1 Electronic Processing PEMPAL Conference Istanbul February – Mark Silins

2 History of Treasury Processing – A Timeline of Change 1. Central accounting and payroll system maintained by the MoF: Payments made by cheque or cash and repetitive payments such as payroll submitted on magnetic tape to financial institutions 2. Software developed to allow budget institutions to create electronic forms: submitted on floppy disk but still verified by manual signature 3. Central bank collaborates with MoF to produce banking gateway: elimination of cheque payments, all pensioners required to establish bank accounts

3 History of Treasury Processing – A Timeline of Change (2) 4. MoF develops an online encryption process: budget institutions now provide all payments and receipt transactions through dedicated secure terminals to the central accounting system, through an interface 5. Treasury regional offices no longer process any payments or receipts: all processing is now done within budget institutions 6. As supplier payments reach bank accounts, suppliers also receive additional information regarding their payments electronically

4 Two countries with different approaches to the use of electronic systems

Ministry of Finance and Economy / Central Treasury Ministries Kosovo Government transaction processing flow – Post implementation of Treasury System (2005) Government Agencies Government Agencies Regional Treasury Regional Treasury Regional Treasury Municipalities Central Bank commercialbanks

6 Banking Interface – Kosovo (2005) Batch file delivered to bank on CD ROM at 11am each day which represented 90% of all payments: Prior to this, all payments were manually keyed into Treasury and then manually re- keyed into central bank system. A ceiling was placed on maximum number of payments each day Bank provides reconciliation file the following day which is compared externally with an extract of the previous day’s payments: Central Bank had been a key limitation as it had not been approved for international banking status and was using outdated technology

7 Banking Interface – Macedonia Treasury system creates files for uploading to central bank into RTGS Instant feedback available on status of payment acceptance or rejection Real time TSA balance with revenues and expenditures reported instantly Reduction of dependence on bank ledger reconciliation for error detection

Ministry of Finance Treasury IT Subsystem Central Bank Public Revenue Office MoF Treasury Clearing House Customs Stopanska Banka Treasury Offices Offices ISDN Frame Relay TO Skopje Wireless Ethernet Ethernet

EXECUTION OF EXPENDITURES 16 Treasury offices throughout the territory of RM MF - Treasury  Budget users submit their payment requests to treasury offices Treasury offices input payment requests into the system and they are electronically submitted to the Treasury

EXECUTION OF EXPENDITURES Treasury Office Office Treasury Budget users commercialbank payment request approved request CB - RTGS

11 Summary of Key benefits Single gateway to banking system through central bank using RTGS Eliminates the need for local treasury processing– Commercial Bank Interface Decreased time between submission of payments and money reaching bank accounts Revenue collection more timely Feedback on errors in payment details much quicker: reduces risks of payments going astray or miscoding

12 Obstacles to full implementation Cash payments: social and other extra budgetary funds can be a big issue Repetitive Payment systems (e.g. salaries, pensions) Manual payment requests to the treasury Cost Communication

13 What else can you do using web-based interfaces All payments Cash Plans Warrant/release of funds (e.g. special means) Urgent payment requests Distribute new policies and procedures Budget preparation

14 Key issues for Countries FMIS must be able to produce output files on demand for electronic submission to national bank: batch or real time Compatibility with RTGS and other system technologies Capacity to receive reconciliation files a considerable advantage