Cash Management Handbook for Departments and Agencies

Transcription

1 Cash Managem ment Handbo ook forr Departments and Agencies Updated March 2014 Fiscal Strategy Division Queensland Treasury and Trade (Treasury)

2 Cash Management Handbook Page 2 Table of Contents Overview Cash Management in the General Government Sector Legal and Investment Framework Departmental Bank Accounts Bank Account Set-Off Arrangement Investments and Borrowings Overdraft Facilities Treasurer Group Balance Treasury Offset Bank Account Current Procedures for TGB Investments Agency Funding Cash Funding Profiles Remittances to Treasury Roles and Responsibilities Overview Agencies (General Government Sector) Treasury Analysts (Treasury) Fiscal Strategy Division (Treasury) Queensland Shared Services (Treasury s Shared Service Provider) Government Banking Unit (Treasury) QTC Cash Management Team (Queensland Treasury Corporation) Cash Forecasting Officer Cash Coordinator Communication Protocol (QTC and Agencies) Cash Flow Forecasting using QTC Connect Overview Required Format (QTC Connect Online Submission) Cash Flow Forecasting Accuracy Reporting of Cash Flow Accuracy Penalties for Inaccurate Forecasting Contacts Appendices Appendix 1 - Parent Entity Consolidated Fund Remittance Advice Appendix 2 - Facsimile Template Business Continuity Plan Appendix 3 - Internal Agencies for Cash Flow Forecasting Appendix 4 - Detailed Forecast Purpose Type (Mandatory) Appendix 5 - Overview of Cash Management Principles... 31

3 Cash Management Handbook Page 3 Overview This Cash Management Handbook seeks to: raise awareness and understanding of cash management concepts within General Government sector agencies; provide information to assist General Government sector agencies in their preparation and submission of daily cash flow forecasts to the Queensland Treasury Corporation (QTC); and provide an overview of the general principles of cash management that should be considered by agencies in developing their cash management systems. Importance of Effective Agency Cash Flow Management The Queensland Government manages a significant quantity of taxpayer funds. Queensland Government employees have a responsibility to manage these funds in an optimal manner. In the private sector, one of the objectives of financial management is to maximise wealth. In a public sector context, the objective is not so much to maximise wealth, but to maximise the funds available to meet the social and economic objectives of the Government. The effective management of cash, including the provision of accurate daily cash flow forecast information to QTC, by individual agencies within the General Government sector has implications for the returns on surplus cash balances or the short-term borrowing costs incurred by the General Government sector. For agencies, a detailed understanding of the cash flowing in to (inflows) and out of (outflows) agency bank account/s needs to be developed to support accurate forecasting and to enable inflows and outflows (particularly those associated with appropriation payments from the Consolidated Fund) to be matched to ensure that these payments are timed to meet agency service delivery requirements. The daily estimates of cash inflows and outflows provided by agencies to QTC are of critical importance to determine the investment or borrowing requirements of the General Government sector. Agency cash flow forecasts are combined with the General Government sector bank balance (i.e. combined Consolidated Fund and agency account balances) to produce an estimate indicating whether QTC expects the General Government sector to have surplus funds (which can be invested) or a deficit at the end of that day that will need to be met through use of short-term borrowings. From a whole-of-government cash management perspective, funds should be held in the Consolidated Fund until such time as they are required by agencies to fund service delivery. Effective cash management should enable allocation of agency appropriation across the financial year to closely match expenses, with the cash held in agency appropriation accounts approaching zero by the end of each fortnightly appropriation cycle. Tools such as overdraft facilities enable agencies to manage timing differences between appropriation payments without the need to hold cash reserves in agency accounts.

4 Cash Management Handbook Page 4 Handbook Sections Section 1 Cash Management in the General Government Sector page 5 Provides an overview of key concepts related to cash management including banking arrangements, the Treasurer Group Balance and Cash Funding Profiles. Section 2 Roles and Responsibilities page 11 Outlines the allocation of cash management roles between agencies, Treasury, Queensland Shared Services and QTC. Includes additional detail on the role of the Cash Forecasting Officer, the Cash Coordinator and communication protocols between QTC and agencies. Section 3 Cash Flow Forecasting using QTC Connect page 16 Sets out the timeframes and provides an explanation of the format to be used by agencies in the provision of daily cash flow forecasts to QTC via QTC Connect. Section 4 Cash Flow Forecasting Accuracy page 20 Provides information on monitoring of agency cash flow forecasting accuracy completed by QTC on behalf of Treasury and the arrangements that apply to the assessment of errors against the penalty provisions. Also includes information on the process for seeking a review of the application of a penalty. Section 5 Contacts page 22 Lists the key Treasury and QTC contacts for cash management and cash flow forecasting. Appendix 1 Parent Entity Consolidated Fund Remittance Advice page 23 Copy of the approved format for agencies to advice of remittances to the Consolidated Fund for administered receipts and equity withdrawal (controlled and administered). Appendix 2 Facsimile Template Business Continuity Plan page 25 Copy of the facsimile template for submission of cash flow forecasts to QTC. For use only in the event the online system (QTC Connect or QTC Cash Management) is unavailable or as agreed between the agency and QTC. Appendix 3 Internal Agencies for Cash Flow Forecasting page 28 List of agencies that are considered to be internal agencies for the purposes of cash flow forecasting. Agencies not included in this list (including other State government agencies) should be treated as external. Appendix 4 Detailed Forecast Purpose Type (Mandatory) page 29 List of cash flows relevant to forecasting (by purpose type). Appendix 5 Overview of Cash Management Principles page 31 Provides an overview of the general principles of cash management that should be considered by agencies in developing their cash management systems as required under the Financial and Performance Management Standard Comments and Feedback As this handbook is written to assist agencies, your comments on how it could be improved would be appreciated. Any comments or feedback can be provided to the Fiscal Strategy Division, Treasury.

