Reevaluate Your Baskets

Reevaluate Your Baskets

Pathway to Recovery® Series
Sometimes, You Have to Reevaluate Your Baskets

We all know the old adage cautioning us not to put all of our eggs in one basket. That saying has survived all these years because it imparts a great deal of financial wisdom in just a few brief words. We can all appreciate that simple logic, yet there still may be times when we become a bit too comfortable or complacent with the assortment of baskets that are available to us.

If you serve as the CFO of a county, town, city, public education institution, or public authority, then you are responsible for a lot of “eggs.” In order to protect and effectively manage the assets that are in your care, you need to have at your disposal a diverse and strategic selection of “baskets” in which to deposit the funds for which you are responsible.

Though protection of principal is certainly the primary goal, earning the highest-available interest on those dollars is also a very important consideration. One size definitely does NOT fit all when it comes to banks, money-market accounts, CDs, municipal pools. and the range of interest rates they offer on any given day. The most successful public sector CFOs are being proactive by seeking out the most advantageous interest rates for the funds in their care. That can mean earning an additional 25 or 50 basis points on their available cash. Higher interest earnings directly equate to increased revenues for your public institution.

As municipalities struggle to deal with new economic challenges, we are seeing more and more public-sector CFOs being asked to find additional non-tax revenue streams. One way to do that may be to add more banking options and more investment choices to your portfolio. That simple strategy will provide you with two direct benefits: first, it adds more baskets in which to diversify (and thus safeguard) your eggs. And second, having more baskets to choose from will give you a wider variety of options when selecting the one that offers the highest-possible return for the specific timeline that you expect to have those funds on deposit.

You may also be aware that, in some states, financial-oversight agencies are looking more closely at whether the municipalities under their jurisdiction are being too passive when it comes to cash management. Even in this low-rate interest environment, some CFOs and their legislative boards are being criticized for not proactively soliciting interest rate quotes in order to maximize the value of their cash. It’s no longer good enough to just park most of your cash in a money-market account or pool and then stop looking for other (perhaps better) options. Public entities are also being required to prepare cash-flow forecasts in order to determine the optimum amount of funds that they have available for investment right now as well as in future months.

Having access to precise liquidity data allows CFOs to know how much total cash they have on deposit. By using forecasting models, they can also determine when that cash will be needed.  This creates a clear window of opportunity that can be used to maximize the interest earnings on that cash, and to deposit it over the longest possible timeline. Reliable forecasting opens up the possibility of using 6-month, 12-month, or even 18-month fixed-rate CDs and US Treasuries to lock in higher earnings for longer time frames. In this era of extreme scrutiny of all taxpayer-funded organizations and government agencies, employing proactive cash-management techniques and liquidity-analysis practices is simply good policy.

We already know not to put all of our eggs in one basket. Now we have reliable, accurate fintech tools to help us evaluate all of the available baskets, and to then select the ones that best serve our particular public entity’s needs.

The author served for a total of 38 years in local government at the village, town, and county levels, including 24 years as a County Treasurer/CFO responsible for investing public funds. He can be reached by phone at 585-484-0311 or through our website at https://threeplusone.us. Fintech tools from three+one® include cashvest®, MC Forecast®, and rfpPrep®, all of which provide public entities with the kind of accurate, reliable cash-management data that they need in order to make the best financial decisions for the funds in their care.

Election Day is Finally Here

Election Day is Finally Here

Pathway to Recovery® Series
Election Day is Finally Here

Regardless of which party comes out on top after today’s Presidential election and Congressional races, we must all now find ways to work together in the best interest of our nation. We have to find ways to build bridges with our neighbors and fellow Americans. Why? Because when the dust of this election settles, old-fashioned catchphrases like “cooperation,” “collaboration,” and “partnership” will be the best pathway to recovery for our nation, our communities, and for ourselves.

On some things, we should speak with one strong voice. That should certainly be the case when it comes to advocating for more federal aid to help states and local governments, of all sizes, to deal with the economic impacts of Covid-19. Fortunately, we have effective public policy advocates like the National Association of Counties (NACo) and many elected and appointed officials working on our behalf.

Where else can we find common ground? Perhaps with one of the most basic, common-sense principles that we all agree on: the fundamental premise that taxpayer dollars are sacrosanct and must be safeguarded, protected, and used in the most efficient, cost-effective ways possible. All Americans, regardless of political affiliation, want to see their tax dollars handled with care.” A big part of that process is the implementation of effective cash-management techniques.

