1. CASH FLOWS FORECASTING PROCESS
PEMPAL TCOP MEETING NOVEMBER 07-09, 2018
REPUBLIC OF ALBANIA
MINISTRY OF FINANCES AND ekonomY
CASH FLOWS FORECASTING PROCESS
Albanian Practice
Dear participants and colleagues,
I am Mimoza, the director of Treasury Operations’ Department in the General Directorate of Treasury under the Ministry of Finance and Economy.
I will present the Albanian practice on cash flows forecasting module.
First of all I am going to present the composition of the Albanian treasury system which consists…
Treasury COP
Thematic Group
Ms. Mimoza Pilkati
Director
Treasury Operations 'Department

2. Albanian Treasury System
REPUBLIC OF ALBANIA
MINISTRY OF FINANCES AND ekonomY
It consists in 36th Treasury Districts Offices (219 employees) and a General Directorate under Ministry of Finance and Economy, made up by below:
Treasury Operations’ Department (15 employees)
Business Processing's Department (8 employees)
Department of Indemnity’s Payments (8 employees)
which communicate with 1,300 budgetary units
Separated General Directorate of Debt, Budget, Tax and Customs Authority
Bacground
Established Albanian Treasury System on 16th APRIL 1993,
It`s necessary because of:
market economy model,
expenditures control ,
the use of standard documents ,
information,
issuing securities and other debt instruments,
there were no system of cash management,
there were no government accounting system.
Mission Effective management of the process of execution of general government budget, the administration of Treasury Single Account, the financial forecasting and the consolidated financial statements preparation according to international standards in the context of realizing the mission of the Ministry of Finance. Also to secure the necessary financing in accordance with the government's budget requirements through a combination of financial instruments that include foreign project or general budgetary financing, domestic borrowing, and state guarantees. This is to be achieved with the clear objective of minimizing the overall effective cost and risk of the debt portfolio, ensuring timely debt service, and developing the financial instrument base in compliance with the legal and regulatory framework. Development of Albanian Government financial information System- AGFIS (Oracle E-Business Suite) to a modern system for processing of general government transactions based on international standards and practices of the financial reporting, the use of liquidity and general government property with economy, efficiency, effectiveness and transparency.
Functions of TDO’s:
Checking bills from budget institutions and authorizing payments.
Maintained detailed (7 digits code) classified accounts.
Carrying out daily reconciliation with banks
Compiling and submitted monthly classified accounts to Central Treasury
Generating management report by AGFIS
Albania is the unitary parliamentary constitutional Republic.

3. CASH FLOWS FORECASTING
The Liquidity Management Unit of Treasury Operations’ Department is responsible for cash flows’ operational forecasting (CFF).
Inflows/outflows data are from history, projection and realization. The forecasts are accurate daily (every day the TSA balance is reconciled with Central Bank’s information (slide 20) and the next days forecast roll out is updated).
CFF are prepare in daily (see slides 6, 18, 19, 20), weekly (slide 21) and monthly (slides 22, 23, 24, 25, 26, 27, 28, 29) basis by aggregated items.
CFF (calculated monthly roll out for three years-MTBP (slide 8) approved by Parliament for the first time in 2017 year) accuracy has been improved considering the data of the amounts of bills of shipments for multi-year commitments (slide 19) and the patterns of time series data (random, trend, seasonal, cyclical).
Në zbatim të udhëzimit të Ministrit të Financave dhe Ekonomisë nr. 02, datë “Për procedurat standarte të zbatimit të buxhetit” struktura përgjegjëse për Thesarin në degë ka përmirësuar vazhdimisht funksionin e kontrollit parandalues (ex-ante) të urdhër shpenzimeve të paraqitura nga institucionet buxhetor në lidhje me instruksionet bankare të pagesës (numrin e llogarisë bankare aktive të operatorit ekonomik, IBAN-in e llogarisë përkatëse, emërtimin e saktë, etj.).
Fuqizimi i këtij kontrolli ka rezultuar në kryerjen e pagesave në kohë reale, pa kthime të urdhër pagesave elektronike me gabime duke shmangur lindjen e detyrimeve të prapambetura dhe respektuar afatet e pagesës në zbatim të ligjit 48/2014 “Për pagesat e vonuara në detyrimet kontraktore dhe tregtare” (Fletore zyrtare nr. 70, datë ).