5 Cash Management Handbook Page 5 1. Cash Management in the General Government Sector 1.1 Legal and Investment Framework The Financial Accountability Act 2009 (FA Act) and the Master Banking Services Agreement (the Master Banking Agreement) with the Commonwealth Bank of Australia (CBA) provide the legal framework for the banking and investment activities of the General Government sector Departmental Bank Accounts Under section 83(1) of the FA Act, each accountable officer is to establish at a financial institution approved by the Treasurer such departmental financial institution accounts as are necessary for the operations of that accountable officer s department. Section 83(2) of the FA Act provides that all public moneys and non-public moneys received by accountable officers must be paid to the credit of a departmental financial institution account of the officer s department. Currently, the Treasurer directs that all departmental bank accounts must be held with the CBA as per the Master Banking Agreement, unless approval to do otherwise has been granted by the Treasurer. On behalf of the Treasurer, Treasury s Government Banking Unit provides the lead agency role for all government banking arrangements. The GovBanking intranet site ( contains information about the Master Banking Agreement and other ancillary banking agreements that have been put in place with the CBA, as well as extensive resources to assist agencies with routine operational matters related to their banking requirements (including the creation of bank accounts) Bank Account Set-Off Arrangement Most agency bank accounts that contain controlled and administered balances are maintained in a set-off arrangement at the CBA. The Consolidated Fund bank account is also included. This set-off arrangement is administered by QTC on behalf of the Treasurer. The set-off arrangement allows the balances of all the bank accounts to be aggregated to determine an overall balance for the General Government sector. This grouping of accounts is also referred to as the Treasurer Group Balance (TGB) (refer section 1.2). QTC makes investment and borrowing decisions, on behalf of the Treasurer, based on the net General Government position, reviewed daily in light of agency cash flow forecasts. Market transactions undertaken by QTC in managing the sector s balances are given effect through the Treasury Offset Bank Account (refer section 1.2.1).

6 Cash Management Handbook Page 6 Interest is incurred by or paid to the Treasury Offset Account on the overall balance of the accounts within the set-off arrangement. Following the abolition of the Cash Management Incentive Regime on 1 January 2007, individual departmental bank accounts held within the set-off arrangement do not earn or incur interest. However, in circumstances where, for statutory or other reasons, departments (or units of departments) are required to fully retain and apply interest earned on certain account balances for specified purposes, arrangements can be put in place for interest to continue to be received/paid on these bank account balances whilst remaining in the set-off arrangement. Participation in these arrangements requires the approval of the Treasurer. The Transactional Banking Services Product Agreement with the CBA also provides for the establishment of an Auxiliary Government Accounts facility (Auxiliary facility). These accounts are not part of the set-off arrangement and are generally held by statutory authorities and trust funds. The CBA pays interest directly to participating accounts at a rate linked to the Reserve Bank of Australia overnight cash rate based on the aggregate balance of the accounts accommodated in the Auxiliary facility. Participation by departments in the Auxiliary facility requires the Treasurer s specific approval under section 87 of the FA Act Investments and Borrowings For General Government sector agencies, the FA Act directs that, unless specific legislation provides otherwise or the Treasurer s express approval has been granted under section 87 of the FA Act, only the Treasurer has the power to invest public or other moneys. Section 50(1) of the FA Act allows the Treasurer to invest all or part of the net credit balance of the Treasurer s Consolidated Fund bank account and all the departmental financial institution accounts. As noted in section of this handbook, the investment of short-term balances is undertaken by QTC on behalf of the Treasurer. Section 50(2) of the FA Act allows the Treasurer to arrange for QTC to offset the net debit balance of the Treasurer s Consolidated Fund and the departmental financial institution accounts by paying monies into the Treasury Offset Bank Account Overdraft Facilities Under section 84 of the FA Act, the accountable officer of a department must not arrange an overdraft facility with regard to any departmental financial institution account except with the specific approval of the Treasurer. Overdraft facilities are in place for all departmental bank accounts receiving appropriation. These facilities are intended to provide an additional tool to assist agencies in undertaking effective cash management.

