UKRAINE MINISTRY OF FINANCE

1. UKRAINE MINISTRY OF FINANCE Workshop on the Implementation and Links between the System of NationalAccounts 2008 and the Government Finance Statistics Manual20 – 22 November 2013, Istanbul, Turkey Larisa Kalinichenko Head, Government Finance Statistics Department UKRAINE GOVERNMENT FINANCE STATISTICS

2. UKRAINE MINISTRY OF FINANCE Slide2 Institutional Coverage of the GeneralGovernment Sector in Government Finance Statistics Central Government Subsector1.Central government units financed out of the state budget Parliament (Verhovna Rada), Presidential Staff, Cabinet of Ministers, ministries, state services, state agenciesand inspectorates, central executive-branch authorities with special status, Constitutional Court, general-jurisdiction courts, territorial state administrative authorities, budgetary entities subordinate to central authorities and state authorities Subsector 2.Central government extrabudgetary units Not applicable. Subsector 3.Social security funds 3.1 Pension Fund; 3.2 Social Occupational Accident and Disease Insurance Fund; 3.3 Social Temporary Disability Insurance Fund; 3.4 State Mandatory Universal Social Unemployment Insurance Fund. Local authorities Subsector 5.Local authorities financed out of local budgets– 12,086 local government authorities, including: 1 Crimea Autonomous Republic ; 24 provinces; Cities of Kiev and Sevastopol; 177 cities under republic (Crimea Autonomous Republic ) or province jurisdiction; 488 districts; 278 cities under district jurisdiction; 55 formations within cities; 782 settlements; 10279 villages. Central government data cover all operations of units belonging to Subsectors 1-3. Data on local authorities cover the operations of Subsector 5 units.

3. UKRAINE MINISTRY OF FINANCE Institutional Coverage of Budgetary System According to Ukraine Budgetary Code State social insurance funds not belonging to Ukraine’s Budgetary System: 1.Pension Fund 2.Social Occupational Accident and Disease Insurance Fund 3.Social Temporary Disability Insurance Fund 4.State Mandatory Universal Social Unemployment Insurance Fund Ukraine Budgetary System Local budget State budget Crimea Autonomous Republic budget Province and Kiev and Sevastopol city budgets, District budgets Local government budgets Budgetary law lacks a definition of the general government sector and public sector Slide3

4. UKRAINE MINISTRY OF FINANCE !!!!!! Budgetary law governs certain issues pertaining to the state mandatory universal social and pension insurance funds: The Ukraine Cabinet of Ministers provides for the submission of draft budgets of the state mandatory universal social and pension insurance funds for the plan year to the Ukraine Verkhovna Rada and Ukraine President no later than September 15 of the year preceding the plan year, with accompanying materials, attached to the draft Ukraine Law on the State Budget; The resources of the state mandatory universal social and pension insurance fundsare serviced by authorities of the Ukraine State Treasury Service; The state mandatory universal social and pension insurance funds submit quarterly reports to the Ukraine Verkhovna Rada, Ukraine President, Ukraine Cabinet of Ministers, Accounting Office, Ukraine Ministry of Finance and Ukraine State Treasury Service on execution of the respective funds’ budgets in accordance with procedures and dates established by the Ukraine Ministry of Finance. Slide4

5. UKRAINE MINISTRY OF FINANCE Accounting Method in Ukraine’s Public Sector Ukraine law does not presently define uniform accounting and reporting methods in the public sector Accounting for execution of the state and local budgetsis conducted by Ukraine Treasury authorities using the cash method with elements of the accrual method for certain operations (accounting for the public debt and liabilities of the administrators of budgetary resources) Accounting forexecution of budgetary entities’ budgetsis conducted by the administrators of budgetary resources using a modified accrual method Accounting forstate mandatory universal social insurance fundsis based on a modified accrual method (uniform accounting methods established by the State Treasury are not used). Financial and budgetary reports on the execution of budgets are divided into: financial: quarterly annual budgetary: monthly quarterly annual Slide5

