Evolution of Expenditure Controls Applied by the Budget Execution and Public Procurement Processes

1. Albanian Treasury Evolution of Expenditure Controls Applied by the Budget Execution and Public Procurement Processes PEMPAL 2019 TCOP Plenary Meeting Prepared: Mimoza Pilkati Director Treasury Operations’ Department Budapest, Hungary

2. Content Albanian Treasury System 01 Central controls over the budget units allocations 02 Controls exercised during the payment processes 03 04 Initiatives to revise the approach

3. 1. AGFIS - Albanian Government Financial Information System’s modules 1.Banking System daily data (interface) 2.Tax System daily data (interface) 3.Customs System monthly data (manually) 4.Social Insurance System monthly data (manually) 5.Obligatory Fund of Health Care System ( ‘’ ‘’ ‘’ ) 6.Foreign Financing Project Implementation Units’ monthly data (manually) 7.Assets/.Inventory Journals’ annual data (manually in 13th period) Requisition (15 Institutions) Commitments (All Institutions) (contracts/purchase order) Purchases Outside Systems Invoice matched with released commitment Expenditures/Payments Financial Reports Payables Banking Reconciliation Automatic assets additions Journals Inquiry Revisions General Ledger Assets’ capitalization/transfers/ depreciation/destructions (used daily only by 6 institutions) Financial Statements (Balance sheets) Inquiry Fix Assets Cash Management Approval Budget, Revisions, Releases Banking Reconciliation Non Tax Revenues Budget Receivables

5. 2. Central controls over the budget units allocations 2.5.The controls over spending units allocations are done automatically through the AGFIS, which rejects their invoices without annual budget plan. 2.6. Approval medium term central budget for each spending unit is recorded in AGFIS by General Directorate of Budget (GDB) under the Ministry of Finance and Economy. Also treasury districts offices (TDOs) get from GDB the protocol paper for checking the consistency with AGFIS data. 2.2.The consolidated fiscal indicators data of generalgovernment (central/local government & special funds) by economic classification are breakdown in monthly basis. After adjustments, these targets serve as a monthly limit (ceilings) for cash flows forecasting of three aggregated items: salaries, capital expenditures and others of each spending unit. • 2.4. Spending units revise their allocations (article 44 of OBL): • With approval of line ministry’s Authorizing Officer between subordinated units for one item of operational expenditures (OE) for the same program. • With approval of Minister responsible for Finance between capital expenditures (CE) projects within one program of a line ministry. • With approval of Prime Authorizing Officer between the items of OE for the same program. • With approval of Council of Minister between programs until 10% of total of operational expenditures or capital expenditures of one line ministry (LM) or between LMs, respecting the total of the approval ceiling. • With approval of Parliament between programs over 10%. 2.1/3. Approval medium term central budget is detailed annually by line ministries/central institutions; functional classifications; economic classification by three digits level (chart of accounts level in 7-digits); also controlled on three digits level.

6. Format of breakdown of initial budget plan by institutions

7. Format of budget funds transfers

8. 3. Controls exercised during the payment processes 4 Payment (Centralized) 2 Commitment 3 Expenditure 1 Requisition 5 Reconciliation Treasury System Frozen medium term budget 14 Line ministries  Tirana Municipality • Invoice is matched with released commitment • Central Government • Local Government • Frozen medium term budget • Central Government • Local Government Invoice is checked automatically with monthly cash flows forecasting Electronic transfers files to Central Bank, then to commercial bank 1.Banking System 2.Financial reports on multiyear commitments data by 3+1 year Bank of Albania • The Controls are done through: • AGFIS by above scheme • TDOs authorize manually procurement requests against the medium term • budget, detailed by projects/products code (requisition phase) • Monthly Financial Reports on unpaid amounts of multiyear commitments • (last column of report calculated by previous column data on each year commitments, • expenditures, payments) by spending units (central + local government).

9. 4.The initiatives to revise the approach The automation strength the disipline. The link between AGFIS and Public Procurement System is not yet in place. It is the componet of AFMIS project financing from the World Bank and it is expected to finish in the end of 2019. • How long does it take to aprove each stage of the payment process? One day delay after recording an invoice in AGFIS and order the daily cash limit; it is the time of the programme, which is executed after working time for the capacity reason. Before, it is in real time, because the invoice is cheked in the same time with annual budget plan and monthly cash flows forecasting. Since January 2017 we have create the posibilities to record invoice against annual budget plann and after accounting in General Ledger, the invoice will be checked against monthly cash flows forecasting. We have separated these controls to avoid the arising of arrears.

10. Thank you for your attention! Any questions? You can find me at mimoza.peco@financa.gov.al