## _tnm1104

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---

### Introduction
- Government banking arrangements are an important factor in managing and controlling government’s cash resources.
- Objectives of effective government banking arrangements:
  - all tax and non-tax revenues are collected and payments are made correctly in a timely manner;
  - government cash balances are optimally managed to reduce borrowing costs (or to maximize returns on surplus cash).
- These objectives are achieved by establishing a unified structure of government bank accounts via a treasury single account (TSA) system.
- A TSA is a prerequisite for modern cash management and an effective tool for the ministry of finance/treasury to establish oversight and centralized control over government’s cash resources.
- Establishment of a TSA should receive priority in any public financial management (PFM) reform agenda.
- Authorship and basis:
  - Both Sailendra Pattanayak and Israel Fainboim are Senior Economists in the Fiscal Affairs Department of the International Monetary Fund.
  - This TNM is based on the IMF working paper “Treasury Single Account: Concept, Design and Implementation Issues,” 2010, 10/143. It has benefited from review and comments by M. Cangiano, M. Lazare, colleagues from FAD PFM divisions, and I. Storkey and M. Williams (both FAD consultants).
- Scope of the TNM:
  - Discusses problems of fragmented government banking arrangements and how a TSA could address them.
  - Explains the concept of a TSA and describes its features.
  - Discusses design issues that need to be considered in setting up a TSA system.
  - Discusses preconditions and key sequencing and implementation issues in establishing a TSA.

### I. Treasury Single Account (TSA): What it is and Why it is so Important
- Core purpose
  - A TSA is a unified structure of government bank accounts enabling consolidation and optimum utilization of government cash resources.
  - It separates transaction-level control from overall cash management and provides a consolidated view of the government’s cash position at the end of each day.
  - Principle: fungibility of all cash irrespective of its end use; transaction-specific distinctions are achieved through the accounting system, not by holding cash in transaction-specific bank accounts.
- Benefits and importance (findings)
  - Consolidates government cash balances and gives the ministry of finance/treasury oversight of all government cash flows.
  - Improves budget control and monitoring through complete and timely information on government cash resources.
  - Facilitates better fiscal, debt management, and monetary policy coordination and better reconciliation of fiscal and banking data, improving the quality of fiscal information.
  - Significantly reduces government debt servicing costs, lowers liquidity reserve needs, and helps maximize return on investments of surplus cash.
  - Fragmented government banking arrangements impose costs: idle cash fails to earn market-related remuneration; perceived cash shortages lead to unnecessary borrowing costs; idle government balances increase commercial bank liquidity, imposing costs on the central bank when drained through open market operations.2
- Definition and operational model
  - A TSA is a bank account or set of linked bank accounts through which the government transacts all receipts and payments and obtains a consolidated cash position daily.
  - Effective TSA foundations: three key principles:
    - The government banking arrangement should be unified to enable ministry of finance/treasury oversight and allow complete fungibility of all cash resources, including on a real-time basis if electronic banking is in place. TSA structures can contain ledger sub-accounts in a single banking institution and accommodate external zero-balance accounts (ZBAs) in commercial banks; these separate accounts should be integrated with a top account (TSA main account) usually at the central bank to net off balances and obtain the consolidated cash position.3 4
    - No other government agency should operate bank accounts outside the oversight of the treasury; the treasury should manage government cash (and debt) positions to ensure sufficient funds to meet obligations, efficient investment of idle cash, and optimal debt issuance. (Debt issuance in some cases is done by a Debt Management Office (DMO).)
    - The TSA should have comprehensive coverage, ideally including cash balances of all government entities, both budgetary and extrabudgetary.

