TSA is an armor against waste and leakage

Remarks by Malam Nasir El-Rufai, Governor of Kaduna State, at the presentation of the TSA Manual; Lagos, 08 September 2016.


In early 2015, as the electoral process reached fever pitch, there was already worrying evidence of a fiscal crisis. Oil prices were sliding, and the consequences of wrong choices in managing our external reserves and other earnings were manifesting as many state governments began to owe their workers.

Although Kaduna State was not owing, we knew it could reach such dire straits if nothing was done about the management of its public finances. As we campaigned for votes, we pondered the solutions to a problem that could become ours if we won. In the absence of any prospect of a revenue surge, it was doubly important to identify and plug sources of leakage and wastage to better conserve financial resources.


As our Transition Committee scrutinized the books prior to our assumption of office, it discovered that the Kaduna State Government and its agencies kept hundreds of atomized bank accounts. These multiple accounts were difficult to trace, and harder to audit. The balances within them were neither consolidated, nor subject to the degree of supervision expected of public finances. Nothing illustrates the atmosphere of laxity we inherited than that a government official was able to place state funds in a fixed deposit account for a paltry 1 per cent per annum interest.


We could not let this situation endure. We assumed office determined to implement TSA. In fact, it was one of the items we had identified as a quick-win, to be achieved within our first 90 days. We needed to ascertain precisely how many accounts the government operated, in which banks and who the authorized signatories to those accounts were. That required a census of accounts that was to be conducted without revealing the motive.


As we did not yet have a state cabinet, we drove this process from the Government House. On 23rd July 2015, we directed the then Accountant-General to make available a list of all bank accounts in existence for all MDAs and all entities owned by the Kaduna State Government. We also demanded the details of the authorized signatories and the last statement of account. By 27th July 2015, we had a list of 324 accounts. We now had a baseline on which to measure compliance whenever we rolled out TSA instructions.


On 6th August 2015, we announced that Kaduna State will adopt TSA by 1 September 2015. By 17th August 2015, we issued formal notices to the banks to close all KDSG accounts and remit the balances to the State TSA with the Central Bank of Nigeria. We gave the banks up to 21 August 2015 to make a copy of the remittance instruction available to us.


Although there was an appreciable degree of compliance by the banks as at the target date of 1st September 2015, it took about six weeks for our TSA to become fully operational. We closed 470 accounts and were able to consolidate balances of N24.7bn, well above even our most optimistic projections.


The TSA process brought many benefits to the state. Its implementation exposed the fact that N1.5bn of Kaduna State money was at risk; and we took steps to retrieve it, including having to accept a deposit assets swap. Months later, we discovered that a particular bank failed to either declare or remit yet another N1.5 billion – a significant sum of money. We were able to claw back every kobo of it plus penalty, interest and what we paid the whistle-blower that exposed it. The enduring benefits of the TSA include blocking fraud and wastage, reducing bank charges and instituting effective cash management and efficient allocation of scarce resources to maximize returns.


The TSA process was not without challenges. There was the issue of internal adjustments to the new fiscal regime TSA had created. We patiently had to orient our MDAs to the rigors of the TSA, to wit, that henceforth they were permitted to open only operational accounts into which only the Kaduna State Government could transfer funds. All revenue payments, no matter the intended beneficiary, went straight into the TSA.


It took a while to determine the origins of the funds swept into the TSA. But we identified and paid counterpart funds, and firmly held the line against requests for exemptions from the TSA until the framework was firmly established. We were recently persuaded to exempt the Kaduna State Water Corporation from the TSA, because it is undergoing a commercialization process under an AfDB reform programme to become an entity that has to pay its own way.


The TSA takes liquidity management to a more rational level. It gives the Executive a broad, consolidated view of revenues and facilitates planning. By centralizing collections and consolidating all revenues in one account, we needed to devise a mechanism for paying MDAs as required. We had to set up a Cash Management Unit (CMU), and train its staff, to ensure that the MDAs were properly funded. We are about to conclude the integration of the TSA with our BATMIS/SIFMIS to enable authorized government officials to access the account balances, real-time online.


