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September 30, 2011

Experience Sharing Conference on “Better Cash Management Through Treasury Single Account”, Kathmandu

Posted by Udaya Pant, FAD Resident Advisor in Nepal

Nepal organized a 2 day experience sharing workshop on cash management practices in the South Asia Region. The workshop was organized under the aegis of the Association of Government Accounts Organizations of Asia (AGAOA).[1]  Inaugurating the conference, the finance minister of Nepal suggested exploring possibilities for setting up a regional PFM capacity building and training facility for the region, and networking of the national PFM institutions. Speaking at the occasion, the chief secretary and the finance secretary supported the idea and emphasized the need for such regional cooperation initiatives and experience sharing.

The business session started with Nepal presenting its experience of implementing a treasury single account (TSA). The benefits, challenges, and the lessons learnt from this ongoing task were highlighted. India presented their ambitious initiative on ‘just-in-time’ cash release to subnational governments and grass root level implementing agencies. In India, central ministries release developmental grants under social and infrastructure sector plan schemes to the state and local governments. Funds are released through two routes: (i) to the state governments for further transfers to district/village level implementing agencies (multi-tier transfers), and (ii) directly to the implementing agencies. The grants are tied to scheme objectives and activities, and usually require a counterpart contribution from the respective state governments. The central government transfers nearly INR 300 billion every year to the lower-level implementing agencies under its 785 plan schemes.

The Central Plan Scheme Monitoring System (CPSMS) is a web-based expenditure tracking system developed by the controller general of accounts in India for monitoring the utilization of such grants by the implementing agencies. It is designed to provide online information on release of funds by the central ministries, the expenditure incurred by the implementing agencies, and the actual cash balance available with them. As of August 2011, nearly 114,000 implementing agencies at different levels of government have been registered with CPSMS and the system has real-time information on fund availability in the bank accounts of nearly 26,000 of the registered (tier 1) agencies. CPSMS is being developed as a decision-support system for just-in-time release of lower levels of program implementation to avoid idle cash balances in the bank accounts of these agencies, and at the same time ensuring that funds are available to them when they need it. Apart from the benefits on better cash management, the system provides a reliable and accurate management information system (MIS) to central planners and state level administrations. It provides a variety of analytical reports showing sector-wise, scheme-wise, agency-wise, and geography-wise data. CPSMS is presently being run for a few flagship schemes of national interest. In the next couple of years it will be rolled out for all central schemes and programs throughout India. The system can also be used by the state governments for monitoring their programs. Once fully developed, CPSMS will provide an integrated platform for monitoring of developmental expenditure, including its outcomes, across different tiers of governance in India. It will also be interfaced with the citizens for dissemination of information to them.

Bangladesh highlighted the problem of idle cash balances under the special accounts of the externally aided projects. Bangladesh operates a TSA at Bangladesh Bank, the central bank of the country. Bangladesh Bank provides banking services to the government through its nine branches and 580 branches of its agent, Sonali Bank, a state-owned commercial bank. The Bangladesh Bank consolidates the daily transactions at these bank branches and reports the daily cash position to the government.  However, there are time lags in reporting of transaction by the agent bank. The institutional arrangement for cash and debt management operations includes a high-level cash and debt management committee (CDMS), headed by the Finance Secretary, and a technical committee to assist the CDMS. Government has a ways and means arrangement with the Bangladesh Bank to cover its day-to-day liquidity requirements. Bangladesh also brought out issues in handling the cash management through the TSA and problems being faced in respect of huge idle balances under the Special Accounts of the Foreign Aided Projects.  Cash forecasting is identified as an area for improvement. Government is undertaking measures to design computerized forecasting and cash flow systems, automating interfaces with banks, and on-line connectivity with the sub-district accounting offices.

Bhutan’s presentation outlined the structure of their cash management system. The main cash account of the government is Government Consolidated Account (GSA) at the Royal Monetary Authority (RMA), the central bank of Bhutan. Daily cash position of the government’s budgetary operations can be ascertained from this account. GSA has three central subsidiary accounts: Government Revenue Account, Government Budget Fund Account, and Non-Revenue Receipts and Deposits Account. The department of national budget also prepares expenditure forecasts.

Sri Lankan presentation described its modified TSA (MTSA). MTSA has a three-tier architecture: the Main Bank Account at the top and its electronically linked subsidiary accounts and subordinate accounts at the second and third levels respectively. The lower level accounts are maintained with two commercial banks: the Bank of Ceylon and the Peoples’ Bank. Balances in the subsidiary and subordinate accounts are transferred to the main account on a daily basis. TSA has helped the government improve its cash management, reduce overdrafts, and produce timely information through an integrated treasury management information system. Sri Lankan treasury is modernizing itself by implementing a more sophisticated and integrated software system, which will help them better manage its cash resources.

In the concluding session, CGA Bangladesh, the current AGAOA Chair, emphasized the need for experience sharing in the region and for developing standard systems and procedures for the region that can be adapted by the member countries with local modifications. The conference resolved to continue building up on such experience sharing events.

Delegates from Afghanistan, Maldives, and Pakistan could not make it to attend the conference, this time. A good number of Nepal officers dealing with PFM and treasury operations also participated in the conference, who found it very useful, innovative and interesting.

[1] Present AGAOA membership includes Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.

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The Financial Comptroller General, Nepal, Dr. Madhav Ghimire, was the chief architect of this initiative and organizing the conference. He and his colleagues did the wonderful job of hosting the conference and AGAOA interaction. A detailed post on Nepal's experience with the TSA implementation and lessons learnt was posted by me in this blog earlier.

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