Cashflow Management Strategies for NYS Government Entities

By Keeley Ann Hines, on February 22nd, 2024

With continued budget constraints and limited resources, government entities are often left with no other choice but to develop creative solutions for generating ancillary income, to ensure they may continue to deliver the public services and programs their respective constituents have grown accustomed to. One of the options showcased frequently in recent years is investments, to which comes with much uncertainty.

Navigating Regulatory Requirements

Day-to-day life at any New York State County, City Village, and School District, includes many rules and regulations around every facet of their operation, and cashflow management and investment compliance is no different. Specifically, New York State General Municipal Law Sections 11 and 39 outline requirements on how and what they are allowed to invest in, how such investments and related transactions will be recorded, and requirements for the development and implementation of a system intended for monitoring investment activity. A suitable investment policy will be adopted by those charged with governance (such as City Counselors or the Board of Education etc.), and monitored on an annual basis, at minimum.

Strategies for Asset Management and Financial Compliance

Ensuring compliance with General Municipal Law Sections 11 and 39, management will also be required to develop strategies and procedures that will demonstrate their prudence over the assets they manage. Among many of the responsibilities public officials have, the safeguarding of public funds is of the most critical importance. Management must always ensure that they comply with any local laws and ordinances, as well as with their own adopted investment policy. They should also consider the benefits of weighing different investment options to one another and determine what will yield the greatest return, but without an unacceptable level of risk for loss.

Financial Forecasting and Risk Management

However, before commencing an investment transaction, it is important to consider the budget versus actual, any known variances to date, or expected variances over the foreseeable future. It is also imperative to develop and document a cashflow forecast that will consider the timing of revenues and expenditures/expenses over the government’s fiscal year, as well as the life of the proposed investment. For instance, management may need to consider periods of the year in which cashflow may be lower or higher based upon collections of property taxes, water, or sewer bills, or even when debt payments are due. All of these factors may impact their ability and willingness to invest and certainly would impact a decision maker’s willingness to invest with a particular date of maturity. Furthermore, management should consider financial reporting implications not only in the general ledger (i.e., creating new accounts), but how they will report activity to those charged with governance as part of the monitoring process. Support for each and every transaction should be documented and retained, and this documentation will likely include investment statements, journal entries, and evidence of any other controls in place as dictated by the investment policy. Lastly, management should be knowledgeable on the liquidity and availability of the investments, any sort of investment risks, and consider the need for expanded footnote disclosure to the annual financial statements.

If you need further guidance or have any questions on this topic, we are here to help. Please do not hesitate to reach out to discuss your specific situation.

This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.

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