Course Framework for Effective Cash Flow Management

Transcription

1 Date: 1 to 3 November 2017 Venue: The Dunes, Arniston Western Cape Facilitator: Deon van der Westhuizen Course Framework for Effective Cash Flow Management UPDATED September 2017

2 Effective cash flow management 2017 COMPILER:- Deon van der Westhuizen School for Public Leadership and Western Cape Government, Bellville Park Campus, University of Stellenbosch Lead facilitator and co-facilitators as approved by SPL This module focuses on Cash flow management, liquidity and sustainability. Presenter/s and resources The course material in the participant s guide Deon van der Westhuizen NQF 6 CREDITS 12 Module title and Unit standard title Effective cash flow management in municipalities Teaching load Assessment Test Individual assignment 20 hours contact session, 40 plus hours off campus on assignment and implementation of best practices provided. Questions from the contact session material and presentation will be used to compile a 50- mark paper with a limited time of 120 minutes. Due 4 weeks after contact to be confirmed. Please note that participants that choose not to complete the assessments will receive a non-accredited certificate of attendance only. Participants that wish to qualify for the accredited course certificate need to complete both assessments and be declared competent in both.

3 1. INTRODUCTION The goal of the training is to ensure capacity building in municipalities and Provincial Treasury of the Western Cape for the improvement of cash management to ensure compliance prudent for financial management and effective leadership. This would require effective policy development and implementation consistent with the relevant National and Provincial legislative prescripts. To realise this, the following objectives are set for this intervention: To assist municipalities to compile and/or establish a best practise cash management policy in the absence of a national framework in terms of Chapter 3(13) of the MFMA to improve cash flow planning, financial management and reporting, leadership, good governance and performance management; Assist with the development of a comprehensive borrowing framework for the provision of financing applying specific financial management techniques; Establishment of a banking development framework to assist with optimal utilisation of the bank tender specifications and services to improve cash flow management, financial accounting transactions and reporting; Effective internal structure (Budget Treasury Office) to ensure skill and knowledge enhancement of both internal (Provincial Treasury) and external staff (municipal) to ensure compliance and effective cash management and reporting; To strengthen the risk management capacity of the municipalities by ensuring adherence to standardised documented business processes and linkage to the BTO structure; and To train officials within both the Provincial Treasury as well as the municipalities in the Western Cape Province to properly comprehend, interpret, offer opinion and manage municipal budgets. The following subject areas are covered: a. Statutory and legislative framework governing Cash Management b. National Treasury Circulars c. Key concepts (including Bank Reconciliations and Cash Flow Statements) d. Cash and investment management policy framework e. Borrowing framework f. Banking development plan g. Funding and reserves policy framework h. Budget and Treasury Office (BTO) structure supporting cash management i. Risk management capacity within the cash management environment Cost effective cash management versus affordability

4 j. Linking cash management to the budget k. Credit control and debt collection as a cash enabler l. Cash management planning, monitoring and control m. Linking cash management to the financial cycle 2. OUTCOMES OF THE MODULE The participant that encounter the module for the first time is assumed to work in close proximity to, or is responsible for CASH FLOW MANAGEMENT in their public sector organisation. This document will set out a framework for the module and the reading expected from students partaking in the study of EFFECTIVE CASH FLOW MANAGEMENT. The following outcomes will be met during the assessments and the learning will take place via contact session: a. Interpret and understand the statutory and legislative framework governing Cash Management. b. Interpret and apply key concepts identified in the National Treasury Circulars. c. Compile accurate Bank Reconciliations and Cash Flow Statements that forms the cornerstone of effective Cash Management. d. Compile and establish a best practice cash management policy in the absence of a national framework in terms of Chapter 3(13) of the Municipal Finance Management Act (MFMA) to improve cash flow planning, financial management and reporting, leadership, good governance and performance management e. Develop a comprehensive borrowing framework for the provision of financing while applying specific financial management techniques f. Establish a banking development framework to assist with optimal utilisation of bank tender specifications and services to improve cash flow management, financial accounting transactions and reporting g. Develop an effective internal structure (Budget Treasury Office) to enable skill and knowledge enhancement of both internal (Provincial Treasury) and external staff (municipal), to ensure compliance for effective cash management and reporting h. Strengthen the risk management capacity of municipalities by ensuring adherence to standardised documented business processes and linkage to the BTO structure. i. Review and analyse key indicators and benchmarks that supports long term viability and sustainability of public sector entities.

