1. Budget execution in Hungary
Zsolt Tavaszi, Tamás Pál Török
Budapest
6 June 2019
PEMPAL TCOP Meeting

2. Budget Act 1. § of the Budget Act Total amount of incomes Operating
60,375 billion EUR
Total amount of incomes
63,454 billion EUR
Total amount of expenditures
3,078 billion EUR
Amount of the deficit
Operating
Accumulation
EU development

3. Budget appropriations
Level
Content
1st Annex of the Budget Act
Appropriations (for operating and accumulation – only budgetary items)
Budgetary expenditures (K1-K8)
Budgetary incomes (B1-B7)
Detailed budgets
Line items (budgetary and financing items)
Budgetary expenditures (K11-K89)
Budgetary incomes (B11-B75)
Financing expenditures (K91-K94)
Financing incomes (B81-B84)
Annual report
(Transactional level)
ERA (unified line item identifier) – More detailed identification structure
K Wages
1K1101 – Wages
2K1101 – Refund of wages
K504 – Refundable subsidies for operation
1K … for central budgetary institutions
2K50401 – Refund of.. for central budgetary institutions
1K50402 , 2K50402– centrally managed app.

4. Budget Appropriations

5. Detailed budgets – 1.789 in 2019 Serial number Denomination Cover 01.
K1-K8. Budgetary expenditures
95 lines
02.
B1-B8. Budgetary incomes
68 lines
03.
K9. Financing expenditure
30 lines
04.
B8. Financing incomes
08.
Data supply on the composition of manpower and wages
105 lines
09.
Repartition of manpower according to functions
71 lines
10.
Data supply on appropriations and fulfilment figures related to subsidies coming from social security funds
43 lines

6. Annual report in the central subsystem
Serial number
Denomination
Cover
01.
Annual report K1-K8. Budgetary expenditures
266 lines
02.
Annual report B1-B8. Budgetary incomes
282 lines
03.
Annual report K9. Financing expenditure
40 lines
04.
Annual report B8. Financing incomes
32 lines
05.
Fulfilled expenditures by government function
308 lines
06.
Fulfilled incomes by government function
315 lines
07.
Statement of residuals
18 lines
08.
Data supply on the composition of manpower and wages
105 lines
09.
Repartition of manpower according to functions
71 lines
10.
Data supply on appropriations and fulfilment figures related to subsidies coming from social security funds
43 lines

7. Annual report in the central subsystem
Serial number
Denomination
12.
Balance sheet
250 lines
13.
Income statement
44 lines
15.
Statement on immaterial assets, material assets, assets given to concession
26 lines
16.
Statement on depreciation of assets
11 lines
17/a.
Informative data
80 lines
17/b.
Turnover between social security funds and other funds, SPUs
31 lines
17/c.
Subsidies for (national) minority local governments in the current year
3 lines
17/d.
Subsidies for (national) minority local governments in the former year

8. Annual report in the central subsystem
The Treasury is responsible for collecting data on detailed budgets, annual reports, annual interim reports… (KGR-K11)

9. The role of the Treasury in the control of public expenditures
Spending Units
Treasury
Planning
Detailed budget
Register of appropriations based on data supply
Management
Based on the detailed budget Treasury
Commitment
Financial countersign
Completion certificate
Validation
Remittance
Payment Treasury
Budget Supervisor:
Preliminary opinion in case of commitments
Opinion on internal regulations and actions related to financial management
Proposition of restructuring management processes
Suspension measures
Bookkeeping, reporting
General ledger accounting in local IT systems
Preparing of annual and interim financial statements, reports, balance sheets
Reporting towards the Treasury
Control and summary of annual and interim financial statements, reports, balance sheets
Reporting and data service towards national and international organizations

10. Modification of appropriations
Reason of the modification
Residuals
(Central Residual Settlement Fund)
Re-structuring of functions
Mid-year estimates modifications
Range of Scope: Parliament, Government, minister responsible for state budget
Chapter governing body
Budgetary body/chapter (in its discretion)

