The Republic of Moldova MINISTRY OF FINANCE STATE TREASURY

Management , accounting and reporting of externally financed projects

2

Regulatory framework

      International agreements Decision by Parliament on ratification of international agreements Public Debt Law, Law on Government Guarantees and Law on Government On-Lending Budget System & Budget Process Law State Budget Law; Decisions by Local Authorities approving annual local budgets (for a given year) Regulation on institutional framework and mechanism for coordinating assistance by international donor organizations and donor countries to the Republic of Moldova (Government Decree) 3

Externally financed projects and the budget process



Budget planning

100%



Execution:

-

through Treasury System

53.1%

through the Banking System

46.9%



Reporting

100%

4

Budget Planning

Components of state and local budgets:



Core component



Special means



Special funds



Externally financed projects

5

Share of externally funded projects in the budget (revenues)

Budget components State budget Local budgets

MDL mln.

Amount USD mln.

Удел ьный вес, % Amount MDL mln USD mln

Core component

14455.4

1189.4

87.3

7034.6

578.8

Share, % 93.2

Special means Special funds

1093.5

281.3

90.0

23.1

6.6

1.7

302.0

90.8

24.8

7.5

4.0

1.2

Externally financed projects

726.8

59.8

4.4

124.2

10.2

1.6

Total 16557.0

1362.3

100 7551.6

621.3

100

6

The share of externally funded projects in the budget (expenditure)

Budget components State budget

Amount MDL mln USD mln

Local budgets

Share , % Amount MDL mln USD mln

Core component Special means

16863.2

1217.0

1387.5

100.1

84.2

6.1

7435.0

344.7

611.7

28.4

Special funds

291.2

24.0

1.5

98.8 8.1

Externally funded projects

1653.1

Total 20024.5

136.0

1647.6

8.2

186.5

100 8065.0

15.3

663.5

Share, % 92.2

4.3

1.2

2.3

100

7

Budget Planning

State Budget Law for 2012 Article 21. – The Ministry of Finance is in the right to: а) - upon application of key budget ministries - change the approved state budget allocations: For projects funded out proceeds of foreign grants and credit, as well as to use the remaining balances of monetary resources sitting in project accounts at the beginning of a year 8

Implementation of externally financed projects

Budget Externally Financed Projects Treasury System Treasury & Banking Systems Banking Systems State budget Local budgets бюджеты Total

40 8

48

12 8

20

11 -

11

17 -

17

9

Rules of providing treasury system services to externally financed projects

      Separate Bank and Treasury accounts for each donor in foreign & local currencies Interest on balances - in bank accounts – that are recorded to local budgets Expenditure for servicing bank account that are paid by state/ local budgets Procurements made as per available contracts Contracts registered with a local treasury Prioritized servicing of projects 10

Providing treasury system services to externally financed projects

Project implementation units of externally financed projects Treasury Commercial bank Enterprises

11

Current Budget classification & Chart of Accounts

Budget classification Treasury Chart of Accounts

Revenues classification 412.02 “Grants for externally financed projects” 4681 “Foreign grants, other state budget receipts and transfers for operations of externally financed projects” Functional classification 28.03 “Loans from international financing organizations” 8582 “External loans to the state budget from international financing organization for operations of externally financed projects” Economic classification of expenditure 291.00 “Capital transfers for externally financed projects” 2681 “State budget expenditure out of proceeds of foreign grants , foreign loans, etc. for operations of externally financed projects” Organizational classification 7XX – State Budget 9XX – Local Budgets 12

50 51 52 53 54 55 56 57 …

Register of foreign donors

Full name

Code Accronym

Council of Europe Development Bank European Investment Bank СЕВ EIB German Bank KfW KfW European Bank for Reconstruction & Development EBRD World Bank European Commission Global Fund to fight AIDS/ TB / malaria International Fund for Agricultural Development WB EC GF IFAD … Другие доноры … 99 13

Treasury account for the proceeds of foreign grants to be used for externally financed projects

