Public Sector Governance and Accountability Series: Budgeting and ...

312 Daniel Tommasi
—Spending units’ accounts are zero-balance accounts: either their
accounts are automatically swept at the end of each day (if the banking
infrastructure allows daily clearing), and money is transferred to these
accounts as specific approved payments are made, or the banks accept
the payment orders sent by spending agencies up to a certain limit
defined by the treasury.
—The central bank consolidates the government’s position at the end of
each day, including balances in all the government accounts.
This system of centralization of cash balances allows but does not
require diversified banking arrangements. Payments can be made through
banks selected on a competitive basis.
When the central bank does not have an adequate network of regional
branches or lacks the capacity to handle the large volume of transactions that
are associated with government payments and receipts, the retail banking
operations are delegated to a fiscal agent (normally an authorized commercial
bank). The fiscal agent makes payments on behalf of the treasury, the central
bank recoups all payments made by the fiscal agent that relate to government
operations, and the agent makes daily deposits of all government revenues to
the TSA in the central bank. These arrangements can be set up both so the
payments are channeled through the treasury and so government agencies
are directly responsible for authorizing payments.
The imprest system
Many developing countries use an imprest system either for all transactions
or for special cases. The principle of an imprest account is that the unspent
balances, either cash on hand or in the bank, plus the value of money paid out,
must always equal the value of the imprest. An initial imprest advance is
provided by the treasury department. Thereafter, the expenditures made from
the imprest account are reimbursed by the treasury department on receipt of
an account verifying the use of the previous advance and including reconciliation
with bank statements. This reimbursement process allocates expenditure
against the budget. The imprest system is illustrated by case 3 in figure 9.2.
The imprest system is used in several African anglophone countries for
processing line ministries’ payment transactions. This system can lead to
favoring generation of idle cash balances within government bank accounts.
In the francophone systems, imprest accounts are used for petty expenditures
and also in some countries for bypassing the ex ante commitment
controls. The imprest accounts are often kept at the treasury in francophone
systems, but the fact that they are considered a “special procedure” could
explain why transactions from these accounts are poorly monitored.