7 Cash Management Handbook Page 7 Overdraft facilities should only be utilised to provide additional working capital to meet temporary cash requirements during periods of uneven cash flows. It is not appropriate for overdraft facilities to be used for medium or long-term financing purposes (for example, to purchase assets). Departments should review the structure of their appropriation payments in the Cash Funding Module (CFM) and actively manage their fortnightly payments in the CFM to match expected outgoings. This should reduce the need to utilise an overdraft in many cases. It is important that overdraft facilities operate on a fluctuating basis, such that they return to a credit position on a regular basis and there is no cumulative build up in the average outstanding balance over time. All overdrafts are monitored by Treasury based on the reporting provided by QTC. 1.2 Treasurer Group Balance The aggregate balance of the Consolidated Fund and departmental bank accounts (i.e. the set-off arrangement) is referred to as the TGB. In managing the TGB on behalf of the Treasurer, QTC seeks to minimise the cash balance each day on the basis that it: can achieve a higher rate of return than that offered by the CBA (when cash balances are positive); and offers a more cost-effective source of funds to meet the General Government sector s liquidity needs (when cash balances are negative). Given the large volume of funds that flow through departmental bank accounts, achieving a nil overall bank balance each day for the General Government sector is highly improbable. However, the closer QTC comes to this objective, the better the return to, or the lower the cost of funds for, the General Government sector Treasury Offset Bank Account TGB transactions are facilitated through the Treasury Offset Bank Account, which the Treasurer is required to establish and maintain under section 49 of the FA Act. The Treasury Offset Bank Account is an investment and borrowing offset account. As the mechanism through which investments and short-term borrowings are facilitated, the Treasury Offset Bank Account balance will be offset by the aggregate cash balances in the Treasurer s Consolidated Fund and departmental financial institution accounts within the set-off arrangement. When the aggregate balance is positive, these surplus funds are invested and when the aggregate balance is negative, short-term borrowings are undertaken. When the aggregate balance of the accounts is in surplus, investments are made by withdrawing funds from the Treasury Offset Bank Account and depositing these funds into one of Treasurer s short-term investment facilities held with QTC.

8 Cash Management Handbook Page 8 Conversely, when the aggregate balance of the accounts is in deficit, borrowings are raised through Treasurer s short-term debt facilities and deposited into the Treasury Offset Bank Account held at the Commonwealth Bank of Australia. By way of example: Bank Accounts Balance ($) Treasurer s Consolidated Fund Bank Account (60,000,000) Agency 1 10,000,000 Agency 2 30,000,000 Agency 3 40,000,000 Net Cash Position (TGB) 20,000,000 Treasury Offset Bank Account (20,000,000) General Government Bank Balance 0 In this example, the value of investments is $20 million (i.e. equivalent to the negative balance of the Treasury Offset Bank Account). This amount offsets the net balance of the other bank accounts and brings the overall position (i.e. TGB plus Treasury Offset Bank Account) to zero. Although the Treasurer has the authority under section 50(1) of the FA Act to withdraw funds from agency bank accounts, funds are not withdrawn from agency accounts for the purpose of facilitating TGB investments, this is the function of the Treasury Offset Bank Account Current Procedures for TGB Investments QTC downloads transaction information on all bank accounts within the bank set-off arrangement each morning. From this information, a balance report is produced. This report displays the total debits, total credits and the balance of each account and aggregates those balances to give the TGB. The estimates of cash inflows and outflows for that day, as provided by agencies (or their shared services providers), is added to the TGB. This produces an estimate indicating whether the Government expects to have surplus funds (which can be invested) or a deficit at the end of that day. If a deficit is expected, funds are withdrawn from either Treasurer s investments held with QTC or accessed from short-term borrowing facilities and deposited into the Treasury Offset Bank Account. The investment/withdrawal of funds is managed by QTC, by dealing on the short-term money market. Further detail on cash flow forecasting and QTC s role in the management of the TGB is included in section 3 of this handbook.

9 Cash Management Handbook Page Agency Funding State funding for departmental services (controlled) and equity injections, and Commonwealth funding for services and equity injections, are disbursed from the Consolidated Fund to agencies fortnightly in advance. Administered appropriation (both State and Commonwealth funded) is paid fortnightly in arrears. All payments are made via electronic funds transfer Cash Funding Profiles Disbursements to agencies are based on the cash requirements specified in agencies Cash Funding Profiles (CFPs), which detail the estimated annual cash flows between an agency and the Consolidated Fund (including administered receipts and expenditure) over the 26 fortnightly periods of the financial year. CFPs are used by Treasury to: regulate the timing of appropriation payments to agencies; determine the timing of payments from agencies to the Consolidated Fund; and determine requirements for additional appropriation to meet unforeseen expenditure under the provisions of the FA Act. For all appropriation items (i.e. departmental services, equity injections, equity withdrawals, administered appropriation, Commonwealth funding, and administered receipts) the CFP should reflect the anticipated flow of cash (note, administered appropriation for expenses (both State and Commonwealth) is paid fortnightly in arrears), taking into account seasonality and other agency-specific factors. In relation to the capacity to make adjustments to the CFP, there are two distinct periods the Interim Supply Period (between 1 July and the date the Appropriation Bill is given assent) and the Post Interim Supply Period (after the Appropriation Bill receives assent). The CFP for the Interim Supply Period is agreed between Treasury and the agency, generally by the end of the preceding financial year. The FA Act requires the Treasurer to provide a statement to each Director-General setting out the total appropriation amount available to each agency during the Interim Supply Period. Adjustments to the CFP during the Interim Supply Period are limited to adjustments to bring interim supply amounts forward or back. The total amount of appropriation funding that can be paid to the agency during the Interim Supply Period cannot exceed its limit. Once the Appropriation Bill has been passed and received assent, further adjustments may be made to the CFP. For further details on the operational aspects of the CFP, please refer to the Cash Funding Profile Guidelines. These guidelines are updated and released annually, and are available on the Treasury website.

