## 1polea2019008 ## Source details **Canonical URL:** [1polea2019008](https://www.imf.org/-/media/files/publications/cr/2019/1polea2019008.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2019/1polea2019008.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2019/1polea2019008.pdf.json) --- ### Mission context and purpose - A Fiscal Affairs Department (FAD) capacity development (CD) mission took place in Warsaw from April 3–16, 2019. - Mission objectives: - Follow-up to earlier FAD missions on developing a Standard Chart of Accounts (SCoA) and a Medium-Term Budget Framework (MTBF). - Support government efforts to improve consistency in reporting and strengthen understanding of the general government’s financial position. - Contribute to attaining the medium-term objective of reducing the structural deficit to 1 percent of GDP by 2021. - Stakeholders met: senior Ministry of Finance (MoF) officials, Budget Zone Financing, Economy Financing, Paying Authority, Macroeconomic Policy, Public Debt, Local Governments’ Finances, Finances and Accounting Departments; Ministry of Internal Affairs and Administration; Ministry of Infrastructure; Statistics Poland; Local Governments. Mr. Riccardo Ercoli (EC SRSS) observed select meetings. - FAD project agreement: place a resident advisor in Warsaw in the middle of May 2019; project supported by EC SRSS; plan envisages completion of the FAD project by June 30, 2020. ### Executive assessment and progress - Commends MoF commitment; notable progress: - Establishment of Budget System Reform (BSR) Project Governance Structures and working groups’ research. - Changes to the Budget Regulation of January 2019 to accommodate medium-term planning. - Preparatory activities for developing the SCoA: user needs assessment, SCoA design steps, budgetary classification and SCoA working groups, gap analysis between Polish and GFSM/ESA classifications, identification of sources of detailed information on coverage of public entities. - Work plan: development phase of SCoA envisaged to be finalized by June 2020. - Capacity building: mission provided conceptual guidance on a multi-dimensional SCoA and harmonization methods; mini workshop demonstrated a model multi-dimensional SCoA. ### Key implementation proposals and constraints - Recommended: adopt a multi-dimensional SCoA to facilitate and automate consolidation consistent with reporting entities’ accountability. - Identified main constraints in preparing spending forecasts and annual budget bids: - Budget processes fragmented across various entities. - Excessive earmarking of funds and standing expenditure commitments reducing discretionary spending. - Recommended: define the scope of the MTBF to consistently cover all entities within General Government that have fiscal impact; explore earmarking and standing commitments in the fiscal rules context. --- ### Developing the Standard Chart of Accounts (SCoA) — background and status - Importance and scope: - Restructuring CoA is cornerstone of PFM reforms; required improvements in organizational arrangements, accounting and financial reporting standards, and IT systems. - Reform objectives include unification of traditional budget classification and performance-based classification components, standardizing and unifying different types of Charts of Accounts (CoAs), and integrating CoAs with budgetary classifications. - Progress to date: - Tentative SCoA structure developed; User Survey Questionnaire designed and dispatched to first level budget holders (Ministries) with deadline for completion June 30. - Working Groups started reviewing current classifications, CoAs, and coding structures; MoF initiated internal exercise to identify and classify institutional units to be covered by BSR. - Gap analysis between Polish and GFSM/ESA based classification undertaken. ### Proposed SCoA multi-dimensional structure (summary) - Mission proposed seven independent segments with a Total of 49 digits. Segment labels and digits per segment: - Administrative (Subject) - Level 1 -Ministry 3 - Level 2 – Department 2 - Level 3 –Entity 5 - Type of entity 2 - Sub-type 2 - Fund: Total digits for Fund: 3 (includes Source; Type (Loan/Grant/ Co-financing) 1; Funding body 2) - Functional: Total digits for Functional: 4 (Function 2; Sub-function 2) - Program: Total digits for Program: 5 (Program 3; Sub-program 2) - Project/Activity: Total digits for Project/Activity: 6 (Activity (Recurrent) 4; Project (Capital) 8; Sub-activity (Recurrent) 2; Component (Capital) 2; Sub-sub-activity (Recurrent) 2; Sub-component (Capital) 2) - Economic Classification (Object) - Total digits for Economic Classification: 6 (Category 1; Object 1; Sub-object 2; Sub-sub-object 2) - Geographical: Total digits for Geographical: 9 (Voivodeships 2; Powiats 3; Gminas 4) ### Sequencing and prioritization - To finalize SCoA expeditiously, focus first on essential segments: Administrative, Economic, Functional, and Fund classifications. - Placeholders recommended for Program, Project/Activity and Geographic segments initially. - Program and Project/Activity segments require individual discussions with line ministries to harmonize with performance budgeting. - Geographic segment development poses challenges: - Need robust geographic data quality to identify subsidies/transfers by region. - Budget not detailed geographically; transaction-level geographic coding may distort execution reporting. - Careful consideration required before early incorporation. ### Aligning economic and functional coding with GFSM/ESA - Recommendation: standardize Economic and Functional segments using GFSM 2014/ESA 2010 methodology because: - Statistical classifications are comprehensive and hierarchical. - Provide internationally accepted definitions and comparability. - Facilitate standardization across all government levels and interface with detailed management classifiers. - Restructuring aims to integrate fragmented budget and accounting classifications with GFS/ESA economic classification; differences should be limited and documented. ### Consolidation automation and counterpart identification - SCoA offers opportunities to automate consolidation or ensure data availability for consolidation. - Consolidation stages: - Elimination of intra-entity transactions of controlled entities. - Aggregation of financial statements after elimination. - Counterparty identifier options discussed: - Use unique code assigned to organizational entities of the general government sector. - Investigate use of codes from National Official Business Register maintained by Statistics Poland. - Investigate use of tax identification code of the public entity. - Accounting rules for elimination should be standardized by MoF; processes differ by transaction economic nature (cash flows vs. asset acquisitions). --- ### Medium-Term Budget Framework (MTBF) — design, constraints and recommendations - Background and regulatory changes: - MoF incorporated medium-term (three years) perspective in budget submission forms via MoF Regulation of January 28, 2019. - Preliminary MTBF decisions: three-year period (forthcoming budget year + two outer years); outer-year spending ceilings initially informative, may become hard ceilings later; MTB to be presented as an annex to the Budget Act. - From 2020, additional changes to budgetary calendar envisaged to better integrate MYSFP and Budget Act preparation. - Operational approach: - MoF to issue initial amounts (first year) and starting amounts (outer years); starting amounts are basis for next planning cycle. - Consideration of imposing single ceilings to line ministries covering state budget expenditures and other sources of funding. - Institutional and capacity-building needs: - Strengthen engagement with line ministries during conceptual phase; provide guidance on bottom-up estimates, indexation rules, and one-off expenditure identification to ensure comparable baselines. - Close collaboration to leverage sector-specific capacity and create feedback loops. ### Relationship with existing multi-year instruments - Existing instruments: - Multi-Year State Financial Plan (MYSFP) included in the Convergence Program. - Multi-Year Financial Forecasts (MYFF) of Local Governments (presented with draft budgets, include at least three outer years). - Certain Budget Act annexes (e.g., European Funds Budget) present outer-year information. - Past weaknesses: - MYSFP largely disconnected from budget preparation; forecasts prepared at higher aggregation than