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

Budget Execution 313
Although, in principle, advances and imprests are used in the francophone
system only for petty expenditures, in some countries imprest accounts
are mushrooming. In some, but not all, countries the imprest accounts can
be kept in the treasury. To a certain extent, these special procedures are not
very different from the normal procedures in several anglophone budget
systems. They could even lead to more efficient cash management, provided
that the imprest account is kept in the treasury. However, the fact that these
procedures are deemed exceptional and not subject to proper audit leads to
increased fiduciary risks.
The imprest systems present many weaknesses. Reporting and controls
are often weak, a significant amount of cash can be kept outside the treasury
account at the central bank, and risks of mismanagement are high.
In countries with underdeveloped infrastructure, however, imprest
accounts can be considered for remote agencies. Also, in some developing
countries, they can be considered for petty expenditure transactions that
facilitate routine management. In any case, whatever the coverage of the
imprest system, proper control and audit procedures and reporting requirements
must be set up to ensure that the system will be limited to special cases
(for example, expenditures under a certain ceiling) and to ensure expenditures
will be classified and reported in the same way as other expenditures.
In countries with modern infrastructure that can use electronic transfers
and automated teller machines, imprest accounts can be totally eliminated.
In developing countries, external aid is very often managed through
special accounts that function under the same type of procedures as
imprest accounts.
Design of the payment system
Figure 9.2 illustrates schematically the different variants for processing
payment transactions. As noted, case 1 summarizes the TSA model in which
payment transactions are centralized within the treasury single account,
which can play either an active or passive role in expenditure control in the
sense previously described; case 2 refers to a TSA that centralizes only the
cash balances; and case 3 illustrates the imprest procedure.
Concerning the cash management objective of minimizing the costs of
borrowing, the modes of centralizing cash balances of case 1 and case 2 give
identical results. However, satisfactory implementation of the method
described in case 2 can be difficult in many developing countries. In countries
with an underdeveloped banking infrastructure, sweeping bank accounts
daily or, to a lesser extent, managing a system of credit limit could pose
problems. The existence of a large number of bank accounts can hinder the
implementation of appropriate daily clearing and consolidation procedures.