Cash Balance Planning PFR Webinar April 2, 2012

Transcription

1 Cash Balance Planning PFR Webinar April 2, 2012 Matt Bunting, Consultant Stacy Overly, Consultant Mike Sobul, Consultant Ernie Strawser, Consultant Debra Kelbaugh, COO Public Finance Resources, Inc. Serving the Public s Financial Leaders

2 Reasons for Cash Balance Planning Cash Stability Planning Can Help Organizations Improve financial stability. Preserve credit standing. Develop investment strategies. Meet financial challenges proactively. Explain its cash balance. 2

3 Historical Cash Flow Peaks and Valleys What can we learn? Historical General Fund EOM Cash Balance 2009, 10, 11 Longer term trend? Interim Fluctuation? Tax/Revenue Variations?

4 Improve Financial Stability Fluctuations in cash demands occur throughout the year. Cash balance planning can minimize borrowing costs and avoid interruptions of payments to employees and vendors. 4

5 Start Vs. The End $2.5 Mill Minimum cash flow needed ideal conditions. 5

6 Understanding = Believing = Planning

7 Developing Investment Strategies

8 Components of Policy Annual Review Status Updates Constructed Amount = Ownership

9 Construction of Amount Three Payrolls Variance Fluctuation 30 Days 1/12th Debt Rating Benchmark? Aa3 (9.3%) State wide

10 Preserve Credit Standing Agency s that typically rate your organization s credit worthiness will evaluate cash balance. Often cash balance as a percent of revenue is an important stability indicator. 10

11 Levy Timing? Recommended Cash Balance Minimum Cash Balance How can this information help us? Size of levy/cuts? Timing of levy/cuts? Borrowing/Investing 11

12 Plan to Meet Financial Goals If an organization plans to zero then it will probably meet its goal. If an organization plans for financial stability then it will probably meet its goal. 12

13 Components of Policy The Board of Education recognizes the need for incorporating financial stability goals into its planning. The district s cash balance is one indicator and provider of financial stability. To provide the district with initial stability the Board establishes a cash balance reserve target of one month s (1/12 th ) of annual expenditures. Annual expenditures shall be defined as the next fiscal year s total projected expenditures, line 5.05 (ODE Financial Forecast Statement). The treasurer shall prepare end of month cash balances (actual and projected) for the current and subsequent fiscal year and submit to the Board for quarterly approval. The treasurer shall identify any month falling below the board s cash balance reserve amount. The treasurer shall identify for the current and subsequent fiscal year any month(s) requiring general fund borrowing (internal fund to fund, or external). The treasurer shall report on the degree to which June 30, ending cash balances are being impacted by revenue surpluses or shortfalls (Line 6.01) for the current and subsequent four fiscal years. The Board shall analyze these reported trends and incorporate the information into their resource appropriating decisions and, if necessary, borrowing authorization. 13

14 Understanding = Believing = Planning Start with the end in mind. All organizations are perfectly aligned to get the results they are getting.

15 More Information: Debra Kelbaugh Chief Operating Officer Public Finance Resources, Inc PO Box 1822 Columbus, OH Phone: Cell: Cell: Matt Bunting, Consultant Stacy Overly, Consultant Mike Sobul, Consultant Ernie Strawser, Consultant Debra Kelbaugh, COO Public Finance Resources, Inc. Serving the Public s Financial Leaders