6. UKRAINE MINISTRY OF FINANCE Reporting Period for Reports The reporting period for monthly budgetary reports is the period beginning January 1 and ending on the last day of the reporting month The reporting period for quarterly financial and budgetary reports is the period beginning January 1 and ending on the last day of the reporting quarter The reporting period for annual financial and budgetary reportsis the budgetary period constituting one calendar year beginning on January 1 and ending on December 31 of the same year, unless a different period is defined in instances established by law

7. UKRAINE MINISTRY OF FINANCE Chart of Accounts for Execution of State and Local Budgets The Chart of Accounts for state and local budgets is governed by a legal regulatory act; Development of the Chart of Accounts took into account the distinctive features of the execution of state and local budgets, the operation of the unified treasury account, and the servicing of local budgets through Treasury authorities, in compliance with general accounting and reporting principles and requirements; The Chart of Accounts provides for the reflection in accounting of operations associated with performance of the functions assigned to Treasury authorities, i.e., it makes possible detailed and complete accounting for all banking and other operations associated with execution of the budgets; The Chart of Accounts has been developed to provide for accounting operations entailed in the execution of the state budget and local budgets operations using the cash method, and for the preparation of financial reports The Chart of Accounts employs a decimal method of encoding accounts with a four-digit number. Under that method, all classes are divided into 10 sections, which are assigned numbers from 0 to 9. All sections, in turn, are divided into no more than 10 groups, which are also assigned numbers from 0 to 9. Each group is divided into no more than 10 accounts. Such an approach meets the requirements of the Ukraine National Bank with regard to the structure of accounts and number of digits, according to which the number of a balance-sheet account must have 4 digits while analytical accounts that are used in the Ukraine National Bank’s electronic payments system must have from 6 to 14 digits. Slide7

8. UKRAINE MINISTRY OF FINANCE Chart of Accounts in Budgetary Entities Accounting in budgetary entities provides for the reflection of all operations associated with execution of their budgets.The timely, complete and accurate reflection on the entities’ balance sheets makes it possible for their officials to take well-founded managerial decisions, analyze an entity’s (organization’s) work, monitor the use of budgetary resources for their intended purposes on the basis of an approved budget, and detect unlawful and unforeseen expenditures Budget execution accounting in entities and organizations whose principal activities are financed out of state or local budget resources is based on the Chart of Accounts for budgetary entities approved in the December 10, 1999, Order No. 114 of the Chief Administration of the Ukraine State Treasury, registered with the Ukraine Ministry of Justice on December 20, 1999,No. 890/4183 The Chart of Accounts uses a decimal method of encoding accounts with a three-figure number (first-level subaccount). All accounts are divided into 2 sections. Section І comprises balance-sheet accounts, which are divided into 8 classes. Section II comprises off-balance-sheet accounts, which include one class 0, “Off-balance-sheet accounts” The Chart of Accounts for a state mandatory universal social insurance fund is approved in a legal regulatory act of that fund.

9. UKRAINE MINISTRY OF FINANCE Further Plans for Improving Accounting and Reporting Development and implementation of a uniform Chart of Accounts and national accounting standardsfor public-sector entities using the accrual method (development has been completed of 19 national accounting standards in the Ukraine general government sector based on the International Public Sector Accounting Standards (IPASA). Implementation is slated for approximately 2015). Establishment of uniform rules for preparing budgetary and financial reports in accordance with national standards developed on the basis of the International Public Sector Accounting Standards Slide9

10. UKRAINE MINISTRY OF FINANCE Budgetary Classification Pursuant to the Budgetary Code, the Ukraine Budgetary Classification includes: • classification of budget revenue, • classification of budget expenditures, • classification of lending, • classification of debt; • classification of budget deficit financing. Classification of budget expenditure and lending are subdivided into: (1) functional, (2) agency, (3) economic, (4) programmatic.

