If you are a public official responsible for managing public funds, then it’s a pretty sure bet you already know what it feels like to be overworked, understaffed, and generally stressed out. Being responsible for millions of dollars of taxpayer money that’s entrusted to your care can be nerve wracking. One of the best ways to help relieve some of that stress is to build a solid financial foundation with the funds in your custody—a foundation that is not only safe and secure, but one that also delivers optimal returns for your municipality.
The cornerstone of any trustworthy foundation is that it is built using a series of interconnected, solid, reliable building blocks, united together to form a long-lasting structure that is much stronger than any of its individual components. In many ways, constructing a strong financial portfolio for your public entity is a lot like building a solid brick wall. It takes knowledge and skill, and the end result is something that will hold up well over the long haul.
So what are some of the building blocks that are components of a strong financial foundation? Having good working relationships with your banks is a great start. Another important building block would be to include in your portfolio a series of safe, secure, fixed-rate investments like laddered CDs and U.S. Treasuries with staggered maturity dates and of various terms from three months to 24 months. A third component of a strong foundation might include an LGIP (Local Government Investment Pool) account where short-term money can be put to work earning at today’s higher interest rates. LGIPs can’t completely take the place of CDs and Treasuries but, by using these building blocks in conjunction with each other, a reliable combination of them will generate maximum long-term earnings and higher revenues.
There are other important building blocks as well. Accurate future cash-flow projections might be one. Another would be regularly updated information about how much you are being charged in banking fees, so you can evaluate whether those fees, or your bank’s compensating balance requirements, are fair and equitable. Yet another might be access to comprehensive liquidity-analysis summaries that provide you with an overview of all of your cash across the broad spectrum of many different banks and multiple accounts. The more of these solid building blocks you have in your foundation, the stronger the end result will be.
NACo understands that solid financial foundations make for the most efficient and effective county governments. That’s why they strongly recommend and endorse three+one as a best practice for counties. Can we help your county build its foundation?
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