the municipal secretary desktop reference manual - Southwestern ...

A CASH FLOW ANALYSIS FOR INVESTMENT PLANNING
FOR SMALL MUNICIPALITIES
If a municipality is interested in improving or maximizing yields from its investment
program, the jurisdiction must take steps to determine when idle money will available, for what
length of time and in what amounts. The procedure which can be used to address this issue is a cash
flow plan.
Although there are several approaches which can be used to develop a cash flow plan, one
method, which is widely practiced by small communities and preferred for its efficacy in short term
projections is the >cash receipts and disbursements= method. This method best lends itself to
comparing cash flows with budgeted revenues and expenditures. Appended is a sample format of
cash receipts and disbursement methods.
The initial step in the development of a cash flow plan is the selection of a forecast
periodCeither annual, monthly or weekly. An annual forecast will provide monthly estimates of
flows and cash balances, a monthly forecast format will provide such information on a weekly basis,
and a weekly approach will offer the same information on a daily basis.
Given the size of most jurisdictions, the first two approaches are the most appropriate. They
will provide the necessary flow data to make investment decisions on instruments in the 90 day
range.
Data necessary for each forecast must be gathered from a variety of sources:
C current year=s operating budget;
C current year=s capital expenditures projections;
C accounting records for data on maturity dates of outstanding investments.
In forecasting or estimating flows, fiscal data should be pooled so as to maximize potential
volume. However, audit trails must be maintained. Funds or bank accounts are not appropriate
bases for forecasting flows.
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