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Technical Resource Committee

Melissa Burns, Technical Resource Committee Chair

Melissa Burns, Chief Financial Officer, City of St. Augustine Beach/Chair, Technical Resources Committee After its September 2016 meeting the Government Finance Officers’ Association released two new best practices on Cash Flow Analysis and Investment Policy and updated four others on Hybrid Retirement Plan Design, Establishing and Administering an OPEB Trust, OPEB Governance and Administration and Educating Employees About the Adequacy of Retirement Benefits. Below is an overview of the two new best practices and a brief synopsis of what was updated on the other four.

Cash Flow Analysis

Simply put, the GFOA recommends that governments need to perform cash flow analysis on an on-going basis to make sure that there is sufficient cash available to meet their disbursement needs while also limiting their idle cash. There are six elements outlined that should be included when conducting cash flow analysis. They are:

·Create a pool of unrestricted operating funds from all government funds, essentially creating one pot of money for all routine operating obligations. This makes a more efficient analysis.

·Consider historical information and projected financial activity.

·Compare actual cash flow results with projections and find out why there are variances in the analysis.

·Make conservative assumptions about both the cash receipts and disbursement portions of the analysis and update on a regular basis

·Monitor cash position daily to ensure sufficient liquidity, and accuracy of the analysis should be evaluated quarterly.

·Choose an appropriate tool for conducting the cash flow analysis whether it is a spreadsheet or a more complex system.

In addition to the above elements, the cash flow analysis should encourage the government to communicate decisions that could affect cash inflows and outflows.

Investment Policy

The GFOA recommends that all governments establish a comprehensive written investment policy and this policy should be reviewed and updated annually. This policy should include the following:

·Scope and investment objectives

·Roles, responsibilities, and standards of care

·Suitable and authorized investments

·Investment diversification

·Safekeeping, custody, and internal controls

·Authorized financial institutions, depositories, and broker/dealers

·Risk and performance standards

·Reporting and disclosure standards

Below is a brief overview of what was revised on the four best practices:

·Hybrid Retirement Plan Design – revised to reflect continued evolution of hybrid plan designs.

·Establishing and Administering an OPEB Trust – revised to align with language related to the January 2016 best practice.

·OPEB Governance and Administration – revised to align the best practice with the Sustainable Funding Practices for Defined Benefit Pensions and Other Postemployment Benefits

·Educating Employees About the Adequacy of Retirement Benefits – updated to address elements of a sound educational program as well as guidance for employers to inform and educated employees on their future retirement income and the variables that could affect it.

References:

GFOA Best Practice, “Cash Flow Analysis”, 2016.
GFOA Best Practice, “Investment Policy”. 2016.
GFOA Newsletter, December 1, 2016.


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