FINANCE/TREASURER AND PUBLIC FUND INVESTING July 2013 Cindy R. Kendall, Extension Specialist Iowa State University/Iowa League of Cities

Cash Flow--Who Cares? n 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) n What are idle Funds? – Cash on hand (in checking or savings account) not currently needed for expenses. n 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. n What is Cash Flow? – Cash flow is the activity of revenues and expenditures though out any given period.

n What is the purpose of using Cash Flow? n Can it only pertain to Cash measurements?

Cash Flow Methods n By Fund n By Date n By Type – Revenue n Taxes vs fees vs state payments – Expenditures n By Program n By Department n By Cycle n 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 n All of the Above

Cash vs. Investments n Liquidity – The availability of funds from an account or conversion of an investment to secure cash. n 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

Cash vs. Investments n What kind of money are you investing? (cont) – Bond funds-watch those IRS regulations n Arbitrage n Penalties n Bond Covenants n Iowa Code limitations – State Treasurer’s Website

Helpful Methods for Investments – Interest on Checking n Negotiate banking services – Timing the length of your investment n Banking Calendars n Cash flow charts n 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

Charts and Graphs

Charts and Graphs (cont)

Investment Charts

One Magic Formula n 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, ,074. – 55,617. = $122,498.

Where does one start??? n Historical information-Get the big picture before you look at the pieces n Magic formula for liquidity: – 2 yr history n Find lowest balance over the last 2 yrs n +(add) the smallest monthly revenue amount in 2 yrs n -(subtract) the highest monthly expense in last 2 yrs n Discussions with Departments/Contractors n Discussions with Banker/Treasurer

Other Software Options n Other forms of spreadsheets n Software as simple as MS Money or Quicken n IPAIT n Complex packages – Trace your cash and investments – Help you forecast cash needs n Patterns – Know when you get what and when you’ll spend $$

DANGER!!! BEWARE!!!