Public Finance Management Act, 1999 (Act No. 1 of 1999)Understanding and Using this ActGuide for Accounting Officers10. Cash and banking |
Cash management
Accounting officers have to establish systems, procedures, processes and training to ensure sound cash management and banking. When departments provide reliable forecasts of the timing and amounts of material cash payments and receipts, they mitigate the risk that the national Treasury may have insufficient funds to meet Government’s cash flow needs. Poor cash management may include:
| • | Failure to collect revenues promptly, or at all |
| • | Failure to bank money as soon as possible |
| • | Failure to pursue debtors with due rigour |
| • | Failure to sell surplus or underperforming assets |
| • | Maintaining stocks at levels higher than required for efficient programme delivery |
| • | Making transfer payments ahead of schedule or other payments ahead of their due date |
| • | Failing to forecast the timing and amounts of material cash flows |
Banking practices
Good cash management and responsible banking practices go hand in hand. For instance, the timely collection of revenues can be partly nullified if the money is not banked immediately, as revenue is not available to Government unless it has been deposited into the Paymaster-General’s account.
Revenue collection arrangements
The ease with which officials can promptly deposit money into the Paymaster-General’s account will depend on the accessibility of the account. This will, in turn, depend on revenue collection arrangements, such as the use of agencies or payments by credit card.
Accounting officers and CFOs should critically evaluate these options to ensure the best combination of collection and banking arrangements. Collection agency agreements should include provision for the prompt depositing of government money into the Paymaster-General’s account.
Bank accounts
Departments may not open a bank account without the written approval of the relevant treasury. Previous approvals continue to apply unless revoked, as long as they are listed. Departments that are authorised to open a bank account may only do so at a bank registered in South Africa and approved in writing by the national Treasury, after prescribed tendering procedures have been followed.
Should the accounting officer require a separate bank account, the relevant treasury may approve this as a subaccount within the Paymaster-General account of the revenue fund.
Money deposited into the Paymaster-General account must immediately be available to the relevant treasury for spending or investment according to its central cash management responsibilities.
Responsibilities of departments
The accounting officer, through the CFO, is responsible for establishing systems, procedures, processes and training and awareness programmes to ensure efficient and effective banking and cash management. These arrangements include:
| • | Making payments, including transfers to other levels of government or non-government entities, no earlier than necessary, with due regard for efficient, effective and economical programme delivery and Government’s normal terms for account payments |
| • | Ensuring that all money collected by a department is paid into the department’s Paymaster-General account and accounted for in its ledger |
| • | Avoiding prepayments for goods or services (i.e. payments in advance of the receipt of the goods or services), unless required by contractual arrangements with the supplier |
| • | Accepting discounts to effect early payment only when the payment has been included in the monthly cash flow estimates provided to the relevant treasury |
| • | Pursuing debtors with appropriate sensitivity and rigour to ensure that amounts receivable by Government are collected and banked promptly |
| • | Accurately forecasting the department’s cash flow requirements so that the national Treasury can optimise its central cash management responsibilities on behalf of Government |
| • | Taking any other action that avoids locking up money unnecessarily, such as managing inventories to the minimum level necessary for efficient and effective programme delivery, and selling surplus or underutilised assets |
The CFO must ensure that the department’s systems, records and statements of procedures meet the purposes of sound cash management. He or she must monitor cash management performance and report to the accounting officer, in writing, at least monthly.
Requisitioning of funds by departments
When requesting the transfer of appropriated funds, accounting officers of national departments must submit their requisitions (in accordance with approved cash flow estimates) to the national Treasury at least four full working days before the end of the month.
Provincial treasuries may determine their own timescales.
At the end of each financial year, and after the accounts of a department have been closed, the accounting officer must surrender to the relevant treasury any unexpended voted money for redepositing into the Exchequer bank account of the relevant revenue fund.
Warrant vouchers, cheques and electronic payments
As numerous problems have been experienced in this area, detailed requirements for accounting officers are set out in Chapter 15 of the Regulations.
Responsibility for trust money and property
Money held in trust (that is, money or property held by a department on behalf of other persons or entities) should not be mixed with the trustee’s own money. Hence, the accounting officer must maintain a separate bank account for each portion of trust money, maintain individual accounting records for each account, and annually prepare separate financial statements.
The accounting officer, through the CFO or a duly authorised agent, is responsible for the safekeeping and proper use of trust money and property in accordance with the relevant deed of trust or its equivalent.
Without breaking the terms of the trust arrangement, the accounting officer may invest trust money as may seem appropriate. Any proceeds will revert to the trust.