1. 1 Establishment and Development of Treasury System in Ukraine Experience with the World Bank Project Implementation Olexandr SHLAPAK Head of the State Treasury of Ukraine PEM-PAL Workshop Treasurers Community of Practice Slovenia, Ljubljana, June 26-27, 2006

2. 2 The State Treasury of Ukraine  April 27, 1995 – establishment of the State Treasury of Ukraine  3-tier structure  Head Office – 404 employees  27 Territorial (Oblast) Departments – 4 049 employees  635 Rayon and Municipal Offices – 12 436 employees  Total– 16 889 employees  Workload  80 ths spending units  12 ths local budgets  600 ths accounts for budgets’ expenditure side  5 000 ths accounts for budgets’ revenue side  15.4 ths PCs  40% of electronic payment orders in EPS NBU  2004 – 136.8 mln settlement and payment documents (24.1mln – revenue docs, 70.5 mln – expenditure docs, 42.2 – IPS)  2005 – 161.5 mln settlement and payment documents (25.2 mln– revenue docs, 87.9 mln. – expenditure docs, 48.4 – IPS)  1997 – 1998 – implementation of Treasury services for the expenditure side of the State Budget  1999 – 2003 – implementation of Treasury services for the expenditure side of local budgets  2002 – joining EPS NBU, setting up Treasury Single Account The State Treasury of Ukraine in Brief

3. 3  Bringing together efforts by the Government of Ukraine, IMF and the World Bank. Sample investments into Information system (1996 – 2005):  Total – 158.4 mln UAH  WB loan – 84.5 mln UAH (53.3%)  the State Budget of Ukraine – 73.9 mln UAH (46.7%)  1. Capacity building loan (3614UAH, 1996 – 1998)  Treasury subcomponent – 2 101.9 ths US dollars  Information technologies – 1 687.7 ths US dollars  Consultancy services– 388.3 ths US dollars  Training– 25.9 ths US dollars  Co-financing of Ukraine – none  2. «Treasury System Project» (4285UAH, 1998 – 2004)  Total– 16 400.0 ths US dollars  Information technologies – 14 877.0 ths US dollars  Consultancy services – 1 253.0 ths US dollars  Training – 270.0 ths US dollars  Co-financing of Ukraine – 23.0 mln UAH (4.5 mln US dollars)  8 years of WB Projects’ implementation history The State Treasury of Ukraine

4. 4 Prior to the Project  Lack of regulation in the legal grounds of the budget process  No methodology for Treasury services, including Chart of Accounts for budgets’ execution  Cash based budgets’ execution through banking system  “Manual mode” in managing public finances  Limited Treasury capacity  Lack of technical treasury infrastructure  No trained Treasury personnel While Implementing the Project  Adoption of the Fiscal Code of Ukraine  Legally fixed powers and responsibilities for the State Treasury bodies  Establishment of the State Treasury institutional structure  Formulation of the methodology grounds for Treasury based budget execution, including the accounting system  Designing the application software for treasury services AS “КАZNА”  Designing and upgrading the interim Treasury information system  Implementation of Treasury services for budgets’ expenditure side  Implementation of Treasury services for budgets’ revenue side  Implementation of Treasury services for local budgets  The State Treasury joins EPS NBU  Establishment of Treasury Single Account (TSA) and consolidation of budget finds at TSA  Enhancing accountability for public finds uses Goal of Treasury System Project – establishment and implementation of the fully functional automated treasury system as an efficient instrument for budget execution and cash management The State Treasury of Ukraine

5. 5  Key provisions  The State Treasury of Ukraine is a direct member of the Electronic Payment System of the National Bank of Ukraine (EPS NBU)  The accounting model for budget execution makes the foundation for treasury services  A spending unit is a holder of an expenditure account  The General Ledger is formed at the moment of making an operation  Concept for application software АS “КАZNА”  One “treasury function bank” per oblast as a TSA “element”  Maximum information in bank accounts  Processing information in real time mode at oblast level  No client software – WEB-based technology  Low requirements to telecommunication channels  Development challenges  The necessity to change from the modified cash based budget execution mode to accrual based budget execution  Відокремленість програмних модулів казначейського обслуговування  There is no transaction data base for budgets’ execution, information exchange between tiers and financial reporting consolidation  There is no transparent interface with the major spending units  Instruments for managing financial resources are not developed  The Ukrainian Model for Treasury System The State Treasury of Ukraine

