1. GEORGIA’S PFMS MODEL AND STRUCTURE OF THE TREASURY GENERAL LEDGER Lela Kurashvili February, 2012

2. THE NATIONAL TREASURY PFMS MODEL 2 NBG DEBT MANAGEMENT BUDGET MANAGEMENT THE STATE TREASURY A BUDGET ORGANIZATION THE GENERAL LEDGER REPORTING THE FUNCTIONAL PROCESS THE INITIAL DOCUMENTS THE FUNCTIONAL PROCESS CONFIRMATION OF AGREEMENTS / LIABILITIES CONFIRMATION OF INVOICES /PAYMENT ORDERS RECORDING OF REVENUES/ PAYMENTS / REFUNDS PROCUREMENT / OBLIGATIONS DEBTORS / CREDITORS / PAYMENTS NON-MONETARY OPERATIONS, EXCEPT ASSETS AND INVENTORY ASSET AND INVENTORY MANAGEMENT MODULE HR MANAGEMENT PERSONNEL PAYROLL BUDGET/ ALLOCATIO NS BUDGET/ ALLOCATIO NS THE ELECTRONIC TENDER SYSTEM AGREEMENT GROUNDS FOR LIABILITIES, OTHER DOCUMENTS INVOICE NON-MONETARY EVENTS REPORTING DEBT TAXES THE GENERAL LEDGER $ $ $ FOREIGN INTERNAL RTGS CIVIL REGISTRY AGENCY REVENUE SERVICE AUDIT PROCUREMENT AGENCY

3. THE PROCUREMENT / OBLIGATION LEDGER 3 INFORMATION ABOUT AGREEMENTS WILL BE RECORDED IN COMPLIANCE WITH CPV CODES; MODULES FROM WHICH THIS INFORMATION WILL BE TRANSFERRED:  REMUNERATION OF EMPLOYEES“  „INTERNAL DEBT“  „FOREIGN DEBT“  „HR MANAGEMENT“ INFORMATION ABOUT AGREEMENTS WILL BE RECORDED IN COMPLIANCE WITH CPV CODES; MODULES FROM WHICH THIS INFORMATION WILL BE TRANSFERRED:  REMUNERATION OF EMPLOYEES“  „INTERNAL DEBT“  „FOREIGN DEBT“  „HR MANAGEMENT“ PROCUREMENT/ OBLIGATIONS HR MANAGEMENT PERSONNEL PAYROLL DEBT BUDGET /DISBURSE MENT AGREEMENT GROUNDS FOR LIABILITIES, OTHER DOCUMENTS $ THE ELECTRONIC TENDER SYSTEM FOREIGN INTERNAL NBG DEBT MANAGEMENT BUDGET MANAGEMENT THE STATE TREASURY A BUDGET ORGANIZATION THE GENERAL LEDGER REPORTING THE FUNCTIONAL PROCESS THE INITIAL DOCUMENTS THE FUNCTIONAL PROCESS CIVIL REGISTRY AGENCY REVENUE SERVICE AUDIT PROCUREMENT AGENCY

4. THE PROCUREMENT / OBLIGATION LEDGER A record made in the Procurement/Obligations Ledger is a source of double entries in accounting books. An organization selects the type of operation using the Directory of Operations; The Directory ensures that the budget classification clause is selected from the Uniform System of Accounts; The Directory ensures that the accounting reports are made based on debit entries. 4 THE OPERATIONS DIRECTORY THE OPERATION TYPE THE BUDGET CLASSIFICATION CLAUSE THE ACCOUNTING REPORT THE DEBIT ENTRY

5. THE PROCUREMENT / OBLIGATIONS LEDGER 5 HR MANAGEMENT PERSONNEL PAYROLL DEBT BUDGET /DISBURSEM ENT AGREEMENT GROUNDS FOR LIABILITIES, OTHER DOCUMENTS $ THE ELECTRONIC TENDER SYSTEM PROCUREMENT/ OBLIGATIONS THE SYSTEM AUTOMATICALLY REGISTERS INFORMATION IN THE PROCUREMENT / OBLIGATIONS LEDGER; ANY CHANGE MADE IN THE LEDGER IS AUTOMATICALLY REFLECTED IN THE ELECTRONIC DATA BASE OF THE TREASURY. THE OPERATIONS DIRECTORY HAS A “TREE STRUCTURE”. THE SYSTEM AUTOMATICALLY REGISTERS INFORMATION IN THE PROCUREMENT / OBLIGATIONS LEDGER; ANY CHANGE MADE IN THE LEDGER IS AUTOMATICALLY REFLECTED IN THE ELECTRONIC DATA BASE OF THE TREASURY. THE OPERATIONS DIRECTORY HAS A “TREE STRUCTURE”. FOREIGN INTERNAL NBG DEBT MANAGEMENT BUDGET MANAGEMENT THE STATE TREASURY A BUDGET ORGANIZATION THE GENERAL LEDGER REPORTING THE FUNCTIONAL PROCESS THE INITIAL DOCUMENTS THE FUNCTIONAL PROCESS CIVIL REGISTRY AGENCY REVENUE SERVICE AUDIT PROCUREMENT AGENCY

