Treasury

September 17, 2013

FOTEGAL: Sharing Experiences of Treasury Management in Latin America

Posted by Israel Fainboim

Latin American budget officials are members of an association (Asociacion Internacional de Presupuesto Público—ASIP) which delivers an annual international seminar and regional seminars and publishes its own journal. Recently, the countries of the region together with two multilateral donors (the Inter American Development Bank and the World Bank) joined forces with the Fiscal Affairs Department (FAD) of the IMF to set up a similar organization for state treasurers.

That is how the Government Treasury Forum of Latin American (FOTEGAL) was born in 2010. The organization was formalized in a document named the Lima Declaration and through the approval of its own statutes. A total of 16 countries are currently members of FOTEGAL (Argentina, Bolivia, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, and Uruguay) and an invitation has been extended to Brazil to join (this country has participated in several of the annual seminars). The Government of Japan (JSA) has also been a key financial supporter of the activities of FOTEGAL. In addition, the IDB is supporting the development of FOTEGAL’s website. A link to this network and many of the documents and presentations made for FOTEGAL already exists within the website of one of the government treasuries, and a separate web page is under construction.

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June 07, 2013

Treasury Community of Practice Debates Internal Control Issues in Kiev

Posted by Mark Silins

The Treasury Community of Practice (TCOP) of PEMPAL[1] conducted a highly participative three-day workshop entitled “Internal Control and the Role of a Modern Treasury” from April 24–26, 2013.  Over 60 officials, including treasury managers and specialists from 18 TCOP-member countries, as well as representatives of the Ministries of Finance of the Netherlands and Ireland, took part in the workshop held in Kiev, Ukraine. The workshop was also supported by experts from the World Bank, OECD, and the Slovenian Centre of Excellence in Finance.

The general objective of the Kiev event was to provide an opportunity for TCOP members to exchange experiences and take stock of the steps taken to date in implementing internal controls in each country and what, if any, steps remained. The workshop discussed both the role of a treasury in terms of managing internal controls within its own operations along with the broader role of the treasury as a key player within the overall public internal control framework in government. Prior to the workshop, participant countries responded to a 40-question survey to ascertain the status of their internal controls in relation to both of these two roles. Responses to the surveys proved extremely useful in designing an agenda relevant to participating countries.

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April 05, 2013

Turkey’s Successful Modernization of Treasury Operations

 Posted by Yasemin Hurcan[1]

Turkey book
In ten years that followed the 2001 economic crisis in the country, Turkey managed to halve its debt to GDP ratio. As a result, Turkey was selected as a benchmark country for debt reduction in the World Bank’s 2012 report “Golden Growth: Restoring the Lustre of the European Economic Model”. A recently published book[2] entitled “Treasury Operations in Turkey and Contemporary Sovereign Treasury Management” discusses how the Turkish Treasury managed to decrease its debt by, amongst other things, restructuring the Treasury’s operations and management. The publication is available as an e-book.

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February 08, 2013

New FAD Technical Note and Manual: Cash Management and the Relationship Between Treasury and Central Bank

Posted by Renaud Duplay

Cash management is one of the main issues when reforming PFM systems in developing countries. Bad cash management is costly because it hampers budget execution, causes arrears and increases funding costs. For this reason the Fiscal Affairs Department (FAD) has already released two Technical Notes and Manuals (TNMs) on this subject and is now releasing further guidance material. A new TNM, prepared by Mario Pessoa and Mike Williams, expands the review of cash management issues by specifically addressing the relationship between the treasury and the central bank.  

