UKRAINE MINISTRY OF FINANCE UKRAINE GOVERNMENT FINANCE STATISTICS Workshop on the Implementation and Links between the System of National Accounts 2008 and the Government Finance Statistics Manual 20 – 22 November 2013, Istanbul, Turkey Larisa Kalinichenko Head, Government Finance Statistics Department

UKRAINE MINISTRY OF FINANCE Institutional Coverage of the General Government Sector in Government Finance Statistics Central Government Subsector 1.Central government units financed out of the state budget Parliament (Verhovna Rada), Presidential Staff, Cabinet of Ministers, ministries, state services, state agencies and inspectorates, central executive-branch authorities with special status, Constitutional Court, general-jurisdiction courts, territorial state administrative authorities, budgetary entities subordinate to central authorities and state authorities Subsector 2. Central government extrabudgetary units Not applicable. Subsector 3.Social security funds 3.1Pension Fund; 3.2Social Occupational Accident and Disease Insurance Fund; 3.3Social Temporary Disability Insurance Fund; 3.4State Mandatory Universal Social Unemployment Insurance Fund. Local authorities Subsector 5. Local authorities financed out of local budgets – 12,086 local government authorities, including: 1 Crimea Autonomous Republic ; 24 provinces; Cities of Kiev and Sevastopol; 177 cities under republic (Crimea Autonomous Republic ) or province jurisdiction; 488 districts; 278 cities under district jurisdiction; 55 formations within cities; 782 settlements; villages. Central government data cover all operations of units belonging to Subsectors 1-3. Data on local authorities cover the operations of Subsector 5 units. Slide 2

State social insurance funds not belonging to Ukraine’s Budgetary System: 1.Pension Fund 2.Social Occupational Accident and Disease Insurance Fund 3.Social Temporary Disability Insurance Fund 4.State Mandatory Universal Social Unemployment Insurance Fund Ukraine Budgetary System Local budget State budget Crimea Autonomous Republic budget Local government budgets Province and Kiev and Sevastopol city budgets, District budgets Slide 3 Institutional Coverage of Budgetary System According to Ukraine Budgetary Code Budgetary law lacks a definition of the general government sector and public sector UKRAINE MINISTRY OF FINANCE

!!!!!! Budgetary law governs certain issues pertaining to the state mandatory universal social and pension insurance funds: The Ukraine Cabinet of Ministers provides for the submission of draft budgets of the state mandatory universal social and pension insurance funds for the plan year to the Ukraine Verkhovna Rada and Ukraine President no later than September 15 of the year preceding the plan year, with accompanying materials, attached to the draft Ukraine Law on the State Budget; The resources of the state mandatory universal social and pension insurance funds are serviced by authorities of the Ukraine State Treasury Service; The state mandatory universal social and pension insurance funds submit quarterly reports to the Ukraine Verkhovna Rada, Ukraine President, Ukraine Cabinet of Ministers, Accounting Office, Ukraine Ministry of Finance and Ukraine State Treasury Service on execution of the respective funds’ budgets in accordance with procedures and dates established by the Ukraine Ministry of Finance. Slide 4

UKRAINE MINISTRY OF FINANCE Accounting Method in Ukraine’s Public Sector Ukraine law does not presently define uniform accounting and reporting methods in the public sector Accounting for execution of the state and local budgets is conducted by Ukraine Treasury authorities using the cash method with elements of the accrual method for certain operations (accounting for the public debt and liabilities of the administrators of budgetary resources) Accounting for execution of budgetary entities’ budgets is conducted by the administrators of budgetary resources using a modified accrual method Accounting for state mandatory universal social insurance funds is based on a modified accrual method (uniform accounting methods established by the State Treasury are not used). Financial and budgetary reports on the execution of budgets are divided into: financial: quarterly annual budgetary: monthly quarterly annual Slide 5

