Accounting and Reporting System in the Russian Federation

Accounting and Reporting System in the Russian Federation Head of the Department of Budget Methodology and Public Sector Financial Reporting of the Russian Ministry of Finance S. B. Romanov

MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION Basic issues for discussion ü Statutory regulation system; ü Accounting entities; ü Accounting items; ü Unified Chart of Accounts and budget classification; ü Bookkeeping reporting system; ü Information system; ü Plans and prospects. 2

MINISTRY OF FINANCE Statutory regulation system OF THE RUSSIAN FEDERATION Stages of public sector accounting development …. . Cash basis method Information about cash administration of budget 2005 Implementation of accrual basis method Information about assets and liabilities, as well as about operations changing thereof 2018 Implementation of national standards Determination of concepts, harmonization of national methodology with international one 3

MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION Statutory regulation system (2005 reform) Instruction on accounting in public sector organizations Unified Chart of Accounts Budgetary classification Instruction on budget administration 4

MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION Statutory regulation system from 2018 Federal law "On Accounting" RF accounting and reporting framework Federal accounting standards Accounting items, procedure for information assessment, acknowledgement and disclosure. Budget Code Budget legal relations framework Chart of accounts, budget classification, reporting Mechanism for reflecting operations and disclosure thereof in reporting 5

MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION Accounting items Non-Financial Assets Basic assets (buildings, transport); Intangible assets (exclusive rights to use), Material inventory, etc. Financial Assets Monetary assets (cash); Financial investments (shares); Receivables Liabilities Debt settlement with creditors; Payables Financial result Income, expenses in current financial year Budget data Budget allotment; Limits of budget liabilities, etc. Off-balance-sheet accounts Property granted for use; property accepted for safekeeping; museum valuables, etc. 6

Unified chart of accounts and budget classification MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION Budgetary classification code 1 -17 Activity Structure of budgetary account code 18 Control account code Subsidiary account code Classification of general government sector operations 19 20 21 22 23 24 25 26 Budgetary Classification Code is integrated into budgetary ledger account=data provided with program, functional, economic classification in the ledger account 7

MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION Unified chart of accounts and budget classification Classification components Budgetary classification of incomes Budgetary classification of expenses Budgetary classification budget planning and administration Budgetary classification of funding sources Classification of general government sector transactions (Government Finance Statistics 2014) Economic classification Government Finance Statistics 8

MINISTRY OF FINANCE Budgetary classification OF THE RUSSIAN FEDERATION Budgetary classification of the Russian Federation Budget administration Budget planning Budgetary accounting Budgetary reporting Classification of budget income (budget deficit funding sources) Chapter Group, sub -group Clause, subclause, element Type Subsidiary code 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Chapter Functional code Special-purpose item (program, subprogram. . . ) Type of expenses Classification of budget expenses 9

MINISTRY OF FINANCE Budgetary classification OF THE RUSSIAN FEDERATION Example of income classification - "Transport tax" Chief Budget Income me Administrator subgroup item group Code 1 8 2 Tax Service Code 1 0 6 0 4 Income subitem 0 1 Physical person transport tax code 2 Income element 0 2 Budget level code Income subtype group 1 0 0 Current payment 0 Analytical group of income subtype 1 1 0 Tax income 10

MINISTRY OF FINANCE Budgetary classification OF THE RUSSIAN FEDERATION Functional classification (4, 5, 6, 7 BCC level) (Classification of Government Functions 2014) Nationwide issues National Defense 0100 0200 National Security and Law Enforcement 0300 National Economics 0400 Housing and Utilities 0500 Environmental protection 0600 Education 0700 Culture, cinema 0800 Public Health 0900 Social Policy 1000 Physical education and Sport 1100 Mass-media Debt Service Inter-budgetary transfers 1200 1300 1400 11

MINISTRY OF FINANCE Budgetary classification OF THE RUSSIAN FEDERATION Classification of general government sector transactions (GFS 2014) 100. Income 200. Expenses 300. Receipt of non-financial assets 400. Replacement of non-financial assets 500. Receipt of financial assets 600. Replacement of financial assets 700. Liabilities up 800. Liabilities down 12

MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION BUDGETARY SYSTEM OF THE RUSSIAN FEDERATION 1 st level 2 nd level Budgetary system of the Russian Federation 3 rd level 13 Federal budget, RF non-budgetary funds budgets (3) Budgets of the RF constituent entities (85), regional non-budgetary funds Local budgets: budgets of municipal entities, urban districts, settlements (21 500) As per article 31 of the RF BC all constituent entities of the Russian Federation and municipal entities in public sector have equal rights and are independent in exercising their budgetary rights (Budget independence principle).

