PUBLIC FUND INVESTING
MAKING THE CITY’S
MONEY GROW - SAFELY
July 2015
Cindy Kendall,
Extension Specialist
Iowa State University/Iowa League of
Cities
515-290-1811
ckendall@iastate.edu
Cash Flow--Who Cares?
• What happens if I do nothing?
– Safe when at the bank due to FDIC and
State pooling requirements
– Advantage to using Purchase or credit
cards?
– 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 today?
Don’t play Tug of War
With ARs
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? And what is the purpose of using it?
– Cash flow is the activity of revenues and expenditures
though out any given period.
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
General
Road Use Tax
Water
Sewer
Total
Amount
2,000
5,000
10,000
3,000
20,000
% of
Ownership
0.10
0.25
0.50
0.15
1.00
Interest
54.96
137.41
274.82
82.45
549.64
549.64
Investment Accounting
Pitfalls
Investments are not expenses
• When you make an investment (like a CD)
– Debit : Investment Account
– Credit : Cash
• When you cash an investment (to spend)
– Debit : Cash (principal and interest)
– Credit: Interest earned account
– Credit: Investment Account
Savings Accounts Accrue
Interest
• Putting money from checking into a
savings account is NOT a transfer
– Debit: Savings Account (an investment)
– Credit: Checking
• At end of month the interest should be
recorded as:
– Debit: Savings Account
– Credit: Interest earned account
An Investment is not
necessarily a reserve
• Council should designate reserves by
resolution (ie: equipment reserve)
• Both operating and reserve funds can be
invested- know what you are investing
• ALWAYS include all investments, savings
and checking accounts on reports to the
Council
Cash vs. Investments
• What kind of money are you investing?
– Operating vs Reserves – watch length
– Bond funds-watch those IRS regulations
•
•
•
•
Arbitrage
Penalties
Bond Covenants
Iowa Code limitations
– State Treasurer’s Website
Tools for Investing
– 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
Charts and Graphs
Date
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)
Cash Flow
Charts and Graphs (cont)
Cash Flow Chart
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
Investment Charts
Value in 1,000s
Types of Investments as of _______
180
160
140
120
100
80
60
40
20
Checking @interest
Time Certificates of
Deposit
T-Bills
Type
Pooled Investments
Investment Charts by
Location
IPAIT
23%
WellsFargo
5%
USBank
72%
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/IPAIT
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!!!