6. 6  Charts of Accounts  The Chart of Accounts of the National Bank of Ukraine  The Chart of Accounts for commercial banks  The Chart of Accounts for the State and local budgets execution (the State Treasury of Ukraine)  The Charts of Accounts as the foundation for the accounting model of the State and local budgets execution  1. Assets  2. Commitments/Liabilities  3. Funds of budgets and spending units  4. Settlement  5. Budget execution outcome  6. Budget revenues  7. Budget expenditures  8. Managerial accounting  9. Off-balance sheet accounting  Coding of analytical properties is regulated by the following:  The Uniform State Registry for Enterprises and Organizations in Ukraine  Budget Classification of Ukraine  The NBU Reference Books  The TSU Reference Books  Charts of Accounts in EPS NBU (1) The State Treasury of Ukraine

7. 7  Sample coding for revenue accounts BBBB K SSS H RR TTT– account number coding (14 digits) XXXX.................................. – balance sheet account (4 digits).......... X.............................– control figures set EPS NBU (1 digit).............. XXX.....................– symbol for revenues reporting (3 digits)...................... X..................– property for consolidated account (1 digit).......................... XX...........– property for agency (ACC) (2 digits)................................. XXX.. – number for analytical properties’ set (3 digits) ВВВВ = 3111 – Accounts for revenues to the General Fund of the State Budget SSS – reporting symbol matching budget classification by revenues (8 digits) Н – property for consolidated account for entering taxes of the given territory (matching the last year figure) RR – property matching agency classification code for budget expenditures, or other property TTT – порядковий номер, matching analytical properties’ set : - codes and names of budget territory in Ukrainian and Russian according to State Classificatory - budget code according to the MoF Budgets Reference - codes of oblast, city, rayon, settlement, village - code and title of an STU body - code and title of an STA body  Sample coding for expenditures accounts BBBB K GGG NNNNNN– account number coding (14 digits) XXXX.................................. – balance sheet account (4 digits).......... X.............................– control figures set EPS NBU (1 digit).............. XXX.....................– code for account type (3 digits)........................ XXXXXX...– # of account holder (6 digits) ВВВВ = 3521 – Spending units’ registration accounts with respect to funds of the General Fund of the State Budget GGG – code for account type given to the analytical properties’ set: - agency classification code - code by the program classification for expenditures or by functional expenditures’ classification - code by the spending unit network - spending unit’s subordination level - funds’ property - code of the STU body - code of the STA body NNNNNN – the number ensuring account uniqueness with the respective analytical parameters’ set (given to account holder by software means when an analytical account is being opened)  EPS NBU Chart of Accounts (2) The State Treasury of Ukraine

8. 8  Treasury Single Account within Budget Process (1) MSU HO STU AS Kazna- Center TSA management system Banking part - ABS AS Kazna - Revenues TCA (1…27) Banking part – ABS RFTS NBU STA, SCS SPF EPS NBU Commercial bank Tax payer Commercial bank Supplier of goods, works and services HO STU, STUD 1…27 SU 2 SU 3 AS Kazna - Expenditures Client- Bank Management: limits, support Cash flows Electronic payment orders Commitments Allocations, planned indicators Information Hard copy documents Assigning allocations against registered commitments Preliminary Treasury control SU 3 STUO WEB Treasury part

9. 9 The State Treasury of Ukraine  Treasury Single Account in the budget process (2) List of Abbreviations TSA-Treasury Single Account ABS-Automated Banking System AS- Automated system NBU- National Bank of Ukraine EPS-Electronic payment system RFTS-Rapid funds transfer system TCA-Technical correspondent account MSU- Major spending unit SU2-2d level spending unit SU3-3d level spending unit HO STU-Head Office of the State Treasury of Ukraine STUD-STU Department (Oblast) STUO -STU Office (Rayon) STA-State Tax Administration SCS-State Customs Service SPF -State Property Fund

10. 10 Sommaire  Information System (IS) The State Treasury of Ukraine (SAN) HP Virtual Array (MS SQL) AS Kazna-Expenditures (MS SQL) AS Kazna-Center StandBy SQL А – Basic SQL В – Аrchive (ORACLE) AS Kazna- Revenues Primary WEB Fire Wall (VPN) FrameRelay 64 KBit/sec Fire Wall StandBy Primary (ORACLE) AS Kazna-R SQL А SQL B WEB’s (SAN) HP Virtual Array Users (60 PC’s/IE) Users (45- 120 PC’s/IE) (MS SQL) AS Kazna-E Fire Wall Users (5 - 60 PC’s/IE) MF Server FrameRelay – 210 Anolog Leased Line – 146 RadioEthernet – 118 xDSL – 49 TCP/IP - 31 Dial-Up – 27 X.25 - 25 Direct Connection – 15 ISDN – 11 LAN - 4 ”UKRTELECOM” LAN (Ethernet) SAN WAN Central level Oblast level - 27 Rayon level - 635