1. PFM Advisor East AFRITAC
Budget Management and Public Financial Accountability in Sub-Saharan Africa
MANAGING CASH – ENSURING PREDICTABILITY AND DISCIPLINE IN BUDGET EXECUTION
By Vijay Ramachandran
PFM Advisor East AFRITAC
A Partnership of the CABRI senior budget officials network, SIDA, WBI, South African National Treasury and East-AFRITAC
June 18 to 22, 2007
Pretoria, South Africa

2. Outline of the presentation
Objectives
Prerequisites
Institutional arrangements
Banking arrangements
In year budget authority
Commitment Control
Cash forecasting
Monitoring and evaluation
Challenges

3. Objectives of cash management
Making cash available at the right place, at the right time and in the required amount
Minimizing the cost of government borrowing and maximize the returns on financial resources, given a prudent degree of risk
Promote fiscal transparency and good governance
Provide efficient services to stakeholders

4. Prerequisites A realistic budget,
Clear procedures for the release of appropriations,
Strict observance of the budget execution rules,
Experienced and skilled staff to prepare and monitor the financial plans, and
Clear borrowing rules.

5. In-year budget authority:
MoF issues quarterly or monthly commitment limits before the beginning of each quarter.
Commitment limits are based on appropriation, annual cash flow plans, and Treasury cash flow forecasts.
Limits may be issued for each budgetary line or for each program.
Forms the basis for commitments and expenditure.
All commitments must be recorded. No payment without commitment.
MoF prescribes clearly defined procedures for multi-year commitments and carry-overs.

6. Commitment Control 1:
Commitments: are obligations which arise by virtue of a contract or agreement or purchase order duly concluded for the supply of goods or services to a government entity, or where an agreement binds the government entity to make future disbursements to a contracting party.

7. Commitment Control 2

8. Institutional Arrangements

9. Banking arrangements 1
Treasury Single Account: An account or set of linked accounts through which the government manages its cash flows.
Advantages:
Centralizes banking to improve flow of cash
Reduces associated operational risk
Reduces uncertainty in fiscal flows
Reduces uncertainty in fiscal impacts on the monetary base
Expedites use of electronic payment and settlement systems
Lower transaction costs from economies of scale in processing

10. Banking Arrangements 2

11. Banking arrangements 3 Challenges: Concentration of revenues
Selection of banks
Remuneration of banks
Bank reconciliation
IT interface
Payment systems
Monitoring of performance of banks

12. Cash Forecasting: Annual, broken down by months
Based on monthly work plan and procurement plan
Some transactions known precisely (bond redemptions, external transfers)
Regular monthly pattern of some flows
Historical patterns, rules of thumb
Inclusive of own resources
Consolidated, reviewed and agreed before start of FY.
Revised rolling quarterly plans conforming with projected commitments and quarterly spending limits from budget agencies.
Indicative cash flow plans from MoF to budget agencies.
MoF responsible to ensure cash availability for covering indicative cash flow plans.
Debt synchronized with Central Bank.
Composition and role of a cash management committee.

13. Monitoring and evaluation
Determine the deviations between planned cash flows and actuals
Determine the causes for the deviations
Improve the cash flow planning system to remove systemic problems
Improve networking with other players
Feed back into the cash flow planning system
Arrears
Exchange rates
Interest rates
Changes in investment schedules

14. Challenges
Active participation of budget agencies-incentives and disincentives
Coordination with monetary policy, fiscal policy and debt management
Coverage of donor projects, sub-national governments and extra budgetary funds
Business process engineering and IT solutions