If you work in the finance office of any public entity, effective cash management includes the following prerequisites:

  • That the funds entrusted to you are safe and secure;
  • That those funds are earning reasonable rates of return that are comparable to best-available market-interest rates; and,
  • That you are forecasting just how much cash you will have available in the future in order to put that money to “work” maximizing interest income.

Even in these challenging times of historically low interest rates, public officials are still expected to fulfill their due diligence requirements by maximizing the value of all available cash entrusted to their care.

As proof of those expectations and professional standards, the New York State Comptroller’s Office recently issued a cash-management audit of a public entity in which their findings stated that “Officials did not formally solicit interest-rate quotes or prepare cash-flow forecasts to estimate the amount of funds available for investment.” This is especially important for public finance officials to be aware of, because none of us wants to be the subject of a critical audit that says that our finance office should, or could, have done things better.

The Comptroller’s written audit report then went on to say that municipalities and school districts should do the following:

  • Solicit interest-rate quotes from multiple financial institutions;
  • Ensure that available funds are invested within legal limits to maximize interest earnings; and
  • Prepare monthly cash-flow forecasts in order to estimate the amount of funds that are available for investment.

At three+one®, we provide our clients with liquidity data and cash-flow projections that can help bring their overall financial pictures into sharper focus. Important for public finance officials, our data will also satisfy the cash-management demands and recommendations made by the New York State Comptroller’s Office. And, if states and local governments do receive additional federal funding to offset the impacts of Covid-19, our cash-management tools can help public entities maximize and increase the value of those funds.

Our clients have access to a broad range of financial technology tools including our cashvest® liquidity-management system and the MC Forecast® cash-flow modeling tool which provides accurate, reliable financial forecasts for municipalities and higher-Ed institutions. And, when it comes to evaluating banking services, our innovative rfpPrep® software makes it easier than ever before to compare options and procure the best-performing and lowest-cost options that fit one’s particular banking needs.

Why not give three+one® a call today or check us out at https://threeplusone.us? We welcome the opportunity to tell you more about how we can provide real, measurable financial benefits to your municipality or higher-Ed institution. Our mission is to provide public entities with the kind of accurate, reliable cash-management data they need in order to make the best financial decisions for every taxpayer dollar in their care.

Now that is the kind of common-sense, common-ground principle that we can ALL vote for!

 

Return to $ender

Return to $ender

Pathway to Recovery® Series
Return to $ender

No state or local official wants to send any of their CARES Act money back to the federal government, but they must act quickly or those funds could soon be marked “Return to Sender.” The rules for using the money are pretty straightforward: (1) the expenses must have been necessary to meet immediate needsrelated to the COVID-19 outbreak; (2) the expenditures should not have been included in the adopted 2020 municipal budget (with the exception of payroll expenses); and (3) the expenses must have been incurred during the period of March 1, 2020 through December 30, 2020.

Given all of the financial challenges presently facing states and local governments, returning millions of dollars in unused Coronavirus Relief Fund (CRF) money back to Washington, D.C. seems like blasphemy. I suspect that state and local officials may be trying to find “creative” ways to use their allocations of the $150 billion CRF funds rather than being forced to return any unused dollars. But unless Congress amends the CRF guidelines, these municipalities have until December 30th of this year to spend that money. Stockpiling of goods to be used beyond the end of this year is not permitted, nor is paying for services that extend past December 30th. The money must be spent in strict accordance with the law because ineligible expenditures will almost certainly be identified during future audits and those moneys could be “recouped” by the feds or be subject to a claw-back.

Clearly, officials are struggling with COVID-related revenue shortfalls and ever-increasing operating expenses. Many of them are eliminating vacant positions from their 2021 budgets and considering layoffs which will have a negative impact on public services. As of mid-October, no one knows if there will be another round of coronavirus-related financial aid approved by Congress, nor can we predict whether the rules adopted under the CARES Act will be relaxed prior to December 30th. Furthermore, we have no way of knowing whether the deadline will be extended into 2021.

According to a U.S. Treasury report, many of the states and local governments with populations of more than 500,000 people that did receive CRF money still have large unspent portions of their allocations tucked safely in their coffers. I can understand why states and large municipalities would want to hang onto their CRF money. They have been hearing political pundits and elected officials say that the December 30th deadline for the CARES Act might be extended, or that the CRF rules might be altered to allow the funds to be used to fill revenue shortfalls. But for now, the most prudent pathway to recovery for state and local governments that received direct CRF funding is to comply with the rules as they are currently written and as they are administered by the U.S. Treasury and the Office of the Inspector General (OIG).

