Implementation of the treasury single account: Contemporary Implications”
The adaptation of the Treasury Single Account (TSA) by the government of Ghana is another mammoth step towards sound cash management. In fact, it is refreshing that this new cash management regime will aid the central bank to address the numerous defects inherent in the existing cash management arrangements by government institutions due to fragmented banking schemes.
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Recounting the previous effort to introduce the TSA in 2007, the planned introduction was not successful as a result of the absence of a legal framework to back the policy. With the passage of the Public Financial Management Act, 2016 (Act 921) which replaces the Financial Administration Act, 2003 (Act 654), the implementation of the Treasury Single Account has been given adequate momentum.
Section 46 of the Public Financial Management Act 2016 established the Treasury Single Account as a unified structure of government bank accounts that enables the consolidation of government cash resources; and into which all government cash including moneys received by covered entities shall be deposited and from which all expenditure of government and covered entities shall be made and optimum utilisation of government cash resources.
The covered entities as stated in the act include the Executive, Legislature and Judiciary; constitutional bodies; ministries, departments, agencies and local government authorities; the public service; autonomous agencies and statutory bodies.
Working on the principle of unity of cash and unity of the treasury where the government notwithstanding its various sub units could operate a single treasury and account, the successful implementation of the Treasury Single Account system in various countries across the world including but not limited to United Kingdom, Unites States of America, France, Australia, India, Brazil and Nigeria has contributed to effective cash management in these countries.
The system can be implemented under a decentralised framework or a centralised framework but a mixture of the two is acceptable. The framework adopted by every country is dependent on the administrative structures and well as the financial administration framework in operation
Objectives of the Treasury Single Account
The primary objective for the adoption of the TSA is to ensure the effective consolidation of all government cash resources with the aim of improving control over public funds towards the improvement of efficient financial management while using the access to the cash resources to enhance monitoring.
In addition to the above, the government has to use this system to reduce the tendency of the government from borrowing at high interest rates, while there are funds sitting idle in the various accounts of the covered entities under consideration.
This is expected to reduce to total finance cost incurred by the government from borrowing from the commercial bank or through issue of treasury bills and bonds.
The TSA is also expected to lower the actual government borrowings and reduce pressure on short-term yield with the objectives of driving down treasury bill rates over the medium-term. This forms a critical component of helping to reduce the cost of borrowing and reducing borrowing in the medium to long-term
It will help the government meet various funding obligations of government entities in a timely manner as there is a greater pool of funds available to the government for their operations,as well as reduction in various transaction times required to raise the required revenue to meet particular commitments. Also, the maintenance of the Treasury Single Account is to reduce the risk of the government resorting to the Central bank for overdrafts to finance its expenditure. It is also expected to reduce the cost of building buffers for cash management purposes.
With the reduction in the tendency of government form borrowing form the financial sector, it is expected to strengthen the financial sector. The lower level of government activity is also expected to create room for the private sector to access funds within the financial sector to facilitate growth and development.
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Implementation of Treasury Single Account
Although there are several variants of the TSA structure that conform to the objectives discussed above, they can be broadly grouped into two categories: centralised and distributed TSA structures. The TSA systems established in most countries fall somewhere in between these two models and involve various types of bank accounts.
A purely centralised arrangement is one in which all revenue and expenditure transactions of the government pass through a single account generally maintained with the central bank. With this typical centralised system,the TSA is composed of a single bank account (sometimes with subsidiary ledger accounts) at the central bank which is operated either by a centralised authority (such as the treasury and its regional units) or by a number of budget institutions.
At the other extreme, a TSA could be virtually operational even though line agencies down to the lowest level in the organisational hierarchy are allowed to retain separate transaction accounts in the banking system. However, in the latter case, balances in all transaction accounts should be transferred into the TSA main account at the end of each day. Countries, such as Sweden have several linked bank accounts outside the TSA main account with their balances automatically remitted at the end of each day to the central bank.
With the implementation of the TSA in Ghana, the operating structure is tilted towards the decentralised operation of TSA and as such, will see the government of Ghana closing over 15,172 bank accounts with the Bank of Ghana and commercial banks in Ghana. In all, over GH¢5 billion is expected to be transferred from various commercial banks.
The implementation of this system is also in line with the requirement of the International Monetary Fund in the Extended Credit Facility Agreement and is expected that the TSA will be well integrated into the Ghana Integrated Financial Management Information Systems.
However, one major question is how the consolidation of cash balances through a TSA will interface with transaction processing and accounting systems, the latter being either centralised or decentralised.