Treasury Today Country Profiles in association with Citi

Abu Dhabi Department of Finance

Abu Dhabi Department of Finance, Winner, Best in Class Treasury Solution in the Middle East

Mohd Abdulla Jaber Al Ali, Abu Dhabi Commercial Bank, Salah Mohamed Al Weswasi, Abu Dhabi Department of Finance and Shadi Abu Hijjleh, Abu Dhabi Commercial Bank

Not only has the Department achieved demonstrable savings together with an increase in investment yield of over $188.6m each year, but financial oversight and efficiency has been enhanced substantially.

Photo of Mohd Abdulla Jaber Al Ali, Abu Dhabi Commercial Bank, Salah Mohamed Al Weswasi, Abu Dhabi Department of Finance and Shadi Abu Hijjleh, Abu Dhabi Commercial Bank.

Salah Mohamed Al Weswasi

Executive Director of Policy and Financial Systems

The Department of Finance (DoF) was established in 1962, and it plays a fundamental role in providing Abu Dhabi government entities with best-in-class financial services and specialised solutions as well as managing available resources efficiently.

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The challenge:

Traditionally, each government entity in Abu Dhabi held a number of accounts, and requested funds from the DOF as required. But the DOF lacked the ability to track in detail the amount that was allocated to each department, making it difficult to monitor budgets and ensure accountability for how funds were spent. Furthermore, government entities did not routinely return surplus funds to the Department, resulting in excess cash being held locally across a large number of banks and accounts. The DOF therefore embarked on a project – part of a wider government initiative towards transparency, accountability and efficiency – to make more efficient use of government funds, improve financial oversight and devolve budget responsibility to individual departments.

The solution:

As part of its strategic plan and in line with Abu Dhabi Government strategy to decentralise procedures and bring about greater efficiency, the DoF has developed a comprehensive solution, and introduced a Treasury Single Account (TSA). This has enabled the Abu Dhabi government departments to independently utilise their respective budgets, while optimising financial resources management.

Under the TSA, departments open a zero balance account, endorsed by the DoF, to execute all payments from. The required funds to meet all payments are automatically transferred from the DoF central account, resulting in a zero balance at all times. Thus surplus cash is not scattered across various accounts but can be professionally managed. The implementation of TSA will not only increase the financial independence of the different departments, but also allows the DoF to move from an executing role towards a more regulatory and policy-making one.

By handing over responsibility for making their own payments, departments will become fully accountable with regard to expenditure and budgeting policies. Departments will operate a dedicated bank account for all receipts, including: collected fees, returned payments, receipts from settled imprest and any other receipts. Accounts for revenue collection will also be opened by departments and the balance of all revenue accounts will be regularly transferred to the DOF’s central revenue account.

The concept will be applied to all entities providing government services and are funded by Abu Dhabi government by regular budget as the major source of income. Already the new structures have now been rolled out to around 40 government entities and departments, with the implementation of a further 24 entities over the course of 2015-6.

“There is now a standardised accounting approach across all 64 entities that are part of the TSA (Treasury Single Account) initiative,” says Salah Mohamed Al Weswasi, Executive Director of Policy and Financial Systems Sector at the Department of Finance. “This has facilitated easier reporting and auditability across both the Department of Finance and participating government entities.”

Best practice and innovation:

This is a pioneering project not only for the way that funds are accounted for, budgets monitored and payments processes standardised in Abu Dhabi, but it provides a blueprint for other governments in the GCC. Following the initial project, the Department of Finance conducted a survey in which all entities that had implemented the TSA participated. The survey covered issues such as liquidity management, payments efficiency, quality of communication with the Department of Finance, transparency, internal control and reconciliation. The feedback was very encouraging, with a satisfaction rate of 81% compared with the target of 80%.

Since centralising cash and investing in line with government policy and centralising the payments process, the returns are now higher, in addition to enhanced risk management and better use of resources.

Key benefits:

  • Reduction in bank charges. The number of bank accounts has been halved, from around 189 to 83.

  • Cost savings.

  • ROI.

  • Productivity gains.

  • Process efficiencies.

  • Yield enhancement.

  • Improvements in governance and accountability.