Transcript Slide 1

Government Finance Statistic and New
Budgeting and Accounting Classification
Structure
CAUCASUS REGIONAL
MEETING
March 2006
Presentation Focus
• Overview of Accounting Reform Project
in Armenia
• New Economic Codes
• New Functional Codes
• New Account Code Structure
• Problems Encountered
• Moving Forward
2
Second Generation Accounting
and Reform Project
• Government financial management
information system (GFMIS)
• International Public Sector Accounting
Standards (IPSAS)
• Chart of accounts in compliance with
Government Finance Statistics (GFS)
2001
3
Second Generation Accounting
and Reform Project
• All of these initiatives result from IMF /
World Bank conditionalities without a
real understanding of the implications or
the work necessary to implement
4
IPSAS
• IPSAS Standards are international
financial reporting standards for the
public sector
• IPSAS Standards are issued by the
IPSAS Board of the International
Federation of Accountants (IFAC)
www.ifac.org
5
IPSAS
• Status
– Cash Based Standards Approved by
Steering Committee with Transition to
Accrual
– Steering Committee Approved Work Plan
– Cash Based Standards Have Been
“Unofficially” Translated into Armenian
– MoFE staff is preparing statements based
on 2005 financial information
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IPSAS
• Key Dates
– Identification of problems to implement cash
based standards – 3/31/2006
– Strategy to implement the standards and
transition plan for accrual based standards –
6/30/2006
– It is expected that a new reporting format to
comply with the new standards will be
developed for use by January 1, 2007
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IPSAS
• Problems and Issues
– Currently using the Soviet Manual from 1980
which is a coding structure and describes
entries
– There are no financial policies
– Lack of understanding about:
• Accrual based IPSAS and unwillingness to “go
backwards”
• What financial reporting standards mean
– There is no certification process or training for
governmental accountants and external
auditors
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New Economic and Functional Codes
• The primary focus was on meeting a
conditionality that required compliance
with GFS 2001.
• As GFS only addresses economic and
function codes, this was the original
focus.
• We spent two years developing the
codes and the annotated manual
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New Economic and Functional Codes
• Objectives of the new economic and
functional coding structure were expanded to:
– Comply with both GFS and IPSAS
– Allow for cash basis with transition to accrual
basis
– Allow for cash based budgeting and accrual based
accounting
– Ensure consistency for a GFMIS
– Provide enough detail for financial management
purposes
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New Economic and Functional Codes
• GFS 2001
– Published by International Monetary Fund
– The primary purpose is to “provide a framework
suitable for analyzing and evaluating fiscal policy”
– GFS is a statistical reporting system NOT an
accounting system
– The GFS manual focuses on the accrual basis,
but cash reporting will be implemented first
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New Economic and Functional Codes
• New Economic and Functional Codes
– Used for Budgeting and Accounting
– Replace Functional Codes
– Replace the Balance Sheet, Revenue and
Expense Codes Used for Budgeting and
Reporting
– Impact All State Budget Institutions, Local
Self-Governing Units and NCE’s and JSC’s
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New Economic Codes
• Breakdown of the Fields:
– Class
– Category
– Group
– Synthetic
– Analytic
– Sub-Analytic
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New Economic Codes
• Ten Classes
– Balance Sheet
•
•
•
•
000000 – Non-Financial Assets
100000 – Financial Assets
200000 – Liabilities
300000 – Net Assets / Equity
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New Economic Codes
• Ten Classes
– Expenses
• 400000 – Current Expenses
• 500000 – Outflows For Non-Financial Assets
• 600000 – Outflows For Principal Repayment
and Acquisition of Financial Assets
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New Economic Codes
• Ten Classes
– Revenues
• 700000 – Current Revenues
• 800000 – Proceeds From the Sale of NonFinancial Assets
• 900000 – Proceeds From Borrowing and The
Sale of Financial Assets
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New Function Codes
• Breakdown of Function Code
– Section – 2 Digit
– Group – 1 Digit
– Class – 1 Digit
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New Function Codes
• New Codes By Section:
–
–
–
–
–
–
–
–
–
–
1100 GENERAL PUBLIC SERVICES
1200 DEFENSE
1300 PUBLIC ORDER AND SAFETY
1400 ECONOMIC AFFAIRS
1500 ENVIRONMENTAL PROTECTION
1600 HOUSING AND COMMUNITY AFFAIRS
1700 HEALTH
1800 RECREATION, CULTURE AND RELIGION
1900 EDUCATION
2000 SOCIAL PROTECTION
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New Function Codes
0100
0200
0300
0400
0500
0600
0700
0800
GFS 1986
STATE AND COMMUNITY SERVICES OF A
GENERAL NATURE
DEFENSE
MAINTENANCE OF PUBLIC ORDER,
NATIONAL SECURITY AND JUDICIARY
ACTIVITY
EDUCATION AND SCIENCE
HEALTH
SOCIAL INSURANCE AND SOCIAL
SECURITY
CULTURE, INFORMATION, SPORT AND
RELIGION
DWELLINGS AND UTILITIES
GFS 2001
1100 GENERAL PUBLIC SERVICES
1200 DEFENSE
1300 PUBLIC ORDER AND SAFETY
1900 EDUCATION
1700 HEALTH
2000 SOCIAL PROTECTION
1800 RECREATION, CULTURE AND
RELIGION
1600 HOUSING AND COMMUNITY AFFAIRS
0900 FUEL AND ENERGY FACILITIES
1000 AGRICULTURE, FORESTRY AND WATER
MANAGEMENT AND AQUACULTURE
1400 ECONOMIC AFFAIRS
1400 ECONOMIC AFFAIRS
1100 INDISTRY, MINERALS, CONSTTUCTION
AND NATURE PROTECTION
1400 ECONOMIC AFFAIRS
1200 TRANSPORT, ROAD MANAGEMENT AND 1400 ECONOMIC AFFAIRS
COMMUNICATION
1300 OTHER ECONOMIC SERVICES
1400 ECONOMIC AFFAIRS
1400 EXPENDITURES NOT BELONGING TO THE
MAIN GROUP
1500 ENVIRONMENTAL PROTECTION
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Account Code Structure
• The primary focus was to meet the
conditionality that the current structure
comply with GFS 2001.
