Treasury migrates ministry accounts to online platforms

Treasury secretary Henry Rotich. PHOTO | FILE

What you need to know:

  • The consolidation will provide the basis of calculating interest on the net government cash position, net of the overdraft balance.

Financial transactions of all ministries, departments and agencies will be migrated to the Treasury’s Integrated Financial Management Information System (IFMIS) and internet banking platforms by the end of this month as part of strategy to help curb unnecessary borrowing.

“This will lay the foundations for enhanced cash management practices in preparation for the full adoption of the Treasury Single Account (TSA). The full TSA implementation will entail the automation of cash planning and exchequer release process and consolidation of the government bank accounts balances at the CBK on a daily basis,” Finance secretary Henry Rotich and Central Bank of Kenya governor, Patrick Njoroge say in a memorandum to IMF managing director, Christine Lagarde.

The consolidation will provide the basis of calculating interest on the net government cash position, net of the overdraft balance.

The Treasury had anticipated to implement the TSA system by the end of June but its implementation took longer than earlier anticipated due to the scope of work involved in coordinating the financial operations of all the ministries, departments and agencies.

“We have now taken the decision to adopt a sub-account structure TSA model, which is in line with our Public Finance Management (PFM) legal and institutional framework,” Mr Rotich and Dr Njoroge said in their communication released by IMF on Wednesday.

The minister said security agencies would be excluded from the mandatory shift of financial transactions to IFMIS and internet banking even as Treasury battled to unlock billions of shillings of idle surplus cash held by public institutions.

“This will allow the National Treasury and the CBK access to information in real time about the availability of idle resources in spending units,” the memorandum said.

Treasury and CBK said the TSA system would help capture exchequer transactions, debt payments and other Consolidated Fund Services transactions in IFMIS to be able to generate reports of revenues, payments and bank balances upon request.

“We commit to reach a Service Level Agreement between the National Treasury and the CBK that would govern the agency operations including overdraft and interest calculations, service fees and other charges arising from their financial relations in anticipation of the likely reduction in reliance on overdraft and interest paid thereon and start automating the Exchequer release process, enabling timely transfers, payments and account reconciliations,” they further said.

The Treasury early this year ordered all State corporations and agencies to surrender billions of shillings held in commercial banks as surplus cash to CBK.

The order — part of measures to help curb unnecessary borrowing — obligates government ministries, and State agencies and corporations to ensure that all their cash-flow requirements are handled through a single account hosted by the CBK.

The Treasury said State corporations and agencies were holding huge sums of surplus cash in short-term bank deposits or funds invested in Treasury bills and bonds even as they continued to receive regular budgetary allocations.

The country has a large number of State corporations and funds whose core functions revolve around correction of markets, exploitation of social and political objectives, promotion and provision of education and health services and redistribution of income or develop marginal areas.

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