PDF Treasury Reference Model - World Bank

Treasury Reference Model

Ali Hashim

Lead Informatics Specialist Public Finance Cluster Poverty Reduction and Economic Management Unit Europe and Central Asia Region World Bank

Bill Allan

Senior Economist, Fiscal Affairs Department, International Monetary Fund

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Tresref-Final.doc Date: March 14, 2001

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TABLE OF CONTENTS

Foreword........................................................................................... .vii Abstract ..............................................................................................ix Acknowledgements..................................................................................xi

PART I

OUTLINE OF THE TREASURY REFERENCE MODEL ................. 1

1.1 Introduction............................................................................................................1

1.2 Treasury Reference Model: Context....................................................................7

1.2.1

Introductory remarks .............................................................................................................................7

1.2.2

Treasury Systems in the Context of the Overall Framework for Government Fiscal

Management.................................................................................................................................................................7

1.2.2.1 Regulatory framework.....................................................................................................................7

1.2.2.2 Functional Processes for Budgeting and Accounting ..............................................................10

1.2.3

The Treasury Ledger System.............................................................................................................14

1.3 Broad Structure of the Treasury Reference model ..........................................20

1.3.1

High Level Conceptual Model..........................................................................................................21

1.3.2

Financial Management Cycle.............................................................................................................27

1.3.3

Financial Management Processes and Organization......................................................................28

1.3.4

Processes at Levels 1 and 2 ................................................................................................................33

1.3.5

Application Software Specifications for Treasury Systems Modules ........................................34

1.3.6

Treasury Organizational Structure ....................................................................................................36

1.3.7

Technology Architecture ....................................................................................................................37

1.3.7.1 Distributed transaction processing and technology architecture ............................................37

1.3.7.2 Centralized transaction processing and technology architecture:..........................................38

1.3.8

Alternative Institutional Models for Expenditure Processing......................................................41

1.3.8.1 Spending Unit/ Line Ministry Based Expenditure Processing...............................................41

1.3.8.2 Banking Arrangements..................................................................................................................41

1.3.8.3 Process Charts for Decentralized arrangements........................................................................42

1.4 Observance of International Standards and Practices ....................................47

1.4.1

Charts of Accounts and Classification .............................................................................................47

1.4.2

Accrual Basis Structure.......................................................................................................................48

1.4.3

Budget Accounts and Classification System...................................................................................51

1.4.3.1 Fund Classification.........................................................................................................................52

1.4.3.2 Organizational Classification .......................................................................................................52

1.4.3.3 Economic Classification................................................................................................................52

1.4.3.4 Illustrative Economic Classification ...........................................................................................53

1.4.3.5 Functional Classification...............................................................................................................53

1.4.3.6 Program Structure...........................................................................................................................54

1.4.4

Fiscal Transparency and Linkages with Treasury System Reforms ...........................................55

1.5 Critical Success Factors for Project Implementation.......................................57

1.5.1

Government commitment and management support.....................................................................57

1.5.2

Inter-agency coordination and user involvement in systems design ..........................................57

1.5.3

Organizational capacity and technical skills ...................................................................................58

1.5.4

Management of change.......................................................................................................................59

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1.5.5 1.5.6 1.5.7

Formal project planning......................................................................................................................60 Systems and data administration.......................................................................................................61 Local technical support.......................................................................................................................61

1.6 Some Treasury Development Projects in Transition Economies....................61

1.6.1

Kazakhstan Treasury Modernization Project ..................................................................................61

1.6.2

Ukraine Treasury Systems Project....................................................................................................63

1.6.3

Hungary Public Finance Management Project................................................................................65

PART II- DETAILED PROCESS CHARTS, PROCESS QUESTIONAIRE, FUNCTIONAL SPECIFICATIONS & DATA ARCHITECTURE.............................67

1.7 Process Charts ......................................................................................................69

1.8 Process Questionnaire .........................................................................................93

1.8.1

Organization Structure of the Treasury............................................................................................93

1.8.2

Management of Budget Authority:...................................................................................................94

1.8.2.1 Budget Apportionment, Allotments and Warrant Allocations...............................................94

1.8.2.2 Budget Transfers and Virements .................................................................................................95

1.8.2.3 Supplementary Budgets ................................................................................................................95

1.8.3

Commitment of Funds........................................................................................................................96

1.8.3.1 Procurement of Goods and Services ...........................................................................................96

1.8.3.2 Creation of a New staff Position and Recruitment to this Position.......................................97

1.8.3.3 Changes to the Payroll and Benefits Structure ..........................................................................98

1.8.3.4 Personnel and Grade Changes......................................................................................................99

1.8.4

Payments and Receipts Management...............................................................................................99

1.8.4.1 Verification of Payment Requests ...............................................................................................99

1.8.4.2 Authorization of Payments ........................................................................................................ 100

1.8.4.3 Payments Against Invoices........................................................................................................ 102

1.8.4.4 Payroll and Benefits Payments ................................................................................................. 103

1.8.4.5 Pension Payments........................................................................................................................ 104

1.8.4.6 Other Payments............................................................................................................................ 106

1.8.4.7 Scheduling Payments.................................................................................................................. 106

1.8.4.8 Payments Processing .................................................................................................................. 107

1.8.4.9 Processing Transfers................................................................................................................... 107