10 Cash Management Handbook Page Remittances to Treasury Agencies are required to make remittances to the Consolidated Fund for the following purposes: administered receipts; and equity withdrawal (controlled and administered). These funds are to be remitted to the Consolidated Fund bank account by electronic funds transfer (account number ). A remittance advice (refer Appendix 1 for copy) is to be sent to the Queensland Shared Services (fax: or helpqtfinance@ssa.qld.gov.au) the day before the funds are remitted, where possible. With regards to administered receipts, agencies will be required to remit these funds from their administered bank account to the Consolidated Fund consistent with the schedule in the Cash Funding Profile Guidelines. Therefore, agencies will need to be able to identify the amount of administered receipts on a cash rather than accrual basis during each fortnightly period.

11 Cash Management Handbook Page Roles and Responsibilities 2.1 Overview Agencies (General Government Sector) Working Capital Management implementing sound management practices to ensure that cash outflows are minimised/delayed, cash inflows from creditors are received and deposited promptly and the level of working capital is optimised (refer Appendix 5). Cash Forecasting implementing effective systems to ensure that forecasts detailed in the CFPs (annual/fortnightly) and the daily cash forecasts to QTC are as accurate as possible (on a cost/benefit basis). Daily cash forecasts (and variances) are to be submitted online using QTC Connect 1 prior to the cut-off times in section 3.1. Cash Forecasting Officer all agencies are to nominate an officer to be responsible for the submission of daily (morning and afternoon) cash flow forecasts. This officer will be the primary point of contact between QTC and each agency in relation to the content of these forecasts, including responding to queries from QTC. Additional detail on the role of the Cash Forecasting Officer is provided in section 2.2. Cash Coordinator all agencies are to nominate an officer to be responsible for the overall cash management function of the agency. QTC will contact this officer to escalate cash flow forecasting matters that cannot be satisfactorily resolved with the Cash Forecasting Officer or if the Cash Forecasting Officer is unable to be contacted. Additional detail on the role of the Cash Coordinator is provided in section 2.3. Access to QTC Connect and QTC Cash Management 2 for both the Cash Forecasting Officer and the Cash Coordinator is to be kept updated by the agency. The QTC Connect (Website) and QTC Cash Management Access form is available from the QTC Cash Management Team and it is also attached to the QTC Cash Management System User s Reference Guide (available from the QTC Cash Management Team). The contact details of the Cash Forecasting Officer and the Cash Coordinator are to be kept updated via QTC Connect, unless other arrangements have been agreed between the agency and QTC. Agencies are responsible for advising QTC of officer changes as soon as possible. 1 QTC Connect is the online secure website for clients. The site provides clients with self-service functionality to improve access to QTC products and services, expand the scope of real-time information, streamline manual processes and support client decision-making. The QTC Cash Management system is available via QTC Connect. 2 QTC Cash Management (available via QTC Connect) is an online system that enables departments and agencies to submit accurate, secure and timely cash forecasts online. Forecasts submitted to QTC go towards the management of Queensland s investment and borrowing program. In this context, QTC aims to use the cash management system to assist agencies and departments to better manage and forecast their future cash inflows and outflows in accordance with the Cash Management Handbook for Departments and Agencies.

12 Cash Management Handbook Page 12 Note: Where agency cash forecasts are prepared (fully or partially) by a shared service provider, the allocation of the Cash Forecasting Officer and Cash Coordinator roles will be dependent on the allocation of cash forecasting (process) and cash management (policy) functions between the agency and its shared service provider. As such, effective communication arrangements need to be put in place between the agency and its shared service provider regarding these functions. Continuous Improvement - agencies are responsible for the continuous improvement of their cash management practices. This includes, but is not limited to, monitoring monthly Cash Flow Forecasting Accuracy Indicator (CFAI) reports, escalating errors to internal agency management and implementing processes to reduce the instances of cash forecasting errors Treasury Analysts (Treasury) Contact officer for CFPs within Treasury. Fortnightly review of CFPs to ensure that the level of appropriation funding being requested for disbursement is reasonable based on their knowledge of the agency s operations. CFPs and any subsequent budget variations to these CFPs are to be submitted by the agency to their Treasury Analysts for review, who will then approve the CFP in Tridata s Cash Funding Module. Monitoring of agency cash balances to identify instances where agencies may be accumulating large cash balances in advance of their service delivery requirements. Working with agencies to investigate these issues and identify possible options for managing these balances, such as tailoring of CFPs Fiscal Strategy Division (Treasury) Responsible for the development and maintenance of the processes for Cash Management. Responsible for the development and maintenance of the policy, including the relevant legislation (FA Act). Providing data to Queensland Shared Services for processing the fortnightly payments to agencies based on funding requested in the CFPs. Fortnightly payments are based on the most current CFP approved in Tridata. Considering requests made by agencies to waive penalties for inaccurate cash flow forecasting applied under section Queensland Shared Services (Treasury s Shared Service Provider) Processing the fortnightly payments to agencies based on funding requested in the CFPs as advised by Treasury. Issuing of invoices for penalties on behalf of Treasury, consistent with the provisions set out in section 4.2. This role also includes responsibility for following up on overdue invoices on behalf of Treasury.

