GOVERMENT ACCOUNTING March 200 3 , Ankara

1. MINISTRY OF FINANCE General Directorate of Public Accounts GOVERMENT ACCOUNTING March 2003, Ankara

2. AGENDA • Clarification of General government sector(GG) • The Current Government Accounting System (GAS) • say2000i Project for consolidated budget • Our Studies and Targets on Government Accounting

3. Clarification of GG sector

4. THE GENERAL GOVERNMENT UNITS • A-Central Government • 1-Consolidated budget (CB) • a) General budget • b) Annexed budgets • 2- Revolving Funds, EBFs, BFs, Autonomous Agencies • B-Local Government • 1-Municipalities • 2-Provincial Administrations • C-Social Security Institutions • 1-The Social Insurance Institution(SSK) • 2-The Government Employees Retirement Fund • 3-Insurance Scheme for The Self Employed(Bag-Kur) • Financial and non-financial public corporations are excluded.

5. TheCharacteristics of Current Accounting System

6. The public sector does not have a unified accounting system, • Central and local government accounting systems are modified cash based; SSIs and revolving funds use accrual accounting, • There are no government-wide accounting and reporting standards, • Government accounting systems in consolidated budget and local administrations are modifiedcash based, but tax revenues are recorded on accrual basis in budget accounts, • Fixed assets and inventories are not recorded and reported, • The government accounting system does not classify accounts in international standards,

7. Continue: • Accounting system does not produce financial statements, • Ministry of Finance produces and reports detailed information on budgetary transactions from out of accounting records, but there is a classification problem. • Commitments are not recorded and reported. • Transfers to the local administrations are deducted from budget revenues. • Accrued budget expenses are not recorded and reported, • The existing accounting system is mostly focused on the cash budget. Therefore, it only permits to trace budget implementation results, but does not generate information on actual outcome of the government’s actions.

8. Treasury guaranties are recorded and reported as contingent liability. When a guaranty given unit does not pay its liability, Treasury pays on the behalf of that unit, but the paid amount is recorded as receivable by Treasury, and also the same amount is recorded as payable by that unit. Complementary period method is used to complete the accounting period transactions. This method differs from the cash-based system in that accounts are held open for nearly one month after the fiscal year (set-off period). During this period expenditures incurred and invoices pertaining to transactions which occurred the preceding period are received provided that their allocations have been transferred to the set-off period. Receipts arising from the preceding period are also accepted. Receipts and payments, which occurred during the set-off period, but have resulted from the preceding period, are entered as receipts and payments of the preceding reporting period

9. Management of Accounting System:In total, There are 1636 Accounting Offices in CB. All accounting offices are depended on MoF, except 3 Treasury AOs. • 1061 are managed by GDPA, • 443(tax offices) are managed by GDR, • 130 are managed by GDBFC, • 3 are managed by Treasury, Note:These figures do not include 3250 local government accounting offices, 1463 Revolving Funds and 6 budgetary and extra-budgetary funds.

10. The Future Direction of Government Accounting System in Turkey

11. 1-say2000i Projectfor central government2-Accrual Based Accounting Project for general government

12. say2000i Modules • Accounting Module(completed) • Personnel and Payroll Module • Health Expenditures(completed) • Regulations(completed) • On-Line Support(completed)

13. Accounting module; -Hascapability to perform all daily accounting operations,-Creates all daily and monthly accounting reports, and -Keeps all important records related with accounting practices on a central database

14. Moving to Accrual Based Government Accounting

15. I-General Accounting Regulation:Accounting and reporting standards and framework chart of accounts are determined. II- Sub-Accounting Regulations for sub-sectors; • Central government, • Local government, • Social security institutions

16. General Classification of Accounts • Balance sheet accounts -Assets -Liabilities -Equity • Operation Accounts -Revenues -Budget Revenues -Expenditures -Budget Expenditures • Memorandum Items

17. Balance Sheet Accounts ASSETS I-Current Assets A-Liquid Assets B-Securities C-Receivables from Revenues D-Treasury Receivables E-Other Receivables and Current Assets F-Stocks G-Debit’s Current Accounts H-Other Current Assets

18. II-Long Term Assets A-Receivables from Revenues B-Treasury Receivables C-Financial Long Term Assets D-Intangible Fixed Assets

19. LIABILITIES III-Short Term Liabilities A-Domestic Debts B-Foreign Debts C-Budget Debts D-Depository Accounts E-Credit’s Current Accounts F-Taxes and OtherLiabilities Payable

20. IV-LONG TERM LIABILITIES A-Domestic Debts B-Foreign Debts

21. V-EQUITY Net Worth -Public Capital -Fixed Assets Inventory -Beginning Balance -Operation Results

22. OPERATION ACCOUNTS VI-REVENUES -Revenues Account -Budget Revenues Account VII-EXPENDITURES -Expenditures Account -Budget Expenditures Account

23. OFF BALANCE SHEET ACCOUNTS A-Appropriation Accounts B-Stamps and Valuable Papers Account. C-Non Cash Guarantees and Securities Owned by Persons D-Commitment Accounts E-Treasury Guarantees F-Other Off Balance Sheet Accounts.

24. Our Targets are: • To prepare a framework chart of accounts and to adapt the internationally accepted accounting and reporting standards, • Accrual basis,classified accounts, detailed data, reliable and comparable financial tables • Covers all general governmental units defined in the GFS and ESA95 • To record and report fixed assets in the accounting system, • To use time separated accounts to show short-term & long-term assets and liabilities • To use computer technology(say2000i) effectively • To provide correct and quick information to related parties in predetermined periods

25. FINANCIAL STATEMENTS • Balance Sheet • Statement of Operating Results • Statement of Budget Implementation Results • The Economic Classification of (Budget) Revenues • The Economic Classification of (Budget) Expenditures • The Functional Classification of (Budget) Expenditures • Statement of Cash Flows • Statement of Debts • Statement of Fixed Assets • Statement guarantees and commitments

26. Time Schedule • December 31, 2002, accounting and reporting standards and frame chart of accounts were completed, • Pilot Implementations in 6 government units covering 49 accounting offices were completed, • Centralized accounting and reporting software for consolidated budget was completed last year, • In 2004, the new accounting system will be used in general and annexed budgets, • In 2005, the coverage of the new accounting system will be extended to all other general government units.

27. Transforming accounting data to statistical data • First, produceconsolidated accounting reports in the software for GG sector. • Then, transform the data to GFS and ESA95; The aim is to produce related tables directly from the accounting system. • We are producing GFS tables from the accounting system in pilot accounting offices.

28. Baki KERIMOĞLU Head of Department E-Mail:bkerimoglu@muhasebat.gov.tr Phone: +90 312 415 16 18 Fax : +90 312 417 05 10