Cash Management and Capital Planning Practical Thoughts on Cash Flow Planning and Capital

For our Discussion Today: Cash Management vs. Budget & Capital Planning Cash Management in General Cash Flow Planning & Capital Planning Nexus Pulling it all Together: Practical Application Please stop me and ask questions.

Cash Management vs. Budget & Capital Planning vs. Accounting Cash Management = Having funds on hand to pay the bills. The actual outflow and inflow of resources Budget = The Legal Authority to Spending. Fulfilling the Legal Requirements Satisfying the Pre-Audit Standard Accounting = The appropriate recording of the outflows and inflows. Appropriately processing transactions Cash Management vs. Budget & Capital Planning vs. Accounting

Government Finance is like a three legged stool. Accounting Cash Management Budget & Capital Planning

Cash Management in General Understanding Your Organizational Spending How Much Do you spend monthly? Not All Months are Equal Knowing the Outstanding Commitments Foundational to Cash Flow Planning Cash Management in General VS

Cash Management in General Understanding Your Risk Tolerance. What is your organizational exposure? How much “cash” should you keep on hand? Not Necessarily Fund Balance Policy Risk Assessment vs. % Basis Emergencies vs. Contingencies Cash Management in General VS

Cash Flow Planning & Capital Planning Nexus Ensuring You Have Enough Money in the Bank to Pay the Bills. Striking a Balance with Liquidity. Cash Flow Planning & Capital Planning Nexus Chase Security not Return

Cash Flow Planning & Capital Planning Nexus Have a Capital Plan: The Three Fundamental Finance Questions How Much? What Will It Be Spent On? When Will you Spend It? Remember Budget v. Cash Flow Asset Life Considerations Cash Flow Planning & Capital Planning Nexus “If you fail to plan, you are planning to fail.” – Benjamin Franklin

Cash Flow Planning & Capital Planning Nexus Know Your Funding Sources Debt Funding? Reimbursement Resolutions & Tracking Costs Working with The LGC Know Your Market Access Know Your Timing Pay-as-You-Go Funding Grant Funding How is Grant Funding Received? Other Requirements Cash Flow Planning & Capital Planning Nexus Maximize the use of your Financial Advisor and your Bond Counsel

Cash Flow Planning & Capital Planning Nexus Know Your Expenditure Expectations Assess Contracts Work With the Project Managers Encumbrance Schedules? How will progress payments be made? Will there be retainage? Will there be large 1x expenses? The LGC may require you to have bid a project before they will let you issue the debt. Cash Flow Planning & Capital Planning Nexus You must communicate with the project managers!

Pulling it All Together: Practical Application The BASE amount you should keep on hand? Estimated Monthly Operating Expenditures Estimated Monthly Operating Revenues Estimated Monthly Debt Services Applying Your Operational Risk Tolerance Add Your Estimated Monthly Capital Spend Estimated Progress Payments Estimated 1x Items Estimated Non-Operating Revenues Applying Your Capital Risk Tolerance Pulling it All Together: Practical Application

Pulling it All Together: Practical Application Invest the Excess Using your expenditure Plan to Gauge Maturities In Accordance with General Statutes Not All Months are Equal Apply Your Risk Tolerance Pulling it All Together: Practical Application Chase Security not Return

Pulling it All Together: Practical Application If you are using Debt: Are you reimbursing yourself? Have your FA Plan an Issuance Calendar Feasibility Studies Rate Models Regulatory Issues GO Bond Elections Type of Debt to be Issued Communicate with the LGC LGC Calendar LGC Documents Needed Issuance Calendar Type of Issuance to be Done Pulling it All Together: Practical Application Maximize the use of your Financial Advisor and your Bond Counsel

Closing Thoughts: Other Items Investment Policy: Have One! Pooled Cash vs. Funds May Need an Interfund Loan Policy Talk to Your Auditors Know the General Statutes Debt Policy: Have One! Talk to your FA Talk to your Bond Counsel Capital Policy: Have One! Closing Thoughts: Other Items Cash Flow Management is Critical, Don’t Set it and Forget it!

Questions? Thank You!