But the TSA is still such a shock to established ways of doing things that we keep getting requests for exemptions. Having conceded in one case, we have not suddenly become available for turning. Whether at federal or sub-national levels, no MDA has its own funds as such. The funds belong to the government, and no segment of government can claim that atomized funds are better supervised than consolidated funds. Attempts by agencies of government to differentiate themselves to justify exemption will persist except the strong will of government to remain resolute on the matter is made clear. TSA constricts the room for discretion, and curtails the ability of public servants to spend public resources for their own benefit. It is not likely to ever be warmly embraced.


We sought technical assistance from the IMF and the Central Bank of Nigeria. Our friends at the Fund were pleasantly surprised by the swiftness of our TSA implementation. But the Fund proved to be such a strong ally, and they provided expertise from all over the world as part of the technical assistance. Indeed, the credit for the launching of the TSA Manual today must go to them. The Federal Government of Nigeria, through the Office of the Accountant General of the Federation (OAGF), had also been rolling out a TSA system at the federal level since the year 2012. The Federal Government was keen to encourage TSA adoption at the subnational level. We were happy to be the testing ground.


We learnt from the FG’s experience, and the two key mistakes that had stymied TSA rollout at the national level. The exemptions that were granted to the most cash-rich agencies such as Customs and the NNPC meant that significant funds remained outside control. The non-conduct of a census of MDA accounts prior to TSA implementation deprived the FG of a baseline to check compliance by the banks in closing all government accounts and remitting their balances.


The struggle against leakages, fraud and waste in the public sector continues. The TSA is an essential weapon in the reform armory. There is a need to adopt it nationwide as part of a new paradigm for prudently managing public finances in the public interest.


The TSA is not a sole silver bullet. For maximum impact, it has to be complemented by a raft of legislative reforms. The following laws have been passed by the Kaduna State House of Assembly:


  • Public Finance (Management and Control) Law to repeal the 1958 colonial law. This law created the TSA and mandated zero-based budgeting in Kaduna State, in addition to the consolidated revenue fund required by the Constitution.
  • Public Procurement Law
  • Fiscal Responsibility Law
  • Tax (Consolidation and Codification) Law
  • Pension Reform Law
  • Investment Promotion Law, and
  • Facilities Management Law


There are other complementary legislation we are planning to enact to entrench and enhance our public financial management system in Kaduna State. These include:

  1. Review and amendment of State Audit Law of 2004 to ensure it is IPSAS-compliant and make it lawful to undertake computer-aided audit,
  2. Budget and Planning Law to ring-fence employees of our budget and planning ministry by creating a commission that provides better conditions of service, enhanced career prospects within one MDA, and protection from service-wide posting, and
  3. Local Government Reform Law.


We were able to implement TSA and other PFM reforms as seamlessly as we did, not just because of ‘political will’ as some are apt to suggest but largely because we were sensible enough to ask for support from all quarters – national, subnational, bilateral and multilateral. We learnt a lot about tax administration from Lagos and Edo States. Several DFID programs like SPARC, NIAF and ENABLE helped us with the drafting and advocacy in respect of some of the PFM and investment promotion legislation. Firms like GEMS Consulting, Bain & Company and Deloitte have been available at short notice to bring their knowledge and experience in aid of our state government.


We are relieved that the TSA implementation went well, culminating in the event today to launch our State TSA Operations Manual. It was tough at the beginning to persuade the IMF to directly engage with and support a subnational. It was equally challenging to convince ruffled feathers in the Federal Ministry of Finance that the Kaduna State government meant no disrespect to protocols in insisting on direct IMF technical support. President Muhammadu Buhari supported our effort, believing and stating that the only way the nation will develop is when all the 36 states individually and collectively develop, gave credence to our desire for direct engagement.


The maturity and understanding of both Gene Leon (IMF) and Haruna Mohammed (FMF) made the whole experiment a success. I remain grateful to them and the Federal Ministry of Finance for taking a big chance with us. I am happy that the Kaduna State team led by our Commissioner Suleiman Abdu Kwari and his Accountant-General did not let them down.


Thank you for your attention. God Bless you all.

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