With interest rates today as high as they’ve been in the recent past, start taking a holistic approach to your strategy for putting all cash to work.

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With interest rates today as high as they’ve been in the recent past, public treasurers are rightfully looking at a variety of prudent ways to increase the value of their cash. Local government pools are paying enticing rates, rates on bank certificates of deposit (CDs) are creeping up, and U.S. Treasury securities are offering yields most new treasurers have not yet had the opportunity to take advantage of. Despite these fresh opportunities, a number of treasurers may be hesitant to take advantage to vastly improve their interest income compared to last year. They can, through rates offered on term investments like CDs or treasuries rather than highly liquid options like LGIPs and bank money-market and savings products.

threeone-cashvest-money-liquidity-strategyThis hesitation is often rooted in the inclination to only think of cash in terms of governmental and legislative “funds” and not truly pooled cash which is how the majority of public treasurers strive to manage their treasury functions.

Regardless of your current accounting practices, with rates on the rise, you can overcome this hesitation and consider the following:

  1. Updating your investment policy to ensure it includes the latest investment options and guidelines that your state permits.
  2. Dust off your “interest allocation” spreadsheets so you can have the confidence to invest even if you need to allocate interest among different governmental funds.  (By the way, if you don’t have such spreadsheets, task your newest staff member to help figure it out; they will appreciate the challenge.)
  3. If you are fortunate enough to have a tool available within your general ledger software, take a look at it and see how it can help with interest allocation.
  4. Take a closer look at your actual cash in the bank, review how long you have it available for investment and move ahead with putting that cash to work, regardless of the governmental fund to which it belongs.
  5. For small “funds,” talk to your LGIP provider or registered investment advisor and find a mutual-fund-like product that would allow you to invest in a portfolio of short-term securities without having to manage the admittedly tedious process of allocating interest across many smaller funds.
  6. Review the ability for “funds” to borrow from each other. This is especially helpful when you need to adjust the allocations within a pooled investment during the holding period.

Our advice: Look beyond governmental “funds” and start taking a holistic approach to your strategy for putting all cash to work.

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