5 3. ASSESSMENT CRITERIA AND METHOD The course is an accredited course and formal controlled assessment is therefore required. ASSESSMENT CRITIERIA Through the assessment, each participant must individually prove that he/she can fulfil the set outcomes and apply the knowledge of, insight and skills in CASH FLOW MANAGEMENT in a municipal work environment in general and his/her own work in particular. For successful completion, the average of all assessments must be a minimum of 50%. CLASSROOM ACTIVITY (50%) Questions from the contact session material and presentation will be used to compile a 50-mark paper with a limited time of 120 minutes. The test will be web-based, in the form of a multiple question and answer format. It will be completed during the contact session, and marks will be available immediately after the completion of the test. HOME ASSIGNMENT (50%) A written individual assignment will be submitted and will be used to assess outcomes. The case study will be municipal specific. Introduction, discussion and conclusion not longer than 10 typed pages (1½ spacing). LEARNING MATERIAL The prescribed material will be available on the web, in the form of documents, templates, best practices and video links. PowerPoint slides used will be made available on the SPL platform. METHOD OF PRESENTATION Contact session. The purpose is to provide a general orientation to the course; and focus on the practice of enterprise risk management and combined assurance, challenges and suggested best practices to role-players. Various concepts and themes will be covered in the material that follow, intended to familiarize the participant with the requirements of best practices like the COSO model, the King Codes, the new risk management framework of National Treasury. 4. COURSE MODE AND SCHEDULE The schedule provided herewith serves to accommodate the allocation of time per objective and per topic proportionally to the contact hours session only whilst the participant need to allocate time for the completion of the assignment in accordance the outcomes required for the

6 assignment instructions. The completion of the assignment will require the participant to make use of the material provided via a weblink. The following table provides a framework for completing the course: Cash flow management Objective & theme Introduction Plenary: Introduction of the theme Breakaway session: Questions & case studies Plenary: Feedback session Outcomes of the course, general orientation and context. Outcome 1: IDP and cash flow management a. Exploring SDBIP, IDP. b. Linking planning to cash flow management. Outcome 2: Understanding the legislative requirements, circulars included. a. Exploring the Systems, Act, Structures Act, MFMA. b. Exploring the requirements relating to the circulars issued by Provincial Treasury. Day 1 8h30 to 10h30 Outcome 3: Financial analysis as a tool to effective cash management a. Analysis of liquidity ratios. b. Analysis of debt ratios, as well as working capital ratios. c. Exploring the elements of financial sustainability of a municipality. d. Monthly commitments and CFA linked to BSAC and C schedules. Outcome 4: Cash and Investment management Policies and framework a. Exploring the content of a cash management policy b. Exploring the content of investment management policies, and investment options. c. Assessing the Cash Flow (Focus Areas) d. CFA opening balance and AFS Cash Flow Statement Outcome 5: Borrowing framework a. Borrowing ratios b. Exploring different financing options Day 1 11h00 to 15h00 Day 2 8h30 to 9h00 Day 2 9h30 to 12h00 Group exercise and feedbacks Group exercise and feedbacks Group discussion exercises

