. Prepaid expenses (31) ... 11 . Finished products (40, 45 )........

13 14 15 16 17

X

x

20

21

22 23 24 25

Including shipped goods for which settlement documents have not been submitted to the bank for collection (45 )

26

12. Goods (41) .. 13 . Agricultural stocks ( 05 , 09) ...... 14. Other normed assets....

27 28 29

Total for section B.

21

Beginning of year 3

x

08

a . Previous year .. b . Report year ..

B. Normed Current Assets

х

30

Expenses for rafting timber are shown exclusive of the value of output. Within the time limits established for turning in documents for securing loans .

X

End of year (month ) 2

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

306

Figure VIII - A - 1.--FORM NO . 1 .

BALANCE SHEET OF AN INDUSTRIAL ENTERPRISE --Con .

Line no .

Assets

Beginning of year 1

C.

Cash , Settlements , and Other Assets

I. Cash :

1 . Cash on hand (50 ) .... 2. Settlement account in Gosbank (51) ... 3 . Other accounts in Gosbank (55-2 and 55-3) 4 . Other monetary assets (56 ) .. Total for group I..... II.

Goods shipped and work performed for which documents have been sent to the bank for collection but payment is not yet due (45) ..

III . Goods shipped and work performed for are overdue or were not sent to the time limit for use as loan security IV . Goods in buyer's responsible custody V. Debtors ( receivables , advances] :

which settlement documents bank for collection within ..... (45 ) .... due to refusal to accept (45 )

Advances paid out per contract for purchase of agricultural products (65) ... Debtors for shortages, waste, and pilferage (76) . OKS (Otdel kapital'nogo stroitel'stva--Department of Capital Construction ) for obligations incurred as a result of violating financial and estimate discipline (79) 4 . Other debtors ..

31 32 33 34 35 36

37 38

1.

2. 3.

Total for group Vooo.. Separate account in Gosbank for adjustment of price differentials in the procurement of agricultural products (53) ...... VI. Unused current assets removed temporarily by sovnarkhoz or ministry ( 77) ... VII . Assets issued to intrasystem enterprises and organizations as temporary financial assistance l.. VIII. Loans to workers and employees for construction of individual housing and for other individual needs ( 76 ) ... IX . Expenses not covered by special fund assets or special-purpose financing (87 , 96 ) ... X. Excess deposits of amortization deductions in the bank at the end of the year ( 86 ) ..... XI. Shortages above loss norms and spoilage of goods and material valuables not written off the balance sheet in the prescribed manner (82) ... XII . Differential in procurement prices for agricultural raw materials . XIII. Special funds deposited in the bank for the financing of capital construction (54) .... XIV . Assets and outlays on capital repair : 1. Outlays on unfinished capital repair (03, 23) ... 2. Separate account in Gosbank for amortization deductions for capital repair ( 55 ) ... 3. Advances to suppliers and contractors (61) .

Total for group XIV ... XV .

41 42

43

44 45

46 47 48

49 50 51 52 53 54 55 56 57

Other assets .. Total for section C ...

1

39 40

To be completed by the sovnarkhoz (ministry , agency) .

58

End of year (month ) 2

307

KHOZRASCHET ORGANIZATIONS

Figure VIII - A - I --FORM NO . 1. BALANCE SHEET OF AN INDUSTRIAL ENTERPRISE --Con .

Line no .

Assets

I.

D. Assets and Expenditures for Capital Construction Completed capital construction and other outlays chargeable to [sources of ] financing : 1. Finished work and acquisition of fixed assets: a . Provided for in the state plan ( 34 ) ... b . Outside the state plan ( 34 ).... 2.

Outlays not increasing the value of fixed assets ( 34 ) ...

3.

Financing of other organizations ( in the form of partial par ticipation ) and other write -offs ( 34 ) .....

63

59 60 61 62

4.

Outlays (losses) on unexecuted and finally terminated capital construction approved for write -off in the prescribed manner ( 34 ) ...

64 65

Total for group I ..... II.

Settlements with enterprises on equipment paid for in a cen tralized manner (75) ..

66 67

III. Completed capital construction not covered by financing ( 34 ) IV . Uncompleted capital construction : 1. Unfinished work and acquisitions of fixed assets : Provided for in the state plan ( 33) . b . Outside the state plan (33) .. C. 2.

68 69 70

Postponed ( zakonservirovannoye) and finally terminated capital construction (33 ) .

V.

Design and estimate documentation ( 01).

VI.

Equipment and materials : 1. Domestic equipment for installation (07) .... 2. Imported equipment for installation (07) ..

Beginning of year 3

71 72

End of year (month ) 4 73

74 4

3. Materials, structural components and parts (07) ...

75 4

4. VII . VIII .

Inexpensive and short- lived items ( 12 ) .........

76 77

Prepaid expenses ( 31) ........ Debtors:

4 1.

Advances and payments to contractors for structural components and parts (61) ...... 2. Design and survey work paid for per degree of completion out of special means in the state budget (61) ... 3. Other debtors...

79 80

Total for section D (65-80 ) ...

81

78

E. Expenditures for the Formation of a Basic Herd I. Expenditures for the formation of a basic herd ( 35 ) ....

82

BALANCE (11 + 30 + 58 + 81 + 82 ) ....

83

Beginning of year 1

End of year (month ) 2

308

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES Figure VIII- A - 1.--FORM NO . 1.

BALANCE SHEET OF AN INDUSTRIAL ENTERPRISE --Con . Line no .

Liabilities

I.

A. Sources of Own and Equivalent Assets The charter fund ( 85) .....

Beginning of year

End of year (month) 2

84

Assigned capital (85 ) .... I - a . Depreciation of fixed assets (02) . Budget financing for expanding the norm of own current assets ( 85) .... State subsidy for covering planned losses . III . Gosbank credits for introducing new equipment , mechanization , and improving production technology (92) IV . Intrasystem settlements in redistributing current assets and profits (77 ) ... v . Long - term [ bank ] credits and settlements on fixed assets obtained [ from cooperatives ] for compensation (74 , 92). VI. Profits ( 99 ) : a . Previous year ... b . Report year ....

85 86

87 88 89

X

90

91

X

92 93 94

X

95

Total for groups I -VI....

For covering quotas (normativov) VII.

Stable accrued liabilities 1. Wage payment and social insurance deduction accruals (69, 70) ...... 2. Reserve for forthcoming payments (except awards for length of service ) (88) ... 3. Awards for length of service (88 ) 4. Creditors for payment on par tially finished output (61) ... 5. Customer deposits for packaging ( 76 ) .... 6. Assets removed in connection with crediting on turnover (85) .... 7. Amortization fund assets [ ear marked ] for stocks of capital repair materials .... 8. Other stable accrued liabilities ..

Beginning of year 3

End of year (month )

97 98 99

100 101

X

X

102 103

X

x

Total for group VII

104

Total for section A

105

B. Bank Credits Against Normed Goods and Material Valuables Loans under the system of crediting on turnover (90 ) ...... Loans against raw materials , materials, and fuel ( 90 ) . Loans against unfinished output and semifabricates of own production ( 90 ) .... Loans against finished products ( 90 ) ......... 5. Loans against goods (90) ..... Loans on a special loan account ( excluding loans against settlement documents en route ) (90) .... 7. Other loans (90 ) ... 1. 2. 3.

Total for section B ... B - l . Depreciation of Inexpensive and Short- lived Items (13) . C. Various Bank Credits, Settlements , and Other Liabilities I.

96

Short-term bank loans ( 90 ) : 1. Loans against settlement documents en route and for the purchase of checkbooks.... 2. Loans against advances on contracts for the purchase of agri cultural products.. 3. Loans for temporary replenishment of current assets . 4. Other loans .. 5. Overdue loans. Total for group I .....

106 107 108 109 110 111 112 113

114

115 116 117 118 119 120

KHOZRASCHET ORGANIZATIONS

309

Figure VIII - A - 1 .-- FORM NO . 1. BALANCE SHEET OF AN INDUSTRIAL ENTERPRISE --Con . Liabilities

Line no .

Beginning of year 1

II . Reserve of the sovnarkhoz or ministry for rendering temporary financial assistance

III .

Creditors : 1. Suppliers , on accepted settlement documents not yet due (60) . 2. Suppliers , on overdue settlement documents (60 ) . 3. Suppliers, on uninvoiced deliveries (60) .. 4. Suppliers of agricultural products (65 ) 5. Financial organs on turnover taxes (73) .. 6. Financial organs on deductions from profit and other pay ments (73) ..... 7. Other creditors . Total for group III..... Separate account in Gosbank for adjustment of price differentials in procurement of agricultural products (53) ...

IV . Current assets received from the sovnarkhoz or ministry for tem porary use (77) ... v . Assets received from the sovnarkhoz or ministry as temporary financial assistance (77) ... VI.

VIII. IX . X.

122 123 124 125 126

127 128 129

130

131

132

Bank loans for individual housing construction and other needs ( 76 )....

133

Special funds , special-purpose financing, and special- purpose receipts ( 87, 96 ) .... Differential in procurement prices for agricultural raw materials

134

Amortization fund subject to deposit in Stroybank (86 ) .. Sources of assets for capital repair : 1 . Amortization fund at the disposal of the enterprise for capital repair ( 86 ) ... 2 . Other sources of financing capital repair ( 86 ) 3 . Gosbank loans for capital repair (90 ) 4 . Services rendered and work completed by suppliers and con tractors (60 ) .

Total for group X ..... XI.

121

135

136

137 138 139 140

141 142

Other liabilities . Total for section Co.....

D. Sources of Assets for Capital Construction Financing capital construction : Through Stroybank : a . Provided for in the state plan (93) ... Outside the state plan , from special sources approved by the Government of the U.S.S.R. (93) 2. Through Gosbank : Provided for in the state plan (93 ) .... Outside the state plan , from special sources approved by the Government of the U.S.S.R. (93) ... 3. Other sources (93) ..... II. Financing of design and survey work from the state budget (96 ) ... III. Settlements with the Glavk on equipment paid for in a centralized manner (75) .... IV . Design and estimate documentation fund (85 ) . V. Depreciation of inexpensive and short - lived items ( 13) . VI. Loans :

143

I.

1 . Loans for imported equipment ( 90 ) 2. Loans for domestic equipment (90 ) 1

To be completed by the sovnarkhoz (ministry , agency ) .

144 145 146 147 148 149 150 151 152

153 154

End of year (month ) 2

310

APPENDIX A --SUPPLEMENTARY FIGURES AND TABLES Figure VIII - A - 1.--FORM NO . 1. BALANCE SHEET OF AN INDUSTRIAL ENTERPRISE --Con .

Liabilities VII .

Creditors : 1. Contractors , on settlements for completed work ( 60 )...... 2. Contractors, on overdue bills for work performed (60) ... 3. Suppliers, on accepted settlement documents not yet due (60 ) . 4. Suppliers, on overdue settlement documents (60) . 5. Other creditors ... Total for section D ( 144–159 ) E. Financing Expenditures on Formation of the Herd Financing of expenditures on formation of the basic herd through banks (94) ... BALANCE ( 105 + 113 + 114 + 143 + 160 + 161) ...

Line no .

Beginning of year 1

End of year (month ) 2

Beginning of year 1

End of year (month ) 2

155 156 157 158 159

160

161 162

REFERENCE INFORMATION

Line no . 1. Overdue payments of deductions from profits into the budget.. 2. Amount of deductions from profits due the budget (accrued since the beginning of the year under the decentralized and centralized systems of profit deduction payments ) .. 3. Section B , "Normed Current Assets , " includes : Above-norm stocks not credited by the bank , taking into account adjustments in loan obligations to the bank as of the first of the month following the report month ?: All normed valuables for the enterprise as a whole (line 30 ) .... b . Production stocks ( line 19) ..... c . Unfinished industrial production and semifabricates ( line 21) .... d . Finished product and goods ( lines 25 and 27 ) e . Other normed assets ... Excess material valuables...

163

164

a.

4.

6.

Obligations to the bank for loans after adjustment as of the first day of the month following the report period ( infor mation to be furnished by all enterprises) : a . Against production stocks ... b . Against unfinished industrial production and semi fabricates .... c . Against finished products and goods... d . Against other normed assets..... Obligations to suppliers written off by the bank in issuing credit , taking into account adjustments in loan obligations to the bank ( information to be furnished by all enter prises ) ....

Amount of wages on deposit treated as liabilities ( lines 128 , 159 ) . Stocks of unsold marketable output indicated on lines 25 , 36 , 37, 38 of the balance sheet : a . At actual factory cost. , ... b . At wholesale or other sales prices existing at the beginning of the year and at the end of report period...

165 166

167 168 169 170

171 172 173 174

175

176

177 178

Line 165 is to be completed only by enterprises having above-norm stocks of normed valuables as a whole , after adjustment of loan obligations to the bank . Lines 166 , 167, 168 , and 169 are to be completed by enterprises having above -norm stocks of valuables for individual items or groups of items, after adjustment of loan obligations to the bank , regardless of whether or not the enterprises have above-norm stocks of all normed valuables as a whole . Consolidated balance sheets show the total amounts corresponding to lines 165-170 in the balance sheets of individual enterprises .

311

KHOZRASCHET ORGANIZATIONS Figure VIII- A - 1.--FORM NO . 1.

BALANCE SHEET OF AN INDUSTRIAL ENTERPRISE --Con .

Linel no .

8.

The item " Fixed Assets " (line 01) includes fixed assets on which depreciation is not calculated ?.

9.

Variances between actual and planned costs of stocks of finished products in warehouses , shipped goods and work performed , goods not paid for , and goods held in responsible custody ....

10 .

11. Proceeds from sales of marketable output?. Including proceeds exclusive of turnover taxes , differences in prices on sales of spare parts, auto - tractor electrical equipment , rubber - asbestos items, tractors, and agricul tural machines , and other deductions.....

12. Result on sales of marketable output ? a . Profits . b . Losses .. 13 . Loans for introducing new equipment, mechanization , and improving production technology retired since the beginning of the year ..... Of which , loans received during the report year ... 14. Savings since the beginning of the year resulting from measures to introduce new equipment , to mechanize and improve production technology , and to rationalize and intensify production processes carried out by bank loans... Of which , economies from introducing measures shown in line 189 carried out by bank loans obtained in the report year . 15 . The item " Unfinished capital construction provided for in the state plan" (line 68) includes outlays made from special sources outside the state plan .... 16. The item " Postponed and finally terminated construction " ( line 71) includes expenditures on the account of special sources outside the state plan .... 17. Compensation for additional expenses related to the intro duction of new wage payment conditions for construction personnel, subject to reimbursement (accruing) to the builder , since the beginning of the year ........ Of which , work carried out according to the state plan .....

18 .

Debtors on bills submitted after partial readiness .

End of year (month ) 2

179 Assets 1

Liabili Liabili Assets ties ties 3 4 2

180 Losses

Profits 1

The financial results according to the plan : For the report quarter .. From the beginning of the report year....

Beginning of year 1

2

181 182 Plan for the report quarter 1

Actual from beginning of report quarter 2

Beginning of year 1

End of year (month ) 2

183

184

185 186

187 188

Rubles

189

190

11

191

11

192

10

193 194 195

1 Line 179 is completed in the July 1 and end -of - year balance sheets , 2 Not completed in April 1 and annual balance sheets. Lines 165-175 , 177 , 178 , and 180 are completed in quarterly and annual balance sheets only . Lines 181 and 182 are not completed in the annțal balance sheet .

196

Director

Chief (Senior ) Accountant

Note : Numbers in parentheses indicate summary ( first- order ) accounts to which the data pertain . Source : Andreyev and Cherkasskiy, Ekonomicheskiy , 1965 , pp . 26-43 (body of the balance sheet) ; Koglev , Finansovyy , 1962 , p . 83 (title page ) .

APPENDIX

A -- SUPPLEMENTARY FIGURES AND TABLES

Figure VIII- A - 2.--FORM NO. 2.

SUPPLEMENT TO THE BALANCE SHEET OF AN INDUSTRIAL ENTERPRISE

Form No. 2 Approved by the Ministry of Finance U.S.S.R. and TsSU U.S.S.R. for the 1961 annual report

Code

312

Sovnarkhoz (Ministry , Central Institution ), Branch Administration Enterprise ( Trust)

SUPPLEMENT TO THE BALANCE SHEET ( IN RUBLES ) For 1 January 1962

I. a)

EXPLANATION OF ITEMS IN THE BALANCE

The item "Other diverted assets" ( Form No. 1, line 05 )

Line no . Payments to the bank from profits, for capital construction : a . Previous year . b . Report year ... Payments to Gosbank from profits , for capital construction financed from the budget account ... Utilization of profits allotted for the financing of capital construction from the settlement account in Gosbank... Payments to the bank from profits , for financing the forma tion of the basic herd .... Deductions for the enterprise fund : a . Advance deductions... b . Deductions from planned profits or savings prior to the report year ...

Other diverted assets .. of which :

03 04 05

06 07 08 09

10

11

Deductions for the fund for consumers goods produced from waste..... Deductions from profits for the expansion and strengthening of subsidiary agriculture... Payments into the budget of profits from the sale of con sumers goods made from waste..... Assets allotted for financing expenditures connected with the introduction of new equipment , mechanization , and improve ment of production technology .... Deductions , up to 30 percent of above - plan profits or above plan savings resulting from cost reduction of production , for the construction of housing .... Profits allotted to compensate for cost increases connected with capital repair .. Equipment transferred to Remmashtrest (Remontno-mashino trest--Machine -Repair Trust) enterprises for repair . Transfer to the budget of suns resulting from overestimated allotment for administrative -managerial expenditures.. Transfer of assets to the sovnarkhoz (ministry , agency ) reserve fund for temporary financial assistance : a . from above -plan profits ..... b . from other enterprise sources .

01 02

12 13 14

15

16 17 18 19 20 21

22

Total ( lines 01-19) ........

Beginning of year 1

х

End of year 2

313

KHOZRASCHET ORGANIZATIONS

Figure VIII- A - 2 --FORM NO . 2 .

SUPPLEMENT TO THE BALANCE SHEET OF AN INDUSTRIAL ENTERPRISE --Con .

b ) Items of normed current assets and other items of the balance sheet *

Normative Item

Item "Raw materials , basic materials , and purchased semifabricates" ( line 13) includes : 1 . Motors... 2 . Contracted ship outfitting . 3 . Waste material and salvage . 4 . Livestock at bases.... Item " Auxiliary materials" ( line 14 ) includes : 1 . Fishing nets and tackle ... 2 . Fertilizer ... 3 . Fodder ..

1 . Expenditures for rafting timber exclusive of the output....

23 24 25 26

27 28 29 30 31 32 33

34

Item " Inexpensive and short- lived items (line 18) includes : 1 . Replacement equipment .... 2 . Tools and fixtures.... 3 . Nondurable industrial and fishing gear .... 4. Special clothing , special footgear , every day articles , and bedding.... Item " Unfinished industrial production and own semifabricates" ( line 21 ) includes : 1 . Wood en route , at logging enterprises..... 2 . Completely assembled finished production , ndergoing testing..... 3 . Contracted ship outfitting, which has been included in gross product.. Item " Unfinished nonindustrial production " (line 22) includes :

Line no .

35 36

37

Item " Prepaid expenses" (line 24 ) includes : 1. Expenditures for preparatory mine work .... 2 . Expenditures for long -wall coal mining equipment , metal and ferroconcrete supports , and articles , all being amortized according to norm - estimate pro cedure... 3 . Seasonal expenditures.. 4 . Seasonal expenditures for the procurement of agricultural products... 5 . Preparatory work for rafting and tapping of timber ...

42

Item "Finished products" (line 25) includes: Timber production at logging enterprises : a . At upper logging yards... b . At railroad and other storage points ..

43 44

2.

Timber production at rafting and lumber transfer enterprises : a . At upper logging yards... b . In rafting .. C. At lower yards , in the water .. d . At lower yards, on the shore..

Item "Goods" ( line 27) includes : 1 . Procured goods..... 2 . Purchased goods..... 3 . Goods in retail enterprises (less taxes and mark -ups) ...... 4 . Cotton seed for sowing . 5 . Goods in the trade network and at warehouses .. Section I - b not to be completed by sovnarkhozy .

38

39 40

41

45 46 47 48

49 50 51 52 53

Actual

Beginning End of year Beginning of year End of year of year 1 2 3 4

314

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES FIGURE VIII - A - 2.--FORM NO . 2.

SUPPLEMENT TO THE BALANCE SHEET OF AN INDUSTRIAL ENTERPRISE --Con .

Normative Item

Line no ,

Actual

Beginning End of year Beginning of year End of year of year 1 2 3 4

Item " Agricultural stocks" (line 28) includes : Seeds and planting supplies .......... Young animals..... Animals fattened and being fattened (on pasture ] ... 4 . Forage.. Item " Other normed assets" ( line 29 ) includes : 1. 2. 3.

54 55

56 57

1.

Work in progress on contracted and scientific research projects...... 2 . Power supplied to subscribers.... 3. Suppliers , on payments for orders which are only partially complete.... 4 . Debtors , on guarantees... 5 . Costs of extended storage..... 6. Equipment designated for repair .... Item " Other assets " ( line 57) includes expendi tures for scientific research work drawn on special - purpose financing account ... Item "Other loans" (line 112 ) includes : 1. Loans against short - lived industrial equipment .... 2. Loans for seasonal expenditures ........ Item ' Depreciation of inexpensive and short lived items " (line 114 ) includes : 1. Replacement equipment . 2 . Tools and fixtures... 3 . Short- lived industrial and fishing gear ... 4. Special clothing , special footwear , everyday articles , and bedding... Item " Other liabilities " ( line 142) includes : Creditors who have paid for production which has been only partially completed ; the liability is being liquidated by shipments of goods..... The informational entry , " Obligations to sup pliers written off by the bank in issuing credit , taking into account adjustments for obligations to the bank on [ past] loans" ( line 175 of the balance sheet) includes payables charged to credits against : production supplies.. b . unfinished production and semi fabricates .... finished production and goods ......

II.

58 59 60 61 62 63

64

65 66

67 68 69 70

71

72

X

X

73 74

х X

х X

REFERENCE INFORMATION ON BUDGET SETTLEMENTS FOR VARIOUS PAYMENTS

Line no .

Creditor and depositor obligations for which the statute of limita tions period has expired.... Including wage deposits... Savings from reduction in staff and administrative -managerial expenditures .

75 76 77

Budget Transferred obligation to the on budget in 1961 1 Jan , 1962 2 1

315

KHOZRASCHET ORGANIZATIONS Figure VIII -A -2 .-- FORM NO . 2.

SUPPLEMENT TO THE BALANCE SHEET OF AN INDUSTRIAL ENTERPRISE--Con .

III . TOTAL OKS (OTDEL KAPITAL'NOGO STROITEL'ST VADEPARTMENT OF CAPITAL CONSTRUCTION ) OBLIGATIONS RESULTING FROM VIOLATIONS OF FINANCIAL AND ESTIMATE DISCIPLINE ( LINE 41 OF THE ANNUAL BALANCE SHEET) INCLUDE OBLIGATIONS INCURRED PRIOR TO THE FIRST OF JANUARY OF THE REPORT YEAR STILL REMAINING AT THE END OF THE REPORT YEAR . IV . THE SUM GIVEN FOR THE ITEM " DESIGN AND ESTIMATE DOCUMENTATION" (LINE 72 OF THE ANNUAL BALANCE SHEET) INCLUDES : a . Value of the design and estimate documen tation completed prior to 1 October 1959 . b . Value of standard designs and normative documents , and other work financed after 1 October 1959 from budget..... Value of work for the compilation of technical -economic bases , and design work for the planning of rayons and cities , and other work financed after 1 October 1959 from budget assets .

( 78)

Rubles

(79) _

Rubles

( 80 ).

Rubles

(81)

Rubles

REFERENCE INFORMATION ON ORDERS TEMPORARILY SUSPENDED OR CANCELLED (To be completed only by machine -building enterprises)

Line no . from annual balance sheet

21

24

Unfinished industrial production and own semi fabricates... Raw and basic materials and purchased semifabricates (the part on purchased semifabricates).. Low -priced and short- lived items ( the part on special tools and special fixtures) .... Prepaid expenditures ( the part on expenses for ini tiating new methods)....

Orders Orders temporarily cancelled suspended 1 2

83 84 85 86

87

Total ( lines 81-85) ...... 1962

Line no .

82

13

18

Balance sheet entry in which expenses are tabulated

Director Chief (Senior ) Accountant

Source : TsSU and Min . fin . , 1961 annual report . Balance sheet line numbers in this form have been adjusted for change in line numbering in more recent editions of the balance sheet .

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

316

Figure VIII -A - 3 .--FORM NO . 3.

Code

Sovnarkhoz , Ministry ( Central Institution )

MOVEMENT OF THE CHARTER FUND

Form No. 3 Approved by the Ministry of Finance U.S.S.R. and TsSU U.S.S.R. for the 1963 annual report

Branch Administration Enterprise ( Trust ) MOVEMENT OF THE CHARTER FUND IN 1963

Items

Charter fund in accordance with the approved balance sheet of January 1 , 1963...

Increase and decrease in the fund as a result of changes in the composition of the trust (enterprise ) : a ) attachments.... b ) removals .... Charter fund as of January 1 , 1963, with above changes taken into account.

Line no . 01 02 03

04 05 06

MOVEMENT OF THE FUND IN 1963 I.

Additions

a ) Fixed assets : Value of capital construction objects put into operation during the report year . Amount of supplementary expenses related to new wage payment conditions for personnel of contract construction organizations.... Value of design and survey work for capital construction objects put into operation ... Outlays on formation of the basic herd included in fixed assets.... Outlays on completed capital repair of fixed assets , ... Added valuation of fixed assets and revision in valuation of fixed assets... Fixed assets attached without compensation at the direction of superior organs. Depreciation on fixed assets transferred without compensation ... Unrecorded fixed assets disclosed in taking inventory Others... Total for subsection I - a ( lines 07-16) .....

b ) Current assets : Commodities and material valuables and other current assets received without compensation ... Value of material valuables obtained from liquidation of fixed assets and receipts from sale of fixed assets.... Current assets of 1963 redistributed by sovnarkhoz , ministry ( central institution ) ( to be entered by branch administration , main administration ) . Obtained for current assets and for covering planned losses from other types of activity ( to be entered by branch administration , main administration , sovnarkhoz , ministry, central institution ) .... Profit of 1962 assigned at the time of its distribution Budgetary financing of current assets . a ) for expanding the normative of own current assets (Article 28 of budgetary classification ) ..... b ) for covering shortages in own current assets (Article 29 of budgetary classification ) .... c ) other allocations from the budget.... Financing the replenishment of current assets from special funds , special- purpose financing means, and other sources, under government resolutions . Financing current assets and covering planned losses by branch administration , main administration ( to be entered by the enterprise ) State subsidy for 1963..... Added valuation of commodities and material valuables in accordance with government resolutions and directives.... Value of inexpensive and short- lived items and spare parts purchased on the account of funds for capital construction .... Results from liquidation of fixed assets not fully depreciated . Others ...

07 08 09 10 11 12 13 14 15 16 17

18

19 20

21 22

23

24 25 26

27 28 29 30 31 32

Total for subsection I - b ( lines 18-32)

33

Total for section I ( lines 17 +33) .

34

Amount

317

KHOZRASCHET ORGANIZATIONS Figure VIII - A - 3 .--FORM NO . 3.

MOVEMENT OF THE CHARTER FUND --Con .

Line Amount no .

Items II. Reductions a ) Fixed assets Fixed assets detached without compensation at the direction of superior organs. Depreciation on fixed assets obtained without compensation ... Incorrect inclusion in fixed assets .. Revised valuation of fixed assets .. Residual value of liquidated fixed assets --original value less depreciation . thousand rubles . Amount of depreciation Depreciation of fixed assets during the report year ... Others...

35 36 37 38 39 40 41 42

Total for subsection II - a ( lines 35-41) .... b ) Current assets : Comrodities and material valuables and other current assets detached without compensation .... Expenditures related to the liquidation of fixed assets . Current assets of 1963 redistributed by sovnarkhoz , ministry ( central institution ) ( to be entered by main administration ) .. Profit and current assets transferred to other types of activity ( to be entered by branch administration , main administration , ministry , central institution ) Deductions from own 1962 sources for expanding normatives into the ministry ( central institution ) reserve for rendering temporary financial aid .. Losses of 1962..... Detachment of current assets and profit by branch administration , main adminis tration ( to be entered by the enterprise ) Funds from culling animals out of the basic herd to be diverted to financing herd formation .. Proceeds from liquidation of fixed assets deposited in the bank . Removals to the separate (osobyy) budget account in Gosbank for current assets replaced by bank credit, in connection with crediting on turnover .. Removal of excess current assets into the budget..... Reduction in value of commodities and material valuables in accordance with resolutions and directives of the Government... Losses on metal items included in unfinished production , semifabricates and tools written off to scrap.. Others ..