Reporting Period for Reports The reporting period for monthly budgetary reports is the period beginning January 1 and ending on the last day of the reporting month The reporting period for quarterly financial and budgetary reports is the period beginning January 1 and ending on the last day of the reporting quarter The reporting period for annual financial and budgetary reports is the budgetary period constituting one calendar year beginning on January 1 and ending on December 31 of the same year, unless a different period is defined in instances established by law Slide 6 UKRAINE MINISTRY OF FINANCE

The Chart of Accounts for state and local budgets is governed by a legal regulatory act; Development of the Chart of Accounts took into account the distinctive features of the execution of state and local budgets, the operation of the unified treasury account, and the servicing of local budgets through Treasury authorities, in compliance with general accounting and reporting principles and requirements; The Chart of Accounts provides for the reflection in accounting of operations associated with performance of the functions assigned to Treasury authorities, i.e., it makes possible detailed and complete accounting for all banking and other operations associated with execution of the budgets; The Chart of Accounts has been developed to provide for accounting operations entailed in the execution of the state budget and local budgets operations using the cash method, and for the preparation of financial reports The Chart of Accounts employs a decimal method of encoding accounts with a four-digit number. Under that method, all classes are divided into 10 sections, which are assigned numbers from 0 to 9. All sections, in turn, are divided into no more than 10 groups, which are also assigned numbers from 0 to 9. Each group is divided into no more than 10 accounts. Such an approach meets the requirements of the Ukraine National Bank with regard to the structure of accounts and number of digits, according to which the number of a balance-sheet account must have 4 digits while analytical accounts that are used in the Ukraine National Bank’s electronic payments system must have from 6 to 14 digits. 7 Chart of Accounts for Execution of State and Local Budgets Slide 7 UKRAINE MINISTRY OF FINANCE

Slide 8 Chart of Accounts in Budgetary Entities Accounting in budgetary entities provides for the reflection of all operations associated with execution of their budgets. The timely, complete and accurate reflection on the entities’ balance sheets makes it possible for their officials to take well-founded managerial decisions, analyze an entity’s (organization’s) work, monitor the use of budgetary resources for their intended purposes on the basis of an approved budget, and detect unlawful and unforeseen expenditures Budget execution accounting in entities and organizations whose principal activities are financed out of state or local budget resources is based on the Chart of Accounts for budgetary entities approved in the December 10, 1999, Order No. 114 of the Chief Administration of the Ukraine State Treasury, registered with the Ukraine Ministry of Justice on December 20, 1999, No. 890/4183 The Chart of Accounts uses a decimal method of encoding accounts with a three- figure number (first-level subaccount). All accounts are divided into 2 sections. Section І comprises balance-sheet accounts, which are divided into 8 classes. Section II comprises off-balance-sheet accounts, which include one class 0, “Off-balance-sheet accounts” The Chart of Accounts for a state mandatory universal social insurance fund is approved in a legal regulatory act of that fund. UKRAINE MINISTRY OF FINANCE

Further Plans for Improving Accounting and Reporting Development and implementation of a uniform Chart of Accounts and national accounting standards for public-sector entities using the accrual method (development has been completed of 19 national accounting standards in the Ukraine general government sector based on the International Public Sector Accounting Standards (IPASA). Implementation is slated for approximately 2015). Establishment of uniform rules for preparing budgetary and financial reports in accordance with national standards developed on the basis of the International Public Sector Accounting Standards Slide 9

Budgetary Classification Pursuant to the Budgetary Code, the Ukraine Budgetary Classification includes: - classification of budget revenue, - classification of budget expenditures, - classification of lending, - classification of debt; - classification of budget deficit financing. Classification of budget expenditure and lending are subdivided into: (1) functional, (2) agency, (3) economic, (4) programmatic. Slide 10 UKRAINE MINISTRY OF FINANCE

Budgetary Classification Budget revenue Budget expenditures and lending Budget financing Tax Nontax Revenue from capital operations Transfers Taxes Fees Other mandatory payments Income from property and business activity Administrative fees and payments, income from noncommercial economic activity Other nontax revenue Functional Economic Agency Programmatic Lending Sections, subsections, area groups Current Capital Internal and external List of main administrators of budgetary resources targeted-program method By type of creditor By type of debt instrument Debt By type of creditor By type of debt instrument Slide 11

