finance/treasurer and public fund investing july 2013 cindy r. kendall, extension specialist iowa...
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FINANCE/TREASURER AND PUBLIC FUND INVESTING
July 2013
Cindy R. Kendall,
Extension Specialist
Iowa State University/Iowa League of Cities
515-290-1811
Cash Flow--Who Cares?
What happens if I do nothing?– Cash is safe in the bank due to FDIC and State
pooling requirements– So what if I don’t get around to doing today’s
deposit?– What’s the big deal if I don’t get the water shut
off at that delinquent account today?– Purchase or credit cards get the bills paid, is
there any advantage to negotiating the fee and schedule?
Cash Flow--Who Cares? (CON’T)
What are idle Funds?– Cash on hand (in checking or savings account) not
currently needed for expenses.
What is Cash Float?– The balance in an account which has been pledged (a
check written) but not yet needed (the check has not been presented to a bank for payment.
What is Cash Flow?– Cash flow is the activity of revenues and expenditures
though out any given period.
What is the purpose of using Cash Flow? Can it only pertain to Cash measurements?
Cash Flow Methods
By Fund By Date By Type
– Revenue Taxes vs fees vs state
payments
– Expenditures By Program By Department By Cycle
By Bank Account– Electronic Banking– ACH-Automated Clearing
House used for debits and credits against another account.
– Wires-same day debits or credits on another bank
– Sweep Accounts-account which is cleaned out at 2:30 and returned the next day in order to earn one day’s interest
All of the Above
Cash vs. Investments
Liquidity– The availability of funds from an account or conversion
of an investment to secure cash.
What kind of money are you investing?– Co-mingled Funds: A mixture of fund balances used to
create a larger balance without loosing identity of ownership.
– Pro Rated Interest: The allocation interest earned on an investment or interest bearing account which is made up of various funds. This allocation is usually based upon ownership of balance.
Pro Rating Interest
Fund Amount% of
Ownership Interest 549.64General 2,000 0.10 54.96Road Use Tax 5,000 0.25 137.41Water 10,000 0.50 274.82Sewer 3,000 0.15 82.45Total 20,000 1.00 549.64
Cash vs. Investments
What kind of money are you investing? (cont)– Bond funds-watch those IRS regulations
Arbitrage Penalties Bond Covenants Iowa Code limitations
– State Treasurer’s Website
Helpful Methods for Investments
– Interest on Checking Negotiate banking services
– Timing the length of your investment Banking Calendars Cash flow charts Discussions with Departments/Contractors
– Gantt Chart: A chart to show a schedule for a project.
– Other information-electronic banking and Treasurer of State Web Site
– Flexible CDs
General Fund Cash Balance
0 0 0 0 0 0 0 0 0 00 0 0 0 0 0 0 0 0 0
264079.1
140954
327955.31
601978.91
481449
1401008.92
966776
1134964.859
848979.806
-80225
953184.7052
465730.89
1023425.864
-200,000
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
93 94 95 96 97 98 99 00 01 02 03 04 05
Fiscal Year
Yea
r E
nd
Bal
ance
ACTUAL
TREND
Charts and GraphsDate Description Revenues Investments Expenses Balance
1-Jul 213,028.00
July 19,449.00 (43,687.00) 188,790.00
Aug 19,074.00 1,000.00 (22,453.00) 186,411.00
Sept 21,083.00 (1,000.00) (47,453.00) 159,041.00
Oct 297,414.00 (22,453.00) 434,002.00
Nov 20,283.00 (22,453.00) 431,832.00
Dec 20,483.00 (35,416.00) 416,899.00
Jan 21,458.00 (22,403.00) 415,954.00
Feb 20,158.00 (23,403.00) 412,709.00
March 277,914.00 (22,403.00) 668,220.00
April 40,695.00 (23,403.00) 685,512.00
May 20,233.00 5,000.00 (22,403.00) 688,342.00
June 19,908.00 (55,617.00) 652,633.00
Totals 798,152.00 (363,547.00)
Charts and Graphs (cont)
0
100000
200000
300000
400000
500000
600000
700000
800000
Cash Flow Chart
Investment Charts
Types of Investments as of _______
-20406080
100120140160
Checking @interest Time Certificates ofDeposit
T-Bills Pooled Investments
Type
Valu
e in
1,0
00s
Investment Charts
USBank72%
WellsFargo5%
IPAIT23%
Investments by Location
One Magic Formula How to determine liquidity (over the last two/three years is a good idea):Look at the lowest cash balance + Add the smallest amount of monthly revenue– Subtract the highest monthly expense
Presto: $159,041. + 19,074. – 55,617. = $122,498.
Where does one start???
Historical information-Get the big picture before you look at the pieces
Magic formula for liquidity:– 2 yr history
Find lowest balance over the last 2 yrs +(add) the smallest monthly revenue amount in 2 yrs -(subtract) the highest monthly expense in last 2 yrs
Discussions with Departments/Contractors Discussions with Banker/Treasurer
Other Software Options
Other forms of spreadsheets Software as simple as MS Money or Quicken IPAIT http://www.ipait.org Complex packages
– Trace your cash and investments– Help you forecast cash needs
Patterns– Know when you get what and when you’ll spend $$
DANGER!!! BEWARE!!!