Managing Public Finance During COVID-19

Managing Public Finance During COVID-19

In response to the financial disruption caused by COVID-19, our partners at the New York State Association of Counties (NYSAC) distributed a critical list of recommended action items to their members.

We share this information because NYSAC is an expert advocate for public management & funds, and because NYSAC has recognized our cashvest liquidity management program as one of those critical steps to emerge from this crisis with strength, and more importantly, confidence in your financial data.

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three+one® is a proud partner of NYSAC®

Pathway to Recovery (Part II)

Pathway to Recovery (Part II)

During these challenging times, three+one® is working to bring solutions to public entities and higher Ed institutions, allowing them to operate without disruption, while creating savings and new sources of revenue to offset any budget gaps that result from the economic slowdown from the COVID-19 pandemic.

Through strong communication, three+one® will adhere to several best practices to help you do more with less:

1. We understand that you need a clear framework for the investment of public
funds
. Without regular in-person board or committee meetings, updating your investment policy statement may not be possible for the moment. For many three+one® clients, we have advocated building in the necessary latitude that allows entities to take advantage of all state guidelines so, when unusual circumstances arise, your cash can still generate revenue to the bottom line. Although the Fed has lowered rates, there is a robust marketplace to earn more value on cash that can lead to potential rates of over 1.0%. It all depends on the time-horizon data of your funds. Do you know how long you will have each dollar on deposit down to the day?

How to do more with less: Review the latitude your investment policy offers with your team; communication is paramount. If it is outdated, let three+one® enhance it for you. As a CFO, having the confidence that you are using the right tools provided to you, through your IPS, is vital to ensure your constituents and board know you are earning and saving the most you can on all dollars. 

2. With time and geographic constraints on your team, reliable data becomes more fundamental. Cash flow today is paramount, and it doesn’t require you to liquidate all investments and move all cash out of liquid-earning options. Liquidity matters when you don’t have time. The ability to determine the change in liquidity is essential when calculating the impacts of a crisis. Is data guiding every step you take in managing your cash today?

How to do more with less: Many three+one® clients use our cashvest® MC forecast model to help with short- and medium-term cash projections. When evaluating lower sales, occupancy tax or other revenue sources, stress testing dollars to see where your cash balances could be in four months is important. If you are not using this tool yet, start digging into the numbers to see what the impact is on your entity.

3. Making payroll, running A/P, conducting bank transactions, inputting GL entries just got a bit more complicated. The need for entities to have staff work remotely has caught many entities unprepared. Let’s work together on creating a framework for an electronic payment policy and the like to prepare for future remote finance offices.

How to do more with less: Please, please, please have an electronic/digital banking policy statement. We have heard time and time again how low on the priority list this type of policy is, but suddenly we all have a different opinion. When you have these in place and the tools to accompany them, life will be easier for you!

4. Now that the Fed has lowered interest rates TWICE, it is impossible to know how your banking stacks up against your peers. Is my earning- credit rate (ECR) good? What should I be earning in interest? Where can I earn interest? Are my fees where they should be? All entities just got a reset, and it is the data that helps ensure you are relying on the math—not an opinion—on where you measure up. 

How to do more with less: We understand that you don’t have time to look this over continually, but three+one®’s rfpPrep® alleviates you from having to wonder if you are getting the best price, rates, and services.

5. When refinancing, liquidity matters. The lender will pay the fee for a new rating, and a lot of that will accelerate; but to get the best rating, as was mentioned in a previous blog, (S&P blog) entities need to prove that they have the best chance to repay to get a higher rating and reduce debt-service costs.

How to do more with less: three+one® can “vest” you with the best chance in paying lower interest on borrowed money. Entities need to change the way they supply data to rating agencies because times have changed.

6. Easing the fear of liquidity or lack of cash when you need it can be extremely stressful. During the 2008 financial crisis, the fear of not knowing if you needed cash was top of mind, leading to a run on the banks and financial instruments. During that period, many entities had to wait for liquid pools to unravel portfolios so cash could be accessed.

How to do more with less: You are not alone. Everyone is scared, wanting to know where the best place is to put their cash. If you have been following your provided time-horizon data, you are still getting over 2.0% on a portion of cash, and your liquid dollars are available in proportional levels to operating and “cushion” dollars. In times of crisis, you need peace of mind. Our cashvest® program is providing clients with that peace of mind when it is needed most.

The underlining value of three+one®’s services applies in both times of opportunity and challenge. Confidence, peace of mind, stewardship, productivity, safety, proactiveness, and accountability are three+one®’s top priorities as we help during these critical and unforeseen times.

Pathway to Recovery (Part I)

Pathway to Recovery (Part I)

COVID-19 has hit our society hard and it feels like it came out of nowhere. Just a few short weeks ago, the stock markets were at all-time highs, unemployment was at historic lows, consumer confidence was strong and, in general, things seemed to be going pretty well for most of us.