### II. Design Issues and Preconditions for Setting up a TSA
#### A. TSA Design Issues — key dimensions
- Four key design issues to address:
  - (i) coverage of the TSA;
  - (ii) government bank accounts structure;
  - (iii) transaction processing arrangements and associated cash flows;
  - (iv) roles of the central and commercial banks in managing the TSA and provision of banking services.
- Coverage of the TSA (findings and guidance)
  - Coverage should be comprehensive, including all government-funded entities, autonomous and statutory government bodies, extrabudgetary funds (EBFs), and special accounts.
  - All cash flows related to government revenue, expenditure, donor financing, debt issuance and amortization (including external debt) should be fully integrated into the TSA system.
  - Inclusion of EBFs may be difficult where they have separate legal status or public standing; balance operational autonomy against costs/risks from fragmentation.
  - Donors should be encouraged to integrate funds with the TSA or at minimum route final payments through the TSA so government can account for and report donor-funded transactions before payments are made.8
  - Social security and other trust funds may be included provided accounting systems are well developed and safeguards exist to prevent abuse; trusts should notify the treasury of future cash outflows.
  - Public corporations that are not discharging government functions generally should not be included in the TSA; if discharging government functions they should be designated government units and integrated with the budget and TSA.
- Bank accounts structure (models and examples)
  - Centralized bank accounts structure: single bank account (with or without sub-accounts) usually at the central bank; transactions tracked and managed through an accounting system.
  - Distributed bank accounts structure: several independent accounts (generally ZBAs opened with commercial banks) operated by line agencies; positive and negative balances netted into the TSA main account (e.g., Sweden).
  - Hybrid models exist with combinations of centralized and distributed features; critical requirement: any balances left with the banking system should be swept overnight back into the TSA.
- Transaction processing arrangements and associated cash flows
  - Options vary based on distribution of responsibilities for budget execution, accounting control, and revenue/payment administration.
  - Models:
    - Centralized transaction processing: concentration of authority at the treasury to process cash transactions and operate the TSA; spending units submit payment requests to central unit—could pair with centralized or distributed bank account structures (examples: Brazil and France for centralized; UK for distributed with centrally negotiated contracts).
    - Decentralized transaction processing: each spending unit processes its own transactions and operates respective bank accounts under the TSA system; cash disbursement ceilings can be enforced against sub/ledger accounts; positive and negative balances netted into the TSA main account (examples: India for centralized account with subsidiary ledger accounts; Sweden for distributed structure with transaction accounts).
  - Electronic transaction processing (e.g., IFMIS) and modern payment systems facilitate TSA establishment by centralizing receipts and payments and minimizing cash use.
- Provision of retail banking services (roles)
  - Key question: whether commercial banks or the central bank will handle transaction banking for receipts and payments; the TSA main account should be held at the central bank.17
  - Central bank typically maintains the TSA main account but may not provide agency-specific transaction accounts where a developed commercial banking network exists.
  - Management of banking system liquidity: government deposit fluctuations affect money market liquidity; international good practice is for banks to transfer collected revenues to the TSA main account on the same day (eliminating float). Some countries remunerate banks by allowing an interest-free float for a few days—this system lacks transparency regarding the cost of revenue collection services.
  - Seed funds advanced to banks to ensure payment liquidity should be swept back into the TSA at day-end or properly remunerated.

