Strategy for implementing a new chart of accounts in government, including the role and responsibilities of the Treasury and of the Budget Department

1. Introducing and implementing
the New
Chart of Accounts in
Government
Jean-Marc Lepain
PFM Advisor
October 30th 2019

2. AGENDA
• Role and responsibilities
• Implementation sequencing
• GFS and COFOG in their relation to budgeting
• Coding
• CoA structure
• Budget Classification

3. Role and Responsibilities: Treasury
• To maintain the chart of accounts including economic classification,
administrative classification, and coding segment structure in
consultation with the Budget Division
• To define accounting rules between (a) the budget classification and
the CoA, and (b) between the different components of the CoA
• To maintain the general ledger and sub-ledger in the system
• To report on budget execution including COFOG reporting

4. Role and Responsibilities: Budget Division
• To maintain budget classification
• To maintain programme classification
• To advise the Treasury on economic classification
• To prepare budget analysis reports

5. Implementation Sequencing
Phase 1: Budgetary Accounting (TAFIS 2)
Phase 2: Budget Accounting + Assets and Liabilities reporting
Phase 3A: Accrual Accounting + General Government
Phase 3B: Full-fledged financial accounting with inventories and
balance sheet + Public Corporations

6. Types of classification
1. Administrative classification
2. Geographical locations (location replace cost centres)
3. Programmes and activities
4. Functional Classification (COFOG)
5. Economic classification
• Other possible classifications: sources of funding (not required)

7. What is GFS
(Government Financial Statistics Classification)
• GFS is an accounting standard, published by United Nations and IMF,
classifying expenditure for the purpose of reporting and expenditure
analysis.
• It is a statistical method to measure Government financial activities
and their impact on other economic sector by assessing the size of
the public sector and its effect on aggregated demand, investment
and saving.
• All countries under IMF Article IV supervision are supposed to adopt
GFS compliant CoA.
• GFS is not an accounting system, even through it is described by
accounting standards.

8. Impact of GSF standards on the Budget
Classification and Budget Reporting
• The Budget Classification must compatible with the GFS compliant
Chart of Accounts.
• Most GFS accounting standards apply only to accrual accounting. The
only GFS standard that affect the CoA is a requirement to clearly
segregate expenditure categories based on GFS (Operational
expenditure, social transfers, subsidies, investment, etc.)

9. Take note the two following points:
• GFS compliance and GFS reporting are two different
things.
• COFOG reporting is part of GFS.

10. Code GFSM Types of Economic Flows
1 Revenue
2 Expenditure
3 Transaction in Assets and Liabilities
4 HoldingGain and Losses in Assets and Liabilities
5 OtherValue Changes in Assets and Liabilities
6 Stock of Assets and Liabilities (Balance Sheet)
7 Expenditures by Functions of Government(COFOG)
8 Transaction in Financial Assets and Liabilities by Sector
GFS Manual Types of Economic Flows
and Meaning of Compliance

11. Central Government
Sub-national
Government
Off-Budget Funds
Non-financial
Corporations
Financial Corporations
Public Corporations
General Government
Public Sector
Government Coverage in GFSM 2014

12. What is COFOG?
(Classification of the Functions of Government)
• COFOG is a classification of expenditure by function of government
developed by the OECD
• The purpose of COFOG is
• To identify Government expenditure that benefit households in order to
calculate domestic consumption in the National Account System (GDP).
• To analyse of Government expenditure by sector (Education, Health, Security)
to determine if the Government is over/under spending;
• To facilitate budget allocation by taking into consideration broad sectorial
policies;
• To assess the impact of Government expenditure on the economy as a whole
and on sectors;

13. Code High level functions of Government
1 General PublicServices
2 Defence
3 PublicOrderand Savety
4 EconomicAffairs
5 Environmental Protection
6 Housing and Community Amenities
7 Health
8 Recreation, Culture and Religion
9 Education
10 Social Protection
COFOG High level classification

14. IPSAS Standards
• International Public Sector Accounting Standards (IPSAS) are a set of
accounting standards issued by the IPSAS Board for use by public
sector entities around the world in the preparation of financial
statements.
• There are currently 38 standards, most of them will not apply until we
move to accrual accounting.
• The first stage consist of moving from the present cash basis to
modified cash-basis. It could be part of Phase 1 of the reform an
requires defining modified cash-basis.

15. AdminstrativeClassification FunctionsofGov.Programme&Activities
Ministries (2 digits)
Departments (2 digits)
Budget Users (2 digits)
Location
Programmes (2 digits)
Activities (2 digits)
Projects (2 digits)
Functions (2 digits)
Sub-functions (2 digits)
Segment Groups & Classification Coding (1)

16. Segment Groups & Classification Coding (2)
Account Group (1 digits)
Categories (2 digits)
Sub-categories (2 digits)
General Ledger Account (objects) (2 digits)
Fiscal YearEconomic Classification

17. Account Group Classification (central
government)
Budgetary Accounting
• 1. Revenue
• 2. Expenditure
• 3. Special Expenditure
• 4. Investment (temporary until full financial accounting introduced)
Financial Accounting
• 5. Assets
• 6. Liabilities
• 7. Equity and financial investments

18. Understanding the difference
between CoA and Budget Classification

19. BUDGETARY ACCOUNTING FINANCIAL ACCOUNTING
 Is equivalent to the P&L Account in
commercial accounting
 Is equivalent to the balance sheet in
commercial accounting
 Captures only cash flows  Give a cumulative view of financial and
economic aggregates
 Monitors the use of financial resources  Monitors the stock of financial and physical
assets
 Determines the budget surplus/deficit  Determines the Central Government net
position
 Covers the statement of activity and the
cash flow statement of Government
Financial reporting according to
international standards.
 Covers the Statement of Assets and
Liabilities
Budgetary Accounting vs. Financial Accounting

20. Way forward
• Start budget classification on the basis of drafted CoA
• Review compensation and allowance
• Review Customs revenue, fees and charges and non-tax revenue
• Define modified cash basis
• Review GFS and IPSAS compliance

21. THANKS