EUROSTAT project Preparatory work for the modernisation of public sector

accounting systems on an accruals basis

Bálint Szablics Hungarian State Treasury

Department for Budgetary Synthesis and Data Service

THE HUNGARIAN STATE TREASURY

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• Established: the 1st of January 1996

• The Hungarian State Treasury performs more than 200 public tasks. It is present in each county (19) in the form

of directorates. In the frames of the directorates operate the following: Exchequer Offices, Payroll Calculation

Offices, Financial and Coordinating Offices and State Budget Offices.

• The Hungarian State Treasury is responsible for:

– Conducting the money circulation and the settlements during budget execution;

– Keeping the records of appropriations, providing financial services related to payments, controlling financial

transactions;

– Managing liquidity (not debt);

– Maintaining budgetary information system, providing information, summarizing the budgetary reports;

– Remitting the EU and domestic subventions;

– Payroll calculation for those working in the public sector;

– Trading with government securities;

– Bookkeeping of central funds and financial reporting;

– Cooperation with other authorities with respect to EU funds;

– Keeping authentic records of public entities;

– Performing government audit to the municipalities.

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HST AS THE GOVERNMENT FINANCIAL

BACKOFFICE

PUBLIC ACCOUNTING IN HUNGARY I.

• In recent years public finances accounting system went across major changes:

– In addition to cash based accounting, accrual records also appeared.

– The changed environment of regulation presented a considerable challenge not only for accounting

professionals, but for the vendor-companies of accounting systems, especially in the first year of the

introduction.

• The appearance of the new accounting system presented several new requirements and

goals for the government and for public sector bodies.

– Enhancement of connection and integrity of budgetary and financial accounting systems

– A clear demand to establish a unified information database (data warehouse), that is able to process

the data of both accounting (budgetary and financial) systems.

• The regulation on public finances accounting – entered into force the 1st January 2014 –

created the theoretic preconditions for the monitoring of budget execution and reporting, the

public management information systems in use were at the same time not able to control

these processes with the necessary efficiency, and to analyse the available information

properly.

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PUBLIC ACCOUNTING IN HUNGARY II.

• Although the new regulation introduced unified accrual based rules in public finances

accounting, but did not mean an immediate change in the institutional framework.

– Preparation of experts could not keep up with the timing of the change

– Information systems could not be developed in time

• The vision of having a centrally managed (government) accounting system has been drawn

up.

– At present bookkeeping is made by the means of modified accrual based and cash/budgetary

accounting kept parallel but separately from the financial reporting sub-system

– There are approximately 10 thousand general ledgers kept in 2.500 institutions using 20 different

applications all over the country

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INTERNATIONAL STANDARDS

• The alteration of public finances accounting rules was generated by the international trend,

which conducts public finances accounting and reporting systems and simultaneously the

economic thinking of governments towards accrual rules.

• The international basis of this trend are IPSASs (International Public Sector Accounting

Standards) based on IFRS and IAS standards, formulated especially for the purpose of

government sector. The European equivalents of these are EPSASs, details of which have

not yet been determined.

• Hence the long-term development of public sector accounting systems is controlled by

IPSASs, naturally with certain restrictions, taking into account the maturity of the domestic

organizations.

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DESCRIPTION OF THE EUROSTAT PROJECT

I.

• The European Commission (Eurostat) awarded a grant for the

HST to prepare a unified development plan of public finances

accrual accounting systems.

• The one-year project – with the participation of experts, partner

organizations; using the experiences of personal and focus

group interviews, and the experiences of study visits in foreign

countries – aimed to review the possible solutions and to work

out the conditions of the new system’s deployment.

• An internal working group has been created, with the

participation of Treasury departments, the Public Finance

Control Department of the Ministry for National Economy and

external consultants.

• The Treasury organized interviews with key stakeholders and

focus groups (e.g. Central Bank, Ministry for National

Economy, Ministry of Interior, Central Statistical Office, State

Audit Office of Hungary, etc). The experience of these

interviews also contributed to the preparation of the main

products of the project.

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DESCRIPTION OF THE EUROSTAT PROJECT

II.

• The Hungarian State Treasury organized two study visits

(Helsinki 09/05/2016 – 10/05/2016; Paris 11/07/2016 –

13/07/2016), to be able to exchange knowledge and best

practices with Finnish and French colleagues.

• The end product of the project is a feasibility study, based on

which, the concrete and practical development of the system

may start.

• The Project Operative Body and Project Governing Body

examined and approved the feasibility study, along with the

summary of the study visits.

• Through this development the Hungarian Sate Treasury

intends to lay the foundation of an Integrated Financial

Management Information System (IFMIS), which will be able to

operate the budget execution and reporting processes –

according to unified principles, on a transparent and cost-

effective way – in the central government sub-system.

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interviews with

decision-makers

opportunity

analysis

interviews with

focus groups

interviews –

ministries

propos

als to

regulat

or

FI study visit

FR study visit

feasibility study

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r

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decis

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INTEGRATED FINANCIAL MANAGEMENT INFORMATION SYSTEM

Source: Cem Dener, World Bank

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DEVELOPMENT OBJECTIVES OF THE PROJECT

The feasibility study covers two questions: professional development and its supporting IT

development.

• Professional development

– Elaboration of sector-specific charge-coverage calculation

• IT development

– Integration of bookkeeping and treasury systems

– Accreditation of bookkeeping systems

– Development of treasury systems

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THE PLANNED TREASURY SYSTEM

• The feasibility study summarizes the alteration of three

areas, which also means the three modules of the

planned integrated treasury system.

– Core Module (CM), supporting the management of

appropriations, commitments and receipts; the

reception and verification of payment orders; the

fulfilment of financial and central operations; and on

this basis the consistent management of

appropriations, facts and expected data.

– Bookkeeping System of Centrally managed

appropriations (BSC).

– Integrated Bookkeeping Application (IBA), supporting

the bookkeeping of appropriations, managed by the

Treasury.

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CM

IBA BSC

„EXECUTION” OF THE FEASIBILITY STUDY

• In the period between 2014 and 2020 Hungary is aiming to accomplish the development

related to public administration and local public services in a separate operational program,

in the Public Administration Development Operational Program. (KÖFOP in Hungarian)

• The enhancements of this operational program are supporting the EU thematic objective

No. 11 "enhancing institutional capacity and an efficient public administration„

• The project No. KÖFOP 2.2.5 - VEKOP 15 targets the implementation of an IT

development, which integrates several Treasury systems and creates a consolidated data

analysing, data mining and visualization surface. The project also aims the on-line

publication of this aggregated and integrated data, in order to contribute the transparency

and open government data accessibility and thus to increase the efforts towards the

realization of open governance.

• As a result of the Eurostat project, HST has valuable new experience, available through the

fulfilment of the future project.

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OTHER RESULTS

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• Discussions with international professionals not in the scope of the project (e.g. Cem Dener

– World Bank, Tamás Blummer – blockchain solutions)

• Market stakeholders’ interviews, roundtable (e.g. SAP, IBM, Microsoft, Freebalance, Unit4)

• Legislative process resulted in some clarifications (taking effect in 2017)

• BI tests (PoC) generated to visualise data for leders

• OGP concept developping

Thank you for your attention!