#### B. Accounting and Reporting Systems for TSA Operation
- Accounting system requirements (findings)
  - The government accounting system must record all transactions and capture relevant information independently of cash flows in specific bank accounts.
  - Different cash transactions requiring different accounting treatments must be recorded via linked ledger accounts to track annual appropriations and monthly/quarterly allotments.
  - In many countries with manual accounting, necessary budgetary and financial information derives from bank account structures; closing these accounts to establish a TSA may remove information unless the chart of accounts is modified and accounting systems are strengthened—this should be done during IFMIS design.
  - An IFMIS general ledger (GL) module should typically provide functionalities including:
    - (i) recording of payments and all transactions with cash (transfers among accounts, transfers to deposit accounts and other investment actions, transfers to the TSA main account in the central bank, etc.);
    - (ii) continuous tracking of cash in bank accounts;
    - (iii) transferring cash to bank accounts outside the TSA system (e.g., petty cash, salaries, pensions, etc.);
    - (iv) reconciliation of daily postings in the general ledger and associated subsidiary ledgers with the cash movements in the TSA, including daily and monthly reconciliation of transaction accounts (such as ZBAs) of line agencies; and
    - (v) preparing summary statements of transactions for reporting and monitoring purposes.19
- Sub-accounts and authority to spend
  - The TSA may include multiple sub-accounts or ledger accounts to maintain distinct accounting identities for line ministries, agencies, and tax departments; these are ledger distinctions, not separate bank accounts.
  - Aggregate permissions to spend may exceed consolidated cash balances at any time; this is acceptable if cash is available when payments materialize.
  - Implementation may require redistributing accounting roles between treasury, line ministries, and spending units; commitment control and payment systems must be integrated to avoid payment arrears when commitments materialize.
- Reconciliation processes
  - Accounting data on revenue and expenditure maintained by treasury/line agencies should be fully reconciled with banking transaction data.
  - TSA facilitates reconciliation between government accounting data and central bank/commercial bank cash flow statements.
  - Reconciliation is needed at multiple levels:
    - Line agency/spending unit level: reconcile payment instructions/checks issued with those paid by banks.
    - Treasury level: reconcile receipts from banks with payments made by taxpayers and net cash balances in banks against transactions by spending units.
  - Where communication infrastructure permits, treasury should be electronically linked with central bank and commercial banks to enable electronic transfer of payment instructions, receipt of bank statements, and automatic bank reconciliation.21

#### C. Preconditions for Setting Up a TSA (key preparatory steps)
- Preconditions and preparatory actions
  - Conduct a complete inventory/census of existing government bank accounts, including number, type, amounts deposited, and reasons for holding them; prepare a complete inventory (nature, type, cash balances).22 23
  - Secure political support at the highest levels of government; closing existing spending unit accounts can provoke opposition, so explicit and strong cabinet-level support is helpful.
  - Assess banking network and technology feasibility: existence of interbank settlement system, small payments clearing, a Real Time Gross Settlements System (RTGS) at the central bank, and connection of major commercial banks to RTGS—especially important for distributed account structures.24
  - Review and, if necessary, revise legal and regulatory frameworks that currently allow spending units to have independent bank accounts.
- Additional operational preconditions (findings)
  - Unknown or hidden bank accounts pose particular threats to TSA objectives and benefits.
  - The decision to implement a TSA can trigger acquisition of necessary banking technology as banking services will be remuneration-based.
  - Where donors require segregation of funds for fiduciary reasons, a framework agreement among donors, government, central bank, and commercial banks is needed to specify procedures and timing for handling donor flows and payments.8

### Box 1. Bank Reconciliation Procedure
- Procedure Steps
  - Step1 - Check previous Bank Reconciliation Statement. Confirm that outstanding items and errors included in the last Bank Reconciliation Statement now appear on the bank statement for the current period. Any items still outstanding from the previous reconciliation and carried forward to the current Bank Reconciliation Statement should be explained and follow-up action noted.
  - Step 2 - Compare the ledger and the bank statement. Compare the ledger entries for receipts with the deposit transactions on the bank statement, and the ledger entries for payments with the payment transactions on the bank statement. Entries that appear in both the cash-at-bank ledger account and the bank statement should be marked off. The remaining items, where the ledger and bank statement vary, may be due to:
    - (i) outstanding or late deposits that appear in the cash-at-bank ledger account and not on the bank statement;
    - (ii) checks not presented or electronic funds transfers (EFT) that appear in the cash-at-bank ledger account and not on the bank statement;
    - (iii) items appearing only on the bank statement that do not appear in the cash-at-bank ledger account, for example fees, charges and electronic deposits; or
    - (iv) errors made in entering items in the cash-at-bank ledger account and/or errors made by the bank (providing the transaction banking services) on the bank statement.
  - Step 3 - Prepare journals for entries in the ledger. Prepare journals for those transactions appearing only on the bank statement that are confirmed as being legitimate transactions. When these items have been recorded in the cash-at-bank ledger account they can be marked off, since they are now common to both sets of records.
  - Step 4 - Prepare adjusting journals for any corrections to the ledger. Prepare adjusting journals for any errors identified in the cash-at-bank account. When these errors have been adjusted in the cash-at-bank ledger account, the entries should match the bank statement transactions and they can also be marked off.
  - Step 5 - Advise the bank of any errors in the bank statement. The bank (providing the transaction banking services) should be notified of any errors appearing on the bank statement. These items will appear on the Bank Reconciliation Statement. The errors should be corrected by the bank and should be recorded on the subsequent bank statement.
  - Step 6 - Prepare the new Bank Reconciliation Statement. The remaining differences that are included on the Bank Reconciliation Statement are those items that appear in the cash-at-bank ledger but not on the bank statement, i.e., outstanding deposits and unpresented checks or EFTs. Errors made on the bank statement and any items still outstanding from the last Bank Reconciliation Statement also need to be included on the new Bank Reconciliation Statement.
- Key Points and Practices
  - Mark off entries appearing in both the cash-at-bank ledger account and the bank statement to isolate reconciling items.
  - Confirm legitimacy of bank-statement-only transactions before recording corresponding journals in the ledger.
  - Prepare adjusting journals for ledger errors so ledger entries match bank statement transactions.
  - Notify the bank promptly about bank-statement errors and ensure corrections appear on subsequent bank statements.
  - Include outstanding deposits, unpresented checks/EFTs, bank errors, and any carried-forward outstanding items in the new Bank Reconciliation Statement.