But then, like a tsunami that washes in from the sea with little or no warning, COVID-19 came ashore. Over the period of a few short weeks, we have come to realize that the landscape we are familiar with will almost certainly be changing in unexpected ways, and we wonder how our families, our professions, and our future will be impacted.

While most of us who are not medical professionals have had no direct experience in dealing with a contagious pandemic, many of us have had experience in dealing with other natural disasters and the resulting long-term recovery. What we are all experiencing now is a bit like the anxiety people feel when some natural disaster of epic proportions is heading their way. Think how residents of New Orleans felt as Hurricane Katrina was barreling their way in 2005, or how the people on the east coast were feeling as Super Storm Sandy swept north towards them in 2012, or how the people living in Paradise, California, felt as the wildfires engulfing northern California in 2018 were blown in their direction by the hot Santa Ana winds.

The three steps to dealing with any natural disaster are: (1) preparation and anxiety about the impending event; (2) providing emergency services when and where they are most needed as the situation actually unfolds; and (3) long-term recovery from the disaster.  

No matter what the disaster looks like, having experienced experts at your side helping you to prepare for, then deal with the emergency itself, is critically important. Equally important is the planning and organizational changes that take place in order for your public entity or higher Ed institution to financially recover from the disaster. To our existing clients, we are here to help you best address what we expect to be a changing financial landscape. To our other colleagues in the public finance sector, we offer our assistance at a time of need.

At three+one®, we know how to use data, liquidity analysis, and financial assessment to help you best prepare for the fiscal impacts of an emergency.

COVID-19 is likely to have a negative impact on your organization’s cash flow, sales tax revenues, and future interest earnings. We are not miracle workers and we can’t make COVID-19 go away. But we can help you best deal with this changing financial landscape by advising you on ways to strategically manage your liquidity while maximizing the interest earnings on your cash.

At times like these, it’s good to have experienced experts in your corner. And to know that the team at three+one® is here to help.   

Digital Banking for All Times and Situations

Digital Banking for All Times and Situations

We all are watching, witnessing, and possibly participating in the unfolding of this unprecedented response to an increasing world challenge. The spread of COVID-19 is sucking the oxygen from all other headlines. It is making us review our business continuity plans.  Ultimately this will help us all to be in a better place. One area of business continuity to consider is how you will continue to accept and receive payments.

One piece of advice we have given to every client over the past few years is that they reduce their dependence on checks. Before the current COVID-19 outbreak, this advice was based on the demographic shift of younger adults entering the workforce—a group of individuals unfamiliar with checks. However, this becomes more pertinent and acute when travel restrictions are suddenly imposed, offices are closed, and work-from-home requirements are put in place.

How then will you collect payments when you cannot be at an office to open mail, take checks over the counter, or create a deposit? How then will you pay your vendors, employees, and otherwise make any reimbursements or refunds?

We live in a time when we already have the answer—but we must make the decision and do what’s necessary to change. Here are some suggestions to help you transition to more digital receipts and payments:

Digital Receipts:

  • Share wire and ACH payment instructions with constituents who may have normally paid by check. They can easily make these payments through their online banking portal as long as they have the right information.
  • Explore PayPal, Venmo, Square, or other possible methods for constituents to transfer money to you.
  • Talk with your Account Receivables module provider to know what your system supports and understand what they are doing to enhance the module for digital payments.
  • If you have not done so already, implement Remote Deposits so you can avoid going to a bank.
  • Should payments be delayed because of an office closure, explore a line-of-credit option with your banking provider. You want to ensure making payroll!

Digital Payments:

  • Adopt a digital-payments policy. Let your vendors know that within a two-, three-, or five-year period you will no longer be making payments with checks.
  • Explore multiple options to make payments digital, to include ACH, ePayments, PayPal, Zelle, etc. Your vendors and constituents will appreciate having options.
  • Talk with your Account Payable module provider to know what your system supports and understand what they are doing to enhance the module for digital payments.
  • Urge employees to sign up for Direct Deposit or alternatively offer payroll card options as well.

These items will help you transition away from the dependency of checks. However, your employees and office must equally be prepared, especially if all are required to work from home. Here are considerations to prepare your office:

  • Explore online banking user rights for those authorized to make payments. Ensure you have appropriate dual authorizations in place so that no one can operate alone.
  • Have trained redundancy as well, should employees be unable to perform their work.
  • Make sure digital banking users take laptops and security tokens home with them to perform secure transactions if necessary.
  • Ensure you are set up for ACH/Wire digital banking.
  • Provide home and cell phone numbers to all members of the team to ease communications when working remotely.
  • Create, test, and practice your remote procedures. Be aware that, during challenging times, fraud can increase. Train your employees in the right procedures to verify and approve any payment requests.