4. Additional Step/Information
Major Government Information Sources for Cash Flows Forecasting
Information Sources
Information Provided (slide 17)
Additional Step/Information
Macro & Fiscal Directorate
Revenue projections at the macro level- annually before the beginning of the year (slide 25 and 26)
Updated revenue information on a macro level (realizations and future outlook) on a monthly basis
Tax Administration
Daily information systematically provided
(by AGFIS)
Daily realizations by economic classification items and forecasts by major tax classes and expected tax refund payments on a monthly basis.
BIs (+hospitals+universities+local gov.)
Monthly cash flow forecasting in the beginning of the year, updating for each change (recorded in AGFIS)
Daily forecasts on a monthly rolling basis for the upcoming periods of year through AGFIS
Budget Directorate
Monthly distribution of the overall budget plan-slide 27 and 28
(which is adjusted for noncash flows from Treasury - slide 29)
Any anticipated changes in the budget policy and/or budgetary figures which would affect cash outflows
Debt Management Unit
Annual borrowing projections (slide 28 ) Quarterly borrowing program figures in daily basis
Auction results and consequent revisions in the borrowing outlook
Increase day-to-day interaction regarding any significant change in the cash flow projections or market conditions/borrowing outlook

5. THE CCF DATA - AGFIS (slide 16)
The database of CCF is hold with excel sheets (slide 6-all sheets; ), where are compared the forecast with the actual outcomes from AGFIS database in monthly basis (slide 8, 23), while the banking system data are updated in daily basis from the uploading in AGFIS .
Also, CFF is improved using the detailed consolidated fiscal indicators actual data generated from AGFIS cash module (as the cash flow financial statement data).
Every month the D&LMC analysis the revenues, expenditure, deficit and borrowing data (slide 8, 9, 10, 11, 12) against the targets and negotiate with all actors of forecasting.
Upon completion of training, the cash forecasting’s officers will be able to:
Elaborate the data of forecasting and overview of the forecasting techniques
Explain the patterns of time series data (random, trend, seasonal, cyclical) and the decomposition of time series data
Understand Data quality issues and their importance for forecasting, as well as learn how to assess data quality
Understand the importance of macroeconomic forecasts with an insight on past failures and biasedness in forecasting
Receive insights into ARMA models and ARDL models for forecasting and nowcasting (transmetimin e kohes)
Deal with many variables and frequency mismatch in data
Learn how to use of time-series models for forecasting with short time-series

6. Format of CF daily includes hidden columns for the data on inflows for previous three years, while outflows for the expenditures of the previous year.
Format of daily cash flows of TSA (data sources: slide 15, 16, 21, 22, 23, 24, 25)