### Conclusion
- Key findings on fragmented government banking arrangements
  - Fragmented government banking arrangements hinder effective cash management.
  - The primary objective of a TSA is to ensure effective aggregate control over government cash balances.
  - The consolidation of cash resources through a TSA helps to avoid borrowing and paying additional interest charges to finance the expenditures of some agencies while other agencies keep idle balances in their bank accounts.
  - Effective aggregate control of cash is also a key element in monetary, debt, and budget management.
- Core principles a TSA system should embody
  - (i) the government banking arrangement should be unified to ensure the fungibility of the government’s cash resources;
  - (ii) no other government agency should be allowed to operate bank accounts without the oversight of the treasury; and
  - (iii) the coverage of the TSA should be comprehensive, encompassing all government cash, both budgetary and extrabudgetary.
- Design considerations and best practice
  - The design of a TSA in a particular country depends on the stage of development of the public institutions and financial management systems and the degree of maturity of its banking system, including the technology used for the interbank settlements and clearing systems.
  - In countries with well developed PFM systems and an advanced banking network, best practice implies creating a TSA in the central bank, while a well developed accounting system records all transactions of different entities that may have transaction accounts in commercial banks on a zero-balance basis.
- Operational and organizational distinctions
  - Issues related to consolidation of cash in a TSA for cash management purposes should not be confused with issues related to the distribution of responsibilities for accounting control and processing of receipts and payments.
  - A TSA can operate with both centralized and decentralized transaction processing and accounting control systems.
- Implementation guidance and sequencing
  - Regardless of their degree of development, all countries should aim at establishing a TSA, provided this takes account of the preconditions identified in this note and addresses the various implementation issues.
  - While the objective should be to establish a full TSA, the implementation phasing needs to be calibrated taking into account the technological requirements and required changes to business processes, which should be introduced in a way to fully reflect the respective country’s unique circumstances.
  - The introduction of a TSA should not be viewed as an independent activity and should be integrated with other treasury reforms, including changes to budget execution processes.
  - If an IFMIS is planned or under implementation, several measures towards a TSA have to be implemented in tandem with the IFMIS roll out.

*Source: _tnm1104 (Technical Notes and Manuals 11/04), Chapter I and Chapter II excerpts.*

### Introduction

### Introduction

### Role and importance of government banking arrangements
- Government banking arrangements are an important factor in managing and controlling government’s cash resources.
- They are critical for ensuring that:
  - all tax and non-tax revenues are collected and payments are made correctly in a timely manner; and
  - government cash balances are optimally managed to reduce borrowing costs (or to maximize returns on surplus cash).
- These objectives are achieved by establishing a unified structure of government bank accounts via a treasury single account (TSA) system.