13 Cash Management Handbook Page Government Banking Unit (Treasury) Undertaking the lead agency role for all government banking arrangements, including the provision of advice and resources for agencies QTC Cash Management Team (Queensland Treasury Corporation) Administering the set-off arrangement by making investment and borrowing decisions on behalf of the Treasurer based on the net TGB position and daily cash flow forecasts provided by agencies. Requesting the issuing of invoices by Queensland Shared Services to agencies on behalf of Treasury for incorrect forecasting (as per section 4.2). Preparing and distributing the CFAI reports to the cash coordinators and the Chief Financial Officer at Treasury (the latest solely in relation to Treasury and the Parent Entity) on a monthly basis. Providing Treasury with a quarterly report on agency cash forecasting. Maintaining online access for agency Cash Forecasting Officers and Cash Coordinators in accordance with QTC Connect (Website) and QTC Cash Management Access forms, as received from the agency from time to time. Providing training and ongoing assistance to agencies in the use of QTC Connect and QTC Cash Management for the submission of their cash flow forecasts, including system support where necessary. Ensuring that an alternative forecast submission process is available for those agencies that are unable to access QTC Connect or for use in any instance where the online system is unavailable (refer section 3.2). 2.2 Cash Forecasting Officer All agencies are to nominate an officer (Cash Forecasting Officer) as the primary point of contact with QTC for all cash forecasting (process) issues for the agency. This approach is intended to reduce the potential for miscommunication or difficulties experienced by QTC in obtaining additional information on daily cash forecasts. The Cash Forecasting Officer will need to have a detailed knowledge of the operations of the agency, including both its cash inflows and outflows, and cash forecasting processes. The Cash Forecasting Officer s responsibilities include: ensuring QTC is provided with both a morning and afternoon daily cash flow forecasting estimate via QTC Connect in accordance with the timeframes set out in section 3.1; where a forecast cannot be submitted via QTC Connect (due to issues with either the agency s or QTC s systems), ensuring that alternative arrangements have been made to ensure that forecasts can be submitted in accordance with the timeframes set out in section 3.1;

14 Cash Management Handbook Page 14 responding to queries from QTC in relation to cash flow forecasts on behalf of the agency, including obtaining information from other agency officers; developing and maintaining a relationship with the agency s Cash Coordinator (this is particularly relevant where cash flow forecasts are prepared (either partially or fully) by a shared service provider on behalf of the agency); and attending and ensuring that other cash flow forecasting staff for the agency attend QTC Cash Management information sessions. 2.3 Cash Coordinator All agencies are to nominate an officer (Cash Coordinator) who has responsibility for the broader Cash Management function of the agency. This officer is the primary point of contact with QTC for all cash management issues that cannot be resolved with the Cash Management Forecasting Officer and the primary contact for Treasury regarding Cash Management (policy) issues. The Cash Coordinator will need to have an understanding of both the operations of the agency and its cash forecasting processes. The Cash Coordinator's responsibilities include: ensuring cash management principles are applied to agency financial operations; monitoring and actioning the monthly CFAI reports provided by QTC, and ensuring that the Cash Forecasting Officer and other cash forecasting operational staff (including relevant shared service provider officers preparing forecasts on the agency s behalf) are provided with a copy of the CFAI report; endeavouring to improve the accuracy of agency cash flow forecasts, including consideration of any issues identified by the CFAI reports and escalating issues within the agency; responding to queries from QTC in relation to cash flow forecasts on behalf of the agency in the event that QTC is unable to make contact with the Cash Forecasting Officer or a satisfactory response is unable to be obtained; developing and maintaining a relationship with the agency s Cash Forecasting Officer; and attending and ensuring the relevant officers within the agency attend QTC Cash Management information sessions. Note: The allocation of the cash management and forecasting roles within the agency (including where applicable between an agency and its shared service provider) is an internal decision for each agency and will need to reflect their individual operational circumstances and be advised to QTC accordingly. 2.4 Communication Protocol (QTC and Agencies) Communication between QTC and agencies is important to ensuring that the cash forecasting process is effectively managed. For some agencies part or all of the cash forecasting process is undertaken by a shared service provider on the agency s behalf. Where this is the case, effective communication also needs to be maintained between the agency and its shared service provider in relation to the forecasts.

