Are You Prepared To Deal With A Cash-Management Audit?

| July 12, 2022

One type of audit that often catches municipalities and finance officials by surprise are “cash-management” audits that look at how deposited cash is being managed.

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Audits are stressful. When the auditors come knocking, there’s nothing quite like that calm, collected feeling of self-confidence that you have when you know that every penny has been accounted for, and all laws and regulations have been followed.

three+one cash management auditOne type of audit that often catches municipalities and finance officials by surprise are “cash-management” audits that look at how deposited cash is being managed and invested during the time period that those public dollars have remained in a public treasury’s care and custody. The auditors look at safety of principal, of course, but they often also look to see if those funds were efficiently and effectively managed in order to generate the maximum amount of interest income for the municipality.

Fiduciary responsibility” for a public-finance professional means more than just parking all available funds in a municipal investment pool, low-interest checking account, or even in a money-market account. Truly effective cash management requires more than that. It necessitates a regular analysis of your public entity’s overall liquidity to determine how much cash you have on deposit across multiple bank accounts. It also requires you to regularly perform future cash-flow projections based upon previous years’ spending patterns so you can confidently determine how long some of those dollars will remain on deposit. And finally, effective cash-management standards demand that you use this knowledge to employ fixed-rate time-deposit investments, such as CDs and Treasury bills, in order to actively pursue the highest available interest rates, while at the same time keeping safety of principal as a top priority.

If you are responsible for the care, custody, and investment of public funds, then you know how stressful audits can be. The liquidity-analysis tools offered by three+one® can help take some of the stress out of your life and make cash-management audits a breeze. And perhaps the best thing? The additional interest earnings your municipality generates will far exceed our modest annual subscription fee; we guarantee it!

Why not give us a call today? You literally have nothing to lose—except maybe some stress!

Prior to joining three+one, the author served for 38 years in local government including 24 years as a county Chief Financial Officer responsible for managing and investing public funds. He can be reached by phone at 585-484-0311, ext. 709, or by email at wec@threeplusone.us

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