MINISTRY OF FINANCE Accounting entities OF THE RUSSIAN FEDERATION Over 200 thousand accounting entities RF General Government Sector Central Government (1) Ministries and Departments Social Security Funds (3+85) Local authorities (22 445) Regional authorities (85) Ministries and Departments Self-governing bodies Non-budget institutions (schools, hospitals. . . ) 14

MINISTRY OF FINANCE Accounting entities OF THE RUSSIAN FEDERATION Structure (Hierarchy) of major budgetary accounting and reporting entities Budget Financial authority Budgetary institutions (schools, hospitals, universities, museums, theatres. . . ) State authority Regional authority Public institution State authority Regional authority Budgetary institutions (schools, hospitals, universities, museums, theatres. . . ) Public institution 15

Bookkeeping reporting system MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION Reporting differentiation system for FT authorities and other reporting entities Ministries, Departments Regional and local budgets Budgetary (accounting) reporting Federal Treasury Local Offices Budget administration reporting Budgetary (accounting) reporting Capabilities to compare reports of different entities 16

MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION Bookkeeping reporting system Basic reporting forms: ü Budget administration report; ü Budget administration balance sheet; ü Financial results report; ü Cash-flow statement; ü Explanatory note. 17

Bookkeeping reporting system MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION Explanatory note includes: ü Text section; ü Information regarding the number of subordinate participants of budgeting process; ü Information on non-financial assets flow; ü Information on receivables and payables; ü Information on total balance changes; ü Information on cash balance at the budget holder's accounts, etc. 18

Bookkeeping reporting system MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION Administration balance of consolidated budget of the Russian Federation and the budgets of state non-budgetary funds bln. rub. Balance I. Non-Financial Assets II. Financial Assets including: Monetary funds Assets III. Liabilities IV. Financial result Liabilities and net worth as of 01. 2018 as of 01. 2019 128, 965. 1 131, 751. 1 53, 344. 1 7, 991. 3 61, 457. 3 12, 530. 1 182, 309. 3 193, 208. 4 100, 132. 7 100, 430. 3 82, 176. 5 92, 778. 0 182, 309. 3 193, 208. 4 19

Bookkeeping reporting system MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION Report on financial results of consolidated budget of the Russian Federation and the budgets of state non-budgetary funds bln. rub. Parameter For 2018 Income (100) 46, 988. 7 Expenses (200) 36, 391. 5 Net operating result (100 -200) 10, 597. 1 Non-financial assets transactions (300 -400) 2, 786. 0 Financial assets transactions (500 -600) 7, 811. 1 Liabilities transactions (700 -800) -84. 0 20

Bookkeeping reporting system MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION Transaction example Transaction Debit Credit Amou nt Tax declaration submitted Taxpayer's debt Revenues 100. 0 Tax is paid Monetary funds Taxpayer's debt 80. 0 Penalty accrued for tax default Taxpayer's debt Revenues 5. 0 21

Bookkeeping reporting system MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION Transaction example Assets and liabilities Transactions Receivables 25. 0 Monetary funds 80. 0 Financial result 105. 0 Revenues Financial result 105. 0 Payment information Income on profit tax 80. 0 Monetary funds 80. 0 Explanations and definitions N company at the beginning 0. 0 at the end 25. 0 Accrued: 105. 0 Paid: 80. 0 N company debt: 25. 0 22

MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION Bookkeeping reporting system Consolidation levels (using accrual basis method) 1. Internal consolidation (within one Ministry of the same budget level) Legal entity 2. . . . Legal entity 1. . . . Service. . . Example: School #1 transfers a computer to School #2 23

MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION Bookkeeping reporting system Consolidation levels 2. Inter-departamental consolidation (within the same budget) Ministry ……. Ministry. . . Service. . . Example: Regional Ministry of Public Health transfers a computer to Regional Ministry of Education (within the same region) 24

Bookkeeping reporting system MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION Consolidation levels 3. Inter-budgetary consolidation Regional Government Federal Government Social funds Local authorities Example: Federal government lends money to regional government 25

