Treasury Single Account: Benefits, Pitfalls

In this special report, third of five parts,  Andrew Airahuobhor, Bamidele Ogunwusi, Sola Alalabadan, Oyeniran Apata, Nkasiobi Oluikpe examines government’s implementation of the newly introduced Treasury Single Account (TSA), a centralised cash position of the treasury, where the revenues of all Ministries, Departments and Agencies (MDAs) are consolidated and all cash outflows (payment and transfers) are executed in a single account within the custody of the Central Bank of Nigeria (CBN).

Treasury Single Account: Public Financial Management reforms



The immediate past Accountant General of the Federation, Jonah Otunla, affirmed that the implementation of the Treasury Single Account (TSA) would bring about transparency, efficiently and accountability.

Otunla said: “TSA is a unified structure of government bank accounts that gives a consolidated view of government cash”.

He explained that TSA would encompass all receipts and payments of the government handled by MDAs, partially funded by the Federal Government and all government controlled Trust Funds and Social Security Funds.

According to him, TSA is part of the Public Financial Management reforms which falls under pillar 3 of the National Strategy for Public Service Reforms towards vision 20:2020.

He said that the public financial management reforms were designed to address impediments to effective and efficient cash management.

According to him, prior to TSA, Nigeria has fragmented banking arrangements for revenue and payment transactions.

“There were more than 10,000 bank accounts in multiple banks, which made it impossible to establish government consolidated cash position at any point in time. It led to pockets of idle cash balances held in MDAs’ accounts when government was out borrowing money,” he said.

Otunla said that fragmented banking also affected the government’s ability to undertake efficient cash planning and management as required by the Fiscal Responsibility Act.

He said that the government was also unable to track its expenditure in a timely manner and that the N70 billion lost in failed banks could be blamed on this.

He maintained that the TSA resolution would also allow flexibility, “currently everyone is a slave to the system, and people need to be at their desk to effect transactions”.

Otunla explained further that TSA was online and in real time, meaning that it could be done from anywhere in the world.

“Once fully operational, transactions can be completed within 30 minutes, even if the individuals responsible are scattered across the globe,” he said.

He said: “The cardinal objective of TSA is to facilitate implementation of the Federal government’s Cash Management Policy, and to achieve greater accountability for public expenditure.”

Otunla said this would ensure that sufficient cash was available as and when needed to meet commitments. He said it would control aggregate cash flow, improve the management of government domestic borrowing programme, enhance efficiency and enable investment of idle or excess cash.

Otunla said that so far the reform had instilled fiscal discipline and prudence as well as closed over 1,000 dormant or idle accounts.

“Currently with only 93 MDAs on TSA, average monthly overdrafts with the CBN fell from the overdrawn amount of N102 billion in December 2011 to N4.461 billion credit in Sept. 2012,” he said.

He said that on a recent visit, a group from the World Bank commended the system for its impact in reducing inflation.

Otunla, however, acknowledged that TSA was not without challenges.

“MDAs and commercial banks are resisting, some due to ignorance, others because previously they have been able to manipulate the system to their benefit which will not work under TSA.

“Some fear it will threaten the autonomy of certain agencies and give the accountant general power over them, this is not true. Other challenges include inadequate capacity in the form of access and ability to use the internet to do transactions,” he said.

According to him, for the system to succeed everyone has to get on board.

“The benefits of TSA implementation far outweigh the cost; all efforts should be harnessed to ensure full implementation. The government is saying that we should do this, but I am insisting that we must do this for our combined benefits and for the good of the nation,” he said.

The meeting was designed to prepare the CEOs for the imminent implementation of the Government Integrated Financial Management Information System (GIFMIS)

The Project Manager of GIFMIS, Desteo Mugabi, said that GIFMIS was the technology behind the TSA.

Mugabi said GIFMIS was not developed over night, but after extensive research and application in Abuja.

“It is live in 217 Abuja based MDAs and works very well, now the rest of the country must be added,” he said.

He said that the adoption of the system should be straightforward and the MDAs would not require anything greater than basic internet and computer skills to implement.

Mugabi warned the MDAs not to send the wrong people for training, but to choose the people who would be responsible for operating the system and their alternates otherwise problems would occur.

He also urged all of them to ensure proper data migration in order to avoid problems when GIFMIS would come alive by the end of 2014 for all MDAs.

Politicians React

Member representing Ojo constituency 1 in the Lagos State House of Assembly, Hon. Victor Akande has criticised the recent directive by President Muhammadu Buhari, ordering Ministries, Departments and Agencies (MDAs) to start paying into a Treasury Single Account (TSA) for all government revenues, incomes and other receipts.

However, Akande who is a member of the Peoples Democratic Party (PDP), said in an interview that such a move would draw the country back, adding that it would lead to bureaucratic delay in decision making.

He said: “When you say you want a better change, can we now go to the old era, where everything was crammed together. It is very wrong because you are sending us back to 30 years ago, where bureaucracy did not make things to work.

“A system where MDAs did not have a holistic account of what they have done over the years is not good enough. The President’s directive on this is in bad faith because to get some things done, you would have to go through bureaucratic processes and with this; there would not be any development.

“Where you want the CBN to manage the accounts of the MDAs is too bad, have they managed their own accounts successfully without fraud?

“Let them come and defend their own budget, they have not done that and you want to put this one on their heads again. Yet, we said we want everything to be clear. It is like joining 3, 4 or 5 ministries together, would there not be problems?” he queried.

