11

Ministry of Finance Ministry of Finance Republic of KazakhstanRepublic of Kazakhstan

Workshop on Workshop on Implementation of BC Implementation of BC and CoAand CoA

DushanbeDushanbe,,

OctoberOctober 2010 2010

22

Treasury Treasury

After gaining independence, Kazakhstan started active creation of After gaining independence, Kazakhstan started active creation of its own financial system that meets requirements of market its own financial system that meets requirements of market economyeconomy

Budget system was reformed at all budget stages, including Budget system was reformed at all budget stages, including planningplanning, , approvalapproval, , budget executionbudget execution, , accounting and reportingaccounting and reporting

Budget system reform is directly related with treasury system Budget system reform is directly related with treasury system developmentdevelopment

In accordance with the Presidential Decree, the Main Treasury In accordance with the Presidential Decree, the Main Treasury Department was set up under the Ministry of Finance in January Department was set up under the Ministry of Finance in January 19941994

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Budget Classification Budget Classification

Reform of new budget system Reform of new budget system necessitated development of new budget necessitated development of new budget classificationclassification

Current unified budget classification is Current unified budget classification is developed in accordance with the IMF developed in accordance with the IMF methodology on the basis international methodology on the basis international standards requirementsstandards requirements

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Structure of unified budget Structure of unified budget classification (UBC)classification (UBC)

UBC includesUBC includes::

Classification of budget revenues Classification of budget revenues (6 (6 symbolssymbols))

Functional classification of budget expendituresFunctional classification of budget expenditures (12 (12 symbolssymbols))

Economic classification of expenditures Economic classification of expenditures (6 (6 symbolssymbols))

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Classification of receiptsClassification of receipts

- - This is grouping of receipts by certain featuresThis is grouping of receipts by certain features, , consists of consists of 6 6 symbolssymbols::

ХХ – – CATEGORYCATEGORY ((grouping of receipts by economic grouping of receipts by economic featuresfeatures),),

ХХХХ – – CLASSCLASS ((grouping of receipts by sources and grouping of receipts by sources and typestypes),),

ХХ – – SUB-CLASSSUB-CLASS ((more detailed grouping of receipts more detailed grouping of receipts by economic featuresby economic features),),

ХХХХ – – SPECIFICITY SPECIFICITY ((defines type of payment or budget defines type of payment or budget receiptreceipt))

Each type of receipts has unique Each type of receipts has unique 6-6-digit code that is digit code that is formed of codes of all classification levels of receiptsformed of codes of all classification levels of receipts

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Categories of budget receiptsCategories of budget receipts::

11 – – Tax receiptsTax receipts22 – – Non-tax receiptsNon-tax receipts3 3 – – Proceeds from fixed capital saleProceeds from fixed capital sale44 – – Transfers receiptsTransfers receipts55 – – Repayment of budget creditsRepayment of budget credits66 – – Proceeds from sales of financial assets of the Proceeds from sales of financial assets of the state state 77 – – Loans receiptsLoans receipts88 – – Utilized balances of budget fundsUtilized balances of budget funds

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Functional classification of budget Functional classification of budget expenditures expenditures - -

grouping of budget expenditures of all levels that defines direction of grouping of budget expenditures of all levels that defines direction of expenditures reflecting public functions and implementation of strategic plans of expenditures reflecting public functions and implementation of strategic plans of state bodiesstate bodies,,

consists of consists of 1212 symbols symbols::

ХХХХ – – functional groupfunctional group ((reflects main directions of expendituresreflects main directions of expenditures, , clearly clearly delineates development prioritiesdelineates development priorities) )

ХХ – – functional subgroupfunctional subgroup ((specifies groups of tasks for each strategic priorityspecifies groups of tasks for each strategic priority))

ХХХ ХХХ – – administrator of budget programs administrator of budget programs ((state bodystate body responsible for budget responsible for budget programs planning and implementationprograms planning and implementation))

ХХХХХХ – – budget program budget program ((defines direction of budget expendituresdefines direction of budget expenditures))

ХХХХХХ – – budget sub-programbudget sub-program ( (specifies expenditures within one budget programspecifies expenditures within one budget program))

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Classifier of UBC functional groupsClassifier of UBC functional groups

01 – 01 – General government servicesGeneral government services

02 – 02 – DefenseDefense

03 – 03 – Public orderPublic order, , securitysecurity, , legallegal, , judicialjudicial, , law enforcement activitylaw enforcement activity04 – 04 – EducationEducation

05 – 05 – Health careHealth care

06 – 06 – Social assistance and social securitySocial assistance and social security

