Cash Planning and Management: Forecasting for Treasury Single Account

1. Forecasting and Planning Cash Balances in the Treasury Single Account Natalia Savkina - Head of Federal Budget Execution Cash Planning OfficeFederal Budget Execution Division Treasury of Russia MOSCOW APRIL 2017

2. Legal Framework for the Current Procedure of Federal Budget Execution Cash Planning Article 217.1 Budget Code of the Russian Federation "Cash Plan" Article 166.1 BC RF "Spending Authority of the Federal Treasury" RF Government's Decision dated 01.12.2004 No.703 "On the Federal Treasury" Russian MoF's Order dated 09.12.2013 No.117н "On the Procedure of Cash Planning and Management for the Purposes of Federal Budget Execution in the Current Financial Year" Russian MoF's Order dated 21.12.2015 No.204н "On the Procedure of Approval and Communication of Liability Payment Ceilings to the Key Spending Units, Budget Holders and Budget Users" Federal Treasury's Order dated 30.12.2016 No.526 "On Approval of the Procedure to Implement the Russian MoF's Order dated 09.12.2013 No.117н in the Federal Treasury" Federal Treasury's Order dated 30.12.2016 No.525 "On Approval of the Procedure to Implement the Russian MoF's Order dated 21.12.2015 No.204н in the Federal Treasury"

3. Article 217.1 Budget Code of the Russian Federation "Cash Plan" 1. Cash plan implies forecasting cash receipts and cash disbursements in the budget for the current financial year. Cash plan stipulates the upper limit of cash used for operations to manage balances in the budget single account. 2.The financial body (public non-budgetary fund administrator) establishes the procedure of cash planning and management, as well as the contents and deadlines for presentation of information necessary for cash planning and management by the key spending units (SUs), key federal budget revenue administrators (FBRAs), and key administrators of budget deficit financing sources (ABDFSs). Forecasting of cash disbursements from the budget for payment of government (municipal) contracts and other agreements is performed taking into account the terms and amounts of payables according to signed government (municipal) contracts and other agreements defined when planning procurement of goods, works, and services for public (municipal) purposes. Cash planning and management is done by the financial body (public non-budgetary fund administrator) or an authorized executive body (local administration).

4. Objectives of Cash Planning and Management 1.To ensure timely and full execution of budget commitments 3.To provide information (framework) for cash management in TSA 2.To make various management decisions Monitoring execution of the basic parameters of the Federal Law "On the Federal Budget" Introducing amendments to the Federal Law "On the Federal Budget" TSA balance monitoring Assessment of possible deviations of actual indicators from targets etc. Assessment of temporarily available cash and possible cash gaps etc. Setting expenditure financing ceilings (EFCs) etc.

5. Procedure of Cash Planning and Forecasting in relation to Federal Budget Execution Automated System of the Federal Treasury (FTAS) Unified Information Analytical System (UIAS) of Russian MoF General Ledg e r Stage I FT Territ. Off. 1 FT Inter-regional Opera-tionsDivision Producing information on federal budget execution Placing information on federal budget execution (97 forms) Producing and placing indicators stipulated in the Law on FB (97 forms) FT Territ. Off. 2 . . . FT Territ. Off. 85 Forecasting within Expenditure Financing Ceilings Stage II Key SUs Expenditure Forecasts (288 forms) Upload of presented forecasts in the applied software of the FT Central Office for processing and analysis (considering forecasts of public non-budgetary funds and other resources 97participants in forecasting Key FBRAs Revenue Forecasts (246 forms) Forecasts of FB deficit financing sources (9 forms) Key FSAs Stage III Cash planning and producing TSA balance information Cash plan and TSA balance information submission

6. Time-line of Federal Budget EXECUTION Cash Planning and Management Cash Plan Update (monthly Feb through Dec) Cash Plan Development 8 business day t+20 Cash planning and TSA balance information 7 business day Cash planning t+16 6 business day Forecast verification and analysis Update of cash disbursement forecasts for expenditures (in case there are EFCs) 5 business day t+8 Presentation of forecasts by forecasting process participants Information on TSA balance t+7 4 business day Forecast verification and analysis t+5 3business day Producing FB execution information by FT Inter-regional Operations Division Presentation of forecasts by forecasting process participants 2 business day Producing consolidated General Ledger by FT Inter-regional Operations Division (FT IOD) t+1 Presentation of indicators stipulated in the Law on FB by Russian MoF 1 business day Producing General Ledgers by FT Territorial Offices (FT TOs) t Verification and analysis of forecasts presented by public non-budgetary funds Adoption of the Law on FB by the State Duma

7. Cash planning for federal budget revenues FORECAST OF FEDERAL BUDGET REVENUES CASH RECEIPTS FOR THE CURRENT FINANCIAL YEAR Federal Tax Authority, Federal Customs Authority, РИ, Federal Treasury Key administrators Other administrators Federal Budget Cash Execution Progress Evaluation Periodicity by key FBRAs: monthly Who presents forecasts: all key administrators (82) Special Aspects of Revenue Planning Planningtime-frame: - year by months - month by days Periodicity by other FBRAs: quarterly Error margin: +/- 15% Fixed deadlines forpayment of key taxes

