1 Establishment and Development of Treasury System in Ukraine Experience with the World Bank Project Implementation Olexandr SHLAPAK Head of the State

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Establishment and Development of Treasury System in Ukraine

Experience with the World Bank Project Implementation

Olexandr SHLAPAKHead of the State Treasury of Ukraine

PEM-PAL Workshop

Treasurers Community of Practice

Slovenia, Ljubljana, June 26-27, 2006

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The State Treasury of Ukraine

April 27, 1995 – establishment of the State Treasury of Ukraine 3-tier structure

Head Office – 404 employees 27 Territorial (Oblast) Departments – 4 049 employees 635 Rayon and Municipal Offices – 12 436 employees Total – 16 889 employees

Workload 80 ths spending units 12 ths local budgets 600 ths accounts for budgets’ expenditure side 5 000 ths accounts for budgets’ revenue side 15.4 ths PCs 40% of electronic payment orders in EPS NBU 2004 – 136.8 mln settlement and payment documents (24.1mln – revenue docs , 70.5 mln –

expenditure docs, 42.2 – IPS) 2005 – 161.5 mln settlement and payment documents (25.2 mln– revenue docs , 87.9 mln. –

expenditure docs, 48.4 – IPS) 1997 – 1998 – implementation of Treasury services for the expenditure side of the

State Budget 1999 – 2003 – implementation of Treasury services for the expenditure side of local

budgets 2002 – joining EPS NBU, setting up Treasury Single Account

The State Treasury of Ukraine in Brief

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Bringing together efforts by the Government of Ukraine, IMF and the World Bank. Sample investments into Information system (1996 – 2005):

Total – 158.4 mln UAH WB loan – 84.5 mln UAH (53.3%) the State Budget of Ukraine – 73.9 mln UAH (46.7%)

1. Capacity building loan (3614UAH, 1996 – 1998) Treasury subcomponent – 2 101.9 ths US dollars Information technologies – 1 687.7 ths US dollars Consultancy services – 388.3 ths US dollars Training – 25.9 ths US dollars Co-financing of Ukraine – none

2. «Treasury System Project» (4285UAH, 1998 – 2004) Total – 16 400.0 ths US dollars Information technologies – 14 877.0 ths US dollars Consultancy services – 1 253.0 ths US dollars Training – 270.0 ths US dollars Co-financing of Ukraine – 23.0 mln UAH (4.5 mln US dollars)

8 years of WB Projects’ implementation history


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Prior to the Project Lack of regulation in the legal grounds

of the budget process No methodology for Treasury services,

including Chart of Accounts for budgets’ execution

Cash based budgets’ execution through banking system

“Manual mode” in managing public finances

Limited Treasury capacity Lack of technical treasury infrastructure No trained Treasury personnel

While Implementing the Project Adoption of the Fiscal Code of Ukraine Legally fixed powers and responsibilities

for the State Treasury bodies Establishment of the State Treasury

institutional structure Formulation of the methodology grounds

for Treasury based budget execution, including the accounting system

Designing the application software for treasury services AS “КАZNА”

Designing and upgrading the interim Treasury information system

Implementation of Treasury services for budgets’ expenditure side

Implementation of Treasury services for budgets’ revenue side

Implementation of Treasury services for local budgets

The State Treasury joins EPS NBU Establishment of Treasury Single Account

(TSA) and consolidation of budget finds at TSA

Enhancing accountability for public finds uses

Goal of Treasury System Project – establishment and implementation of the fully functional automated treasury system as an efficient instrument

for budget execution and cash management


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Key provisions The State Treasury of Ukraine is a direct member of the Electronic Payment

System of the National Bank of Ukraine (EPS NBU) The accounting model for budget execution makes the foundation for treasury

services A spending unit is a holder of an expenditure account The General Ledger is formed at the moment of making an operation

Concept for application software АS “КАZNА” One “treasury function bank” per oblast as a TSA “element” Maximum information in bank accounts Processing information in real time mode at oblast level No client software – WEB-based technology Low requirements to telecommunication channels

Development challenges The necessity to change from the modified cash based budget execution mode to

accrual based budget execution Відокремленість програмних модулів казначейського обслуговування There is no transaction data base for budgets’ execution, information exchange

between tiers and financial reporting consolidation There is no transparent interface with the major spending units Instruments for managing financial resources are not developed

The Ukrainian Model for Treasury System


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Charts of Accounts The Chart of Accounts of the National Bank of Ukraine The Chart of Accounts for commercial banks The Chart of Accounts for the State and local budgets execution (the State

Treasury of Ukraine)

The Charts of Accounts as the foundation for the accounting model of the State and local budgets execution

1. Assets 2. Commitments/Liabilities 3. Funds of budgets and spending units 4. Settlement 5. Budget execution outcome 6. Budget revenues 7. Budget expenditures 8. Managerial accounting 9. Off-balance sheet accounting