43 44

45 46 47 48 49 50 51

52 53

54 55 56 57

Total for subsection II- b ( lines 43-56 ) ..

58

Total for section II (42 +57)

59

Charter fund according to the balance sheet of January 1 , 1964 (lines 06 + 34-58)

Reference Information Amount Line no .

Distribution of profit ( financial results ) of 1962

Of which , deposits to the budget made in 1963

60 61 62

Deductions from 1962 profit to the budget -- total. Of which , deposits to the budget made in 1963 Deposit of 1962 profit in banks for capital construction and also use of profit for capital construction from the settlement account.. Deposit of 1962 profit in banks for financing basic herd formation .... Deductions from profit to the enterprise fund , to the fund for consumer goods from waste , for residential housing construction , for bonuses on all- union socialist competition , and to other special fundstotal.... Of which , deductions made in 1963 from 1962 profit... Other payments of 1962 profit to the budget......

63

64 65 66

For profit -making enterprises

For loss - incurring enterprises

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

318

Figure VIII -A - 3 .--FORM NO . 3 .

MOVEMENT OF THE CHARTER FUND--Con . Amount Line no .

Deductions to the sovnarkhoz , ministry , agency reserve for rendering temporary financial aid ... Of which , deductions made in 1963 from 1962 profits.. Other deductions from 1962 profits .

For profit -making For loss - incurring enterprises enterprises

68

69 70 71

Of which , deductions in 1963....

72 Profit assigned to increase the charter fund (Form No. 3 , line 22) ...

73

Total (lines 60 , 62-64 , 66 , 68 , 70 , 72-73 , minus 74 ) ........

74

Loss assigned to reduce the charter fund (Form No. 3 , line 48)

75

Note : In determining the total for loss - incurring enterprises, data from appropriate lines are subtracted from line 74. The total on line 75 equals balance sheet profit or loss for 1962 . Director

1964

Source : (heading) .

Chief (Senior) Accountant

Shchenkov, Bukhgalterskiy , 1963, pp . 30-33 (body ) ; TsSU and Min . fin . , 1961 annual report

319

KHOZRASCHET ORGANIZATIONS Figure VIII- A 4 .--FORM NO . 5 .

PRODUCTION EXPENSES

Form No. 5

code

Approved by the Ministry of Finance U.S.S.R. and by TsSU U.S.S.R. for the 1961 annual report Sovnarkhoz , Ministry ( Central Institution )

Branch Administration , Main Administration Enterprise ( Trust) PRODUCTION EXPENSES (Without Intraplant Turnover ) In 1961

( in thousand rubles ) * Line number

Element of expense

Raw and basic materials with deductions for waste... Of which , purchased items and semifabricates . Auxiliary and other materials .... Fuel from outside .... Power of all kinds from outside ... Basic and supplementary wages..... Deductions for social insurance .. Amortization of fixed assets...

Other monetary expenses .. Total expenses... Note . Machine -building enterprises show on empty line 09, as a separate element of expense, the value of purchased component. products, semifabricates, and services of sub contracting ( kooperirovannykh ) enterprises . These data are not included in lines 01 and 02 . Expenditures written off to nonproduction accounts ** .. Increase (+ ) or decrease ( -) of balance on the account " Pre paid expenses" Increase ( + ) or decrease ( - ) of balance of work in progress, semifabricates , tools , and fixtures of own production included in gross output..... Increase ( + ) or decrease ( - ) of balance on the account " Forth coming expenditures "

Factory - plant cost of all marketable output....

11

11 1962 *

Plan

Report

01 02 03 04 05 06 07 08 09 10 11 12

13 14

15 16 17 18

Cost of gross output ( line 12 minus line 13 , minus increase or plus decrease on lines 14 and 15 , plus increase or minus decrease on line 16 ) ..... Increase ( + ) or decrease ( -) : a . of work in progress and semifabricates included in gross output..... b . tools and fixtures of own manufacture included in gross output...

Total during 1961

19

20 21 22 23 24

Director Chief (Senior ) Accountant Head of Planning Department

As of January 1961 data in accounting reports are given in rubles (Shchenkov , Bukhgalterskiy, 1961, p . 337) . The 1962 edition has an additional line : " Of which , outlays charged to the fund for mastering new technology" (Astashkevicher, Bukhgalterskiy , 1963, p . 367) . Source : TsSU and Min . Fin . , 1961 annual report.

.a .b

General plant expenses . Other production expenses .

-plant Factory output of cost Nonproduction expenses Full cost of output ...

Shop expenses .....

Losses due spoilage to ..

contract enterprises *.

A Raw materials supplies and . () educted waste dRecovered

Sovnarkhoz ,Ministry Institution )(Central Administration Branch M)( ain Administration )(Trust Enterprise

1.

,services items sPurchased nd aemifabricates sub of

Code

:in1960 rates and prices average with Comparison 1. marketable all for output ..... .marketable output comparable for

*and expenses maintenance operation Equipment

*. needs technological for kinds all of power and Fuel .. workers wage production of wages Basic *.Supplementary workers wage production of wages ew ]*(nExpenditures production mastering for

sItem expense )o( tat'ya f

E

03 04 05 06 07 08 09 10 11 12 13 14 15 16

B 01 02

Line code

.plan output all marketable for the in adopted rates and prices with Comparison 2.

percentage .. of a1960 as output marketable comparable cost reduction Actual

X

1

in1961 Expense of Item

)(17

MARKETABLE COST OF OUTPUT

INFORMATION REFERENCE

Planned for cost report year

.6NO -VIII -A5 -FORM Figure

cost -):+,r(shipment educing irates ncreasing freight and

)1( 8 )1( 9 )(20 )(21

2

for Actual cost report year

Total marketable output

1961 in produced actually output cost marketable of Full

p)( ercent expendit .o the nomencla approved ure items provided are industry these which for enterpri of inbranches complete *Tby be ses dture

Average 1960 for cost 3

ifrom ,changes manner restablished ]pEffect esulting rice (nfor output marketable of cost the on esemifabricates ,sfraw power team lectric pmaterials urchased uel upplies

By Output Marketable Comparable and Total Produced Actually of Cost

MARKETABLE OF COST OUTPUT

t)( housand rubles trubles )( housand t)( housand rubles trubles )( housand

4

for cost Actual report year

cwhich :Of omparable production

thousand rubles )in

6 No. Form U.S.S.R. Finance of Ministry the by Approved report annual 1961 the for U.S.S.R. TsSU and

320 APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

thousand rubles ..

) tax turnover

11 1962

A

A thousand rubles marketable in -produced output of cost Actual

44

III section f column complete 1961 in opened E.2oonly * nterprises

for . output defective responsible persons from withheld Sum , materials quality low for claims by suppliers from recovered Sums output .. loss defective from the reducing to charged

sCost .aemifabricates nd definitely ,others items rejected of

l,lpfine column ).of 38 ercentage 2aline a1ocolumns as 38 nd

Line Actual 1961 code in 1 B 40 41 42 43

according ... plan approved the to year preceding for output marketable pro output actual a. of ruble per expenditures of Reduction per of expenditures level yearly average the apercent as duced

C.

a.

C.

a.

kExpenditures () opeks plan approved the to according output marketable of ruble per

Indicators A .marketable plan according approved the to all of cost Planned output a.

(exclusive of enterprise prices wholesale Marketable in output

output ().;3367 kopeks -marketable of ruble Expenditures per

III .

marketable ruble of for output preceding the year

all of Cost marketable actual produced output

. output defective correcting for Expenditures Value defective of output at price use ....

--

. II

6.NO FORM -5.-AFigure VIII

a.

Director

Value of : waste

B

Line code

39

37 38

36

-plant factory at output Gross ... cost

A raw material .. of price the at

1

* 1960 Prices Comparable in Marketable Output Ruble of Expenditure per Dynamics

31 between lines dapproved (actual prices plan ,inifference p1).of 38,caaand line olumn 38sercentage

1960

35

34

33

32

29 30 31

25 26 27 28

Line code B 22 23 24

,b. usefulness of degree the priced to according

(iprices 1960 )n

according and output actual for recalculated plan the to (difference production of ,assortment 38 and 29 lines between

expenditures marketable of ruble per level yearly average the ercent apReduction as output of

actually (k)for produced opeks marketable Expenditures ofccording ruble per recalculated aoutput plan the to and output actual the

between ,1961 38 and 30 lines inb.ifference (dactual prices

(Senior )AChief ccountant Head Planning of Department

Loss due to spoilage .

IV.Loss Due Waste and Spoilage to

ifference pd1960 ercentage a(between as 1961 in output ruble marketable of expenditures per Reduction of

-in turnover )of tax prices (ein xclusive wholesale enterprise products marketable of Actual output

,c1apcolumn 38 line )of lasolumn ercentage 38 1),cof laolumn apcolumn line s ercentage

according the approved to ... plan ,ib.n .actual plan inthe adopted prices

(2) 63 production of +2assortment 7 1961 (,ib.n4ctual a)+2prices )2(adopted .20 prices plan ,i64n actual

,in actual .. prices 1961

planned cost report the year .of actual cost of report the .year b.

MARKETABLE OF .COST Con -OUTPUT Output 1961 in Marketable Reduction for Plan Cost of Fulfillment

1961 i)( n 1960 prices

48

46

Actual Line 1961 code in 1 B 45

2

1

1961 In

)(in rubles thousand

KHOZRASCHET ORGANIZATIONS 321

1 2

A

1962

Director

B

Designation individual of Product kinds of production code

, rust TEnterprise

TSource : SSU in 1and 961 annual report .,fMin

с

Unit of measure ment

Branch MAdministration , ain Administration

Institution )(CSovnarkhoz ,Ministry entral

1

2

Wholesale price w(produc ithoued turn t Output )(u1961 taxes over ,iinnp to 100 terms rubles. physical m(in arketable rubles and p]o[okopeks utput;hysical ver wypusk )tovarnwy 100 rubles rubles )in

A.-VIII .6-5.Figure NO FORM

3

Head Planning of Department

5

enterprise At wholesale prices e( xclusive of turnover ) taxes

ON INFORMATION REFERENCE INDUSTRIAL KINDS IMPORTANT MOST OF PROFITABILITY IN1961 PRODUCTION

cost Reported

unit per cost Full in output of uto (p -rubles 100 ;1961 kopeks in rubles )over rubles in -100

S)AChief ( enior ccountant

January Since data 1961 accounting reports given are hchenkov ukhgalterskiy 961 31BSrubles 37 ).,p(in

Planned cost

E Code

COST MARKETABLE OF OUTPUT Con .--

6

7

At

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

cost reported

A1swo 964 parts 4ifollowing column two into indicates source ,(2)aIpdivided for cost ctual lanned ;treport year report the additional changes :the sections fhave added been ulfillment plan reduction cost marketable comparable 2uof output nit products important most of ononov ukhgalterskiy ).,p51B(Kcost 964 3

cost planned At

of pmarketable [Value )ohysical utput tnovarnyy (ivypusk )1961 rubles thousand

6Form No. to Supplement

322

KHOZRASCHET ORGANIZATIONS

Sovnarkhoz , Ministry (Central Institution ). Branch Administration Enterprise ( Trust )

PRODUCTION SERVICES AND ADMINISTRATION EXPENSES

Code

Figure VIII - A - 6 .-- FORM NO . 7 .

323

Form No. 7 Approved by the Ministry of Finance U.S.S.R. and TSSU U.S.S.R. for the 1961 annual report

PRODUCTION SERVICES AND ADMINISTRATION EXPENSES

I.

SHOP EXPENSES ( in rubles )

Items

Maintenance of shop personnel..... Of which , savings from reduction of shop personnel staffs.. Maintenance and amortization of buildings , structures, and furnishings ( inventar ' ) ..... Current repairs of buildings and structures.. Expenditures on testing, experimentation , research , improvements , and inventions...

Line no .

Planned

Reported

1

2

01 02 03 04 05 06

Expenditures on labor safety .... Other expenses ( including depreciation of inexpensive and short-lived items)..... Down - time payments....

07 08

X

Shortages and losses resulting from spoilage of material valuables and unfinished production ..... Other unproductive expenses .. Overage of unfinished production and material valuables (minus) ......

09 10 11

X X X

II.

Total shop expenses in 1961 (lines 01-10 minus 11 )...... Shop expenses in 1960.... EQUIPMENT OPERATION AND MAINTENANCE EXPENSES--total* .

12 13 . 14

III . GENERAL PLANT EXPENSES Items

Planned

Reported

1

2

15

A. Administrative -managerial expenses--total..

Line no .

B. General economy (obshchekhozyaystvennyye) expenses Maintenance of plant personnel (other than administrative -managerial ) .... Maintenance , amortization , and current repairs of buildings, structures , and furnishings of general plant nature ..... Testing , experimental and research work , maintenance of general -plant laboratories , and expenditures on inventions and technical improvements . Expenditures on labor safety ... Expenditures on maintenance of firemen , militarized guards, and watchmen . Organized recruitment of labor force . rubles )... Interest paid out (less receipts of Other general economy expenditures .. Total (lines 16-23) ......... C. Taxes , collections , and other obligatory expenditures and deductions ..

D. Unproductive expenses Fines for idle time of freight cars , ships , and other modes of transportation ... Surcharges on electric power tariff for capacity coefficient of electric installations (per cosine Ø ).....

16 17

18 19 20 21 22 23 24 25

26

X

27

X

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

324

Figure VIII - A - 6 .--FORM NO. 7.

PRODUCTION SERVICES AND ADMINISTRATION EXPENSES--Con .

Line no .

Planned

28 29

X X

30 31 32

X X X

33

Items

х

34 35 36

X X X

1 Other fines , penalties, and forfeits paid out for violations of business (khozyaystvennykh ) contracts ... Payments for down - time due to external reasons.... Shortages and losses due to spoilage of materials and products in plant storage**... Other unproductive expenses... Total (lines 26-31 )....... E. Excluded revenues Fines , penalties , and forfeits received ( - ) ....... Discount from electric power tariff for capacity coefficient of electric installations (per cosine Ø ) (- )..... Overage of products and material valuables (- )..... Total (lines 33-35 ) ...

Reported

2

Total general plant expenses in 1961 ( lines 37 15 + 24 + 25 + 32 minus 36 ).... 38 General plant expenses in 1960.... IV . ADMINISTRATIVE -MANAGERIAL EXPENSES REGISTERED WITH FINANCE ORGANSI (To be entered by the enterprise only )

Items

Registered with finance organs in accordance Line with the annual no . estimate (from data of last registration ) 1

Personnel

Number at the end of the report year.... Expenses Basic and supplementary wages (except bonuses not registered with finance organs)....... Expenditures for business trips and relocation .. Other expenses .. Total (lines 40-42)..

Reported

2

39

40 41 42 43 Planned

Total (lines 43-45 ) . REFERENCE INFORMATION In addition , number of administrative -managerial personnel in shops at the end of the report year.....

44

Bonuses ( including related deductions for social security ) included in the wage fund but not registered with finance organs .. Savings from reduction in staff and administrative -managerial expenses..

45

46

47

1 The report covers only the administrative-managerial personnel and expenditures registered with finance organs for the enterprise as a whole (including auxiliary , subsidiary, service , and other economies ) . The number of shop and guard personnel and expenditures on their maintenance are not included in the report . Director Chief (Senior ) Accountant 1962 Head of the Planning Section * Beginning in 1963 , a breakdown of this total is also reported . Shchenkov , Otchetnost ' , 1966 , pp . 123-4 . ** In a version of Form No. 7 published in 1963, this line continues : " and also losses due to shortage , waste , and pilferage of materials and products in connection with court (arbitration ) rejection of unsubstantiated suits" (Astashkevicher , Bukhgalterskiy , 1963, p . 390 ) . Source : TsSu and Min . fin . , 1961 annual report .

KHOZRASCHET ORGANIZATIONS

325

Figure VIII- A - 7.--FORM NO . 10. FINANCING AND SPECIAL FUNDS Code

Form No. 10 Sovnarkhoz , Ministry ( Central Institution ) Branch Administration

Approved by the Ministry of Finance U.S.S.R. and TSSU U.S.S.R. for the 1963 annual report transferred and Used

Assigned replenish to and circulating capital other ses purpo

other from Received accrued or sources )(nachisleno

MOVEMENT OF MEANS OF FINANCING AND SPECIAL FUNDS IN 1963

Un

Enterprise (Trust )

6

2

X

X

3

4 X

01

State subsidy to cover planned losses on shipped output....

02

X

03

X

04

For scientific research work .

05

Deductions of up to 30 percent of above - plan profit , or above -plan savings from reductions in cost of output , for residential housing construction ....

06

Means for the maintenance of buildings , quarters, structures , gardens, parks, and pioneer camps transferred to trade unions for use without charge ..

07

Receipts for measures to increase the capacity coefficient of electrical installations and for improving the electric power economy...

08

Ob) verexpended

a) 1

Budgetary financing of circulating capital........

For inventions.

On January 1 , 1964 Balance

1963 in budget

a)

Line no .

Balance

On January 1 , 1963

from Received the

Ob) verexpended

Movement of Means of Financing From the Budget and Other Sources ( in rubles )

7

8

X

Receipts from culling animals out of the basic herd.. 09

Of which , actually expended ( bonuses awarded) ....

For other types of bonuses.

13 14

Bonuses and rendering one -time aid from minister's ( sovnarkhoz chairman's ) fund ...

For other purposes.

15

Of which , e.g. , for maintenance of children's homes , nurseries , and kindergartens

X

X

х

X

X

X

12

For bonuses for collecting ferrous and nonferrous scrap metal..

10 11

For bonuses to workers for creating and introducing new technology .

16 17

Total (lines 04-15 ) .......

18

Of which , for capital construction on account of special purpose financing (19 )

rubles .

X

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

326

Of which , individual bonuses ..

1

2

3

X

X

X

4

Enterprise fund for improving cultural- social conditions of workers and perfection of production : a ) for new equipment, for modernizing equipment and expanding production ..... b ) for housing and cultural -social construction and also for repair of enterprise housing fund ... c ) for individual bonuses , improvement of cultural- social services to employees , purchase of passes to rest homes and sanatoriums, and for rendering one -time aid to employees...

Ob) verexpended

Balance

On January 1 , 1964

a)

1963 budget in

Balance )a

Lin .no e

On January 1, 1963

Receive from d the

O)b verexpended

Movement of Means in Special Funds ( in rubles )

Assigned replenish to and capital circulating other pur poses

Used transferred and

Figure VIII-A - 7 . --FORM NO. 10. FINANCING AND SPECIAL FUNDS --Con .

5

6

7

X

х

X

20 21

22 23 24

Total ( lines 20-23) ....

Fund for consumers' goods from waste : a ) for expanding shops and sections producing consumers ' goods ; for improving the quality , finish , and external appearance of consumers ' goods ; for preparing new models and producing the tooling for consumers ' goods 25 output; for housing construction . b ) for bonuses to engineering and technical personnel, wage workers , and salaried employees of an enterprise who distinguished themselves in the organization of production , fulfillment and overfulfillment of pro duction plans for consumer goods ; for cultural-social needs of wage workers ; engineering and technical per 26 sonnel and salaried employees of the enterprise .... c ) centralized sovnarkhoz , ministry ( central institution ) 27 fund ..... 28

Total ( lines 25-27) Bonuses awarded under socialist competition : a ) for individual bonuses to wage workers , engineering and technical personnel, and salaried employees . b ) for improvement of cultural-social services and housing needs.... Fund for mastering new equipment : a ) at sovnarkhozy (ministries) b ) at enterprises .. Other funds.... Of which : ( e.g., fund for expanding subsidiary agriculture)

Total (lines 24 + 28 +29 + 30 + 31+ 32+ 33)

29 30 31 32 33

34 35 36

37

1 of which , capital construction on account of special funds ( 38 )

1964 Source:

rubles .

Director Chief (Senior ) Accountant

Shchenkov, Bukhgalterskiy , 1963, pp . 208–209 , 212-213 (body ) ; TsSU and Min . fin . , 1961 annual report (heading ) .

5.

aOf , utomatic which

Production machinery equipment .and

09

12

11

10

machinery Power equipment .and

.4

awhich ,Ofutomatic

Transmission installations

2.

3.

05

04

03

07 08

iFixed ,inparagraphs capital A ndicated not which is amortization B,on and

rented fixed for expenditures Capital

06

: addition In

01

B

02 Nonindustrial capital fixed . total --

pIndustrial - roductive fixed capital-

Structures

charged ...

, capital ( 31 )-0Total

tot ... al

A

Buildings .1.

B.

A.

).(Trust se Enterpri

Administration Branch

1962

1

On as hand of

1963

hand On of as

A.

January 1,1962

2

9.

.8

AmortiOutlays ation anuary 1,Jzfor January deduc capital tions repair

Actual in1962

Total

1

3

2

ment storage .in

fixed capital -900 ).Total code

5

16 Minor production and office equipment nventar ,a')(ind other ccessories 17 18 apasnoye ezrwhich )(,Ofeserve quip

14 15

which Of

Retired during report the year

6

Branch of industry code

7 11 No. Form

1962

1, anuary JJanuary 1963

hand On of as

Amorti zation deduc tions

)I( n rubles

Outlays for capital repair

Actual 1962 in

On as hand of

I( n rubles

Approved U.S.S.R. Finance of Ministry the by TSSU and U.S.S.R. the for report annual 1962

Enterprise code

11, 963 January Due to and dilapidation natural depreciation calamities 7 6 Due to

6. instruments regulating and Measuring devices laboratory equipment .and 13

AII .CAPITAL VAILABILITY , MORTIZATION REPAIR ND FIXED OF

4

Total

a.Of , utomatic which Transportation equipment .7.

PIndustrial - roductive Fixed Capital Type by

, ew which Of nfixed operation into put capital

Received during the report year

1962 IN AMORTIZATION FUND )AMOVEMENT ASSETS IXED (FND CAPITAL FIXED OF

of Branch Type Subordination settlement Rayon administration code code code 3 4 5

CAPITAL FIXED OF MOVEMENT I.

code

.Tools

Territory code .

Line no .

,Ministry Sovnarkhoz Institution C).( entral

Line no .

Line no .

AMORTIZATION FUND FIXED THE AND ASSETS l-A8.Figure .MFORM OF l-OVEMENT VIII NO

KHOZRASCHET ORGANIZATIONS 327

19

1963

deductions . Amortization

... 1960 inperformed actually repair

2

INFORMATION REFERENCE

36

35

Director

construction financing capital for bank inthe Deposited 37 .. herd of basic the formation financing for and

com officially not owhich objects ,Ofn

28 enterprise .. total the for Outlays -repairs current on 1. 29 .. enterprise the for total -repairs capital on Outlays 2. 30 .... equipment of oon repair capital , utlays which Of account force on performed repairs capital on Outlays enterprise ).total repairs capital on outlays 31 (in force capital account (ealue )v3. of stimate Planned 32 amount total the in included repair capital on4. Outlays sheet balance annual the of 54 line on shown 33 financing .which of sources by covered not are systems )(areconstruction the of on5.gregatov Outlays included the in equipment of modernization and . 31 line 34 repair shown capital expenditure on

1

1963

X

1

X

X

2

.MOVEMENT III INSTROYBANK TODEPOSIT SUBJECT FUND AMORTIZATION THE OF

2

1

X

for 1962

1962 for

Planned

Planned

Amortiza Outlays January anuary for de t1,Jion capital ductions repair 4 3

1962 for Actual

Reported

Reported

)( ines 20-26 LTotal

deductions Amortization

2

FINANCING REPAIR

of sources other from Receipts 42 ..... financing repair capital (lines 40-42 )Total 43 capital completed to off Written 44 .... repairs (uor )fTransferred on outlays sed from technology new introducing .. repair capital in savings amortization Transferred the from through enterprises other to fund .... redistribution 46 amorti from the expenditures Other 47 zation .. fund l44-47 ( ines )Total 48 account separate Deposited inthe 49 .in Gosbank ccountant ASChief )( enior

repair .....

26

25

1

1962

1, anuary JJanuary 1963

of as hand On

-rubles 38 offi not objects n ,oOf which ... commissioned cially 39 fund amortization inthe Received from other enterprises through 40 redistribution ... for compensate to assigned Profit capital increases of invalue Planned

economies other of capital Fixed

report ).(hannual eading band f;TpShevchuk Min ,1and sSU ody Otroumov p961 963 80-183 snovnyye : in Source s

health of capital Fixed . organizations

,cultural scapital ofcientific Fixed 24 ... organizations educational and

Economy of Type by Capital Fixed Nonindustrial B.

41

missioned

economy

economy

Line no .

and farms state of capital Fixed . 20 agriculture subsidiary Fixed capital , procurement of organizations supply .. ,and trade 21 housing the capital of Fixed 22 communal the capital of Fixed 23

1962

as of hand On

Line no .

.FUND Con -AMORTIZATION THE AND ASSETS FIXED OF MOVEMENT .1A8 1. NO -FORM -VIII Figure

Line no .

Line no .

27

Line no .

3

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

OF CAPITAL SOURCES OTHER FUND AMORTIZATION THE MAND . OVEMENT IV Reported

4

AmortizaforOutlays de tion capital ductions repair

1962 for Actual

328

45

329

KHOZRASCHET ORGANIZATIONS Figure VIII -A -9 .---FORM NO . 12.

SALES OF OUTPUT

Form No. 12 Approved by the Ministry of Finance U.S.S.R. and TSSU U.S.S.R. for the 1963 annual report

Code

Sovnarkhoz , Ministry ( Central Institution ), Branch Administration Enterprise ( Trust )

SALES OF OUTPUT IN 1963

A.

Sales of Marketable Output ( in rubles )

Number of industrial enterprises ( completed in consolidated reports )

Line no .

Planned factory cost.. Difference between planned factory cost and actual cost : saving ( - ).... over expenditure ( + )........ Extra -production expenses....

01

Total, full cost ( lines 01-02+03+ 04 +05) Turnover tax ... Differences in prices for sold spare parts , auto and tractor electrical equipment, rubber - asbestos items, tractors, and agricultural machinery . Markup on retail prices of radio receivers and television sets ... Deductions to budget for formation of means to compensate for losses due to price reductions on goods?.. Deductions for bonuses to workers for creating and mastering better quality items . Receipts from sales... Of which : receipts from sales of better quality items value of wooden packaging collected from purchasers outside the wholesale price ... Result : profit .... loss.... In the overall amount of the result : a ) profit from the sale of consumer goods made from waste ... b ) profit from the sale of output for which time limits on the use of temporary wholesale prices have been broken or for which the permanent wholesale prices employed were approved in violation of established procedure..

06 07

02 03 04 05

Planned

Reported

1

2

X X

08 09

10 11 12 13 14 15 16

17

18

REFERENCE INFORMATION Receipts from actually sold marketable output in enterprise wholesale prices and other prices as employed in the plan for sales of market able output... Itemization of expenditures attributed to the full cost of sold output--total .. Of which : a ) transportation payments in transactions f.0.b. station of consignee . b ) other transportation expenditures... c ) deductions for scientific research work .

1.

2.

19

X

20

21 22 23

1 Completed by enterprises in sewing , textile , knitting , footwear , and furniture industries .

Y APPENDIX A -- SUPPLEMENTAR FIGURES AND TABLES Figure VIII - A - 9..--FORM NO . 12 .

SALES OF OUT PUT--Con .

Line no .

24 25 26 27 28 29 30

c ) receipts from sales ... d ) profit ( loss) ...

X X

Other Sales Reported Results

Actual (+, rofit p loss -)

Line .no

B.

X X

31 32 33 34 35

release In prices i ( ncluding turn )tax over

3.

d ) deductions for personnel bonuses for developing and introducing new technology ... e ) deductions to the fund for mastering new technology f ) deductions for maintenance of sovnarkhoz , branch administration , or association apparatus g ) discounts to sales organizations given during the sale of output.... h ) expenditures on crating and packaging materials... i ) other sales expenditures . j) Actual sales of all marketable output , including consumer goods made from waste , reported for 1962 : a ) full cost ... b ) turnover tax ..

Planned | Reported

Planned (+, rofit p loss

330

36

Subsidiary agriculture . State farms...

37

Procurement organizations ( including animal procurement) . Automotive transport economy .

38

Timber rafting and hauling..

40

Services of nonindustrial nature ..

41

39

Purchased products and commodities ..

42

Above -norm and surplus material valuables .

43

Value of wooden packaging collected from purchasers outside the wholesale price , in which 100 percent of the value of packaging is coveredo..

44

Other material valuables...

45

Total....

46

Turnover tax on section " B " (47)

rubles

Reference Information . Receipts from direct sales by the enterprise (outside the trade network and public dining enterprises ) to wage workers and salaried employees of agricultural products, animals and rubles . poultry , fuel , lumber , houses , cottages , and uniforms in 1963 (48 )

1964

Director Chief (Senior ) Accountant

Source : (heading ) .