We recently received some very good news, however. The U.S. Treasury issued updated guidance on September 2nd, and the OIG followed up on September 21st, saying that 100% of the salaries and benefit costs of every “public safety” employee will now be eligible for CRF funding. This means that states and local governments will be able to use CRF funds to pay for TEN FULL MONTHS of the salaries and benefits of every police officer on their payroll. This includes the salaries of all State Police officers, County Sheriffs, deputies, firefighters, EMS responders, corrections officers, jail guards, and dispatchers. Local governments will no longer have to certify that these public safety employees’ work schedules were “substantially dedicated” to addressing COVID-19.

The same thing goes for “public health” employees. The list of medical and health services includes all municipal employees of any public health department that is “directly engaged in matters related to public health” including all supervisory personnel. Similar to public safety employees, the OIG is assuming that every single public health employee will spend 100% of his/her worktime between March 1st and December 30th being “substantially dedicated” to addressing the pandemic.  The U.S. Treasury should be commended for this lenient interpretation of the CARES Act because it opens up the door for billions of CRF dollars to remain in the hands of local governments rather than being sent back to Washington, D.C. at the end of this year.

What does this mean? It means that states that received CRF funding should immediately pass the unused remainder of that money down to lower levels of government to be used to offset the salaries of local police, fire, and public health employees.

Take New York State for example. The state received $5.1 billion in CRF funding in April, but as of late August, they had only spent about $2.2 billion of that money. Keep in mind that there are 52 counties, 931 towns, 61 cities, and 534 villages in New York State that did not receive one cent of direct federal CARES Act aid! Imagine how many police officers, deputy sheriffs, and paid firefighters work for those hundreds of municipalities. New York State should quickly implement a plan asking every municipality within the state’s boundaries to submit a voucher showing the total of all salaries and benefits of their public safety and public health employees for the period of March 1st through December 30th. The state should then use its remaining CRF funds to reimburse local governments for those expenses. If the vouchers submitted exceed the total amount of CRF money still available, then distributions could be prorated whereby every municipality receives, for example, 80% or 90% of the amount claimed.

By adopting this model, local governments would get some badly needed breathing room; taxpayers would see direct relief and continuity of public services; and, best of all, states would not have to write huge checks back to the U.S. Treasury that are marked “Return to Sender.”

The author served for a total of 38 years in local government at the village, town, and county levels, including 18 years as a county Budget Officer and eight years as a Disaster Recovery Coordinator. As Director of Public Partnerships for three+one®, he can be reached at 585-484-0311 or by email at: wec@threeplusone.us

 

Public Servants to the Rescue

Public Servants to the Rescue

Pathway to Recovery® Series
Public Servants to the Rescue

We need to encourage more young people to enter public service because, when the chips are really down, it is always public servants who come to the rescue.

From the NYFD’s first responders on 9/11, to those brave men and women battling wildfires in the western states right now, to the FEMA hurricane relief efforts in the south, it is always public servants who have risen to the occasion when duty called. But all too often, public servants have taken a bad rap. In an oversimplification of a complex set of problems facing our communities, public servants often unfairly take the blame for high property taxes. But when you really need help, who do you call first? Public servants, without fail, in every single case.

If you ever have to make a desperate 9-1-1 call because of an emergency, a public employee will be on duty ready to dispatch the assistance you need. And, when you hear that siren signaling that help is on the way, you’re likely to bless the firefighters, police, or EMS responders that arrive in your hour of most desperate need. They are public servants, and they are funded by taxpayer dollars.

Of course, we rely on public employees for more than just emergency services. They also educate our children, plow our roads, serve in the armed forces, deliver much-needed (now more than ever) public health and human services, staff back-offices providing clerical services, and keep detailed financial records of how every tax dollar gets spent.

State and local governments have never fully recovered from the effects of the recession of 2008-2009, and they now face the additional challenges caused by COVID-19. Public sector payrolls have been steadily reduced over the past ten years, and vacancies can be hard to fill. New positions are almost impossible to get approved, despite a growing population and an ever-increasing demand for public services.

The steady but lackluster economic expansion of 2010 through 2019 brought no real relief to municipal budgets, and thus did not translate into job creation (or, more appropriately, job restoration) in the public sector. This has resulted in all those in public service being asked to “do more with less” in order to maintain and deliver critical public services.