6. THE PROCUREMENT / OBLIGATION LEDGER A Typical Directory of Operations – A budget classification clause; – An Accounting Report; – A cash based or accrual operation; – Functional classification etc. 6 11112121 31121 2121 ClauseDebit Purchase of a transport vehicle by means of cash transfer to the supplier Example:

7. THE DEBIT/CREDIT PAYMENT LEDGER 7 THE ELECTRONIC TENDER SYSTEM HR MANAGEMENT PERSONNEL PAYROLL DEBT BUDGET / ALLOCATIO NS BUDGET / ALLOCATIO NS THE AGREEMENT GROUNDS FOR LIABILITIES, OTHER DOCUMENTS $ INVOICE DEBTOR / CREDITOR PAYMENTS INVOICE PROCUREMENT / OBLIGATIONS INFORMATION ABOUT THE TYPE OF OPERATION; INVOICE/AGREEMENT CONDITIONS; THE OPERATION SUB-TYPE, DEFINED ACCORDING TO THE OPERATION SUBJECT. INFORMATION ABOUT THE TYPE OF OPERATION; INVOICE/AGREEMENT CONDITIONS; THE OPERATION SUB-TYPE, DEFINED ACCORDING TO THE OPERATION SUBJECT. FOREIGN INTERNAL NBG DEBT MANAGEMENT BUDGET MANAGEMENT THE STATE TREASURY A BUDGET ORGANIZATION THE GENERAL LEDGER REPORTING THE FUNCTIONAL PROCESS THE INITIAL DOCUMENTS THE FUNCTIONAL PROCESS CIVIL REGISTRY AGENCY REVENUE SERVICE AUDIT PROCUREMENT AGENCY

8. PROCUREMENT/OBLIGATIONS LEDGER 8 HR MANAGEMENT PERSONNEL PAYROLL DEBT BUDGET / ALLOCATIO NS BUDGET / ALLOCATIO NS THE AGREEMENT GROUNDS FOR LIABILITIES, OTHER DOCUMENTS $ THE ELECTRONIC TENDER SYSTEM INVOICE DEBTORS/CREDITORS PAYMENTS INVOICE PROCUREMENT / OBLIGATIONS CONFIRMATION OF INVOICES / PAYMENT ORDERS RTGS THE GENERAL LEDGER FOREIGN INTERNAL AN ACCOUNTING ENTRY MADE BY SELECTING THE OPERATION; ACTIVATED ONLY IF THE AMOUNT IS SPECIFIED; IN PARALLEL, A PAYMENT ORDER IS FORMED. AN ACCOUNTING ENTRY MADE BY SELECTING THE OPERATION; ACTIVATED ONLY IF THE AMOUNT IS SPECIFIED; IN PARALLEL, A PAYMENT ORDER IS FORMED. NBG DEBT MANAGEMENT BUDGET MANAGEMENT THE STATE TREASURY A BUDGET ORGANIZATION THE GENERAL LEDGER REPORTING THE FUNCTIONAL PROCESS THE INITIAL DOCUMENTS THE FUNCTIONAL PROCESS CIVIL REGISTRY AGENCY REVENUE SERVICE AUDIT PROCUREMENT AGENCY