Shchenkov , Bukhgalterskiy , 1963 , pp . 107-110 (body ) ; TsSU and Min . fin . , 1961 annual report

KHOZRASCHET ORGANIZATIONS

Figure VIII - A - 10 .-- FORM NO . 20.

331

PROFIT AND LOSS Form No. 20

Code

Approved by the Ministry of Finance U.S.S.R. and TsSU U.S.S.R. for the 1963 annual report Sovnarkhoz , Ministry (Central Institution ) Branch Administration Enterprise ( Trust )

PROFIT AND LOSS IN 1963 ( in rubles )

Line no . I.

Profit

Profit from sales.....

01

Profit from housing and communal economy operations.

02

Receipts on bad debts which had been written off .

03

Receipts of fines , penalties , interest , and court costs , in excess of payments....

04

Excess of electric power tariff discounts over tariff surcharges related to the capacity -use coefficient of electrical installations..

05

Profit of former years ascertained in the report year ..

06

Differential on organizational overhead (orgnakladnykh ) and trans portation expenditures for procurement of cattle . Profit on packaging operations ,

07

Other profit...

09

08

Of which : 10 11

Total ....

12 13

Loss balance ... Total balance II.

14

Loss

Losses on sales..

15

Losses due to natural calamities...

16

Maintenance of enterprises held in reserve status (zakonservirovannyye ) ..

17

Losses on debts written off after expiration of the limitation of actions period.....

18

Losses on debts written off arising from shortages , waste , and pilferage . a ) due to insolvency of debtors b ) due to other reasons .

Losses on receivables (besides debts for shortages, waste , and pilferage written off due to insolvency of debtors.... Losses on other bad debts written off ... Losses on housing and communal economy operations .

19 20

21 22

23

Expenditures on maintenance of buildings , quarters , structures , gardens, parks , and pioneer camps transferred to trade unions for use without compensation ...

24

Losses of previous years ascertained in the report year ..

25

Losses on cancelled orders ... Reduction in value of above -norm stocks of commodities and material valuables according to government resolutions and directives on wholesale and retail price reductions..

26

27

Amount

332

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

Figure VIII - A - 10.--FORM NO . 20.

PROFIT AND LOSS --Con . Line no .

Differential on organizational overhead and transportation expenditures for procurement of cattle...

Amount

28 29

Losses on packaging operations Losses due to liquidation of fixed assets not fully amortized . Other losses .

30 31

Of which :

32 33 34

Total..... . O

Profit balance ...

Total balance . Reference Information

35 36

Line no . 1.

Prof it on sales of all marketable production except for prof it on sales of consumers ' goods made from waste ....

37

2.

Losses on sales of all marketable production without deducting profit on sales of consumers ' goods.........

38

39

3 . Profit on sales of consumers ' goods made from waste .. 40 Other profit .......

40

Losses on operation of housing and communal economies

41

Expenditures on maintaining buildings , quarters, structures , gardens parks , and pioneer camps transferred to trade unions for use without compensation . Other losses..

43

6.

7.

8.

9.

Profit balance (lines 37-38 + 39 +40-41-42-43) LOSS Utilization of profit: a ) deduction to the budget.. b ) financing capital construction ( deposits in Stroybank and Gosbank , financing from the settlement account in Gosbank ) ... c ) deduction to the fund for consumers ' goods made from waste . d ) for replenishment of working capital. e ) deduction to the enterprise fund . f ) other outlays... g ) transfer of profit in the course of redistribution .

42

44

45

46 47 48 49 50 51

Total of lines 45-51 .

52

Anticipated coverage of the losses of planned- loss enterprises: a ) from profit.. b ) from state subsidy

53 54

Total of lines 53-54 ...... 10.

Actual profit for 1963 from sales of subsidiary agricultural output not segregated on an independent balance sheet and profit from subsidiary agriculture operating on a khozraschet basis and segregated on an independent balance sheet .... Director 1964

Plan for 1963 ( in rubles )

55

56

rubles

Chief (Senior ) Accountant

Source : Shchenkov , Bukhgalterskiy, 1963 , pp . 115-117 (body ) ; TsSU and Min . fin . , 1961 annual report (heading ) .

333

KHOZRASCHET ORGANIZATIONS

Sovnarkhoz (Ministry, Central Institution )

Administration (Department) of Executive Committee

BALANCE SHEET FOR CAPITAL INVESTMENTS

Code

Figure VIII- A- 11 .-- FORM NO . 35-KS .

Form No. 35 - KS Approved by the Ministry of Finance U.S.S.R. and TSSU U.S.S.R.

Enterprise (Organization ) Address

196 196 196

Due date... Sent.... Received ... Approved ( verified ) ..... Consolidated ....

196 196

196

BALANCE SHEET FOR CAPITAL INVESTMENTS AS OF 1

Group no .

Groups and items

Line no .

ASSETS I

Completed capital construction and other outlays covered by financing 1 . Finished work and acquisition of fixed assets : a ) provided for in the state plan ( 34 ) . b ) outside the state plan ( 34 ) .

01 02 03

2. Outlays increasing the value of fixed assets ( 34 ) .... 04 3. Financing other organizations (under shared partici pation arrangements ) and other items written off ( 34) .. 05 4 . Outlays ( losses) on unexecuted and terminated capital construction , whose write - off is authorized in the 06 established manner (34 ) ... 07 5. Losses of the previous year ( 99) . Total for group I (01-07) .... I-a

T-b II

09

Finished capital construction not covered by financing ( 34 ) ...

10

Unfinished capital construction 1. Unfinished work and acquisition of fixed assets : a ) provided for in the state plan ( 33 ) . b ) outside the state plan ( 33 ).... 2.

Discontinued and terminated construction ( 33) Total for group II ( 11-14 ) .

II - a

III

IV

11 12 13 14

15

Design and estimate documentation (01) ........

16

Outlays on geologic prospecting work financed out of operational funds of the budget ( 36 ) : 1 . Completed work..... 2 . Incompleted work .... Fixed assets (01) .

17 18

Equipment and materials : V

08

Settlements with enterprises on equipment , paid for in a centralized manner ( 75 ) ..

1.

Domestic equipment to be installed (07) .

19

At beginning At end of of year report period

20

( In rubles ) At end of At beginning of year report period

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

334

Figure VIII- A - 11.--FORM NO . 35 -KS .

Group no . II

BALANCE SHEET FOR CAPITAL INVESTMENTS -- Con .

Line no .

Groups and items Financing capital construction 1 . Through Stroybank : a ) provided for in the state plan ( 93) .... conducted outside the state plan from special sources authorized by the Government of the U.S.S.R. (93) ..... 2 . Through Gosbank : a ) provided for in the state plan ( 93 ) ..... b ) conducted outside the state plan from special sources authorized by the Government of the U.S.S.R. (93) . 3 . Other sources (93) . Total for group II (50-54 ) ..

III IV V V -a VI VII

VIII

IX X

Settlements with the main administration on equipment paid for in a centralized manner (75 ) .... Depreciation on inexpensive and short- lived items ( 13) ... Financing geologic prospecting work from operational funds of the budget (95 ) Financing design and survey work from the state budget ( 96 ) ..... Bank credits for introducing new equipment , mechanization and improving production technology (92 ) Loans : 1 . Loans against imported equipment ( 90 ) . 2. Loans against domestic equipment (90 ) 3 . Other short - term loans ( 90 ).... Special funds (87) , special- purpose financing and receipts (96) .... Forthcoming expenditures (88 ) .. Creditors : 1 . Settlements with contractors for work completed (60 ) . 2 . Contractors not paid on time for work completed (60 ) . 3 . Contractors not paid by the bank due to violation of financial control requirements (60 ) . 4 . Suppliers , on accepted settlement documents not yet due (60 ) ... 5. Suppliers , on overdue settlement documents (60 ) ... 6. Suppliers, on uninvoiced deliveries (60 ) . 7 . Import organizations , on uninvoiced deliveries (60 ) .. 8. Workers and employees (70 ) .. 9 . Other creditors (76 ) .... Total for group X (66–74 ) ......

50

51

52

53 54 55 56 57 58

59 60

61 62 63 64 65 66 67

68 69 70 71 72 73 74

75

-

XI XII XIII

Internal settlements on assigned assets (85 ) .. Liabilities to basic activity enterprises resulting from violation of financial and estimate discipline (79) . Profit of the report year ( 99 ) . Balance ...

76 77 78 79

Reference Information :

1.

2.

3.

Of the total for group II assets--units put into operation but not formally documented in accordance with the established legal procedure .... The amount under item " Equipment to be installeddomestic " ( line 20 ) , includes specially delivered equipment (oborudovaniye osobykh postavok ) . Wages held on deposit included under obligations to creditors .

80

82 82

At beginning At end of of year report period

1

KHOZRASCHET ORGANIZATIONS Figure VIII - A - 11 .--FORM NO. 35 -KS .

4 .

5.

6 .

7.

8.

9 .

BALANCE SHEET FOR CAPITAL INVESTMENTS --Con .

The amount shown under " Design and estimate documentation " includes : value of design and estimate documentation completed before October 1 , 1959 .... ... ( 83) b ) value of model projects and normative documents and other work financed after October 1 , 1959 from the budget ..... (84 ) c ) value of technical -economic substantiation and design work for regional and city planning and other work financed after October 1 , 1959 from the budget... . ( 85 ) a ) Retirement since the beginning of the year of loans for introducing new equipment , mechanization , and improving . ( 86 ) production technology in construction ...

Of which , loans received prior to the report year .. ....( 87 ) b ) savings resulting from introducing new equipment , mechanization , and improving production technology in construction , from rationalizing and intensifying pro duction processes financed by bank loans received since the beginning of the year .. . ( 88) The item " Unfinished work and acquisition of fixed assets provided for in the state plan " ( line 11 ) includes out).ays made from special sources outside the state plan .. ( 89 ) The item " Finished work and acquisition of fixed assets provided for in the state plan " ( line 01) includes outlays made from ( 90 ) special sources outside the state plan .... The item "Discontinued and terminated construction " ( line 14 ) includes outlays made from sources outside the state plan ..... (91) Compensation for additional outlays related to the intro duction of new wage payment conditions for construction personnel subject to reimbursement ( accruing) to the builder , since the beginning of the year ..... (92) Of which , work carried out according to the state plan ... Director of the Organization

196_

Source :

335

Chief (Senior ) Accountant

Kogtev , Finansovyy , 1962, pp . 98-105 .

(93)

rubles

11

11

11

IT

11 11

1 11

APPENDIX A --SUPPLEMENTARY FIGURES AND TABLES

336

Figure VIII -A - 12 .--FORM NO . 36 -KS . BALANCE SHEET OF A CONSTRUCTION ORGANIZATION Form No. 36 -KS

Code

Sovnarkhoz , Ministry (Agency) Branch Administration Trust UNPR , Construction Administration , Office

Approved by the Ministry of Finance U.S.S.R. and TsSU U.S.S.R.

196

BALANCE SHEET FOR BASIC ACTIVITY OF A CONTRACT CONSTRUCTION ORGANIZATION AS OF 1 Due date . Sent.... Received..... Approved ( verified) Consolidated.....

Group no .

196 196 196 196 196

At end of Line At beginning no . of year report period

ASSETS A. Fixed Assets and Noncirculating Assets

I

I II

III IIIa IV V VI

01

Fixed assets (01) ..... Diverted assets : 1. Payments to the budget of deductions from prof it (80) : a ) previous year ...... b ) report- year profit... 2. Deductions for bonus payments under All-Union socialist competition (80) .... 3. Other diverted assets ( 80 ) ..... Intrasystem current assets and profit redistribution transactions (77) .. Assets assigned to (subordinate ] organizations ſon independent balance sheets] (85) .....

Losses (99) : a ) previous year . b ) report year .

02 03 04 05 06 07 08 09 10

X

11 12

X

X

13

Total for section A .....

14

Availability of own and equivalent current assets..

B. Normed Current Assets1 Covered by own resources

Normatives , in rubles

At end of At beginning of year report period I

1. 2. 3. 4. 5.

Stocks in subsidiary agriculture , including incompleted agricultural production (07 , 09 , 29) . 6. Prepaid expenses (31) .... Incompleted production of auxiliary ( subsidiary) and nonindustrial production units and economies not segregated on an industry balance sheet (23,29) 8 . Customers billed for work performed (64 )... 9. 10 . Cash on hand (50) ..... 11 . Settlement and current accounts (51) 12 . Other money (55 , 56 ) ..... Total for group I ....... Total for group I less depreciation on inexpensive and short - lived items.... In addition , normatives of own current assets for basic materials, structural components and parts, and incompleted production* 2 II

1. 2. 3. 4. 5. 6. 7.

15 16 17 18

Inexpensive and short -lived items ( 12 ) . Other materials (07) .... Fuel (06 ) .....

19 20 21 22 23 24 25 26 27

X

X

28

29

Covered by Customers ' Advances and Bank Loans: Basic materials (07 ) ...... 30 Structural components and parts (07) 31 Incompleted construction and installation work (20 ) .. 32 Letters of credit, separate accounts for freight turnover , and limited checkbooks (55) 33 Advances to subcontractors (61) .... 34 Subcontractors paid for structural components and parts (61) .... 35 Settlements with subcontractors for equipment .. 36 Normatives , in rubles At end of At beginning report period of year

Total for group II...... Total for section B. Of which , materials en route (07) .... To be entered by organizations which do not receive advances from customers.

37 38 39

X

X

337

KHOZRASCHET ORGANIZATIONS Figure VIII -A - 12 .--FORM NO . 36 -KS . BALANCE SHEET OF A CONSTRUCTION ORGANIZATION--Con .

Group no .

Line At beginning At end of no . of year report period

ASSETS

C. Settlements and Other Assets I II

III

IV V VI VII VIIa VIIB VIII

IX

Customers on overdue bills for work performed (64)..... Goods shipped and services rendered : 1. Goods shipped and services rendered , for which payments not yet due (45).... 2. Goods shipped and services rendered, for which payments overdue (45) ... Debtors : 1 . BVR (Mutual Settlements Bureau) on offsets of mutual payments (67) .. 2 . Debtors for waste, shortages, and pilferage (76) . 3. Intrasystem settlements subject to compensation (77) . 4 . OKS (Otdel kapital'nogo stroitel'stva --Capital Construction Department) liability due to violation of financial and estimate discipline (79) .. 5 . Other debtors (76 ) .... Total for group III... Free current assets removed temporarily by sovnarkhoz or ministry (77) ..... Stroybank loans to workers and employees for individual dwelling construction and other needs ( 76 ) .... Shortages above loss norm and spoilage of commodities and material valuables not written off the balance sheet in the established manner (82) ...... Assets of special funds deposited for financing capital construction in banks (54 )...... Expenditures not covered by assets of special funds and special-purpose financing (87, 96 ) Over deposits of amortization deductions in Stroybank at end of year ( 86) .. Funds for and outlays on capital repair : 1. Outlays on unfinished capital repair (03, 23).... 2. Separate account in the bank for amortization deductions for capital repair (55) Total for group VIII .. Funds for and outlays on forming the basic herd : Outlays on forming the basic herd ( 35 ) ....

Total for section C ..... D. Funds for and Outlays on Capital Construction3 (To be completed by organizations whose capital construction is not reported on an independent balance sheet - Form No. 35 -KS) a ) provided for in the state plan (34) . l. Completed capital construction b ) outside the state plan ( 34 ) .... 2. Outlays on unexecuted and terminated capital construction and other outlays written off ( 34 ) ..... 3. 4 . Finished capital construction for which financing is not available ( 34 ) ..... a ) provided for in the state plan (33) . 5 . Incompleted capital construction b ) outside the state plan ( 33) .. 6. Discontinued and terminated capital construction (33)....... 7. Design and estimate documentation (01).... 8. Equipment requiring installation (07) .... 9. Advances and payments for structural components and parts to contractors (61) 10. Design and survey work paid for by degree of completion out of special means from the state budget (61)...

LIABILITIES A I Іa II ІІa IIb

III IV V VI

Balance ...

Charter fund (85 ) ...... Depreciation of fixed assets (02 ) . Budget financing of working capital (85). Bank credits for introducing new equipment, mechanization , and improving production technology (92 ) .... Intrasystem working capital and profit redistribution settlements (77) ... Allotted assets of superior organizations (85 ) .... Profit of (99) : a) previous year ... b ) report year . Total for groups I-VI...

43 44 45 46 47 48 49 50 51 52 53 54 55 56 57

58

59

60 61 62 63 64 65 66 67 68 69 70 71

7

Total for section D ..

40 41 42

72 73

74 75 76 77

X

78 79 80 81

82 83 84 85

X

338

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES Figure VIII- A - 12 .-- FORM NO. 36 -KS.

Group no .

BALANCE SHEET OF A CONSTRUCTION ORGANIZATION -- Con .

Line At beginning At end of no . of year report period

LIABILITIES

Normatives , in rubles Stable Liabilities: VII

At end of At beginning report period of year

1. Wage payment and social insurance deduction obligations ( 70 , 69 ) .... 2. Reserve for forthcoming expenditures (88). 3. Accepted suppliers ' settlement documents .. 4. Amortization fund means for stocks of capital repair materials Total for group VII ...

86 87 88

89

90

Total for section A ... I

II

B Settlements with subcontractors for work performed (60 )....

Indebtedness to suppliers offset by the bank during crediting

III

91 92

Customers' advances and bank loans: 1. Customers' advances (61)... 2 . Customers ' payments for structural components and parts (61).. 3. Loans : a ) against seasonal accumulations of materials ( 90 ) . b ) against letters of credit, separate accounts for freight turnover , and limited checkbooks (90 ) ..... c ) for paying suppliers' bills (90) d ) against settlement documents Total for group II...

II III

IV V VI VII VIII IX

X

95

96 97 98 99

rubles ( 100 )

Depreciation on inexpensive and short- lived items ( 13 ) ...

Total for section B ..... с I

93 94

Various short- term bank loans: 1. Loans against bills for work performed not paid when due by customers ( 90 ) .... 2. Other loans (90 ) ...... 3. Loans, not repaid on time (90 )..... 4. Reserve of ministry (main administration ) for rendering temporary financial aid* Creditors: 1. Suppliers on accepted settlement documents not yet due (60 ) .... 2. Suppliers, on overdue settlement documents (60 ) .. 3. Suppliers, on uninvoiced deliveries (60 ) ... 4. Subcontractors, on overdue bills (60 ) ...... 5. Financial organs, on taxes, collections , and other payments (73) . 6. Other creditors (76 ) ...... 7. Intrasystem settlements subject to reimbursement ( 77) . 8. BVR (Mutual Settlements Bureau ), on mutual payment offsets (67 ) ... Total for group III... Amounts received from sovnarkhoz or ministry for temporary use as working capital (77)... Assets received from the sovnarkhoz or ministry as temporary financial aid (77) . Stroybank loans for construction of individual dwellings and other needs (76 ) . Special funds (87) , special -purpose financing and receipts (96 ) .... Amortization fund subject to deposit in Stroybank ( 86 ) .. Resources for capital repairs : 1. Amortization fund at the disposal of the organization for capital repair (86) 2. Other sources of financing capital repair ( 86 ) ... 3. Bank loans for capital repair ( 90) .... Total for group IX .... Resources for financing basic herd formation : Financing basic herd formation through Stroybank (94).... Total for section C .. D

101

102

103 104 105 106

107 108 109 110 111 112 113 114 115

116 117 118 119 120 121 122 123 124 125 126

( To be completed by organizations whose capital construction is not reported on an indi pendent balance sheet--Form no . 35 -KS) 6 a ) provided for in the state plans ( 93)...... 127 1. Financing capital construction b ) outside the state plan , on account of through Stroybank special sources permitted by the Govern 128 ment of the U.S.S.R. (93) .. * To be completed by ministries (agencies) .

х

X

339

KHOZRASCHET ORGANIZATIONS Figure VIII- A -12.--FORM NO . 36 -KS . BALANCE SHEET OF A CONSTRUCTION ORGANIZATION--Con .

Group no .

At end of Line At beginning no . of year report period

LIABILITIES

2. 3. 4. 5. 6. 7. 8. 9. 10.

129 130 131 132 133 134 135 136 137

Other sources of capital construction financing (93) Design and estimate documentation fund (85) ..... Subcontractors , on accepted bills for work performed (60 ) Subcontractors , on overdue bills for work performed ( 60 ) .. Suppliers , on accepted settlement documents not yet due (60 ) ... Suppliers , on overdue settlement documents (60) .. Loans against equipment (90) .... Financing of design and survey work from the state budget ( 96 )

138

Total for section D ......

Balance .....

139

Nonbalance sheet items ? 1 . Value of work performed not accepted for payment .. Reference Information 8 1. Overdue payments ( arrears) to the budget (coordinated with financial agencies).... Amount of deductions from profit due (accrued) to the budget since the beginning of the year under the decentralized system of profit deduction payments .... 2 . Section B , "Normed Current Assets," includes : a ) above -norm stocks of material valuables not credited by the bank* .. b ) excess material valuables * .... 3 . The amount of overdue indebtedness reflected in line 37 [sic-40 ? ] includes bills for work performed not paid by customers due to exhaustion of the estimate limit or to lack of technical documentation .... 4 . The amount shown under the item " Design and estimate documentation " includes : a ) the value of design and estimate documentation relating to construction expected to be carried out...... b ) the value of design and estimate documentation for terminated and discontinued construction ..... c ) the value of model project designs, normative documents and other planned work . 5. a) Loans for introducing new equipment, mechanization , and improving production technology in construction , retired since the beginning of the year ..... Of which , loans received prior to report year .... b ) Savings earned since the beginning of the year from measures to introduce new equipment, mechanize and improve production technology in construction , and to rationalize and intensify production processes carried out by bank loans... 6 . The item " Incompleted capital construction provided for in the state plan " (line 65) , includes outlays made from special sources outside the state plan .... 7. 8 . According to data of the revaluation and determination of depreciation of fixed assets on January 1, 1960 : a ) replacement value of fixed assets ** . b ) depreciation of fixed assets** ...

141 142

X

143 144

145 146

rubles

147 148

rubles rubles

149 150

rubles rubles

151

rubles

152 153

rubles rubles

154 155

rubles rubles

Plan

9. Financial results (profit + , loss - ) :

Line no .

Actual

Of which , on Of which , on Total delivered work of Total delivered work of the current year the current year

1 a ) For the report quarter .... b ) From the beginning of the year

140

2

3

4.

156 157

* In consolidated balance sheets , amounts given by separate construction organizations are totaled . ** Completed in balance sheets for April l and July 1, 1960 .

Head of Organization Chief (Senior) Accountant 1962

1 2 3 4. 5 6 7 8

Matyushin , Zhurnal'no, 1963 , p . 218 , indicates three additional blank lines in this section in a version of the form approved in 1962 . This line is not given in 1962 form reported in ibid . The 1962 form reported in ibid . leaves out section D , but 23 lines are allotted for it. Shown in a version of Form 36 -KS, approved in 1962 and published in ibid ., p . 220 . Given in ibid ., p . 221 . Section D for liabilities is not given in the 1962 version , but 17 lines are allotted ( ibid. , p . 222) . Not listed in 1962 version given in ibid . , p . 222 . 21 lines are allotted for informational supplements in the 1962 version but only 1 item (no . 9 ) is actually listed ( ibid ., p . 222) .

Source : Matyushin , Zhurnal'no , 1963, pp . 473-483 ; Nagibin , Organizatsiya , 1962 , pp . 473-483 .

340

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

Communication

farms 6 State

5 River

Motor

Transportation

trade ? Domestic

Account numbers: Summary (2 -digit) and subaccount ( 1 -digit) 2 Railroad

Industry

Account titles : (Summary and subaccounts? )

Construction

Table VIII - A - 1 .--STANDARD ACCOUNT TITLES AND NUMBERS USED IN MAJOR KHOZRASCHET SECTORS

Section I FIXED ASSETS

4.

4

05

05

05

05

1

7 6 8

1 2 3 4 5

1 2 3 4 6 5

5 4 6

01 02 03

04 05

01 02 03

05

II

1 2 3 4 5

oi 02 03

3 4 5

4.

05

01 02 03 1 2

Lii

01 02 03 1 2 3

Hii

01 02 03

Lii

01 02 03 1 2 3

Ti TL

1 2 3 2 5

2 3

06

07 1 2 3 4 5 08

09 10 11 12 1 2

--

0 1 2 3 4 5 06

06

06

06

06

07

06 07

07

08

07 1 2

07 0 1

07 1 2 3

3 4 5

2 3

08

08

09

4 5 08 1 2 3 09

09

09

12 1 2

11 12 1 2

11 12 1 2

12

12 i 2

13

13

13

13

13

14

14

14

08

09

09

11 12 1 2

11 12

0

13

14

14

0 1

Lii

13

1 2 13

14

Section II PRODUCTION STOCKS AND EQUIPMENT TO BE INSTALLE ! Products of agriculture.. Raw materials and supplies ... Raw materials , basic materials , and purchased semifabricates.... Auxiliary materials.. Agricultural stocks and products ... Packing and packing materials ... Materials being reworked [by outside organizations ). Other materials..... Ship machines and mechanisms Uniforms and material for their sewing . Materials .... Materials for constructing track surface . Plant's raw materials for ties.. Special winter clothing and material for its sewing . Special summer clothing and material for its sewing . Spare parts .. Fuel.... Petroleum products ,.. Construction material and equipment to be installed ... Basic construction materials .... Structural components and parts .... Other materials... Other materials ( including fuel and spare parts) Domestic equipment to be installed .. Imported equipment to be installed. Spare parts.... Spare parts.. Purchased replacement parts... Equipment and spare parts for capital repairs. Young animals and animals being fattened.. Procurement of agricultural products . Procurement and storage expenses ... Inexpensive and short- lived items. In storage ... In use.... Tools and fixtures , .. Production and minor equipment (khozyaystvennyy inventar ') .... Special clothing.. Depreciation of inexpensive and short- lived items, Depreciation of tools , fixtures , and minor equipment ( inventari) .. Depreciation of special clothing.... Revaluation of material valuables .

01 02 03 1 2 3

1

Fixed assets ... Depreciation of fixed assets . Capital repair ... Buildings and structures ( except dwellings) Dwellings... Equipment and transportation means . Equipment and transportation means ( except the fleet) ..... Fleet... Other fixed assets .

14

341

KHOZRASCHET ORGANIZATIONS

Motor

farms State

Rivers

Transportation

? trade c Domesti

Communication

Account numbers : Summary ( 2 -digit) and subaccount ( 1 -digit) 2 Railroad

Industry

Account titles : ( Summary and subaccounts ?)

Construction

Table VIII - A - 1 .--STANDARD ACCOUNT TITLES AND NUMBERS USED IN MAJOR KHOZRASCHET SECTORS--Con .

Lili

Lii

Lii 20

19 1 2 3 4 20

1 1 2 3

20

920

23

21

21

23 0 1 2 24

23

21 22 23

24

24

25

25

25

1 2 26

1 2 26

21 23

24

1020

LiiiiiñLilica

3 18

Til Lilla

820

20

23

Tii

Lii

Lii

17 1 2

18 19

8

25

29

26

27 28 29 30 31

27 29

29

29 SO

31 1

31 1

2 3

2

2

4

4

3

33 1 2 34 1 2 3 4

33 1 2 34 1 2 3 4 5

33 0 1 34 0 1 2 3

6 35 36 1 2

6 35

4 35

31 1 2 3

3

31

Liria

Expenses of river transport operation .. Expenditures for fleet maintenance . Expenditures for the maintenance of waterways Expenditures for the maintenance of transport enterprises .. Shipboard operation expenses Crop husbandry ..... Animal husbandry . Expenses of loading and unloading work in transport.... Loading and unloading work in port.. Out of port work ..... Expenditures for the maintenance of moving machines Maintenance of administrative and service personnel Basic production ..... Expenses and income in the operation of motor transport .... Construction work.... Equipment installation work . Capital repair .... Semifabricates of own manufacture . Expenses in operation of communication facilities . Auxiliary production .... Industrial production Construction repair work .. Construction and installation work Rejects in production .... General production expenses . Shop expenses..... Operation and maintenance equipment expenses ... Other shop expenses . General plant expenses . Overhead expenses .. Operation of construction machinery .. Nonindustrial production and operations Other production and operations Noncapital [ construction ] work . Prepaid expenses .... Expenditures for mastering new types of products Expenditures on preparatory mining work ..... Temporary (nontitled ) fixtures and structures Expenditures for repairs of ships and of loading unloading mechanisms charged to the plan for coming winter repairs Other expenditures .... Expenditures for logging Construction and acquisition of fixed assets Provided for by the State Plan .. Conducted outside of State Plan . Finished construction and acquisition of fixed assets Provided for by the State Plan .. Conducted outside of State Plan . Expenditures which do not increase fixed assets Financing other organizations Other deductions .. Expenditures on discontinued construction whose write -off is authorized Formation of basic herd ..., Geologic prospecting work .. Incompleted geologic prospecting work Completed geologic prospecting work Expenditures not included in the volume of geologic prospecting work

♡ ii Liiiii T

PRODUCTION EXPENSES

Lii Tii

Section III

33 1 2 34 1 2 3 4 5

3 5 4 33 1 2 34 1 2 3 4 5 6 35

26 27 28 29

26 27

26 29

29 30 31

31

31

33 1 2 34 1 2

33

33 1 2 34 1 2 3 4. 5

35

35

6 35

342

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

Communication

Construction

Table VIII - A - 1.--STANDARD ACCOUNT TITLES AND NUMBERS USED IN MAJOR KHOZRASCHET SECTORS --Con .

qiiiii

Section IV

40 41 1 2 3 4

?trade Domestic 40 41

40 41

2 iiii

1 2 3

iiiii

--

1 3

--

42

3

45

45

45

46 1 -2 3

46 1

46 2 1 3 4.

