In most countries, the primary mandate of the national treasury is to optimize the financial management of government operations. This basic institutional mandate, however, encompasses a varying range of functions in different countries. Reflecting historical and cultural factors, the economic situation of the country, and the balance of powers among government agencies responsible for economic management, the treasury may have a more or less extensive role in some, or all of the following areas:
1. the planning and control of the execution of the central government budget and the monitoring of operations of the extrabudgetary funds and subnational governments;
2. day-to-day cash management, including control of inflows and outflows into the government account(s) with the banking system; and securing the smooth financing of government expenditures;
3. the management of government debt and debt guarantees;
4. the management of government financial assets, including equity holdings in public enterprises; and
5. the accounting of government operations and the development and maintenance of government financial information system(s).
The treasury’s role in budget execution can range from passive (when the treasury merely makes resources available to spending agencies, to execute their approved budgets) to fully active (when it is empowered to set limits on commitments and/or payments of expenditures, or even to authorize individual expenditures on the basis of pre-established criteria), Similarly, the treasury can share to different degrees the management of the public debt with the central bank. Finally, the treasury may or may not be responsible for the accounting function within the central administration.
This paper reviews in some detail the gamut of possible treasury functions and the implications of different assignment of responsibilities to the treasury for its organization and structure. It argues that, in countries facing substantial economic and financial adjustment problems and/or rapid institutional change, such as the economies in transition, it is desirable to give the treasury a broader (rather than narrower) range of responsibilities in government financial management.
The paper also highlights the importance of an appropriate government financial information system for the effective financial management of government operations and discusses the main desirable features of such a system. It concludes with a discussion of the relationship of the treasury with other public sector entities, in particular the central bank.