### Treasury Single Account (TSA): concept and priority
- A TSA is a prerequisite for modern cash management and is an effective tool for the ministry of finance/treasury to establish oversight and centralized control over government’s cash resources.
- A TSA provides a number of other benefits and thereby enhances the overall effectiveness of a public financial management (PFM) system.
- The establishment of a TSA should receive priority in any PFM reform agenda.

### Authorship and basis
- Note: Both Sailendra Pattanayak and Israel Fainboim are Senior Economists in the Fiscal Affairs Department of the International Monetary Fund.
- This TNM is based on the IMF working paper “Treasury Single Account: Concept, Design and Implementation Issues,” 2010, 10/143. It has benefited from review and comments by M. Cangiano, M. Lazare, colleagues from FAD PFM divisions, and I. Storkey and M. Williams (both FAD consultants).

### Scope of this Technical Note and Manual (TNM)
This technical note and manual (TNM) addresses the following main issues:
- Discusses the problems of fragmented government banking arrangements and how a treasury single account (TSA) could address them.
- Explains the concept of a TSA and describes its features.
- Discusses the design issues that need to be considered in setting up a TSA system.
- Discusses the preconditions and key sequencing and implementation issues that need to be addressed in establishing a TSA.

*Source: _tnm1104 - Introduction_*

### Chapter I of this TNM discusses the importance of a TSA in PFM systems and describes its

### _tnm1104 - Chapter I of this TNM discusses the importance of a TSA in PFM systems and describes its

### I. Treasury Single Account (TSA): What it is and Why it is so Important
- Core purpose
  - A TSA is a unified structure of government bank accounts enabling consolidation and optimum utilization of government cash resources.
  - It separates transaction-level control from overall cash management and provides a consolidated view of the government’s cash position at the end of each day.
  - Principle: fungibility of all cash irrespective of its end use; transaction-specific distinctions are achieved through the accounting system, not by holding cash in transaction-specific bank accounts.

- Benefits and importance (findings)
  - Consolidates government cash balances and gives the ministry of finance/treasury oversight of all government cash flows.
  - Improves budget control and monitoring through complete and timely information on government cash resources.
  - Facilitates better fiscal, debt management, and monetary policy coordination and better reconciliation of fiscal and banking data, improving the quality of fiscal information.
  - Significantly reduces government debt servicing costs, lowers liquidity reserve needs, and helps maximize return on investments of surplus cash.
  - Fragmented government banking arrangements impose costs: idle cash fails to earn market-related remuneration; perceived cash shortages lead to unnecessary borrowing costs; idle government balances increase commercial bank liquidity, imposing costs on the central bank when drained through open market operations.2

- Definition and operational model
  - A TSA is a bank account or set of linked bank accounts through which the government transacts all receipts and payments and obtains a consolidated cash position daily.
  - Effective TSA foundations: three key principles:
    - The government banking arrangement should be unified to enable ministry of finance/treasury oversight and allow complete fungibility of all cash resources, including on a real-time basis if electronic banking is in place. TSA structures can contain ledger sub-accounts in a single banking institution and accommodate external zero-balance accounts (ZBAs) in commercial banks; these separate accounts should be integrated with a top account (TSA main account) usually at the central bank to net off balances and obtain the consolidated cash position.3 4
    - No other government agency should operate bank accounts outside the oversight of the treasury; the treasury should manage government cash (and debt) positions to ensure sufficient funds to meet obligations, efficient investment of idle cash, and optimal debt issuance. (Debt issuance in some cases is done by a Debt Management Office (DMO).)
    - The TSA should have comprehensive coverage, ideally including cash balances of all government entities, both budgetary and extrabudgetary.

### II. Design Issues and Preconditions for Setting up a TSA
#### A. TSA Design Issues — key dimensions
- Four key design issues to address:
  - (i) coverage of the TSA;
  - (ii) government bank accounts structure;
  - (iii) transaction processing arrangements and associated cash flows;
  - (iv) roles of the central and commercial banks in managing the TSA and provision of banking services.