The note was prepared at the request of the Latin American Treasurers' Forum (FOTEGAL) and addresses both institutional and technical issues and is particularly relevant to developing countries. Based on international experience, the TNM describes the modern framework of a formalized relationship between both institutions standing on two key principles:

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September 14, 2012

Recent Meetings of the PEMPAL Network in Europe and Central Asia

Posted by Deanna Aubrey, PEMPAL PFM Adviser

The three ‘communities of practice’ of budget, treasury, and internal audit of the Public Expenditure Management Peer Assisted Learning (PEMPAL) network had a series of meetings in the first six months of 2012. PEMPAL covers up to 22 governments in the Europe and Central Asia region and brings practitioners together regularly to discuss common priority issues in PFM reform. PEMPAL is supported by the World Bank, Switzerland’s State Secretariat for Economic Affairs (SECO), the Russian Federation, and OECD SIGMA.

Members of Treasury Community of Practice (TCoP) gathered in Tbilisi, Georgia from February 27-29. Treasury experts from 10 countries met to learn more about Georgia’s PFM reforms implemented by the State Treasury Service, who co-hosted the meeting. The workshop was an opportunity to exchange experiences in modernizing national treasury systems particularly related to issues of integration of external financing. Participants also had the opportunity to visit the customs clearance zone of the Ministry of Finance in Lilo district in Tbilisi as an example of modernization public services through information technology. More information can be found at http://www.pempal.org/event/read/55 and in IMF’s PFM blog at http://blog-pfm.imf.org/pfmblog/2012/04/georgian-state-treasury-hosts-workshop-on-treasury-and-external-financing-reforms.html

Fifty-seven participants from Ministries of Finance from 18 ECA countries from Budget Community of Practice (BCOP) met in Bohinj, Slovenia on March 27-29 to exchange experiences in program budgeting as part of the Budget Community of Practice (BCOP) work program. Country cases of France, Australia, Poland, and Slovenia were showcased and reform progress shared by Kazakhstan, Russian Federation, Armenia, Croatia, and Bosnia and Herzegovina. Most PEMPAL member countries have implemented elements of program budgeting including defining and identifying programs, formulating program objectives, and selecting performance information. However, the quality of performance information remains generally poor, is in many cases not systematically monitored, and has limited influence on budget decision making. Countries acknowledge that the reform process is long and ongoing and are planning on exchanging information and meeting more on this topic in the future. More information can be found at http://www.pempal.org/event/read/58 and in IMF’s PFM blog at http://blog-pfm.imf.org/pfmblog/2012/05/program-budgeting-is-on-the-reform-agenda-across-europe-and-central-asia.html

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May 14, 2012

New Zealand to Legislate an Expenditure Rule

Posted by Ian Lienert

Euro-zone countries are being admonished by the EU to strengthen their fiscal frameworks, including by introducing a legislated budget balance rule in national legislation. On the other side of the globe, the New Zealand Government has announced that its fiscal framework will be strengthened, by introducing a spending fiscal rule in amended legislation. The similarity of the EU and New Zealand actions is striking, given the large differences in fiscal consolidation needs. For example, Euro area gross general government debt was nearly 90 percent of GDP in 2011, in contrast to New Zealand’s relatively low ratio of 44 percent. [1]

The New Zealand Government’s announcement was preceded by considerable analysis and strong criticism by some commentators. The Government’s advisor, the Treasury (New Zealand’s “ministry of finance”), while supporting self-imposed limits on new spending as a means of controlling growth in expenses, does not support a legislatively embedded formula-based spending limit.[2] However, because of the Government’s agreement with a minor political party there is a proposal to amend the Public Finance Act, which, if enacted, would make the new fiscal rule permanent, unless a future government initiates its repeal.

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April 20, 2012

Georgian State Treasury Hosts Workshop on Treasury and External Financing Reforms

Posted by Ion Chicu, World Bank, and David Tsekvava, Deputy Head of State Treasury, Ministry of Finance, Georgia 

A three-day PEMPAL [1] Treasury Community of Practice (TCOP) workshop was held in Tbilisi, Georgia on February 27-29, 2012 on public finance reform progress related to Treasury systems and external financing.  Fifty participants from ten countries attended (Albania, Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan and Ukraine).  Experts from the World Bank provided information on regional and international developments and technical support to the discussions.  The meeting was hosted by the State Treasury of the Ministry of Finance of Georgia who proved to be warm and wonderful hosts.