2 3

4

--

4

4

5

115

--

115 6

7 8

8

9

5

aiiii

6

44 1 2 3 4 5 6 7 45 1 2 46

115 6 7 8

--

--

--

-iii

46 1 -2 3

43

iii

25

wiingii

!! ---

iiiiiiiiii

43

45

Liiiii toi

42 1 2

4 5 6 42 1 2

9

46 1 2 3

.

iiiii i

47

iiiii --

i

iiiii

47

LI

4 ii

Finished products... Goods..... Goods in depots , warehouses , and storerooms Goods in vegetable stores .... Goods in retail trade and public dining enterprises .. Purchased products ....... Goods in depots , warehouses , storerooms , and en route Goods in retail trade enterprises ... Goods in communication departments . Goods in warehouses and depots ... Goods in retail trade ... Goods and raw material in storerooms of public dining enterprises... Agricultural goods at procurement points . Containers and packing material--empty and in use ... Trade markup (natsenka ) and turnover tax .. Trade markup (discount ) . Turnover tax ... Suppliers ' discount for reimbursement of transport expenditures .. Nonproduction expenses Distribution expenses ... Wholesale enterprises .. Enterprises of retail trade .... Public dining enterprises.. General vegetable stores .. Cost of operating procurement points . Administrative -managerial expenditures . Transportation expenditures covered by suppliers . Goods shipped , work and services performed .... Released goods , work and services performed . Transactions on goods sold on credit ... Sales.... Finished industrial products , work and services... Production of communication khozraschet enterprises .. Finished consumer products made from waste.... Nonindustrial work and services... Purchased products and goods ( including purchased wooden packing ) ..... Transfer of construction - installation (geological prospecting and design work ) ..... Goods in wholesale trade ( including direct deliveries with participation [of wholesaler ] in transactions ) .... Goods in retail and small wholesale trade.. Products of subsidiary agriculture... Other material valuables ( including those above norm and surplus )..... Wholesale sales ..... Goods from wholesale depots and warehouses . Goods from distribution warehouses .. Goods from general vegetable stores... Goods shipped directly ( from producer to buyer ] ( tranzitom ) with [ wholesaler's ] participation in transaction ... Finished products from warehouses of industrial enterprises..... Finished products from agricultural enterprises ... Products of own production (meals and others ) in public dining enterprises . Agricultural products from procurement points Intrasystem release of goods..... Income from operation of communications facilities .... Sales of goods in retail and small wholesale trade ....

qii

qiii

FINISHED PRODUCTS , GOODS , AND SALES

farms State

Rivers

Transportation

Motor

Railroad

Accounts titles: (Summary and subaccounts ? )

Industry

Account numbers : Summary (2 -digit ) and subaccount ( 1 -digit ) 2

47 48

5 6 7 8 47 48

343

KHOZRASCHET ORGANIZATIONS

Communication

49 Lii

1 2 3 4 5

? trade Domestic

49 Tiri

Lii

49

--

48

Tii TI

TI Lii

48

LiiLi

Motor4

Rivers

Transportation

farms State

Railroad

Industry

Account numbers : Summary ( 2 -digit) and subaccount ( 1 -digit) ?

Hii Lii --

Ti

Gross receipts ... Planned value of hauling work... Sales and intrasystem release of packing , materials , work performed , and services completed .. Income from hauling .. Income and fees from operation of river transport.... Income and fees from hauling and other work of the fleet ..... Income from loading work ... Income from waterway management... Income from the operation of the fleet. Advance income..

Lii

Account titles : (Summary and subaccounts ? )

Construction ?

Table VIII - A - 1.--STANDARD ACCOUNT TITLES AND NUMBERS USED IN MAJOR KHOZRASCHET SECTORS --Con .

Section V MONETARY ASSETS

50 51

50 51

50 51

50 51

50 51

53 54 55 1

54 55 1

54 55 0

54 55 1

54 55 1

54 55 1

54 55 .

54 55 1

wiii

2

2

Liin

2

wont ul

50 51 52 0 1

whini

50 51

2

3

II

I

--

II

1 4

2

3

Li

5

3

--

--

4.

56 1 2

56 1 2

56 1 2

56 0 1

3 4 56 1 2

56 1 2

56 1 2

Liin

1

1

2 61 0 1

60 61

Tii

60 61

--

1 2

60 61

Tiiiiiiiii

60

NTTI OLI

1

60 61

--

Lii

iii

3 57 57

60 61

Lii

--

--

Section VI SETTLEMENTS

60 61

1 2

62 LA TH

Settlements with suppliers and contractors Settlements on advances and partial payments for orders Suppliers and contractors with advance payments and partial payment of orders Advances and part payments from purchasers and customers .. Settlements on advances Advances to contractors Advances to customers .. Settlements with debtors on claims Settlements on hauling and loading and unloading work Settlements with stations regarding collections Collections from stations Undercollections (nedobory ) from stations Underdeposits (nedovznosy) from stations

Lii

50 51

I

Cash .... Settlement account. Income accounts..... Subordinate income accounts.. Basic income accounts .... Account in the bank for price differentials [ on procured agricultural products ]....... Special account for capital investments . Other accounts in the banks... Separate account in the bank for capital repairs... Letters of credit and special accounts for freight turnover ... Letters of credit... Special accounts for freight turnover Limited checkbooks ..... Other accounts in the bank ... Current accounts in Gosbank for specially allocated assets..... Deposit accounts . Settlement subaccounts in Gosbank for income (proceeds) from hauling .. Deposit accounts for proceeds from the sale of unclaimed freight.... Budget account in Gosbank ( VVU ) [ Voyenno -veterinarnoye upravleniye ? (Military Veterinary Administration ) Printing association's ( soyuzpechat ') current account. Other monetary assets ..... Monetary assets en route . Monetary documents .... Monetary assets not documented (neavizovannyye) and incorrectly deducted (entered ) by Gosbank. Account in Gosbank for transfer operations Funds in operational cashier's offices

62 0 1 2

344

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

trade Domestic

Communication

Construction3

Table VIII- A - 1 .--STANDARD ACCOUNT TITLES AND NUMBERS USED IN MAJOR KHOZRASCHET SECTORS --Con .

LiiLi

farms State

Motor4

Tii

64 1 2

64 1 2

66

TI

4 5

64 LIIT

Liiiii

5

1264

1.

TI 67

66 0 1 2 3

4

TTTTT

TITI

66

62 1 2

3

Liivi

64

Hii

Lii

III --

LITi

3 4

64 1 2 65

Rivers

Transportation

II

Railroad --

--

1

67 68 0 1 2

67

67

2 67

67

68

69 70 71

73

2 3

74 1 2

76

69 70 71

1372

-73 0 1 2 74 0 1

75 76

69 70 71

76

iii

73 1 2 3

69 70 71

Lii

Improperly drawn up checks and other documents from stations..... Overpayments from stations . Obligation of communication organs to clientele on transfer operations . Accepted transfers .... Paid transfers.... Settlements with consumer cooperative organizations on settlement of proceeds from trade..... Settlements with social security departments on pension payments.... Settlements with savings banks on ( excess ] cash deposited and supporting cash issued . Settlements with customers... Settlements with purchasers and customers . Planned payments.... Other settlements .. Settlements on purchases of agricultural products.. Settlements with residential and nonresidential tenants (kvartiros" emshchiki i arendatory ) ... Settlements with clientele .. Hauling... Deficit on transport payments .. Deficit on freight on sale .... Deficit on freight hauling.... Deficit on passenger and baggage hauling and various fees .... Deficit on freight sales... Clients on communication services (except services offered on credit) ..... Clients on communication services offered on credit through apartment telephones.. Settlements on clearing mutual claims.. Settlements with depositors.... Proceeds from transferred freight on deposit. Unclaimed wages on deposit .... Other depositors.... Settlements on operational advances.. Money transferred to payment points for the payment of wages ...... Operational advances to ship captains... Settlements on (with organs of ] social insurance . Settlements with wage workers and employees .... Settlements on employee expense accounts ... Settlements with wage workers and employees for uniforms..... Settlements regarding shortages and waste . Settlements on small shortages.. Settlements on shortages and waste.. Difference between purchase and retail (sale) prices for missing goods and material valuables .. Settlements with the budget . Turnover tax .... Deductions from profit .. Other payments.... Payment to the budget of advances from communications clientele.. Settlements with cooperative organizations.. Fixed assets transferred to them . Fixed assets received from them .. Settlements on payments for equipment.. Settlements with various debtors and creditors .. Wage workers and employees on loans received from the banks.. Banks on loans , given for individual dwelling con struction ... Wage workers and employees on loans received for individual dwelling construction .

Liiiii

Account titles : (Summary and subaccounts ? )

Industry

Account numbers : Summary ( 2 -digit ) and subaccount ( 1 -digit ) ?

1 2 69 70 71

69 70 71

72

72

69 70 71

69 70 71 72 1 2

73 1 2 3

73 1 2 3

74 1 2 75 76

74 1 2 75 76

0

1

1

1

1

2

2

2

2

73 1 2

73

3 73 1 2

3 74

75 1476

76

74 1 2 75 1576

345

KHOZRASCHET ORGANIZATIONS

ultiwi

State farms

Titiwi

Rivers

Motor 4 niniwi

iiiiii

2 1 3

' trade Domestic

Communication

Railroad

Transportation

Liiiii

winiwi

Industry

Account numbers : Summary ( 2 -digit) and subaccount ( 1 -digit ) ?

-

4 8

77 1

7 77 1

2 3

2 3

2 3

F

--

77 1

5 6

ii

--

--

Il

7

Lilii --

i

ii

ii

8 I

78

iiiii

5

Liiii

iiiii

Lii

0 1 2 3 4

6 7.

TitiIN w

4 7 5 6

77 1

i

4 5

Tiuni

4 5

Lii

2 3

77

Iiiii

2 3

77

itnii

77 1

Liiii i

77 1

78

78 1

2 79

79

79

79

79

79

79

79

1

1

7

1

1

1

1

2

2

2

2

3

Lii

Lii

Lii

Lii

Lii

Lii

Lii

Lii

5 6 8

Tii

iiii

0 1 2 3

Iiii

2

TI

Payment demands submitted for collection ( inkasso ) on operations not credited by the bank .. Debtors on waste shortages, and pilferage . Debtors on communal- dwelling services..... [ Unclaimed ] sums [held ] on deposit . Settlements on losses and damages in shipment. Other debtors and creditors .... Settlements with purchasers on freight not issued to consignees ...... Banks on loans issued to wage workers and employees .. Settlements with TSI (Administration of International Railways) of the Ministry of Railways on inter national shipments ..... Settlements on subscription for periodic publications Intra - agency settlements .... Redistribution of current assets and profits... Funds obtained in the form of temporary financial assistance ...... Unused current assets temporarily extracted... Funds granted in the form of temporary financial assistance ... Current assets received for temporary use.. Current operations ... Settlements on allocated fixed and current assets ... Proceeds...... Settlements between the remittance control bureaus and communications offices .... Settlements among remittance control bureaus. Settlements between the remittance control bureaus and the Ministry of Communications U.S.S.R ... Hauling and other operations. Profit withheld...... Covering planned losses... Rendering temporary financial assistance . Income from hauling ..... Various settlements between the Ministry of Railways and line administrations... Income from shipboard operations.. Settlements on collections for hauling ... Orders for subscription .... Accepted subscriptions... Subscription orders sent for execution to press distribution departments .... Settlements on individual dwelling construction ... Intraenterprise ( vnutrikhozyaystvennyye) settlements... Settlements with the capital construction department on liabilities incurred as a result of the viola tion of financial discipline... Settlements with other operations (khozyaystva ) [ on independent or separate balance sheets )... Settlements with the printing association department on amounts entered as funds under transfer.... [ For use among sections (services , departments) and their economic units ] Hauling and other operations . Profit withheld ... Coverage of planned losses , Rendering temporary financial assistance ..... [ For use among various subdivisions of a railroad line ] Materials for surface construction of track .... Other operations within the subdivision ... Income department on local incomes and other receipts

ultiwi

Account titles : (Summary and subaccounts ?)

Construction3

Table VIII - A - 1 .--STANDARD ACCOUNT TITLES AND NUMBERS USED IN MAJOR KHOZRASCHET SECTORS --Con .

346

APPENDIX

A -- SUPPLEMENTARY FIGURES AND TABLES

Transportation

Account titles : ( Summary and subaccounts ?)

farms State

Account numbers : Summary ( 2 -digit) and subaccount ( 1 -digit ) ?

trade Domestic

Communication

Table VIII -A -1 .--STANDARD ACCOUNT TITLES AND NUMBERS USED IN MAJOR KHOZRASCHET SECTORS--Con .

Section VII DIVERTED ASSETS 80

80

1

80

80

80

80

80 UTTI

Diverted assets... Payments to the budget of deductions from profits .... Payments to the budget of deductions from profits earned prior to the report year ... Payments to the budget of deductions from profits of the report year .... Deductions to funds .. Other diverted assets ... Liquidation of fixed assets....

80

1

1

1

1

2 3 4

2 3 4

1 2

2 3 4

2 3 5 4

2 3 4

82

82

82

82

82

82

82

82

85 1

85 1

85

85 1

85 1

85

85

85 i

i 2 3 4

Section VIII SHORTAGES AND LOSSES Shortages and losses due to spoilage . Section IX

1 2 3

2

2

2

2

---

1

86 1 2 3 87 1

2 3 4

86 0 1 2 87

TIL

86 1 2 3 87 1

Lii

-

TI

86 1 2 3 87 1

86 1 2 3 87 1

86 1 2 3 87 1

2

3 2 4 88 1

2

86

2. 3 86 1 2

87

87 1

2

3 88

88 UTTI

LIT

3 88 Iiii

3 88 Tii

FUNDS AND RESERVES Charter ( basic) fund . Charter (basic) fund.. Fixed assets fund .... Current assets fund.. Financing from the budget to increase and replenish current assets and to cover planned losses... Fixed assets of basic activity allotted [to subordin ate units ].... Current assets of basic activity allotted ['to sub ordinate units ) .. Fixed assets allotted to construction ... Current assets allotted to construction... Settlements on assets allotted [ to subordinate unchartered units ).... Fund of design and estimate documentation . Amortization fund.... Amortization fund designated for capital investments : Amortization fund designated for capital repairs . Other sources of capital repair financing Special funds .. Enterprise (chief's , director's ) fund . Fund for devaluing out - of - style and obsolete goods . Fund for consumers ' goods from waste .. Captain's fund..... Other special funds... Reserve for forthcoming payments . Leave pay of wage workers and ship's crew ... Standardized deductions for forthcoming between - trip expenditures.... Operating expenses . Income of future periods ..... Reserve of own current assets .

3 88

2 88

2 3 89

89

Section X BANK CREDITS AND FINANCING Short - term bank loans... For credit on turnover .. Loans against above - norm stocks . Special loan accounts.. Loans against settlement documents en route .

90

90

90 0 1 2 3

90

90

90

90

90

347

KHOZRASCHET ORGANIZATIONS

--

4

1 2 93 1 2 3 4 5 94

1 2 93 1 2 3 4 5 94

1 2 93 1 2 3 4 5 94

0 1 93 0 1 2 3 4 94

1 2 93 1 2 3 4 5

96

96

96

96

96

--

1

--

--

--

--

2

--

1 2 91 92

92

93

94

93 1 2 3 4 5 94

96

96

98 1 2.

99

99

92

3

E

92

Lii

92

92

Lii

1 2 93 1 2 3 4 5 94 95 96

-LIT

5 6 7

92

92

Tii

iii

E

For clearing of payments in decentralized manner ... For payment of balance on interministerial and intraministerial clearings .... For capital repairs. Other loans..... Loans against payment demands submitted to banks for collection .... Loans against goods and material valuables Special loan account for commodity turnover .. Long-term bank credits .... Bank credit for introducing new equipment, mechan izing , and rationalizing production .. Bank credit for organizing and expanding production Financing capital investments . Provided for in the State Plan , through Stroybank .. Conducted outside the State Plan , through Stroybank Provided for in the State Plan through Gosbank..... Conducted outside the State Plan through Gosbank ... Financing from other sources ... Financing the formation of basic herd.. Financing geologic prospecting work . Special-purpose financing and receipts ..... Ministry of Railways financing of capital invest ments provided for in the State Plan [ in amounts under 2,500 rubles ] through Gosbank .... Financing special programs (not provided for in the production - financial plan ] .... Receipt of means put at the disposal of the Minis try for rendering temporary financial assistance . Other special-purpose financing and special-purpose receipts ..... Local income and expenses of a railroad line.. Local income and expenses of railroad stations .. Deductions for redistribution of [retail and] whole sale trade discount.. Deductions received .. Deductions paid out..

farm Statse

Motor

River5

Transportation

? trade tic Domes

Communication

Account numbers : Summary (2 -digit) and subaccount ( 1 -digit) ? Railroad

Industry

III

Lii

Lii

Lii

iii

Lii

-

3 97 98

iii

--

Lii

Account titles : ( Summary and subaccounts )

3 ruction Const

Table VIII- A -1 .--STANDARD ACCOUNT TITLES AND NUMBERS USED IN MAJOR KHOZRASCHET SECTORS--Con .

Section XI

FINANCIAL RESULTS

99

99

99

--

99

99

99

1

--

2

---

5 6

3 4 5 6 rooi

7.

7 8

--

7 8

10 11 12

Lili w ni

Hii

Lii

laniw

laulu

1 2

E

1 2

LII

E III

Tii

10

7. 8 9

1 2

iii

5 6

3 4 5 6

Lii

1 --

Lilii --

1 2

7 8

3

TU

E

Profit and loss ..... Deductions received for covering administrative managerial expenditures.. Deductions paid out for covering administrative managerial expenditures...... Deductions received for covering expenditures on commodities , materials , work, and services transferred within retail trade organization ]... Deductions paid out for covering expenditures for release of commodities, material , work , and services..... Results on packing operations.. Other income and losses... SINGLE -ENTRY MEMORANDUM ACCOUNTS Rented fixed assets .... Raw materials and supplies accepted for processing ... Goods and material valuables accepted for responsible custody .... Equipment accepted for installation . Registered prenumbered forms..... Opened budget credits in banks .... Goods accepted for commission sales ... Difference between bookkeeping and retail prices for . missing goods and material valuables..... Debts of insolvent debtors written off as loss .... Bills for work not accepted by the bank for payment .. Bills presented (to debtors) in terms of degree of completion .... Conventional valuables [stamps, stamped envelopes ,etc ) Fines , penalties , and forfeit of payment... Claims presented to debtors for payment of fines , penalties, and forfeits ..

4 5 6

1 2 3

4 5 7

7 8

7 6

348

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES Table VIII- A - 1 .--STANDARD ACCOUNT TITLES AND NUMBERS USED IN MAJOR KHOZRASCHET SECTORS--Con .

Not applicable . 1 Titles of summary accounts are listed at the left margin ; titles of subaccounts are indented. 2 Account numbers shown here relate only to enterprises classified within a given sector . In those cases in which lists of accounts apply to all enterprises subordinated to a major specialized agency (ministry ) , accounts applicable to nonbasic enterprises have been eliminated . 3 The "Construction " column contains accounts used by both contract construction enterprises and Capital Construction Departments ( OKS) . Account nos . 33 , 34 , and 93 are used by OKS's only , while account nos. 20, 54 , 64 , 67, 77, and non balance sheet accounts 4 and 9 are used only by contract construction organizations . 4 This column contains the general classification of accounts approved by the Ministry of Finance U.S.S.R., for motor transportation organizations . In the Ukrainian S.S.R. , the Ministry of Motor Transportation and Roads added the following account numbers : 04 Roads and road construction 37 Income and expenses of motor transport operation 38 Income and expenses of transport and loading and unloading operations Road maintenance and repair 39 66 Settlements on unused (neotovarennyye) fuel coupons and settlements with subscribers on preventive repair service Capital ( invested] in roads and road structures 89 Income from future periods . 98 In the R.S.F.S.R., the Ministry of Motor Transportation and Roads added accounts 37, 38 , 66 , 98 with the same titles as in the Ukrainian Ministry , and account 45 : " Services rendered by motor transport , " but omitted accounts 04 and 89 . 5 Accounts for the R.S.F.S.R. Ministry of River Transportation . 6 A complete listing of subaccounts for State Farms is not available, although they are known to exist. 7 In the R.S.F.S.R. Ministry of Trade , 70 first -order accounts are used (Belousov , Bukhgalterskiy , 1963, p . 23 ) of which 64 dealing with basic activity are listed here . 8 Title reads : " Basic hauling output . " 9 Title reads : " Industrial production . " 10 This account is used in three types of organizations of the trade sector : ( 1 ) subordinate production enterprises (and for the reworking of products ) ; (2 ) subsidiary agricultural enterprises ; and ( 3) public dining enterprises. (Anisov , Organi zatsiya , 1962, pp . 73 , 75 , 83.) 11 Words in parentheses are omitted . In construction only " geological prospecting" is omitted . 12 Reference to a subaccount 4 has been found, but no title is given . 13 " And Special Clothing" is added to the title . 14 References have been found to a subaccount 8 but no title is given . 15 Three unnumbered subaccounts are listed for account no . 76 : " Deposited sums ," " Various individuals on other settle ments, " and " Other debtors and creditors. " ( Anisov , Organizatsiya , 1962 , pp. 256-257 . ) Source : Industry --Dmitriyev, Bukhgalterskiy , 1963, pp . 55-56 ; Goloshchapov , Spravochnik , 1965, pp . 26-33. Construction --Matyushin , Zhurnal'no, 1963, pp . 5-10 ; Protopopov, Bukhgalterskiy , 1960 , pp . 13-16 . Railroad transportation --Vinnichenko, Bukhgalterskiy , 1963 , pp. 7-15 . Motor transportation --Belukha, Uchet, 1963, pp . 9-18 ; Ministerstvo avtomobil'nogo transport, Spravochnik , 1961, pp . 214-215 . River transportation --Druz and Serebryakov , Bukhgalterskiy , 1962, pp . 25-47 . Communication --titchenko , Bukhgalterskiy , 1962, passim ; Titchenko , Bukhgalterskiy , 1965, pp. 69-76 . State farms-- Bondarenko , Spravochnik , 1961, pp . 41-42 ; Vasil'yev , Bukhgalterskiy , 1964 , p . 201 . Domestic trade--Anisov , Organizatsiya , 1962 , passim .

1

349

KHOZRASCHET ORGANIZATIONS

Industrial enterprises

Construction organizations

sales and Supply organizations

Table VIII - A - 2 .--STANDARD REGISTERS OF THE UNIFORM JOURNAL - ORDER SYSTEM OF ACCOUNTING

4.

5

6

Sector of use

o Journal - rders

Auxiliary statements

Type and form no .

1

Period of use

Function (Accounts or types of data entered )

3

2

7

X X

Monthly Monthly Monthly Monthly Monthly Monthly

X X

Monthly Monthly Monthly Monthly Monthly Monthly

Money and Bank Credit 1 1 1 -S 1 -SN 1 -SN 2

2 2 -S

2 -S

2 -SN 2 -SN 3 4 4- A 3

5 2

X X

(No. 50 ) .... ( located on reverse side of Journal -Order ) . (No. 50 ) .... ( located on reverse side of Journal -Order) (No. 50 ) .. ( located on reverse side of Journal -Order )

Settlement Settlement Settlement Settlement Settlement Settlement

Account Account Account Account Account Account

XXIIII

1-S

Cash Cash Cash Cash Cash Cash

(No. 51 ) ..... ( located on reverse side of Journal-Order ) (No. 51) .. ( located on reverse side of Journal - Order ) (No. 51) .... ( located on reverse side of Journal - Order ) .

X X

X X

Other money accounts (Nos . 54 , 55, 56 ) ... Loan and bank credit accounts (Nos . 90 , 92) - for enterprises and organizations which do not use special loan account.. Loan and bank credit accounts (Nos. 90 , 92 ) - for enterprises and organizations using special loan account.. Special loan account ..

Settlements on Clearing of Mutual Claims (No. 67 ) .... Offset of Mutual Claims ( located on reverse side of Journal Order ) .

X

X

X

Monthly

X

x

X

Monthly

X X

.

X X

Monthly Monthly

X

X

X

Monthly

X

X

X

Monthly

Settlements

6

5

Settlements with Suppliers and Contractors (No. 60 ) .. ..... Insert for every 50-60 invoices Settlements with suppliers by planned payments . Insert for every 50-60 invoices per month

Settlements with Suppliers and Contractors (No. 60 ) ..... Insert for every 50-60 invoices 5 - S Record of settlements with customers for work performed . Insert for every 50-60 invoices 6 - S Record of uninvoiced deliveries ... Insert for every 50-60 uninvoiced deliveries annually 6 - SN Settlements with Suppliers and Contractors (No. 60 ) Insert for every 50-60 invoices 6-A Settlements with Suppliers and Contractors (No. 60 ) ... It can be used in place of Journal -Order No. 6 Card for recording settlements with suppliers and contractors . 6 Used with Journal- Order No. 6 - A ( opened for every invoice received) .. 6Z Agricultural product procurement accounts and settlements with suppliers (Nos . 10 , 11, 53, and 65) ..... Inserts : one for every 50-60 invoices , another for 10 designated products 6Z - SV Record of settlements with sugar beet suppliers . ? Employee Expense Accounts (No. 71 ) ... For every 50-60 advance payment reports

X

Monthly X

X

6 -S

X

Quarterly , semiannual , or annual

X

Monthly

X

Monthly

X

Semiannual or annual Monthly

-

X

Monthly

X

Monthly

-

X

X

-

X

Monthly

[Not available ] X Monthly

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

350

sales and Supply organizations

Construction organizations

Table VIII - A - 2 .--STANDARD REGISTERS OF THE UNIFORM JOURNAL - ORDER SYSTEM OF ACCOUNTING --Con .

Industrial enterprises

Sector of use

Journal -Orders

Auxiliary statements

- Type and form no .

1

2

3

7

Settlements with various creditors and debtors and intra -agency settlements (Nos. 61 , 73, 76 , and 77 ) . Settlements on advances , with purchasers and with depositors on the basis of executive documents ( ispolnitel'nyye dokumenty ) . Insert for every 20 debtors and creditors per month

8

8

8 -A

9

9

Period of use

Function (Accounts or types of data entered )

Other accounts with various debtors and creditors... Insert for every 20 debtors and creditors per month

4

5

6

X

X

X

Monthly

X

X

X

Quarterly , semiannual, or annual

X

X

X

Quarterly , semiannual , or annual

X

X

Annual

7

Record book of deposited wages ( separate sheet for every 25-30 depositors ) ... Record book of settlements with apartment and dormitory dwellers - for large units ( separate set for every 10 per sonal accounts of apartment and dormitory dwellers ) .

X

X

X

Annual

Intraenterprise Settlements (No. 79 )....