7. THE COORDINATION WITH DEBT
The Committee of Debt and Liquidity Management
Deputy Minister
General Directorate of Macro and Fiscal Policy
Aiming to improve cash management a D&LMC was established in 2017 year to enhance the operational framework for cash management with a view to improve the coordination between budget execution, debt management and monetary policy implementation.
Debt and Treasury are separated General Directorates under Ministry of Finances and Economy
General Secretary
Improve liquidity forecasting.
Forecasts of future cash flows are essential for more active cash management. With this regard, MoFE asked the WB/IMF to provide technical assistance in enhancing capacity in the area of cash management. The main objective of the missions was to support the authorities in the review of (i) the institutional and operational structures concerning cash management and (ii) the framework for forecasting and planning cash flows. A Cash and Debt Management Committee (C&DMC) was established to enhance the operational framework for cash management with a view to improve the coordination between budget execution, debt management and monetary policy implementation. Following their recommendation further efforts were undertaken aiming to carry out monthly variance analysis, which has been reported annually in previous years but will be improved by detailed consolidated fiscal indicators actual data generated from AGFIS cash module compared with cash flow financial statement data.
With AFMIS implementation after 2019, it will be possible to develop the software, a separate system from AGFIS, to manage the daily treasury cash plan data’s changes of Tax and Customs administration, special funds, SSI and CHIF, main ministries, budget supports, debt auctions calendar, disbursement of foreign financing etc. which will improve liquidity forecasting.
SWOT ANALYSIS of Debt and cash management provides a draft assessment of management’s strengths, weaknesses, opportunities and threats.
The SWOT analysis tool is one of many possible strategic assessment tools, and it has been chosen to assist the Committee identify risks to achieving the goal and outcome objectives and key result areas. As part of the PFM Strategy, a risk management needs further to be developed, with associated mitigating actions identified.
It is undertaking the analysis in the categories of information, processes and systems to facilitate a comprehensive coverage of potential issues. This analysis does not seek to identify all issues, but to provide some ideas for further discussion to facilitate risk identification. Ms. Marjus Borokoci will presents in details in the afternoon session.
General Directorate of Treasury
General Directorate of Budget and Public Debt

8. Information for the Committee of Debt and Cash Management
Info for D&LMC monthly meetings
Information for the Committee of Debt and Cash Management

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Info for D&LMC monthly meetings
Information for the Committee of Debt and Liquidity Management

10. THE TSA’s BUFFER
The TSA’s buffer is approved from Minister of Finances and it’s included to guideline of budget execution procedures, which is revised every year. The minimum level is calculated as an average of the three days of last month when is paid the max amount. The max level is equal with the first week of each month payments (wages, etc.) amounts.
Strategies for overcoming the issues
The introduction of electronic transaction processing (e-invoice) and payment systems facilitates of the TSA establishment. Modern payments processes rely increasingly on electronic transactions, centralizing receipts and payments through a limited number of agents, and processing government transactions with a minimum of intermediate handling steps. This avoids unnecessary use of cash, thus reducing operational risk.
Further optimization of the process of revenue collection and administration by the Government of Albania.
Good cash management system is of fundamental importance. Such system must recognize the time value and the opportunity cost of cash; be an enabling instrument of expenditure planning for line ministries; be forward looking – anticipating macroeconomic developments, be capable of accommodating significant macroeconomic changes and minimizing their adverse effects on budget execution.
Future Reforms of the TSA (after 2020 year)
The TSA coverage should be comprehensive by including all government-funded entities, including the autonomous and statutory government bodies as well as extrabudgetary funds (EBFs) and special accounts.
The donors should be encouraged to integrate their funds with the TSA or, as a minimum, to route final payments through the TSA.
Inclusion of social security funds and other trust funds in the TSA could be considered, provided that the accounting system is well developed and adequate safeguards exist to prevent the abuse of trust fund resources.
Organic budget law amendment to modified accrual accounting for revenues
Centralization of revenues collection
AFMIS
Developing liquidity forecasting programme.
Improve TSA’s interaction with other policy areas

11. The passport of indicators of PFM Strategy 2020-aggregated level

12. Information on arrears by items
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Information on arrears by items
The arrears report generated from AGFIS frequently
(Generated from AGFIS in each moment, also detailed by each institutions and in aggregated level by line ministries)

13. THE FUTURE IMPROVEMENTS
View performance “in-context” with budgets and plans
THE FUTURE IMPROVEMENTS
In the future, while the database of the cash flows forecasting is hold with excel sheets, where are entered data from AGFIS in monthly basis, we consider implementation of data warehouse to do this updating in daily basis and to get the results in dashboard (complex reports and charts).
Business Intelligence for management the data information for the cash flows forecasting through generating of the complex report on different AGFIS modules (budget, commitment, expenses, revenues, banking system)
In the future, will be introduced the project code of operational expenditures to compare with procurement forecasting