The meeting followed from an earlier meeting in Astana, Kazakhstan on September 27-29, 2011 whereby more than 80 participants from 17 countries from the Bank’s Europe and Central Asia (ECA) region met to discuss progress in implementing integrated financial management information systems across the region. Many TCOP member countries are the recipients of external financing in various forms and a need was identified for a smaller group meeting to address the issues associated with the effective management of external financing.  The practical problems faced in the process of integrating external financing into national budget systems are widely known. In many cases the challenges are related to the fiduciary requirements of the donor organizations. National systems do not always fully fit those requirements, which leads to the use of parallel mechanisms, such as those often established to implement donor-funded investment projects.  Within the framework of public financial management (PFM) reforms, and consistent with the principles espoused by the Paris Declaration of Aid Effectiveness, PEMPAL member countries have been pursuing the objective of integrating external financing into all stages of the budget process. 

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April 04, 2012

La Cuenta Única de Tesorería es una herramienta esencial para la gestión de tesorería del gobierno: Nueva nota técnica del Departamento de Finanzas Públicas

Publicado por Sailendra Pattanayak

La cuenta única de tesorería (CUT) es un prerrequisito esencial para una gestión de caja eficaz y es una herramienta clave que permite al ministerio de hacienda o de finanzas establecer la supervisión y el control centralizado de los recursos  de tesorería del gobierno. También proporciona otros beneficios y, por ende, mejora la eficacia global del sistema de gestión financiera pública (GFP). En particular, la CUT facilita una mejor coordinación fiscal, de la gestión de la deuda y de la política monetaria, así como una mejor conciliación de los datos fiscales y bancarios, lo que a su vez mejora la calidad de la información fiscal. El establecimiento de la CUT reduce considerablemente los costos del servicio de la deuda pública, las necesidades de reservas líquidas, y ayuda a maximizar el rendimiento de las inversiones del excedente de efectivo.

El Departamento de Finanzas Públicas del FMI ha publicado recientemente una nueva nota técnica de la serie Notas Técnicas y Manuales  titulada La Cuenta Única de Tesorería: Una herramienta esencial para la gestión de tesorería del gobierno. Esta nota se basa en gran medida en el anterior documento de trabajo del FMI “Treasury Single Account: Concept, Design and Implementation Issues”, preparado por Israel Fainboim y por mí,[1] y publicado en el blog PFM el 12 de julio de 2010. En la nota se examinan las principales características de la CUT, posibles estructuras alternativas de la CUT y los sistemas de procesamiento de transacciones correspondientes, así como varias cuestiones relativas al diseño y a las condiciones previas que deberían abordarse para establecer un sistema de CUT. Además, se explican los principales pasos que deberían seguirse para implementar la CUT y se proporcionan directrices prácticas sobre la contabilidad y la presentación de informes en un régimen de CUT, conciliación bancaria y acuerdos con los bancos sobre los servicios para la gestión de la CUT.

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December 05, 2011

Treasury Single Account is an Essential Tool for Government Cash Management – A New FAD Technical Note & Manual

Posted by Sailendra Pattanayak

A treasury single account (TSA) is a prerequisite for effective cash management and is a key tool for the ministry of finance/treasury to establish oversight and centralized control over government’s cash resources. It also provides a number of other benefits and thereby enhances the overall effectiveness of a public financial management (PFM) system. In particular, a TSA facilitates better fiscal, debt management, and monetary policy coordination as well as better reconciliation of fiscal and banking data, which in turn improves the quality of fiscal information. The establishment of a TSA significantly reduces the government debt servicing costs, lowers liquidity reserve needs, and helps maximize the return on investments of surplus cash.