Coding of analytical properties is regulated by the following: The Uniform State Registry for Enterprises and Organizations in Ukraine Budget Classification of Ukraine The NBU Reference Books The TSU Reference Books

Charts of Accounts in EPS NBU (1)


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Sample coding for revenue accountsBBBB K SSS H RR TTT – account number coding (14 digits)XXXX.................................. – balance sheet account (4 digits).......... X ............................. – control figures set EPS NBU (1 digit).............. XXX ..................... – symbol for revenues reporting (3 digits)...................... X .................. – property for consolidated account (1 digit).......................... XX ........... – property for agency (ACC) (2 digits)................................. XXX .. – number for analytical properties’ set (3 digits)ВВВВ = 3111 – Accounts for revenues to the General Fund of the State BudgetSSS – reporting symbol matching budget classification by revenues (8 digits)Н – property for consolidated account for entering taxes of the given territory (matching the last year figure)RR – property matching agency classification code for budget expenditures, or other propertyTTT – порядковий номер, matching analytical properties’ set :

- codes and names of budget territory in Ukrainian and Russian according to State Classificatory - budget code according to the MoF Budgets Reference - codes of oblast, city, rayon, settlement, village - code and title of an STU body - code and title of an STA body

Sample coding for expenditures accounts BBBB K GGG NNNNNN – account number coding (14 digits)XXXX.................................. – balance sheet account (4 digits).......... X ............................. – control figures set EPS NBU (1 digit).............. XXX ..................... – code for account type (3 digits)...................... .. XXXXXX ... – # of account holder (6 digits)ВВВВ = 3521 – Spending units’ registration accounts with respect to funds of the General Fund of the State Budget

GGG – code for account type given to the analytical properties’ set: - agency classification code - code by the program classification for expenditures or by functional expenditures’ classification - code by the spending unit network - spending unit’s subordination level - funds’ property - code of the STU body - code of the STA body

NNNNNN – the number ensuring account uniqueness with the respective analytical parameters’ set (given to account holder by software means when an analytical account is being opened)

EPS NBU Chart of Accounts (2)


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The State Treasury of Ukraine Treasury Single Account within Budget Process (1)

MSU

HO STUAS

Kazna-Center

AS Kazna-Center

TSA management

system

Banking part - ABS

AS

Kazna -Revenue

s

AS

Kazna -Revenue

s

TCA (1…27)

Banking part – ABS

RFTS NBU

STA, SCS SPF

EPS NBU

Commercial bank

Tax payerTax payer

Commercial bank

Supplier of goods, works and services

Supplier of goods, works and services

HO STU, STUD 1…27

SU 2

SU 3 AS Kazna -

Expenditures

Client-

Bank

Management: limits, supportCash flowsElectronic payment ordersCommitments Allocations, planned indicatorsInformation

Hard copy documents

Assigning allocations against registered commitments

Preliminary Treasury control

SU 3STUO

WEB

Treasury part

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The State Treasury of Ukraine Treasury Single Account in the budget process (2)

List of Abbreviations

TSA - Treasury Single Account ABS - Automated Banking System AS - Automated systemNBU - National Bank of Ukraine EPS - Electronic payment system RFTS - Rapid funds transfer system TCA - Technical correspondent account MSU - Major spending unitSU2 - 2d level spending unit SU3 - 3d level spending unitHO STU - Head Office of the State Treasury of Ukraine STUD - STU Department (Oblast) STUO - STU Office (Rayon)STA - State Tax AdministrationSCS - State Customs Service SPF - State Property Fund

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Sommaire Information System (IS)


(SAN) HP Virtual Array

(MS SQL) AS Kazna-Expenditures

(MS SQL) AS Kazna-Center

Sta

nd

By

SQL А – Basic

SQL В – Аrchive(ORACLE) AS Kazna-

Revenues

Pri

mary

WEB

Fire Wall

(VPN) FrameRelay

64 KBit/sec

Fire Wall

Sta

nd

By

Pri

mary

(ORACLE) AS Kazna-R

SQL А SQL B

WEB’s

(SAN) HP Virtual Array

Users (60 PC’s/IE)

Users (45- 120 PC’s/IE)

(MS SQL) AS Kazna-E

Fire Wall

Users (5 - 60 PC’s/IE)

MF ServerFrameRelay – 210

Anolog Leased Line – 146

RadioEthernet – 118

xDSL – 49

TCP/IP - 31

Dial-Up – 27

X.25 - 25

Direct Connection – 15

ISDN – 11

LAN - 4

”UK

RT

EL

EC

OM

”

LAN (Ethernet)SAN

WAN

Central level

Oblast level - 27

Rayon level - 635

Documents

1 Establishment and Development of Treasury System in Ukraine Experience with the World Bank Project Implementation Olexandr SHLAPAK Head of the State