MANAGING BUDGET FUNDS IN THE REPUIBLIC OF KAZAKHSTAN The Ministry of Finance of the Republic of Kazakhstan MANAGING BUDGET FUNDS IN THE REPUIBLIC OF KAZAKHSTAN 2017

OUTLINE II. PROCEDURE FOR MANAGING BUDGET FUNDS I. PROVISIONS OF THE RK BUDGET CODE pp. 3-4 II. PROCEDURE FOR MANAGING BUDGET FUNDS AT THE TREASURY COMMITTEE OF THE RK MOF pp.5-6 III. PROCEDURE FOR PLACING TEMPORARILY SURPLUS BUDGET FUNDS pp.7-8 IV. ONGOING WORK UNDER DRAFT BUDGET CODE p.9

I. Provisions of the RK Budget Code Article 101. Budget Funds Management 1. Budget funds management shall be a set of activities aimed to ensure timely payments in line with the timing of budget receipts. 2. Budget funds management shall be performed by the authorized budget execution body. 3. The authorized budget execution body shall take necessary measures to ensure availability of cash for payments in the amount specified by the summary plan of receipts and payments financing. 4. To ensure timely and complete payments, the authorized budget execution body shall: - develop cash flows forecast which is a process to identify expected budget receipts and expenditure execution for the planned period, cash surplus (deficit) and sources of its coverage; - monitor funds movement on the controlling cash account of respective budget. 5. Cash surplus shall be the excess of expected or actual receipts of the republican [national] and local budgets and budget funds balances over payments expected or made since the beginning of the current fiscal year. Cash deficit shall be the excess of payments expected or made over expected or actual receipts of the republican [national] and local budgets and budget funds balances since the beginning of the current fiscal year.

I. Provisions of the RK Budget Code Article 101. Budget Funds Management 6. In case cash deficit in controlling cash account of respective budget is forecast, the cash deficit shall be covered by borrowings or amending the summary plan of receipts and payments financing. 7. In case cash surplus in controlling cash account of respective budget is forecast, the authorized budget execution body shall determine the volume of temporarily surplus budget funds. Temporarily surplus budget funds shall be the money in treasury single account unused for a certain period of time during the current fiscal year. To ensure efficient use of the temporarily surplus budget funds and generate revenues for respective budget, the temporarily surplus budget funds of the republican [national] and regional budgets, budgets of cities of republican [national] status, capital city shall be placed in deposits with the National Bank of the Republic of Kazakhstan. Budget funds may not be placed in bank accounts except in the case set forth by this article of the Code. 8. Placement of temporarily surplus budget funds of the republican [national] and local budgets shall be made by the central authorized budget execution body. 9. The procedure for placing temporarily surplus budget funds shall be defined by the central authorized budget execution body upon agreement with the National Bank of the Republic of Kazakhstan.

II. Procedure for Managing Budget Funds at the Treasury Committee of the RK MOF 1. Budget funds management shall be performed by the authorized budget execution body. To ensure timely and complete payments, the authorized budget execution body shall develop cash flows forecast which is a process to identify expected budget receipts and expenditure execution for the planned period, with the aim to forecast the volume of cash for efficient budget funds management. The forecast shall be based on the following data: approved, specified (adjusted) budget for the respective fiscal year; summary plan of receipts and payments financing as well as summary commitments; balance of controlling cash account of respective budget; expected volume of respective budgets’ receipts given the flow of receipts in the previous months of the current year (due dates) and benchmarking of receipts over similar period in the previous fiscal year; Implementation of budget programs in line with payments financing plans and benchmarking the implementation of budget programs over similar period in the previous fiscal year taking into account budget program commitments pursuant to the summary commitments financing plan. 2. The authorized budget execution body together with relevant government bodies shall specify: monthly expected volumes of budget receipts;  at the end of the current month – volumes of payments due next month.