7 Annuity loans Structured loans Bonds c. Exploring interest rate swaps, and their benefits. d. Understanding the use of a sinking fund to settle long term annuity loans. Outcome 6: Banking development plan a. Differentiating between:- Financial Community, Credit rating agencies, Municipal officials Outcome 7: Funding and reserves framework a. Exploring budget assumptions and different costing models to budgeting. b. Provision for debtors not collected c. Income from investments and other sources. d. Cash funded versus non-cash funded reserves. Outcome 8: BTO structure supporting cash management a. Cash management within the BTO structure b. Cash Management: Financial Sustainability (Linked to Monthly Reporting Section 71) Circular 71 of NT: Sustainability Ratio, Debt/ total operating, Current Ratio Outcome 9: Risk management capacity within cash management a. Liquidity risk. b. Credit risk. c. Exploring the reasons for borrowing. d. Exploring the risks of not borrowing. Outcome 10: Effective cash management versus affordability, linking budget to cash management a. Exploring and understanding the cash flow forecast; b. Exploring risk as a measure of affordability c. Annual budget submission d. Adjustment budget submission Outcome 11: Credit control a. Indigent management and auditing of indigent registers b. Credit control c. Debtors collection processes exploring current best practices Individual test Day 2 12h30 to 14h00 Day 2 14h30 to 16h00 Day 3 8h30 to 10h30 Day 3 11h to 13h00 Group exercise and feedbacks Group discussion exercises Group exercise and feedbacks

8 5. REFERENCE MATERIAL Handbook for Municipalities Creditworthiness, Credit Rating and Borrowing to fund Municipal Infrastructure. Pretoria. Government Printer. INCA Fundamentals of Municipal Finance. Occasional paper presented at the Municipal Finance Essentials workshop November INCA Cash Management and Investor Relations. Occasional paper presented at the City of Cape Town Workshop 16 February Lienert, L Modernizing Cash Management. Technical notes and manual prepared for the IMF. SALGA Improving Revenue Management for Local Government. SALGA Local Government Credit Control and Debt Collection Policy Guidelines. South Africa Constitution of the Republic of South Africa. Pretoria: Government Printer. South Africa Local Government: Municipal Finance Management Act, no 56 of Pretoria: Government Printer. South Africa Local Government: Municipal Systems Act, no 32 of Pretoria: Government Printer. South Africa MFMA - Budget Formats Guideline. Pretoria. Government Printer. South Africa MFMA Circular 42: Funding a Municipal Budget. Pretoria. Government Printer. South Africa MFMA Circular 51: Municipal Budget Circular for the 2010/11 MTREF. Pretoria. Government Printer. South Africa MFMA Circular 54: Municipal Budget Circular for the 2011/12 MTREF. South Africa MFMA Circular 55: Municipal Budget Circular for the 2011/12 MTREF. South Africa MFMA Circular 61: Banking, overdraft and investment. Pretoria Government Printer. South Africa MFMA Circular 64: Municipal Budget Circular for the 2012/13 MTREF. South Africa MFMA Circular 66: Municipal Budget Circular for the 2013/14 MTREF.

9 South Africa MFMA Circular 67: Municipal Budget Circular for the 2013/14 MTREF. South Africa MFMA Dummy Budget Guide. Pretoria. Government Printer. South Africa Municipal Budget and Reporting Regulations. Pretoria: Government Printer (GN 393 in Government Gazette dated 17 April 2009). South Africa Municipal Debt Disclosure Regulations. Pretoria: Government Printer (Government Gazette dated 15 June 2007). South Africa Municipal Investment Regulations. Pretoria: Government Printer (Government Gazette No R 308 dated 1 April South Africa Whitepaper on Local Government. Pretoria: Government Printer. Van der Walt, G. & Du Toit, D.F.P Managing for Excellence in the Public Sector. Landsdowne: Juta & Co, Ltd. Western Cape Generic By-Laws. [25 November 2010]. Western Cape Provincial Administration BTO Structures Guidance Document. Cape Town. Western Cape Provincial Administration Supply Chain Management. Cape Town Western Cape Provincial Administration Treasury Circular Mun 10 of 2013.Cape Town. Zybrandts, W The grey power project of the Overstrand Municipality. Occasional paper presented at the Western Cape One Day Municipal Workshop 17 August 2011.