15 Cash Management Handbook Page 15 Communication processes between QTC and agencies: agency forecasts are to be submitted to QTC by the agency (or on the agency s behalf by their shared service provider) prior to the specified cut-off times; forecasts (including nil returns) are to be provided for each agency for both the daily and afternoon variation cut-off times; forecasts must be authorised by both the preparer of the forecast and an appropriate authorising officer; where a large transaction/estimate in the forecast raises concerns about a potential error, QTC will contact the agency s Cash Forecasting Officer via telephone to discuss the issue. If QTC is unable to contact the Cash Forecasting Officer, the Cash Coordinator will be contacted. In the event that QTC cannot contact either of these nominated officers, QTC will also escalate the issue to the Fiscal Strategy Division, Treasury. If QTC is unable to obtain an explanation from any of the abovementioned parties, the forecast will be assumed to be correct and the agency will be responsible for any forecast error and associated penalty that results; QTC will advise agencies of any issues associated with QTC Connect or QTC Cash Management that impact on its use for the submission of the daily cash flow forecasts. In the event that the systems are offline, QTC will advise agencies of the alternative process to be used to ensure that cash flow forecasts are able to be submitted by the normal cut-off times. This process will be based on the facsimile template at Appendix 2; QTC on behalf of Treasury will provide each agency s Cash Coordinator with a monthly CFAI report to assist the agency is improving its cash forecasting; and each agency must keep QTC informed of any changes to the staff involved in the preparation of daily cash flow forecasts. QTC is to be advised of changes to the Cash Coordinator as soon as possible, this includes advising of changes related to staff leave or other absences. The Cash Forecasting Officer and Cash Coordinator s details must be advised to QTC as outlined in section

16 Cash Management Handbook Page Cash Flow Forecasting using QTC Connect 3.1 Overview The objective of the QTC Cash Management Team is to determine the net position of the TGB each day and on behalf of the Treasurer to invest or borrow accordingly to minimise the General Government cash balance (i.e. the net balance of all government accounts within the set-off arrangement). As outlined in section 1.2.2, to achieve this, QTC downloads the balances of every account within the set-off arrangement (via Commbiz) to determine the starting point, and then receives daily cash flow forecasts from agencies to arrive at the TGB. As such, QTC relies heavily on agency cash flow forecasts to make borrowing and investment decisions. As a result of the superior level of investment earnings achieved by QTC (relative to the CBA) or potential borrowing costs incurred if the set-off arrangement is overdrawn, the General Government sector s cost of funds can be adversely affected by inaccurate cash flow forecasting. This is because the accuracy of agency cash flow forecasts has a direct impact on the ability of QTC to estimate the TGB s overall daily position. Agencies must attempt to forecast all transactions, not just material transactions. Note: Although there is scope to undertake transactions in the early afternoon, returns obtained are generally not as favourable as those in the earlier market. Agencies should ensure that the morning cash flow forecasts are as accurate as possible to reduce afternoon cash flow forecasting variations. Agency Cash Flow Forecasting Submission Cut-off Times: Cash Flow Forecasting Submissions must be received by QTC by no later than: 10.30am (EST) (9.30am ESDST): for daily cash flow forecasts; and 3.15pm (EST) (2.15pm ESDST): for any variances to the original cash flow. To allow QTC to ensure all forecasts have been received and processed, all agencies must submit both a morning forecast and an afternoon variation (even where this is a Nil forecast or variation). Forecasting submissions must be submitted online via QTC Connect, unless other arrangements have been agreed with QTC. If agencies wish to submit more than one afternoon variation on a given day, they must contact QTC by telephone prior to submitting the second variation. Note: Often a number of areas within an agency or a third party (e.g. a shared service provider) are involved in the provision of information for the preparation of an overall agency forecast. Where this is the case, internal communication protocols should be developed by agencies with a view to ensuring that completed forecasts reach QTC by the above deadlines (refer discussion in section 2.3). Any communication issues will be raised by QTC with agencies and Treasury in order to ensure these communication protocols are revised and updated as appropriate.

17 Cash Management Handbook Page Required Format (QTC Connect Online Submission) Daily cash flow forecasts should be submitted online via QTC Connect. Access to QTC Connect and QTC Cash Management is managed by QTC s Cash Management Team and requests for new/changed access can be made by agencies using the QTC Connect (Website) and QTC Cash Management Access form available from the QTC Cash Management Team. Use of the online forecasting system is explained in detail in the QTC Cash Management System User s Reference Guide, which is available through QTC Connect or from the QTC Cash Management Team. An explanation of the submission format is detailed below. 1. Forecasts are required for all bank accounts on a consolidated (agency) basis. A separate entry is not submitted for each bank account. One entry with the relevant cash flows for the bank accounts as a total is all that is required. Nil returns must also be provided for both the daily forecast and afternoon variation. 2. Agencies are required to submit details of daily cash flows by purpose type (refer Appendix 4). The purpose types identify different types of agency inflow/outflow transactions. 3. The forecast requires transactions for four (4) working days. The current day, and the next 3 working days. Agencies must provide projected transactions for all days on the forecast screen. QTC relies on these projections to assist in determining its money market strategies. Failure to provide reliable forward projections may adversely impact on the General Government sector s interest revenue or cost of funds. 4. Cash flow forecasts are to be classified as follows: Outflows Intra-Government (Internal) External Organisations Inflows Outflows: Intra-Government (Internal) External Organisations Are monies that will be withdrawn (debited) from the bank account/s. All outflows (material or not) are to be included whether the payments are made by Electronic Funds Transfer, system-produced cheque, manual cheque or a third party (direct debit). Monies remitted to the Consolidated Fund must be forecast by the agency as an internal cash flow. The only cash flows that do not need to be forecast are monies that CITEC take for payroll. Inflows: Are amounts of money being deposited (credited) to the bank account/s, whether by departmental personnel or third parties. All inflows (material or not) must be included whether the money is deposited by the agency itself, by Electronic Funds Transfer or direct deposit from a third party.