Above all, remain calm. These situations stimulate creativity. As the adage goes: Necessity is the mother of invention. We will all find ourselves better prepared and more confident in our ability to press forward and move onward.

As always, with our broad experience in the finance industry, we stand ready to help you make this check-free transition.

Just in Case… Financially Preparing for Crises Like Coronavirus

Just in Case… Financially Preparing for Crises Like Coronavirus

The media outlets have been inundating us all with a barrage of updates on the spread of the coronavirus and the threats it poses worldwide, including here in the U.S.

Even the threat of a pandemic with severe consequences is having rippling economic effects, over and above the mounting stresses on the medical community. As warned by CDC recently, it is not a matter of “if” but rather “when” it will become a major concern in North America.

Though the level of severity of this virus is still in limbo, what’s happening in China clearly shows the degree of havoc such an outbreak can have within a single country.  And it’s already being spread worldwide.

Whether a crisis is health related, a natural disaster, or human inflicted, the need to be prepared on a local level is essential. Being alert to warning signs can impel us to be ready for any “just-in-case” scenario.

Every public-serving entity must consider the economic and financial impact a potential crisis could have going forward. Being ready to protect, support, and care for those it serves is paramount. The responsibility on the shoulders of any public-entity leader is especially massive in time of crisis.

Managing a crisis requires precise information and the ability to address “what-if” questions. One such question is: “How many dollars do we need on hand to confront and manage our public’s needs?”

In addressing such concerns, the information provided to leaders must be with a level of confidence, so rational action steps can be taken. Any delay in the decision-making process, due to the lack of financial readiness, is not an option—especially in the public’s mind.

At three+one®, our cashvest® liquidity modeling provides a precise level of accuracy in cash that is on hand and that can be made available immediately for unexpected events. The level of data that three+one® collects enables us to provide great confidence in financial implications on an entity’s liquidity, both in “days out” or “months out” periods.

The power of cashvest®’s MC forecast modeling can provide a level of precision that is unique in the public marketplace, allowing strong confidence in making immediate decisions and actual expected outcomes.

Time is one commodity that cannot be sacrificed or wasted when it comes to addressing an emergency situation. Having accurate financial data and modeling leads to stronger crisis management and better decision making. At the same time, the confidence of knowing that one’s liquidity is being managed as an asset if such an emergency does not emerge, which demonstrates sound financial and fiduciary management.

Let the power of three+one®’s cashvest® liquidity modeling be a tool to your financial office in helping manage your entity through any “just-in-case” occurrence. The power of our liquidity data will lead to better decision making in helping those you serve when they need it the most.

The 2026 Tidal Wave

The 2026 Tidal Wave

The ability to see trends developing well in advance—while planning for future challenges—is Job #1 for any fiduciary serving in the public or private arena.

One trend surfacing over the last several years has been the upcoming enrollment challenge for educational institutions.  

The correlation between hard economic times and a lower birth rate exists. This is especially true for the period of 2008-2009, when our country encountered one of its greatest financial crises since the Great Depression of the 1930s. During that period of uncertainty, a lower birth rate (by double digits!) occurred.

Years later, the results of that lower birth rate are having a dramatic effect on secondary schools with lower enrollments, also in double digit decrease. This has directly affected the infrastructure, personnel staffing, and financial levels that are all based on a historically normal school student body size.

While the lower birth rate indicates a bounce back from 2010 and years hence, the window of opportunity to address a smaller student body is present if addressed proactively. Any reaction would be seen as too late to protect against a significant financial downside.

It is important to note that this effect on secondary education now will become an inevitable tidal wave to hit higher Ed institutions in a relatively short time.

The financial and competitive environment in 2026 and 2027 could be enough of a factor to reshape an institution or even threaten its survival. 

This is the time for higher Ed boards of trustees and administrators to plan for this event, especially since the trend is an undeniable fact.

The university for which I serve as a trustee is already planning for this upcoming period. With a proactive liquidity strategy put in place three years ago, this university has viewed and managed all cash as an asset that will generate over $7 million in new revenue. That “cushion” will serve as a reserve for possible disruption in tuition cash flow over the coming years.

The ability to put a strategy in place for such a disruption will be expected by fiduciaries to institutions serving the public and student bodies.

At three+one®, our proprietary cashvest® platform can formulate a liquidity strategy while also providing a new source of revenue that can be used to build your reserve funds to strong and surprising levels.

The year 2026 need not be higher Ed’s Achilles heel. Rather than inducing panic, this pivotal year, just six years out, should be viewed as an opportunity to reshape the financial strength of higher Ed. We see the future of education to be extremely bright, with greater diversity and eager minds with a global perspective.

With sound financial planning, started well in advance, we can preserve the foundation of great education, today and for generations to come.