1. PUBLIC FINANCE IN THE REPUBLIC OF MOLDOVA: REFORMS AND THE DEVELOPMENT STRATEGY PLENARY SESSION OF THE TREASURY COMMUNITY OF PRACTICE JUNE 1-3, 2015, KISHINEV, MOLDOVA PUBLIC EXPENDITURE MANAGEMENT PEER ASSISTED LEARNING Ministry of Finance of the Republic of Moldova General Directorate of the State Treasury 1

2. Reforms and the Development Strategy National Development Strategy MOLDOVA – 2020: solutions for economic growth and poverty reduction Law # 166, as of July 11, 2012 2

3. Reforms and the Development Strategy National Development Strategy MOLDOVA – 2020 is meant to present a coordinated point of view concerning long-term sustainable economic development based on diagnostic investigation of factors that hinder economic development Priority areas of activities of the state → → clearly formulated goal of the Strategy: ensuring sustainable economic development and, therefore, poverty reduction 3

4. Reforms and the Development Strategy  A number of strategies aimed at reforms and development of the public sector, the strategies provide for revision of laws and regulations  A number of action plans that cover some pressing issues that affect public finance Strategy for Public Finance Management Development for 2013-2020 Government Decree # 573, as of August 6, 2013. 4

5. Strategy for Public Finance Management Development Diagnostics of public finance management – strengths and identification of problems: Evaluation of public expenditure and financial accountability efficiency - 2011. (PEFA) (previous evaluations – in 2006 and in 2008) Impact of the world economic crisis → Importance of improving systems for planning both capital and current expenditures, and the need to enhance financial discipline both in the process of budget development and at the level of execution. 5

6. Strategy for Public Finance Management Development 6 The Strategy is comprised of 7 Components that represent the most important areas of public finance management Component 1 – Macro budget forecast Component 2 – Budget development and planning Component 3 – Budget execution, accounting and reporting Component 4 - Financial management and internal control Component 5 – Revenue administration Component 6 – Public procurements Component 7 – Financial management information system

7. Strategy for Public Finance Management Development 7 Budget execution, accounting and reporting (Component 3) thematic areas: 1. The process of budget execution 2. Cash flow management 3. Accounting and reporting in the budget system 4. Accounting and financial reporting

8. Strategy for Public Finance Management Development 8 1. Budget execution process Expected results: - Clearly defined budget execution procedures - Delegation of responsibility and control over expenditures Measures: - Improvement of the legal framework for budget execution, brining into compliance with the new law on public finance; - Development of the new budget execution methodology with simultaneous implementation of PFMIS Achievements: Methodological norms of cash budget execution, of which the national public budget is comprised, through the treasury system of the Ministry of Finance (order of the MF # 215, of December 28, 2015). Tasks for the future: constant improvement of the budget execution methodology, improvement of rules and norms with simultaneous development of PFMIS

9. Strategy for Public Finance Management Development 9 2. Cash flow management Expected results: - Centralization of balances in the Treasury Single Account - Elaboration of annual liquidity forecasts with monthly breakdown, updated weekly / monthly, ensuring control over expenditures within the available cash balances Measures: - Inclusion into the treasury system of all sources of donor funding - Development of the liability module in the new PFMIS Achievements: transfer of projects financed from external sources from commercial banks to the National Bank of Moldova Task for the future: establishing relationship between the liability module and the forecasting module

10. Strategy for Public Finance Management Development 10 3. Accounting and reporting in the budget system Expected results: - Consistency of the Chart of Accounts and the Budget Classification - Regulatory and coverage of reports on budget execution Measures: - Development and implementation of the single Chart of Accounts in accordance with the GFS standards 2001 - Changing the structure of reports on budget execution Achievements: Chart of Accounts in the budget sector and Methodological Norms for Accounting and Financial Reporting in the Budget Sector (MF Order # 216, of December 28, 2015). Task for the future: consolidation of responsibility of central governing bodies by means of delegating direct reporting to the Parliament

11. Strategy for Public Finance Management Development 11 4. Accounting and financial reporting Expected results: - Clearly defined national accounting procedures - Application of the single Chart of Accounts that is integrated with the economic classification for planning, execution and reporting purposes - Completeness and regularity of financial statement submission Measures: - Implementation of the Chart of Accounts in PFMIS and methodological norms on its application - Integration of the system of maintenance of accounting in budgetary entities into PFMIS - Elaboration and implementation of accounting standards for the public sector

12. Strategy for Public Finance Management Development 12 Achievements: - application of the new Chart of Accounts in the budget sector - bringing systems of accounting of budget entities into compliance with the new Chart of Accounts - establishment of a Board for development and implementation of accounting standards for the public sector in accordance with international standards Tasks for the future: - Integration of the system of maintenance of accounting in budgetary entities into PFMIS - creation of the Concept and Action Plan for development and implementation of accounting standards for the public sector in accordance with international standards

13. Strategy for Public Finance Management Development 13 Financial management information system (Component 7) Expected results: ● an integrated system capable of progressive modernization for the purpose of adapting to future needs ● common platform and user interface ● operation management in the framework of the Single Treasury Account ● provision for core functions related to public finance management ● supporting the process of development of the long-term budget forecast and annual budget

14. Strategy for Public Finance Management Development 14 ● possibility to generate a historical data base on budget limits and expenditure; detailed breakdown of data on cash flows and bank operations ● carrying out operations in real time mode ● flexibility in providing various information for managerial decisions upon users’ requests ● access of auditors and regulatory bodies to information

15. Strategy for Public Finance Management Development 15 THANK YOU FOR ATTENTION! angela.voronin@mf.gov.md