CHAPTER ONE
INTRODUCTION
1.1 Background of the
study
The
introduction of Treasury Single Account is as a result of numerous corrupt
practices that exist in the Country’s public accounting system. This was as
result of lack of transparency and accountability in the management of public
funds. Treasury Single Account (TSA) is one of the financial policies
implemented by the federal government of Nigeria to consolidate all the revenue
from all the ministries, departments, and agencies (MDAs) in the country by way
of deposit into Commercial banks traceable into a single account at the Central
Bank of the country. They are critical for ensuring that all tax and non-tax
revenues are collected and payments are made correctly in a timely manner; and
government cash balances are optimally managed to reduce borrowing costs (or to
maximize returns on surplus cash). This is achieved by establishing a consolidated
government bank accounts via a treasury single account (TSA). Treasury single
account (TSA) is a prerequisite for modern cash management and is an effective
tool for the ministry of finance/treasury to establish oversight and
centralized control over government’s cash resources (Adeyemo and
Salami, (2008). It provides a number of other benefits and thereby enhances the overall
effectiveness of a public financial management (PFM) system.
Treasury
single account (TSA) also facilitates debt management, and monetary policy
coordination as well as reconciliation of banking data, which in turn improves
the quality of fiscal information (Aluko, 2008). Treasury Single Account (TSA) is one
of the proven practices in improving the payment and revenue collection
systems, and carrying out consistent control of public expenditures by
centralizing the free balances of government bank accounts. The TSA
infrastructure is usually implemented as a part of the Financial Management
Information System (FMIS) solutions. In other words, treasury single account
(TSA) is a bank account or a set of linked bank accounts through which the
government transacts all its receipts and payments and gets a consolidated view
of its cash position at the end of each day.
However,
fiscal operations are actions taken by the government to implement budgetary
policies, such as revenue and expenditure measures, as well as issuance of
public debt instruments and public debt management. Fiscal operations include
accounting and financial reporting, cash management, investments, accounts
payable, payroll, fixed assets, internal control, and debt service management.
This includes maintaining the general ledger and all subsidiary ledgers,
preparation of required reconciliations, ensuring compliance with the annual
budget ordinance, reporting to State and Federal agencies, updating the Capital
Improvements Plan and preparation of the annual operating budget.
The
Office of Fiscal Service is to develop policy and operate the financial
infrastructure of the federal government, including payments, collections, cash
management, financing, central accounting, and delinquent debt collection. They
provides policy oversight of the bureaus under it and develops policy on
payments, collections, debt financing operations, electronic commerce,
government wide accounting, government investment fund management, and other
issues. The office also performs two critical functions for the department: it
manages the daily cash position of the government and it produces the cash and
debt forecasts used to determine the size and timing of the government's
financing operations. Fiscal Operations and Policy, oversees the development
and implementation of policies relating to the government's cash management
operations, investment and administration of trust funds, payments,
collections, and debt collections.
Therefore, treasury single account (TSA)
is an essential tool for consolidating and managing governments’ cash
resources, thus minimizing borrowing costs. Considering Nigeria as a country
with fragmented government banking arrangements, the establishment of a TSA
should receive priority in the public financial management reform agenda as
well as meeting the preconditions and desirable sequencing for its successful implementation.
From the foregoing, it is obvious that the primary objective of a TSA is to
ensure effective aggregate control over government cash balances. It avoids
borrowing and paying additional interest charges to finance the expenditures of
some agencies while other agencies keep idle balances in their bank accounts.
There were situations where some MDA’s manage their finances like independent
empire and remit limited revenue to government treasuries. Under a properly run
TSA, this is not possible as agencies of government are meant to spend in line
with duly approved budget provisions. The maintenance of a single account for
government will enable the Ministry of Finance monitor fund flow as no agency
of government is allowed to maintain any operational bank account outside the
oversight of the ministry of finance. The full implementation of this programme
therefore is a critical step towards eradicating corruption and other financial
irregularities ravaging the country. Therefore by introducing economy and
efficiency in the management of scarce public resources, the Government is in a
better position to realize its policy goals
1.2 Statement of the
problem
A
country with fragmented government banking arrangements that lack effective
control over its resources can pay for its institutional deficiencies in
multiple ways. First, idle cash balances in bank accounts often fail to earn returned
on capital. Secondly, the government, being unaware of these resources, incurs
unnecessary transactions and borrowing costs in raising funds to cover a
perceived cash shortage. Thirdly, delay in executing government budgets and
projects as a result of lack of funds in Government account. The problem of financial leakages,
increase in corruption, lack of transparency and accountability are also major
concerned. The researcher, therefore want to examine how treasury single account
(TSA) implementation on government fiscal operation can significantly
eliminate or reduces the above mentioned problems.
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