A new Technical Note and Manual (TNM) entitled “Treasury Single Account: An Essential Tool for Government Cash Management” has recently been published by the IMF Fiscal Affairs Department (FAD). This TNM is largely based on the previous IMF working paper “Treasury Single Account: Concept, Design and Implementation Issues,” authored by Israel Fainboim and myself,[1] and published on the PFM blog on July 12, 2010. The TNM discusses the main features of a TSA, alternative TSA structures and associated transaction processing systems, and various design issues and preconditions that need to be addressed for setting up a TSA system. In addition, it explains the key sequential steps for implementing a TSA and provides practical tips on accounting and reporting under a TSA regime, bank reconciliation, and service level agreements with banks for TSA operation.

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October 31, 2011

PEMPAL Treasury Community of Practice Workshop on Use of Information Technologies in Treasury Systems

Posted by Deanna Aubrey, PEMPAL Community Facilitator

On September 27-29, 2011, PEMPAL[1] Treasury Community of Practice (TCOP) held a workshop in Astana, Kazakhstan. Astana provided a spectacular backdrop for the meeting with the modern capital, only established some 14 years ago, preparing for events to celebrate Kazakhstan’s 20 years of independence.

Most countries participating in the TCOP from the Europe and Central Asia (ECA) region are in the process of modernizing or developing their Treasury information systems and many of them are either considering or already moving towards expanding system functionality and creating integrated Financial Management Information Systems (FMIS).  Given the importance of this theme to TCOP PEMPAL members, PEMPAL already organized previous meetings, including on the use of digital signatures in treasury operations, and more are planned for the future. The Astana meeting focused on the development and application of FMIS solutions, as well as the effective utilization of such web-based platforms for the public financial management needs of decentralized budget institutions and their spending units, in support of various reforms such as improvements in accounting and reporting and strengthening internal control frameworks.

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August 10, 2011

Cash Management: More Than Just Public Financial Management

Posted by Greg Horman

The overriding objective of cash management is to ensure that the government is able to fund its expenditure in a timely manner and meet its obligations as they fall due. Cost-effectiveness, risk reduction, and operational efficiency are also important. Cash management is a critical, albeit not so visible, dimension of effective public financial management, with important linkages to monetary policy implementation. More precisely, cash management encompasses two distinct but related activities: cash flow forecasting and cash balance management. The former is concerned with these questions: (i) Over a given time period (daily, weekly, monthly, and so on), what is the volume of the government’s aggregate cash inflows and outflows? (ii) At the end of each time period, what is the balance of cash at hand? The latter is concerned with this question: (iii) What actions does the government take to ensure that it has the “correct” amount of cash at hand at any point? This posting highlights some of the issues related to managing cash balances, which is not very well covered in the public financial management literature.

Changes in the daily cash balance of the treasury single account (TSA), domiciled at the central bank, are mirrored by changes in banking sector liquidity. Indeed, they may be the most significant autonomous influence on liquidity. The central bank takes these changes into account in its monetary policy operations. Effective cash management is characterized by agreement between the ministry of finance and the central bank on the flow of information from the ministry of finance to the central bank on the likely future size of the TSA. Ideally, this should be provided in real time, or at least before the start of each day. Insofar as the ministry of finance can manage its cash flows reasonably tightly around a target balance for the TSA, the government’s cash balance becomes largely neutral for monetary policy purposes.

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June 14, 2011

Discussions of PEM PAL Treasury Community of Practice on Public Sector Accounting and Reporting Reforms

Posted by Anila Çili (Director, Central Harmonization Department on Financial Management & Control
Ministry of Finance, Albania) and Deanna Aubrey (Budget, Treasury and Internal Audit Community Facilitator, PEM PAL CEF Secretariat, Center of Excellence in Finance, Slovenia)

From 18-22 April 2011, 41 participants from Ministries of Finance and Treasuries from 15 European and Central Asian countries[1] met in Ljubljana, Slovenia to discuss public sector accounting and reporting reforms as part of the ongoing network activities under the Public Expenditure Management Peer Assisted Learning Program (PEM PAL) program.[2]  This program has 21 member countries from across the Europe and Central Asia (ECA) region who regularly meet in ‘communities of practice' to discuss reform issues in the areas of budget, treasury and internal audit (www.pempal.org). The event was also linked to a conference on international trends in public sector accounting reforms organized by the Center of Excellence in Finance, Ljubljana Slovenia held on 20-22 April.[3] The conference involved discussions on the increased role of accounting in the public sector, especially in the post financial crisis era, its evolution in the recent years and the lessons learned.