18 Cash Management Handbook Page 18 As requested by Treasury, the QTC Cash Management Team will, based on information provided by Fiscal Strategy Division, forecast monies appropriated by Consolidated Fund (Parent Entity) to the agencies on a fortnightly basis. Therefore, agencies should not include inflows for payroll appropriations in forecasts. QTC Cash Management Team will also forecast quarterly interest payments/receipts made to approved accounts within the facility from the Treasury Offset Account. Outflows and inflows are to be further classified into Intra-Government and External flows. Intra-Government flows are flows between bank accounts within the setoff arrangement. That is, they are flows between agencies or between bank accounts within agencies and therefore have no impact on the General Government net balance. (A list of agencies (primarily departments) within the set-off arrangement is contained in Appendix 3) External flows are flows between an agency and an organisation whose bank account is outside the set-off arrangement. Not all Queensland Government entities are in the set off arrangement. Any entity not in the list in Appendix 3 is outside the set-off arrangement. In instances where an agency has more than one bank account, amounts transferred from one account to another must be forecast on both sides (i.e. intra-government inflow and intra-government outflow). For some agencies, the majority of outflows will be by means of cheques. The agency will need to have a system in place to forecast when the payee will present the cheques at the bank. The most popular systems are the postcode method (estimates the date of deposit based on the destination postcode (e.g Day 1, Day 2) and the 60/20/20 method (i.e. 60% - day 1, 20% - day 2, and 20% - day 3) or another ratio based on historical data. Be aware of any cheques that are collected by or delivered to the payee as these are often deposited on the same day. For large cheques (i.e. in excess of $1 million) a phone call to the payee to determine when the cheque will be deposited is required. Electronic Funds Transfer (EFT) payments by contrast, will normally occur on the day processed. Subsequently, EFT is a good way of improving cash flow forecasting as well as providing cost efficiencies in comparison to cheques. 5. For cash management purposes, expenditure and collections are not important. The focus is on the cash inflows to and cash outflows from the agency bank account/s. That is, cash management is about cheques being presented, monies being deposited or electronic funds transfer transactions against bank accounts on a particular day. Although reports from the departmental ledger on cheques produced can assist in the cash management process, the departmental ledger will not contain all the necessary details for estimating cash flows.

19 Cash Management Handbook Page In estimating cash flows for each day, agencies will need to perform a reconciliation of the previous day s actual activities on the bank account versus the forecasts. Agencies should take into account: amounts expected to be presented the previous day but were not; and amounts not expected to be presented the previous day but were. 8. When there is a variance greater than $10M agencies will be required to enter an explanation. 9. To assist agencies in improving the accuracy of daily forecasting and determining the General Government sector s longer term funding requirements, a subsidiary work sheet that underlies the forecast can also be submitted to QTC with each forecast. Due to the different cash flows of individual agencies, it is not possible to provide a template for a subsidiary worksheet. However, as a minimum, this work sheet should identify key components of the forecast and allow for explanatory notes and comments to be added to explain significant flows. 10. The forecast must be authorised by both the preparing officer and an appropriate authorising officer (noting that the Cash Forecasting Officer and/or the Cash Coordinator may perform one of these roles, depending on the circumstances of the individual agency). The forecast needs to be fully authorised in accordance with the timeframes set in section The daily cash flow forecast screen allows for submission of variations that the agency becomes aware of after the submission of the original 10.30am (EST) (9.30am ESDST) forecast. QTC is able to amend daily investment and/or funding needs movements if new information is received, up until 3.15pm (EST) (2.15pm ESDST). As QTC monitors receipt of submissions, where on a given day an agency wishes to submit more than one (1) afternoon variation, a telephone call must be made prior to submission of a second variation. 12. Agencies may use the facsimile template to submit daily cash flow forecasts, only with prior written arrangement with QTC (refer Appendix 2). 13. The facsimile template is also to be used as part of the Business Continuity Plan (BCP) for the provision of daily forecast by agencies in the event that the QTC Connect or QTC Cash Management is unavailable. The required content of daily forecasts (including variations) to be submitted by facsimile is set out at Appendix 2.