X

х

X

Monthly

Production Expenses and Distribution Costs

10

X

Monthly

X

Monthly

X

Monthly

X

Monthly

X

Monthly

X X

-

Materials and other accounts - portions related to production expenses (Nos . 03 , 05 , 06 , 08 , 12 , 13 , 20 , 21 , 23 , 24 , 25 , 26 , 29, 31 , 69, 70 , 82 , 86 , and 88 ) . 10 - A Materials and other accounts - portions related to production expenses (Nos . 03, 05 , 06 , 08 , 12 , 13 , 20 , 21 , 23, 24 , 25 , 26 , 29 , 31 , 69, 70 , 82, 86 , and 88 ) . (Used in place of Journal Order No. ío in enterprises with nonshop (beztsekhovoy] administrative structure . )...... Portions of materials and other accounts not charged to production 10/1 (Noş. 03 , 05 , 08 , 12, 13 , 20 , 21 , 23 , 24 , 25 , 26 , 29 , 31 , 69 , 70 , 82 , 86 , and 88 ) .. Record of material valuables in stores ( for enterprises having 10 more than five stores) ... 10 - A Record of material valuables in stores ( for enterprises having not more than five stores) . Record of material valuables in shops ( one blank for every seven 11 shops ) .. 12 Record of shop outlays (attached to Journal- Order No. 10 only) Insert for every two shops 13 or 13 - A Record of outlays of nonindustrial units..... Record of losses in production ... 14 Record of general plant expenses , prepaid expenses , reserve for 15 future payments , and nonproduction expenses . 10 - S or 10 - A - S Materials and other accounts portions of outlays for construc tion - installation work (Nos. 03, 07 , 11, 12 , 13 , 20 [or 33 ], 23, 27 , 28, 29 , 30 , 31, 69 , 70 , 82 , 86 , and 88 ) . Insert in Journal-Order No. 10 - s ( in account No. 20 ) for every 25 construction projects 10 - S | Movement of material valuables ... Insert for every 20 financially responsible individuals

X X

x

X

-

Monthly Monthly

X

Monthly Monthly Monthly

Monthly

X

Monthly

351

KHOZRASCHET ORGANIZATIONS

Construction organizations sales and Supply organizations

Table VIII - A - 2 .-- STANDARD REGISTERS OF THE UNIFORM JOURNAL- ORDER SYSTEM OF ACCOUNTING --Con .

Auxiliary statements

Journal -Orders

1

Function (Accounts or types of data entered )

2

-

12 - S

13 - S

19 - S

10 - SN

3

4

5

Record of outlays for basic production and noncapital work (attached only to Journal- Order No. 10 - A - S ) .... Insert for every 50 capital investment projects

6

Record of outlays for auxiliary production units and utilization of construction machines and mechanisms (attached only to Journal-Order No. 10 - A - S ) ...... Contains a list for every 50 capital investment projects Record of prepaid expenses .... Insert for every 50 expenses Record of overhead and procurement -storage expenses, ( attached only to Journal -Order No. 10 - A - S ) ... Insert for every month

7

X

Quarterly , semiannual , or annual

X

Annual

X

Quarterly , semiannual , or annual

-

Materials and other accounts , portions dealing with distribution cost (Nos. 03, 05 , 06 , 12 , 13 , 23 , 29 , 31 , 44 , 69, 70 , 82 , 86 , and 88 ) .

Period of use

Quarterly , semiannual, or annual

X

-

15 - S

Industrial enterprises

Sector of use

Type and form no .

X

Monthly

Shipments and Sales of Commodities and Material Valuables and Transfer of Construction - Installation Work

11 16

16 - A

17

11 - S 5 -S 16 - S

11 - SN 16 - SN

16A -SN

17 -SN

17A -SN

Finished products , shipments , and sales accounts (Nos , 40 , 43, 45 , 46 , 47 , and 64 ) .... Record of finished articles , sales of products and material valuables.... Insert for every 50-60 invoices Record of sale of products and material valuables (without recording the movement of finished articles ) . Insert for every 50-60 invoices Record of sale of products under planned payment system . Insert for every 50-60 invoices

Accounts for sales of work and services and for settlements with customers for work performed ( Nos, 45 , 46 , 64 ) .. Record of settlements with customers for work performed Insert for every 50-60 invoices Record of sales of services and material valuables ... Insert for every 50-60 invoices Commodity , shipment and sales accounts (Nos , 41, 42 , 45 , 46 , 47) with auxiliary statements attached to it..... Record of sales of commodities, products , and material valuables ( specifying individual storages) Insert for every 50-60 invoices Record of sale of commodities , products , and material valuables (without specifying individual storages ) Insert for every 50-60 invoices Record of turnover on transit operations with participation in settlements Insert for every 50-60 invoices Record of turnover on transit operations without participation in settlements

.

X

Monthly

X

Monthly

X

Monthly

X

Quarterly , semiannual , or annual

X X

X

Monthly Monthly

х

X

Monthly

X

Monthly

X

Monthly

X

Monthly

X

Monthly

X

Monthly

X

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

352

Construction organizations sales and Supply organizations

Table VIII - A - 2 .--STANDARD REGISTERS OF THE UNIFORM JOURNAL - ORDER SYSTEM OF ACCOUNTING--Con ,

Auxiliary statements

O -Journal rders

Function (Accounts or types of data entered )

2

3

Industrial enterprises

Sector of use

Type and form no .

Period of use

4

5

6

7

X

X

X

Monthly

X

X

х

Monthly

X

X

X

Monthly

X

X X

Monthly Monthly

X X

Monthly Annual

Special Funds , Assets for Special Purpose Financing , and Special Purpose Receipts

12

Special funds and special purpose financing accounts (Nos . 87 and 96 ) ..... Charter Fund, Fixed Assets , and Depreciation

13

Fixed assets, charter fund, and other accounts (Nos . 01, 02 , 74 , and 85 ) .... Outlays for and Financing of Basic Herd Formation

14

Accounts for young animals and formation and financing of basic herd (Nos . 09, 35 , and 94 ) Diverted Assets and Financial Results

15 15 - SN

Accounts for diverted assets and profit and loss (Nos . 80 and 99 ) Accounts for diverted assets and profit and loss (Nos . 80 and 99) Capital Investment Outlays and Their Financing

16 18 18/1

Accounts for capital investment outlays and financing (Nos . 07 , 12 , 27 , 30 , 33, 34 , 75 , and 93) Record of outlays on capital investments .. Insert for every 50 capital investment projects Record of outlays for completed capital investments ... Insert for every 50 capital investment projects

X X

X X

X

X

X

X

X

As needed

X

X

X

Annual

Annual

Revaluation of Commodities and Material Valuables 17

Revaluation of Material Valuables (No. 14 ) . General ledger ( loose sheets ) MODEL FORMS OF WORK TABLES

Form No. 1

2 3 4 5

6

7 8

Distribution of wages and material expenditures in industry (used only by enterprises with decentralized recordkeeping , where the documentation of wages and materials is carried out directly in shops ) - one sheet for each shop or unit .... Distribution of wages in construction organizations.. Summary data on settlements with workers and employees...... Summary of wages by composition and worker category . Summary of accrued wages by composition and worker category and summary of settlements with workers and employees ( in place of tables 3 and 4 ) ..... Calculation of amortization of fixed assets in industry ... Insert for every 8 shops or units Calculation of amortization of fixed assets in construction organizations..... Calculation of depreciation of inexpensive and short - lived articles....

X X X

X

X х X

Monthly Monthly Monthly Monthly

X

Monthly Monthly

X

Monthly

X

Monthly

353

KHOZRASCHET ORGANIZATIONS

Construction organizations

sales and Supply organizations

Table VIII - A - 2.--STANDARD REGISTERS OF THE UNIFORM JOURNAL - ORDER SYSTEM OF ACCOUNTING --Con .

Function (Accounts or types of data entered)

Industry enterprises

Sector of use

Period of use

Form No.

3

4 9

12

13

Source :

Goloshchapov , Spravochnik , 1965 , pp . 36-43, 45 .

-

11

X

7

Monthly

1

10

Distribution of services of auxiliary production units (nonindustrial ) ... Distribution of services and output of auxiliary production units and distribution of construction machinery operating outlays.... Register of wages not issued (can be used instead of record book for wages on deposit - Form No. 8a ) . One sheet for every 30-40 depositors Card for analytic accounting of settlements with debtors and creditors (can be used as supplement to Auxiliary Statement No. 8 ) . For each personal debtor and creditor account... Detail - Sheet (for detail or subaccount breakdown of debits to particular accounts for which analytic accounting of credit entries is carried on journal orders or statements ]

6

5

X

Monthly

X

X

X

Monthly

X

X

X

Monthly

X

X

X

Monthly

354

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES Figure VIII- B - I .-- FORM NO . 1.

BALANCE SHEET OF A BUDGETARY INSTITUTION

Academy of Sciences U.S.S.R. Scientific Research Institute (Name of institution )

[ Form No. 1 ]

Balance Sheet for Execution of the Expenditures Estimate ' 1 April 1961 In rubles and kopecks )

Line no .

Beginning of year

End of year ( quarter )

A

B

1

I.

Assets

2

Fixed Assets

Fixed assets (010-016 , 019 ) * . II. Material Stocks

1

Procurement and processing of materials (020 ) ..... Products and output of subsidiary economies (030 ) . Young animals and animals being fattened ( 050 ).... Materials and food products (060-068 ).... Long - lived and laboratory testing materials (060-1) Inexpensive and short - lived items in use (070 ) .... Inexpensive and short- lived items in stock (071) .....

2 3 4 5 5a 6 7

III .

[ VII.

12,315-00

13,427-15

8 10 11

12

324-00

13 17 18 19 20 22 23

900-00

3,089-00 10-00 153-00

24 25 26

28 29 29a

100-00

382-00

209-00

Expenditures

Expenditures out of the budget from which the institution is financed (200 ) ..... Expenditures out of special means ( 211 ) ..

VIII .

3,753-55

Settlements

Settlements on personal expense accounts (160 ) . Debtors on shortages (170 ) Settlements on social insurance (171 ) .. Customers on scientific -research work subject to payment (174 ) ...... Other debtors ( 178 ) ..

VI.

5,128-00

Monetary Assets

Opened credits for expenditures of the institution through Gosbank (090 and 091) . Opened credits for financing capital investments and other measures through Gosbank (092 ) .... Current account for means received for commissioned uses ( 110 ) ..... Current account for special means (111) Current (settlement ) account for scientific -research and experimental work (113 ) . Current account for other nonbudgetary means (114 ) Cash (on hand ] (120) .... Other monetary assets ( 130-132 ).. V.

378,716-00

Production

Expenses of contracted scientific research work (080 ) . Expenses of production workshops (083) ... Expenses of experimental and subsidiary economies of scientific research institutes (084 ) .

IV .

350,768-00

30 33

192,197-06

Losses ) Outlays for Capital Construction

Construction materials and equipment to be installed ( 040 ) .. Settlements with suppliers and contractors ( 150 ) .. Expenditures on new construction and reconstruction , out of the budget (201) ..... Expenditures on new construction and reconstruction , out of special means (212 ) . Design and estimate documentation (420 ) 2

Balance ..

37 38 39

40 40a 41

369,593-00

591,878-76

355

BUDGETARY INSTITUTIONS

Figure VIII - B - 1.--FORM NO . 1 .

BALANCE SHEET OF A BUDGETARY INSTITUTION -- Con .

[ In rubles and kopecks ] Liabilities

Line no .

Beginning of year

End of year ( quarter)

A

B

1

2

Capital ( fondy )

I.

Capital in fixed assets (220 )..... II. Financing Fund for bonus payments and for rendering one -time assist ance to personnel (240 )...... Bonus fund for scientific research work (241) .

42

48 49

350,768-00 | 378,716-00

900-00

3,089-00

Intra - agency Settlements

III .

Settlements among budgetary institutions on budget financ ing , through Gosbank (140 ) .... Settlements on budget financing of capital investments and other measures , through Gosbank ( 142 ) ... IV . Settlements

Settlements on social insurance (171)... Settlements on payments into the budget (173) . Of which , shortages attributed to guilty individuals.. Customers on advances for scientific research work (175 ) .... Settlements on means received for commissioned expenses (276 ) ... [Unclaimed ] sums [held ] on deposit (177 ) Other creditors (178 ).. Settlements with workers and employees ( 180 ) Settlements with ( student ] stipend recipients ( 190 ).. V. Income Sales of products, completed work , and services rendered , by production workshops (281 ) .. Sales of contracted scientific research work (282 ) Special -means income (400 ) ...

[ VI .

Profits ] 1

VII .

Financing Capital Construction

17,380-00 | 209,800-00

52

55 56

545-00

273-26

73

369,593-00

591,878-76

74

2,195-00

2,195-00

57 58 59 60 61 62

64 65 66

68 70 72a

}

Settlements on budget financing of capital construction , through Gosbank (140 ) .... Settlements with suppliers and contractors (150 ) Design and estimate documentation fund (430 )

50

Balance .... Single -entry memorandum accounts

Rented fixed assets ... Head of institution

Chief ( senior ) accountant

* 1

Numbers in parentheses indicate second -order accounts to which the data pertain . The abridged version of this form in the source omits several lines, in asset section " VII . Losses, " and liability section " VI. Profits, " as is evident from missing line numbers and from a description of the form in the official instructions on reporting (Dedkov and Yakimov, Bukhgalterskiy , 1965, pp . 272-276 ) . Omitted items relate to investment financing through Stroybank , and to subsidiary productive activities , among others . 2 These accounts are not contained in the standard classification of accounts as listed in the official instruction (see table VIII - B - 1 ) . Source : Mastalygina, Bukhgalterskiy, 1962, pp . 253-255 .

9

7

6

5

3 4

2

1

3

1 2

Line no .

year ..

year ...

219,800

.Total

astalygina BMSource ,.p21: 56 ukhgalterskiy 962

F143 inogeyev naliz 1ispolneniya ,).pA(and 965 41

209,800

the of end at account on Balance

which inexpensive ,vof of alue litems - ived short and to transferred

report the in off written Expenditures

commissioned and finished Outlays on the written at off objects construction

10,000

Through Gosbank

q(). uarter year

fixed assets .

end of the year

December bank on ..... 31

Settlements -173 Account to Transferred

the during recalled and closed Credits

off to written materials of Shortages .. account institution's the the by closed credits unused of Balance

.... budget the payments into on debts .Bad off written

Debit

Sciences U.S.S.R. of Academy -Research Scientific Institute institution (Name )of

Amount

(senior )aChief ccountant

institution of Head

7

6

5

4

3

1 2

and bank Stroy Through ( apital cGosbank investments and measures )other

Line .no

Financing Budget of Movement Balance ,-SOn 142 and 140 Subaccounts in the of III 11ection April Sheet 961

17,380 194,690

Through Gosbank

219,800

2,000

to account assets fixed from Transferred litems ived short -and inexpensive

acentralized in made Payments by manner administrator superior credit the institution's present charged the to 25, 30 fixed from Transferred to account assets

materials [discovered excess of Receipt

Balance at beginning the of year Credits opened during the year .....

bonuses . for opened Credits

.. account materials

Total .

estimate .

... account

Credit

inventory ]. during

form This reverse the on located is of962 (side ukhgalterskiy astalygina 1BMbalance ).,p2sheet 51

1' No. Statement Reference

AMOVEMENT SHEET BALANCE TO ,STATEMENT FINANCING BUDGET OF ON --B2.TTACHED VIII Figure

administrators 230 in 2Chief ;sacontained 31 nd econdadministrators credit -l233 third evel report subaccounts from data 1and ,140 42

Through and Stroybank Gosbank (capital investments and measures )other

line This source o3;S29 the mitted hin inserted been as of basis the on Yakimov ukhgalterskiy 2BDedkov ,p.1and 54 963 mirnov

Amount

356 APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

357

BUDGETARY INSTITUTIONS Figure VIII- B - 3.--FORM NO . 2-3.

REPORT ON EXECUTION OF THE EXPENDITURES ESTIMATE OF SCIENTIFIC RESEARCH INSTITUTIONS

Form No. 2-3

Academy of Sciences U.S.S.R. Scientific -Research Institute (Name of institution ) Report on Execution of the Expenditures Estimate of Scientific - Research Institutions 1 April 1961 Article no .

Title of article and letter -designation

B

A

WN

1

4 5

8 9 12 14 15 18

16

Financing through Gosbank Wages--total.... Of which : a . basic wages of staff personnel . b . wages of instructional personnel..... c . payments to academicians and corresponding members for rank.... Supplements to wages.. Office and maintenance expenditures--total. Of which , heating . Temporary assignments and official trips.. Expenditures on education , on - the - job training of students , scientific -research work , and library book acquisition --total.... Of which : a . reagents , utensils , seeds , and other materials for scientific work ...... a - l . expenditures for acquisition and maintenance of experimental animals .... b . temporary assignments of scientific personnel.. c . payments for scientific and experimental work conducted outside , including services of auxiliary and subsidiary economies placed on a chartered basis ...... d . payments for electricity , gas , steam , water , and fuel for scientific and technical purposes e . scientific expeditions, including expenditures for maintenance of expedition ships... f . expenditures on bonuses from the fund of the Presidium , Academy of Sciences U.S.S.R ... Stipends..... Expenditures on food... Acquisition of equipment and supplies... Acquisition of clothing , bedding , and uniforms . Capital investment for construction .... Other expenditures , total.. Of which : a . bonuses under the Council of Ministers U.S.S. R., Resolution No. 660 of June 5 , 1957.... b . social and everyday expenditures ... c . special expenditures of the Presidium of the Academy of Science U.S.S.R..... d . expenditures for payment of grants to widows of academicians.. Total financing through Gosbank .... Including wages of nonstaff personnel... Financing through Stroybank and Gosbank ... Capital repair of buildings and installations, total Of which , wages of nonstaff personnel. Total..

Division 200 , section 32

Approved estimate for the year

Credit opened

1

2

Actual Cash expendi- lexpendi tures tures 3

4

260,000

89,000

88 , 986

88,986

250,000 10,000

X X

88,628

X

X 5,330 4,180 X 112

5,114 4,214-10

300

X 5,330 4,200 х 160

24,000

22,500

22,457

22,073-96

10,000

X

X

3,068

15,000

х х

х X

4,260

6,000

х

x

2,619

15,000 16,000

112

X х

X

60,000

х 20 , 600

X 20,556

20,556

50,000 1,000

28,450 450

28,335 410

32,931 410

38,000

14,000

14,000

17,800

8,000

х X

х X

3,800

514 , 300 2,500

514,300

X

х

х

х

184,690 х

184 , 366 x

X

х

184,690

184,366

192,197-06 507

192,197-06

Credits opened and means received (cash expenditures ) through Stroybank and Gosbank for capital outlays indicated on a separate capital investment balance sheet : Expenditures under article 15 --rubles . Credits under article 15 --rubles . Head of institution Chief (senior) accountant

Source : Mastalygina , Bukhgalterskiy , 1962, pp . 265-266 .

5

11

10

3

6

1 2

.no

Line

.. aspects

Category personnel of

1961 1April

Sourc : ukhga elters M astal ygina B , kiy 1 962 , 2 p. 69

Administrative personnel which Of head he s a,t cientific r -of esearch institutio and n deputies his for scientific

which a ,Of dministrative personnel

Production wage workers apprentice and s

Number institutio ns e ,of nd of year associate s otrudnikis )(Scientific Scientific -t echnical auxiliary and scientific

Total staff .personnel

Scientific associates .

personnel .Other Library .personnel

personnel ..

U.S.S.R. Sciences of Academy Institute -Research Scientific n )of institutio N ( ame

57 1 16

110

15

X

X

52 1 16

103

Report

(thousand fund )Wage rubles

X

X

X

Report

Average registered register per As at the end of number personnel of

Division s , ection 200 32

s Chief a )( enior ccountant

6,475

to Data be 63,093 obtained from cards 9,567 registration

Plan

institution of Head

15

172

52 7 16

1 103

Plan

Fulfillment on Report the of End Staff nrollment ,a Plan Wages

q () uarter year

-Research Scientific in Institutions

No. 3-3 Form

R . 4 B VIII Figure 3 NO FORM . -EPORT E-3 STAFF ON A , SCIENTIFIC IN WAGES INSTITUTION ND ESEARCH NROLLMENT

358 APPENDIX A --SUPPLEMENTARY FIGURES AND TABLES

BUDGETARY INSTITUTIONS

359

Figure VIII- B -5 .--FORM NO . 4 . REPORT ON EXECUTION OF THE NONBUDGETARY (SPECIAL ) MEANS ESTIMATE Form No. 4 ( Semiannual and annual) Approved by the Ministry of Finance U.S.S.R. August 18 , 1960, No. 41-59 ( In rubles )

(Name of institution ) Report on Execution of the Nonbudgetary (Special) Means Estimate for 1961 Income

1

2

5

6 7 8 9

10 11 12 13 14 15 16

3

4

Operations Dormitories (obshchezhitiya ). Residential housing. Transport.... Preparatory courses for stu dents entering higher educa tional institutions (vuzy ).. Publication of multicopy newspapers . Other types of activity .... Total for operations.... Production Educational -experimental and subsidiary economies (work shops , forestry establish ments, experimental stations, and other production units.. Publication of scientific works , journals , and text books.. Scientific-research work .

X

X X

X X

18

Balance of the fund, beginning of year ... Receipts and expenditures of the fund during report period

X

X

X

(Signature ) Source : Smirnov, Bukhgalterskiy, 1963, pp . 344-347.

Wages of non staff personnel and wages for capital repairs included in total expenditures Estimate Report 17 18

X

X

X

X

X

X

X

X X X X

X

X X X

X X X

X X X X

x X X

X

X

X

X

X

X

X

X X

X

Amount in column 6 includes expenditures for Reconstruction and expansion of laborato Equipment Equipment ries and other acquisition installation educational units 12 10 11

X

Chief accounsant

Head of institution

X X

X

Amount in column 4 includes receipts from Educational- Scientific Chartered experimental research and subsidi- work under production units, ary economies, contract , account account account No. 111 No. 282 No. 280 8 9 7 X

X

X X X

X Total for production ..... Grand total for report period Balance of special means at end of the report period .... Contributed to budget revenue .. Fund for expanding the material and technical base of the higher educational institution

17

6

Of which Office and Wages of Production Capital staff Bonuses maintenance expenses repair expenses personnel Estimate Report Estimate Report Estimate Report Estimate Report Estimate Report 10 11 12 13 14 15 16 8 7 9

x

1 2 3 4

Expenditures

Approved Approved estimate Actual estimate Actual for the as re for the as re year ported year ported

8

Sources of special means

5

Line no .

(Signature )

X

X

X

X

360

APPENDIX

A -- SUPPLEMENTARY FIGURES AND TABLES

Figure VIII - B - 6 .--FORM NO . 5 .

REPORT ON MOVEMENT OF FIXED ASSETS Form No. 5

( Annual) Approved by Ministry of Finance U.S.S.R. August 18 , 1960 , No. 41-59 Annual Report on Movement of Fixed Assets in Line no .

2

2 3

4 5 6

Linen , bed accessories, special clothing , and uniforms..... Libraries , museum valuables and exhibits . Other fixed assets..

7

Total of fixed assets .

Intake

1

2

1

Charged to budget financing : a . through Stroybank ( from capital investment balance sheet ) .. b . through Gosbank .... Charged to special means. Received free - of - charge .

5

Amount

3

Line no

Outgo

4

5

1

Shortages written off : a . to the institution's account.... b . to guilty individuals.... Transferred free -of - charge . Written off due to dilapida tion and wear and sale of excess and unnecessary property ..

2 3

4 5

4

Total intake..

6

Total outgo .

Head of institution ( signature Chief accountant (signature)

Source :

End of

3

Buildings and structures.. Of which , residential housing and dormitories.. Apparatus, machinery , and special equipment. Minor equipment (khozyaystvennyy inventar ! ) and trans portation equipment ....

Line no .

2 3

Beginning of year

Type of fixed assets

1 1

1961

Smirnov , Bukhgalterskiy , 1963, p . 353 .

year 4

Amount

6

361

BUDGETARY INSTITUTIONS

Figure VIII -B - 7.-- FORM NO . 6 .

REPORT ON MOVEMENT OF MATERIAL VALUABLES Form No. 6

(Name of institution ) Annual Report for 196__ Movement of Material Valuables

Expended on Balance at institution's beginning of year end of year needs during year

Balance at Line no .

Name of material valuables '

I.

1

Total of materials and food products ........ Of which :

Materials for educational , scientific , and other special purposes . Including : a . glass and glassware .. b . printed matter and geographic maps . Food products.... Medicines and bandaging supplies .. Fuel , combustibles , and lubricants . Maintenance supplies and office accessories.. Feed and forage . Sewing supplies .. Special clothing and uniforms .... II . Inexpensive and short - lived items . Of which , up to 2 rubles per unit . In addition , long - lived and laboratory - testing materials ..

2 3 4 5 6 7 8

III .

X X

X X

X

X

Movement of Material Valuables

Amount

Amount

A. Total intake Of which : 1 . Acquired 2 .

Received free - of - charge

B. Total intake

Materials and Food Products Total outgo.... Of which : Transferred from materials to inex 1. pensive and short - lived items.. Transferred free - of - charge .. 2 . 3 . Written off due to spoilage and natural calamities : a . to institution's account . b . to accounts of guilty individuals.. 5 . Sales , total ... Of which : a . food products.. b . medicines and bandaging supplies ... c . excess and unnecessary materials ... Inexpensive and Short - Lived Items Total outgo ..

Of which , acquisitions charged to article 12 Head of institution Chief

(senior ) accountant

1 Other examples of this form contained in Goloshchapov , Byudzhetnyy , 1963, pp . 234-235 ; Smirnov , Bukhgalterskiy , 1963, pp . 354–355 ,differ from the present version primarily in the selection of subaccounts of summary account 06 listed in section I. Source :

Mastalygina , Bukhgalterskiy , 1962 , pp . 283-284 .

362

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES Table VIII-B-1 .--STANDARD CLASSIFICATION OF ACCOUNTS FOR BUDGETARY INSTITUTIONS

01 010 011 012 013 014 015 016 019 021 031 041 051 06 060 060_1 061 062 063 064 065 066 067 068 069 07 070 071

08 080 081 082 083 084

09 090 091 092 093 094 096 10 100 101 103 11 110 111 113 114 115 121 13 130 131 132

14 140

141 142 143 144

Section I. Fixed Assets Fixed assets Buildings and structures (excluding the housing fund) Housing fund Machinery, apparatus, instruments, minor equipment ( inventar '), and tools for special purposes Libraries , museum valuables , and exhibits Linen , bed accessories, clothing , and footwear Office and service equipment and furniture (khozyaystvennyy inventar ') , and transportation equipment Documentation for standard designs Other fixed assets Section II . Material Stocks Procurement and processing of materials Products and output of subsidiary economies Construction materials and equipment to be installed Young animals and animals being fattened Materials and food products Materials for educational, scientific, and other special purposes Long- lived and laboratory experimental materials2 Food products Medicine and bandaging supplies3 Maintenance and office supplies Fuels and lubricants Feed and forage Packing and crating supplies Other materials Materials en route Deviation from list prices for materials2 Inexpensive and short- lived items Inexpensive and short -lived items in use Inexpensive and short-lived items in stock Section III . Production Production expenses Expenses of contracted scientific- research work Publication expenses 2 Expenses of subsidiary agricultural economies Expenses of production (educational) workshops3 Expenses of experimental and subsidiary economies of scientific research institutes Section IV . Monetary Assets Opened budget credits Opened credits for institution expenditures, through Gosbank Opened credits for transfer to subordinate institutions and for expenditures on centralized measures, through Gosbank Opened credits for financing capital investments and other measures, through Gosbank Opened credits for financing capital investments and other measures, through Stroybank Opened crédits for financing capital repair , through Gosbanka Opened credits for expenditures financed from other budgets Current (bank ) accounts under republican budgets of autonomous republics and local budgets Current account for institution expenditures Current account for transfers to subordinate institutions and for expenditures on centralized measures Current account for teachers' wages for nonbudgetary ] accounts (bank Current commissioned uses received for funds for funds account Current Current account for special means Current (settlement) account for scientific -research and experimental work Current account for other nonbudgetary funds Funds of road departments in Stroybank Cash ( on hand ] Other monetary assets Letters of credit Limited checkbooks Monetary documents Section V. Intra -Agency Settlements Settlements on budget financing between subordinate and superior credit administrators Settlements among budgetary institutions on budget financing , through Gosbank Settlements on the financing of measures from other budgets Settlements on budget financing of capital investments and other measures , through Gosbank Settlements on budget financing of capital investments and other measures , through Stroybank Settlements on financing scientific -research work from basic activity assets

151 161 17 170 171 172 173 174 175 176 177 178 179 * 181 191

20 200 201 203 21 210 211 212

213 216

Section VI . Settlements Settlements with suppliers and contractors Settlements on personal expense accounts Settlements with various debtors and creditors Debtors on shortages Settlements on social insurance Debtors on payments for maintaining children in children's institutions Settlements on payments into the budget Customers on scientific -research work subject to payment Customers on advance payments for scientific -research work Settlements on funds received for commissioned expenditures [Unclaimed ] sums (held ] on deposit Other debtors and creditors Settlements on planned payments2 Settlements with workers and employees Settlements with (student] stipend recipients Section VII . Expenditures Budgetary expenditures Expenditures out of the budget from which the institution is financed Expenditures on new construction and reconstruction , out of the budget Expenditures out of funds received from other budgets Other expenditures Expenditures for distribution Expenditures out of special means Expenditures on new construction and reconstruction , out of special means? Expenditures on scientific -research work from various sources of financing Expenditures out of other sources

Section VIII. Capital (Fondy ) 221

23 230 231

232 233 235 236 237 24 240

241 242

Capital in fixed assets (fond v osnovnykh sredstvakh ) Section IX . Financing Financing Budget financing through Gosbank Budget financing of capital investments and other measures , through Stroybank Measures financed from other budgets Budget financing of capital investments and other measures , through Gosbank Financing scientific - research work from basic activity assets Parents ' payments for maintaining a children's institution Other receipts for maintaining a children's institution Various funds Fund for bonus payments and for rendering one -time assistance to personnel Bonus fund for scientific -research work Means for expanding and strengthening the material- technical base of educational institutions2

251 Capital ( invested ] in inexpensive and short- lived items 2 Section X. Income

28 280 281 282 401 411 420

430 1 2 4

Sales of output of subsidiary economies and workshops Sales of subsidiary agriculture output3 Sales of products , completed work , and services rendered , by pro duction (educational ) shops3 Sales of contracted scientific -research work3 Special -means income Profit and loss Design and estimate documentation Design and estimate documentation fundº

Single-Entry Memorandum (Zabalansovyye) Accounts Rented fixed assets Raw materials and supplies accepted for processing Material valuables accepted for responsible custody Material valuables paid for under centralized supply for institutions maintained on other budgets Debts of insolvent debtors written off as loss Registered [prenumbered ] forms

6 1 Two-digit numbers for these first -order summary accounts are listed in the official tabulation, but three-digit numbers are used in practice . See the balance sheet (figure VIII-B -1), and Dedkov, Razvitiye, 1962, pp . 86-90 . 23 Number and title not listed in the official instruction ; used in the Ukrainian Academy of Sciences, at least (Sobornikov , Bukhgalterskiy, 1966 , pp. 6-12 ). In the Ukrainian Academy of Sciences, the account numbers listed below are titled as follows (ibid .) : 062-- Construction repair materials 281 -- Sales of printed matter 083--Expenses of production workshops and educational -experimental economies 282-- Sales of subsidiary agriculture output 212--Expenditures for new construction , reconstruction , and acquisition of 283--Sales of products completed , work completed , and services rendered equipment out of special means by production workshops and educational - experimental economies 280--Sales of contracted scientific - research work 4 VIII- B - 1 , lines 40a and 72a ). of accounts but cited in the standard balance sheet (figure in the official instruction's list Not included Source : Instruction No. 323 of the Ministry of Finance U.S.S.R., September 17, 1960, in Dedkov and Yakimov , Bukhgalterskiy , 1965 , pp . 29-32 ; Sobornikov , Bukhgalterskiy , 1966 , pp . 5-12 .

