Public Sector Accounting and Reporting Reforms CROATIAN EXPERIENCE October 2016

1. Public Sector Accounting and Reporting ReformsCROATIAN EXPERIENCEOctober 2016

2. 1 Background • Public Sector Accounting and Reporting Reforms in the Republic of Croatia began in 2002 when the Modified Accrual Accounting Principle and the new Accounting Plan were introduced – the same rules apply for the central and local government • New 2003 Budget Act • Strategy for the improvement and modernisation of processes in the State Treasury system for the period 2007-2011 - Budget preparation (budget classification, program budgeting, three-year long framework) - Budget execution (unique account in HRK, widening the coverage, monitoring liabilities through commitments during contracting, preparation for a single foreign currency account, integration) - Accounting and reporting (about 3500 users submit financial statements) - Information system (SAP system in the Treasury) - Internal Financial Control development • New 2008 Budget Act, amended in 2012 and 2015, new amendments pending • 2015 Accounting Plan and financial statements have been extended in order to meet the requirements of Eurostat

3. 2 Approach to the Implementation of Public Sector Accounting Standards • Croatia has not adopted IPSAS and has no such plans for now, national rules are being applied - Ordinance on Budget Accounting and the Accounting Plan - Ordinance on Financial Reporting in Budget Accounting - Ordinance on Budget Classifications - Ordinance on Defining Budget and Extra-Budgetary Users... - Ordinance on the Semi-Annual and Annual Statement on Budget Execution • The Ministry of Finance – State Treasury is responsible for the preparation and implementation of laws and subordinate legislation • The academic community and consulting companies are consulted during the preparation of subordinate legislation, and the Ministry of Finance has the final say • Accountant training has been planned, but it has not been implemented systematically. Workshops are held periodically, and the Ministry of Finance officials give lectures at the State School for Public Administration and at the workshops organised by the consulting companies

4. 3 Progress Achieved • Budget execution - Introduction of the Treasury Single Account (in HRK and foreign currency) – increased solvency - Introduction of liability control during contracting • Budget Accounting System is based on the Modified Accrual Accounting Principle, but conceptually, it is set in such a way as to be able to acquire from the records and statements the information necessary for full accrual, i.e. for reporting according to all statistical systems • Since 2002, all general government entities have applied the single chart of accounts which is based on the economic classification of data and on the decimal system with five levels of data development and double-entry accounting • Connecting the Information system for public debt management (TREMA) and State Budget Users Accounting Systems with the financial-information system of the State Treasury (SAP)

5. 4 Issues and Challenges • Lack of qualified employees – in the Treasury and at the Budget User level • Insufficient funds for the implementation of further integration • Lack of political will • Monitoring EU projects with rules differing from the ones concerning the budget • Obtaining data for statistical purposes

6. 5 Lessons learned • Use the influence of international consultants in order to convince the politicians to implement reforms • Accept other countries' good practice, by taking into account the particularities of each country • Opposition at the beginning of every reform – move forward • Training for accountants in the Public Sector • Creating circulars for the preparation of financial statements and other instructions – to be sent by e-mail and published on the website • Answers to Queries (by phone, e-mail)

7. Questions