Fiscally Ready Communities Best Practices
Cash Controls Policy Guide

The Fiscally Ready Communities Cash Controls policy guide supplements the local government’s process of developing cash controls. Cash Controls are essential to reduce the risk of inefficiencies and fraud.

Fiscally Ready Communities Recommended Cash Control Policies:

• The local government should perform ongoing cash flow analysis to ensure that they have sufficient cash liquidity to meet disbursement requirements and limit idle cash.
  • This can help governments recognize issues that might have a negative impact on their cash position.
  • Cash flow analysis is an essential tool for making informed management decisions.
  • Local units of government should consider historical information and projected financial activity, compare actual cash flow results with projections, make conservative assumptions about cash receipts and disbursements, and monitor cash position daily.
    • Common inflows include tax receipts, bond proceeds, utility payments, grants, other revenue from fees and penalties, and maturities of all securities held in investments that will mature during the forecast time frame.
    • Outflows represent anticipated payments such as debt service, employee payroll or benefits, and payments to vendors for goods and services anticipated during the forecast time frame.
    • Governments should also consider and accommodate non-repetitive payments such as capital expenditures or expected legal settlements, using reasonable assumptions.
  • The accuracy of the cash flow forecast should be evaluated and updated at least quarterly.
  • A simple forecast often works best, while maintaining the reliability and accuracy of information needed for making appropriate management decisions.
• The local government should compare actual cash flow results with projections and determine the reasons for those differences in the analysis. The cash flow analysis depends on the government’s size and complexity.
  • This will impact its cash liquidity position, ensuring future cash flows are more accurate.

  Fiscally Ready Communities Cash Controls Policies

  Key cash controls include:

• Bank reconciliations must be performed monthly (Department of Treasury, 2007).
  • The accountant or bookkeeper shall reconcile the cash and investments recorded in the general ledger to either the treasurer’s reconciliation (if it is adequately reconciled to the bank statements) or to the bank statements directly.
• The local unit shall make conservative assumptions about both the cash receipts and disbursement portions of the analysis, and update these assumptions regularly, as well after any major changes in operations (e.g., a new debt issuance at the beginning of a fiscal year).
• The local unit shall monitor cash position daily to ensure sufficient liquidity.
• Cash should be physically secured and compared with control records. (Department of Treasury, 2007)
• The local unit shall attempt to segregate duties of custody via segregation policies. This will aid in decreasing the probability of fraud or misappropriations of monies.
  • For example, cash collection and depositing should be performed by an employee who is independent from the recordkeeping and bank reconciliation process. (Department of Treasury, 2007)

Cash Controls Policy Review Table

Please use the table below to consider whether your cash control needs an overhaul or a refresh. This document has been built so you can track where you are in the process.