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COA – A Review of Good Practice Design in PEMPAL member countries – Draft Paper

PEMPAL Treasury Community of Practice –COA Working Group. COA – A Review of Good Practice Design in PEMPAL member countries – Draft Paper. TCoP Leadership Group Visit September 2013. Macedonia Working Group Meeting Mark Silins.

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COA – A Review of Good Practice Design in PEMPAL member countries – Draft Paper

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  1. PEMPAL Treasury Community of Practice –COA Working Group COA – A Review of Good Practice Design in PEMPAL member countries – Draft Paper TCoP Leadership Group Visit September 2013 Macedonia Working Group Meeting Mark Silins

  2. Replacing old traditional practice with new broader based reform • In many cases the traditional definition of the COA was quite narrow- largely the structure relating to the preparation of financial statements on a modified accrual basis by the Treasury • In the late 1990s, the focus on fiscal consolidation and management saw the development of cash based budget classifications These two structures were often not integrated

  3. Modernisation of Accounting and Reporting • Countries have been redeveloping their approaches to accounting, focussing on compliance with IPSAS and also reporting according to GFSM frameworks • There is a much stronger convergence between IPSAS, that is financial reporting, and budget control and reporting since 2008. • The advent of automation in each country has highlighted the issues in relation to the separation of the BC and COA and most countries now recognise the possibility of better integration of these different reporting and accounting structures.

  4. The first step is to properly define and design the PFM system in your country - Georgian Example NATIONAL BANK DEBT DEPARTMENT BUDGET DEPARTMENT TREASURY BUDGETARY ENTITY CIVIL REGISTER GOVERNMENT REVENUE SERVICE AUDIT PUBLIC PROCUREMENT AGENCY GENERAL LEDGER REPORTING FUNCTIONAL PROCESS FUNCTIONAL PROCESS SOURCE DOCUMENTS BUDGET/ APPROPRIATIONS AGREEMENT ELECTRONIC TENDER SYSTEM REPORTING CONFIRMATION OF AGREEMENTS / OBLIGATIONS PROCUREMENT / OBLIGATIONS TAXES GROUNDS FOR OBLIGATIONS, OTHER DOCUMENTS $ CONFIRMATION OF INVOICE/ PAYMENT ORDER DEBTOR/CREDITORSPAYMENTS INVOICE $ GENERAL LEDGER RTGS REVENUE ACCOUNTING/ TRANSFER / PAYING BACK NON-MONETARY TRANSACTIONS, EXCEPT FOR ASSETS AND INVENTORY NONMONETARY EVENT $ ASSET AND INVENTORY MANAGEMENT MODEL DEBT FOREIGN INTERNAL PERSONNEL MANAGEMENT EMPLOYEE WAGES

  5. Design the COA/BC to support all reporting and analytical requirements – The Moldovan Schematic of the COA

  6. Ensuring the Five key Reporting Requirements are integrated into the CoA/BC • Budget Reporting • Financial Reporting • Macro-Fiscal Reporting • Statistical Reporting • Management Reporting and Control

  7. Using GFSM2001 and Generally Accepted Accounting Concepts to design the Economic Segment Correctly

  8. This structure supports: • a well formulated budget • It allows daily monitoring of the fiscal position • It supports cashflow management and forecasting • It supports statistical reporting • It supports IPSAS cash and accrual and modified accrual • The use of general accounting concepts as a (GFSM 2001) structure is logical and comprehensive for economic management and reporting Revenues Expenses- recurrent Expenditures The Convergence of Budget, Financial, Statistical and Macrofiscal Reporting Non Financial Assets – Capital Expenditures Financial Assets – Financing of the budget Liabilities- Financing of the budget Equity/Net Assets

  9. Conclusions of the Paper • COA reform should be in the context of broader PFM reform. Developing a PFM framework similar to the approach in Georgia can assist in better understanding the requirements in CoA redevelopment; • An integrated BC and COA is possible and preferred as it reinforces the interrelationship of budgeting and accounting; • Countries should develop a COA schematic and concept paper to be widely circulated among stakeholders to ensure all requirements are integrated and to improve understanding regarding the reasons for the reforms; • A well-designed COA should meet a range of major reporting requirements including, budget, financial, statistical and macro-fiscal reporting. MDA management reporting should also be a core consideration; • GFSM2001 can be used as a useful template to ensure integrity in COA design in relation to the economic segment; • An economic segment should be pure in terms of its design and in general be limited to accounts which reflect general accounting concepts, and therefore align with GFSM2001; and • As TCOP member countries proved, it is possible to have a COA which can simultaneously capture information on a cash basis for budget reporting and control, and still record modified or full accrual transactions.

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