Treasury and Cash

Management

Bill Dorotinsky, PRMPS

Budget Execution Course
January 16-17, 2003

Core Treasury Functions

Cash management (flow and stock)
Financial asset management
Debt management, servicing; guarantee management
Accounting (policy, chart of accounts, general
ledger) and reporting
Revenue collection, forecasting
Account management (payment, collection,
reconciliation)
Central Bank relations

Varied organizational options

Treasury as an organization
MoF core treasury plus formulation
Core treasury only

Treasury system system for managing government

transactions
Centralized
Distributed treasury, commercial banks
Automated, mixed, manual

Widely differing authority

Complete authority to reduce below budget, vire
No authority to reduce, vire without Government or legislative
approval

Cash management
Objectives:
Assure fund availability for meeting government obligations (liquidity)
Cash conservation
Minimize borrowing, borrowing cost
Maximize returns from idle cash
Risk management

Tools:
Treasury consolidated fund (single account)
Financial plans
Warrants (allowable draws on TCF)
Invoice payment/cash rationing
Debt issuance
Supplemental budgets

Treasury Consolidated Fund

(treasury single account)
Single account or accounts under treasury
management consolidation of cash
The more accounts, the more difficult to manage, report

Payment arrangements will vary:

Centralized: direct transaction from TCF
Deconcentrated: payment by spending agency from
TCF
Decentralized: payment by spending agency from
imprest account

Financial plans
Important link between budget, agency
programs and activity, cash flow
Links commitments and cash

Used for cash flow forecasting when

combined with revenue forecast
Allows planned, orderly debt issuance

Usually monthly
Periodic variance analysis to plan, budget

Cash rationing
(misnomer cash budgeting)

Last resort liquidity management

Disruptive to programs, vendors
High corruption potential
Need transparent ex ante rules
Public procedure

Likely to undermine budget priorities

Debt management
Debts and liabilities need to be recognized and inventoried
Debt can include:
Bills, notes and bonds
Budgetary arrears
Accounts payable
Unfunded pension liabilities
Accrued but unpaid employee benefits, to name a few
Debt can also include certain obligations of sub-national
governments

Contingent liabilities
Government acts as a guarantor of debt repayment
in the event that the borrower cannot make
repayment, or of payment under certain conditions
Loan, pension benefit, bank deposit, agricultural price

Contingent debt must be managed with the same

detail as direct debt.
As with direct debt these contingent debts must be
inventoried and monitored in a central location
Active identification, monitoring, management of
risk important