8. Cash planning FOR federal budget expenditure FORECAST OF FEDERAL BUDGET EXPENDITURE CASH DISBURSEMENTS FOR THE CURRENT FINANCIAL YEAR • Planningtime-frame: • year by months • month by days Who presents forecasts: all key SUs (97) Special Aspects of Expenditure Planning Federal Budget Cash Execution Progress Evaluation Limitations: expenditure should not exceed EFCs Error margin: +/- 15% Periodicity : monthly • Currency: • rubles • foreign currency

9. Cash planning FOR federal budget deficit financing sources FORECAST OF CASH RECEIPTS AND CASH DISBURSEMENTS FOR SOURCES OF FINANCING FEDERAL BUDGET DEFICIT • Planning time-frame: • year by months • month by days Who presents forecasts: key FSAs (3) Special Aspects of Planning Sources of Financing Federal Budget Deficit Federal Budget Cash Execution Progress Evaluation Periodicity : monthly Error margin: +/- 15% • Currency: • rubles • foreign currency

10. FORECAST OF CASH FLOW IN ACCOUNTS OF PUBLIC NON-BUDGETARY FUNDS Federal Mandatory Health Insurance Fund RF Pension Fund RF Social Security Fund Legal ground: Russian MoF's recommendation * Currently, expert evaluationby the Federal Treasury Forecasting annual cash flow with details by months

11. Final Cash Planning Algorithm 1. Initial Cash Plan Cash planning of federal budget funds Consolidation and analysis of forecasts of the RF Pension Fund, RF Social Security Fund and expert evaluation of the Mandatory Health Insurance Fund by the Federal Treasury Federal Treasury's expert evaluation of other funds Consolidation of all cash flows and cash plan development

12. Integrated CASH FLOW ANALYSIS AND MONITORING Cash Plan Financial forecast of federal budget execution and TSA balance management Information on revenues administrated by the Federal Tax Authority and Federal Customs Authority TSA cash flow forecast Timely information on budget execution and TSA balance management Key "derived" documents Key cash flows by days (period t+90) Comprehensive budget execution, spending, etc. analysis Analysis of actual forecast implementation: - by accrued method; - compared to the same period of previous years Analysis of actual forecast implementation by types of revenues Contents of the document Update periodicity daily once a week twice a day once a week

13. EXPENDITURE FINANCING CEILINGS SETTING SPENDING Cash planning of federal budget execution is the basis for decision-making on expenditure financing ceilings Cash Plan Producing • Determination of acceptableexpenditure limits • Determination of the overall amount • of expenditure cuts • Determination of expenditure financing • ceilings (EFCs) • Approval of EFCs by key SUs in general, • without details according to the • Budget Classification Codes • Spendings within approved EFCs • allocated to key SUs • Control over cash disbursementswithin EFCs in personal accounts of • budget users

14. Procedure of financing ceilings setting Information on TSA balance Forecasts (Key SUs) Developing framework for EFC setting Decision made by Russian MoF to set EFCs No Yes Other liquidity increase options are possible (e.g. extended use of sources: securities etc.) If insufficient liquidity in TSA – EFCs with parallel expenditure cuts If sufficient liquidity in TSA – EFCs within the declared forecasts

15. Stages of expanding cash planning and forecasting scope 2014 2015 2016 2017 2018 2019 Commercial (final) Preparation (testing) Piloting Prototype Text Text Text Text Improvement, approval and trial use of full-scale forecast in TSA (bank account) Participants: Federal-level participants, RF constituent-level participants, local-level participants, RF public non-budgetary funds Territorial public non-budgetary funds Method:FTAS GIIS "Electronic Budget" Note: automated mode Full-scale forecast in TSA (bank account) Participants: All FT clients Method:GIIS "Electronic Budget" Note: automated mode Creation of conditions and approval of TSA forecasting preliminary results Participants: 7 pilot RF constituents Method: Electronic tables Note: manual mode Development of TSA forecasting mechanism and engagement of all participants Participants: Federal-level participants, RF constituent-level participants, Local-level participants (8 pilot entities), RF public non-budgetary funds (directorates) Method:Electronic tables, FT Automated System Note: manual mode, automated mode TSA cash flow forecast

16. TSA forecasting life cycle in prospect Collection and transmission, processing and storage, update of information • Bank of Russia • Russian MoF • Clients • Treasury of Russia • Preparation of information for optimal decision-making • Targeting results Information Forecasting and targeting Technologies Resources "Big" TSA Efficient management of TSA balances • FT Automated System • Electronic Budget • Other systems • Staff • Equipment Single information environment ensuring information security, timeliness of information processing Ensuring continuous operation

17. Thank you for attention!