11. Modification of appropriations
Appropriations of incomes may be increased if they are overfulfilled, and have to be decreased if the fulfillment figures are lower than planned
Minister of finance can increase the appropriations of central budgetary institutions and chapter managed appropriations if its residuals cover it. (Centrally managed appropriations do not have residuals, its remaining appropriations are deleted at the end of the year.)
Central budgetary institutions can increase its appropriations of incomes and expenditures in case they receive new missions to accomplish during the fiscal year
Some appropriations of expenditures may be exceeded without modification
EU funds related expenditures
Certain subsidies
Expenditures related to law-suits, compensations, collaterals, guaranties
Expenditures related to investments
Expenditures related to foreign exchange rates, debt service, prime interest rate

12. Release of funds YTD/Year-to-date allotment
Operating budget of governmental bodies.
Performance proportioned allotment
Accumulation budget of governmental bodies, chapter-managed estimates.
Modification of schedule
Institutions with temporary liquidity problems, chapter-managed estimates.
with different time-frame replacement
with non-different time-frame replacement
Appropriations increases without amendment
Exceeded appropriations

13. TSA – Accounts managed by the Treasury
HUF accounts
accounts
2.198 clients
Foreign exchange accounts
1.300 accounts
316 clients
Treasury Single Account

14. Payments Submission of transfer orders
Paper-based
Electronic
Prior notification of big lump sum payments
Transfers in excess of HUF 1,000 million to be announced at least 3 days in advance
Double cover test
Liquidity coverage test
Appropriation line item test
Identification of performance
Single Column headings established under the order number (ERA) and government ID are used to identify the transfer lines.
Net financing

15. Banking arrangements
Treasury Single Account (TSA) at Central Bank of Hungary
provision of funds for operations (performance or monthly basis):
gross expenditure – own income = net expenditure
(budgetary contribution)
liquidity management
via TSA (central government)
municipalities can hold bank accounts at commercial banks
rolling cash-flow plan (T+2 months)
data exchange to prepare overnight operations
new Accounts Management System (from 2020)
other related fields

16. Cash forecasting Daily forecasts for three months Sources:
a large amount announcements
Bottom-up information: institutional reports, commitments, financing plans
Top-down information: planning on basis of last years and main information
Liquidity Board (Delegates of MoF and HST)

17. Cash forecasting Others: Problems:
Continuous information exchange with Central Bank, MoF, Tax Authority and other large entities
Problems:
Large fluctuation of cash balance within a month
Lot of disbursements at the beginning of month (wages, family allowance, pension, disbursement of VAT, etc.
Incomes: in the second half of month
Difficult to plan some types of incomes (e.g.: payments from European Commission

18. IFMIS project
The main objective of the project is the improvement of information processes in public finances, the rationalization of public data and information flow, the development of a data warehouse and the development of decision support functions supporting modern budget implementation tasks and the increase of transparency.
This project is part of a large, strategic-level program plan, other elements of which are the development of a Treasury Data Warehouse, the creation of a central master data management system and the development of a new account management - banking system.

19. Present system

20. Components of the IFMIS
Budget Module: Budget Management, Commitment Management, Payments and Revenue Management, Liquidity Management, Budget Monitoring.
Integrated Accounting Application: Accounting application for centrally managed appropriations.
Institutional accounting system: new accounting system for spending units.  

21. Main systems in cooperation
Budgetary Planning:
Ministry of Finance
(Not part of the IFMIS)
Budget implementation:
Account management system
Data Warehouse
MDM
Payroll and HR (KIRA)
Public purchase
Reporting
KGR-K11 will not be replaced

22. Systems’ transformation
Pensions
Wages
Family subsidies
K11
IFMIS
Bank accounts management system
TSA
Spending units

23. Planned technological background
Central Module and Integrated Accounting Application: SAP Platform
Data Warehouse: SAP HANA
Supply Systems, EER Project: SAP Platform
Institutional accounting system: not SAP
New Account Management System: Not SAP

24. Scheduling of the IFMIS project
Preparatory phase from 2016
Public purchasing processes: Q1
Detailed Design: Starts in 2019Q2
First phase of implementation: Functional design of the central module without integration points, establishment of institutional frontends, development of MDM integration. Deadline: 31 December 2019
Phase 2: Integration with the new Account Management System, Integration with the Integrated Accounting Application and Institutional Accounting System. Deadline: 30 June 2020
Testing, migration, go-live: 01 January 2021 

25. Thank you for your attention!