07 – 07 – Housing and utilitiesHousing and utilities

08 - 08 - CultureCulture, , sportsport, , tourism and information spacetourism and information space

09 – 09 – Fuel and energy sector and subsurface managementFuel and energy sector and subsurface management

10 - 10 - AgricultureAgriculture, , water industrywater industry, , forestry forestry, , fisheryfishery, , natural conservation areasnatural conservation areas, , environment environment protectionprotection, , land relationsland relations

11 - 11 - IndustryIndustry, , architecturearchitecture, , urban planning and constructionurban planning and construction12 – 12 – Transport and communicationsTransport and communications

13 – 13 – OtherOther

14 – 14 – Debt servicingDebt servicing

15 – 15 – TransfersTransfers

16 – 16 – Repayment of loansRepayment of loans

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Economic classification of budget Economic classification of budget expendituresexpenditures - -

grouping of budget expenditures that reflects transactions performed grouping of budget expenditures that reflects transactions performed by state institutions with the aim of budget programs by state institutions with the aim of budget programs implementationimplementation, , consists of consists of 6 6 characterscharacters::

ХХ – – CATEGORY CATEGORY ((reflects division of expenditures by reflects division of expenditures by : : 1 – 1 – current expenditurescurrent expenditures 2 - 2 - capital expenditurescapital expenditures 3 – 3 – budget creditsbudget credits 4 – 4 – purchase of financial assetspurchase of financial assets 5 – 5 – repayment of loansrepayment of loans))

ХХ – –CLASS CLASS ((groups expenditures by main types within the categorygroups expenditures by main types within the category))

ХХХХХХ – – SUBCLASSSUBCLASS ((more detailed grouping of budget expendituresmore detailed grouping of budget expenditures),),

ХХХХХХ – – SPECIFICITYSPECIFICITY ((defines type of transactiondefines type of transaction))

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Budget Programs AdministratorsBudget Programs Administrators

Администраторы (имеют 3-значный уникальный код)

республиканских бюджетных

программ – их число 41 (это – министерства,

агентства, ведомства)

Местных бюджетных

программ – 76, из них:

Областного уровня – 53 (это - Управления)

Районного уровня – 23 (это - Отделы)

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Budget Structure Budget Structure ––Consists of the following sectionsConsists of the following sections::1)1) revenuesrevenues::• Tax receipts Tax receipts ((categorycategory 1) 1)• Nontax receipts Nontax receipts ((categorycategory 2) 2)• Proceeds from sale of fixed capital Proceeds from sale of fixed capital ((categorycategory 3) 3)• Receipt of transfersReceipt of transfers ((categorycategory 4) 4)2) 2) ExpendituresExpenditures (1-15(1-15 FGR FGR, , specificity specificity 100 – 400)100 – 400)3) 3) Net budget creditingNet budget crediting::• Budget creditsBudget credits (1-13 (1-13 FGRFGR, , specificity specificity 500)500)• Repayment of budget credits Repayment of budget credits ((categorycategory 5) 5)4) 4) Balance of transactions with financial assets Balance of transactions with financial assets ((FAFA):):• Purchase of FAPurchase of FA (1-13 (1-13 FGRFGR, , specificity specificity 600)600)• Proceeds from sale of FAProceeds from sale of FA ((categorycategory 6) 6)5) 5) Budget deficit Budget deficit ((surplussurplus))6) 6) Deficit financing Deficit financing ((utilization of surplusutilization of surplus):):• Receipt of loans Receipt of loans (16 (16 FGRFGR, , specificity specificity 700)700)• Repayment of loans Repayment of loans ((categorycategory 7) 7)• Utilized balances of budget funds Utilized balances of budget funds ((categorycategory 8) 8)

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Interrelation between functional and economic Interrelation between functional and economic UBCUBC::

1) 1) Section of budget structure “Expenditures”Section of budget structure “Expenditures” - - 01- 15 01- 15 functional groups of expendituresfunctional groups of expenditures

2) 2) Section “Budget credits”Section “Budget credits”

3) 3) Section “Purchase of financial assets”Section “Purchase of financial assets”

4) 4) Section “Repayment of loans”Section “Repayment of loans”

Such interrelation enables to monitor Such interrelation enables to monitor budgetary process at the stages of budgetary process at the stages of planningplanning, , execution and reportingexecution and reporting

1) 1) Specific features related to “Current expenditures” Specific features related to “Current expenditures” and “Capital expenditures” categories are used and “Capital expenditures” categories are used (100 – 400 (100 – 400 subclassessubclasses) )

