Cash Management

By June 21, 2015

State and Local Cash
The ability to distinguish between state and local cash is critical to VU, both for cash management and reconciliation purposes. Under the current system, this separation is accomplished by both the account range and by a state account attribute that appears on every state account. Every state account in VU’s accounting system corresponds to an account on the State’s accounting system, and all of the transactions posted to State accounts in VU’s accounting system (FAS) must eventually be recorded in CARS (the State’s accounting system).
The majority of VU’s cash, except for the appropriated general fund cash and federal funds, is received and deposited locally. Based upon the account number assigned to the transaction, a nightly process separates those funds into state versus local cash. The sum total of all state cash deposited in our local bank account the previous day is then transferred to the Treasurer of Virginia’s bank account the next morning. The system then prepares an entry that is electronically transmitted to the state to record the deposit of funds in CARS.
Funds received from federal grantors are usually wire transferred directly to the State Treasurer’s bank account, and an entry is posted to VU’s accounting system to record receipt of those funds. This entry then runs through a nightly interface that generates an entry that is electronically transmitted to the state to record the deposit of funds in CARS.
For the state general funds appropriated to VU, the state credits VU in CARS, and a corresponding entry is posted in VU’s accounting system. However, the cash remains in the State Treasurer’s bank account.
The net result of these processes is that entries related to state accounts are recorded on VU’s accounting system, but the cash physically resides in the State Treasurer’s bank account.
The University also uses Inter-Departmental Transfers (IDT) which are journal entries between state and local accounts. These entries are used to move funds between state and local accounts. Each night, the system calculates the net increase or decrease to state cash based upon the accounts involved. The next day, money is either sent to or retrieved from the state based upon whether there was a net increase or decrease in the state’s cash.
In addition, the state handles disbursements to any vendors that are paid via Electronic Data Interchange (EDI) or that are subject to the Comptroller’s Debt Set-off Program (CDS). Therefore, if a local account is charged for a payment to an EDI or CDS vendor, the information for the disbursement is transmitted to the state, and funds are sent to the state to cover the local portion of the payments to these vendors.
Under decentralization, all daily activity for state accounts is posted to a clearing account on CARS. All activity for the month, related to state account numbers on VU’s accounting system, is summarized and forwarded to CARS to offset the entries to the clearing account. The net result is that the state activity is recorded to the appropriate CARS accounts.
Also on a monthly basis, VU must reconcile its accounting transactions recorded in local accounts to VU’s bank account. In addition, revenues, expenditures, cash balances and appropriations/allotments recorded in CARS must be reconciled to the activity recorded in the state accounts on VU’s accounting system.
1 Daily Cash Management
In order for VU to effectively manage its Local cash balances, and to maximize the return on invested balances by ensuring that they do not remain idle, Business must be able to determine with a high degree of accuracy the extent to which cash is available for investment on a daily basis. In order to do this the system will not only need a high level of integration and communication among the banking, cash receipts, cash disbursements and cash flow forecasting modules, it will need to provide easy access to data on daily balances in all fund types.
Business would like to review the cash balances available upon arriving at work in the morning. There are some unique short term money market investments available today only and VU would like to maximize the amount placed in these vehicles.
1.1 Demonstrate how the system determines the amount of cash available by account, fund type and department.
1.2 Demonstrate the capability to provide average daily available cash balances (cash inflows net of cash outflows) over user defined time periods. Various statistical data should be provided such as frequency distributions and standard deviation of balances.
1.3 Utilizing this information, further demonstrate the earnings calculations at three or more rates against various accounts and groupings of accounts.
Business is concerned that the bank says that there is more cash available than the VU’s general ledger would indicate
1.4 Demonstrate the reconciliation capabilities by the system using on-line processing with multiple bank accounts against General Ledger, Accounts Receivable and Accounts Payable activities.
1.5 Demonstrate cash budgeting capabilities. The treasury application should allow VU to forecast receivable amounts from outside entities, such as state government, and to incorporate the amounts into VU or campus budget. In addition, planned disbursements should be reflected in the cash budgeting process, i.e. debt service payments.
1.6 Demonstrate how the system will facilitate federal cash drawdowns and how it will forecast cash receipts in order to maximize investment return.
2 Cash Flow Forecasting
Cash flow forecasting is needed for both investment and State policy purposes. The University needs to optimize its return on investment of Local cash. In addition, VU must be careful to adhere to the State’s requirements on cash flows/balances.
2.1 Demonstrate the ability to provide historical cash receipts and disbursements by category (tuition, grants, payroll, benefits, etc.) over user-defined time periods and project the future (30, 60, 90 days) based upon history, AR receipt projections and AP commitments.
2.2 Demonstrate the ability to provide actual forecasting tools for all disbursements and receipts over user-defined horizons, to include the ability to forecast receivable and payable amounts by category and incorporate planned disbursements such as debt service.
3 Cash Receipt Processing
Dept1 holds various conferences during the academic year. Currently, they are hosting two different conferences. Dept1 is receiving payments from attendees to these conferences by three means: checks coming through federal mail, wire transfer payments (primarily from overseas locations), and credit card payments (taken over the phone and on forms received via federal mail). When physical checks are received, Fisadmin prepares a bank deposit slip and carries the deposit to the local branch bank.
3.1 Show how Fisadmin records the accounting distribution for the payments received.
3.2 Show how Fisadmin records these payments in the system in sufficient detail to be able to track the individual payments for participants in each conference.