Sailendra yak TSA Presentation English

8/9/2019 Sailendra yak TSA Presentation English

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Establishing a Treasury

Single Account (TSA) Concept, Issues andChallenges

Sailendra Pattanayak

Fiscal Affairs DepartmentInternational Monetary Fund


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May 2010 Sailendra Pattanayak, IMF

Overview of

presentation1. Typical banking arrangements

2. TSA principles and benefits

3. Different TSA structures4. TSA coverage and interface with

transaction processing systems

5. Banking Arrangement for Donor Flows

6. Issues/Preconditions for establishing aTSA


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Typical Payment System

with Many Bank Accounts

Spending

Ministry

Bank

Accou

n ts

SU

SU

SU

SU

SU

SU

SU

SU

Ministry

of

Finance

Spending

Ministry

Spending

Ministry

SU = Spending Units

SU


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Banking Arrangements

under TSA Regime

Debt administration

Subsidies

Local governments

Suppliers

Wage earners

Daily settlement

with TSA

Current / deposit

bank account(s) of

the treasury (TSA)

Transit / zero-balance

bank accounts of the

treasury

Tax payersGovernment Borrowings


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2. TSA Principles andBenefits


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TSA Principles A TSA is a unified structure of government bankaccounts that gives a consolidated view of governmentcash resources It could be just one account or a set of linked accounts (main

and subsidiary)

All public monies are seen as fungible to preventinefficient use of cash resources

The consolidation of government cash resourcesthrough a TSA is comprehensive It covers all budgetary and extrabudgetary funds

The TSA should be legally recognized, institutionallyrobust and stable

The TSA can contain ledger sub-accounts for controland monitoring purposes, but these should not containover-night balances


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TSA Principles contd. Options for accessing the TSA is mainlydependent upon institutional structures andpayment settlement systems

The cash balance in the TSA is maintained at alevel sufficient to meet daily operationalrequirements of the government

Treasury-related revenue and disbursementfloats in the banking sector are kept at the

minimum realizable level Significant revenue and disbursement floats in the

banking sector benefit the banks at the expense ofthe government



TSA and Consolidated

Fund Concept All government revenues should accrue to a commonpool (such as the Consolidated Fund) and no source ofrevenue be earmarked for specific expenditure In general, there is no need for revenue-specific or expenditure-

specific bank accounts

Revenue and expenditure transactions should beclassified through a well-developed chart of accountsand not by maintaining distinctive bank accounts forthem

The TSA should be maintained in domestic currency, asthis parallels the currency in which most budgettransactions are executed



TSA Benefits Ensures complete, real-time information on government cashresources

Helps preparation of accurate and reliable cash flow forecasts Optimizes the cost of government operations

including minimizing the volume and cost of government borrowing andlowering liquidity reserve needs

Facilitates efficient payment mechanisms Improves operational and appropriation control during budget

execution Enhances efficiency and timeliness of bank reconciliation Facilitates timely and more complete accounting statements/reports

E.g. preparation of full statements of sources and uses of cash


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3. TSA Structure andOperation



TSA Structure Option

1

State Treasury

Head Office

StateTreasuryRegionaloffice

StateTreasuryLocal office

Central Bank

Central BankRegionalbranch

Budget unit

Payment

order

Paymentorder

Recon

c.

Settlement

Settlement

LimitedTreasurycommunication andinformationsystems




2

State TreasuryHead Office

StateTreasury

Regionaloffice

StateTreasuryLocal office

CentralBank

Paymentorder

Recon

c.

Settlement

Budget unit

Advanced

Treasurycommunication andinformationsystems(2a)


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3

Budget Unit

Commercial BankRegional Branch

Commercial BankHead Office

PaymentOrder

Very Reliable andAdvancedCommercial BankSector

Central Bank

Reconc.

Settlement

State TreasuryHead Office


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Requirements for an

efficient TSA Co-operation of the line ministries

Development of an Interbank settlement/clearingsystem

Real Time Gross Settlement System (RTGS) at thecentral bank for high value transactions

Major commercial banks and treasury connected tothe RTGS

Development of a small payments clearing system



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Different Models fortransactional banking under

TSA Use commercial bank branch networks to channel funds

to/from regional treasury offices to the TSA at centralbank (CB)

Use regional branches of the CB where a reliable

commercial branch network is not available Regional treasury offices act as banks (only

recommended where the commercial banking sector isregarded as too unstable)

Use commercial banks branch network to clear funds

directly between TSA and taxpayers/suppliers


TSA i C i l


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TSA using CommercialBanking system network and

RTOs


TSA at CB

Bank A Bank B

Branch 1 Branch 2 Branch 1 Branch 2

RTO and BIs RTO and BIs RTO and BIs RTO and BIs

Taxpayer/supplier Taxpayer/supplierTaxpayer/supplier


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Use of regional CB offices


TSA at CB

Regional CB office Regional CB Office

Bank Branch 1 Bank Branch 2 Bank Branch 3 Bank Branch 4

RTO and BIs RTO and BIs RTO and BIs RTO and BIs

Taxpayer/supplierTaxpayer/supplierTaxpayer/supplier


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Banking network (no

RTOs)


TSA at CB

Bank A Bank B

Branch 1 Branch 2 Branch 1 Branch 2

Taxpayer/supplier Taxpayer/supplier Taxpayer/supplier Taxpayer/supplier

Treasury and BIs


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Management of

Receipts Collection through commercial banks Alternatively through treasury system

