Methodological description1
on reconciliation of budgetary source data and ESA figures

(10 February 2014)

Requirements for publication

Article 3 of the COUNCIL DIRECTIVE 2011/85/EU of 8 November 2011 on requirements for budgetary frameworks of the Member States identifies the following publication requirements:

„Article 3
1. As concerns national systems of public accounting, Member States shall have in place public accounting systems comprehensively and consistently covering all sub-sectors of general government and containing the information needed to generate accrual data with a view to preparing data based on the ESA 95 standard2 . Those public accounting systems shall be subject to internal control and independent audits.

2. Member States shall ensure timely and regular public availability of fiscal data for all sub-sectors of general government as defined by Regulation (EC) No 2223/96. In particular Member States shall publish:

(a) cash-based fiscal data (or the equivalent figure from public accounting if cash-based data are not available) at the following frequencies:
- monthly for central government, state government and social security sub-sectors, before the end of the following month, and
- quarterly, for the local government sub-sector, before the end of the following quarter;

(b) a detailed reconciliation table showing the methodology of transition between cash-based data (or the equivalent figures from public accounting if cash-based data are not available) and data based on the ESA 95 standard."

This description and the attached methodological reconciliation tables provide the documents required by the above-quoted Article 3 (2) point b).
Government Decree 368 of 2011 (31 December) on implementation the Act on Public Finances in its Annex 8 points 23-28 adopts this publication requirements in he Hungarian regulation.

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1 The description includes [explanatory notes within squared brackets] compared to the Hungarian version.

2 European System of Accounts (ESA), methodology of the macroeconomic statistics of the European Union

Data sources

Budgetary units form the central and the local level of the legal government sector [e.g. the budgetary sector] identified by the Hungarian Act on Public Finances. The central level of budgetary sector consist of the Central Budget (central budgetary institutions, centrally managed appropriations [the core government unit], chapter-managed appropriations [programs, earmarked line-items], Budgetary Funds and Social Security Funds that are integral part of the National Budget. Implementation of the National Budget (the budget of the central level of budgetary sector approved by the Parliament) has been organised via treasury system. As the concept of the Hungarian budgeting follows the cash-based principles, all cash transactions are recorded in the Hungarian State Treasury (hereinafter: Treasury) by using cash transaction coding for economic classification. Units of the central level of budgetary sector also maintain own accounting, in which the cash transactions are accounted parallel with the Treasury, having infra-annual and annual reconciliation with the Treasury. In several cases behind the net cash movement the transactions are recorded on gross bases; supplementary payment orders [for grossing up] are used for it resulting infra-annual data on gross bases [reflecting the real transactions]. The cash transaction coding system were more aggregated than in the unit-level accounting system up to 2013, but identical from 2014.

The local level of budgetary sector covers the local governments, local and nationwide minority governments and all their budgetary units. These units use the uniform budgetary sector accounting system, including the classification of the budgetary cash transactions; and make quarterly reports on budgetary appropriations and actual data on implementation of their budget. The reports are submitted to the Treasury, data procession and checking is made by the Treasury.

Concerning the infra-annual data sources the non-budgetary units that are statistically classified in the general government sector [ESA S.13 General government] form two groups having or having no infra-annual reporting obligations. The regular reporters are either the reclassified public corporations whose ownership rights are exercised by Magyar Nemzeti Vagyonkezelő Zrt. (Hungarian National Asset Management Inc.) and Magyar Fejlesztési Bank (Hungarian Development Bank Plc.), or the media corporations and Media Support and Asset Management Fund, and Pension Reform and Debt Reduction Fund [these funds are non-budgetary public funds]. The data sources of these units are: profit and loss statements and balance sheets on quarterly basis; and from 2014 the cash-flow statements have to be reported on monthly basis, although the cash-flow statements are not used for compilation quarterly government sector national accounts. Quarterly and annual ESA figures are based on profit and loss statements, balance sheets and statistical surveys.
The other group of the non-budgetary units classified as government units consists of big number of smaller non-profit corporations or non-profit institutions controlled by central or local government units. The infra-annual data for these units are estimations based on the latest actual annual data. The actual annual data are collected via statistical surveys; they are checked and processed by the Central Statistical Office.

For all units of the government sector [either budgetary or non-budgetary] Gross capital formation data are collected via statistical surveys. The statistical data replaces budgetary data for budgetary units.

Main groups of source data, data process and data flow of compilation government finance statistics (GFS) and key actors are presented in a Flow-Chart.

Methodology

The budgetary source data of the central and local subsector of the budgetary sector are recorded on cash basis. The Hungarian concept of budgetary accounting includes public policy type lending transactions (lending and repayable transfers on the expenditure side and repayment on the revenue side). The methodological bridge between the elements of the budgetary statements of the central subsector and ESA'95 statistical categories are presented in a methodological reconciliation table. The national list of taxes and social security contributions and their correspondence to ESA'95 statistical categories are presented in a TAX table.

Public corporations classified in the government sector, including non-profit corporations follow international form accounting and reporting obligations laid by the Hungarian Act on Accounting [general business accounting].
Non-profit institutions classified in the government sector also follow the general accounting rules with some simplified accounting and reporting rules.
All these two groups of the units produce profit and loss statement and balance sheet data.

