Installation of Treasury Functions in The Kyrgyz Republic

1
Installation of Treasury Functions in The Kyrgyz
Republic

• A Retrospective

2
Kyrgyz Ministry of Finance Budget execution
arrangements prior to 1994

• Systems inherited from the Former Soviet Union
• Limited treasury services delivered by the
  Budget, Sectors,and Accounts Departments, and the
  Central Bank.
• Government payment functions discharged using
  thousands of bank accounts.
• No in-year fiscal reports except from the central
  bank which reported on revenues, and aggregate
  transfers to line ministries bank accounts.
• Unreliable and much delayed annual financial
  accounts.
• Non-transparent process governing use of public
  funds.
• The systems did not promote tracking of
  expenditure arrears, cash planning, and
  reconciliation of accounts with bank balances

3
Establishing Kyrgyz Treasury in 1994
Retrospective (1)

• Following factors contributed to successful
  installation of the Kyrgyz Treasury
• Exceptional level of political commitment to
  reform initiatives.
• Effective leadership at the MOF and willingness
  to effect fundamental systemic changes to install
  the treasury.
• Focused technical assistance, and its
  unquestioned acceptance.
• Mobilization of skilled staff from wherever
  available and intensive hands-on training of
  field treasury staff.
• High level of coordination and cooperation
  between the budget and treasury directorates.
• Staying focussed on basic treasury operations,
  leaving ambitious IT plans for a later phase.

4
Kyrgyz Treasury Retrospective (2)

• The Kyrgyz Treasury model has been successfully
  adopted in Azerbaijan, Armenia, Turkmenistan
  (partly), and Tajikistan (partly) Key elements
  of the model are presently being implemented in
  Georgia.
• Essential approach adopted in the Kyrgyz Republic
  was
• Overhaul the inherited legal, institutional, and
  systemic framework before embarking upon full
  scale treasury functions.
• Resist the temptation to computerize legacy
  systems.
• Give priority to establishing core treasury
  services of consolidation of cash resources into
  TSA, payment system, classification structures, a
  simple reporting system, and government accounts
  based on TGL.
• Generate annual government accounts from TGL, and
  reconcile these with parallel records built from
  the accounts rendered by the line ministries .

5
Kyrgyz Treasury Overview Strengths (1)

• Efficient operation in manual mode despite
  limited IT resources
• Fastest off the track among EITs Basic
  functionality realized within one year during
  1994 comprising
• Robust legal frameworkTreasury Law
• Central Treasury with 62 regional treasury
  offices (RTO) established within 6 months.
• Modestly staffed with 435 staff
• Unification of (most) of cash resourcesbudgetary,
  extrabudgetary, and foreign currency of central
  and local governments into a shared TSA
• GFSM1986 compliant classification system
  installed by January 1995.

6
Kyrgyz Treasury Overview Strengths (2)

• Centralized payment service for all central and
  local government budget instituions (BI)
• All central and subnational revenues pass through
  the treasury
• Shared taxes distributed daily at the RTOs
• Budgetary and extrabudgetary expenditures of BI
  pass through the treasury
• Centralized Treasury General Ledger (TGL) with
  sub-ledgers at RTOs
• The treasury, as installed, remained operational
  without further outside help.

7
Kyrgyz Treasury Overview Weaknesses (1)

• A review conducted in 2002 found that lack of
  contemporary IT resources and frequent turnover
  of skilled treasury staff have stunted advanced
  treasury functions
• Timely fiscal reports of acceptable data quality
• Effective control over expenditure commtiments
  and payment arrears
• Effective control over TSA balances and cash
  management in real time
• Short- and Medium-term cash flow forecastscash
  plans
• GFSM2001 based classification structures and
  chart of accounts to enable accrual-based reports
  on fiscal operations

8
Kyrgyz Treasury Overview Weaknesses (2)

• Some operational weaknesses in basic treasury
  functions have surfaced
• Absence of cash planning has led to day to day
  budget allocations and cash provisioning.
• Some dergadations have surfaced
• Some BIs keep extrabudgetary resources outside
  treasury purview
• Undesirable offset operationsakin to barter
  dealshave been allowed
• Some government bank accounts continue to be
  operational outside the TSA

9
Kyrgyz Treasury Next Steps (1)

• Objectives of Computerized Treasury Information
  Management System (TIMS) Project.
• Automation of bank and payment operations.
• Central Treasury (CT) will have direct access to
  TSA, membership of RTGS, and SWIFT access codeThe
  RTOs will participate in NACH through CT.
• Direct payments into suppliers bank accounts by
  RTO through NACH. The role of agency banks will
  be reduced to cash disbursements.
• Direct daily settlment between RTO and TSA for
  transactions routed through agency banks.
• Elimination of paper flow, except between BI and
  RTO.
• Direct credit of revenues from taxpayer bank into
  TSA with parallel electronic information to TIMS.
• Automatic sharing of revenues between governments
  by TIMS.