Impose penalties on late remittances

Framework agreements between Ministryof Finance (MoF)/Treasury and agencybanks Standardized services and transparent fees Penalties for delays and under-performance Monitoring

Detailed information available to MoF andagencies


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Management of

Payments Agencies submit payment requests Covered from TSA after control and verification Clarify roles and responsibilities between

ministries, agencies, banks, central bank andMoF Maximize use of direct bank transfers Use checks, credit and debit cards when efficient Minimize imprest accounts and cash payments Ensure that payments are made on due date Eliminate layered cash flows


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Management of

Balances Define separate pools of funds within TSA system,for instance: Liquidity Deposit Investment

Differentiation based on liquidity needs, level ofuncertainty, costs of alternative sources, etc

Select instruments that match expected cash needs Integrated management of assets and liabilities Transparent and efficient pricing of assets,

liabilities and services


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4. TSA Coverage andInterface with TransactionProcessing Systems


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TSA Coverage Only central government

Should include extrabudgetary funds, if any

Could include autonomous government entities

Could be extended to social-security funds andother trust funds

Central and sub-national governments Either under a single TSA or separate TSAs

Public corporations are generally notincluded

Bringing social security


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Bringing social securityand other trust funds

under TSA Each Trust Fund could be distinctly identified and

controlled through the Treasury Ledger and/or TSAsub-account

The key issues are: Whether Government has the legal right to use, even

temporarily, the surplus cash available

The risk of perverse incentive to use the cash reserves ofthese funds to finance budget deficits This risk is quite high in low-income countries, particularly those

with underdeveloped PFM systems

One TSA for both central


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One TSA for both centraland sub-national

governments Could be done through the use ofcorrespondent accounts

The key issues are: Has the advantage of consolidating the surpluses

and deficits of all correspondent governmentsparticipating in the TSA system Minimizes the cost of general government borrowing

Requires well-developed Treasury Ledger System tomonitor the balances of each correspondent

Need to consider the risk of abuse by the central

government to finance its deficits at the cost of sub-national governments

Need for safeguards to ensure timely availability offunds to each correspondent government

TSA i f i h


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TSA interface withtransaction processing and

accounting systems TSA with centralized payment and accounting controls

Payment requests are prepared by individual budget agenciesand sent to a centralized Treasury for payment

Treasury manages the float of outstanding invoices Might lead to inefficiencies and high transaction costs

(particularly with manual processing)

TSA with deconcentrated payment and accountingcontrols Individual budget agencies process and make payments

directly to suppliers (and account for these transactions)

MoF sets the cash disbursement limits (monthly or quarterly)


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5. BankingArrangement for DonorFlows


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Covering donor funds

within TSA What are donor concerns? Assurance for use of donor aid on specific projects (or

non-diversion of funds) Some ring-fencing to avoid liquidity problems (and

ensure timely payments during project execution) Minimize exposure to exchange related

fluctuations/losses in the value of donor aid (whencurrency exchange rate regime is volatile)

Reliability of controls (in managing donors funds) andinformation produced by the national PFM systems


B ki t f


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Banking arrangement fordonors funds possible

options Converting donors funds into local currency on transfer to the TSA(best option)

The use of the resource-source arrangement would still allowdonor funds to be linked to specific projects

This, being a single-currency TSA, has technical andtransparency benefits

Opening separate foreign currency sub-accounts within the TSA There could be one account for each foreign currency, or one

for each of the main donor currencies The governments accounts would still be reported in local

currency, with foreign currency converted at the relevantexchange rate


B ki t f


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Banking arrangement fordonors funds possible

options Maintaining foreign currency accountsoutside the TSA, but bringing the flows withinthe accounting regime

Weakens the concept of the TSA, andrequires additional administrativeprocesses, but at least has the benefit oftracking transactions through theaccounting system



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6. Issues/Preconditions forEstablishing a TSA


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Some country-specific issues

for design of a TSA Associate a resource source (e.g. resource from adonor) with specific expenditure categories Could be done through sub-accounts of a TSA

Need for transit accounts e.g. for major revenue streams to monitor their

collection and remittance or to facilitate revenuesharing

Technical feasibility of daily settlement between thezero-balance accounts of budget agencies and theTSA

Some country specific


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Some country-specificissues for design of a TSA

contd. Appropriate interface between the TSA and transactionprocessing/accounting systems This issue should be carefully examined at the

conceptual design stage in case of an IFMIS

Identification of non-bank transactions (after closure ofagency-specific bank accounts)

Elimination of below-the-line transactions

Strategy for obtaining retail banking services fromcommercial banks, including use of e-payment/EFToptions



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Preconditions for

establishing a TSA Political support is essential (such as for closure ofagency a/cs)

Legal and regulatory requirements

TSA should be legally recognized Authority to open bank accounts should vest with

the MoF/Treasury

Technological requirements

Reach of the banking network and reportingarchitecture

Transaction clearing and inter-bank settlementsystems

Preconditions for


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Preconditions forestablishing a TSA

contd. Formalization of agreements between theTreasury, TSA Bank and Banks providing retailbanking services Should cover services offered by the banking

system, service charges/fees, penalties for non-performance, reporting and reconciliationarrangements, etc.

Revisiting the chart of accounts for coverage ofnon-bank expenditure transactions

Capacity development of TSA users



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Sailendra yak TSA Presentation English

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