Consolidating Georgia’s Treasury Single Account (TSA)
Posted by Nino Tchelishvili
Until 2015, self-governing cities and municipalities in Georgia were managing their budgets using commercial bank accounts. These arrangements were seen as a proof of the independence of these self-governing entities, which is guaranteed by law. Public Law Entities (PLEs) founded by central or local governments, which were allowed to undertake economic activities and generate their own revenues, also held accounts in commercial banks. Consolidation of financial reports by municipalities and PLEs took place at the Treasury. However, the quality, timeliness and consistency of this information was constantly questioned. The key problem identified was the poor quality - or even absence - of financial management information systems in municipalities and most PLEs.
At the central government level, the story was very different. About a decade ago, the government established a fully-functional TSA covering all its financial operations. This system was integrated with the government’s Public Financial Management System (PFMS), which is managed by the Treasury. Since 2012, modules on budget planning, appropriation management, debt management, and human resources have been added to the PFMS. This web-based system operates through high speed internet, and can be accessed in real time even from very remote and tiny villages. The system was designed and developed within the Treasury, and new modules, functionalities, and users can be added at relatively low cost.
In these circumstances, it seemed – and has proved to be - relatively straightforward to extend the TSA to municipalities and PLEs, which represent about 15 percent of the consolidated budget. This reform, which started in early 2014, received strong support from the government. Necessary amendments to the Budget Code were tabled in Parliament and received their early approval.
Nevertheless, the reform ran into some criticism. An argument was put forward that a consolidation of the TSA was inconsistent with the organic law on self-government which guarantees the full independence of municipalities and PLEs. Other critics questioned the performance of the Treasury’s IT system and whether it could handle such a large volume of operations.
Another concern was that municipalities and PLEs would lose the interest earned on their deposits with the commercial banks while, at the same time, the banks’ liquidity would suffer without these cash balances. The TSA, however, is held at the central bank (the National Bank of Georgia, NBG), which is the government’s fiscal agent by law. The NBG and the State Treasury have a non-commercial relationship, which implies that no commission or transaction fees are charged on government operations, and no interest is paid on government deposits. Any profits or losses incurred by the NBG are recorded in the budget.
Following a discussion of this issue with municipalities and PLEs, the Treasury agreed to revise the project design and rewrite the Budget Code to allow municipalities and PLEs to make deposits in commercial banks. An important condition of this agreement was that all receipts and payments would be processed via the TSA and recorded in the PFMS, thereby preserving the integrity of the TSA system.
The reform was implemented in two phases, starting in 2015. A team of Treasury officials and IT consultants prepared the business analytics, in consultation with the municipalities and PLEs, as well as the commercial banks, and designed the specifications for the customized software modules, which included new functionalities in cash management and revenue collection.
The system upgrade was tested and was up and running a few weeks before the deadline of January 1, 2015. The reform has added about 700 new organizations and 2,000 new users to the system. In parallel, intensive training – funded by USAID and GIZ - was provided to the potential users. Formal classroom training was conducted at the Ministry of Finance’s Academy. On-the-job training sessions were conducted by Treasury and IT personnel in the field. Thematic workshops were organized for state theaters, public art schools, universities and other entities with specific functions. Video guides were prepared and uploaded on the system’s web-site, printed manuals were distributed, and hotlines were established in the Treasury.
The system was launched with no major issues. Hotfixes were dynamically issued whenever needed. Overall, it took less than two months to stabilize the system’s functioning. The volume of transactions has nearly doubled, but no additional staff have been hired by the Treasury Service. Internal reallocations of staff made it possible to handle the increased workload efficiently.
The reform makes the TSA both more efficient and more effective. Since January 2015, for example, budget execution reports on municipalities and PLEs have become available in real time on a daily, monthly and annual basis. At the same time, economies in the use of resources have also been obtained by eliminating the need to develop, maintain, support, and run separate information systems in 78 different locations.
 Deputy Head of the Treasury Service, Ministry of Finance of Georgia.
 The self-governing cities and municipalities as well as PLEs founded/controlled by central government and self-governing cities were to move to the TSA in 2015, and the PLEs founded/controlled by municipalities were to be integrated in 2016.
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