14. Challenge
AFMIS will combine and integrate the following functional modules:
Medium-term budget planning and monitoring (MTBP)
Public investment management (PIM)
Budget project portfolio monitoring (BPPM) including the data warehouse solution
Budget execution and treasury (AGFIS) (integration with existing system)
AFMIS shall also include a number of interfaces with the following systems to improve information exchange :
Human resources management information system (HRMIS) interface for payroll data and electronic payments
Integrated Planning Systems information system (IPSIS) interface for monitoring strategic plans and results
External Assistance management information system (EAMIS) interface for donor funded project details
Debt management (DMFAS) to AGFIS interface for public debt management and cash management information needs
Public procurement system interface to exchange data on public procurement processes and contractual information
Improvement of existing AGFIS interfaces with other systems (e.g. Tax/Customs)
Strategic Planning Objectives
Pillar 1: Sustainable and prudent fiscal framework.
Pillar 2: Well integrated and efficient planning and budgeting of public expenditure.
Pillar 3: Efficient execution of the Budget.
Pillar 4: Transparent government reporting.
Pillar 5: Effective internal control.
Pillar 6. Effective external oversight of the public finances.
Key issues of PFM Action Plan by Treasury
1. Improve forecasting methodologies for liquidity management.
1.2. Preparation of a inter-institutions memorandum for National Acc.
1.3. Creation of a full statistical system covering the needs for budget and semi-budget entities with standardized information.
1.4. Design and implement a SOE financial reporting process.
2.1. Multi-year commitment controls.
2.2. Improve the information content and quality of the budget documents that go to Parliament (include balance sheets data).
2.3. Approve the Law on "Local Government Finances“ (integrated).
3.1. Changing OBL on pre-commitment controls.
3.2. Configure AGFIS to allow tracking operational exp.by project code
3.3. Introduce e-invoice to foster timely recognition of expenses.
4.1. Implement IPSAS.
5.1. Review performance monitoring methodology.
Major Reforms results from manual treasury system to automated one –
Albanian Government Financial Information System (AGFIS) on
September, They consist in:
Preparation and updating of the treasury system legislation
resulted in the first PFM Strategy
Enhancement budgetary control by AGFIS.
Enhancement liquidity management by AGFIS and realized
centralized electronically payments process through TSA.
Development of accounting and legal framework.
Since 2010, for the first time, in 2014 are generated
electronically Government Finance Statistics data by IMF
methodology with AGFIS.
Enhancement of managerial accountability by matching the
performance indicators through AGFIS data.
Supported by technical assistance and the best experiences exchange through pear assisted learning and training abroad.
WB/IMF/EU technical missions
TCOP-PEMPAL
SETS
JVI/CEF/SECO training

15. Interactive Dashboards Transparent Business Intelligence (for example)
After implementation of Datawarehouse as a component of AFMIS project