budget classifications. ### Stabilizing Expenditure Rule (SER) and top-down constraints - SER background: - Introduced in 2013; effective in 2015; aligns with EU preventive arm Expenditure Benchmark Rules. - SER covers expenditure for general government net of expenditure financed with EU funds or by entities unable to generate significant deficits; estimated to cover around 90 percent of general government expenditures. - SER mechanics: - Overall fiscal space: total SER spending from previous year adjusted for recent GDP growth rates, inflation target, adjustment for policy measures increasing revenue by more than 0.03 percent of GDP; further corrected if (i) debt and deficit exceed thresholds in the Public Finance Act or (ii) fiscal balance deviates from MTO. - Correction mechanisms incorporate countercyclical elements; different rules for good and bad economic conditions. - Decomposition and implications: - General government expenditure ceiling decomposed between state budget and non-state budget. - Non-state budget expenditures largely exogenous; excluded amounts subtracted from overall expenditure estimate; residual must absorb top-down constraints. - State budget absorbs full burden of top-down constraints and further constrained by standing commitments such as defense (2 percent of GDP) and Health Services (6 percent of GDP). ### Expenditure rigidities and options - Two pressing issues limiting MTBF effectiveness: - Fragmented budget process across separate budgets for social security, special purpose funds, and other entities. - Extensive earmarking and standing expenditure commitments limiting reallocation. - Options to increase discretionary space: - Increase discretionary portion available to rest of state budget. - Address legal framework allowing establishment of special purpose funds with earmarked revenues. - Consider cross-cutting measures across BSR working groups to expand discretionary space. - Recommendation: define MTBF scope to cover all entities, funds and accounts with budgetary impact; initially some entities may be covered for information only but should become forecasts for decision making as reform matures. --- ### Project management, timetable and governance - IMF FAD support: - Resident advisor onboarding: May 2019. - Determination of segments and coding structure: September 30, 2019. - Seek agreement on concept design of SCoA: October 31, 2019. - Detailed classification of the SCoA: April 1, 2020. - Contingency period: June 30, 2020. - Finalize: June 30, 2020. - Project duration: FAD project over 18-months; completion envisaged by June 30, 2020 with 60-day contingency; potential delays due to elections scheduled for October. - Governance arrangements: - MoF established a Steering Committee; tasks divided between BSR Phase I (BSR I) and Public Accounting Reform Phase I (PAR I). - Working Groups dedicated to different topics; joint WG covering SCoA and budgetary classifications. - Mission emphasized expanding participation to local governments, statistics agency and central bank. ### Change management and capacity building - Scale and impact: - Reform affects more than 50,000 institutions and will alter standard operating procedures across PFM cycle. - Early and meaningful stakeholder engagement is critical to buy-in. - Use of survey data and outreach: - Accounting user survey to indicate capacity of public entities; develop risk matrix and conduct road shows and video conferencing. - Periodic bulletins recommended to inform stakeholders and help sequence IT upgrades. - Collaboration tools and documentation: - Set up collaborative IT working environment (e.g., Microsoft SharePoint) for teleconferencing and document exchange. - Issue final SCoA as an accounting manual; by end of Phase 1, WG should develop SCoA manual including: - purpose and scope; enabling legal provisions; definition and purpose of each segment; coding principles; financial statement layouts; summary table of accounting entries; purpose, format and disposition of all reports produced using SCoA elements. - Recommendations (change management): - Conduct road shows and video conferencing on proposed reforms. - Set up collaborative IT environment for project management. - Issue final SCoA with accounting manual and training/promotional material. --- ### Key recommendations (condensed) - SCoA development: - Enhance User Survey Questionnaire: incorporate mission amendments; ensure respondents understand purpose and implications. - Standardize Administrative segment coverage and align with regional/international standards; clarify reporting entity boundaries and consolidation needs. - Standardize Economic and Functional segments using GFS/ESA methodology; focus initially on main segments to finalize SCoA expeditiously. - Issue final SCoA as an accounting manual/guidelines and include provisions for consolidation using counterpart identifiers. - MTBF development: - Strengthen MoF engagement with line ministries; provide guidance for bottom-up estimates and engage experts early. - Define MTBF scope to cover all entities, funds and accounts with budgetary impact; transition information-only coverage to decision-making forecasts as reforms mature. - Project management: - Develop change management strategy to promote stakeholder buy-in; conduct road shows; set up collaborative IT environment; provide manuals and capacity building materials. *Source: 1polea2019008 - PREFACE and mission chapter text (PDF chapter/section).* ### PREFACE _________________________________________________________________________________________ 6 ### PREFACE ### Mission context and participants - A Fiscal Affairs Department (FAD) capacity development (CD) mission took place in Warsaw from April 3–16, 2019. - The mission met with senior officials of the Ministry of Finance (MoF), including: Ms. Barbara Brodowska-Mączka, Director General; Ms. Anna Napiórkowska, Director of the State Budget Department; Ms. Joanna Dadacz, Director of the Accounting and Auditing Department; and staff from Budget Zone Financing Department, Economy Financing Department, Paying Authority Department, Macroeconomic Policy Department, Public Debt Department, Local Governments’ Finances Department, Finances and Accounting Department. - Meetings were also held with representatives of: Ministry of Internal Affairs and Administration, Public Administration Department, Statistics Poland and Local Governments (engaged in the Public Service Monitoring System Project); Ministry of Infrastructure: Budget Department and Public Roads Department. - Mr. Riccardo Ercoli, Policy Analyst of the European Commission’s Structural Reform Support Services, observed select meetings. - The mission expresses appreciation for hospitality and assistance from the authorities and thanks Ms. Katarzyna Szarkowska and Mr. Bartosz Staszewski for coordination support, and the IMF resident representative in Warsaw and staff for support. ### Purpose of the mission - Follow-up to earlier FAD missions on developing a Standard Chart of Accounts (SCoA) and a Medium-Term Budget Framework (MTBF) as elements of broader Public Financial Management (PFM) reforms in Poland. - Support government efforts to improve consistency in reporting and strengthen understanding of the general government’s financial position. - Contribute to attaining the medium-term objective of reducing the structural deficit to 1 percent of GDP by 2021. --- ### EXECUTIVE SUMMARY ### Overall assessment and progress - The mission commends the Polish Ministry of Finance for a high level of commitment to the reforms, evidenced by public pronouncements by the Minister of Finance and progress on prior recommendations. - Notable progress includes establishment of the Budget System Reform (BSR) Project Governance Structures, working groups’ research, and changes to the Budget Regulation of January 2019 to accommodate medium-term planning. - The MoF has started preparatory activities for developing the SCoA, including: - initial steps to assess user needs and design the SCoA structure; - budgetary classification and SCoA working groups drawing staff from main MoF stakeholders; - gap analysis between Polish and GFSM/ESA based classification; - identification of sources of detailed information on coverage of public entities. - Work plan for the development phase of SCoA was firmed up in consultation with the mission; development is envisaged to be finalized by June 2020. ### Technical engagement and capacity building - The mission provided