20 Cash Management Handbook Page Cash Flow Forecasting Accuracy 4.1 Reporting of Cash Flow Accuracy As a result of the superior level of investment earnings and borrowing costs achieved by QTC (relative to the CBA), the General Government sector s cost of funds can be adversely affected by inaccurate cash forecasting. To provide a means of assessing and monitoring the accuracy of cash flow forecasts, QTC provides each agency (via its Cash Coordinator) with a monthly CFAI report showing the variance between actual and forecast outflows and inflows for each day of the month. The Cash Coordinator is responsible for: circulating the CFAI report to officers involved in the cash forecasting and cash management functions, this is to include the Cash Forecasting Officer and, where applicable, shared service provider officers; reviewing the CFAI report: identifying the cause of any errors: implementing procedures to mitigate the likelihood of a similar error occurring in the future; and escalating issues to agency management in accordance with agency procedures. A quarterly report on agency forecasting errors will be provided to Treasury as agreed with QTC. 4.2 Penalties for Inaccurate Forecasting To encourage accurate forecasting practices, and in recognition of the cost to Government of material forecasting errors, any agency that causes the net government bank balance to go into overdraft through poor cash flow forecasting may incur a monetary penalty. Agencies are charged overdraft costs in the event that the set-off facility is overdrawn; and the agency has either: over-estimated external cash inflows by greater than $10 million; under-estimated external cash outflows by greater than $10 million; or a combination of the above. In those circumstances, the agency will be charged the difference between the bank overdraft rate and the QTC Working Capital Facility rate on the amount of the incorrect forecast. Queensland Shared Services will issue tax invoices for any penalties incurred on Treasury s behalf. These invoices will be based on QTC s calculation of the difference between the forecast and actual outcome each day.

21 Cash Management Handbook Page 21 Agencies will be given the opportunity to show cause for each instance of major inaccuracy, which will be considered on its merits by Fiscal Strategy Division. The penalty charge may be waived if the agency is able to present a strong case demonstrating that the error was the result of exceptional circumstances genuinely beyond the agency s control. It should be noted that such circumstances are very rare. A written application should be made to the Assistant Under Treasurer, Fiscal Strategy Division outlining the particular circumstances for Treasury s consideration. In the event that an agency disputes Treasury s decision on the application of a penalty, the Director-General of the relevant agency may write to the Under Treasurer requesting a review of the decision. QTC maintains for Treasury a register of all agency forecasting errors above $10 million, including those that fall within the range where the above penalty provisions apply. The application of penalties for inaccurate forecasting will be reported to Treasury on a monthly basis. In addition to new penalties incurred during the past month, this report will include information on penalties previously invoiced by Queensland Shared Services that have yet to be paid by the relevant agency.

22 Cash Management Handbook Page Contacts TREASURY Fiscal Strategy Division Bridget Smith Manager, Budget Strategy and Coordination Tel: Government Banking Unit Will Taylor Manager, Banking and Investment Services Tel: QUEENSLAND TREASURY CORPORATION For cash flow forecasting inquiries (including queries on penalty arrangements for inaccurate forecasting): Cash Management Officer Customer & Market Solutions Delivery (QTC Cash Management Team) Tel: For other inquiries: Director, Treasury Department Fiscal Group Tel: Narrelle Lowe Manager, Customer & Market Solutions Delivery Tel:

23 Appendix 1 Page 23 Appendix 1 PARENT ENTITY CONSOLIDATED FUND REMITTANCE ADVICE Every deposit into the Consolidated Fund throughout the year is to be accompanied with the following form which is to be sent to QSS (details below). This is an important step in ensuring that amounts received into the Consolidated Fund are recorded correctly. If your Shared Service Provider processes the payments, then this form is to be sent to them, together with details of the amounts to be remitted to the Consolidated Fund. Your Shared Service Provider is then required to send this form to the QSS contact below, together with the bank EFT advice. Bank Account Details for the Consolidated Fund: BSB: Account: Please fax advice to: Queensland Shared Services (07) or to : helpqtfinance@ssa.qld.gov.au Contact Telephone:

24 Appendix 1 Page 24 AGENCY NAME: PARENT ENTITY CONSOLIDATED FUND REMITTANCE ADVICE ( to: helpqtfinance@ssa.qld.gov.au) AGENCY TRIDATA CODE: EFT DATE: / / CONTACT NAME: CONTACT NUMBER: CONTACT FAX: CONTACT Receipt type General Receipts Account Code Back-date* 30 June Y/N Administered Receipts C N Non-appropriated Equity Withdrawal C N Amount ($) Queensland Government Insurance Fund C N Income Tax Equivalent C N Dividends C N Return of GOC share capital C N Sundry Revenue C Appropriated Equity Withdrawals Rounded to nearest $000 Appropriated Equity Withdrawal (Administered) C Y Appropriated Equity Withdrawal (Controlled) C Y Return of Appropriation Funding (at year end) Rounded to nearest $000 State funded Controlled Departmental Services C Y State funded Administered Appropriation C Y State funded Controlled Appropriated Equity Injection State funded Administered Appropriated Equity Injection Commonwealth funded Controlled Departmental Services C C C Commonwealth funded Administered appropriation C Y Commonwealth funded Controlled Appropriated Equity Injection Commonwealth funded Administered Appropriated Equity Injection Commonwealth funded Administered Appropriated Equity Injection Remittance Total (equals EFT remittance) * Applicable at year end only C C C N Y Y Y Y Y Y