Estimations

Infra-annual data of smaller non-budgetary units classified in the government sector (that are not obliged for regular infra-annual reporting) are estimations based on time-equivalent of the latest available annual actual data with the necessary adjustments caused by organizational changes (liquidation, integration/merge, transformation).

Data revision

In the central subsector of the budgetary sector the revision of budgetary cash data is made at the time and in manner of recognition the need for correction.
In the local subsector of the budgetary sector the revision of quarterly budgetary cash data is made by encored data procession.
Data revision process is under development in connection with the new budgetary accounting rules introduced in 2014 and enlargement of control function of the Treasury.

Methodological reconciliation between the two - budgetary and ESA -datasets

Concerning the statistical central government:

a) The starting point is the cash balance of revenues and expenditures of the Central Budget;
b) the necessary methodological adjustments secure to meet the statistical compliance, the cases of grossing up or imputations (benefits in kind, imputed social security type employer's benefits), the cases of netting (VAT-accounting, calculation of net acquisition of assets by decreasing the figures of the acquisition by figures of receipts from sale of non-financial assets, exclusion of budgetary cash inflows and outflows related to the transfer of EU-funds received by non-government final beneficiaries), consolidation corrections;
c) the following financial flows of the budgetary figures have to be excluded from the balance: public policy lending and repayable transfers, equity transactions if they meet the ESA methodological criteria of being financial transactions, advance payments and other financial transactions (e.g. exclusion of foreign exchange holding gains or losses);
d) time adjustments have to made to get accruals for taxes, social security contributions and similar revenues, compensation of employees, acquisition of fixed assets, purchase of goods and services, interest receivable and payable, subsidies and some transfers;
e) some non-cash transactions have to be included in the balance, such as debt assumptions, claim cancellations, financial leasing and other special cases (e.g. court decisions´);
f) the institutional coverage have to be expanded to include non-budgetary units that meet the statistical criteria of being central government unit in ESA-term; and profit and loss statement data of them have to be converted to statistical category with the necessary corrections (e.g. exclusion of holding gains/losses, consolidation corrections).

Concerning the statistical local government:

a) The starting point is the cash balance of revenues and expenditures of the local governments and their units;
b) the necessary methodological adjustments secure to meet the statistical compliance, the cases of grossing up or imputations (benefits in kind, imputed social security type employer's benefits), the cases of netting (VAT-accounting, calculation of net acquisition of assets by decreasing the figures of the acquisition by figures of receipts from sale of non-financial assets, exclusion of budgetary cash inflows and outflows related to the transfer of EU-funds received by non-government final beneficiaries), consolidation corrections;
c) the following financial flows of the budgetary figures have to be excluded from the balance: public policy lending and repayable transfers, equity transactions if they meet the ESA methodological criteria of being financial transactions, advance payments and other financial transactions (e.g. exclusion of foreign exchange holding gains or losses);
d) time adjustments have to made to get accruals for taxes, social security contributions and similar revenues, compensation of employees, acquisition of fixed assets, purchase of goods and services, interest receivable and payable, subsidies and some transfers;
e) some non-cash transactions have to be included in the balance, such as debt assumptions, claim cancellations, financial leasing and other special cases (e.g. court decisions´);
f) the figures of revenues, expenditures and balance of budgetary funds have to be added after having the above-mentioned methodological adjustments;
g) the institutional coverage have to be expanded to include non-budgetary units that meet the statistical criteria of being central government unit in ESA-term; and profit and loss statement data of them have to be converted to statistical category with the necessary corrections (e.g. exclusion of holding gains/losses, consolidation corrections).

Concerning the statistical social security subsector:

a) The starting point is the cash balance of revenues and expenditures of the social security funds and their budgetary units;
b) the necessary methodological adjustments secure to meet the statistical compliance, the cases of grossing up or imputations (benefits in kind, imputed social security type employer's benefits), the cases of netting (VAT-accounting, calculation of net acquisition of assets by decreasing the figures of the acquisition by figures of receipts from sale of non-financial assets, exclusion of budgetary cash inflows and outflows related to the transfer of EU-funds received by non-government final beneficiaries), consolidation corrections;
c) the following financial flows of the budgetary figures have to be excluded from the balance: public policy lending and repayable transfers, equity transactions if they meet the ESA methodological criteria of being financial transactions, advance payments and other financial transactions (e.g. exclusion of foreign exchange holding gains or losses);
d) time adjustments have to made to get accruals for taxes, social security contributions and similar revenues, compensation of employees, acquisition of fixed assets, purchase of goods and services, interest receivable and payable, subsidies and some transfers;
e) some non-cash transactions have to be included in the balance, such as debt assumptions, claim cancellations, financial leasing and other special cases (e.g. court decisions´);
f) the figures of revenues, expenditures and balance of budgetary funds have to be added after having the above-mentioned methodological adjustments;
g) currently there is no non-budgetary unit that have to be classified additionally in the social security subsector, such kind of adjustments is made for expanding the institutional coverage.

Publication format for monthly and quarterly data

Publication format is to be fixed at a later stage of data procession with respect to the new budgetary accounting introduced in 1 of January 2014 and underlying developments in the treasury information system.