• The new codes were integrated into the
current framework
• Further work is being done to expand
and modernize the structure before a
GFMIS is implemented
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Account Code Structure
• Further Work Is Needed To:
– Accommodate program budgeting needs
– Meet reporting needs of individual budget
Institutions
– Provide for a richer administrative
hierarchy
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Account Code Structure
• Further Work Is Needed To:
– Include all future information needs even if
they will not be used in the short-term
– Ensure that each segment is uniquely
numbered to facilitate reporting
– Ensure all field segments are uniquely
defined so there is no overlap in definition
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Account Code Structure
A uniform classification system is a
system for classifying economic events
and transactions. It represents the
basis for:
– Budgeting and Accounting
– Financial Reporting
– Statistical Reporting
– Internal Management Reports
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Account Code Structure
A classification system does NOT
dictate the basis of budgeting or
accounting or financial reporting
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Account Code Structure
• Flexible
– Must meet all of the financial information
and needs of all levels of government:
 Parliament and Government
 Ministers
 Managers, budget staff, accountants and other
internal staff
 International organizations / donors
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Account Code Structure
• Current Structure in Armenia
–
–
–
–
Administrative / Organization
Geographic
Functional
Economic
•
•
•
•
Assets
Liabilities & Equity
Revenues
Expenditures
– Program
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Account Code Structure
Fund
Administration / Organization
Sub-Organization
Geographic
Economic
Sub-Economic
Function
Source of Funds
Program / Project
Armenia
Serbia
X
X
X
X
X
X
X
X
X
X
X
X
Bosnia
X
X
X
X
X
X
X
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Account Code Structure
• Budget Control Versus Accounting
– Budget control can be at a different level than the
accounting
Budget
Budget, Budget Control, Budget Execution
422000 Travel Costs
Accounting
422211 Per diem allowance for business travels abroad
422221 Hotel allowance for business travels abroad
10,000
Accounting
7,000
Variance
3,000
5,000
2,000
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Account Code Structure
Name of Segment
Administrative
Type of Public Body
Public Body
Branch
Ministry / Agency
Cost Center / Department
Definition
Identifies organizational reporting relationships so reports
can be developed at any level of the organizational hierarchy.
State, communities, joint stock company
Unique identifier for each public body
Legislative, Judiciary and Executive
Hierarchy of Ministry / Agency
Level of
Budget
Control
Required Fields
On Accounting
Transactions
MoFE
MoFE
MoFE
MoFE
Ministry
X
X
X
X
X
X
X
X
X
Number of
Digits
Values
Defined By
1
4
1
2
3
Regional
Identifies revenues and expenditures by region
2
MoFE
X
X
Function
Designates the activities or functions related to revenues and
expenditures.
4
MoFE
X
X
Program
Designates the program to which applicable revenue and
expenditure codes apply
4
MoFE
X
X
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Account Code Structure
Name of Segment
Economic
Definition
Level of
Budget
Control
Required Fields
On Accounting
Transactions
MoFE
MoFE
MoFE
MoFE
MoFE
MoFE
Ministry
X
X
X
X
X
X
X
X
X
X
X
Number of
Digits
Values
Defined By
1
1
1
1
1
1
3
Classification of assets, liabilities, equity, revenues and
receipts and expenditures and other inflows and outflows by
type of economic activity (GFS 2001 and MFE Order 873)
Class
Category
Group
Synthetic
Analytic
Sub-Analytic
Sub-Economic
Sector
Designates GFS sector from which revenue was received or
to which expenditures were made
1
MoFE
X
X
Transaction
Designates the type of transaction as defined by GFS.
1
MoFE
X
X
Source of Funds
Identifies the source of funding
2
MoFE
X
X
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Problems Encountered
• IMF provided technical oversight, but
the oversight was provided by an
economist and an IT individual neither
of whom understood GFS or accounting
needs and concerns.
• Current focus on function and the
program link to function will necessitate
reformulating many programs.
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Problems Encountered
• Lack of cooperation by the MoFE Budget
Department over the past two years
• The philosophy that MoFE knows best and no
input by State ministries and agencies and
communities is needed
• Training must be conducted for 70 State
ministries and agencies and 900 communities
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Moving Forward
• Implementation Dates:
– Development of the 2008 budget
– Reporting as of January 1, 2008
• Now have the attention of MoFE Budget
Department
• Working cooperatively with the EC, UNDP
and USAID local government projects
• Agreement from World Bank to focus on the
cash basis and not to use the transaction
codes for now
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Moving Forward
• Workshop has been conducted with
State ministries and budget analysts
• Workshops planned in April for
communities and oversight agencies
• Training plan is being developed
• Identifying changes needed to current
Treasury and Budget systems
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