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June 06, 2011

How Exceptional Expenditure Procedures Interfere with Good Governance in Francophone Africa

Prepared by Jean Pierre Nguenang

In francophone countries, two types of public expenditure execution procedures exist: normal procedures (subject to ordinary law) and waiver (or exceptional) procedures. The second differs from the former in that they are far less stringent. Spending, managed through the normal procedure, involves two major phases: the administrative phase and the accounting phase. The administrative phase comprises three successive expenditure execution stages: commitment, verification, authorization. The accounting phase deals with payments and bookkeeping. There are multiple waiver procedures that can derogate from normal procedures. These are discussed below in some detail. While the original rationale for such exceptional procedures may have been understandable – accelerating emergency expenditure – the practice has long become one of bypassing appropriate checks and balances. The practice undermines budget credibility and fiscal discipline, leads to misreporting of government expenditure, and provides scope for misappropriation and, in the worst case, misuse of government resources.  

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March 28, 2011

2nd Annual Regional Seminar of the Latin American Treasurers Held in Mexico City (March 16-18, 2011)

Posted by Israel Fainboim

An initiative launched by the Fiscal Affairs Department (FAD) of the IMF two years ago and supported by the Inter American Development Bank and the World Bank, to create a forum for the Latin American Treasurers to discuss treasury management issues on a regular basis, organize an annual seminar, and create a web page for exchanging ideas and materials, has been a success.

In April 2010 the Peruvian Treasury, under the direction of Mr. Carlos Diaz, did an excellent job in hosting the first seminar on treasury management. The 2010 seminar discussed cash planning, cash balance targeting, the adoption of a treasury single account (TSA), and the use of information systems for treasury and cash management. During that seminar the treasurers agreed to get organized, to propose an action plan, and to develop a web page. These and other objectives were included in a document signed by all of them, which was called the “Lima Declaration.”

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March 03, 2011

Le compte unique du Trésor : une idée révolutionnaire…en 1806!

Billet de Franck Bessette        

Si le concept de Trésor public a vu le jour en France au XIIIème siècle, en ce sens que les fonds publics ont été séparés de la caisse personnelle du roi, la monarchie française a continué à recourir à des comptes distincts pour divers usages. Le concept du Compte unique du Trésor (CUT) a été le produit des difficultés qu’ont éprouvées pendant de longues années les divers gouvernements révolutionnaires qui se sont succédé après 1789 pour satisfaire leurs besoins de liquidités. Pendant l’essentiel de la période révolutionnaire, ce sont des banquiers privés («faiseurs de services»), dont certains se chargeaient de collecter les impôts, qui avançaient à l’État les liquidités nécessaires, mais à un coût très élevé. L’institution du Compte unique du Trésor a été l’aboutissement d’un long processus qui s’est accompli pour l’essentiel au cours de la première moitié du XIXème siècle. Il serait difficile de faire ici l’historique détaillé des réformes du système du Trésor en France au cours de cette période, mais on peut distinguer trois grandes étapes.

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February 16, 2011

Treasury Single Account: A Revolutionary Idea…in 1806!

