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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

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treasury and cash management

Treasury and Cash Management

Bill Dorotinsky, PRMPS

Budget Execution Course

January 16-17, 2003

core treasury functions
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
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
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
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
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
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
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
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