2) 2) Specific features of “Budget credits” category are Specific features of “Budget credits” category are used used (500(500thth subclass subclass) )

3) 3) Specific features of “Financial assets” category are Specific features of “Financial assets” category are used used (600(600thth subclass subclass) )

4) 4) Specific features ofSpecific features of « «Repayment of loansRepayment of loans» » are used are used (700(700thth subclass subclass) )

Also, correct application of UBC codes Also, correct application of UBC codes facilitatesfacilitates::

budget balancingbudget balancing,, absence of distortions in the course of absence of distortions in the course of

report generation basing on functionalreport generation basing on functional, , departmental and economic departmental and economic classification for the same reporting dateclassification for the same reporting date

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Accounting systemAccounting system--

A section is added to the Budget Code of the Republic A section is added to the Budget Code of the Republic of Kazakhstan of Kazakhstan ((will take force on January 1, will take force on January 1, 2013)2013). It . It regulates accounting system regulates accounting system and financial reporting of and financial reporting of state institutionsstate institutions, , based on based on accrual methodaccrual method

Accrual methodAccrual method is ensured by recognition of transaction is ensured by recognition of transaction results as a result of their execution irrespective of the results as a result of their execution irrespective of the time of paymenttime of payment

Currently Currently ((before January before January 11,, 2013) 2013), state institutions in , state institutions in Kazakhstan use budget accounting on the basis of cash Kazakhstan use budget accounting on the basis of cash methodmethod

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Transfer to International Public Sector Accounting Transfer to International Public Sector Accounting StandardsStandards ( (IPSASIPSAS))

Regulation of the Government of the RK as of June Regulation of the Government of the RK as of June 66,, 2008 « 2008 «On adoption of On adoption of action plan on performance based budgetaction plan on performance based budget» » defines main activities on defines main activities on transfer to IPSAStransfer to IPSAS

In accordance with the Decree of the Ministry of Finance as of August In accordance with the Decree of the Ministry of Finance as of August 2828,, 20082008, Working Group on IPSAS was established., Working Group on IPSAS was established. It consists of It consists of representatives of Accounting Committeerepresentatives of Accounting Committee, , heads of accounting services of heads of accounting services of central state bodies and employees of the Ministry of Finance of the RKcentral state bodies and employees of the Ministry of Finance of the RK

Action plan on improvement of accounting and financial reporting of state Action plan on improvement of accounting and financial reporting of state institutions for 2009-2013 was drafted and approved by the Decree of the institutions for 2009-2013 was drafted and approved by the Decree of the Ministry of Finance of RK as of July Ministry of Finance of RK as of July 2424,, 2009 2009

USAIDUSAID ( (ERECEREC) ) project was contracted for consulting on international project was contracted for consulting on international experience of transfer to IPSASexperience of transfer to IPSAS and organization of training seminars on and organization of training seminars on IPSASIPSAS

Agreement with IFACAgreement with IFAC was concluded on official translation of IPSASwas concluded on official translation of IPSAS 2010 2010 into Kazakh and Russian languagesinto Kazakh and Russian languages

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Action plan on improvement of accounting and Action plan on improvement of accounting and financial reporting of state institutions for financial reporting of state institutions for 2009-20132009-2013

STAGE STAGE 1. 1. Preparation of methodology of new accounting and Preparation of methodology of new accounting and

financial reporting system for state institutions in conformity financial reporting system for state institutions in conformity with IPSASwith IPSAS and accrual method (2009 – 2010and accrual method (2009 – 2010))

STAGE STAGE 2. 2. Pilot program on new methodology Pilot program on new methodology implementation in conformity with IPSASimplementation in conformity with IPSAS (2011) (2011)

STAGE STAGE 3. 3. Implementation Implementation (2012)(2012)

STAGE STAGE 4. 4. Assessment and following control Assessment and following control (2013)(2013)

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Chart of accounts in state institutions developed in conformity Chart of accounts in state institutions developed in conformity with IPSASwith IPSAS and accrual methodand accrual method

Синтетические счета

бухгалтерского учета в Плане счетов расположены в

порядке уменьшения ликвидности и

содержат 4 знака (ХХХХ)

1-я цифра – указывает на

принадлежность к РАЗДЕЛУ

2-я – на принадлежность к

ПОДРАЗДЕЛУ

3-я – на принадлежность к

ГРУППЕ

4-я – на принадлежность к

СУБСЧЕТАМ

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Example from Section Example from Section 1. 1. “Short-term assets” of “Short-term assets” of the new Chart of Accountsthe new Chart of Accounts