- Coverage of the TSA (findings and guidance)
  - Coverage should be comprehensive, including all government-funded entities, autonomous and statutory government bodies, extrabudgetary funds (EBFs), and special accounts.
  - All cash flows related to government revenue, expenditure, donor financing, debt issuance and amortization (including external debt) should be fully integrated into the TSA system.
  - Inclusion of EBFs may be difficult where they have separate legal status or public standing; balance operational autonomy against costs/risks from fragmentation.
  - Donors should be encouraged to integrate funds with the TSA or at minimum route final payments through the TSA so government can account for and report donor-funded transactions before payments are made.8
  - Social security and other trust funds may be included provided accounting systems are well developed and safeguards exist to prevent abuse; trusts should notify the treasury of future cash outflows.
  - Public corporations that are not discharging government functions generally should not be included in the TSA; if discharging government functions they should be designated government units and integrated with the budget and TSA.

- Bank accounts structure (models and examples)
  - Centralized bank accounts structure: single bank account (with or without sub-accounts) usually at the central bank; transactions tracked and managed through an accounting system.
  - Distributed bank accounts structure: several independent accounts (generally ZBAs opened with commercial banks) operated by line agencies; positive and negative balances netted into the TSA main account (e.g., Sweden).
  - Hybrid models exist with combinations of centralized and distributed features; critical requirement: any balances left with the banking system should be swept overnight back into the TSA.

- Transaction processing arrangements and associated cash flows
  - Options vary based on distribution of responsibilities for budget execution, accounting control, and revenue/payment administration.
  - Models:
    - Centralized transaction processing: concentration of authority at the treasury to process cash transactions and operate the TSA; spending units submit payment requests to central unit—could pair with centralized or distributed bank account structures (examples: Brazil and France for centralized; UK for distributed with centrally negotiated contracts).
    - Decentralized transaction processing: each spending unit processes its own transactions and operates respective bank accounts under the TSA system; cash disbursement ceilings can be enforced against sub/ledger accounts; positive and negative balances netted into the TSA main account (examples: India for centralized account with subsidiary ledger accounts; Sweden for distributed structure with transaction accounts).
  - Electronic transaction processing (e.g., IFMIS) and modern payment systems facilitate TSA establishment by centralizing receipts and payments and minimizing cash use.

- Provision of retail banking services (roles)
  - Key question: whether commercial banks or the central bank will handle transaction banking for receipts and payments; the TSA main account should be held at the central bank.17
  - Central bank typically maintains the TSA main account but may not provide agency-specific transaction accounts where a developed commercial banking network exists.
  - Management of banking system liquidity: government deposit fluctuations affect money market liquidity; international good practice is for banks to transfer collected revenues to the TSA main account on the same day (eliminating float). Some countries remunerate banks by allowing an interest-free float for a few days—this system lacks transparency regarding the cost of revenue collection services.
  - Seed funds advanced to banks to ensure payment liquidity should be swept back into the TSA at day-end or properly remunerated.

#### B. Accounting and Reporting Systems for TSA Operation
- Accounting system requirements (findings)
  - The government accounting system must record all transactions and capture relevant information independently of cash flows in specific bank accounts.
  - Different cash transactions requiring different accounting treatments must be recorded via linked ledger accounts to track annual appropriations and monthly/quarterly allotments.
  - In many countries with manual accounting, necessary budgetary and financial information derives from bank account structures; closing these accounts to establish a TSA may remove information unless the chart of accounts is modified and accounting systems are strengthened—this should be done during IFMIS design.
  - An IFMIS general ledger (GL) module should typically provide functionalities including:
    - (i) recording of payments and all transactions with cash (transfers among accounts, transfers to deposit accounts and other investment actions, transfers to the TSA main account in the central bank, etc.);
    - (ii) continuous tracking of cash in bank accounts;
    - (iii) transferring cash to bank accounts outside the TSA system (e.g., petty cash, salaries, pensions, etc.);
    - (iv) reconciliation of daily postings in the general ledger and associated subsidiary ledgers with the cash movements in the TSA, including daily and monthly reconciliation of transaction accounts (such as ZBAs) of line agencies; and
    - (v) preparing summary statements of transactions for reporting and monitoring purposes.19