9. PROCUREMENT/OBLIGATIONS LEDGER 9 HR MANAGEMENT PERSONNEL PAYROLL DEBT BUDGET / ALLOCATIO NS BUDGET / ALLOCATIO NS THE AGREEMENT GROUNDS FOR LIABILITIES, OTHER DOCUMENTS $ THE ELECTRONIC TENDER SYSTEM INVOICE DEBTORS/CREDITO RS PAYMENTS INVOICE PROCUREMENT / OBLIGATIONS CONFIRMATION OF INVOICES / PAYMENT ORDERS RTGS THE GENERAL LEDGER A PAYMENT ORDER IS CONFIRMED BY A BUDGET ORGANIZATION BASED ON DETAILED CPV CODES; THE PAYMENT ORDER CONFIRMED BY THE TREASURY IS AUTOMATICALLY SENT TO RTGS. ACCOUNTING RECORDS MADE BASED ON THE DOUBLE ENTRY PRINCIPLE ARE AUTOMATICALLY REFLECTED IN THE GENERAL LEDGER OF THE TREASURY“ A PAYMENT ORDER IS CONFIRMED BY A BUDGET ORGANIZATION BASED ON DETAILED CPV CODES; THE PAYMENT ORDER CONFIRMED BY THE TREASURY IS AUTOMATICALLY SENT TO RTGS. ACCOUNTING RECORDS MADE BASED ON THE DOUBLE ENTRY PRINCIPLE ARE AUTOMATICALLY REFLECTED IN THE GENERAL LEDGER OF THE TREASURY“ FOREIGN INTERNAL NBG DEBT MANAGEMENT BUDGET MANAGEMENT THE STATE TREASURY A BUDGET ORGANIZATION THE GENERAL LEDGER REPORTING THE FUNCTIONAL PROCESS THE INITIAL DOCUMENTS THE FUNCTIONAL PROCESS CIVIL REGISTRY AGENCY REVENUE SERVICE AUDIT PROCUREMENT AGENCY

10. ASSETS AND INVENTORY 10 $ DEBT THE ASSET AND INVENTORY MANAGEMENT MODULE THE GENERAL LEDGER NON-MONETARY EVENT Example: Transport vehicle: Mercedes, “C” class, manufactured in 2000“ - Code 0001; FOREIGN INTERNAL NBG DEBT MANAGEMENT BUDGET MANAGEMENT THE STATE TREASURY A BUDGET ORGANIZATION THE GENERAL LEDGER REPORTING THE FUNCTIONAL PROCESS THE INITIAL DOCUMENTS THE FUNCTIONAL PROCESS CIVIL REGISTRY AGENCY REVENUE SERVICE AUDIT PROCUREMENT AGENCY ASSETS ARE RECORDED ACCORDING TO THE IDENTIFICATION CODES OF ANALYTICAL RECORDING (REPORT); EACH OPERATION PERFORMED WITH ASSETS IS AUTOMATICALLY REFLECTED IN THE MAIN LEDGER BY MEANS OF BACK LINK. ASSETS ARE RECORDED ACCORDING TO THE IDENTIFICATION CODES OF ANALYTICAL RECORDING (REPORT); EACH OPERATION PERFORMED WITH ASSETS IS AUTOMATICALLY REFLECTED IN THE MAIN LEDGER BY MEANS OF BACK LINK. ACCEPTANCE OPERATION ACCRUAL OF AMORTIZATION DEPRECIATION MATERIAL IMPROVEMENT CHANGE OF TYRES REPAIR COSTS ACCEPTANCE OPERATION ACCRUAL OF AMORTIZATION DEPRECIATION MATERIAL IMPROVEMENT CHANGE OF TYRES REPAIR COSTS

11. 11 DEBT $ THE GENERAL LEDGER NON-MONETARY EVENT NON-MONETARY OPERATIONS, EXCEPT ASSETS AND INVENTORY NON-MONETARY EVENT THE GENERAL LEDGER OTHER NON-MONETARY OPERATIONS, EXCEPT ASSETS AND INVENTORY FOREIGN INTERNAL NBG DEBT MANAGEMENT BUDGET MANAGEMENT THE STATE TREASURY A BUDGET ORGANIZATION THE GENERAL LEDGER REPORTING THE FUNCTIONAL PROCESS THE INITIAL DOCUMENTS THE FUNCTIONAL PROCESS CIVIL REGISTRY AGENCY REVENUE SERVICE AUDIT PROCUREMENT AGENCY NON-MONETARY OPERATIONS INTERNAL OPERATIONS OTHER ECONOMIC FLOWS NON-MONETARY OPERATIONS INTERNAL OPERATIONS OTHER ECONOMIC FLOWS

12. ACCOUNTING OF AGGREGATED PARAMETERS Once at the end of each reporting period, aggregated parameters are recorded in the General Treasury Ledger as one operation:  Expenses funded from income received from economic activity of legal entities of public law;  Common public payments;  Direct payments made bypassing the Common Treasury Account. 12

13. GEORGIA’S PFMS MODEL AND STRUCTURE OF THE TREASURY GENERAL LEDGER 13 Thank You for Attention! www.mof.ge www.treasury.gov.ge Lela Kurashvili February 2012