GOSBANK

363

Table VIII -C - 1 .--STANDARD GOSBANK CLASSIFICATION OF ACCOUNTS

No.

01 010 011 012 013 014

Account title

Division I. Bank Capital Bank capital (fondy banka ) [ L ] 1 Charter fund Reserve fund Special funds Fixed asset fund Amortization fund

No.

(NA ) ( NA ) (NA ) (NA ) (NA )

Division II. Currency and Coin in Circulation Currency and coin in circulation [ L ] Bank notes in circulation Treasury notes in circulation Coin in circulation Division III. Monetary Assets 03 Monetary assets in the bank's cash vaults [ A ] 030 Cash departments working balances ] 031 Above -limit balances in cash departments of branches having no reserve fund 04 Payment and collection points , supporting and excess cash [ A ] 040 Payment points (pripisnyye kassy) 041 Supporting and excess cash en route 042 Collection points (prikhodnyye kassy ) Division IV . Precious Metals 05[ 0 ]2 Precious metals [ A ] Division V. Foreign Currency and Settlements on Foreign Operations 06 Foreign currency (valyuta ) and payment documents in foreign currency [ A ] Foreign currency 060 07 Current accounts in foreign currency and settlements on foreign operations [ A - L ] 070 Current accounts in foreign currency 071 Unpaid foreign money orders (perevody ) 072 Gosbank accounts with foreign correspondent banks 073 Foreign correspondents ' accounts with Gosbank Settlements with foreign governments on clearings 074 077 Debtors on letters of credit in foreign operations 078 Creditors on letters of credit in foreign operations Division VI . Settlements with the State Budget and Budgetary Institutions ogro] Revenues to be distributed among budgets [ L ] 09[ 0 ] Revenues of the union budget ( L ) 02 020 021 022

(NA ) 152 153

16 160 164 165 17 170 171 172 173

174 175 176 177 178 18 180 181 182 183 184

185 10[ 0 ] Revenues of republican budgets of union republics [ L ] 11[ 0 ] Expenditures of the union budget [ A ] 12 [ 0 ] Expenditures of republican budgets of union repub lics ( A )

13[ 0 ] 14 140 141 142

143 144 15 150 151

Assets of local budgets [ L ] Current accounts and deposits [ L ] Current accounts of institutions and organizations maintained on the union budget Current accounts of institutions and organizations maintained on republican budgets of union republics Current accounts of institutions and organizations maintained on local budgets State Insurance Administration (Gosstrakh ) account Deposits of budgetary institutions Other settlements with the state budget [ A - L ] Coin in , circulation , in the amount reimbursed to Ministry of Finance U.S.S.R. [ A ] Settlements with Ministry of Finance U.S.S.R. on the purchasing of precious metals [ A ]

Settle ment account no . [L] 20 200 201 202 203 204 205 22 220 221 222

Account title Subaccounts in branch bank : Gold on hand Silver on hand Other precious metals on hand Antiquarian objects Subaccounts in regional] office : Precious metals received from Gosbank branches still under seal (for purchasing ) Precious metals not yet arrived Settlements on revaluation of material goods [ A -L ] Various settlements with the Ministry of Finance U.S.S.R. [ A - L ] Division VII . Settlements With U.S.S.R. Credit Institutions Settlements with U.S.S.R. credit institutions [ A - L ] All-Union Bank for Financing Capital Investments (Stroybank ) [ A - L ] State Labor Savings Banks [ A - L ] Other credit institutions [ A - L ] Division VII- a . Financing Capital Investments Assets for financing capital investments [ L ] Assets of the union budget for financing Assets of republican budgets of union republics for financing Assets of local budgets for financing Own assets of enterprises and organizations financed out of the union budget Own assets of enterprises and organizations financed out of republican budgets of union republics Own assets of enterprises and organizations financed out of local (okrug , oblast, and kray only] budgets [ Own assets of enterprises and organizations financed out of city budgets ?] [ Own assets of enterprises and organizations financed out of rayon budgets ? ] [ Settlement accounts or subaccounts of construction site heads or capital construction departments ( OKS )] Financing capital investments [A ] Financing capital investments out of the union budget Financing capital investments out of the republican budget of union republics Financing capital investments out of the local budgets Financing capital investments of consumers ' cooperatives Financing capital investments of producers ' cooperatives ( 1960 ) [ Some form of " own " or other nonbudget assets for financing capital investments ] Division VIII . Credit and Settlement Operations [With Enterprises and Organizations of : ]

Loan account no . [A ] 21 Fuel and power industry 210 Coal and shale industry of sovnarkhozy (211 ) 3 Petroleum and gas industry of sovnarkhozy ( 212 ) Ministry of Petroleum Industry (1960 ) 213 Peat industry of sovnarkhozy ( 214 ) Electric power stations of sovnarkhozy ( 215 ) Ministry of Electric Power Stations (1960 ) 23 Metallurgical and chemical industry ( 230 ) Ferrous metallurgy of sovnarkhozy 231 Nonferrous metallurgy of sovnarkhozy 232 Chemical industry of sovnarkhozy

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

364

Table VIII- C - 1 .--STANDARD GOSBANK CLASSIFICATION OF ACCOUNTS --Con .

Account title

Settle Loan ment account account no . no . [A] [L] 25 24 240 250 26 27 28 29

( 290 ) (291 ) (292 ) (293 ) (NA ) (NA )

(287)

297

30 300 302

31 ( 310 ) ( 312 )

32 320 321 34 340 ( 341) 36 38 40 400 401 402 403 (x ) (x ) 405

33 ( 330 ) 331 35 ( 350 ) 351 37 39

8 88888

280 281 282 283 (NA ) (NA )

(x ) (x ) (x ) 41 410 415

42 420

43 (NA )

421 426 44 (440 ) 441 442

(NA ) ( 436 ) 45 450 (451 ) (452 )

46 (460 ) 48 480 50

47 470 49 490 51

52 54 56 ( 560 )

53 55 57 570

58 585

59 595

60

61

Machine -building industry Machine -building industry of sovnarkhozy Defense industry Construction and construction materials industry ( NA ) Ministry of Construction ( 1961) (NA) (NA ) Construction industry of sovnarkhozy (1961) Construction materials industry of sovnarkhozy (1961 ) Contract construction and construction and - installation organizations of other ministries and agencies (1960 ) Logging and paper industry Logging industry of sovnarkhozy Paper and woodworking industry of sovnarkhozy Light industry Light industry of sovnarkhozy Textile industry of sovnarkhozy Food industry Food products industry of sovnarkhozy Meat and milk industry of sovnarkhozy

[ Reserved numbers (1959) ] Agriculture and procurement Current accounts of collective farms : Basic Special Separate (otdel'nyye ) Designated purposes Loan accounts of collective farms Loan accounts of collective farms Interkolkhoz enterprises and organizations ( settlement and loan accounts ) Transportation and communication Ministry of Railways--settlement accounts (1961) Ministry of Railways --revenue accounts Ministry of Communications (1960 ) State trade Trade organizations of sovnarkhozy [Ministries of trade ? ] [Workers ' Supply Departments (ORSy ) in Ministry of Railways ? ] Consumers' cooperatives Consumers ' cooperatives Foreign trade Foreign trade Local industry (1960 ) ; Sel'khoztekhnika? ( 1962) [ Reserved numbers ? ] Producers ' cooperatives (1959 ) Supply and sales organizations Supply and sales organizations of sovnarkhozy Other enterprises and organizations Other nonsovnarkhoz enterprises and organizations Centralized operations of sovnarkhozy

No.

62 620 622 63-66 67 670 671 672 673 68 680 682 683 69 690 695 696

70 71 711 72

720 721 722 723 724 725 726 727

721 725 73 730

731 732 733

Account title Overdue indebtedness to banks [ A ] Overdue indebtedness on short - term loans Overdue indebtedness on long - term loans [ Reserved numbers ? ] Accounts for centralized settlements ( A - L ] Assets for rendering temporary financial assistance Accounts for redistributing current assets Ministries of Communications U.S.S.R. and of the Union Republics --operating revenue accounts [ A - L ] Ministry of Communications U.S.S.R .--transfer oper ations Financing capital repair CA - L ] Separate accounts for capital repair Assets from centralized sources for financing the capital repair of local soviets ' housing Financing the capital repair of local soviets ' housing Current accounts of trade union organizations ( L ] Current accounts of trade unions for social insurance Current accounts of trade union organizations Current subaccounts , and transit and centralized accounts of trade union organizations for dues stamps (profmarki) Current accounts of social and other organizations [ L ] Deposits [ L ] Deposits of citizens Settlements on offsets of mutual claims in the decentral ized manner by economic organizations of : [ A - L ] (Circa 1957-60 ) [ Scientific -research institutes ?] Heavy industry ( except metallurgy and machine building ) Ferrous and nonferrous metallurgy Machine -building industry ( including defense industry ) Consumers ' goods industries Ministry of Railways Water transportation Interbranch supply and sales organizations (Since 1961) Industry Transportation

Other settlements on offsets of mutual claims by economic organizations ( A - L ] Settlements of economic organizations through Mutual Settlements Bureaus ( 1959) Settlements of economic organizations on one - time offsets Incomplete settlements on offsets of mutual claims Nonreimbursed amounts on subsequent refusals to accept payment demands]

7470 ] Letters of credit and separate accounts for freight shipments [ L ] 75[ 0 ] [Specific - purpose ] remittances not paid out [ L ] Limited checkbooks for : [ L ] Transportation and communications services Goods and services

76 760 761

77[ 0 ] Certified payment authorizations and checks [ L ] Division VIII- a . Long - Term Crediting

78 780 781 782 783

784

Assets for long -term crediting ( L ) Long - term credit fund on U.S.S.R. budget account Indivisible funds of collective farms Assets of consumers ' cooperatives for long - term crediting Assets of producers ' cooperatives for long -term crediting ( 1960 ) Deposits of producers ' cooperatives (1960 )

365

GOSBANK

Table VIII -C - 1 .--STANDARD GOSBANK CLASSIFICATION OF ACCOUNTS --Con . No. 79 790 792 793 795 796

Account title Long -term loans to : [ A ] Collective farms Consumers ' cooperatives (1964 ) Producers ' cooperatives (1959) Individual borrowers Individual borrowers , used for unauthorized purposes Individual borrowers , made through enterprises , organizations , and kolkhozy

797

Division IX .

No.

Division XI . 90 901

902 903 904

[ 91 ]

Settlements on Outside Assets (Storonnyye sredstva )

81[ o ] Various special-purpose funds and assets [ L ] Loans for various purposes [ A ] 82

830

831 84 840 841 85

Initiated (nachal'nyye ) interbank remittances (oboroty ) ( A - LJ Initiated interbank remittances of the current year Initiated interbank remittances of the previous year Concluded (otvetnyye) interbank remittances ( A - L ] Concluded interbank remittances of the current year Concluded interbank remittances of the previous year

Settlements with the [ Gosbank ] Directorate and office on concluded interbank remittances : [ A - L ] Current year Previous year Amounts not cancelled in listings of the Directorate and office : [ ALL ] Current year 860 Previous year 861 87[ 0 ] Settlements between intracity Gosbank institu tions [ A - L ] 88[ 0 ] Settlements between Gosbank institutions on (cash ) emission operations ( A -L ] 8910 ] Payments from deposits of military servicemen [ A ]

850 851 86

NA

Not available .

X

Debtors and Creditors

Debtors and creditors ( A - L ] Khozraschet enterprises of the bank on [ their ] working capital Unregulated amounts on interbank remittances Settlements on direct foreign money orders Other debtors and creditors [ Reserved number ? ] Division XII . Fixed Assets of the Bank and Operating Expenses

92 920 921 922

Division X. Mutual Interbank Settlements

83

Account title

923 924 93 930 931 932 935 94 940 941 942

[ 95 ]

Fixed assets of the bank [ A ] Buildings and structures Operating supplies Settlements with khozraschet enterprises of the bank on fixed assets Capital outlays on buildings rented by the bank Design - and -estimate documentation Settlements on capital investments of the bank [ A - L ] Capital outlays Construction and other materials Debtors and creditors on capital investments of the bank Stroybank financing of Gosbank's capital investments Expenses of future periods [ A ] Operating (khozyaystvennyye) materials Expenses of future periods Inexpensive and short- lived items [Reserved number ? ] Division XIII .

Income and Expenses of the Bank

96 960

Income of the Bank [ L ] Operating and miscellaneous income

97 970 971

Expenses of the bank [ A ] Operating and miscellaneous expenses Administrative -managerial expenses

98[ 0 ]

Profit and loss ( A - L ]

Not applicable .

Note : Single - entry memorandum accounts , not shown here , are listed in Nazarkin , Uchet , 1959 , pp . 28–29. 1 Bracketed letters after titles signify : A --asset or use (aktivnyy ) account ; L --liability (equity ) or source (passivnyy ) account ; A -L --asset and /or liability account . 2 Dates in parentheses , in the case of agency names , signify date of source . The bracketed zero ([ 0 ]) indicates that the first-order (two -digit) account contains one second-order account with the same title, whose (three- digit) number is formed by adding a zero . 3 Account numbers in parentheses are inferred from the numeration system . Source : First- order ( two- digit ) accounts--Nazarkin , Uchet, 1959, pp . 25-28 ; second -order (three- digit) accounts--compiled from scattered references, primarily in Boguslavskiy, Bankovskiy , 1960 ; Khlynov, Operatsii, 1965 ; Nazarkin , Uchet, 1959 ; Proselkov, Sbornik , 1964 ; Ryauzov and Tertus , Bankovskaya , 1961 .

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

366

Table VIII - D - 1 .-- STANDARD CLASSIFICATION OF ACCOUNTS USED FOR BUDGET EXECUTION IN THE MINISTRY OF FINANCE SYSTEM

1

Section I. Monetary Assets 01 Monetary assets 010 Monetary assets in Gosbank ( R , U ) ' Current account (basic) of a local budget ( L ) ' 011 013 Budgetary assets in Stroybank and Gosbank institutions for financing capital invest ments and other measures 014 Current accounts of local budget credit administrators ( L ) 015 Current account for special-purpose budget reserves ( L ) 016 Current account for the redistribution of local industry profits (L , R ) 017 Current account for financing capital repair of the city housing fund (L ) 017a Current account for financing automobile road construction from 2 percent deduc tions (L , R ) 018 Amounts en route Section II . Expenditures 02 020 021

Budget expenditures Budget expenditures Amounts temporarily carried as expenditures of the republic budget of a union republic ( R ) Section III. Loans Issued

032

Short- term loans issued to lower budgets Section IV .

04 040 041 042

Budget revenues Budget revenues Unidentified receipts (L ) Amounts temporarily carried as local budget revenue (L ) Section V. Loans Received

05 050 051 052 053

Loans received (L , R ) Short- term loans received Short - term loans received Short- term loans received Short -term loans received

06 060 061 062 063 064 07 070 071 072 073 08 080 081 082 083

092 110 120 130 140 150

Revenues

from the union budget ( R ) from the republic budget of a union republic (L ) from local budgets (L ) from banks ( L , R ) Section VI. Settlements Settlements with other budgets Mutual settlements with the union budget (R ) Mutual settlements with the republic budget of a union republic (L , U ) Mutual settlements with local budgets ( L , R ) Settlements with banks on assets issued for support of credit resources (U ) Banks, on assets assigned from the union budget for support of credit resources (U ) Section VII . Assets Transferred and Received Assets transferred and received Assets transferred to and received from the union budget ( R ) Assets transferred to and received from the republic budget of a union republic ( L , U ) Assets transferred to and received from local budgets ( L , R ) Assets transferred and received by rural budgets ( L ) Section VIII . Funds Funds (L , R ) Assets from the redistribution of local industry profits (L , R ) Fund for financing capital repair in the housing economy (L ) Assets for financing measures charged to penalties for discharging unpurified sewage water ( R ) Assets for financing automobile road construction charged to the 2 percent deduc tion (L , R ) Section IX . Results

Budget execution results Single - Entry Memorandum (Zabalansovyve) Accounts Special - purpose budget reserve ( L ) Long- term loans received from banks (L , R ) Appropriations (L ) [opened credits (R , U ) ] for expenditures paid through Gosbank Opened credits for financing capital investments and other measures, through Stroybank and Gosbank Deposit account of state social insurance assets for transfer to budgets of union republics (U )

1 Letters in parentheses designate accounts used in connection with local budgets (L ) , republican budgets of union republics (R ) , or the union budget (U ) ; if not otherwise indicated , accounts are used at all budget levels . A three-digit account number (with zero added) is also used with this account title . Source : Dedkov , Sbornik , 1960 , pp. 93-97 ; Dedkov and Yakimov , Bukhgalterskiy , 1965 , pp . 301-302 , 341-342 .

OTHER SYSTEMS

367

Table VIII - E - 1 .--ARCHIVAL RETENTION PERIODS FOR SELECTED TYPES OF RECORDS

Item no .

Retention period and type of record Permanent Retention

1. 2 . 3. 4 . 5 .

Annual balance sheets and reports General ledgers and journals Records of proceedings of commissions reviewing and approving annual balance sheets and reports Personal accounts for wages of workers and employees Cashbooks ( in single - entry accounting ) Five Years

6 . 7.

Books and card files (kartoteki) on property and materials (5 years or more ) 2 3 Consolidated statements on wage payments to workers and employees Three Years or More

8 . 9. 10 . 11 .

12 . 13 . 14 .

15 . 16 .

17 . 18 . 19 .

20 . 21 . 22 . 23 . 24 . 25 . 26 . 27 . 28 . 29 .

Control and matrix - entry ( shakhmatnyye ) books , journals , and auxiliary statements ? Turnover and cumulative statements for detail accounts and summary balance - sheet accounts2 Accounting documents such as those dealing with cash or posting memorandums 2 Requirement and settlement statements for the issuance of wage payments by banks (kept permanently in the absence of personal accounts [ Item 4 ] or analogous documents ) ? Journals and books registering bills, cash orders, waybills , payment statements , authorizations , commissions , cards , materials accounts , etc. Stubs and copies of orders , bills , invoices , waybills , and receipts2 Correspondence between organizations and enterprises regarding payables and receiv ables, payments of bills , and mutual settlements Documents and memorandums on audits and verifications of financial activities Materials dealing with inventories taken of properties, goods , and material valuables ( inventory descriptions , reconciliation statements , records of inventory commission proceedings, correspondence , and others) 2 3 Contracts and agreements (business, operational , labor ) 2 Quarterly balance sheets and reports Records of proceedings of commissions reviewing and approving quarterly balance sheets and reports Provisional (trial ) balance sheets Stubs of checkbooks and authorizations 2 Cashbooks ( in double - entry accounting ) 2 Bank remittance notes and transfer demands Copies of (payment ?) authorizations and bank transfers Annual and quarterly plans for document audits , reports on their fulfillment ; corre spondence on questions of auditing and violation of financial discipline Registers of contracts Invoices, waybills, deeds (akty ) and substitute documents on the receipt of material valuables2 Incoming and outgoing orders and receipts for recording goods and material valuables2 Books and index cards on property and materials

One Year 30 . 31 .

Monthly balance sheets and reports of institutions and enterprises Correspondence regarding approval and correction of balance sheets and reports

1 In the absence of annual balance sheets and other reports , quarterly (or monthly) versions are kept permanently . Copies submitted to superior bodies in the same system are kept 5 years if consolidated reports are available, and permanently if not . Copies submitted to other agencies are kept 5 years . 2 In the event of controversy , disagreement, investigation , or court proceedings connected with pilferage and wastage of money and material valuables , these documents are kept until the final settlement . 3 Materials marked EK [ Expert Commission ] are kept for 10 years and may be destroyed only with permission of archival authorities . Source : Brazhnik and Shcheglov, Spravochnoye , 1964, pp . 26-29 ; Ponomarev and Strelkov , Spra vochnik , 1964 , pp . 73-76 .

6

5

4

3

2

1

Item .no

wages

tion

: USSR

plan

USSR Stroybank

accounts

)s( tat'i accounts

Ab. nnual

Q,I.a uarters II I,II

I, Quarters III , II

I.

of construc capital Financing and USSR Gosbank by tion

do to credits tenter -c.Lerm ong ,prises organizations and ,and kolkhozy popula the

Odue a. utstanding ,p loans ast do n loans , onpayments sup to purchasers and pliers indebtedness b.Past due on

operations settlement and Credit of Gosbank Stroybank and USSR

Gosbank cash USSR Fulfillment of

. .do

USSR

USSR

USSR

USSR

Periodicity

Monthly turnover ,pReceipts tax ofrofit tcollec ,adeductions nd axes USSR Budget State the in tions

Execution Budget Union of in revenue expenditure and basic

in USSR Budget State of Execution expenditure and basic revenue

short and Title work of description

Gosbank of Reports nk USSR and Stroyba

Gosbank s of Report

Institutions and Credit Finance by Fulfillment Plan

--

.do

.do

'S R U-and by USSR

aby bnd USSR ;U-R y's sovnarkhozy ,and ministries agencies

30

28

10

25

9

10

35

do

67

TSSU USSR

June

TsSU's ic Republ y (bgroups of ics ) republ

num (date or Completion time period report after days of )ber

.do .

U-R's by and USSR

STATISTICS FINANCIAL FOR PLAN WORK

USSR of Ministry of Reports

Gosbank of Reports nk and USSR Stroyba

Gosbank of Reports

Finance USSR

Source data of

breakdown Data bterritorial ,( yranch unit ),e tc. s sector orubordination

STATISTICS AND PRICE FINANCIAL TSSU FOR PLAN OF 1965 WORK THE Table -E2.-VIII

368 APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

11

10

9

8

7

Item .no

tion

Finance of M inistry a.USSR

Processing reports annual of credit and finance institu

articles of the presence On and metals precious of made

USSR Sc. troybank Gd. ostrudsberkassy

b.Gosbank USSR

stones precious

Quarterly

do

Annual

Monthly Receipts insurance of pre miums payments and insur of Gosstrakh by indemnities ance Administra Insurance ZState

insurance social of Execution

. ..do

do

. ..do

R -U 's By

..do do ..

reports Annual of credit and finance institutions

T U-RofSSU'S Reports

do . ...do

do

agencies

Sotsstrakh of USSR Reports social insurance

State for istration Banks Savings Labor

data of Source

UUSSR by -and R 's

USSR U-R's by and

'S R U-and by SSR UChief Admin of Reports

breakdown Data ,b( yranch unit territorial tc. ),or essector ubordination TsSU's Republic y (bof groups ) republics

:I2 35 :II 35 III : 35

i

.e osstrakh G

tions for : 1964

budget

Periodicity

ssy GostrudsberkaMonthly of Operations :_State Banks Savings Labor ;in balances deposit changes lottery and bond of payments from receipts and winnings lot domestic ercent p3state lotteries from and loan tery

and short Title work of description

.AND Con PRICE STATISTICS FINANCIAL FOR SU Ts OF PLAN WORK .-1965 THE -E2 -VIII Table

1June

April 30

June 20

June 25

28 May

45

10

72

10

TSSU USSR

or num (date time Completion after days of )ber period report

OTHER SYSTEMS 369

í

***

sovnarkhozy .

tions ** plan

* plan tions

Sf. otsstrakh

Fulfillment accumula of the

Fulfillment the of accumula

Periodicity

ter

Quarterly U() RGENT

U() RGENT

of months each quar

2 First

year

First half

I, Quarter m 9 onths

Annual

Ig. ngosstrakh _Foreign_Insur Administration ance

Title short and work of description

1-KV table No.

ssion nnyye khozy .of data summa submi ays ry 5d after withi ) ovnar sotdel

5F SNo. - ummary )(quarterly

do . ....

.form in ..do No. - ummary S5F )(monthly

do

Annual reports of credit and finance institutions

Source data of

-odo

USSR

*** subordination

21 Aug 23 Aug. 28 Aug. S2 ept. 28 ;b:y :IUSSR activity economic of types republic totals ,w 's 28 U-RII by and : ith 28 : III enterprises sovnarkhoz for and :ministry RSFSR enterprises of agency and 30

I: II : :III :RSFSR

r aschet estimates (are of basis on summary the in included subordination local enterprises for Data .

;IUSSR activity ;b1in economic of types : y7 form republic totals ,wand 's U-R1II by : ith 7 for sovnarkhoz and enterprises 1III :8 enterprises of agency and ministry ,l ocal srepublican eparately and

subordination republican

subordination

TsSU'S Republic (ofy bgroups republics )

activity ;I economic of types ;b,U:ySSR 47 sovnarkhozy Reports ministries II 50 wrepublic totals aith nd : U-R by and ,agen 's acies ,:III sovna enter for and nd es 55 s data proc rkhoz prise RSFSR :sed 60 s of enter Tby agenc and minis U-RinsSU's prise ytry ocal ls ,republican eparately and

Activities Units Economic of Financial . II Reports Consolidating Accounting Current Processing and ZĀ.7

breakdown Data territorial y ,b( ranch unit ),e tc. sector sor ubordination

10 . Sept

dUon separate by fulfillment plan profits the ata baTsSU's submit simultaneously S.S.R. ,Kazakh mail ynd krainian R.S.F.S.R. of

t s ate llmen th.ion iantion separ .S.R. accu the by submi fulfi on data of nd mula ,aSU's Kazak S.S.R Uplan R.S.F skrain addit TIn

19

34

70

April 30

April 30

TsSU USSR

time d (Completion ate num or ber days of after period )report

APPENDIX A --SUPPLEMENTARY FIGURES AND TABLES

**

*

14

13

12

Item no

PRICE .1965 Con -STATISTICS AND FINANCIAL FOR TsSU OF PLAN WORK -E2.·Table VIII THE -370

1

*

19

18

17

16

15

Item no .

down )

K3- V

. .do

industry

)* tions

Periodicity

,IQuarter m 9 onths

do ... U)( RGENT

in compiled uly 1Jas of ibreak branch ndustry -o f

9, year months

,I Quarter

5dafter within of submission summary . ays data

industr Profita of 20 ial bility

Sales marketable of output half First of industrial enterprises as a year whole and by separate branches of industry

selected for indicators No. table in

Sales half First marketable of output of industrial enterprises aas year branches separate by and whole sovnarkhoz of industry

marketable Sales of output industrial enterprises as a of branches all for whole

year

half First

I, ful by Quarter Grouping enterprises of of fillment m plan accumulations 9 onths i,c ( ndustrial enterprises on construction tract organiza

Title short and work of description

V 3-KNo.

do .. ... No. 3-KV

do

V table 3-K No.