11. Budgetary Classification Budget revenue Budget expenditures and lending Budget financing By type of creditor Taxes Sections, subsections, area groups Functional Tax By type of debt instrument Fees Current Other mandatory payments Economic Capital Income from property and business activity Debt Nontax List of main administrators of budgetary resources Agency By type of creditor Revenue from capital operations Administrative fees and payments, income from noncommercial economic activity Programmatic By type of debt instrument targeted-program method Other nontax revenue Lending Internal and external Transfers Slide11

12. Budgetary Classification Budget revenue Internal taxes on goods and services GFS 2001 code 114 Other taxes and fees GFS 2001 code 116 • Taxes on income, profits, and capital gains • GFS 2001code 111 Taxes on international trade and external transactions GFS 2001 code 115 Tax Fees for special use of natural resources GFS 2001 codes 113,114 Property taxes GFS 2001 code 113 Other nontax revenue GFS 2001 codes 141,142,143,145 Revenue from property and business activity GFS 2001 code 141 Nontax Budgetary units’ own revenue GFS 2001 code 142 Administrative fees and payments, income from noncommercial economic activity GFS 2001 codes 115,142 Revenue from capital operations Revenue from sale of land and intangible assets GFS 2001 code 314 Revenue from sale of fixed assets GFS 2001 codes 311,313 Revenue from sale of public inventories GFS 2001 code 312 Transfers from foreign countries and international organizations GFS 2001 code 132 Transfers from general government units (from other budgets, subsidies and subventions) GFS 2001 code 133 Transfers Slide12

13. UKRAINE MINISTRY OF FINANCE Budgetary Classification of Expenditures (functional) Slide13

14. UKRAINE MINISTRY OF FINANCE Budgetary Classification of Expenditures (economic) Slide14

15. Budgetary Classification of Financing By Type of Debt Instrument Budget financing Borrowing Financing through debt instruments External Retirement Internal Revenue from privatization of public property Change in deposits and securities used for liquidity management Financing through active operations Change in cash Financing with funds in Unified Treasury Account Slide15

16. Budgetary Classification of Financing by Type of Creditor Budget financing Internal financing External financing Financing with resources of state funds Loans from international organizations Financing with bank loans Loans from foreign government authorities Other internal financing Loans from foreign commercial banks Revenue from privatization Financing with funds balances in accounts of budgetary entities and budgets Loans not elsewhere classified Change in deposits and securities used for liquidity management Change in deposits and securities used for liquidity management Adjustments Adjustments Slide16

17. Budgetary Classification of Debt by Type of Debt Instrument Debt Internal External Debt on long-term instruments Debt on long-term instruments Debt on medium-term instruments Debt on medium-term instruments Debt on short-term instruments and bills Debt on short-term instruments and bills Debt on other external instruments Debt on other internal instruments Adjustments connected with changes in deposits and securities, and with appraisal differences Adjustments connected with changes in deposits and securities, and with appraisal differences Slide17

18. Budgetary Classification of Debt by Type of Creditor Debt External Internal Debt on loans obtained from international financial organizations Debt on loans obtained from budgets at various levels and state funds Debt on loans obtained from foreign government authorities Debt to banking institutions Debt on loans obtained from foreign commercial banks Debt to other government units Internal debt not elsewhere classified Debt on loans not elsewhere classified Adjustments connected with changes in deposits and securities, and with appraisal differences Adjustments connected with changes in deposits and securities, and with appraisal differences Slide18

19. UKRAINE MINISTRY OF FINANCE Further Plans for Improving Budgetary Classification: Reflecting in the classification “below the line” transactions involving the acquisition and sale of nonfinancial assets and the attraction and retirement of loans, i.e., as financing transactions Reflecting “below the line” transactions involving the transfer of funds for increasing public participation in nonfinancial and financial corporations, i.e.as financing transactions Separating subsidy and current transfer items and bringing them into conformity with the requirements of SNA 2008 Slide19