detailed conceptual guidance on a multi-dimensional SCoA and methods to harmonize budgetary, accounting, and statistical classifications, illustrating use of GFS/ESA methodology expanded for country-specific needs. - A mini workshop demonstrated a model multi-dimensional SCoA and practical approaches to harmonization; State Budget Department found practical demonstration particularly useful. ### Key implementation proposals and issues - Recommended using the reforms to establish a multi-dimensional SCoA to facilitate and automate consolidation consistent with assigned accountability and responsibilities of reporting entities. - Identified main constraints in preparing spending forecasts and annual budget bids: - budget processes fragmented across various entities; - excessive earmarking of funds and standing expenditure commitments reducing discretionary spending. - Recommended defining the scope of MTBF to consistently cover all entities within General Government that have fiscal impact; earmarking and standing commitments to be explored in fiscal rules context. ### Project support and timetable - FAD project agreement will place a resident advisor in Warsaw in the middle of May 2019; the FAD project is supported by the European Commission’s Structural Reform Support Services (EC SRSS). - The plan envisages completion of the FAD project by June 30, 2020. --- ### Key recommendations (summarized) Developing the SCoA - 1.1 Increase effectiveness of the accounting User Survey Questionnaire by: - considering incorporating the mission’s proposed amendments into a final version of the questionnaire; - ensuring SCoA survey respondents are made fully aware of the purpose of the survey and implications of their responses on the reforms. - 1.2 Standardize the coverage of the Administrative (organization) segment across various reports and ensure consistency with regional and international standards for identifying sectors of general government and public sectors. In standardization consider: - boundaries of individual reporting entities in accordance with accountability and responsibility; - need to consolidate in line with regional and international fiscal reporting requirements. - 1.3 Standardize the Economic and Functional segment of the SCoA and codify using the classification methodology presented in the GFS/ESA expanded for country specific needs. Such standardization should: - bring together the fragmented budget and accounting classifications of the economic category of expenditures; - initially focus on the main segments of the SCoA to be able to finalize the SCoA expeditiously. - 1.4 Issue the final version of the SCoA in the form of an accounting manual/guidelines for reference and capacity building. - 1.5 Include in the accounting rules and guidelines provisions for consolidation of reporting entities using appropriate counterpart identifiers. Developing the Medium-Term Budget - 2.1 Strengthen engagement with line ministries and entities at the stage of conceptual thinking on MTBF by: - providing more guidance from the MoF to line ministries and other entities in calculating their bottom-up estimates; - engaging experts from line ministries earlier and building shared understanding of MTBF design. - 2.2 Define the scope of the MTBF to cover all the entities, funds and accounts that have budgetary impact by: - developing consistent entity classifications for MTB, budget, accounting and fiscal reports; - ensuring entities and extra-budgetary funds covered initially for information should become forecasts for decision making once the reform matures. BSR Project Management - 3.1 Develop a change management strategy for SCoA and MTBF reforms to promote buy-in from stakeholders at each phase by: - conducting road shows and video conferencing on proposed reforms; - setting up a collaborative IT working environment for project management; - issuing the final version of the SCoA with an accounting manual and training/promotional material for capacity building. Note: “The anticipated dates for these deliverables are being finalized in consultation with the working groups. The dates are being synchronized with the work plan of the resident advisor.” --- ### I. INTRODUCTION ### Reform context and objectives - The Polish government’s Budget System Reform (BSR) program was first approved by the Council of Ministers in 2016. - Reform objectives include unification of traditional budget classification and performance-based classification components, standardizing and unifying different types of Charts of Accounts (CoAs), and integrating CoAs with budgetary classifications. - Expected benefits: improved accounting and financial reporting, support for implementation of a Medium-Term Budget (MTB), and stronger basis for understanding the financial position of the general government. - The medium-term objective explicitly noted: a structural deficit of one percent of GDP. ### Current challenges identified - Various versions of CoAs are in use; the budget classification system is complex and inconsistent, creating difficulties in meeting international reporting obligations. - Prior FAD mission (November 2017) and World Bank work highlighted weaknesses in the CoA and recommended moving to a Standard Chart of Accounts (SCoA) with a balance between standardization at higher levels and flexibility at lower levels. - While initial steps have been taken towards SCoA and MTBF, significant work remains; this mission followed up on progress and developed the resident advisor work program. --- ### II. DEVELOPING THE STANDARD CHART OF ACCOUNTS — BACKGROUND ### Importance and scope - Restructuring the government’s CoA is a cornerstone of Polish public financial reforms and essential to support improved accounting, financial reporting, and MTBF implementation. - The CoA restructuring will require improvements in: - organizational arrangements; - accounting and financial reporting standards, principles and policies; - information technology (IT) used in accounting and reporting systems. ### Policy foundation - The CoM-approved six-point reform plan (“Assumptions to Budget System Reform”) includes unification of traditional budget classification and performance-based classification components and integration of CoAs with budget classification to support consolidation and reporting. *Source: 1polea2019008 - PREFACE (PDF chapter/section).* ### 5. The capacity development work during this mission builds on former support ### 1polea2019008 - 5. The capacity development work during this mission builds on former support ### B. Progress Towards Developing a Standard Chart of Accounts - The capacity development (CD) work during this mission builds on former support provided by the FAD and the World Bank. - A headquarters mission in October 2017 (Harris) advised on public financial management reforms; this mission continued to determine the baseline for these reforms that will be addressed in a specific IMF project with Poland. - The World Bank supported the CoA reform as part of their broader Enhancement of Public Sector Accounting and Financial Reporting Program, which ended in 2016, providing guidance on conceptual design and integration of a SCoA and budget classifications. - This mission has developed a tentative SCoA structure intended to address major weaknesses identified by previous CD missions; the tentative proposal was briefly discussed with authorities at a workshop and will be reviewed and discussed in detail with users of the SCoA over the next five months. ### Survey of Accounting Practices of CoA users - Relevant Working Groups (WGs) have started reviewing current classifications, CoAs, and coding structures and how these are carried in underlying accounting systems of various entities. - Accounting functions are decentralized; entities are responsible for developing their own accounting and IT systems. - A User Survey Questionnaire was designed to determine current accounting systems and practices; it elicits detailed information on: - (i) IT environment; - (ii) functionality and coverage of accounting systems; - (iii) structure, portability and potential to expand/change current CoA coding systems; - (iv) nature and characteristics of statutory and managerial reports. - The mission reviewed and proposed revisions to the draft questionnaire to improve evaluation, comprehensiveness and clarity, and to eliminate ambiguous responses (see Annex I). - The questionnaire has been sent to the first level budget holders (Ministries) with instructions to disseminate to the 2nd and 3rd level budget holders; it is posted on the MoF website for online completion. The deadline for completion by respondents is June 30. All public entities are expected respondents. - The survey format will be made available through a centralized web-based application; the mission strongly endorsed this method. - The covering letter to respondents should include: - (i) a brief description of the challenges with current non standardized classifications; - (ii) classification requirements related to on-going PFM reforms; - (iii) the need to capture financial data of all different types of public entities; - (iv) the need to link detailed entity level classifications by integrating or interfacing them with the envisaged SCoA through individual IT accounting systems and centralized reporting systems. ### Identification of Institutional Units - Current classification systems (budgetary classification or CoAs) lack a clearly defined administrative segment corresponding to accountability for implementation of fiscal policy. - Under the Public Finance Act, 2009, the budget is divided into separate budgetary parts corresponding to high-level organization units, sections of government administered by different ministers, types of spending or groups of public tasks, as well as territories; the number of parts is determined by MoF regulation and may vary. - Accountability responsibilities are mostly assigned to holders of these budget parts; however: - Several budget parts could be organized administratively under one ministry. - Substantial spending may be channeled through budgetary parts administered by holders other than relevant ministries. - Therefore, responsibilities for government administration (such as policy formulation) and budgetary accountability responsibilities are not fully aligned. - The MoF has initiated an internal exercise to identify and classify institutional units to be covered by the BSR. - Coverage of the Public Finance Sector (PFS) is defined in Article 9 of the Public Finance Act, 2009. Currently: - The scope of the PFS does not include all entities covered by the Stabilizing Expenditure Rule (SER); - The scope does not include the scope of entities required to be included in the general government by the EU deficit and debt pact. - There are overlaps between entities covered by the PFS and the SER, and some entities are not covered by either. - Authorities are developing consistent principles for the scope of the PFS; a WG has developed a document describing scope and legal concepts for classification of entities. - The relationship between various entities to determine boundaries of institutional units/reporting entities and consolidated entities is being investigated. - Plan: develop consistent guidelines on consolidation principles for budgetary and accounting systems aligned with statistical reporting needs for Government Finance Statistics (GFS) and ESA. ### C. Next Steps in Developing a SCoA - A mission-conducted workshop presented: - the main conceptual principles of a SCoA; - a preliminary proposal for the SCoA structure; - the relationship between the proposed SCoA and existing classification structures. - The mission proposed a multi-dimensional structure for the SCoA comprising seven independent segments. Every transaction is recorded using all seven segments; each segment captures a single characteristic of the transaction. - While no formal hierarchical relationship exists between the seven segments, there could be hierarchical relationships between sub-segments within a segment; potential linkages include: - linking the administrative segment with the program and project segments; - linking the functional segment to the program segment. - The multi-dimensional coding facilitates recording, aggregation, consolidation and reporting by single or combinations of segments, and the ability to drill down to sub-segments and items within sub-segments. - Detailed building blocks in the SCoA allow different levels of decision-making and presentation: - budgetary purposes could be decided at one level of detail/aggregation; - financial statement presentations at another level; - fiscal/statistical reporting at another level while maintaining consistency in basic data. - The tentative SCoA proposal will be reviewed and discussed in detail over the next few months to develop user needs. ### Proposed Structure of the SCoA (summary of Table 1) - The mission proposed seven independent segments with the following segment labels and total digits per segment, leading to a Total of 49 digits: - 1 Administrative (also referred to as Subject in Poland) - Level 1 -Ministry 3 - Level 2 – Department 2 - Level 3 –Entity 5 - Type of entity 2 - Sub-type 2 - Fund - Source - Type (Loan/Grant/ Co-financing) 1 - Funding body 2 - Total digits for Fund: 3 - Functional - Function 2 - Sub-function 2 - Total digits for Functional: 4 - Program - Program 3 - Sub-program 2 - Total digits for Program: 5 - Project/Activity - Activity (Recurrent) 4 - Project (Capital) 8 - Sub-activity (Recurrent) 2 - Component (Capital) 2 - Sub-sub-activity (Recurrent) 2 - Sub-component (Capital) 2 - Total digits for Project/Activity: 6 - Economic Classification (Also referred to as Object in Poland) - Category 1 - Object 1 - Sub-object 2 - Sub-sub-object 2 - Total digits for Economic Classification: 6 - Geographical (Voivodeships 2; Powiats 3; Gminas 4) - Total digits for Geographical: 9 - Total 49 ### Restructuring the Administrative Segment - The future SCoA should include a well-defined Administrative segment with broad coverage for reporting on the financial operations of the entire general government and eventually the public sector. - In GFS/ESA, the public sector captures activities of all units of the general government plus all public corporations. - In the proposed SCoA the Administrative segment is broken down into three levels to identify the administrative hierarchy and includes entity type and sub-type. - Embedding the administrative hierarchy and identifying entity types linked to a specific administrative hierarchy will facilitate alignment of government administration responsibilities and budgetary accountability responsibilities. ### Aligning and Integrating the Economic Classification - The Economic Classification is currently fragmented across: - four CoAs applicable to various types of government entities and detailed budget classification systems for the state budget and local government budgets; - some legal entities required to use private sector accounting without regard to a specific CoA. - These classification systems are integrated at the entity level only; they are not integrated at the level of the budget (central or local). - In central government, various extrabudgetary entities use their own CoAs based on various accounting standards and policies. - CoAs prescribed in the MoF Regulation of September 2017 group accounts by main economic categories; coverage across State Budget (SB), Local Government (LG) budgets, SB and LG units and establishments, and SB units based outside the Republic of Poland is shown in Table 2 (Groups of accounts 0–10 coverage indicated as XX or X in the table). - Due to EU reporting requirements, it is strongly advisable to standardize the structure and codification of the economic and functional segments of the SCoA using GFSM 2014/ESA 2010 classification methodology because: - these statistical classifications are comprehensive with a well-defined hierarchical structure; - they provide internationally recognized and accepted definitions of economic classification and functions of government transactions; - they facilitate standardization across all levels of government and public entities and comparability across units and internationally; - they provide flexibility to interface detailed classifiers required for management with main classifications used in SCoA. - The mission conducted a dedicated session explaining how GFS methodology for economic segments can be used to develop a SCoA that harmonizes budget, accounting and fiscal reporting classifications and presentation (see Figure 1). - Rationalization and integration of budget/accounting classifications with the economic classification will facilitate statistical reporting; if coded in accordance with GFSM/ESA coding pattern, it will enable detailed analysis of economic events (see Figure 1). - The proposed restructuring will bring together fragmented budget and accounting classifications by integrating and harmonizing with GFS/ESA economic classification; differences should be limited and documented. - Figure 2 illustrates how the new SCoA could harmonize budget classification with accounting classification and how transaction classification across seven segments can aggregate into budgetary and financial reports. ### Sequencing the SCoA Reform - To finalize the SCoA expeditiously, it is advisable to first focus on essential segments: the administrative, economic, functional, and fund classifications. - Placeholders could be set for Program, Project/Activity and Geographic segments. - Coding of Program and Project/Activity segments will need individual discussion with line ministries to ensure harmonization with performance budgeting requirements. - Development of the Geographic segment may pose challenges: - Geographic segment must ensure robust geographic data quality to accurately identify subsidies/transfers to beneficiaries in different regions. - The budget is not detailed geographically; including Geographic classification at transaction level may pose challenges. - Ex ante allocation of budget expenditure by regions could give a distorted picture of execution of regional initiatives. - Careful consideration is required whether to incorporate Geographic segment in the early phase of the project. *Source: Mission staff and MoF materials as presented in the mission report.* ### 23. The general government sector in Poland comprise the central government ### 23. The general government sector in Poland comprise the central government ### Structure of the general government sector - The general government sector in Poland comprise the central government subsector, local governments, and social security funds. - These subsectors include entities covered by the state and local government budgets, and numerous extrabudgetary units that were created as independent “legal entities.” - The state budget and local governments’ budgets have internal vertical structures with several layers of subordinated budgetary units. - High-level entities oversee collecting, aggregating, consolidating and reporting their financial positions, in line with the granularity of the CoAs and budget classifications that are currently prescribed. ### Accounting and IT systems - Entities of the general government in Poland use their own accounting systems supported by various IT systems. - The IT system used by the MoF is called the Trezor system. This system is used as a tool for collecting and reporting: - budget planning, - budget execution, and - financial statements of the budgetary units, - besides recording the state budget execution as a separate entity. - For collecting aggregate data concerning local governments, MoF established a system called BeSTi@. ### Reporting and consolidation practices - At the State level: - There is no consolidation requirement at the State level. - Entities that support budgetary parts holders (at first and second level) are required to issue consolidated financial statements covering their own financial statements and the financial statements of their subordinated entities (with the full elimination of all transactions between those entities). - This consolidation has limited coverage: it covers just the subordinated budgetary entities and not the subordinated entities with legal personality. - There is no consolidation at the level of the State budget. - It is envisaged that the requirement to issue the balance sheet on budget execution will be introduced as from 2021. - At the level of local governments: - Consolidation requirements are more advanced. - All local governments are required to issue: - a financial statement including a balance sheet of the local budget execution and financial statements of all local budgetary entities; and - a consolidated balance sheet that additionally includes other entities subordinated to the local government (including legal persons e.g., companies, museums, hospitals or libraries). - The consolidated balance sheet involves elimination of intra-group transactions and full coverage but does not include other elements of the consolidated financial statement. ### Developing a Standard Chart of Accounts (SCoA) and consolidation automation - The development of a SCoA provides opportunities for automating some consolidation processes or ensuring data availability for consolidation. - The consolidation process broadly involves two stages: - Elimination of intra-entity transactions of the controlled entities. - Aggregation of the financial statements of controlled entities by the reporting entity after elimination of the intra-entity transactions. - The elimination process involves two steps: - Identification of the counterparties of the intra-entity transactions. - Application of predefined accounting rules for elimination of different categories of transactions. ### Challenges in identifying counterparties for elimination - Identifying counterparties for purposes of elimination can pose challenges in Poland’s highly decentralized government system. - Possible counterparty identifier options discussed: - Use the unique code already assigned to organizational entities of the general government sector. - Investigate whether the standard codes allotted to public entities in the National Official Business Register, maintained by the Statistics Poland, could be used as the counterparty code. - Investigate whether the tax identification code of the public entity could be used as the counterparty code. - Choice depends on whether the construction of these codes allows differentiation between various types of public entities and other private sector entities. ### Accounting rules for elimination - Accounting entries for transaction elimination depend on the economic nature of the transaction. - Elimination of intra-government transactions related to cash flows may involve different processes from those required to eliminate assets acquired by one government entity from another. - These rules can be standardized using the economic category of the transaction and included in the process flows of the application software used by the controlled entity and the individual reporting entities. - Consolidation rules should be prescribed by the MoF and concurrence of reporting entities should be obtained whenever the process flows are modified in the controlled entities. ### Recommendations (excerpted) - Increase the effectiveness of the accounting User Survey Questionnaire by: - considering incorporating the proposed amendments of the mission in a final version of the questionnaire; - ensuring that the SCoA survey respondents are made fully aware of the purpose of the survey and the implications of their responses on the reforms. - Standardize the coverage of the Administrative (organization) segment across various reports and ensure consistency with regional and international standards for identifying the various sectors of the general government and public sectors. In standardization consider carefully: - the boundaries of individual reporting entities in accordance with accountability and responsibility; and - the need to consolidate in line with regional and international fiscal reporting requirements. - Standardize the Economic and Functional segment of the SCoA and codify using the classification methodology presented in the GFS/ESA expanded for country specific needs. Such standardization should: - bring together the fragmented budget and accounting classifications of the economic category of expenditures; and - initially focus on the codification of main segments of the SCoA in order to be able to finalize the SCoA expeditiously. - Issue the final version of the SCoA in the form of an accounting manual/guidelines for reference and capacity building. - Include in the accounting rules and guidelines for implementing the new SCoA provisions for consolidation of reporting entities using appropriate counterpart identifiers. ### Developing the Medium-Term Budget (MTBF) — background and progress - Background: - The Polish authorities committed to extend the horizon of policy making into the medium term as a key instrument for achieving medium-term objectives set out in the Convergence program. - The MoF first pronounced plans on moving towards a MTBF in 2016. - The Minister of Finance reinforced commitment in early 2019 and spoke about the multi-annual budget framework—from the concept to implementation. - A working group within the BSR project is dedicated to developing the multi-year perspective on budgeting. - FAD technical assistance progress: - Two FAD capacity development missions in 2017 contributed to developing the MTBF: - Initial technical exercise to prepare the first round of forward estimates for selected ministries followed the FAD TA mission in March 2017. - Follow-up mission in November 2017 reviewed progress and offered guidance. - Regulatory and procedural changes: - MoF Regulation of January 28, 2019 incorporated the medium-term (three years) perspective in the budget submission forms. - Key elements of the no-policy change scenario were defined, including applying respective indexation rules to spending forecasts and deductions of one-off expenditures. - From 2020, additional changes to the budgetary calendar were envisaged to better integrate MYSFP and budget act preparation. - The January 2019 regulation aimed at linking multi-annual and annual planning processes and improving the quality of budget forecasts to lead to implementation of the multi-year budget framework. ### MTBF conceptual decisions and implementation approach - Preliminary decisions made by the MTBF working group include: - The MTB will cover three-year period, i.e., the forthcoming budget year and the two outer years. - Spending ceilings for the outer years will be informative for the first years of implementation of the MTB, but may shift to hard ceilings at later stages. - The coverage of MTB will be, to the extent possible, aligned with the coverage of the Budget Act and SER, with certain entities/funds covered for information only. - MTB will be presented as an annex to the Budget Act. - MTB will be prepared within the annual budget process and subject to consultations with the Social Dialogue Council together with draft Budget Act. - Introduction of MTB should be accompanied by provisions supporting prioritization of expenditures according to strategic objectives and public policy directions. - MoF intends to issue: - initial amounts (for first year) as well as starting amounts (for outer years) for individual budget parts in the early stage of MTBF implementation. - These amounts will be subject to a final decision of CoM while adopting the draft budget act. - Starting amounts are to be the basis for initial amounts in the next planning cycle. - MoF is considering imposing single ceilings to line ministries for state budget expenditures and other sources of funding. This single ceiling will include budgetary part, respective special purpose funds, voivodship budget funds, contingency reserves, etc. ### Operational guidance and capacity-building needs - The mission recommends MoF strengthen engagement with line ministries and entities during this learning phase. - Line ministries need more guidance by MoF in calculating bottom-up estimates: - Detailed guidance on how to prepare non-policy change estimates, which indexation rules to apply and what are considered one-off expenditures is key to ensure comparable baselines. - Close collaboration will allow MoF to leverage sector-specific visions and technical capacity and organize a feedback loop for timely course corrections. - Building a shared understanding and stronger relationships will help improve the overall design of the MTBF. ### Planning and forecasting instruments with multi-annual perspective - Existing multi-annual planning vehicles: - Multi-Year State Financial Plan (MYSFP). - Multi-Year Financial Forecasts (MYFF) of Local Governments. - Certain annexes to the Budget Act present information on outer budget years (for example, concerning the European Funds Budget). - MYSFP: - MYSFP is included in the Convergence Program. - MYSFP defines key objectives of social and economic policy, planned measures and their impact on revenues and expenditures of general government, including long-term stability of public finances, and preliminary amount of expenditures derived from SER. - MYSFP constitutes the basis for preparing the draft Budget Act. - Until recently MYSFP was largely disconnected from the budget preparation process; line ministries and other state budgetary holders prepared their spending forecasts for the MYSFP on a more aggregated level than the budget classifications or CoAs in use. - While MoF provided macroeconomic assumptions, there were no underlying policies or central guidance issued on how to prepare these forecasts. *Source: IMF mission chapter text.* ### 41. The MYFF of Local Governments are presented together with the draft budgets and ### 1polea2019008 - 41. The MYFF of Local Governments are presented together with the draft budgets and ### Local Governments: MYFF, reporting and oversight - The MYFF of Local Governments are presented together with the draft budgets and incorporate the budget year and forecasts of at least three outer years. - Local Governments generally use macroeconomic forecasts prepared by the Macroeconomic Policy Department of the MoF. - The MoF specifies the required formats for reporting the MYFF, Annual Budget Plan, execution and other reporting. - Financial management of Local Governments is overseen by the Regional Accounting Chambers (RACs). - RACs are functionally independent public entities supervised (on the basis of legality) by the Ministry of Internal Affairs and Administration. - The arrangement may help achieve certain uniformity of LGs budget planning and forecasting procedures and practices, even though LGs are responsible for developing their own methodological guidelines. ### Public Service Monitoring System (PSMS) - Ministry of Internal Affairs and Administration, Statistics Poland and Local Governments plan to introduce a Public Service Monitoring System (PSMS) to help plan and allocate resources more efficiently in the medium term. - PSMS functionality: - Calculate costs of municipal services, based on quantity, quality, geographic accessibility, economic accessibility and financial cost/benefit analysis. - Distinguish between infrastructure costs and service costs, including maintenance costs related to various activities. ### European Funds Budget (EFB): medium-term arrangements - The EFB comprises revenue and refundable expenditure for implementation of programs financed with European funds (excluding technical assistance programs and certain specific types of funds). - The EFB is presented separately from the State budget to accommodate more flexible management arrangements within a multi-year horizon of operational programs and to meet specific monitoring requirements to ensure a neutral impact on the deficit of the General Government sector. - While the EFB does not contribute to the deficit, co-financing from the Polish sources is considered in State budget deficit calculation. - Four managing authorities for the EFB: - Ministry of Investment and Development - Ministry of Maritime Authority and Inland Navigation - Ministry of Agriculture - Ministry of Family, Labor and Social Policy - Strategic and operational planning: - The underlying strategic directions document is “Programming of the 2014–20 financial perspective—Partnership Agreement” approved for seven years. - Managing authorities prepare operational program documents with seven-years span including objective, targets and indicators as well as financing schedule; forecasts are prepared on a program level with a breakdown between capital and current spending. - A specific annex to Budget Act provides a breakdown of state budget revenues and state budget expenditures concerning each operational program financed with European funds. ### Linkages between Multi-Year Forecasts (MTBF) and Annual Budget - Medium-term forecasting processes were largely independent from the annual budget planning until recent changes in Budget regulation. - Problems identified: - Multi-year forecasts and annual budget plans were prepared on different levels of aggregation. - Underlying source data for individual entities have high levels of fragmentation. - Difficult to bridge forecasts to respective line items in the annual budget and to assess quality of forecasts against budgeted and actual amounts. - Experience from other countries: - Countries with the most developed MTBFs, where the MTB is fully integrated with the budget process, have shown larger impact on policy prioritization. - Countries with separate or differently organized processes have shown very limited impact. - Key elements to transform budget decision making: - Introduction of several strategic decision points in the budget process (ensuring fiscal space and robust prioritization). - Setting of expenditure ceilings early in the process. - Mission support: - Supports initial efforts oriented towards full integration of the MTBF and Budget planning process. - Initial goal: have a well-developed set of expenditure forward estimates to guide internal budget decision making ultimately leading to binding forecasts. ### Adjustment to Baseline to Comply with top-down Hard-Budget Ceilings - Main challenge: accommodating baseline spending forecast for outer years as well as annual budget bids within the top-down hard ceilings. - Top-down constraints stem from fiscal consolidation efforts and Poland’s medium-term objective—to contain general government structural deficit to 1 percent of GDP. - Poland’s commitment toward the medium-term objectives is presented in the Convergence Program. Box: Commitment Toward the MTO in Convergence Program - Poland is subject to requirements of the preventive arm of the Stability and Growth Pact. - Poland has defined its MTO as a general government structural balance of minus 1 percent of GDP. - Assessment of compliance is based on: - structural effort (change in the structural balance) - expenditure benchmark ### Stabilizing Expenditure Rule (SER) and expenditure ceiling mechanics - Poland developed a national Stabilizing Expenditure Rule (SER) in line with the Expenditure Benchmark Rules of the preventive arm of the Stability and Growth Pact of the EU. - The SER was introduced in 2013 and became effective in 2015. - The expenditure benchmark contains the net growth rate of government spending at or below a country’s medium-term potential economic growth rate, depending on the country’s position in relation to its MTO. - Coverage and calculation: - The SER covers expenditure for the general government sector net of expenditure financed with EU funds or incurred by entities whose budgets are not able to generate significant deficits and is estimated to cover around 90 percent of general government expenditures. - In the SER the overall fiscal space is calculated as follows: the total SER spending from the previous year is adjusted for recent GDP growth rates, inflation target of the central bank, and an adjustment for the fiscal impact of policy measures adopted that can increase revenue by more than 0.03 percent of GDP; the amount is further corrected if: (i) debt and deficit levels are exceeding thresholds as specified in the Public Finance Act; or (ii) the fiscal balance deviates from the MTO. - Correction mechanisms incorporate countercyclical policy elements; different rules apply for good and for bad economic conditions. - Decomposition and implications: - The general government expenditure ceiling capped by the SER is further decomposed between state budget and non-state budget. - Non-state budget expenditures are largely exogenous and include entities with discretionary rights to prepare their budgets in line with the Public Finance Act. - Expenditure amounts of these entities are subtracted from the overall expenditure estimate based on no-policy change scenario; the residual amount must absorb the full burden of top-down constraints. - The residual amount after all adjustments and deductions is the fiscal space available for the rest of the State Budget. - The state budget limit is the absorber of the full burden of top-down constraints and is subject to further constraints from standing expenditure commitments such as defense (2 percent of GDP) and Health Services (6 percent of GDP). - The discretionary portion left for the rest of the State Budget entities as a ceiling is very limited against the spending needs of these entities. Box: Groups of Entities/Funds Covered by SER - First group (deducted from amount of expenditures): bodies, entities and funds with discretionary budgetary powers or budgets that shall be balanced in medium to long-term, including: - Local governments - the National Health Fund - entities with ultimate discretion to plan their budget spending (PFA Article 139, such as Chancellery of the President) - Bank Guarantee Fund - financing of one-off measures - Second group (extrabudgetary type of funds): include: - The Social Security Fund and Bridging Retirement Pension Fund - The Social Security Fund for Farmers - Funds administrated by the National Economy Bank (including Road Fund, Railway Fund, etc.) - The Labor Fund - Specific accounts set up in accordance with the Public Finance Act provisions ### Expenditure rigidities and constraints on MTBF effectiveness - Two pressing issues contributing to top-down budget constraints stemming from the SER: - The budget process is fragmented into separate budgets for social security and other special purpose funds, and other entities. - Extensive earmarking and standing expenditure commitments (e.g., certain percentages of GDP) make it difficult for the government to enforce multi-year expenditure limits. - These expenditure rigidities reduce scope for absorbing new policies through reallocation, increasing pressure to expand the total expenditure envelope. ### MoF guidance, coverage and institutional framework for MTBF - Need for MoF guidelines to steer toward the principle of unity in medium-term forecasting and budget processes so decisions with direct or indirect impact on expenditure are taken within medium-term estimate and budget processes. - A MTBF is not only multi-year projections but an institutional framework that instills discipline and transparency in fiscal policy and budget planning. - Preliminary MoF decision: - The MTB will, to the extent possible, be aligned with the coverage of the Budget Act and SER, with certain extrabudgetary entities or funds covered for information only. - For information only, forecasts should become forecasts for decision making once the reform matures. - Coverage should be extended to entities that do not fall within the SER, but to all spending that has budgetary implications. ### Options to address top-down constraints and earmarking - Increase the discretionary portion (left for the rest of the state budget) of the spending limits. - Present legal framework allows government entities to establish new entity special purpose funds or special accounts with earmarked revenues, which diminish the state budget limit managed by the MoF. - The Act on Public Finance defines several types of entities with different financial management arrangements and specifies sources of financing; types described include: - i) Budgetary units without legal personality that transfer collected revenues to the revenue account of the state or respective local government budget and cover their expenditures directly from the budget. - ii) Executive agencies and legal persons (budget institutions with legal personality attained upon entry to the court register) entitled to spend revenues generated by conducting specific activities. - iii) State Special Purpose funds (bank accounts with public funds being the main source of financing). - Major institutions receiving earmarked revenues include the National Health Fund, the National Road Fund and the Railway Fund. - Most Government targeted funds and programs set up accounts in the National Economy Bank (Bank Gospodarstwa Krajowego) which is a state development bank. - The issue of expanding discretionary space can be addressed as a cross cutting issue among different directions and working groups of the BSR. ### Prior FAD mission and recommendations - The FAD mission in February 2017 provided advice and recommendations on developing a realistic and credible MTBF. - Recommendations covered technical aspects of preparing forward estimates and discussed multi-year prioritization, control and accountability mechanisms as key to achieving compliance with top-down hard ceilings. - The mission reiterated recommendations to design multi-year commitment prioritization, and control and accountability mechanisms; the current mission concurs with those findings. ### Recommendations (selected) - Strengthen engagement with line ministries and entities at the stage of conceptual thinking on MTBF: - More guidance from the MoF to line ministries and other entities in calculating their bottom-up estimates. - Engage experts from the line ministries and build shared understanding of the overall design of the MTBF. - Define the scope of the MTBF to cover all the entities, funds and accounts that have budgetary impact: - Develop consistent entity classifications for MTBF, budget, accounting and fiscal reports. - Entities and extra-budgetary funds that will be covered only for information purposes at the initial stage should become forecasts for decision making once the reform matures. ### Project management: SCoA development and IMF FAD support - Development of the structure and content of a SCoA is a main objective of the BSR of the Polish government. - A FAD project agreement supports placement of a resident advisor in Warsaw to support the MoF; the FAD project will extend over a period of 18-months and advise on development of detailed classifications for a new SCoA for implementation in later stages. - The IMF project is financially supported by the European Union Structural Reform Support Services (SRSS). - FAD project activities include: - (i) determine and agree the segments of the SCoA structure and the coding system; - (ii) develop and agree the detailed list of classifications for use in the SCoA. - Governance and structure: - MoF established governance arrangement and administrative structures for the BSR. - Tasks divided between two projects: - BSR Phase I (BSR I) covering issues in “Assumptions for Budget System Reform,” including budgetary classification and MTBF. - Public accounting reform Phase I (PAR I) covering specific public accounting issues, such as financial reporting or economic segment of SCoA. - A Steering Committee has been set up to sponsor and oversee the BSR I project; similar arrangements adopted within PAR I. - Project leaders and project teams appointed and commenced activities. - Working Groups (WGs) dedicated to different topics, with a joint WG covering SCoA and budgetary classifications. - High-level plan for BSR has a multi-year perspective with detailed deliverables and timelines; stakeholders inside MoF included, but mission emphasized expanding participation to local governments, other budgetary entities, the statistics agency and the central bank. ### Resident advisor workplan and milestones (Table 3) - Activity completion dates: - Onboarding of Resident Advisor May 2019 - Determination of segments and coding structure September 30, 2019 - Seek agreement on concept design of SCoA October 31, 2019 - Detailed classification of the SCoA April 1, 2020 - Contingency period June 30, 2020 - Finalize June 30, 2020 - Project completion: - Plan envisages completion of the IMF project by June 30, 2020 in line with agreement with the SRSS and provides for a contingency period of 60 days in the planning. - One reason for contingency is potential delays due to elections scheduled for October. *Source: 1polea2019008 - chapter text (as provided).* ### 59. As indicated in the November 2017 report, change management is a critical aspect ### 1polea2019008 - 59. As indicated in the November 2017 report, change management is a critical aspect ### Change-management context and implications - The implementation of the new SCoA will have far reaching implications at all stages of the PFM cycle from transaction reporting to budgetary and financial reporting. - The reform will impinge on the standard operating procedures across the public sector comprising more than 50,000 institutions. - Given the extensive scale of the reform, it would be prudent to ensure the buy in of the main stakeholders at the conceptual stage of the project. ### Stakeholder engagement and timing - Agreement in the MoF on all issues will not be reached for some time, but there are many areas where line ministry input will be very useful. - Even where line ministry views cannot be taken on board in design, inclusion in thought processes helps them better understand the reasons for the reform. - Meaningful and early engagement is a good investment in wider ownership of the reforms and increases its chance of success. ### Use of survey data and risk-targeted outreach - The information compiled from the accounting user survey will provide the project team an indication of the capacity of various public entities to undertake the reform. - The BSR team should develop a risk matrix of stakeholders and conduct road shows and video conferencing on the proposed reforms, particularly for those entities perceived to be the riskiest for the project. - Road shows should be supplemented with periodic bulletins on the status of the reforms to keep stakeholders informed of timelines and progress and to assist them to sequence their own PFM reform initiatives in tandem with the SCoA reform. - Many stakeholders will likely need to upgrade their IT environment to leverage benefits from the new SCoA; timely information about BSR progress will help stakeholders plan IT upgrades accordingly. ### Collaboration and working-group support - The change management strategy should include the implementation of a formal collaboration arrangement to ensure timely exchange of ideas between members of the working groups (WGs). - WG members will be required to perform their own duties in addition to participating in WGs; ensuring attendance at meetings may be challenging. - A formal collaboration environment will provide opportunities for teleconferencing and for online exchange of documents such as meeting agendas and recorded minutes, and a forum for exchanging ideas and seeking clarifications. - The authorities could set up a collaborative environment for facilitating project management, using IT products such as Microsoft SharePoint. ### Documentation, manuals, and capacity building - Manuals and other user reference materials are very useful change management and capacity building tools. - The final version of the SCoA should be issued in the form of an accounting manual for reference and capacity building. - By the end of Phase 1, the WG should develop a SCoA manual describing: - (i) the purpose and scope of the SCoA; - (ii) the enabling legal provisions for implementing the SCoA; - (iii) the definition and purpose of each segment of the SCoA; - (iv) the principles for coding the SCoA segments; - (v) the layouts of all the financial statement and other fiscal reporting documents; - (vi) a summary table of the various accounting entries resulting from the use of the SCoA; and - (vii) the purpose, format and disposition of all the reports produced using the data elements of the SCoA. ### Recommendations (C) - Develop a change management strategy to inform and promote buy-in from all the stakeholders at each phase of the BSR. This objective can be attained by: - Conducting road shows and video conferencing on the proposed reforms; - Set up a collaborative IT working environment for facilitating project management; and - Develop and issue the final version of the SCoA with an accounting manual and other training/promotional material for reference and capacity building. ### Annex I: User Survey Questionnaire (contents summary) - Identification information and entity contact details. - Accounting systems: particulars, technology, vendor, maintenance, costs, upgrades, architecture, database, licensing. - Coverage and functionality: parent ministry use, subordinate entities, number of users, supported functionalities (e.g., general ledger, reporting, sales, purchase, VAT, fixed assets, settlements, payments, wages). - Chart of Accounts: current structure, segments and digits, hierarchical definitions, electronic file of codes and descriptions, portability and expandability (ability to change number of segments and characters, maximums), support for event-driven recording, attachment of performance (non-financial) information, interface for additional classifiers. - Reporting requirements: accounting/reporting standards, extraction of cash-based data if accruals used, differentiation between indirect and direct costs for performance budgeting. - Characteristics of reports: opinions on layouts, report aims, estimated data redundancy. - Statutory reporting: data elements by periodicity, statutory reports not standard-generated, submission format (paper/electronic), direct access by parent ministry/MoF, support for consolidated and individual reporting. - Managerial reports: data elements and periodicity, data flow diagrams, use of business intelligence tools such as data warehousing and data mining for performance reporting. *Fiscal Affairs Department, International Monetary Fund — 700 19th Street NW, Washington, DC 20431, USA, http://www.imf.org/capacitydevelopment* --- _Source: https://www.imf.org/-/media/files/publications/cr/2019/1polea2019008.pdf_