Single Treasury Account

INTRODUCTION

Though Section 80 (1) of the 1999  Constitution as amended states “All revenues, or other moneys raised or received by the Federation (not being revenues or other moneys payable under this Constitution or any Act of the National Assembly into any other public fund of the Federation established for a specific purpose) shall be paid into and form one Consolidated Revenue Fund of the Federation”; successive governments have continued to operate multiple accounts for the collection and spending of government revenue in flagrant disregard to the provision of the constitution which requires that all government revenues be remitted into a single account.

DEFINITION

The single treasury account is defined as an account that all ministries and government departments’ accounts balances are collected at the central bank whereas there is an intermediate account for every ministry and department that shows the total of all debit and credit transactions. Thus, the total amount will be reflected eventually on the single treasury account at the end of the day. (Whether the type of transaction is collected or disbursed).

Adeolu (2015). Treasury Single Account is a public accounting system under which all government revenue, receipts and income and collected into one single account, usually maintained by the country’s Central Bank and all payments done through this account as well.

The purpose is primarily to ensure accountability of government revenue, enhance transparency and avoid misapplication of public funds. The maintenance of a Treasury Single Account will help to ensure proper cash management by eliminating idle funds usually left with different commercial banks and in a way enhance reconciliation of revenue collection and payment.

The Treasury Single Account has been defined as a process and tool that unifies all government accounts in a single unit for the effective management of its finances, bank and cash position.

OBJECTIVES

1.  Manage cash effectively
2. Enhance the treasury cash
3. Reduce the borrowing process
4. The optimum use of resources.

HOW TREASURY SINGLE ACCOUNT OPERATE

With particular reference to Nigeria, the Central Bank has opened a Consolidated Revenue Account to receive all government revenue and effect payments through this account. This is the Treasury Single Account. All Ministries, Departments and Agencies are expected to remit their revenue collections to this account through the individual commercial banks who act as collection agents. This means that the money deposit banks will continue to maintain revenue collection accounts for MDA’s but all monies collected by these banks will have to be remitted to the Consolidated Revenue Accounts with the CBN at the end of each banking day. In other words, MDA’s accounts with money deposit banks must be zero rized at the end every banking day by a complete remittance to the TSA of all revenues collected. The implication is that banks will no longer have access to the float provided by the accounts they maintained for the MDA’s. Difference types of account could be maintained under a TSA arrangement and these may include the TSA main account, subsidiary or sub-accounts, transaction accounts and zero balance account. Other types of accounts that could operate include imprest accounts, transit accounts and correspondence accounts. These accounts are maintained for transaction purposes for funds flowing in and out of the TSA.  

Establishment of Treasury Single Account

Establishing a TSA usually requires a legal basis to ensure its robustness and stability. Being legally recognized the following are some of the requirements needed to put in place (Simon, H. A. 1997).

1. Preparing an Inventory of Existing Bank Accounts. In countries with a fragmented government banking arrangement, the process of establishing a TSA should start with a census of all the existing bank accounts of government which should be prepared (including their nature, type, and cash balances). This would facilitate identifying bank accounts for eventual closure/merger with the TSA.
2. Political Support. Establishing a TSA can require hard decisions, such as closing the existing bank accounts of budget organizations (outside treasury control) that can provoke powerful opposition. For success, the highest levels of government must explicitly and strongly support a TSA reform. Cabinet decisions to initiate and reinforce the reforms are helpful.
3. Legal and Regulatory Requirements. The legal framework should be amended, as necessary, to allow for the establishment of the TSA. The establishment of a TSA must be accompanied by the closure of irregular bank accounts of ministries and budget units, and legal authority for opening government accounts should be vested in the MoF.
4. Technological Requirements. The technological feasibility and capacity of the banking system to participate in the operation of a TSA, and to report on TSA transactions, should be established. In fact, a decision on TSA could trigger the acquisition of necessary technology by the banking system as the banking services will be remuneration based.
5. The Existence of an Interbank Settlement System. This includes the development of a small payments clearing system, an RTGS at the central bank, and the connection of major commercial banks to the RTGS. This requirement is especially important in case of a decentralized TSA architecture. The treasury could also be connected to the RTGS.
6. Appropriate Interface Between the Treasury and the Banking Network. The interface between the treasury, line agencies and the banking network should be agreed by all the stakeholders and formalized through agreements. Such agreements should provide for the modalities of issuing payment orders/checks, and the arrangements for reporting and reconciliation. An electronic interface between the treasury and the banking network through an IFMIS would facilitate a full-scale centralized TSA. This should be addressed during the conceptual design phase of the TSA and the IFMIS.
7. A Comprehensive Chart of Accounts. With the establishment of a TSA, some information that is currently available from the banking system is likely to be lost. If such data are relevant for budget management purposes, they should be captured through the chart of accounts, which may require modification. This work should also be completed during the conceptual design phase of the TSA and the IFMIS.
8. Capacity Development of the TSA users. The prospective users of the TSA system both within the MoF/treasury and line agencies will need to be trained in the new procedures and applications. Such training should be carefully coordinated with the introduction of the TSA. A user manual on receipt and payment procedures under the TSA system should also be develop.