Has 4 parts – 15 characters/ digits XXXX XXX XX XXXX XX Part I – 4 digits – code of balance account from the Chart of Accounts ; Part II – 5 digits – chapter/ paragraph of Budget Classification; Part III – 4 digits – code of a public institution , beneficiary, that has received proceeds of foreign grants; Part IV – 2 digits –budget classification code (functional, organizational); foreign donor’s code. Example:

4681 41202 3649 01

Where,

4681

– “Foreign grants, other receipts & transfers of state budget for operations of externally financed projects”

412.02

– “Grants for externally financed projects”

3649

– “Consolidated unit for implementing the Development programs” International Fund for Agricultural

01-

11.05 “Activities & services in agriculture, forestry, fishery & water industry, not attributed to other groups ”, 750 “Project of providing financial services and developing agribusiness in rural areas”, 57 “ International Fund for Agricultural Development “ 14

Treasury account for proceeds of foreign loans to be used for implementing of externally financed projects

Has 4 parts – 15 characters/ digits XXXX XXX XX XXXX XX Part I – 4 digits –code of balance account from the Chart of Accounts; Part II – 5 digits – main group code/ functional classification group of budget expenditure ; Part III – 4 digits - code of public institution, beneficiary of resources of foreign credit ; Part IV – 2 digit – budget classification code (functional, organizational); foreign donor’s code; Example:

8582 02803 3649 01

Where,

8582

– “Foreign loans of state budget from international financing institutions for operations of externally financed projects”

28.03

- “Loans by foreign financing institutions”

3649

– “ Consolidated unit for implementing the International Fund for Agricultural Development programs”

01

- 11.05 “Activities & services in agriculture, forestry, fishery & water industry, not ascribed to other groups ”, 750 “Project of providing financial services and developing agribusiness in rural areas”, 57 “ International Fund for Agricultural Development” 15

Treasury expenditure account for proceeds of grants and foreign loans used for implementing of externally financed projects

Has 4 parts – 15 characters/ digits XXXX XXX XX XXXX XX Part I – 4 digits – code of balance account from the Chart of Accounts; Part II – 5 digits – main group code/ functional classification group of budget expenditure ; Part III – 4 digits - code of public institution, beneficiary of resources of foreign credit ; Part IV – 2 digit – budget classification code (functional, organizational); foreign donor’s code.

Пример :

2281 29102 3649 01

где,

2281

“State budget expenditure out of proceeds of foreign grants, foreign loans, etc. receipts for implementing operations of externally financed projects”

291.02

– “Share of foreign grants”

3649

– “ Consolidated unit for implementing the International Fund for Agricultural Development programs”

01-

11.05 “Activities & services in agriculture, forestry, fishery & water industry, not ascribed to other groups ”, 750 “Project of providing financial services and developing agribusiness in rural areas”, 57 “ International Fund for Agricultural Development” 16

New Budget Classification and new Chart of Accounts

Budget Classification / Chart of Accounts Economic of Classification / Chart of Accounts

Program classification “Activity”

Grants

131120 “Current grants” from foreign governments for externally financed projects” 131220 “Capital grants” from foreign governments for externally financed projects” 132120 ““Current grants” from international organizations for externally financed projects” 132220 ““Capital grants” from international organizations for externally financed projects” 524000 “Foreign loans”

Loans Expendit ure

Class 2 “Expenditure” Class 3 “Non-finance assts” 7XXXX – State Budget / Local Budgets 17

Reporting



Monthly

Project Implementation Units



Quarterly & annual

Ministry of Finance Line Ministries Project Implementation Units Line Ministries Ministry of Finance

18

Externally financed Projects serviced by Treasury system

Reporting

On a daily basis, statements from the serviced bank Externally financed Projects serviced by Banking system Reports are entered manually into information System of Ministry of finance 19

Challenges

 Projects are dispersed across the Treasury & banking systems  Reporting  Accounting  Technical capacity  Staff 20

Solutions

 Integrated management of externally financed projects serviced by Treasury system  Implementation of an Integrated Public Finance Management Information System (IPFMIS)  Uniform rules and methodology  Training 21

Thank You for Your attention!

www.mf.gov.md