II. Procedure for Managing Budget Funds at the Treasury Committee of the RK MOF 3. The authorized budget execution body shall: monitor cash movement in controlling cash account of respective budget; supervise and manage current balances in controlling cash account of respective budget; define the amount of temporarily surplus budget funds. 4. The authorized budget execution body based on the forecast, cash balance in controlling cash account of respective budget shall monthly analyze expected budget execution for the coming month and define expected cash balance in controlling cash account of respective budget as of the end of the forecasting period. Based on the analysis, both surplus and deficit of controlling cash account of respective budget may be forecast. 5. In case deficit of controlling cash account of respective budget is forecast, or current cash deficit during the month is generated, the authorized budget execution body shall initiate additional borrowings or moving scheduled issue of government securities. In case the forecast payment volumes exceed the forecast republican [national] and local budgets’ receipts and balances of budget funds in the controlling cash account of respective budgets (cash deficit) and in case attracting cash in the coming month through government securities issue or borrowing from a higher-level budget proves impossible, the authorized budget execution body shall revise the monthly schedule of payments against budget programs in the summary financing plan.

III. Procedure for Placing Temporarily Surplus Budget Funds 1. Authorized budget execution bodies shall define volumes of temporarily surplus budget funds to be placed in deposits with the National Bank of the Republic of Kazakhstan. 2. Placement and repayment shall be made on the basis of an Agreement established between the central authorized budget execution body and the National Bank of the Republic of Kazakhstan. 3. To place temporarily surplus budget funds in deposits with the National Bank of the Republic of Kazakhstan, a General Agreement between the central authorized budget execution body and authorized local budget execution body on the transfer of temporarily surplus budget funds shall be established. 4. Each placement (transfer) of temporarily surplus budget funds shall be accompanied by a transaction report (annex 1) which should contain all the placement information: amount, opening and closing date, remuneration rate, remuneration amount, the sum of the deposit to be returned and remuneration to be paid, remuneration rate in case of early withdrawal of the deposit. All transaction reports shall be signed by duly authorized officials of the parties (annex 2) and shall constitute an integral part of the Agreement. The rate of remuneration shall be set by the National Bank of the Republic of Kazakhstan. In case there is intent to transfer temporarily surplus budget funds a notification (annex 3) signed by the duly authorized person and certified by seal shall be produced. In case of early withdrawal – full or partial – before the due date set forth in the transaction report a repayment request (annex 4) shall be submitted.

III. Procedure for Placing Temporarily Surplus Budget Funds No later than 2 (two) working days prior to the date set forth in the transaction report a written notification (annex 5) shall be submitted with detailed information specified by the Agreement. 5. To transfer temporarily surplus budget funds to the National Bank of the Republic of Kazakhstan, the central authorized budget execution body based on the transaction report shall develop opinion and payment document signed by duly authorized persons entitled to sign payment documents. Local authorized budget execution body pursuant to the Agreement and within the time frame indicated in the transaction report shall transfer temporarily surplus budget funds to the account of the central authorized budget execution body. Upon receipt of the funds from the local authorized budget execution body to its account, the central authorized budget execution body no later than next day shall place the funds in deposits with the National Bank of the Republic of Kazakhstan. The central authorized budget execution body within the time frame set forth by the Agreement or request shall transfer the deposit amount based on the information indicated in the Agreement, and shall transfer in full accrued remuneration (interest) for the de-facto stay of the funds with the National Bank of the Republic of Kazakhstan to respective local budget as revenues. With respect to temporarily surplus budget funds of local budgets received or placed in deposits with the National Bank of the Republic of Kazakhstan the central authorized budget execution body shall keep analytical records.

IV. Ongoing Work under Draft Budget Code To ensure prompt cash management of budget funds, the Budget Code is to be amended as follows: “Temporarily surplus budget funds of the republican [national] budget may be used to credit local budgets with a certain interest rate, and for the period between 3 and 6 months based on an Agreement between the authorized body providing cash services for budget execution and local executive authority”.