It is no longer news what the Treasury Single Account stands for. As a name, it does appear a little clumsy. Why not Single Treasury Account? TSA is now a fait accompli. Different governments had toyed with this idea long before the administration of President Muhammadu Buhari. The primary concern has been how to capture all of the Federal Government’s revenue. The perception of leakages in revenue collection was total even though it did not flow from any empirical study or audit. There were a number of government agencies that their enabling Acts allowed them to collect revenue directly and use the same to execute their mandate. The Federal Ministry of Finance was never comfortable with agencies that had this level of financial independence. Financial independence as used here is the ability of an agency to collect revenue and use the same to execute the mandate of the agency. Such agencies did not draw from the federal budget. In 2007, the Fiscal Responsibility Bill was passed into law. The Fiscal Responsibility Act created the Fiscal Responsibility Commission and required listed agencies to remit yearly, 80 per cent of their Operating Surplus to the Consolidated Revenue Fund. This Act failed woefully to define what constituted “Operating Surplus”. This was left to the Ministry of Finance and the FRC’s apparatchiks to interpret. It should be noted that the creation of the FRC was one way to manage the recurring problem of bringing some government agencies within the control and ambit of the Ministry of Finance. The FRC, of all its functions, some obviously outlandish, found the payment of 80 per cent operating surplus the most important. Agencies were routinely threatened of sanctions even as some of them raised the issue of proper definition of operating surplus. The National Assembly (both Houses) foisted a regime of intimidation on these agencies threatening them routinely that their financial independence would be abridged by amending their enabling Acts or by insisting that the constitution is superior to those enabling Acts. For the FRC, operating surplus was the accounting profit (excess of income over expenditure) of the agency. The agencies that disputed this definition posited that to carry that definition to its logical end would “kill” such agencies and scuttle their mandate. The agencies argued that what is operating surplus must flow from simple cash accounting and not based on accrual accounting that recognises a number of non-cash expenditure like depreciation, amortisation, prepayments, etc. These items of expenditure made in a year are recognised in part under accrual accounting in the year the expenditure was incurred and in subsequent years. Because only a fraction is taken into account, it will result in higher operating surplus. This was the crux of the matter. Meetings held between such agencies with the Commission and the Ministry of Finance produced no result. The ministry therefore resorted to the imposition of what it considered “adequate” for such agencies to pay. This was the position before the advent of Buhari.
All government agencies are audited by external auditors and the office of the Auditor-General for the Federation; also, their books of accounts are opened to officials of the office of the Accountant General of the Federation, the Federal Inland Revenue Service amongst others. Yet, there is still doubt as to whether there are leakages or not. Leakages that are not revealed by any of these bodies are conjectured into being as reasons to justify the introduction of the TSA. A better reason would be that we need a federal budget that captures all the MDAs which is not achievable under the present system. To get what would look like a Federal Government budget, you will need to add to the budget approved for it by the National Assembly, the budgets of several agencies that enjoy financial independence, the budgets of which do not go to the National Assembly for approval. We are talking of government revenue. Government can decide like it has done that the TSA is the way to go without giving any reason. It is unfair and immoral to paint public officers black to justify a change in policy direction that has become inevitable given the crash in oil revenue and the ineptitude with which the issue of corruption has been treated. This whole argument in support of the TSA is also a vote of no confidence in the government institutions that have oversight functions over these agencies.

There are several issues arising from the introduction of the TSA. They include:

Whether the TSA is foolproof against revenue leakages; how it affects liquidity in the banking sector; the Remita challenge;
huge reconciliation problem; would service delivery be enhanced or curtailed under the TSA?; and, would the TSA generate indolence in revenue generation?
What is settled is that the TSA has come to stay but still undergoing fine-tuning here and there. The issues listed above are germane for a better understanding of the effect of the TSA and for the efficient implementation of the policy regime. It is now possible for the MDAs to collect revenue through the TSA in any of the money deposit banks. These accounts in the various banks (26 or so) are immediately swept into designated accounts with the Central Bank of Nigeria. However, deposits and payments are made through the same account with the CBN using Remita as a switch. Remita is a software developed by Systemspecs, a Nigerian company that most MDAs are using even before the compulsory order that came with the TSA. Others have had to join the Remita train. It has grown to becoming a monopoly. It is well-known that Systemspec has been marketing its Remita software as one-stop software that addresses all the issues associated with accounting for revenue collection and payments, including payroll. But it is coming at a great cost to the MDAs. For instance, Systemspecs charges 1.05 per cent for revenue and one per cent for payments that pass through its switch. By way of comparism, banks charge commission on turnover (COT) only on payments/disbursements with rates ranging from N2.5 to N5 per mille. Banks do not charge on revenue. For instance, if an agency collects N1bn in a month and disburses N800m in the same month, Systemspecs would collect the sum of N10.5m and N8m respectively. This charge is humongous. This was not budgeted for by the MDAs but simply thrust upon them by policy change. If banks were to play their traditional role for the same transaction, an agency would pay the COT of between N2m and N4m depending on the agreed COT rate with the customer. It is unclear if the banks would charge anything for the service they now provide under the TSA regime and that service is using the banks platform to collect revenue which does not remain with the banks. There is also the huge reconciliation challenge as well as revenue authentication and verification before services are provided.
That the implementation of the TSA mopped up liquidity from the banking system is no news. It left the banks comatose because most of them have been less creative. Our banks will be remembered for giving young marketing staff targets that are out of this world. They exploited the system with free Federal Government funds. The effect of the withdrawal was bad enough as to put some on the edge. A friend who had an overdraft duly approved could not draw on that facility because there was no “cash backing”. The CBN has responded to the cash squeeze by a six per cent reduction of Cash Reserve Ratio from 31 per cent to 25 per cent. This has released N740bn of sterilised funds into the banking system. But this does not tell the whole story.

It is important to make the point that the TSA will not stop revenue leakage if we understand the term in all its ramifications. Revenue leakage includes but not limited to outright stealing of government funds; provision of services when revenue for such service has not been earned; using fake documents to procure services with no revenue accruing to government, etc. The TSA is good but we must concurrently develop control mechanisms to checkmate IT eggheads that would want to take our commonwealth for granted. The present charge by Systemspecs is not sustainable and outrageously unacceptable. It should be drastically reduced for the TSA project to be a win-win position to Nigerians, otherwise it would leave a slur on the TSA. It is inevitable that in the near future, competition would drive down the cost of providing services like the type Systemspecs is providing. Except that happens, we would have unwittingly enthroned a behemoth called Remita. All the issues raised in this article should continue to engage us as we try to make the best of the TSA regime.

Otumara, a chartered accountant and corporate governance specialist, wrote in from Lagos

via otumarag@yahoo.com. Tel. 08036741433

Austin Ejeke, Magboro, Ogun State

http://punchng.news/2015/10/956

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Food for

Food for thought

TSA or STA, e no concern me. Even God & Devil no say if my time reach, I no go dull. #DeyThere