Posted by Franck Bessette        

While the concept of a State Treasury (le Trésor in French) was created in France in the XIIIth century in the sense that public monies were at that time separated from the king’s personal cash-box, the French monarchy still used separate bank accounts for various purposes. The concept of the Treasury Single Account (TSA) in France was the result of the long struggle of the various revolutionary governments after 1789 to meet their cash needs. During most of the revolutionary period, private bankers, some of them in charge of collecting taxes, were providing central government with the necessary cash but at a very high cost. The creation of a TSA in France was a gradual process, mostly accomplished during the first half of the XIXth century. It would be difficult here to give a detailed account of the reforms of the Treasury system in France during this period but this post would like to briefly underline the three major steps of this process.

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September 15, 2010

Now that’s Fiscal Policy, Mate!

Posted by Jason Harris[1]

Australia has one of the strongest fiscal positions in the developed world, with the budget projected to return to surplus in 2012, and net debt projected to peak at 6% of GDP. [2] The relative consensus between the main political parties on the long-standing medium-term fiscal strategy has played a key role in delivering these outcomes. The strong starting position ahead of the global fiscal crisis has given Australia the flexibility to engage in relatively aggressive stimulus policies, without endangering long-term sustainability.

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June 09, 2010

UK Public Finances Opened Up to Scrutiny

Posted by Suzanne Flynn 

Last week, for the first time, the UK Treasury released the Combined On-line Information System—known as COINS—covering millions of individual lines of public sector expenditure. It is one of a raft of Whitehall databases to be made public as part of the new coalition government's commitment to greater openness (salaries of top civil servants earning over £150,000 is another). Naturally, the British press has leapt on some key data from the database: a headline in at least two broadsheets proclaimed that during the past year the (old) government spent 1.8 billion pounds on consultants alone. Easy to criticize the spending, but the detail does not tell us what those consultancy contracts achieved.
 
The Treasury press notice hailed it as ''the most detailed UK public expenditure data ever released''. However, it also suggested it would be of more interest to ''institutions and experts'' than the ordinary public as the material was ''complex'' and was being released ''in its raw form, requiring technical expertise to process''. My experience confirmed this, I failed to download the main data files (only the adjustment files which then had to be uploaded into MS Access to be meaningful), it seems the main file is too large for my PC to cope with, once downloaded the files are in access of 500Mb. The Treasury has helpfully provided a 31 page guidance note and a promise that more directly useful and accessible datasets that draw on the contents of the COINS databases will be available from August this year. Already software companies have developed solutions to enable easy access and data manipulation.

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April 21, 2010

State Treasurers of the World Unite!

Posted by Holger van Eden 

Last week the Peruvian government hosted a well-attended seminar in Lima on Treasury Management in Latin America (program attached below). The seminar was co-organized and supported by the IMF, the World Bank, and the Inter-American Development Bank. More than 17 countries participated. There were presentations from the international organizations on various aspects of treasury management, and from State Treasurers on ongoing reforms in their countries. The seminar was opened by the Peruvian Finance Minister Mercedes Araoz. At the end of the seminar, the participants decided to set up an international professional association for State Treasurers to enhance exchange of expertise and experiences. For further information interested parties can access the seminar webpage. The international organizations indicated their support for the initiative through a joint statement presented by Fiscal Affairs Department senior advisor, Ms. Adrienne Cheasty (joint statement attached below). A yearly international seminar on aspects of treasury management is foreseen. Mexico volunteered to host next year’s event.[1]

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January 13, 2010

Government Payroll Management: Removing the Ghosts in the Databases

Posted by Franck Bessette 

The wage bill is usually one of the biggest items of government expenditure and susceptible to weak control, misappropriation, and even corruption. From an expenditure policy perspective, the political economy of wage bill management often creates inflexibility because of pay increases linked to the electoral cycle, political preferences for wage scale compression, political or electoral based hiring, or the role of trade unions which favor seniority based promotions and management through the number of positions. This policy issue nevertheless requires a proper understanding of public financial management perspectives and the use of appropriate tools for budgeting and controlling personnel expenditures.

This post, based on a small sample of countries, looks at some PFM instruments and their linkage to personnel management issues.

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