- Sub-accounts and authority to spend
  - The TSA may include multiple sub-accounts or ledger accounts to maintain distinct accounting identities for line ministries, agencies, and tax departments; these are ledger distinctions, not separate bank accounts.
  - Aggregate permissions to spend may exceed consolidated cash balances at any time; this is acceptable if cash is available when payments materialize.
  - Implementation may require redistributing accounting roles between treasury, line ministries, and spending units; commitment control and payment systems must be integrated to avoid payment arrears when commitments materialize.

- Reconciliation processes
  - Accounting data on revenue and expenditure maintained by treasury/line agencies should be fully reconciled with banking transaction data.
  - TSA facilitates reconciliation between government accounting data and central bank/commercial bank cash flow statements.
  - Reconciliation is needed at multiple levels:
    - Line agency/spending unit level: reconcile payment instructions/checks issued with those paid by banks.
    - Treasury level: reconcile receipts from banks with payments made by taxpayers and net cash balances in banks against transactions by spending units.
  - Where communication infrastructure permits, treasury should be electronically linked with central bank and commercial banks to enable electronic transfer of payment instructions, receipt of bank statements, and automatic bank reconciliation.21

#### C. Preconditions for Setting Up a TSA (key preparatory steps)
- Preconditions and preparatory actions
  - Conduct a complete inventory/census of existing government bank accounts, including number, type, amounts deposited, and reasons for holding them; prepare a complete inventory (nature, type, cash balances).22 23
  - Secure political support at the highest levels of government; closing existing spending unit accounts can provoke opposition, so explicit and strong cabinet-level support is helpful.
  - Assess banking network and technology feasibility: existence of interbank settlement system, small payments clearing, a Real Time Gross Settlements System (RTGS) at the central bank, and connection of major commercial banks to RTGS—especially important for distributed account structures.24
  - Review and, if necessary, revise legal and regulatory frameworks that currently allow spending units to have independent bank accounts.

- Additional operational preconditions (findings)
  - Unknown or hidden bank accounts pose particular threats to TSA objectives and benefits.
  - The decision to implement a TSA can trigger acquisition of necessary banking technology as banking services will be remuneration-based.
  - Where donors require segregation of funds for fiduciary reasons, a framework agreement among donors, government, central bank, and commercial banks is needed to specify procedures and timing for handling donor flows and payments.8

*Italic: Source — _tnm1104 (Technical Notes and Manuals 11/04), Chapter I and Chapter II excerpts.*