2-KV No. table

and data processed by U-RTSSU's table in

table in

,data cies and proces

Source data of

I: 47 :II 50 :III 55 60 RSFSR : :I :II III : RSFSR :

do

's R U-of By sovnarkhozy Reports

y b.,i.do USSR table U-R ;b sovnarkhozy .yn's ata wda)(e 3-K No. hole stimate V as branches afirst by nd industry of half enterprises

:I 57 6II :0 III :5 6 :70 RSFSR

republic with 's -R Ua;,U by SSR I: sovnarkhozy ofnd Reports ministries totals ,ministry for nd a agen :II and agency III : ,procesand republican of enterprises and cies data subordination : RSFSR ocal lseparately ,Tsed in SSU's U-Rby

: III RSFSR :

I: :II III : : RSFSR

do .

submitted (Not )to USSR TsSU

21 Aug. 23 Aug. 26 Aug. S1 ept.

17 . Aug 19 . Aug

12 . Aug 12 . Aug 17 . Aug S1 ept.

21 . Aug 23 . Aug 28 . Aug S1 ept.

TsSU's Republic y (of bgroups ?) republics

republic I: 7 with 's U-R 4 nd a by ;U,ofSSR sovnarkhozy Reports totals sovnarkhoz for enterprises ministries ,and :II agen 50 ministry for and agency and enter :5 5III prises republican of and :0 in ,s 6RSFSR T SSU's by U-R ep sed subordination larately , ocal

breakdown Data unit ,b( yranch territorial e ),orubordination tc. ssector

.TsSU Con -STATISTICS PRICE FINANCIAL OF FOR PLAN WORK .AND 1965 THE -E2 -VIII Table

14 Sept.

21 . Aug

10 Sept.

separate sovnarkhozy industry for V 2-K No. table in data submit S.S.R. ,aU S.S.R. Kazakh krainian R.S.F.S.R. sSU's T the of addition Innd

70

70

10 Sept.

70

TsSU USSR

time (dCompletion num or ate after days of )ber period report

OTHER SYSTEMS 371

23

22

21

Item no .

year

half First

I,Quarter m 9 onths

' Periodicity

Current assets assets ,fixed cre ,and settlements bank of branches by dits sovnarkhoz industry

half First

J1Onuly

year

half First

I, Quarter m 9 onths

year

)(- uota I,nyye verkhnormativQuarter s qAbove m9 onths of stocks uninstalled equipment

and current own of Condition

goods of stocks - uota qAbove *and valuables material

assets equivalent

short Title and work of description

No. 15 -KV

..do ... KNo. 5- V

do ...

... do ..... -KV 11 No.

do

V table 4-K No.

table in

table in

data of Source

do

do

..do

... .do

.breakdown ibU.S.S.R. f -oin ranch aby TsSU compiled are sovnarkhoz by data uly 1J* ndustry

aby branches bynd USSR ;U-R 's table in sovnarkhoz of industry

:I 50 :II 52 III : 55 60 : RSFSR

III :

S2 ept.

10 Sept.

10 Sept.

2 ept. S

Aug. 1:I 5 1Aug 5 :II :0 2III Aug. RSFSR Aug. 2: 6

70

70

70

TS SU USSR

or num (date time Completion ) period report after days of ber

2I: 3 Aug. II 2: 6 Aug. III 2: 8 Aug. : ept. S4RSFSR

1I: 5 Aug. :7 1II Aug. 20 Aug. :8 R 2RSFS Aug.

2I: 3 Aug. 2:II 6 Aug. 28 g Au S4:RS epFS t.R

TsSU's Republic (bofy groups ) republics

I: 50 :II 52 III : 55 RSFSR 60 :

III :

republic :I 7 with 's U-R 4 a;U by SSR ,ofnd sovnarkhozy Reports II 5: 0 enterprises sovnarkhoz for totals ministries nd a,agen agency 5III :5 ministry for and procesdata ,and cies 6:RSFS 0 R ,of and republican in enterprises Tsed U-RbySSU's subordination l , ocal separately

breakdown Data bterritorial ,( ranch unit y e ),or tc. s ubordination sector

.PRICE Con -STATISTICS AND FINANCIAL FOR SU Ts OF PLAN 1965 WORK Table -E2--THE VIII 372 APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

24

26

29

28

tions :

whole

hoz sovnark B.a y

indicators Basic the from sheets balance contract of gconstruction eologic ,and s-design aurvey nd organiza

Stable liabilities

F.b or the economy aas

:capital repair sovnarkhoz Ba. y

assets aFixed , mortization deductions outlays ,and for

industry as do ,for .....

25

27

fixed assets ,Current credits bank ,and settlements by industry of branches

Item no .

wa hole

Title short and work of description

J1On uly

..do

J1On uly

1October On

J1On uly

Periodicity

KNo. -V 14

No. -KV 13

8V No. 9-Kand

sovnarkhozy of Reports do and data processed by U-RTSSU's tables in

and processed data by TU-Rin table SSU's

Tby U-RinSSU's sed

ministries , nd a agen

and data processed by table U-RTSU's in

V -K13 No. table

K 5- V No. table

data of Source

's U-R by and USSR sovnarkhozy of Reports

's R U-by and USSR sovnarkhozy of Reports

: III

: RSFSR

republic I: 's with R nd U-;,U by asovnarkhozy SSR of Reports II totals : ministry for agency and III : republican and of aenterprises procesnd ,data cies RSFSR subordination : l , ocal separately

5I: 0 ;afor USSR U-R by industry nd 's totals republic with :2 5II awhole as III 5: 5 agency enter and ministry for RSFSR :60 republican ,s and ofep prises subordination larately , ocal

branches by a 's ;U-R SSR ynd b,sovnarkhozy U of Reports totals republic with industry ministries of ,and agen enter agency and ministry for procesa data , nd cies of prises ep ,sin and republican sSU's RTby U-sed subordination ocal l,arately

breakdown Data unit ,b( ranch territorial y e ),sor tc. ubordination sector

.PRICE Con -STATISTICS AND FINANCIAL FOR SU Ts OF PLAN WORK 1965 -2. THE E -VIII Table

:I 5 1Aug. :II 1Aug. 7 20 Aug RSFS 2: 8 R Aug.

2I: 6 Aug. 2II :7 Aug 2:III 8 . Aug. 2 ept. S

23 Aug. 25 Aug. 28 Aug. 4Sept.

2I: 3 Aug. II 2 :3 Aug. :III 2 5 Aug. S2RSFSR : ept.

2:I 6 Aug. :6 . 2II Aug :6 . 2III Aug S4:RSFS ept.R

TsSU's Republic y (bgroups of ?) republics

2 ept. S

12 Sept.

Sept. 14

12 Sept.

14 Sept.

TsSU USSR

(date time Completion num or after days of ber ) period report

OTHER SYSTEMS 373

70

economy aw as hole b.For the

.do ...

*

. sovnarkhozy

as and awplan hole sep by economic of types arate

Annual Fulfillment of accumulations the

sovnarkhoz By

32

activity

sheet :

1 uly JOn

accumulations the of Fulfillment Annual awhole as plan separate by and activity economic of types )*( reliminary pdata

a.

the from indicators Basic balance investment capital

hole aas wthe economy Fb. or

28

)(annual

K12 -V

9-KV

Periodicity

31

30

Item .no

and short Title of work description

Annual accounting sovnar of reports m, inistries khozy data ,and agencies U-R by processed No. table in TsSU's

ation

U )(aministries RGENT ,agen nd

table -KV 12 No.

ministries ,and agen

and data processed by table in TNo. U-R SSU's

and 8-KV No. tables

of data Source

RSFSR : republic R with 's V-;aof by ,Und SSR Reports sovnarkhozy totals for ministry II : agency and II : I procesand republican of ,aenterprises cies data nd lsubordination T,sed SSU's U-Rinocal by separately

subordination

srepub ,land epara ocal lican tely

aUSSR ;with U-Rnd by 's republic

LB. ]Process Reports dating Account Annual Consoli and ing republic with U-R by 's ;a,U SSR sovnarkhozy I: ofnd Reports II sovnarkhoz enter : for totals III and ministry : for prises cies ,and proces data : RSFSR republican of in Tsed enterprises U-R sSU's agency by subordin lsS,and ocal form - ummary 5F No. eparately

U-R by and USSR sovnarkhozy of's Reports

republic 's -R with Ua;,U by SSR sovnarkhozy ofnd Reports ministries totals for ministry nd ,agen aagency and ,procesand republican of enterprises data and cies subordination ocal l ,in SSU's RTby U-sed separately

breakdown Data unit ( yranch territorial ,b ),e tc. ssector ubordination or

STATISTICS .AND Con -PRICE FINANCIAL PLAN FOR TSSU OF WORK 1965 VIII -E2.Table THE --

I: 0 2 Apr. total for sovna 2Apr. enter s II : 2 rkhoz prise s : nd 2III group econo ,aby rayon for 5 ed Apr. mic 30 stry agenc :enter RSFSR of Apr. mini and yprises

F7 eb. F 9 eb. Feb. 10 11 Feb.

1I: 5 Aug. 17 :II Aug. 20 III Aug. : 28 . Aug 2I: 3 Aug. 26 g Au 28 Aug S4:RSF eptSR .

I: 3 2Aug 2II Aug :6 III 2: 8 Aug. : ept.R S4RSFS

TsSU's Republic y (bof groups ?) republics

separate by fulfillment data plan profits the mail submit Kazakh simultaneously S.S.R. Uon ,aTsSU's krainian nd R.S.F.S.R. of

25 May

Feb. 15

10 Sept.

S2 ept.

10 Sept.

SU Ts USSR

Completion num (d time or ate of after days period report )ber

374 APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

33

Item .no

34

38

37

36

35

of industry

tural products

industrial of Profitability and by wenterprises a hole as industry of branches separate

Sales marketable output of industrial enterprises a as branches separate by and whole

of marketable Sales output of do carried enterprises industrial balance procurement the on ministries sheet of produc for procurement and tion agricul of

Sales marketable output of enter sovnarkhoz industrial byhole and aw as prises industry branch of

Sales marketable output of sovnarkhoz enter industrial ohole w a(ndis as prises ) industry of branch by tinction

*****

TsSU's

. do

.do ) mate

No. 13

28 No.

Periodicity

Annual accumulations the of Fulfillment and ministries separate plan by )agencies list established (per

and short Title work of description

e ( sti

adata cies , nd U-R by processed

Annual accounting re , sovnarkhozy of ports a,ministries nd agen

istries for produc procurement and tion of agricultural pro data nd a,ducts RU-by processed 13 No. table in SU's Ts

Annual accounting re sovnarkhozy of ports by processed data and table U-RTS in SU's

Annual accounting re sovnarkhozy , of ports ministries a , gencies data and processed by Ttable U-RinSSU's

data of Source

25 Apr. 25 Apr. 30 Apr. I: II : III :

an .on estimate of basis the consolidation in included are subordination local enterprises for Data

13 May I: 15 May II : 20 May III : 25 May : RSFSR (Not submitted ) USSR SU Ts to

M8 ay 10 y Ma 15 y Ma 20y Ma

M5 ay 7 ay M 10 May 15 May

20 . Apr 22 Apr. 25 . Apr 30 . Apr

25 Apr. 27 Apr. 30 Apr. M5 ay

SU's Ts Republic y (bgroups of ?) republics

:I II : : III : RSFSR

:I II : : III :RSFSR

:I republic U-R by with 's ;and USSR II totals ministry for : agency and and ,of republican enterprises III : RSFSR : subordination lseparately , ocal

by ;a-R branches 's bynd UUSSR

branches 's ;aU-bUSSR Rby ynd for with subtotals industry of sovnarkhoz enterprises

's R U-and by SSR UAnnual min of reports

of industry

U-R's by and USSR

,and agencies by :I and ministries By II : * activity economic of types III : RSFSR :

breakdown Data ,b( yranch unit territorial ),e tc. ubordination s sector or

.AND Con -PRICE STATISTICS FINANCIAL TSSU FOR OF PLAN 1965 WORK THE Table -E2.-VIII

June 15

June 15

10 May

June 10

28 May

30 May

TSSU USSR

(dor time num ate Completion ) period report after days of ber

OTHER SYSTEMS 375

*

42

* level

. .do of by enterprises Grouping fulfillment plan accumulations

profits losses and of Statement of branches separate by 1964 in metal band - uilding machine

41

working

summary .of data submission after sovnarkhozy 5days within

No. 29

Periodicity

Annual types other by Sales output of

do of types other by output of Sales industry ,bactivity y besides agencies and ministries separate list established p)( er

industry b)activity ( esides

Title short and work of description

40

39

Item .no

ation

ation

do ... Annual accounting re , .. sovnarkhozy of ports data and processed by U-RTS table in SU's

nd cies ,adata by U-R processed 14 No. table in TsSU's

Annual accounting re , sovnarkhozy of ports ministries ,and agen

data of Source

2I: 0 Apr. 22 Apr. II : 25 Apr. :III 30 Apr. :RSFSR

separate by down enterprises broken industrial submit on data Kazakh S.S.R. ,athe UR.S.F.S.R. krainian of addition TIn*nd sSU's

25 May

June 15

5 ay M 10 May May 15 20 May republic with 's USSR U-R;atable by ..... ,i.do nnd I: enter for :II s)totals upplement (sovnarkhoz 28 No. and ministry : III for prises republican of RSFSR : enterprises agency ocal lssubordin ,and eparately i( ndustrial enter construction c , ontract prises organiza torganizations , rade of U-Rministries tions enterprises atrade , utotransport adminis and m U-R inistries of autotransport trations for and w supply highways [,Oorker RS of ,and sovkhozy departments administrations and ministries production for procurement and )of products agricultural

June 10

30 May

I: 5 2 Apr 30 II : Apr. 5:III M ay RSF :M8 ay SR

M5 ay M7 ay 10 May 15 May

TSSU USSR

TsSU's Republic y (bgroups of cs ) republi

Completion or (d time num ate after days of report period )ber

:I :II :III RSFSR :

ministries By agencies and

with arepublic U-RUSSR by 's ; nd for enter sovnarkhoz totals and ministry for prises republican of enterprises agency subordin ocal s,land eparately

breakdown Data b territorial ,( ranch unit y ),e tc. s sector orubordination

. -Con -PRICE STATISTICS FINANCIAL AND TSSU FOR WORK OF PLAN 1965 THE -E2. VIII Table

376 APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

No. 30

No. 34

of stocks -quota Above uninstalled equipment

48

...do

do

do

current own of Condition and assets equivalent

,Current bank assets credits afixed , mortization assets nd losses ,aprofits and by down funds broken special branches industry of

' Periodicity

Annual losses and profits of Composition

losses and profits of Composition agen and separate ministries by )(per list established cies

activity of economic types by

short Title and work of description

47

46

45

44

43

Item .no

.do ...

do .

27 and 15

and 27 15

table 4-ANo.

table in

industry

..do

Annual accounting re ,ports sovnarkhozy of ministries ,and agen cies and data proces in Tsed U-R sSU's by

Annual accounting re ministries of ports data agencies and U-R by processed No. tables in TSSU's

data ,and cies U-R by processed No. tables in TsSU's

Annual accounting re , sovnarkhozy of ports ministries agen a, nd

Source data of

RSFS : R

republic 's with R U-;aUSSR by nnd i,.do table ..... sovnarkhoz for totals enterprises enter agency ministry for and republican ,s and ep of prises subordination larately , ocal

subtotals with 's U-R by nd ;a USSR sovnarkhoz of branches for

;awith USSR U-R by republic nd 's sovnarkhoz totals enterprises for ministry enter agency and for and republican ofep prises ,s and subordination l , ocal arately

ministries By agencies and

republic U-R by with 's ;and USSR I: enterprises sovnarkhoz for totals :II :III ministry for enter agency and RSFSR prises : republican ofep and ,s subordination larately , ocal

breakdown Data bterritorial ,( ranch unit y )e tc. ,orubordination s sector

Con .-STATISTICS PRICE AND FINANCIAL FOR PLAN TSSU OF 1965 WORK THE -E2.-VIII Table

2:I 9 Apr :9 O 2II Apr. 8III : ay M

1:I 5 May 1May 8 :II :5 2III May :J1 une RSFSR

1I: 3 May 15 : II May 20 May III : JRSFSR 1: une

20 May

June 20

June 30

June 20

25 May

27 May

20 . Apr 22 . Apr 25 . Apr 30 Apr.

2I: 5 Apr :0 3II Apr. M5III : ay 10 May

TS SU USSR

TsSU'S Republic (bofy groups ics )? republ

num (date or Completion time ) period report after days of ber

OTHER SYSTEMS 377

49

Item .no

50

51

ation

c. otals Tfor enterprises organizations and of ministries and agencies osovnarkhozy than )( ther of republican and ,s ep subordin ,local arately

Periodicity

Annual

Consolidation do accounting of re the of sovnarkhozy for ports nd USSR ,aRSFSR krainian indica all SSR for Kazakh economic of types all tors annual separate in activity established per forms report

cur normed of stocks qAbove - uota

Processing annual of reports indicators in remaining for the established program : Magencies and ,a. inistries and enterprises for union of organizations subordination

S.b ovnarkhozy

program

*assets rent

and short Title work of description

TsSU's

ministries of Reports data and agencies and RU-by processed

-URTSSU's

and data processed by

ministries of Reports and agencies

table No. 33

data of Source

subordination

R U-of's By sovnarkhozy Reports

U-R By sovnarkhozy of's Reports

:I enterprises totals for repub of :II III : separately and lican ,l ocal RSFSR :

sub with 's R U-;aUSSR by nd

agencies mnd USSR ,a inistries

republic Annual ;aaccounting USSR U-R by with 's rend sovnarkhoz totals enterprises for sovnarkhozy , of ports : III ministries enter agency ministry for and agen a, nd proces snd and republican of ep ,aprises cies data subordination ,lTsed arately SSU's U-Rinocal by

breakdown Data y ,b( ranch unit territorial tc. ),e s sector orubordination

FINANCIAL STATISTICS PRICE AND FOR SU Ts OF PLAN WORK 1965 THE -E2.-VIII Table

June 10 June 10 June 20 J1 uly

1J:I une :II J1 une :J1 une III :5 1RSFSR June

III 1: 5 May J5RSFSR : une

I: 9 2 Apr. 2:II 9 Apr. M8 ay

TsSU's c Republi y (bgroups of ) 2 cs republi

June .by 30 is breakdown -oin ovnarkhoz bcurrent fndustry ranch assets astocks normed of qprepares uota above on data U.S.S.R. addition ,TInsSU

5 ug. A

15 July

J1 une

J5 une

20 May

SU TS USSR

or num (date time Completion ) period report after days of ber

378 APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

55

54

53

52

Item .no

reports

1965 for ment

type and use of

of cur normed balance Expected

fulfill plan profits Expected

and ries e minist separat B.e y

national for Sthe d. ummary

. do

. .do

..... do

.do

Annual

Periodicity

Semiannual

rEstimate ( aschet

..do

aagencies nd ,and estimates

R -UBy's

..do

s , ep and republican of prises subordination larately , ocal

activ economic of types ;by USSR II : wrepublic ;aith ity U-R ,by nd 's

ministries By agencies and

's U-R by and U , SSR sovnarkhozy of Reports

Work . ummarization SIII USSR ministries of Reports

ministries , nd aagen cies ,and data proces SSU's RTby U-sed

data of Source

Reports of pawn brokers

Estimate

...do

aOnce y ear ..do p( reliminary data ) 1965

and (vPayments benefits yplaty a ear yOnce f( inal 1964 il'goty )r the by eceived state budg population the from ) data enter of account the on and et ro organizations and ,b prises formation of source by down ken

Processing pawnbrokers 'of

assets 1-1-1966 of as rent

agencies

economy

Title short and work of description

breakdown Data ,b ( yranch unit territorial essector ),ortc. ubordination

STATISTICS .AND Con -PRICE FINANCIAL PLAN FOR SU Ts OF WORK 1965 VIII -E2.Table THE --

20 May

1:I 5 May II 1: 5 May 1:III 5 May

10 July

10 Dec.

Oct. 15

Dec. 25

20 Dec.

25 . Aug

15 Sept.

TsSU USSR

1I: 6 Dec. II Dec. 1: 6 Dec. :16 III :1RSFSR Dec. 7

D9I: ec. 9Dec. for totals enterprises sovnarkhoz : ec. 9DIII Dec. 0 enter:1agency RSFSR and ministry for

June 2:I 0 :20 II June III J:1 uly : uly R J5RSFS I:30 June 3II :0 June III 1: 5 July RSFSR :5 2 July

TsSU's Republic (bofy groups ?) republics

time Completion (date num or days of ber period report )after

OTHER SYSTEMS 379

59

58

57

56

Item .no

social security

1964 for sources

organizations

use of type and

' Periodicity

III , II

Annual

Annual 2.

pub . .do and state Expenditures of e,lic conomic organizations kolkhozy organizations ,and a,onnd h ealth enlightenment

re financial of balance Report

of Calculation the to payments grants pensions of ,population ,on bonds w innings stipends nd ,aand indemnities insurance of population from the receipts taxes payments other and to financial systems credit and contributions social to and

TSSU

yaOnce ear p( reliminary ) data 1965

platy (w benefits and Payments yaOnc eare by f( inal eceived r 1964 )i 'goty lthe budg state data the ) from population enter of account the on and et ro b ,prises organizations and formation of source by down ken

short and Title work of description

Annual reports USSR of ministries appropriate and agencies

state budget , ,savings Gosstrakh , ovnarkhozy sbanks ministries , nd aagen tabulations nd a,cies of annual reports by

the of execution on

Qreports of I, uarterlyUSSR Quarters 1. minist iate approprries and agencies Annual reports of .do ministries appropriate agencies and

R -U 'S Reports ministries By of agencies and ,and estimates

Source data of

's -R Uand by USSR banks of reports Annual

breakdown Data territorial ,b( yranch unit ),eor tc. ssector ubordination

:I II : : III

Con STATISTICS AND PRICE FINANCIAL FOR SU Ts WORK OF PLAN ..-1965 THE -E2 -VIII Table

S1I: ept. S5II : ept. 10 : III Sept. Sept. 1:RSFSR 5

Dec. 30 Dec. 30 Dec. 30

2:I 5 July :5 2II July :5 2III July

TsSU's Republic (y bgroups of cs )? republi

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

Nov. 15

prelimi 1964 ;-A nary 1 pril final1964 August ;10 1965 expected fulfillmentDecember 15

O 1 ct.

45

5Jan.

30 July

SU Ts USSR

d num or Completion ( ate time ) period report after days of ber

380

1

63

62

61

60

Quarterly

' Periodicity

..do

..do

Annual and prices wholesale Average profitability impor most of tant heavy industry products

Summarization on data of in reductions from economies sectors of basic ,for costs the national economy : Pdata a. reliminary

assets industry in

current o!)( fborachivayemost

forma of Annual sComposition , ources current of astructure , nd tion the of branches in assets 1964 for economy national

Turnaround time

Fb. inal data

taxes for

and workers to payments Wage in employees currency alichnyye n)a( nd withholdings

Title short and work of description

. .do

do

USSR Ministry the by Reports

6 No. form report ing

sectoralUSSR TsSU of Data departments . do ..

Annual reports . ..do of ,minis sovnarkhozy ,atries agencies nd and data processed Tby U-R SSU's

of Finance USSR , USSR Gosbank

data of Source

and agencies

FORMATION PRICE AND FOR PRICES ON STATISTICS PLAN WORK

U-R's by and USSR

--

III : :RSFSR

ministries republican separate By

: III

R ;aU-accountsovnarkhozy by 's to bSupplement USSR ynd

i

Item no .

breakdown Data territorial ,b(byranch unit ),e tc. ssector orubordination

STATISTICS .PRICE Con -AND FINANCIAL PLAN FOR SU Ts OF WORK 1965 -E2--THE VIII Table

2I: 5 Apr O II 2: 8 Apr. 20 May 2:RSFS June 0 R 1:I 0 May 10 May : II J5 une 1 ug A

1:I 0 Sept. :0 1II Sept. 1III :5 Sept. (Not submitt ed ) USSR TsSU by

TsSU's Republic (bofy groups ?) ics republ

15 Aug

20 Aug

20 Aug

25 July

Dec. 25

15 Sept.

42

TSSU USSR

num Completion (d time or ate of report after days )ber period

OTHER SYSTEMS 381

4

a ear yTwice

price indexes Annual Wb. holesale the f rc.)o ( azrabotka A nalysis do prices retail of structures observation systematic and them in changes of . do

a.Continuous ecording tR)(u emporary chet surveillance aover , nd prices (oformleniye documentation ,the systemati ,and registration data of zation prices permanent

statistical observa Systematic movement and level the of tion

price of Ssurveys d. ample in practices application enterprises

prices :of

industries ture

Semiannual

retail and Average wholesale of profitability and prices of products important most furni ,athe nd lfood ight

3

table

Periodicity

retail and wholesale Annual Average of profitability and prices of products important most furniture nd ,althe ight food industries and of personal service enterprises

and Title short work of description

2

Item .no

dination

..do

.do statis and Accounting do esolu ,r reports tical directives and tions and Government the of nd a,USSR Gosplan sample surveys

l,p-Price ists rice r , esolu bulletins directives and tions runion epublican ,of organs local and a ; nd sovnarkhozy recorded (u chetnyye

No. work 1-SP with

of data Source

1:I 5 Aug. 15 Aug. : II S1III : ept. :1 ct. RSFSR O bnd y sovnarkhozy ;a-RUUSSR by 's

instructions

1I: 5 May 15 May 10 : III June 1:RSFSR 5 Aug.

I: 30 Apr. 5II M : ay BSSR :19 May III 25 : May J,1:RSFSR uly tablework 10 July

Oct. 15

20 Aug

20 Aug

TSSU USSR

(dor num ate time Completion of report after days )ber period

USSR SU Ts additional special and current Per

TsSU'S Republic (bofy groups )? republics

,separate ministries republican By II subor : local of for industry and

sovnarkhozy by ;a-R 's bynd USSR Uform report Accounting

breakdown Data territorial ,b( yranch unit ),eor tc. ssector ubordination

.OF Con STATISTICS -PRICE FINANCIAL AND FOR PLAN TsSU 1965 WORK THE Table -E2 -VIII

382 APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

2

6

5

Item .no

for prices retail of Structures

Not applicable .

:.,p1P2SSU TSource 965 plan 42-257

do

.. .do

republic .U-RU nion

1961-1964 :Price for indexes akupochnyye Pza.)( urchase sales kolkhoz fprices < or government to b. holesale W prices

certain consumer goods

Title short and work of description

yaOnc eare

Periodicity

S.S.R.'s Kazakh and krainian U ,III S.F.S.R. Russian -Group

Estimate

. .do

USSR

aLEMoldavian nd ,Armenian ithuanian atvian I-S.S.R.'s -stonian Group

data of Source

presentation of s for made were table original the modification editorial N.)purposes ote :( onsubstantive

Uzbek S.S.R.'s nd TK ,aGroup adzhik irgiz G eorgian B elorussian Azerbaydzhan --urkmen II

follows : deadlines as completion to work according grouped are republics union of administrations TsSU

's U-Rby separate nd ;aUSSR

breakdown Data ,b unit territorial y ( ranch e),s ubordination sector ortc.

.PRICE Con -STATISTICS AND FINANCIAL FOR TsSU OF PLAN WORK 1965 -2-VIII E -THE Table

work plan overall the portion of this in since reports all here submission omitted is of manner specifying table original the in Acolumn

1Oct.

S1 ept.

Dec. 15

SU TS USSR

teletype )."or telegraph (bs U rgent rochnaya are marked aexception ,1of 31 hich 1the 13 4y8nd items wsubmitted ith mail by to be were

TsSU's Republic (bofy groups ) republics

or num (date time Completion of after days period report )ber

OTHER SYSTEMS 383

Ist Copy

For

Accountant

:Gp7-38 .3,p1BSource 963 yudzhetnyy oloshchapov

602850 No. Account Personal

Controller

1963 March 25 opened Credit

U.S.S.R. by Gosbank noted be To

12 13

16

15

Place Seal for

subordinate to transfer for 602850 No. Account Budget On institutions centralized for and measures 1963 II Quarter for Credits

61

9.

1 2 3 4 5

Chief Accountant

personnel .of indicated Ministry Finance organization and recipient the of by aare endorsements dditional ; nd given (c)number is

Minister oFinance r ][of Administration Budget of Head

int57–358 here the presented form IExpenditure from differs .3,p1Schedule pinansy FAn 963 Ivliyev in shown is budget union on credits opening for nbudget form o V);(bof chapter sthe 1951-55 ee classification resembling al,1side in 25 isting 67on 7he reverse includes articles of list :()T1nd that

52,000

52,000 . Total

25,800

7,500

18,700

25,800

) side reverse

Total

Form No. 13

18 ,200

the under investments Capital plan state

bnd clothing of ,aAcquisition edding

repair Capital and buildings of

. work capital for plan state

Acquisint of and equipme ..... supplies tion the in not included investm Capital ents

bandaging and medicine of Acquisition

medical ,food for (in Expenditures sociocultural other children's ,and

acquisition book library ...

