1 Establishment and Development of Treasury System in Ukraine Experience with the World Bank Project Implementation Olexandr SHLAPAK Head of the State Treasury of Ukraine PEM-PAL Workshop Treasurers Community of Practice Slovenia, Ljubljana, June 26-27, 2006

2 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 – employees  635 Rayon and Municipal Offices – employees  Total– employees  Workload  80 ths spending units  12 ths local budgets  600 ths accounts for budgets’ expenditure side  ths accounts for budgets’ revenue side  15.4 ths PCs  40% of electronic payment orders in EPS NBU  2004 – mln settlement and payment documents (24.1mln – revenue docs, 70.5 mln – expenditure docs, 42.2 – IPS)  2005 – 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

3  Bringing together efforts by the Government of Ukraine, IMF and the World Bank. Sample investments into Information system (1996 – 2005):  Total – 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 – ths US dollars  Information technologies – ths US dollars  Consultancy services– ths US dollars  Training– 25.9 ths US dollars  Co-financing of Ukraine – none  2. «Treasury System Project» (4285UAH, 1998 – 2004)  Total– ths US dollars  Information technologies – ths US dollars  Consultancy services – ths US dollars  Training – ths US dollars  Co-financing of Ukraine – 23.0 mln UAH (4.5 mln US dollars)  8 years of WB Projects’ implementation history The State Treasury of Ukraine

4 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 The State Treasury of Ukraine

5  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 The State Treasury of Ukraine

6  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) The State Treasury of Ukraine

7  Sample coding for revenue accounts BBBB 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 Budget SSS – 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 property TTT – 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) The State Treasury of Ukraine

8  Treasury Single Account within Budget Process (1) MSU HO STU AS Kazna- Center TSA management system Banking part - ABS AS Kazna - Revenues TCA (1…27) Banking part – ABS RFTS NBU STA, SCS SPF EPS NBU Commercial bank Tax payer Commercial bank Supplier of goods, works and services HO STU, STUD 1…27 SU 2 SU 3 AS Kazna - Expenditures Client- Bank Management: limits, support Cash flows Electronic payment orders Commitments Allocations, planned indicators Information Hard copy documents Assigning allocations against registered commitments Preliminary Treasury control SU 3 STUO WEB Treasury part

9 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 system NBU- National Bank of Ukraine EPS-Electronic payment system RFTS-Rapid funds transfer system TCA-Technical correspondent account MSU- Major spending unit SU2-2d level spending unit SU3-3d level spending unit HO STU-Head Office of the State Treasury of Ukraine STUD-STU Department (Oblast) STUO -STU Office (Rayon) STA-State Tax Administration SCS-State Customs Service SPF -State Property Fund

10 Sommaire  Information System (IS) The State Treasury of Ukraine (SAN) HP Virtual Array (MS SQL) AS Kazna-Expenditures (MS SQL) AS Kazna-Center StandBy SQL А – Basic SQL В – Аrchive (ORACLE) AS Kazna- Revenues Primary WEB Fire Wall (VPN) FrameRelay 64 KBit/sec Fire Wall StandBy Primary (ORACLE) AS Kazna-R SQL А SQL B WEB’s (SAN) HP Virtual Array Users (60 PC’s/IE) Users ( PC’s/IE) (MS SQL) AS Kazna-E Fire Wall Users ( PC’s/IE) MF Server FrameRelay – 210 Anolog Leased Line – 146 RadioEthernet – 118 xDSL – 49 TCP/IP - 31 Dial-Up – 27 X Direct Connection – 15 ISDN – 11 LAN - 4 ”UKRTELECOM” LAN (Ethernet) SAN WAN Central level Oblast level - 27 Rayon level - 635