The State’s financial situation was very poor. There was a lack of money and no cost control systems. The Ministry of Finance had bank accounts for tax collection and other revenues. Each ministry had its own bank account for expenses.
Every morning each ministry applied for funds to pay their bills. A special committee at the Ministry of Finance reviewed the applications and transferred approved sums to the ministries’ bank accounts from the Ministry of Finance’s bank account. Often the Ministry of Finance’s bank account was empty while the ministries’ bank accounts had healthy cash balances.
To improve this inefficient cash management system the idea of setting up the State Treasury unit in the Ministry of Finance was developed. In 1995, a special team was formed to set up the new State Treasury payment system and to develop cash flow management functionality.
Each regional office had its local payment system. Their task was to channel the ministries and other State’s agencies’ payments to Eesti Ühispank, Põhja-Eesti Pank and Hoiupank (the banks) through the banks’ payment programmes, and manually check budget limits and whether the payments were lawful.
Each State agency had to submit all its outgoing payments (filled in on a special paper form) to a regional office. In addition, copies of all invoices had to accompany outgoing payments.
Once a month the regional offices sent information about outgoing payments to the main office. Based on this information a monthly report was prepared that showed how much was spent by whom and for what.
In Tallinn, the ministries and agencies started to send their outgoing payments directly to Eesti Ühispank and Hoiupank (the banks) through the banks’ payment programmes for customers. Before the bank settled the payments, each payment had to be approved by the State Treasury.
The State Treasury downloaded all payment details into its payment systems for the following checks:
- Has a State entity booked enough funds for its outgoing payments for the day (i.e., request of funds)?
- Does a State entity have a budget limit for such payments and, if yes, what is the outstanding balance of the unused budget limit?
- For payments relating to purchases and big investments, has the State entity provided documents and contracts for procurement controls?
- Is there sufficient unused monthly expenditure limit for the total amount of outgoing payments?
In 1998, preparations for merging all the regional payment programmes began in order to use a single programme for all payments and to be able to generate daily reports. This went live at the beginning of 2000.
In 2003, a new internet-based programme was launched for accounting for the State’s revenue. All information about incoming payments was automatically sent to the State Treasury by the banks.
In addition to Eesti Ühispank (now SEB) and Hansapank (merged with Hoiupank and now Swedbank), two more banks Optiva Pank (now Danske Bank) and Nordea Bank (merged with DNB, now Luminor) were added to the State’s payment systems.
By 2005, all the regional offices had been closed down.
During the period 2003 to 2008, the State Treasury used three programmes:
- A programme for receiving payment details from State entities, for payment controls and for sending payment files to the banks for settlements and for reporting (used only by the State Treasury, no access for the State entities);
- An internet-based programme for presenting details of the State’s revenues (except taxes) and generating reports (incl. state budget outcome report, information on expenditures was imported from the previous IT-programme). This programme was used by State entities and the State Treasury.
- A programme for managing the State entities credit and debit cards.
In 2009, a new internet-based payment programme (the e-State Treasury system) was launched to replace the three old programmes.
The e-State Treasury system enables:
- State entities’ following on-line of information on incoming taxes, fees, penalties and other revenues and downloading from their accounting systems or inserting manually outgoing payment details (including foreign currency payments);
- State entities’ using different type of accounts based on the nature of revenues and expenditures (e.g. for grants, budget expenditures, different type of revenues);
- Automatic controls on the availability of budget limits and pre-booking of funds;
- The budgetary department of the Ministry of Finance entering state budget limits in the system. (The State Treasury and the State entities cannot insert or change budget lines and limits.);
- Internal payments between State entities; internal deposits and overdraft loans;
- Reporting (incl. the cash-based state budget outcome report);
- Management of debit and credit cards.
The State Treasury has gradually been able to reduce the extent of manual controls (e.g. checking procurement documents).
It should be noted that heads of State entities are responsible for their own payments.
During 2011-2012, central and general government sectors’ financial reserves were consolidated into the TSA. State-owned foundations’ bank accounts were closed, and their cash balances were transferred to the e-State Treasury system in 2011. The Estonian Health Insurance Fund’s bank accounts were included into the TSA system in December 2011, and the Estonian Unemployment Insurance Fund’s bank accounts in January 2012.
In 2012 the State Shared Service Centre was established. It is responsible for accounting, salaries and personnel services. Most of its tasks are carried out on the new common financial accounting platform (SAP). SAP was launched for all ministries and agencies in 2013. Budgetary limit controls are automatically carried out on the platform and entities’ outgoing payments forwarded to the e-State Treasury system. The State Treasury’s role is to channel incoming and outgoing payments to state entities. It is no longer responsible for preparing the budgetary outcome report that is also generated on the new platform.
2018 to present
In autumn of 2018 the State Treasury ended cooperation with Danske Bank. In about a year, in autumn of 2019, LHV Pank joined the e-State Treasury system.