6.6 Banking
6.6.1 Introduction
This section of the Treasury Instructions relates to banking arrangements in respect of public money held in departmental and Crown bank accounts (both domestic and foreign currency). Refer to section 6.7 of these Treasury Instructions ("Trust money") for banking arrangements in relation to trust money.
Proper accounting systems must be set up and maintained to ensure that public money is properly accounted for and internal controls maintained.
6.6.2 Bank accounts
The Crown has contracted with Westpac Banking Corporation to provide the Crown's domestic banking operations. All New Zealand dollar accounts must be set up at the Government Branch of Westpac Banking Corporation unless an exemption has been granted. For Crown bank accounts an exemption is granted by the Minister under section 65R(1) of the Act. For departmental bank accounts the Treasury or the Minister, under section 65S(1) of the Act, grants an exemption.
Foreign currency bank accounts and non-Westpac New Zealand dollar bank accounts may be opened under the terms of a Direction for Foreign Currency Departmental Bank Accounts and a Notice of Delegation Regarding Crown Bank Accounts issued by the Treasury. With respect to Crown bank accounts, foreign currency accounts may be opened in accordance with the Notice of Delegation Regarding Crown Bank Accounts issued by the Treasury.
Departmental bank accounts are primarily the responsibility of departments. All Crown bank accounts are the responsibility of the Treasury (refer section 6.5.2 of these Treasury Instructions "Authority to operate Crown bank accounts"). Crown and departmental bank accounts operate under the authority of the sections in Part 6 of the Act.
All payments (whether by cheque, tape, electronic funds transfer etc) out of a bank account are to be authorised by two account signatories, unless the Treasury approves a specific exemption. Appointment of account signatories (who may be specified officers or classes of officers), and changes thereto, are managed by the department under a direction by the Treasury.
Cheques drawn on a departmental bank account or a Crown bank account must have the name of the department printed on them.
Section 65U(4) provides that where money has been paid into a Crown or departmental bank account in error, or in excess of the amount required for the purpose for which it was paid, it may be paid out of that bank account to the person entitled to the payment. This section could be applied to refund payments, where the refund arises due to overpayment. Note that such refunds are not expenses and therefore do not require an appropriation; they should be accounted as reductions in revenue.
6.6.3 Departmental bank accounts
Treasury's prior approval must be obtained before opening or closing Departmental bank accounts (including sub-accounts). In the case of foreign currency departmental bank accounts the Treasury will issue Directions for Foreign Currency Departmental Bank Accounts, pursuant to section 65T of the Act, governing the terms and conditions under which such accounts must operate.
A positive balance must be maintained in New Zealand dollar departmental bank accounts at all times. Sub-accounts may go into overdraft provided the net position remains positive. Foreign currency bank accounts must not be overdrawn. Trust bank accounts must be managed under section 6.7 of the Treasury Instructions ("Trust money").
Departmental receipts and payments are paid into, and out of, departmental bank accounts. When establishing the account structure consideration should be given to cash forecasting requirements, cost of maintenance, size and nature of business, discounting facilities offered, volume of transactions and organisation structure. The bank account structure must be agreed with the Treasury.
The combined balance of departmental bank accounts operated by a department must never be overdrawn. Any cash balances held in New Zealand dollar departmental bank accounts at the Government branch of Westpac must be invested by the Treasury overnight. Departments may receive, on a periodic basis, payment from the Treasury for overnight cash balances held in departmental bank accounts.
No foreign currency bank account must be overdrawn at any time. Departments that earn interest on foreign currency departmental bank accounts must comply with the Direction for Foreign Currency Departmental Bank Accounts issued to it.
6.6.4 New Zealand dollar Crown bank accounts
Section 65U of the Act requires all receipts of public money to be paid into a Crown bank account or a departmental bank account. Departmental revenue is earned whenever a direct exchange relationship with a department occurs (i.e. when a department provides a good, service, right or money, for which it receives some form of payment or a right to payment). Departments also act for the Crown in respect of non-departmental activities and may therefore collect receipts for the Crown in respect of non-departmental revenue. Examples of such receipts are taxes, fines, duties, levies, royalties and infringement fees. Departments must deposit all receipts from Crown activities into a “Crown receipts bank account”.
Although the responsibility to operate Crown bank accounts rests with the Treasury, some Crown bank accounts will be able to be operated by departments. The authority to operate Crown bank accounts results from the issuing of a formal Notice of Delegation Regarding Crown Bank Accounts by the Treasury in accordance with section 65R of the Act and section 41 of the State Sector Act 1988. Departments must at all times comply with the terms of any such Notice.
Separate bank accounts will be established for depositing Crown receipts and making payments on behalf of the Crown. This separation ensures the integrity of the Controller function and Parliamentary supply, as amounts received will not be able to be directly used for payments, but will instead be remitted to the New Zealand Debt Management Office.
A positive balance must be maintained in each Crown bank account (or sub-account) operated by a department at all times unless the Notice of Delegation Regarding Crown Bank Accounts permits otherwise.
Departments must not undertake transfers between Crown accounts. If a transfer is necessary then the department must notify the Treasury as to why it is necessary and the Treasury will arrange it for them. One example of a transfer may be where a department has received funds from another party into the wrong bank account and the department needs the ability to transfer them to the correct account.
Crown bank accounts must be reconciled at least monthly.
At the end of the financial year any money remaining in a Crown bank account managed by a department must be returned to the main Crown bank account managed by the New Zealand Debt Management Office. Sufficient funds must remain in the Crown bank account to cover any unpresented cheques or other known withdrawals relating to the financial year just completed. Sufficient funds must also remain in the Crown bank account to enable the payment of any outstanding obligations that are to be met from that account.
6.6.5 Foreign currency Crown bank accounts
Foreign currency Crown bank accounts may only be opened pursuant to a Notice of Delegation Regarding Crown Bank Accounts and at banks listed in the department's policy document on the Management of Foreign Currency Transaction Exposure.
6.6.6 Foreign currency holdings in departmental and Crown bank accounts
Departments must hold no more foreign currency than is required for normal business operations. Approval to open a foreign currency departmental or Crown bank account should not be sought unless such an account is essential to the efficient conduct of that business.
