Cash Management and Investment policy – Section 2.3
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Administrative Accounting Policies and Procedures – McNeese State University
Revised/Approval Date: December 2004
The Vice President for Business Affairs and the Comptroller determine and publish the criteria for establishing policies for cash management and investment procedures.
McNeese State University conducts investment activities under the authority provided from R.S. 49:327. The President has designated that the cash management and investment activities for the University are the responsibility of the Office of the Comptroller. All policies and procedures for centralized cash management and investment activities are reviewed periodically and updated.
To ensure that an adequate system of internal control over cash management and investments is maintained.
These policies and procedures are applicable to all McNeese employees who participate in cash management and investment activities.
- To provide funds as needed for operations of the University
- To generate maximum investment income with complete safety of investment
- To centralize banking activities
- To provide information to meet management needs of the University
University cash management and investments are subject to an audit anytime by the Internal Auditor.
The primary objective of our cash management system is to provide for day-to-day funding needs (liquidity) so that current transactional requirements and obligations can be met. To accomplish this objective, cash is maintained in interest bearing checking accounts and excess cash is reduced and made available to generate investment income. Safety of university assets is also a principle concern of our cash management and investment program. Every effort is made to mitigate both credit risk and interest rate risk for all funds deposited or invested.
The use of centralized bank accounts and electronic funds transfer (EFT), and use of the Automated Clearing House System (ACH) has further enhanced our investment goals. McNeese State University has placed cash management as a major goal and has recognized the significant returns available from implementing our objectives.
Short-term Cash Management (Less than 90 Days)
The University utilizes short-term cash forecasts to: (1) determine cash needs for operations, (2) manage the investment of excess cash. The Assistant Comptroller coordinates and directs the University’s short-term cash management program and reviews cash balances monthly.
The following information is considered in maintaining the University’s cash management:
- Cash receipts anticipated – Registration moneys, State Appropriation funds, Federal funds, maturing investments and other larger receipts are monitored.
- Cash disbursements anticipated – Payrolls, financial aid, debt service, utilities, retirement contributions, tax and insurance liabilities, and other large payments are identified.
McNeese State University has agreements with area banks for interest bearing demand accounts so that all funds on deposit other than “clearing” accounts are invested. Interest rates on demand accounts may vary from bank to bank and in accordance with account activity.
The University’s central cash account management allows efficient deposit, collection, transfer, and investment of funds. For its disbursement account, the University utilizes a “zero balance” account with funds transferred daily from interest bearing account to cover all checks clearing for that day. Transferring of funds electronically between accounts and banks has replaced checks for many large dollar transactions in the University’s cash management system.
Coordination of cash receipts and disbursements are a primary goal in effective management of short-term investments. Comptroller’s Office personnel are made aware of our investment objectives and the specific procedures required fulfilling them.
Investments allowed include money market funds, time certificates of deposit, direct United States Treasury Obligations, and United States Government Agency Obligations.
Long-term Investments (90 Days of Longer)
The cash forecasting information prepared for short-term cash needs is the basis for projecting funds available for longer-term investment opportunities. Time Certificates of Deposit with maturities not exceeding the terms outlined in (R 49:32.7B), money market funds, and direct United States Treasury Bills are the primary long-term investments used by the University. Additional investment options include United States government agency obligations.
Once funds are determined to be available for investment, area banks are contacted by telephone and requested to provide a rate quote for amount and time period for each investment. The CD is made with the bank providing the highest rate of return with sufficient securities pledged by the bank with the State Treasury. The T-Bill rates are monitored through the banking trust company.
Asset Allocation and Investment Guidelines
Since the University’s primary focus is short term cash management, available investment securities are limited to United States Treasury Bills, Bank Certificates of Deposit, and United States Government Agency Securities. Bank Certificates of’ Deposit are purchased for periods not greater than twelve months and are secured by appropriate pledging from respective banks authorized by the Treasurer of the State of Louisiana to receive such deposits. All banks having deposits for McNeese State University shall have adequate collateral pledged to cover such deposits including certificates of deposit as well as any other deposited funds. Banks are further required to meet the FIRREA regulations, including a Security Agreement, a Bank Board of Directors Resolutions authorizing specific bank offers to execute these agreements. For U.S. Treasury Securities and Government Agency securities purchased by the University, banks must provide safekeeping receipts, collateral agreements, custodial agreements, and a listing of the correspondent bank actually holding the security.
Performance Evaluation and Safety
University employees having responsibilities for cash management and investment activities are bonded through the Office of Risk Management. Certain University cash wire transactions require verification and authentication through the assignment of unique PIN numbers by various financial institutions and may require second-person verification. An annual reconciliation of interest income is done by a member of the Comptroller’s Staff who does not have direct day-to-day cash management responsibilities. The monthly reconciliation of all bank statements is verified monthly by an assistant comptroller and by the University’s Internal Auditor on a periodic basis.
Investment decisions and information are coordinated and communicated with the Vice President of Business Affairs and periodically evaluated based on the University’s investment objectives.
Cash management at McNeese State University will continue to develop with new methods and procedures adopted to meet changes in the banking system and to address University needs and objectives.