Budget Classification and Chart of Accounts in the Budget Sector 1

Legal and Regulatory Framework ► Law on Accounting # 113-XVI, of April 27, 2007 ► Budget Classification (Order of the MoF # 208, of December 24, 2015) ► Chart of Accounts in the budget sector and Methodological Accounting and Financial Reporting Standards in the budget sector (Order of the MoF # 216, of December 28, 2015) ► Matrix of public finance reforms policies (A financial agreement between the Government of the Republic of Moldova and the European Commission) 2

Budget Classification Order of the MoF on the Budget Classification # 208, of  Organizational classification  Functional classification  Program classification  Economic classification  Classification of sources  Organizational classification  Functional classification  Program classification  Economic classification  Classification of sources 3

Structure of the Budget Classification (I) Elements of the budget classification Structure and shorthand notation NameNumber of digital characters Organizational classification Org1 Public body 4 Org1i Intermediary budget entity 4 Org2 Budget entity 5 Functional classification F1 Main group 2 F2 Group 1 F3 Sub-group 1 4

Structure of the Budget Classification (II) Program classificationP1Program2 P2Sub-program2 P3Activity5 Economic classification K1Type1 K2Category1 K3Section1 K4Item1 K5Sub-item1 K6Element1 Elements of the budget classification Structure and shorthand notation NameNumber of digital characters 5

Structure of the Budget Classification (III) Classification of sources S1Budget level1 S2Budget sub-level1 S3Component1 S4Sub-component2 S5Origin of the source1 S6Donor3 Elements of the budget classification Structure and shorthand notation NameNumber of digital characters 6

PS in the context of the reform : Chart of Accounts in budget entities (Order # 93, of ) Chart of Accounts for mayor’s offices in villages (communities), cities,(Order # 94, of ) Chart of Accounts for execution of the budget of a district, municipality in financial departments (Order # 51, of ) Chart of Accounts for cash execution of public national budget funds by means of the treasury system (Order # 98, of ) Integrated PS (Order # 216, of ) 7

Integration of the Chart of Accounts with the Economic Classification Chart of Accounts integrated with the Chart of Accounts classes 6,7,8 Economic classification Economic classification Type / class 1,2,3,4,5 Budget Classification Type 9 8

1 Revenues 2 Expenditures 3 Non-financial assets 4 Financial assets 5 Liabilities 6 Funds transferred and received between accounts 7 Results 8 Off-balance accounts 9 Changes in cash balances 9 Changes in cash balances. Economic Chart of classification Accounts

Structure of the Economic Classification and Chart of Accounts Level ILevel IILevel IIILevel IVLevel VLevel VI xxxxxx Class ( type ) Sub-class ( category ) Group of accounts ( section ) Account ( item ) Sub-account of Level I ( sub-item ) Sub-account of Level II ( element ) 10

Structure of a sub-account of Level II Before After Number of characters BEFDTT Chart of Accounts Account222 Class 1 Sub-class 1 Group of accounts 1 Account 1 Sub- account 112 Sub-account of Level I 1 Sub-account of Level II 1 Total

Major Changes - Use of different accounting instructions - Fixed assets, - tangible assets, whose unit price exceeds the limit set by the legislation (MDL 6000) Asset – Liability accounts - Account “Low value and short life items” - Use of different accounting information systems Elaboration of Accounting Standards for the Public Sector Fixed assets – tangible assets with the period of useful life exceeding one year Unifunctional accounts Excluded Accounting information system is common for al budget entities (on the basis of 1С) 12

Stages of the accounting reform in the budgetary sector (1) Elaboration of requirements and rules for PFIMS Development of the Chart of Accounts in the budgetary sector Development of the new financial reporting system in the budgetary sector Elaboration of Methodological Accounting and Financial Reporting Standards for the budgetary sector Changes in the legal framework

Stages of the accounting reform in the budgetary sector (2) Updating the accounting system 1С 2015 Testing and training the personnel for use of the Chart of Accounts in the budgetary sector and Methodological Accounting and Financial Reporting Standards in the budgetary sector Application of the Chart of Accounts in the budgetary sector and of Methodological Accounting and Financial Reporting Standards in the budgetary sector from

Stages of the accounting reform in the budgetary sector (3) Development of Accounting Standards for the public sector Integration of 1С with PFMIS by 2020 Implementation of Accounting Standards for the public sectorfrom 2017 Further development of PFMIS on-going Training of personnelon-going 15

Budget Execution Methodology THANK YOU FOR ATTENTION! General Directorate of the State Treasury Department of Methodology mf.gov.md 16