CASH MANAGEMENT BEST PRACTICES FOR MUNICIPALITIES MAF ENGAGEMENT Oudtshoorn C. Mapeyi 05 March 2019

Presentation Outline Introduction and Legislation Cash Context or Drivers - Revenue Cash Context or Drivers – Expenditure Cash Context or Drivers – Institutional Arrangements Cash Management Best Practice Cycle Cash Management Requirements Way Forward Go to Insert > Header & Footer > Enter presentation name into footer field

Introduction and Legislative Underpinning Banks Act, 1990 (Act 94 of 1990) RSA(1996) MFMA(2003) Other legislation POLICY FRAMEWORK Cash Management and investment Policy. Ratio or Liquidity Policy. Section 62(1)(a). Section 11. Section 13. Section 46(5) Section 64 Section 65 Service Delivery mandate Section 153 Go to Insert > Header & Footer > Enter presentation name into footer field

Cash Context or Drivers Cash management Billing- (Accurate, Data profiling, Meter reading, Sending of accounts, Vendor management ) Grant allocation – (Monitoring the unspent grants, adequate cash for committed projects) Traffic Fines – (Collection of fines, Admin mark, handing over, warrant of arrest) Accounts receivables – (process receipts, consolidation of accounts, cheques or cash and collection) Working Capital Manage – (short term investments, liquidity management, available funds and cash reserves) Go to Insert > Header & Footer > Enter presentation name into footer field

Cash Context or Drivers Cash management Payroll – (Payroll payments) Purchases – Commitments details and goods and services purchases Interest and Redemption – (monthly, bi-annual payments for interest & redemption) Accounts payables- (processing of payments and cash requirements) Third Party and other payments – (Bulk purchases and statutory payments) Go to Insert > Header & Footer > Enter presentation name into footer field

Cash Context – Institutional Arrangements Cash management Cash Office - (Petty cash and cash collection or receiving) Budgetary Controls - (cash forecasting & control) General Ledger – (Cash transactions and posting) Banks – (Bank Statements) Management Team – (Cash flow monitoring & forecasting) Audit – (Reconciliations, assurance and control environment) Go to Insert > Header & Footer > Enter presentation name into footer field

Cash Management Best Practice Cycle Online receipting. Regular bank recons. Integrated bank account with sub-ledger. Cash Management objectives – Short-term liquidity & long term funding requirements Information Systems People – skills, regular checking of bank account Measures – Timeous reporting, accuracy of forecasting, return on capital investments. Controls- Policies, Procedures, bank liaison, internal controls, limits Processes – Record & manage receipts and payments. Institution – centralized cash office Perform recons. Perform period ends closing and report. Manage cash position. Minimize borrowing. Forecasting for cash requirements. Management of petty cash. Go to Insert > Header & Footer > Enter presentation name into footer field

Cash Management Best Practice Requirements Maintain cash control mechanisms Segregate cash management from billing and expenditure sections. Centralize revenue collection. Establish revenue protection Security and passwords features for payment Perform bank reconciliations’ Map cash collection with payment cycles. Match unallocated deposits within 1 day. Regular recons of all cash book. Access to online banking systems. Maintain a petty cash system Report and manage cash balances Report cash balances daily. Daily recording of cash into financial system. Daily cash up and sign offs. Manage cash surpluses Short term cash requirements vs. cash forecasting daily. Forecast Cash Requirements Consolidate and manage cash forecast requirements. Monitor bank facilities to minimize interest payments and maximize revenue. Cash forecast for 6 to 12 months. Go to Insert > Header & Footer > Enter presentation name into footer field

Way Forward

Key Issues of consideration on best practices on cash management Send accounts timeously to single address. Consolidation of accounts. Regular meetings with Post Office regarding accounts. Centralize customer process to ensure accuracy and completeness of consumer information. Minimize duplication of consumer data. Changes to customer profile must be centralized and regularly checked and monitored. Systems notification on duplications. Any inactive or deleted customer, ensure no outstanding balances and approval thereof must be obtained from management. Automatic flagging and reporting on high risk debtors. Aged debtors older than 60 days should be reviewed regularly. Enforce credit control and debt collection policy and by-law. Segregate the debt amongst officials and monitor daily ( e.g. Households, Government, Deceased, Insolvent, Business, Rental Stock) . Go to Insert > Header & Footer > Enter presentation name into footer field

Key Issues of consideration on best practices on cash management Daily receipting of unallocated deposits.( Electronic matching where possible). Electronic interface between cash points where possible. Dropping daily takings into a drop box to mitigate cash transit heist. Interface control of total cash with cashiers daily and sign off with segregation of duties. Regular supervision of cash points and unmatched deposits. Prompt response on queries on accounts receivables and payments . Avoid any delays and disputes on debt and avoid unnecessary interest on payments. Effective helpdesk as a central point for queries and also track the response time. Have cash automated process and avoid manual interventions as much possible. Go to Insert > Header & Footer > Enter presentation name into footer field

Key Issues of consideration on best practices on cash management Check and monitor the cash flow daily and identify receipts and payments that are due to ensure there is a sufficient cash available. Perform weekly, monthly and quarterly cash flow forecasting. Weekly identify projects to be funded through all the funding sources such as grants, borrowings and own revenue. To ensure there is cash available per funding source. E.g. short term investments. Regularly review the borrowing capabilities and debt exposure of the municipality. Advisory services – internal audit Go to Insert > Header & Footer > Enter presentation name into footer field

Christopher Mapeyi Fiscal Policy Cash Management 483 6122 Christopher.Mapeyi@westerncape.gov.za