Bookkeeping reporting system MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION Interaction system State authorities State non-budgetary funds Federal Treasury Ministry of Finance of the Russian Federation Reporting dates: Monthly, quarterly, annually. Local budgets Budgets of the RF constituent entities Government of the Russian Federation Information is submitted in electronic form. 26

MINISTRY OF FINANCE Informational system OF THE RUSSIAN FEDERATION All reports of the accounting entity on monthly, quarterly and annually basis 27

MINISTRY OF FINANCE Plans and prospects OF THE RUSSIAN FEDERATION Federal standards of state finance accounting International standards (42 IPSAS, GFSM) Indirect adoption National standards (30 RF SSS) Reform goals: ü improvement of accounting information quality, ü improvement of reporting reliability ü statistical survey of state finances along the entire sectoral perimeter ü cross-country comparison 28

MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION Stages of implementing the State finance accounting standards development program ü Public discussion (6 months) → 85 regional methodological boards → Russian Ministry of Finance Board ü Project Expert Examination → Russian Ministry of Finance Board (Bank of Russia, Ministry of Finance of Russia, professional community, non-commercial non-state regulators, public oversight authorities) ü Adoption of standards 1. 5 year prior to entry into legal force ü Methodological recommendations one year prior to the first application → Regional meetings (2019 -over 1500 participants) ü Methodological support of the first-time implementation (year of the first implementation) → Ministry of Finance of Russia + Non-State Regulator (nongovernmental professional organization) "State Finance Development Union" 29

Plans and prospects MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION Standards of state finance accounting No. Name Effective date 1. Conceptual framework of accounting and reporting of public sector organizations*** 01. 2018 2. Basic assets 01. 2018 3. Leases 01. 2018 4. Asset impairment 01. 2018 5. Submission of accounting (financial) reporting 01. 2018 *** - not a standard in IPSAS 30

Plans and prospects MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION Standards of state finance accounting No. Name Effective date 6. Accounting policy, assessment values and errors. 01. 2019 7. Post-reporting events 01. 2019 8. Cash-flow statement 01. 2019 9. Revenues 01. 2019 10. Impact of foreign exchange rate changes 01. 2019 11. Budget information in accounting (financial) reporting 01. 2020 12. Stocks 01. 2020 13. Reserves. Disclosure of conditional liabilities and contingent assets information 01. 2020 14. Concessionaire agreements 01. 2020 15. Long-term agreements 01. 2020 31

Plans and prospects MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION Standards of state finance accounting No. Name Effective date 16. Non-produced assets*** 01. 2021 17. Related party disclosure 01. 2021 18. Joint activities 01. 2021 19. Intangible assets 01. 2021 20. Employee benefits 01. 2021 21. 22. 23. 24. Borrowing costs Financial instruments Accounting (financial) reporting adjusted for inflation Consolidated accounting (financial) reporting 01. 01. 2021 01. 07. 2022 01. 2022 *** - not a standard in IPSAS 32

Plans and prospects MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION Standards of state finance accounting No. 25. Name Effective date Equity accounting method Approaches to accounting (financial) reporting of general government sector state finance statistic information*** 01. 2022 27. Biological assets 01. 2022 28. Information on accounting (financial) reporting review by segments 01. 2022 29. State (municipal) treasury*** 01. 2022 30. Industrial standards according to the Program 01. 2022 31. Industrial standards according to the Program 01. 2023 26. *** - not a standard in IPSAS 01. 2022 33

Plans and prospects MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION The standards are gradually adopted into the Russian practice +7 29 +7 Quantity of national standards +5 +5 +5 2018 The first results* data for analysis 2019 2020 2021 2022 100% of lease assets are included in balance sheet 36% of the RF financial assets are long-term. < 0. 001% decrease of cost of funds due to impairment *According to the RF consolidated budget administration statement Year 34

MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION Plans and prospects ü Work on national (industrial) standards; ü Development of state finance statistical methodology; ü Development of budgetary classification; ü Concentration of budgetary accounting and reporting function in competent centers. 35

MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION Ministry of Finance of the Russian Federation www. minfin. ru Regulatory acts in general government sector accounting and reporting https: //www. minfin. ru/ru/perfomance/budget/bu_gs/budgetaccounting 36