10
Kyrgyz Treasury Next Steps (2)

• Full registration of expenditure commitments and
  automated reports on payment arrears.
• Sophisticated module for forecasting short- and
  medium-term cash flowscash planning.
• Prioritizing payments due based on cash plans.
• A single TGL in the system operated in real time
  by the CT and RTOs, eliminating inter-treasury
  settlement operations. This will, for example,
  permit central treasury to directly credit budget
  allocations and cash limits into the ledger
  account of each BI.
• The new CoA for the TGL will be GFSM2001
  compliant.
• The CoA will be underpinned by relational data
  base and will record all dimensions of a
  transaction.
• Full range of management reports
• Automation of accounts keeping in real time.

11
Kyrgyz Treasury Payment process after
modernization
12
Kyrgyz Treasury Modernization Plan

• Being funded by the World Bank
• Close cooperation between Fund and the Bank
• Project time span 3-4 years
• Estimates of cost about US8 million

13
Kyrgyz Republic GTAC Treasury Project Overall
Project Organization (2/2).
IT System technical definition, procurement
Implementation. W
B
IT System technical definition, procurement
Implementation. WB
Activities
Activities
System Functional
System Functional
Actors
Actors
Definition
Definition
IT Project
IT
Project
Project
IMF
IMF
IT System
management
network
management
network
Phases
Phases
Part 2.1.1
Proj
. Organization
Part 2.1.1
Proj
. Organization
Part 2.1.1
Proj
. Organization
Part 2.1.1
Proj
. Organization
IT system
IT system
Blueprint, Modernization Plan
Blueprint, Modernization Plan
Blueprint, Modernization Plan
Blueprint, Modernization Plan
Modernization
Modernization
Part 2.1.2 Functional
Part 2.1.2 Functional
Blueprint Planning
Blueprint Planning
Part 2.1.2 Functional
Part 2.1.2 Functional
1.1.Blueprint,
1.1.Blueprint,
1.1.Blueprint,
1.1.Blueprint,
Architectural design
Architectural design
Architectural design
Architectural design
Modernization Plan,
Modernization Plan,
Modernization Plan,
Modernization Plan,
Part 2.1.6
Part 2.15
Training
Part 2.1.6
Part 2.15
Training
Overall IT project
management Part I
Overall IT project
management Part I
Functional Design
Part 2.1.6
Part 2.15
Training
IT Staff Kernel Selection
Functional Design
Part 2.1.6
Part 2.15
Training
IT Staff Kernel Selection
Overall IT project
management Part I
Overall IT project
management Part I
IT Staff Kernel Selection
IT Staff Kernel Selection
Functional Design
Part 2.1.3 Quick
-
Wins
Functional Design
Part 2.1.3 Quick
-
Wins
Part 2.1.3 Quick
-
Wins
Part 2.1.3 Quick
-
Wins
IT System Functional
IT System Functional
Development
Development
Development
Development
Architectural
Architectural
General Design
General Design
Part 2.1.4 TOR
Part 2.1.4 TOR
Part 2.1.4 TOR
Part 2.1.4 TOR
IT System Preparatory Phase
IT System Preparatory Phase
RFP preparation
RFP preparation
RFP preparation
RFP preparation
Selection Process for
Selection Process for
Part 3 Packaged software
Part 3 Packaged software
Part 3 Packaged software
Part 3 Packaged software
IT System Realization
IT System Realization
Hardware Telecoms Procurement bid
Hardware Telecoms Procurement bid
Hardware Telecoms Procurement bid
Hardware Telecoms Procurement bid
1. 2.Impl. Monitoring
1. 2.Impl. Monitoring
1. 2.Impl. Monitoring
1. 2.Impl. Monitoring
IT System Detailed
IT System Detailed
Part 5
Part 5
Part 5
Part 5
Technical Design
Technical Design
Project Realization.
Project Realization.
Project Realization.
Project Realization.
Packaged software
Packaged software
Packaged software
Packaged software
IT System
IT System
Parameterization
Parameterization
Parameterization
Parameterization
Parameterization
Parameterization
Part 6
Part 4
Part 6
Part 4
Overall IT project
management Part I
Overall IT project
management Part I
IT System Realization Phase
Part 6
Part 4
Technical Infrastructure
Implementation
IT System Realization Phase
Part 6
Part 4
Technical Infrastructure
Implementation
Application Integration
Application Integration
Overall IT project
management Part I
Overall IT project
management Part I
Technical Infrastructure
Implementation
Application Integration
Technical Infrastructure
Implementation
Application Integration
Development
Development
1. 3
Impl
. Monitoring
1. 3
Impl
. Monitoring


1. 3
Impl
. Monitoring
1. 3
Impl
. Monitoring


Phased Implementation
Phased Implementation
Phased Implementation
Phased Implementation
IT system Pilot
IT system Pilot
Training.
Training.
Training.
Training.
Experimentation
Experimentation
Full Implementation
Full Implementation
1. 4
Impl
. Monitoring
1. 4
Impl
. Monitoring
1. 4
Impl
. Monitoring

1. 4
Impl
. Monitoring

Training
Training
14
Thank You