. trave offic and lnment ial s assig Tempo rary j-for train ob Expen tof on he ing ditures acient nd rch sresea ,work stude ific nts

7,500

28 2

FINANCING FOR SCHEDULE EXPENDITURE BUDGET THE BY MAINTAINED INSTITUTIONS

cor

.installations expenditures Other .

.... work capital for

uniforms .

supplies ....

?title Article

Suppl wages to ements .... Offic overh e expen ead .and ses

) institutions

Stipends ...

Wages ....

Article ino .n estimate

14

1963 March 25 receive Date d

Directi Specialons

Gosbank Reporting Symbol

200

of Ministry S.S.A. Uzbek the Health

rubles 52,000

S.R. S. Uzbek the of Ministry Health of

Budget 1963 Cfor Republican the on a redit Open

Enlightenment

Rubles Thousand TFifty - wo

Budget the by Maintained Institutions Financing For U.S.S. R. Gosbank of Office Republican Uzbek To

SCHEDULE EXPENDITURE

13 No. Form

10

No. Journal 345

Division

Estimate of

Amount

No. 002506

1963 March 25

.R. SS,Uzbek Finance of Ministry

]S[ tate Seal

FORM 1IX .NO Figure -A.3--

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

1

To be sent to the Gosbank U.S.S.R. Office

384

18

385

BUDGET APPROPRIATION PROCEDURES Figure

IX - A - 2 .--FORM NO . 15.

lst Copy

EXPENDITURE

SCHEDULE FOR FINANCING ECONOMIC ORGANIZATIONS

Form No.

[State Seal ] Uzbek S.S.R. Ministry of Finance 26 September 1963

No. 000568 EXPENDITURE SCHEDULE For Financing Economic (khozyaystvennyye ) Organizations To Uzbek Republican Office of Gosbank U.S.S.R. Open

a Credit on the Republican Budget for 1963

For

Ministry of Agriculture of the Uzbek

Amount

Twenty - Six

Division

151

Thousand Rubles

26,000 rubles

Ministry of Agriculture of the Uzbek

Section

42

Gosbank Reporting Symbol

S. S.R.

8 -- Other Organizations

Chapter

Article

S.S.R.

Capital Repair 32

Credits for Quarter IV 1963

Special Directions

Place for Seal Minister of Finance [ or ] Head of Budget Administration Chief Accountant

To be noted by Gosbank U.S.S.R. Date received

Journal No.

26

September 1963

284

Credit opened

Personal Account No. Controller

Accountant

Source :

Goloshchapov Goloshchap ov , Byudzhetnyy ,

1963 , p .

38 .

26 September 1963 341853

15

APPENDIX A --SUPPLEMENTARY FIGURES AND TABLES

386

Figure IX - A - 3 , -- FORM NO . 12.

EXPENDITURE SCHEDULE --FINANCING PLAN Form No. 12 1st Copy

[ Stamp ] Ministry of Finance R.S.F.S.R. 26 December 1962 No. 000456 To Republican Office of Stroybank EXPENDITURE SCHEDULE --FINANCING PLAN Capital Investments (Name of expenditure ) Under the estimate of Ministry of Communications R.S.F.S.R. On the republican budget of R.S.F.S.R. Division 124 , Chapter § [Section ] _ , Article 24

( in rubles )

of Source funding

Office Bank to sent be To

Investment

Including by quarter Name of Investment and Source of Funding

1.

2.

1963

Volume of work.. Additions to working capital of construc tion (organizations ] .. Including an increase in normed assets.... Total.....

1 . Republican budget.... 2 . Profits ... 3 . Amortization ......... Total financing.....

I

II

III

400,000

80,000

100,000

130,000

90,000

400,000

80,000

100,000

130,000

90,000

400,000

80,000

100,000

130,000

90,000

400,000

80,000

100,000

130,000

90,000

400,000

80,000

100,000

130,000

90,000

IV

1.

Profits on work per formed on force account.... 2. Savings from reductions in the value of con struction ..... 3 . Mobilization of inter nal resources... Including a reduction in normed assets.... Total....

Open a credit on the republican budget for Quarter I 1963 in the amount of 80,000 (eighty thousand ) rubles . Credits on the republican budget for subsequent quarters of 1963 are to be opened at the beginning of each quarter . Under the present plan , total [credits ] of 400,000 (four hundred thousand ) rubles are to be opened . Special Directions

Credits for 1963

Place for Seal Minister of Finance [ or ] Head of Budget Administration

Chief Accountant

Source :

Goloshchapov , Spravochnik , 1965 , pp . 39-40 .

BUDGET APPROPRIATION PROCEDURES

Figure IX - A - 4 .--FORM NO . 830 .

387

BUDGETARY AUTHORIZATION

Form No. 830 To Register 46 Planning and Financial Administration of the Ministry of Higher and Secondary Special Education R.S.F.S.R. (Name of credit administrator--transferor)

Moscow City Office

O [ ffice ]/ B [ ranch ] of Gosbank

19 September 1961

Operation Type 8

BUDGETARY AUTHORIZATION NO . 1519

Reduce the credits on our Budgetary Account and transfer

OUTGO 6102285

WHERE

Sverdlovskoye (District ] Branch of Gosbank , Moscow (Budgetary account No.) (Name of bank and address :

FOR WHOM

city , republic, kray , oblast)

INTAKE

6112183

All -Union Correspondence Institute for Finance and Economics (Name of credit administrator -- transferee )

R.

(Budgetary account No.) R.

Budget R.S.F.S.R.

Two Hundred Ninety Thousand Rubles

290,000.00

(Script)

( figures )

1961

Division 200

Quarter IV

Symbol 61

Ministry of Higher and Secondary Special Education R.S.F.S.R. Estimate Article ( for financing an economic organization )

Chapter

Special Instructions Expenditures may begin 1 October 1961

Signatures and Seal of Credit Administrator

Credit reduced

196 Signature and Seal of Transferor's Bank

Note : Source :

Credit opened 196 Signature and Stamp of Transferee's Bank

The reverse side of this form is similar to the reverse side of form No. 13 (figure IX - A - 1 ) . Smirnov , Bukhgalterskiy , 1963 , p . 54 .

* The supplier enters No. 830 here for intercity settlements , or No. 870 if the payer's account is carried by another bank in the same city .

R.

Manner of Shipment

Script

161655 161260 161261 163112 163113

No. ,Nomenclature Priceli st ,No. Article

Contract Order No. 63010

Receiver

and Payer address

Shipper

1963

:K3peratsii hlynov 2O.,p1Source 965

Accountant Senior

Chief of Sales Dept.

Seal and signatures supplier of

9 3

30.00 16.00 16.00 3.55 4.85

16.470 8.800 240 33.

provision No

Price

Quantity

1

of Stamp

aTOne .Rub Kop hree nd Thousand -84 Fifty Hundred Two

Date t of Shipmen

Number of positions 12

Account city the SGosbank ,in Moscow of partakovskoye Branch

bank supplier's

R.R. tariff

R.

R.

R.

bank of Signatures

Date of payment

1253.84 Total with penalty

1,213.24 40.60

494.10 140.80 531.84 31.95 14.55

No. Account Supplier's

24072102

*CREDIT Balance Account No. 830

Insulator 4569 -1B -303 1B- -304 Packi Barrels No. Barrels ITP ng 140 No. 150

Penalty for days

II Moscow

-K 883 No. Form

decentralized By clearing

Operation Type

1425003 No. Account Payer's

DEBIT

2 No.

date due Payment

Amount

Weight

Receiving Station

Oblast

PINVOICE - AYMENT DEMAND No. 171

Shipping Station

IBR 14401 No.

Oblast

PINVOICE - AYMENT DEMAND

Name

Plant yator 2o1 Sibi Krasnoyarsk City Account Gosbank in Krasnoyarsk of city the in Office City Head

26.III 1964

28 March 1964

Supplier address and

-2PATE lant Moscow City

Documents provided as contract by sent ()t[o] onanded hpayer

Unit

Centner

Unit of measure

5/of XII

/ aybill Receipt and 136757 W R.R. No.

[on bank payer's in ]Arrived

FORM .8IX -NO 83 Figure B1.K -388 APPENDIX A --SUPPLEMENTARY FIGURES AND TABLES

FOR

R.

In script

WHOM FOR

WHERE

1964 A 6 pril

Source K hlynov peratsii 1O .7,p: 2965

signature acknowledging Bank authorization of receipt

addresses two to

below indicated

Spartakovskoye

Name of e paye .25 Kop Hundred Rub Four Eighty One

Plant Machinery Oxygen Moscow

account payee's the emit to r ,and transfer you with carried our off Write

R.

R.

signature ]s and eal [Payer's Client's

account our n from authorizatio this for expenses telegraph the off Write

IBR No. *No.

N 435 No. AUTHORIZATIO PAYMENT

Gosbank of O / ffice Branch

)for s u (;"post rgent telegraph b:b yrochnoy y indicate settlements intercity

cylinders oxygen for 1964 March 27 of 644 No. Bill on

Moscow of ity C ,Branch Gosbank e Proletarskoy

M , oscow Balakireva imeni Factory

)(,k blast o ray epublic r ity c :and address bank of Name

Moscow City

Namer e of pay

N AUTHORIZATIO PAYMENT 873. No. . FORM -B2 -IX Figure

870

196

figures

Bank signatures

for Penalty R. days

Account Balance

on bank the by out Carried

Amount penalty including

No. Account Payee's 184-25

24013

Account Balance No. 960032

Telegraph R. expenses

No. Account Payer's CREDIT

22204

DEBIT

Operation 1No. type

873 No. Form

THE SYSTEM OF PAYMENTS 389

Completed in 3 copies, or 2 copies for remittance by telegraph . For settlements through 2 intracity banks, 4 copies are prepared . The last copy of the authorization with the clerk's signature and stamp of the bank is returned to the payer . This signature without the bank's emblematic seal in place of the stamp does not confirm execution of the authorization , but is only a receipt for reception of the authorization from the client . * For intercity settlements, the payer enters the balance account num ber 830 , and for settlements between two intracity banks , 870 . The amounts of telegraph expenses are entered by the bank .

390

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES Figure IX - B - 3 .-- SETTLEMENT CHECK

This check

is good for

10

days , not counting the day of issue

Name of personal account holder Gosbank U.S.S.R.

Klin

( Bank's stamp_with

Machine Tool Plant

Personal account no .

Klin

76112

Branch

IBR No.

21118

ChR No. 000000

SETTLEMENT CHECK from

limited checkbook

f

Rub .

29

or

IBR No.)

Кор .

27

( figures Transfer

to Account No. 22202 of the Klin

Artificial and Synthetic Fiber Combine ( Name of organization )

Twenty Nine Rubles 27 Kopecks

( Amount

script)

in

in payment for goods on

Invoice No.

395

of 15 May 1965

|

Place of

City of Klin

issue

May

15 (Month Ivanov

Signature

The issuance of change

Source :

Khlynov ,

Operatsii ,

in

cash

1965 ,

p .

on

in script )

by authorization

this check

103 .

1965

is

forbidden

station Shipping

station Receiving

: Source

344100 347401 345603 391508

Nomenclatur No. e , Pricelist No. , Article

Addendum

1964 12.II of 25 No.

O / rder Contract

Receiver

50813 Account No.

and Payer address

Shipper

Account 1757303 No.

Supplier address and

11

Chief Storage of

100 40 50 1

Quantity

%5.80 % 30 3.

.Kop 5 3Forty Rub Accountant

Markup Delivery

boxes Bergman sockets Carbolite holders Ceiling Packing

0.15 0.21 0.26 0.59

30988 No. W aybill /and Receipt

shipment of Manner

Name

Weight

M . oscow Obl

Moscow of C ,State Bank oye Branch Spartakovsk inity

INVOICE

Price

of Mozhaysk city the in Bank State in

ion Administrat Unit Hydraulic Mozhaysk

positions of No. 1 Date shipment of

.p7,Khlynov 965 1 peratsii O

Units

Unit of measure

1964 III 24.

Mozhaysk of City

2 No. age Stor

Trust Mosvodokanalprom ,4Per .Moscow leteshkovskiy P

.NO 8 FORM -. -4B 68 IX Figure

March 1964 28 of

Purchaser's Cipher

2.14 1.22 40.35

15.00 8.40 13.00 0.59 36.99

Amount

purchaser to Delivered

Directive payment to as refusal or accept to

Demand Payment to

INVOICE

No. Operation Storage

30988 No.

30988 No.

868 No. Form

THE SYSTEM OF PAYMENTS 391

Trade ..

banks ment

k -Non hozrasche organizat t ... ions ons ... instituti Budgetary Clientele of long -term invest

Total sample ,million rubles ....

413.5

106.1

51.2

45.3

54.5

53.2

The distribut ion sector "By w as com

54.7

45.5

46.8

48.8

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

Sourc Ryauz B Tertu and eskaya ankov :65 ,1 961 sov .p1 puted data from ruble terms given in sourc .the e

307.4

100.0

100.0

4.5 10.7

1.9

2.6

3.1

100.0

18.9

5.0

100.0

34.1

7.4

34.6

88.2 65.4 100.0 100.0

12.4

3.1

5.2

14.1 21.3 11.8

85.9 78.7 100.0 100.0

17.9

4.6 13.3 2.0

3.4 36.6

19.1 24.7 59.3

75.3 40.7 100.0 100.0

100.0

10.4

4.4 11.2 organizations sales and Supply 2.3

31.7

2.5 14.1 17.4 3.6

23.3

20.6

25.7

79.4 76.7

74.3

Goods and Other services

By purpo se ) ithin w (secto r

PAYMENTS ,B GOSBANK :IN PURPOSE AND SECTOR PERCENT NONCASH TOTAL OF DISTRIBUTION -C1.Y IX Table --

80.9

14.1 11.1 2.5

100.0 100.0

65.9

87.6

82.1 13.6

12.3 7.6

100.0

purposes

All

100.0

and services

Other

100.0

purposes

Goods

rounding )may to due F add not ( igures

100,0

All

10.2 2.5 .. and communications 6.1 Transport

food industries Light and

Khozraschet organizations

organizations .Other

Other sectors

Local industry .

.. Agriculture

industry Heavy ..

. Total

sector Paying

sec By tor in e () ith w pos pur

SURVEY SAMPLE 1 ,J958 16-21 UNE

392

1 2 3

l ,Che imi goo for cks and ted ds

Residual .

certified ... Arbitration orders

4.2

O965 Khlynov 1 .,p6 peratsii 7

0.10 0.09

0.08 0.1

0.03

0.07 0.25

0.07 0.16

0.02

0.32

0.12 1.54

0.2 1.37

0.23

1.66

1.57

--

2.7 0.3

of

Amount

35.6

33.7

160.7

100.0

32.3

44.9

152.8

100.0

A ND D ,B ESTINATION PURPOSE GOSBANK Y PAYMENTS IN NONCASH OF TOTAL DISTRIBUTIO PERCENT -C2.-IX Table

36.3

244

149.7

100.0

documents

Number

Allposes pur

of of documents Intracity Intercity Total payments

Number

Unless otherwise indicated I ,Source konnikov :94 D enezhnoye 962 p1 .2

0.09

0.03

0.02

0.06 0.09

0.15

0.3 1.2

0.01 1.5

1.0 0.6

11.3

3.1

2.1

23.8

0.9

53.2

42.5

18.1

85.3 54.8 29.6

13.5

100.00

69.8

100.00

32.3

100.00

Amoun t of payme nts

76.9

Gindin I mproving 1 ,".9 p962 p -18

Certis check fied and payme nt ... authorizations Settlement ,not checks bank

ser vices . Wit dep h t osi . With out depos it .

Unl imited .....

Checks transport for services w ith deposit .,Limited

Letters credit of . accounts Separate

. authoriza Payment tion Planned payments m ( ainly by pay authorizations ).ment

. Subse accep tance quent Without e acceptanc

demands Payment Prior .acceptance

Total

instrument Payment

services and Goods

rounding )may to due add not (Figures

18-30 ,1 961 S EPTEMBER SURVEY AMPLE INSTRUMENT :TYPE OF

PAYMENT STATISTICS 393

1 2

Source : 1961 Derived -from the elements reported .

Barkovskiy O rganizatsiya ,.p5 11 962 I mproving 1 ,"p.Gindin 962 3

31.3

36.0

Inter city .

Derived -from a -C11958 IX table nd the in data that to source .other table

4.7

126.7

131.4 168.6

237.3

8.8 9.2 .

264.0

16.9 65.2

Intracity

17.9

82.1

25.7

Other

AND PAYER ,B GOSBANK PURPOSE IN PAYMENTS NONCASH OF DISTRIBUTIO PERCENT --C3.Y IX Table

74.3

and services

Goods

100,0

1961 ):Destination Survey (September

organizations k - hozraschet Non

organizations Khozraschet

100.0

purposes

All

1

Total .

Total .

Survey ):1958 Payer (June

on destinati or Payer

to rounding due add F not may () igures

AND ,1 SURVEYS 1961 :S958 DESTINATION OR AMPLE

394 APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES

395

PAYMENT STATISTICS

Table IX - C - 4 .-- PAYMENTS FOR GOODS AND SERVICES BY KHOZRASCHET ORGANIZATIONS --PERCENT DISTRIBUTION BY TYPE OF GOSBANK ACCOUNT AND ESTIMATED CREDIT PARTICIPATION : 1958

Estimated credit participation in payments

Distribution of payments

Bank account and source Accounts initially charged

Sources of clearing account payments

(1 ) Total ..

Ultimate accounts and sources

Regrouping by major source

( 3 ).

(2 )

(5 )

(4 )

100.0

40.4

100.0

11.6

4.4

16.0

Settlement and current accounts ..

Adjustment for " own " funds in special loan accountsi

100.0

(Deposits) 17.8

Minor payment accounts2 With prior deposits 2 Without prior deposits

44.6 5.9 438.7

Loan accounts and credit ..... Ordinary loan accounts .. Special loan accounts . Settlement credit...

(x )

Clearing accounts . Of which , actual offsets ....

(x )

X 1

Not applicable .

40.4

23-25

3.4 1.8 1.6

3.4 1.8 1.6

....

100.0

53.0 5.9 43.1 4.0

8.4

4.4 4.0 (x ) 27.5

(x ) 27.5

(Bank credit) 354.6

50

(Offsets) 25-27 27.5

Entry represents zero .

The source ( p . 175) justifies these figures on the grounds that to some extent special loan accounts represent deposit funds rather than credit, since in some trade sectors all income is credited initially to this account . 2 " With prior deposits" includes letters of credit, " separate accounts , " limited checks , certi fied checks , and payment authorizations, for which ( own or borrowed ) funds are deposited in reserve before payments are made . "Without prior deposits" includes unlimited checkbooks for transport services and limited checkbooks tied to special loan accounts . Bank credit for payments without prior deposits is initiated by drawing checks ( Ikonnikov , Denezhnoye , 1962 , pp . 297-298 ) . 3 The source gives " 53.1" for this entry , unaccountably ignoring the 1.6 percent ultimately chargeable to credit . See footnotes 2 and 4 . 4 This entry includes only those payment documents charged directly to such accounts and not indirect charges via checking accounts (see footnote 2 ) or clearing accounts ( see column 2 ) (ibid . , p . 297 ) . Source : Shvarts , Beznalichnyy , 1963 , pp . 174–175 . Columns 1 , 4 , and 5 are given directly by the source . Column 3 is derived from columns 1 and 2 . Column 2 is estimated from the following data in the source :

A.

Total volume of clearing - type payments Actual offsets of mutual claims .. Balances covered by transfers from settlement and special loan accounts ... Remaining balances charged to settlement credit .

100 68

22 10

B. The share of settlement plus special loan accounts ( 22 percent of total clearings 8.8 percent of total payments ) is arbitrarily divided equally among the two types of accounts by the source ( i.e., 4.4 percent of total payments from settlement accounts , and 4.4 from special loan accounts ) . Data in column 1 are from the June 1958 sample survey ; data in column 2 are described as having been obtained from a separate study (obsledovaniye ) , but appear to refer to annual data for the year 1958 , which are reported elsewhere ( ibid . , p . 169 ) to be 68.2 , 21.6 , and 10.2 percent .

396

APPENDIX A -- SUPPLEMENTARY FIGURES AND TABLES Table IX -D - 1.--LIST OF MODEL FORMS RECOMMENDED BY GOSBANK FOR USE IN FINANCIAL TRANSACTIONS

Form no .

883 -K

883- K EKSPORT

849 - K

Title

Invoice -Payment Demand ( Schet-platezhnoye trebovaniye )

..do ..

.do ..

868

Invoice (Schet-faktura )

870

Announcement of Refusal to Accept (Zayavleniye ob otkaze ot aktsepta ) Register of Payment Demands Sub mitted for Collection (Reyestr predstavlyayemykh na inkasso platezhnykh trebovaniy )

88 %

Type of transaction and purpose , or area of use

INVOICE -PAYMENT DEMANDS Combines invoice (to payer) and payment demand (to bank) for collection . General purpose document used for both inter- and intracity collection operations , and for all forms of acceptance . Used by suppliers of goods destined for export and by foreign trade associations for imported goods . Adapted for transcription of data to the punch -card accounting system used in foreign trade . Separates the turnover tax component when the tax is diverted by the bank in the course of the transaction (e.g., for sugar, alcohol), or separates the price differential component in transactions of grain receiving organizations. General purpose document, can be used in all types of settlements . Not in itself a pay ment instrument , except when serving as an extension of 883-K to provide additional space for commodity listing . Submitted by payer to his bank to stop payment (full or partial) on a Payment Demand . Used only under subsequent acceptance system . First copy is returned to the supplier as a bank receipt for Invoice -Payment Demand; the second copy serves as a basis for settlement credit (when records are kept by the bank ).

PAYMENT AUTHORIZATIONS General purpose document drawn by the payer which authorizes his bank to transfer money from his account to the payee's account . Can not be used to withdraw cash .

873

Payment Authorization (Platezhnoye porucheniye)

872

Grouped Payment Authorization For transfers of funds to several (up to 7 ) (Svodnoye platezhnoye porucheniye payees .

872 - a

.....do ..

872-2

.do..

872- P

.do ..

830

831

Budgetary Authorization (postal) (Byudzhetnoye porucheniye poch tovoye ) .do .... ( telegraph ) (.....[ telegrafnoye ])

For transfers of funds to several (up to 3) payees . For transfers of funds to several (up to 7 ) collective farms (kolkhozy) from procurement organizations . Used by Ministry of Communications for trans fers of funds by postal money order . For intra- and intercity transfers of (central) budget credits by credit adminis trators to subordinate units . .do .

Number of copies submitted to bank

Intrabank Intracity

883- K | 849 - K 3 4 4 4

Intercity (supplier receives credit against documents 4 en route ) Intercity (supplier does not receive such credit (see above ) or is entrust ed by the bank to 3 keep records ) When used as attachment 1 to 883-K

Availability of example of form

Figure IX - B- 1

1962 5 (NA )

Figure IX - B -4

Intrabank Intracity Intercity

3 4 3

1965

Normally If supplier does not receive settlement credit, or maintains own record of pay ment documents sery ing as security

2

1965

Intrabank Intracity Intercity , postal Intercity, telegraph For acceptance by bank For acceptance by bank of budgetary organi zation's check Intrabank Intracity Intercity, postal Intercity, telegraph .....do..

3 4 3 2 2

1

1 3 4 3 2

Figure IX - B-2

(NA )

1965

.do .

1965 (NA )

(NA ) 4

Figure IX -A -4

3

(NA)

LETTERS OF CREDIT AND SEPARATE ACCOUNTS

886

888

Application for Letter of Credit (Zayavleniye na akkreditiv)

Invoice-Register ( Schet -reyestr )

Also used for opening a separate account for a purchaser in a supplier's bank

Combines the functions of an invoice ( to payer ) and a payment instrument ( to supplier's bank ) against letters of credit or separate accounts .

For letter of credit : by mail by telegraph For separate account: by mail by telegraph

1965 5 3

3 2 3

1965

397

STANDARDIZATION OF PAYMENT DOCUMENTS Table IX -D - 1 .--LIST OF MODEL FORMS RECOMMENDED BY GOSBANK FOR USE IN FINANCIAL TRANSACTIONS --Con .

Form no .

Title

Type of transaction and purpose , or area of use

Number of copies submitted to bank

Availability of example of form ?

CHECKS 895.

Application -Authorization (Zayavleniye-porucheniye)

896

Application (for issue of checkbooks ) (Zayavleniye [ na vydachu chekovykh knizhek ] )) Register of Settlement Documents (Reyestr po raschetam s platel'shchikami

898

801

Directive (Rasporyazheniye)

893

Collection Authorization (Directive ) ( Inkassovoye porucheniye rasporyazheniye ])

893 - f

875 876

.....do..

Application ( for Loan ) (Zayavleniye (na vydachu ssudy ] ) Loan Contract (Srochnoye obyazatel'stvo )

Combines application for limited checkbook and payment authorization to transfer funds from own account to separate deposit account for checks . Application for checkbook : Monetary, settle ment, limited (without deposit ) , and un limited , Used by payee to list the certified payment authorizations, certified checks, or checks fram limited and unlimited checkbooks de posited in his bank . EXACTED PAYMENTS Issued by superior organizations having the authority to settle disputes ( involving amounts between 25 and 100 rubles ). Upon receipt by a claimant , the form is submitted to the bank together with form No. 893 . Submitted by a claimant with executive documents ordering a transfer or payment. In cases not requiring executive documents (i.e., incontest able exactions) , this form serves as a " Directive ," Used by financial organs to exact unpaid taxes or other payments due. Designates the budget classification of the payment. SHORT- TERM CREDIT

Intrabank Intracity

As Authorization As Directive (One additional copy for two -bank intra city transactions) Intrabank or intercity Intracity

General purpose, used for a variety of short term bank loans. For ordinary short- term bank loans.

3

1965

1

1965

2 3

1965

1

1965

2 3

1965

3 4

1958

2

1960

1

1960

1

1962

1

1962

1

1962

2 or more

1958

WAGES

863

Statement of Accrued and Due Wages (Spravka o nachislennoy i pri chitayushcheysya zarabotnoy plate ) .....do ..

864

.....do..

202

Card ng Sample Signatures and Certifyi Seal (Kartochka s obraztami podpisey i ottiskom pechati ) Certification of Authorized Personnel (Spravka o polnomochiyakh )

800

227

867

( NA )

Authorization ( to Receive State ments of Personal Account and Attachments ) (Doverennost ! [ na polucheniye vypisok iz litsevykh schetov i prilozheniy k nim ]) Application for Opening an Account (Zayavleniye ob otkrytii scheta )

For use by state farms and other state agricul tural enterprises, this form is presented (with check for drawing payroll cash ) in second half of month . Used by bank to control use of wage fund. Same general function as form No. 800. For use by industrial, transportation , and trade enter prises and organizations. Same general function as form No. 800. For use by budgetary institutions (subject to bank con trol over wage fund) and "nonproductive" (e.g., supply and sales, administrative ) khozraschet organizations. OPENING AND USING BANK ACCOUNTS Signatures of personnel authorized to use an organization's account and seal, notarized or certified by its superior agency .

Issued by a superior agency to certify the officers of an organization and their represen tatives empowered to sign settlement documents . (Not required if the superior agency certified signatures on form No. 202 ). Issued to employees of account-holding organiza tions other than those officers empowered to use the accounts.

(NA )

Submitted by an enterprise or economic organiza tion , together with the necessary documents (resolutions, decrees, etc.) substantiating the legality of the applying organization and forms Nos . 202 and 227, to open a basic " settlement" or " current" account .

(NA )

1958

1

1958

1958

NA Not available . 1 A figure number indicates that a version of the form is translated and reproduced in appendix A. A date indicates that an example of the form is contained in the source cited below with that year of publication . Source: Form numbers, titles, descriptions, and number of copies submitted to bank , as of February 1965 --Goloshchapov , Spravochnik , 1965, pp . 356-359. Examples of forms--Galimon , Kontrol', 1962, pp. 14 , 26 , 33; Khlynov , Operatsii, 1965, passim ; Pronin, Raschetnyve, 1958, pp. 14 , 18 , 25 , 30 , 117.

APPENDIX

B

LIST OF SOURCES CITED Aleksandrov, A.M. Finansy 252 pp .

sotsializma (Finances of Socialism ).

Moscow , Izdatelstvo “ Finansy ,” 1965.

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