1000 1000 Monetary funds and their equivalentsMonetary funds and their equivalents 1010 1010 Cash on handCash on hand 1020 1020 Current account of state institutionCurrent account of state institution 1030 1030 Settlement accountSettlement account 1040 1040 Control cash account (CCA) for accounting of receipts and settlementsControl cash account (CCA) for accounting of receipts and settlements 1041 1041 CCACCA of sponsor and charity assistanceof sponsor and charity assistance 1042 1042 CCACCA of paid servicesof paid services 1043 1043 CCACCA of temporary placement of moneyof temporary placement of money 1050 1050 Foreign exchange accountForeign exchange account 1060 1060 Special accountSpecial account 1061 1061 Special account of budget investment grant projectSpecial account of budget investment grant project 1062 1062 Special account of budget investment project from external loansSpecial account of budget investment project from external loans 1070 1070 Other monetary meansOther monetary means 1071 1071 Letters of creditLetters of credit 1072 1072 Monetary documentsMonetary documents 1073 1073 Cash in transitCash in transit 1074 1074 Other monetary meansOther monetary means 1080 1080 Planned assignmentsPlanned assignments to accept liabilities in conformity with individual plan of financing of liabilities of state to accept liabilities in conformity with individual plan of financing of liabilities of state

institutions financed from the republican budgetinstitutions financed from the republican budget 1081 1081 Planned assignmentsPlanned assignments to accept liabilities in conformity withto accept liabilities in conformity with individual plan of financing individual plan of financing 1082 1082 Planned assignmentsPlanned assignments to accept liabilities in conformity withto accept liabilities in conformity with capital investmentcapital investment 1083 1083 Planned assignmentsPlanned assignments to accept liabilitiesto accept liabilities at the account of other budgets at the account of other budgets 1084 1084 Planned assignmentsPlanned assignments to accept liabilities in conformity withto accept liabilities in conformity with transferstransfers 1085 1085 Planned assignmentsPlanned assignments to accept liabilities in conformity withto accept liabilities in conformity with subsidiessubsidies 1086 1086 Planned assignmentsPlanned assignments to accept liabilities in conformity withto accept liabilities in conformity with transactions related with receipts to republican transactions related with receipts to republican

budget in the form of cost of goods budget in the form of cost of goods ((worksworks, , servicesservices) ) and their utilizationand their utilization 1087 1087 Planned assignmentsPlanned assignments to accept liabilities in conformity withto accept liabilities in conformity with projects from external loans and related projects from external loans and related

grantsgrants

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Sections of new chart of Sections of new chart of accountsaccounts

1 1 sectionsection – « – «Short-term assetsShort-term assets»»2 2 sectionsection – « – «Long-term assetsLong-term assets»»3 3 sectionsection – « – «Short-term liabilitiesShort-term liabilities»»4 4 sectionsection – « – «Long-term liabilitiesLong-term liabilities» »

5 5 sectionsection – « – «Net assetsNet assets//capitalcapital» » 6 6 sectionsection – « – «IncomeIncome»»7 7 sectionsection – « – «ExpendituresExpenditures»»8 8 sectionsection – « – «Expenses for production and other Expenses for production and other purposespurposes»»

9 9 sectionsection – « – «Off-balance accountsOff-balance accounts»»

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ExampleExample: : from Scheme of transfer to new CoA of from Scheme of transfer to new CoA of public institutionspublic institutions

AccountsAccountsInstruction on accounting in public Instruction on accounting in public

institutionsinstitutions

as of January as of January 2727,, 1998 1998

Transfer of balances from accounts Transfer of balances from accounts Instruction on accounting in public Instruction on accounting in public

institutionsinstitutions

as of January as of January 2727,, 1998 1998

Tt new CoATt new CoA

Accounts of new CoA of public Accounts of new CoA of public institutions to be used in futureinstitutions to be used in future

Name of Name of accountaccount//subaccountsubaccount

No. of No. of account account / / subaccousubaccou

ntnt

No. of No. of account account / / subaccousubaccou

ntnt

Name of Name of accountaccount//subaccountsubaccount

Name of Name of accountaccount//subaccountsubaccount

No. of No. of account account / / subaccousubaccou

ntnt

SectionSection I. I. AssetsAssets

LandLand    010-1 010-1 2310 2310 LandLand LandLand 2310 2310

Intangible assetsIntangible assets 014 014 27102710 Intangible assetsIntangible assets Intangible assetsIntangible assetsSoftware Software CopyrightCopyrightLicense agreements License agreements PatentsPatentsGoodwillGoodwillOtherOther

Intangible assetsIntangible assets

27102710

27112711

27122712271327132714271427152715

2716 2716

2020

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