If you have already dedicated yourself to a career in public service, we thank you. As Jacob Lew, former Secretary of the U.S. Treasury said: “There is no higher calling in terms of a career than public service, which is a chance to make a difference in people’s lives and improve the world.” If we hope to attract the best and brightest of the next generation to public service, then we must help to transform the nation’s dialogue about people serving in government.

All of us should be encouraging the next generation to serve their community and to do their part to make the world a better place. It is also important that we lead by example when it comes to things like integrity, honor, and the value of being transparent and honest with those we serve.  We have an obligation to show that public service is an honorable and noble profession, and we should mentor new hires in the “best practices” that we have developed and learned over the years. The taxpayers of the future deserve nothing less.

The overwhelming majority of public servants are dedicated, hard-working, trustworthy individuals who decided somewhere along the way to commit their lives to making the world a better place, while still managing to earn enough money to pay their bills, raise a family, and contribute to their community. And when the chips are really, REALLY down—as they are right now—it turns out that public servants are the people you count on the most to save the day.

The author served for a total of 38 years in local government at the village, town, and county levels, including 18 years as a county Budget Officer and eight years as a Disaster Recovery Coordinator. As Director of Public Partnerships for three+one®, he can be reached at 585-484-0311 or by email at: wec@threeplusone.us

 

You Are Going to Need a Better Crystal Ball

You Are Going to Need a Better Crystal Ball

Pathway to Recovery® Series
A Better Crystal Ball

If you are a public sector budget officer, then this year you are going to need a better crystal ball. We can help with that.

I can appreciate the anxiety that municipal budget officers are feeling right now. Even in the best of times, putting together a spending plan for your organization that incorporates and addresses all of the “what ifs” that can happen between now and December 31st of the following year can be a daunting task. And the autumn of 2020 is definitely NOT the best of times.

I served as a budget officer for a small-to-medium size county in upstate New York for 18 years, and I had to deal with my share of challenges. In addition to the standard annual struggle to hold the line on property taxes while still providing much-needed services to the public, my rural community was still coming back from the economic impacts of the Great Recession when we were hit with historic flooding that swept through our scenic valley in 2011. Businesses closed, sales tax revenues fell, and some houses remained vacant and abandoned.

cashvest® by three+one® is like using a crystal ball for your entity’s finances

Covid-19 has presented us with challenges that none of us have ever seen before. There are many unanswered questions swirling about which compound the difficulty of making revenue projections for the coming year. Will Congress approve more federal aid to states and local governments? Will every municipality receive a fair and direct share of that desperately needed aid, regardless of the size of their population? Will the coronavirus be contained over the next two or three quarters, or will there be a second wave that could result in yet another blow to businesses struggling to survive?

Here at three+one®, we provide our clients with liquidity data and cash-flow projections that can help bring the financial picture into a sharper focus. We do this by equipping our clients with a broad range of financial technology tools. These can include our patented cashvest® liquidity monitoring and cash management system; access to our MC Forecast® cash-flow modeling tool which provides accurate, reliable data about what your municipality’s or higher-Ed institution’s cash position will be 6, 12, and even 18 months from now; and the option of utilizing our innovative rfpPrep® software that makes it easier than ever before to compare banking services and procure the best-performing and lowest-cost options that fit your particular needs.

The timing is perfect right now because besides providing you with a much clearer view of what your financial picture will look like over the next several quarters, three+one will also help you to immediately begin achieving real, significant financial benefits that can be incorporated into your 2021 budget. These include:

  • Increased interest earnings by helping you put every available dollar to work—and extending the timeline that you can lock in the interest.
  • Savings on bank fees by helping you to consolidate under-utilized accounts and embrace new banking technology measures that can help combat fraud.
  • Our liquidity data can help reduce the number of times you have to borrow for short-term cash-flow needs; that means lower debt service.
  • Higher credit ratings based upon the extensive liquidity data we provide can result in lower interest rates when you do have to borrow money.

Why not give three+one® a call? Our team of experienced financial professionals will be happy to help you polish up that crystal ball of yours and assist you in getting a more accurate picture of what the future holds.

The author served for a total of 38 years in local government at the village, town, and county levels, including 18 years as a county Budget Officer and eight years as a Disaster Recovery Coordinator. As Director of Public Partnerships for three+one®, he can be reached at 585-484-0311 or by email at: wec@threeplusone.us