16. THE DATA COLLECTION
The information on cash revenue and expenditure from other departments (tax administration, budget department, line ministries, other public entities) is collected through AGFIS.
Major Reforms results from manual treasury system to automated one –
Albanian Government Financial Information System (AGFIS)
On September, Fully Live Implementation of AGFIS with 36th treasury districts offices (TDOs) online and interfaced with banking system (Central Bank+15th commercial banks) and taxes system
Until 2017 year – 15th BIs online with AGFIS (14th central gov+1municipal of Tirana)
On 2006 year - Final Acceptance (design & test) of the Albanian Government Financial Information System.
On September, Fully Live Implementation of AGFIS with 36 treasury districts offices (TDOs) online.
Since 2012 year – Ministry of Finance and Economy as a pilot institution online with AGFIS.
Until 2017 year – 15 BIs online with AGFIS
Gjithashtu, SIFQ është integruar edhe me sistemin të Drejtorisë së Përgjithshme të Tatimeve që në vitin 2015 dhe do të zgjerohet ky integrim edhe me sistemet e tjera të Doganave, të burimeve njerëzore të DAP-it etj. duke automatizuar procesin e arkëtimeve tatimore dhe raportimin në kohë reale të treguesve fiskalë të konsoliduar të qeverisë për një analizë dhe vendimarrje të drejtë dhe në kohën e duhur.
Ky integrim i sistemeve të mësipërme ka shmangur qarkullimin fizik të parasë nga Thesari në sistemin bankar, duke përmirësuar ndjeshëm menaxhimin e “cash-it”, për rrjedhojë edhe parashikimin e flukseve të mjeteve monetare në/nga Llogaria e Unifikuar e Thesarit në Bankën e Shqipërisë (TSA-Treasury Single Account).
Pagesat e detyrimeve tatimore të institucioneve buxhetore kryhen kontabilisht nëpërmjet SIFQ dhe çdo ditë. Po kështu edhe transaksionet e shpenzimeve dhe të ardhurave midis institucioneve buxhetore kryhen kontabilisht nëpërmjet SIFQ.
Në kuadrin e reformës për modernizimin e sistemit të Thesarit në Shqipëri, në vitin 2003, qeveria e Shqipërisë vendosi të instalojë një sistem të automatizuar sipas standarteve ndërkombëtare.
Në vijim të mbështetjes financiare të Bankës Botërore që prej vitit 2010 është në funksionim Sistemi Informatik Financiar i Qeverisë (SIFQ).
Komunikimi elektronik i centralizuar me sistemet e pagesave AIPS dhe AECH bazohet në marrëveshjen dypalëshe specifike me Bankën e Shqipërisë “Marrëveshje për komunikimin elektronik midis sistemit informatik financiar të qeverisë (SIFQ) dhe sistemeve të pagesave AIPS dhe AECH të bankës” në zbatim të marrëveshjes kuadër nr. 716/1, datë “Për ofrimin e shërbimeve financiare nga Banka e Shqipërisë për qeverinë e Republikës së Shqipërisë” në cilësinë e agjentit fiskal.
PFM Government Strategy leads on:
Continue Extension and Expansion of AGFIS:
the extension to:
100 BIs until 2020 year (this number will be revised in few months because of administrative reform/ BI’s number reduction: central and local institutions)
the expansion of AGFIS functionalities:
Configure AGFIS to allow tracking operational expenditures by project /
output code,
Implementation of IPSAS (accrual bases of accounting) and Extra-budgetary funds.
Integration of AGFIS with:
Tax Information System (already in place since 2015)
Public Debt Management System for foreing&domestic payments (live in march 2018)
Public Procurement System (in process)
Custom Information System (in process)
Human Resource Management Information System (in process)
Medium Term Budget Planning (in process)
Program Based Budget Monitoring (in process)
Implementation of Document Management System
Electronic Archive for budget execution process, monitoring and reporting for all spending units (sending supporting documents for financial transaction execution into AGFIS through Web Portal ) using and fostering a common internal financial control rules
Improve the Government Transparency on usage of public funds
Implementation of BOOST Application (WB collaboration. Dissemination on April 2018).
To facilitate access of public to Government financial information
To increase the transparency of public finances
To increase the accountability of government officials on public funds management.
A typical BOOST is a repository of public expenditure/revenue data at the most detailed level of disaggregation available in the country’s Treasury System

18. Format of IT daily report on unpaid invoices

19. Format of IT report on multi years commitment by signed schedule

20. Format of Central Bank information on cash flows of TSA

21. Format of weekly cash flows of TSA

22. Format of monthly cash flows of TSA

23. Format of monthly deviations between forecasting and realization

24. Format of monthly cash flows in foreign currencies

25. MINISTRY OF FINANCES AND ekonomY
Tax Revenues monthly forecasting
REPUBLIC OF ALBANIA
MINISTRY OF FINANCES AND ekonomY

26. Format of monthly targets of Tax and Nontax Revenues (Macroeconimic Department)

27. Format of monthly targets of Expenditures

28. Format of monthly targets of Deficit Financing

29. Format of Calculation on monthly target of consolidated fiscal indicators

30. The contact:
Mobile: