Article 1. Article 2. Terms used in this Regulation have the following meanings:

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1 On the basis of Article 46 and 59 of the Law of the Budgets in the Federation of Bosnia and Herzegovina ("Official Gazette of the F BiH", no. 20/98), the Government of the Federation of Bosnia and Herzegovina, is e n a c t i n g a: R E G U L A T I O N regarding the system of the general treasury ledger, the manner of maintaining the single treasury account and the operations of the treasury I GENERAL PROVISIONS 1. General provisions Article 1 This Regulation regulates the General Treasury Ledger System, collection and payment of public money through the single treasury account, the control and management of public expenditures and the functioning of the single treasury account. This Regulation also regulates the manner of work of the treasury as the basic organizational unit within the Federal Ministry of Finance (hereafter: Federal ministry), as well as within the ministries of finance of the cantons, in the area of budget execution planning for the budget of the Federation, as well as the cantons, maintaining the accounting, internal control of the budget, cash management and maintaining the single Treasury account, repayments of debt, issuing guarantees, issuance of new debt and management of unused funds, in accordance to delegated authorizations. This Regulation is the basis for the systematic and information development of the treasury operations, and foremost the management of public money and public debt, as well as operations in regards to the execution of the budget and sub-systems of treasury activities. 2. Definitions Article 2 Terms used in this Regulation have the following meanings: a) Treasury represents the basic organizational unit within the ministries of finance of the Federation and cantons in which the activities relating to budget execution planning of the budget of the Federation, as well as cantons, budget control, cash management and maintaining the single Treasury account, debt, guarantee and loan management, and accounting in accordance to delegated authorizations, are all executed in accordance to law, this Regulation and other regulations. 09/24/04 10:34 AM Treasury Regulation - Bosnia

2 b) Budget represents a legal act of the Federation and cantons whereby an estimate is given as the amount of revenues, receipts, and the determined amount of expenditures and other payments for a period of one fiscal year. The annual Budget shall determine the upper limit of the total debt, which itself includes the amount of existing debt, and new debt for that budget year. The annual Budget also determines the total guarantee amount. c) Cash Transactions -- cash transactions, in the sense of this Regulation, represent salary payments, compensation payments, travel advances, material costs payable only in cash, as well as other payments to third parties made in cash. d) Internal control represents a system of regulating and checking procedures and responsibilities that are implemented over the financial, material and accounting operations of the budget institutions, i.e. represents an organized system of regulated procedures and responsibilities according to which liabilities are incurred, assets are managed, cash payments are made and similar, to ensure that the opportunities for fraud or misfeasance are minimized. e) Treasury General Ledger -- represents a systematic record of transactions and business events relating to revenues, receipts, expenditures and other payments, as well as the state of the assets, liabilities and equity, that occur during a fiscal year or up to a certain period, that relate to the budget. It provides information on transactions and business events in accordance to the regulated Chart of accounts and classifications. The General Treasury Ledger, together with the Treasury Single Account, represents the basic system for public expenditure management. f) Single Treasury Account represents one or more bank accounts that are used for the receiving, keeping, paying and transfer of all revenues, receipts, expenditures and other payments of the budgets in the Federation. The Single Treasury Account can have more than one sub-account. g) Budget Institutions are considered ministries, managements and others whose salaries and other expenditures are planned in the budget, and that are marked in the budget as a chapter. h) Consolidated Annual Budget Account the consolidation of the annual accounts is the procedure of developing accounting statements of the same type that include the primary financial statements of the budget. During consolidation the relations, on the basis of credits and loans, revenues and expenditures and permanent assets, between the entities that are being consolidated are eliminated. i) Issuance of New Debt represents the completion of all necessary procedures, including negotiation of the terms, preparation of documents and receipt of all required approvals and due execution sufficient to create a new and enforceable obligation between a borrower and a lender, as in accordance to legal regulations for this area. 2

3 j) Debt Forecasting -- represents an estimated amount of total debt over the next fiscal year, and following years, based upon the total amount of debt currently outstanding, the dynamics for repayment of existing debt and the total amount of debt projected to be issued during the following periods. k) The Law regarding the Budgets (hereinafter referred to as: the Law) has been issued in the "Official Gazette of the F BiH", no. 20/98 and regulates the following arrangements: the preparation, enactment and execution of the Budget of the Federation of Bosnia and Herzegovina; the budgets of cantons, cities, and municipalities; and the financial plans of the extra-budgetary funds; the loans and debt and the accounting and control of the Budget. II GENERAL TREASURY LEDGER SYSTEM Article 3 The General Treasury Ledger System is based on the accounting basis of modified accrual, as is in accordance to Article 21 of the Regulation regarding the accounting of the budget ("Official Gazette of the F BiH", no. 47/98) (hereinafter: the Accounting Regulation). In this System each budget institution has its account in the general ledger that is opened in accordance to the register from Article 6 of the Law. The General Treasury Ledger System provides for recording transactions and business events, i.e. revenues and expenditures, as well as the state and changes in assets, liabilities and sources of equity, in accordance to the chart of accounts and on the levels of the regulated classifications (organizational, functional, economic and fund) The Federal Ministry, i.e. ministries of finance of cantons, manages, through the treasury, the General Treasury Ledger System. The General Treasury Ledger System consolidates the general ledgers of the budget institutions for all sources of revenues and expenditures. According to this principle all financial transactions that relate to the Budget will be recorded through the System, including transactions that relate to debt and programs financed by foreign or domestic aid. The budget institutions are obliged to maintain the general ledger for all transactions and events that relate to that budget institution is in accordance to the provisions of the Accounting regulation. The transactions and events in the general ledger of the budget institution must at every moment be in accordance to the content and amounts of transactions and events of the General Treasury Ledger System. The ministry that is in the budget responsible for a budget institution is obliged to ensure that the transactions and events recorded in the general ledger of the budget institution be timely reconciled to the content and amounts of transactions and events of the General Treasury Ledger System. 3

4 III FUNCTIONING OF THE SINGLE TREASURY ACCOUNT 1. Establishment of the Single Treasury Account Article 4 In accordance to this Regulation the Federal Ministry, i.e. the ministries of finance of the cantons, shall establish a Treasury Single Account (hereinafter: the STA). All cash resources of the Budget shall be deposited in the STA. This includes all resources of the Budget as defined in Article 9 of the Budget Law. Aside from these revenues, revenues of budget institutions, from Article 14, paragraph 2 of this Law, can also be deposited and kept on the STA, in accordance to special instructions regarding the manner of paying and spending regulated by the Minister of Finance of the Federation, i.e. cantons (hereinafter: the Minister of Finance) and at the proposal of the budget institution. The Minister of Finance shall have the power to authorize sub-accounts and supplementary accounts to be opened that are an integral part of the STA. The Minister of Finance regulates in detail the manner of operating through these accounts. The Minister of Finance has the exclusive responsibility to, through the Treasury, manage the STA, including the sub-accounts and supplementary accounts. The Treasury may invest any amounts held in the STA not immediately needed for budget proposes in accordance with the provision of Article 13 of the Law. Such investments can only be made with institutions that must meet obligatory deposit insurance. All interest earned from investments from the previous paragraph shall be deposited to the STA. 2. Banking Relations Article 5 The Minister of Finance shall have the sole authority to open and control one or more bank accounts necessary or appropriate for the STA. To open and control a bank account, the Minister of Finance shall conclude a contract that specifies the services provided by the bank, including the reports and deadlines for submitting such reports. This contract shall determine the remuneration that will be paid to the bank for these services. The remuneration so determined will be uniformly applicable to all banks conducting transactions for the Treasury and will be in the form of a fixed amount per transaction. The Treasury must review these arrangements not less than once a year and submit to the Minister of Finance proposes for their eventual change. 4

5 3. Executing receipts and payments through the STA Article 6 The Federal ministry, i.e. the ministries of finance of the cantons, shall, through the Treasury be responsible for the management of the cash resources of the Budget. The Minister of Finance shall regulate procedures regarding the payment and receipt of funds within the country and abroad. Each amount of revenues and receipts and other amounts that belong to the Budget must be paid into the STA. The Minister of Finance regulates the manner of payment of revenues of the budget institutions defined in Article 14, paragraph 2 of the Law, at the proposal of the budget institution. Expenditures and other payments of the Budget are paid from the STA in accordance to implementation regulations regulated by the Minister of Finance. No expenditure can be paid from the STA unless approved by the Budget or other legislation. IV SUB-SYSTEMS OF TREASURY ACTIVITIES 1. The Treasury within the ministries of finance in the FBiH Article 7 The Treasury is a sector within the Federal ministry that executes the Federal budget, maintains the General Treasury Ledger and STA, executes internal control over the federal budget institutions and manages the cash and debt. The Treasury consists of a Central Office and an Office in Mostar. The Federal ministry may create other Offices outside the central location of the Ministry, as may be needed. The treasury in the cantons is the basic organizational unit within the ministries of finance of the cantons that executes the cantonal budgets, maintains the General Treasury Ledger and STA, executes internal control over the cantonal budget institutions and manages the cash and debt. 2. Financial Planning and Monitoring Article 8 The Treasury shall be responsible for preparing financial plans projecting the cash flow of funds to and from the STA. The financial plans will be used to as the basis of the cash execution of the approved Budget. 5

6 The Treasury shall obtain the necessary information from various sources to project cash flows. Sources of information shall include, but not be limited to: a. Latest position on receipts and cash payment into bank accounts, b. Forecast of all receipts into the STA obtained from the Federation Customs Administration and Federation Tax Administration, and other Ministries that generate receipts. c. Forecast of debt service payments, d. Projections of external flows of assistance and borrowing, e. Movements in key macroeconomic parameters, and f. Expenditure forecasting for the purpose of implementing government activities i.e. programs. The Treasury shall analyze this data and calculate consolidated projected inflows and outflows to and from the STA. Based on this analysis a proposal for global limits on the level of funds available for spending in the planning period. If a deficit is projected, recommendations for necessary corrective steps will be included in the financial plan. The financial plan will be submitted to the Minister of Finance for review and approval. 5. Budget Execution Article 9 The Federal Ministry, i.e. the ministries of finance of the cantons, shall be, through the Treasury, responsible for the execution of Budget approved by the Federation Parliament, i.e. cantonal assemblies. The Treasury shall perform the following functions is the area of budget execution: a. Review and approve monthly expenditure requests submitted by the Budget Institutions to ensure they do not exceed the expenditure limits expressed in the Budget. b. Execute request for payments from paragraph 1., item a. of this Article. c. Inform Budget Institutions about the status of the available of resources from the Budget by position. The Federal Ministry, i.e. ministries of finance of the cantons, shall, through the Treasury be responsible for payments of expenditures and other payments made on behalf of all Budget Institutions. In conformity with the procedures formulated by the Minister of Finance, all Budget Institutions will forward their requests for spending resources of the Budget along with necessary documents and a list of their spending priorities to the Treasury, after initially recording incurred liabilities for payment. The Treasury executes them in accordance to instructions and authorizations given by the Minister of Finance, and only in the case that there is approval for spending in accordance to the positions in the Budget. The Treasury recommends to the Minister of Finance the spending priorities during the execution based on information regarding the availability of funds, provisions of the Budget Execution Law for that year, as well as other regulations and requests. 6

7 All collected and paid revenues that belong to the Budget must be paid into the STA. In accordance to Article 28 of the Law the budget institutions are obliged to pay public money into the STA. The revenues from paragraph 4 of this Article are collected and paid in a manner and in accordance with law, this Regulation and other regulations that regulate this area. The Treasury is also responsible to track through the accounting the collection of revenues paid into the STA in accordance to paragraph 4 of this Article. The Minister of Finance regulates the manner of recording revenues of the budget institutions from Article 14, paragraph 2 of the Law. The Treasury shall monitor and regularly inform the Minister of Finance on the status of the execution of the Budget, as well as other interested parties in accordance to the reporting requirements from Article 12 of this Regulation. 6. Centralized Payroll Article 10 The Treasury shall be responsible for the management and control of a centralized payroll system. The Treasury shall perform the follow functions in the area of centralized payroll: a. Maintain up-to-date information on employees. b. Make cost projections based on salary scales, contributions and taxes for the purpose of budget execution planning, c. Execute salary, contributions and tax payments. Budget Institutions are obliged to submit to the Treasury documents certifying the establishment and extermination of work relations with its employees. These documents shall be submitted to the Treasury at least eight days after the work relations have been established or exterminated. 7. Accounting Methodology Article 11 The Federal Treasury shall be responsible to develop and maintain a Chart of Accounts and a Standard classification framework used to record and report on financial transactions and financial assets and liabilities for all levels of government. The Standard classification framework is also used in budget preparation. The Chart of Accounts shall include classifications for assets and liabilities; revenues; and expenditures. The Standard classification framework shall include the classification for organizations, classification for functions of government, classification for funds, and classification for other necessary elements. 7

8 The Treasury is also responsible for developing and maintaining a register of budget institutions, as well as a consolidated directory of suppliers of goods and services to budget institutions, for its respective level. The Treasuries of each level periodically assess the accounting methodology and recommend the necessary changes. The cantonal treasuries recommend necessary changes to the Federal Treasury, and the Federal Treasury reviews and recommends to the Minister of Finance of the Federation their adoption. The Treasury recommends to the Minister of Finance internal and external reporting requirements of the budget institutions. 8. Financial Reporting Article 12 The Treasury shall prepare, in Accordance to the provisions of the Law, the Accounting Regulation and the Rulebook on financial reporting and annual accounts (o, no. 30/99); the Consolidated Annual Budget account and submit it to the Minister of Finance for review and approval. The Treasury shall prepare monthly reports on the execution of the Budget, as well as other financial reports as needed, and submit them to the Minister of Finance for review and approval, in accordance to the Law, Accounting Regulation and the Rulebook from paragraph 1 of this Article. 9. Internal control of budget institutions Article 13 In accordance to Article 45, paragraph 1 of the Law, the budget institutions shall establish internal control as a form of financial control of all transactions that relate to the revenues, receipts, expenditures and other payments, as well as state of assets, liabilities and sources of equity. The Minister of Finance makes regulations regarding the system of internal control in accordance to Article 45, paragraph 4 of the Law. The Treasury shall ensure that the budget institutions properly implement the procedures from paragraph 2 and recommend changes to them to the Minister of Finance. 8

9 10. Repayment of Debt, Issuance of New Debt, Issuance of Guarantees and Management of Unused Funds Article 14 The Federal Treasury is obliged to implement procedures and make regular payments of revenues, intended for the external debt servicing, to the sub-account of the Federation, the Account for external debt servicing in the Central Bank, in accordance to the Provisions of the External Debt Law of the Federation of Bosnia and Herzegovina. It is obliged to regularly inform the Minister of Finance regarding the state of the sub-account. In case there are insufficient funds on the account for paying due liabilities of the Federation, the Treasury shall inform the Minister of Finance in order for measures to be taken in the aim of overcoming the current insufficiency of funds intended for the external debt servicing. The Federal Treasury is obliged to implement procedures and make payments for the entire debt of the Federation. The Federal Treasury is obliged to participate in the preparation of the following: (a) all arrangements in regards to issuance of guarantees of the Federation in accordance to the External Debt Law. (b) all credit arrangements between Bosnia and Herzegovina and foreign creditors, (c) all credit arrangements between the Federation and the State, (d) all credit arrangements between the Federation and foreign creditors, (e) all credit arrangements between the Federation and the Republika Srpska, (f) all credit arrangements between the Federation and the final beneficiaries of the credit in the Federation. The Federal Treasury is obliged to prepare all records and individual quarterly reports that relate to the debt and that include: (a) to total amount of debt outstanding, (b) due dates for all principal and interest repayments that need to be executed, (c) payments that are late, (d) unfulfilled obligations determined by the loan agreement, (e) total amount of guarantees issued by the Federation. The Federal Treasury is obliged to prepare all records and individual quarterly reports that relate to the loans given to the final beneficiaries of the credit that are of the same content as in the previous paragraph. The Treasury is obliged to develop procedures for the reporting of: the cantons, municipalities, state-owned enterprises, credit indebtedness with foreign creditors and guarantees received from banks. The Treasury shall prepare the debt forecasts. The Treasury is obliged to maintain all official registers and keep the original documentation regarding new debt. 9

10 The Treasury is obliged to record and invest unused funds for approved projects and to monitor the investments in accordance to the loan documents. The Treasury is obliged to record and track the interest earned from the funds for projects approved for the Federation. The Treasury is obliged to prepare all records that relate to the debt, and monitoring all debt activities of the Federation. This includes preparation of, and sending out all notices about payments and payment requests. The Federal Treasury is obliged to participate in all negotiations regarding issuance of new debt. The Federal Ministry of Finance shall be the sole and exclusive entity that prepares agreements regarding the issuance of new debt. The Minister of Finance of the Federation shall be authorized to sign all such agreements. No other Ministry or Budget Institution has the authority to independently incur any debt or to represent the Federation in making agreements regarding issuance of new debt or giving any other guarantees on behalf of the Federation. V TRANSITIONAL AND FINAL PROVISIONS 1. Management of giro accounts in the OOPP s Article 16 Until the STA is fully established and completely operational Budget Institutions shall keep the right to conduct certain payment transactions through their giro accounts opened in the Organizations authorized for payment transactions (hereinafter: the OOPP S). The Budget Institutions are allowed to execute only cash transactions from the accounts mentioned in paragraph 1 of this Article. The Minister of Finance shall issue instructions for executing cash transactions. Exceptionally from the provisions of paragraph 2 of this Article, the budget institutions can conduct other payments through their giro accounts in accordance to the instructions given by the Minister of Finance. This will be valid until the conditions regarding payments made on behalf of budget institutions regulated in Article 9, paragraph 3 of this Regulation are fulfilled. The budget institutions are responsible for the payments executed in paragraphs 2 and 3 of this Article. In addition to budget revenues for the purposes identified in paragraph 3, the budget institutions are allowed to receive own source revenues onto their giro accounts or bank accounts provided that the collection of these revenues are in accordance to regulations, and that their spending is properly reported on as in accordance to the Rulebook from Article 12, paragraph 2 of this Regulation. 10

11 The Minister of Finance shall be authorized to issue an order to the OOPP s for transferring funds to the STA if it is determined that surplus of revenues are being unduly kept on the accounts of the budget institutions. The STA, in the sense of this Regulation for the transition period until the STA is fully established and operational, represents all accounts on which Budget resources are deposited. 2. Operations of the budget institutions through the sub-accounts of the STA Article 17 Once the payment transactions are transferred to the commercial banks, and the giro accounts of the budget institutions have been closed and in case the conditions regarding payments made on behalf of the budget institutions regulated in Article 9, paragraph 3 of this Regulation have been fulfilled, the budget institutions may execute the payments of certain expenditures according to their budget positions through the sub-accounts of the STA, opened in accordance to Article 4 paragraph 3 of this Regulation. The manner of executing payments and the type of expenditures that can be paid from the STA sub-accounts from paragraph 1 of this Article, are regulated through instructions by the Minister of Finance in accordance to Government decisions, that are made in accordance to the Program for the gradual introduction of the General Treasury Ledger System and the Single Treasury Account that us brought in accordance to Article 58 of the Law. Article 18 The Government shall, at the proposal of the Minister of Finance, make a Program for the gradual introduction of the Treasury General Ledger System and the STA. Article 19 This Regulation shall come into affect from the day it is issued in the Official Gazette of the Federation of Bosnia and Herzegovina. 11