Akande argued that the leakages that had been noticed in the management of MDAs’ accounts should not be linked into leadership problem, saying otherwise it was an inability of adequate control.

He said: “The problem is not about leadership per se, we can say it is leadership and we can say it is not leadership. All that we need to do is control, we don’t have control. We should put the control in place.”

A former President of the Finance Houses Association of Nigeria, Eddie Osarenkhoe, has said that the recent directive by President Muhammadu Buhari on the Treasury Single Account (TSA) for Ministries, Departments and Agencies (MDAs), would put a stop to mismanagement of revenue and encourage proper monitoring.

Osarenkhoe, who was a guest on Channels Television programme, over the weekend, described the adoption of the treasury single account by government MDAs, as a good development adding that the policy should be encouraged in order to have a sanitised public sector.

According to the analyst, such policy was a deliberate one meant to promote proper planning to ensure that government agencies do not have a situation where funds meant for the public would be used by individuals to enrich themselves.

He said: “You can’t talk about planning without harmonising your source of income. It is coming because our earnings from crude oil sales was reducing and the government needed to monitor all sources of revenue.

“It is normal that all incomes from all sources should be put in one account. It is an attempt to bring sanity in the system, as it will show a proper account of the earnings of every government agency.

“It is something that we should encourage, as it makes it easier to monitor revenue to ensure, accountability, transparency, liquidity and proper planning,” he stated.

Osarenkhoe, however, stressed that having a single account would make way for proper account auditing, which according to him, would enable the government to easily identify persons doing well for compensation.

Also, one of the leading advocates of a regime of Treasury Single Account, who is also the Chief Executive, Economic Associates, Dr. Ayo Teriba, said it is absolutely necessary for government to determine what comes to its coffer at every given time.

Teriba, while speaking on a Channels Television programme last week, said prior to this time, many government agencies had the autonomy to receive money on behalf of the federal government or on behalf of the federation account and they had the liberty to spend part of the revenue because they were only required to remit only a fraction of the amount that they declared.

He, however, noted that the privilege was increasingly being abused, adding that it would be beneficial to the country when all revenues accrued to the government go into one account.

Senators Applaud TSA Directive

Directives given by President Muhammadu Buhari to Federal Government Ministries, Department and Agencies (MDAs) for operation of single treasury account for remittance of funds, has been commended by some senators.

President Buhari had ordered all the MDAs to stop multiple treasury accounts for proper monitoring of inflow and outflow of funds in their accounts particularly, as regards their remittance into the federation account.

The lawmakers said the move was part of the President’s effort to check corruption in the country.

Senator Abulrahman Abubakar (APC, Kogi Central) said all funds generated by ministries and agencies ought to be remitted first into federal government single treasury account to curb leakages.

“It is a way forward. I am sure what the President has seen is that in the past, a lot of money earned by MDAs are not remitted at the end. It is only proper that whatever is earned is properly remitted and paid into the appropriate treasury account before it is disbursed. In government, you spend what you have budgeted, so you don’t earn and spend. You earn, remit and then spend from your budget and that is what the President is trying to do”, he said.

Also commending the new policy, Senator Danjumah La’ah (PDP-Kaduna South), described the order as a move in the right direction. He commended the president for putting measures in place to check corrupt practices in government establishments.

He said: “This is not the first time President Buhari is coming up with such directive. This measure was adopted when he was the military Head of State to check and balance the federal funds.

“The move is a good one and it is to ensure checks and balances in all the ministries, departments and agencies. My governor, Nasir El-Rufai has equally given the order in Kaduna State and it is to make sure that all the systems must work amicably”.

The Head of Research at Sterling Capital Limited, Mr. Sewa Wusu, explained that the policy will affect the flow of liquidity in the banking system. He however, supported the decision by the federal government to fully implement the TSA, saying it would bring about transparency and effective revenue management.

“The liquidity in the banking system will definitely be affected. This is because once the banks collect government’s funds, it will be sent directly to the TSA. The free funds some banks used to enjoy will no longer be there,” Wusu added.

Nonetheless, he stressed that the decision to fully enforce the policy would help to ensure the consolidation of government’s revenue. He argued that prior to the initiative, government funds in banks were fragmented, a system that gave room for corruption.

“But now that the TSA is to be fully implemented, it will help to block leakages and uncover idle cash. It will also allow complete and timely information of government cash,” he explained.

Kaduna Adopts TSA

The Kaduna State Government has announced its decision to commence implementation of the Treasury Single Account (TSA) framework by September 1. This makes the state, the first to do so in the country.

As part of the process of attaining this goal, all banks that maintain the accounts of the government have been put on notice to close them and remit the balances to the Central Bank of Nigeria which will host the state’s TSA.

A statement by Samuel Aruwan, the Special Assistant, Media and Publicity, disclosed that the governor, Nasir El-Rufai, gave the directives at a meeting with officials of all banks holding the state government’s many revenue and expenditure accounts. The meeting was also attended by the Kaduna State Branch Controller of the CBN.

Mr. El-Rufai, according to the statement, explained that after the establishment of the TSA, the state government would open specified sub-accounts with the CBN and the commercial banks.

The banks present assured the governor that within five working days of receiving the formal instructions from the state government, they would close the accounts and remit the balances to the TSA.

While thanking the banks for their continued support, the governor assured them that a future session would be held to explain to the banks how the new TSA and the sub-accounts will work.

The statement also disclosed that selected revenue-holding accounts are excluded from the directive. The government will publish needed Treasury Circulars and other instructions to give effect to these decisions.

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