ACCOUNTS UNDER TREASURY SINGLE ACCOUNT

1. Treasury Single Main Account. This is the treasury’s account with the central bank, which consolidates the government’s cash position. It is the main TSA account when the TSA arrangement in a particular country consists of a set of linked accounts. Cash balances in all other linked accounts are swept into this account. In other words, all government receipts finally flow into, and all disbursements are met from, the central TSA account.
2. Treasury Single Subsidiary Accounts or Sub-accounts. These are not separate bank accounts per se (in the sense of holding individual cash balances), but are special subaccounts within the main TSA account. This is basically an accounting arrangement to group together a set of transactions and allows the government to maintain the distinct accounting identity or ledger of its budget organizations (line ministries/agencies) effectively. A cash disbursement ceiling for each entity can be enforced against these ledgers. Balances in these accounts are netted off with the TSA main account for cash management purposes.
3. Transaction accounts. Sometimes government bank accounts that are justified for retail transaction banking operations are opened separately and structured as transaction accounts. These separate transaction accounts could be opened for government entities that need transaction banking services, but do not have a direct access to the TSA main account or a subsidiary account, and/or specific category of operations (e.g., special funds). A transaction account could take the form of a zero-balance account or an imprest account.
4. Zero-balance accounts (ZBAs). Where transactional accounts are necessary, these are generally opened on a zero-balance basis, i.e., end-of-theday cash balances in these accounts are swept back into the TSA main account periodically (preferably daily). Such accounts opened in commercial banks are used for disbursements or for collection of government revenues (particularly nontax revenues). At the end of the day, all revenues collected would be deposited in the TSA. The commercial bank would honor payments of the respective agency, and would be reimbursed by the TSA overnight. ZBAs have many similarities with special credit line arrangements, where budget agencies are provided spending credits towards the amount of payments they can make within a specified period, to be reimbursed by the TSA in the central bank. A ZBA also has the benefit that it bypasses the normal interbank settlement process for each individual transaction, which is often time consuming in developing countries, and ensures same-day settlement on a net basis for all receipts and payments passing through the accounts.
5. Imprest accounts. These transaction accounts can hold cash up to a maximum authorized amount and are recouped from time to time. Such accounts might be necessary in some cases, particularly when there is only limited availability of interbank settlement facilities. However, the number of imprest accounts should be kept to a minimum and the strategy should be to progressively transform these accounts into zero
6. Transit accounts. These accounts are not meant for day-to-day transaction banking operations of government units. A transit account simply serves as a transit for eventual flow of cash into the TSA main account. Transit accounts might be necessary for major revenue streams to monitor their collection and remittance by the banking system and to facilitate revenue sharing (formula-based sharing from a common pool of resources) between tiers of government in a federal system in line with constitutional provisions.
7. Correspondent accounts. A separate ledger account is opened for each correspondent. The correspondent entity has real- time information on the balances it maintains in the TSA. There should be safeguards to ensure that each correspondent government is provided with the funds needed to implement its own budget in a timely manner. The central bank (which maintains the accounts in the TSA) has the obligation to make payments to the extent of the balances available in a correspondent’s account. (Including the required ex ante control for authorizing payments).

ADVANTAGES OF TREASURY SINGLE ACCOUNT

1. Allows complete and timely information on government cash resources. In countries with advanced payment and settlement systems and an Integrated Financial Management Information System (IFMIS) with adequate interfaces with the banking system, this information will be available in real time. As a minimum, complete updated balances should be available daily.
2. Improves appropriation control. The TSA ensures that the MoF has full control over budget allocations, and strengthens the authority of the budget appropriation. When separate bank accounts are maintained, the result is often a fragmented system, where funds provided for budgetary appropriations are augmented by additional cash resources that become available through various creative, often extra-budgetary, measures.
3. Improves operational control during budget execution. When the treasury has full information about cash resources, it can plan and implement budget execution in an efficient, transparent, and reliable manner. The existence of uncertainty regarding whether the treasury will have sufficient funds to finance programmed expenditures may lead to sub-optimal behavior by budget entities, such as exaggerating their estimates for cash needs or channeling expenditures through off-budget arrangements.
4. Enables efficient cash management. A TSA facilitates regular monitoring of government cash balances. It also enables higher quality cash outturn analysis to be undertaken (e.g., identifying causal factors of variances and distinguishing causal factors from random variations in cash balances).
5. Reduces bank fees and transaction costs. Reducing the number of bank accounts results in lower administrative cost for the government for maintaining these accounts, including the cost associated with bank reconciliation, and reduced banking fees.
6. Facilitates efficient payment mechanisms. A TSA ensures that there is no ambiguity regarding the volume or the location of the government funds, and makes it possible to monitor payment mechanisms precisely. It can result in substantially lower transaction costs because of economies of scale in processing payments. The establishment of a TSA is usually combined with elimination of the “float” in the banking and the payment systems, and the introduction of transparent fee and penalty structures for payment services. Many governments have achieved substantial reductions in their real cost of banking services by introducing a TSA.
7. Improves bank reconciliation and quality of fiscal data. A TSA allows for effective reconciliation between the government accounting systems and cash flow statements from the banking system. This reduces the risk of errors in reconciliation processes, and improves the timeliness and quality of the fiscal accounts.
8. Lowers liquidity reserve needs. A TSA reduces the volatility of cash flows through the treasury, thus allowing it to maintain a lower cash reserve/buffer to meet unexpected fiscal volatility.

DISADVANTAGES OF TREASURY SINGLE ACCOUNT

Despite the avalanches of the numerous benefits of TSA system, it should be noted that it possesses some disadvantages, mentioned as follows

1. Risk of identity theft, switching and interception of remittances and diversion via Hacking as well as other forms of on-line fraud.
2. Nigerian infrastructure deficiencies and constraints e.g. lack of adequate Computerization, wired and wireless system.
3. Insufficient cyber security measures.
4. Inadequate electricity power supply.
5.  Regional and International Terrorism.