Budgetary Classification Budget revenue Tax Nontax Revenue from capital operations Transfers Slide 12 Fees for special use of natural resources GFS 2001 codes 113,114 Property taxes GFS 2001 code 113 Taxes on income, profits, and capital gains GFS 2001 code 111 Taxes on international trade and external transactions GFS 2001 code 115 Internal taxes on goods and services GFS 2001 code 114 Other taxes and fees GFS 2001 code 116 Revenue from property and business activity GFS 2001 code 141 Administrative fees and payments, income from noncommercial economic activity GFS 2001 codes 115,142 Other nontax revenue GFS 2001 codes 141,142,143,145 Budgetary units’ own revenue GFS 2001 code 142 Transfers from general government units (from other budgets, subsidies and subventions) GFS 2001 code 133 Transfers from foreign countries and international organizations GFS 2001 code 132 Revenue from sale of fixed assets GFS 2001 codes 311,313 Revenue from sale of public inventories GFS 2001 code 312 Revenue from sale of land and intangible assets GFS 2001 code 314

Budgetary Classification of Expenditures (functional) Slide 13 Code ItemGFS Code 0100 General public functions Debt service Interbudgetary transfers Defense Public order, safety and the judicial branch Economic affairs Environmental protection Housing and community amenities Health Spiritual and physical development Education Social protection and social security 710 UKRAINE MINISTRY OF FINANCE

Budgetary Classification of Expenditures (economic) Slide 14 Code Item GFS Code 2000 Current expenditures х 2100Employee compensation and wage accruals Use of goods and services Debt service Transfers 25, Social security Other current expenditures Capital expenditures х 3100Acquisition of fixed assets Creation of public inventories and reserves Acquisition of land and intangible assets 313, Capital transfers 25,26,28 UKRAINE MINISTRY OF FINANCE

Slide 15 Budgetary Classification of Financing By Type of Debt Instrument Budget financing Financing through debt instruments Revenue from privatization of public property Financing through active operations Borrowing Retirement External Internal Change in deposits and securities used for liquidity management Change in cash Financing with funds in Unified Treasury Account

Slide 16 Budgetary Classification of Financing by Type of Creditor Budget financing Internal financingExternal financing Financing with resources of state funds Financing with bank loans Other internal financing Revenue from privatization Financing with funds balances in accounts of budgetary entities and budgets Change in deposits and securities used for liquidity management Adjustments Change in deposits and securities used for liquidity management Loans not elsewhere classified Loans from foreign commercial banks Loans from foreign government authorities Loans from international organizations

Budgetary Classification of Debt by Type of Debt Instrument Debt External Internal Debt on long-term instruments Debt on medium-term instruments Debt on short-term instruments and bills Debt on other internal instruments Debt on long-term instruments Debt on medium-term instruments Debt on short-term instruments and bills Debt on other external instruments Adjustments connected with changes in deposits and securities, and with appraisal differences Slide 17 Adjustments connected with changes in deposits and securities, and with appraisal differences

Budgetary Classification of Debt by Type of Creditor Debt External Debt on loans obtained from budgets at various levels and state funds Debt to banking institutions Debt to other government units Internal debt not elsewhere classified Adjustments connected with changes in deposits and securities, and with appraisal differences Debt on loans obtained from international financial organizations Internal Debt on loans obtained from foreign government authorities Debt on loans obtained from foreign commercial banks Debt on loans not elsewhere classified Slide 18 Adjustments connected with changes in deposits and securities, and with appraisal differences

Further Plans for Improving Budgetary Classification: Reflecting in the classification “below the line” transactions involving the acquisition and sale of nonfinancial assets and the attraction and retirement of loans, i.e., as financing transactions Reflecting “below the line” transactions involving the transfer of funds for increasing public participation in nonfinancial and financial corporations, i.e. as financing transactions Separating subsidy and current transfer items and bringing them into conformity with the requirements of SNA 2008 Slide 19 UKRAINE MINISTRY OF FINANCE