1.8.4.10

Receipts : Tax Revenues....................................................................................................... 107

1.8.4.11

Sharing Tax Revenues .......................................................................................................... 108

1.8.4.12

Receipts: Non-Tax Revenues............................................................................................... 109

1.8.5

Cash Management ............................................................................................................................ 110

1.8.5.1 Cash Flow Forecasts ................................................................................................................... 110

1.8.5.2 Revenue Forecasts ....................................................................................................................... 110

1.8.5.3 Expenditure Forecasts ................................................................................................................ 111

1.8.5.4 Monitoring Cash Balances......................................................................................................... 111

1.8.5.5 Managing Cash Balances ........................................................................................................... 111

1.8.5.6 Reconciling TSA (Treasury Single Account) and Sub-Account Balances ....................... 112

1.8.5.7 Monitoring Payables ................................................................................................................... 112

1.8.5.8 Monitoring Receivables.............................................................................................................. 113

1.8.5.9 Investing Idle Cash...................................................................................................................... 113

1.8.5.10

Maintaining Portfolio Records............................................................................................. 113

1.8.6

Debt and Aid Management ............................................................................................................. 114

1.8.6.1 New Debt Agreements ............................................................................................................... 114

1.8.6.2 Foreign Aid and Grants Receipts.............................................................................................. 114

1.8.6.3 New Debt Inflows........................................................................................................................ 115

1.8.6.4 Debt Service Payments............................................................................................................... 115

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1.8.6.5 Issuance of Securities ................................................................................................................ 116

1.8.6.6 Redemption of Securities ........................................................................................................... 117

1.8.7

Budget Review and Fiscal Reporting............................................................................................ 117

1.8.7.1 Revenue Monitoring ................................................................................................................... 117

1.8.7.2 Expenditure Monitoring ............................................................................................................. 118

1.8.7.3 Work Program Monitoring......................................................................................................... 119

1.9 Treasury System ? Overall Functional Requirements ...................................121

1.9.1

Functional Process- 1. Management of Budget Authority ........................................................ 123

1.9.1.1 Start of the Year Processes ........................................................................................................ 124

1.9.1.2 Maintain Budget Data................................................................................................................. 126

1.9.1.3 Warrants........................................................................................................................................ 127

1.9.2

Functional Process - 2. Commitment of Funds.......................................................................... 130

1.9.2.1 Commitment Entry ...................................................................................................................... 131

1.9.3

Functional Process- 3. Payments and Receipts Management; (a) Payments Management . 133

1.9.3.1 Invoice Entry ................................................................................................................................ 134

1.9.3.2 Contract Administration............................................................................................................. 136

1.9.3.3 Payment Administration............................................................................................................. 140

1.9.3.4 Payroll............................................................................................................................................ 148

1.9.3.5 Payroll Processing....................................................................................................................... 149

1.9.3.6 End of the Year............................................................................................................................ 155

1.9.4

Functional Process- 3. Payments and Receipts Management, (b) Receipts management.. 156

1.9.4.1 Establishing Reference Data...................................................................................................... 156

1.9.4.2 Receipts Processing .................................................................................................................... 159

1.9.4.3 Miscellaneous .............................................................................................................................. 162

1.9.5

Functional Process- 4. Cash Management................................................................................... 164

1.9.5.1 Enter Monthly Expenditure Plan............................................................................................... 165

1.9.5.2 Revise Revenue Plans/Forecasts .............................................................................................. 166

1.9.5.3 Maintain Debt Management Data............................................................................................. 167

1.9.6

Functional Process- 5. Debt & Aid Management........................................................................ 169

1.9.6.1 Recording of Basic Loan/ Aid and Guarantee data ............................................................... 170

1.9.6.2 Aid.................................................................................................................................................. 173

1.9.6.3 Guaranties ..................................................................................................................................... 174

1.9.6.4 Loans Given by Government:.................................................................................................... 174

1.9.6.5 Interface with the Accounting Systems modules................................................................... 174

1.9.7

Functional Process- 6. Budget Review and Fiscal Reporting .................................................. 176

1.9.7.1 Overall Fiscal reports.................................................................................................................. 176

1.9.7.2 Reports related to Management of Budget Authority, Commitments & Payments......... 181

1.9.7.3 Payroll Reports ............................................................................................................................ 185

1.9.7.4 Reports related to Receipts Management................................................................................ 187

1.9.7.5 Report related to Cash Management........................................................................................ 192

1.9.7.6 Reports Related to Debt Management ..................................................................................... 194

1.9.8

General Specifications..................................................................................................................... 194

1.9.8.1 Beginning of the Year Procedures............................................................................................ 194

1.9.8.2 Data Aggregation from Regional Systems .............................................................................. 195

1.9.8.3 Reconciliation of Daily postings to Treasury Single Account ............................................ 196

1.9.8.4 End of Year closing of Accounts .............................................................................................. 197

1.9.9

Miscellaneous.................................................................................................................................... 198

1.9.9.1 Data import and export facilities............................................................................................... 198

1.9.9.2 Interface with other systems ...................................................................................................... 198

1.9.9.3 Backward Mapping of Account Codes.................................................................................... 198

1.9.9.4 Security Features ......................................................................................................................... 199

1.9.9.5 Recovery and data integrity....................................................................................................... 200

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