Treasury Single Account legalised under new PFM Act
The establishment of the Treasury Single Account (TSA) has received legal backing with the passage of the Public Financial Management (PFM) Act, Act 921.
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Clauses 45 to 53 of the new Act makes provision for cash and asset management by the government under which the Treasury Single Account (TSA) is prescribed.
The Head of Revenue and Cash Management at the Controller & Accountant General Department, Dr Mohammed Sani Abdulai, explained that TSA is expected to enable the government to manage its cash flow prudently and to ensure the judicious use of public funds.
“There is established by this Act, a Treasury Single Account to serve as a unified structure of Government accounts to give a consolidated view of government cash resources; and into which all monies received by covered entities shall be deposited and from which all expenditures of government and covered entities shall be made,” he said.
He was addressing members of the Institute of Financial and Economic Journalists (IFEJ) and the Parliamentary Press Corps on the new PFM Act at a forum in Accra.
Why TSA?
Recently, the government moved funds from the idle account of Metropolitan, Municipal, and District Assemblies (MMDAs) and Ministries, Departments and Agencies (MDAs) to support public sector accounts such as paying of salary, financing of goods and services by public institutions.
Dr Abdulai explained that an audit of various government accounts led to the closure of 3,160 accounts and the transfer of 2,082 into the TSA. He, however, explained that 258 accounts were yet to be transferred into the TSA.
He said the new legal regime was expected to ensure that the government had the liquidity to execute its payments, and to help it manage its planned expenditure through effective cash management.
The PFM Act
The PFM Act, which was passed into law by Parliament on August 3, 2016, repeals the Financial Administration Act of 2003 and its amendment and the Loans Act of 1970.
The law seeks to regulate the financial management of the public sector within a macroeconomic and fiscal framework, as well as define the responsibilities of persons entrusted with the management and control of public funds, assets, liabilities and other resources.
It also seeks to ensure that public funds are sustainable and consistent with the level of public debt and also makes provision for accounting and audit of public funds.
In the medium term, the law is expected to bring about a more efficient, effective and economical use of the resources of the government and contribute to the achievement of national goals.
The Minister of Finance, Mr Seth Terkper, said the PFM Act would make provision for new policy measures regarding borrowing and debt management, among others.
He said the passage of the Act was part of efforts to address the persistent structural weakness in fiscal formulation, especially relating to commitment control and contracts to bring effective fiscal discipline to the management of public resources.
The Acting Chief Director of the Ministry of Finance, Mr Patrick Nomo, said the passage of the new law was expected to provide the government with the opportunity to codify some good practices introduced and evolved as part of the PFM Reform Implementation.
“In addition, the Act will underpin Ghana’s ongoing reforms designed to address persistent weaknesses and promote fiscal discipline, transparency and accountability. It will help improve credibility of the budget, the predictability during budget execution, strengthen expenditure controls and reduce cash rationing, all of which contribute to improving the overall financial management of the public sector,” he said.
He added that the media briefing was expected to help communicate and publicise the passage of the bill into an act for key PFM stakeholders.
“In addition, it will provide key highlights and the far-reaching implications with regard to the sanctions as covered in the Act on the use of public funds, among others,” he said.
Sinking Fund
The new legislation empowers the Minister of Finance to create a sinking fund for the redemption of specified medium-to long-term debt obligations.
It also makes provision for annual and other reports to be submitted by the Controller and Accountant General in relation to the activities and operations of the sinking fund.
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The reports will also capture the money to be transferred into the fund.
The Chief Economic Officer and Group Head of PFM, Ms Eva Esselba Mends, said the government was confident that the PFM Act would help regulate the borrowings of state-owned enterprises (SOEs), as part of measures aimed at keeping the public debt from spiralling.
That, she said, was because the Act mandated SOEs to seek approval from the Ministry of Finance before going ahead to take new loans.
The approval is to give the ministry the opportunity to determine the risk level and ability of the borrowing institution to repay.
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“Borrowing by local government authorities subject to subsection 2 and without limiting section 73, a local government authority, may borrow funds only from within the country, and up to the limit determined by the Minister in consultation with the Minister responsible for Local Government, and consistent with the medium-term debt strategy and annual borrowing and recovery plan,” she said.
She added that a local government authority shall obtain prior written approval of the minister for the issuance of debt securities to the public or borrowing of an amount above the limit determined by the minister.
According to her, a local government authority, public corporation or state-owned enterprise is liable for the debt and other obligations of that local government authority, public corporation or state-owned enterprise without recourse to the government, unless otherwise explicitly guaranteed by the government in accordance with this act.