### Box 1. Bank Reconciliation Procedure

### Box 1. Bank Reconciliation Procedure

### Procedure Steps
- Step1 - Check previous Bank Reconciliation Statement. Confirm that outstanding items and errors included in the last Bank Reconciliation Statement now appear on the bank statement for the current period. Any items still outstanding from the previous reconciliation and carried forward to the current Bank Reconciliation Statement should be explained and follow-up action noted.
- Step 2 - Compare the ledger and the bank statement. Compare the ledger entries for receipts with the deposit transactions on the bank statement, and the ledger entries for payments with the payment transactions on the bank statement. Entries that appear in both the cash-at-bank ledger account and the bank statement should be marked off. The remaining items, where the ledger and bank statement vary, may be due to:
  - (i) outstanding or late deposits that appear in the cash-at-bank ledger account and not on the bank statement;
  - (ii) checks not presented or electronic funds transfers (EFT) that appear in the cash-at-bank ledger account and not on the bank statement;
  - (iii) items appearing only on the bank statement that do not appear in the cash-at-bank ledger account, for example fees, charges and electronic deposits; or
  - (iv) errors made in entering items in the cash-at-bank ledger account and/or errors made by the bank (providing the transaction banking services) on the bank statement.
- Step 3 - Prepare journals for entries in the ledger. Prepare journals for those transactions appearing only on the bank statement that are confirmed as being legitimate transactions. When these items have been recorded in the cash-at-bank ledger account they can be marked off, since they are now common to both sets of records.
- Step 4 - Prepare adjusting journals for any corrections to the ledger. Prepare adjusting journals for any errors identified in the cash-at-bank account. When these errors have been adjusted in the cash-at-bank ledger account, the entries should match the bank statement transactions and they can also be marked off.
- Step 5 - Advise the bank of any errors in the bank statement. The bank (providing the transaction banking services) should be notified of any errors appearing on the bank statement. These items will appear on the Bank Reconciliation Statement. The errors should be corrected by the bank and should be recorded on the subsequent bank statement.
- Step 6 - Prepare the new Bank Reconciliation Statement. The remaining differences that are included on the Bank Reconciliation Statement are those items that appear in the cash-at-bank ledger but not on the bank statement, i.e., outstanding deposits and unpresented checks or EFTs. Errors made on the bank statement and any items still outstanding from the last Bank Reconciliation Statement also need to be included on the new Bank Reconciliation Statement.

### Key Points and Practices
- Mark off entries appearing in both the cash-at-bank ledger account and the bank statement to isolate reconciling items.
- Confirm legitimacy of bank-statement-only transactions before recording corresponding journals in the ledger.
- Prepare adjusting journals for ledger errors so ledger entries match bank statement transactions.
- Notify the bank promptly about bank-statement errors and ensure corrections appear on subsequent bank statements.
- Include outstanding deposits, unpresented checks/EFTs, bank errors, and any carried-forward outstanding items in the new Bank Reconciliation Statement.

*Source: _tnm1104 - Box 1. Bank Reconciliation Procedure.*

### Conclusion

### Conclusion

### Key findings on fragmented government banking arrangements
- Fragmented government banking arrangements hinder effective cash management.
- The primary objective of a TSA is to ensure effective aggregate control over government cash balances.
- The consolidation of cash resources through a TSA helps to avoid borrowing and paying additional interest charges to finance the expenditures of some agencies while other agencies keep idle balances in their bank accounts.
- Effective aggregate control of cash is also a key element in monetary, debt, and budget management.

### Core principles a TSA system should embody
- (i) the government banking arrangement should be unified to ensure the fungibility of the government’s cash resources;
- (ii) no other government agency should be allowed to operate bank accounts without the oversight of the treasury; and
- (iii) the coverage of the TSA should be comprehensive, encompassing all government cash, both budgetary and extrabudgetary.

### Design considerations and best practice
- The design of a TSA in a particular country depends on the stage of development of the public institutions and financial management systems and the degree of maturity of its banking system, including the technology used for the interbank settlements and clearing systems.
- In countries with well developed PFM systems and an advanced banking network, best practice implies creating a TSA in the central bank, while a well developed accounting system records all transactions of different entities that may have transaction accounts in commercial banks on a zero-balance basis.

### Operational and organizational distinctions
- Issues related to consolidation of cash in a TSA for cash management purposes should not be confused with issues related to the distribution of responsibilities for accounting control and processing of receipts and payments.
- A TSA can operate with both centralized and decentralized transaction processing and accounting control systems.

### Implementation guidance and sequencing
- Regardless of their degree of development, all countries should aim at establishing a TSA, provided this takes account of the preconditions identified in this note and addresses the various implementation issues.
- While the objective should be to establish a full TSA, the implementation phasing needs to be calibrated taking into account the technological requirements and required changes to business processes, which should be introduced in a way to fully reflect the respective country’s unique circumstances.
- The introduction of a TSA should not be viewed as an independent activity and should be integrated with other treasury reforms, including changes to budget execution processes.
- If an IFMIS is planned or under implementation, several measures towards a TSA have to be implemented in tandem with the IFMIS roll out.

*International Monetary Fund — Technical Notes and Manuals 11/04 | 2011*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/tnm/2011/_tnm1104.pdf_