Treasury Single Account: An Essential Tool for Government Cash Management (Spanish Edition)

Best practice is to hold book entries in a government IFMIS, although it is possible to adopt a system whereby TSA subaccounts within the same bank function as book entries. Timely revenue and payment transactions: Government resources should be placed into the TSA immediately after being collected and disbursements made only when expenditures are justified.

This is referred to in the literature as minimizing the float; in other words, reducing the time it takes to receive and make payments, which is an opportunity cost for the government.

Finally, it is essential to establish a solid legal base for the adoption of a TSA. Its coverage and granting authority to the treasury should be defined to enable the opening and closing of bank accounts. Although the concept of cash unity and a TSA had existed for a long time, it was boosted in the s with the advent of information and communications technology ICT , which has led to the development of new tools to record and manage government cash flows and balances. The technological change has also eliminated processes that previously were carried out only through ledger records and procedures over a wide range of bank accounts, distributed throughout various offices in different localities.

Likewise, ICT has facilitated automated recording and reconciliation, as well as strengthened the control of cash flows and balances. Despite sharing the same objective, there are significant differences in the TSA conceptual models that have been adopted in each country in Latin America.

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The following definition of a TSA is an initial reference point: These elements of the conceptual design are examined below for the different countries of the region. The examination starts with an analysis of the legal basis for the TSA, as it usually determines key features of the conceptual design, and is followed by an analysis of the aspects described in the previous paragraph.

As with all public actions, managing the resources of a government should be supported by appropriate legislation in compliance with the principle of legality. This chapter examines the nature of the rules that establish the TSA, its institutional coverage, the competencies or power assigned usually to the treasury for authorizing the opening and closing of bank accounts, and the choice of bank that will operate as general cashier, where the resources to be managed will be concentrated.

The higher the hierarchy of the law that creates the TSA, the more stable its legal support will be. It will also be more difficult to make exceptions that may weaken the operation of a TSA and reduce its benefits. Costa Rica, Ecuador, and El Salvador allow for a TSA within their respective constitutions, while in Bolivia, its legal support is provided by a supreme decree of the executive power Decreto Supremo del Ejecutivo. In 11 countries, the law that creates a TSA is an organic or special law, which is a better option compared to an ordinary law, because its higher rank requires a qualified majority in congress to be amended.

If countries with higher-ranking laws were added to those that have a constitutionally established TSA, the number of countries with a strong legal framework would increase to This highlights the high level of legal standing of the TSA within the region. The law in place in both countries established, in general terms, the principle of a TSA, although it has not been more extensively developed. The explicit granting of power to authorize the opening or closing of bank accounts is essential to prevent cash resources being managed outside of the TSA in bank accounts that are not approved by the national treasury.

In 4 countries Argentina, Bolivia, Chile, Ecuador , this power is granted to the national treasury through executive decree Decreto Ejecutivo and, as in Panama, by a law that gives power to the comptroller general for those institutions that are not included in the TSA and to the national treasury for those institutions that are. Placing the TSA in the central bank has advantages and disadvantages Table 4.

Introduction

The advantages include the elimination or substantial reduction of credit or counterparty risk and the prevention of moral hazard—risks that could be significant if the TSA were to be held at a commercial bank. The central bank, therefore, is a much safer haven for government deposits than a commercial bank. No public commercial bank is placed in an advantageous situation with respect to the rest of the commercial banks. The effort and the costs of controlling liquidity in this case become the responsibility of the treasury or the Ministry of Finance.

Facilitates cost-effective banking arrangements and rapid settlements. Agreement can be reached for the central bank to act as a clearing house for government operations, which can speed up settlements. Risk of the central bank failing to remunerate the TSA cash balance or setting lower-than-market interest rates lower than those offered by commercial banks.

This disadvantage could be reduced, however, if cash is managed actively by maintaining minimum and stable balances at the central bank and investing excess cash in the commercial banks. In this case, the cost and the effort to control liquidity will fall to the central bank. In most countries 13 in the region, the law assigns the bank general cashier 13 that consolidates TSA resources.

In 11 countries, it is assigned to the central bank. Interestingly, in two of three economies in the region that are fully dollarized Ecuador and El Salvador the central bank has reserve functions and acts as a general cashier for TSA resources.

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In six countries, the law requires a public commercial bank to fill the role of general cashier Argentina, 14 Chile, the Dominican Republic, Panama, 15 Peru, 16 Uruguay. In all countries included in this study, the regulations permit a commercial bank to act as collector and disburser of funds, but the level of services provided to the treasury varies considerably between countries, as described below. Most commonly, the arrangements are incorporated into either the general regulations of the law that establishes the TSA, the regulations governing the treasury subsystem, or the technical rules of the treasury subsystem.

Irrespective of the type of legal instrument, it is crucial that a clear and complete set of regulations is established and complemented by procedures that explicitly stipulate the functioning of the TSA. The classification proposed by Fainboim and Pattanayak includes three different account structures:.

The TSA is composed of a single account, generally held at the central bank. Either way, the relevant transactions are accounted for and managed through a well-developed accounting system that identifies the ownership of resources by way of subaccounts or book-entry accounts, acting as substitute bank accounts.

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The money is transferred usually, at the beginning or end of each day into these accounts as and when approved payments are made, and the general cashier bank holding the TSA provides the consolidated cash position at the end of each day. This structure enables funds to be consolidated through procedures known as cash pooling services. This combines the features of the above two structures. The consolidation of resources is complemented by payment accounts that decentralize the payment process within regional management units or treasuries. In each case, the balances within the banking system are also swept into the TSA at the end of the day.

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Taking these concepts as references, it becomes clear that the mixed structure model predominates in eight countries, which is explained by the use of collection and payment accounts although, in some cases, these are zero-balance accounts. Nearly all of these countries claim that the mixed model accounts operate as temporary mechanisms, until such time when more efficient collection and payments processes are available.

In five countries Bolivia, Chile, El Salvador, Guatemala, Mexico , the model adopted is decentralized, and in four countries Brazil, Ecuador, Honduras, Nicaragua , it is centralized, although in the latter two countries there are certain exceptions. The replacement of bank accounts by ledgers and book entries in the IFMIS and by zero-balance accounts remains a pending task in many countries. In seven countries, more than 1, bank accounts are still held at commercial banks Figure 4.

In Bolivia, for example, the number of mixed fiscal, payment, and collection accounts held at private banks is as high as 6, Bolivia holds fiscal accounts at its central bank. Would you like to tell us about a lower price? This technical note and manual addresses the following main issues: Discusses the problems of fragmented government banking arrangements and how a treasury single account TSA could address them. Explains the concept of a TSA and describes its features.

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Discusses the design issues that need to be considered in setting up a TSA system. Discusses the preconditions and key sequencing and implementation issues that need to be addressed in establishing a TSA. Read more Read less. Kindle Cloud Reader Read instantly in your browser. Product details File Size: March 29, Sold by: Not Enabled Screen Reader: Enabled Amazon Best Sellers Rank: Share your thoughts with other customers.

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