Private & Public Sector Cash Management Help

Webby

Hi All,

I got pass the first stage of passing Unit 15, I just need to do the additional Q's, one topic I know they going to ask me about will be about the differences between the private & public sectors when it comes to surplus cash management as it was somthing I couldn't answer in the simulation, can anyone help as I'm struggling to understand the differences in the text book.

Thanks

Webby

katz568

In public sector organisations there are statutory and other regulations relating to the management of cash balances (SORP's), whereas in private sector organisations there are no regulations regarding the management of cash balances other than those contained in the Companies Act regarding directors' duties and maintaining records.

HTH
Katrina

sdv

try the links below

sdv wrote: »

Sandy Hood has posted excellent posts on this.

I was looking for one post in particular where sandy wrote in the last but one paragraph

"The key is the need to be prudent with finance and not to invest surpus balances where there is any risk of not being able to receive the deposit back. To this end you will see that local authorities tend to stick to government stock and banks with a large capitalisation. This will be unlike the commercial treasury departments where portfolios of shares may well be found along with a range of other short term deposits." (got this from my CM file)

and I thought it summed up the solution to that task perfectly.

However, I did find some othe posting on the following links - looks to be more detailed!

http://forums.aat.org.uk/showthread.php?t=16681&highlight=public+sector

http://forums.aat.org.uk/showthread.php?t=19767&highlight=Local+government+Act

http://forums.aat.org.uk/showthread.php?t=21682&highlight=Local+government+Act

have a look

meibaker

hi, i did had trouble with this question too, but did pass it at the end! if you give me your email, i will send you my answer!

stevef

In local government the management of cash balances 9treasury management) is subject to the CIPFA Code of Practice on Treasury Management, the CIPFA Prudential Code (both of which have statutory status) and statutory instruments (Regulations).

Basically these state that each organisation must have a written Treasury Management Policy and Practices approved by elected Members each year, have to report performance in the past year and forecasts for the future to elected Members, and have to indicate how investments (and loans) are to be evaluated. The TM code forbids investments to be denominaed in non sterling and adds more stringent controls on investments of more than one year.

The concept behind the codes is to assess the risk of each investment and minimise the risk taken. Each investment opportunity can be evaluated for "Security, Liquidity and Yield" and should be prioritised in that order. Hopefully we can avoid a repeat the Icelandic banks problem!

Webby

Thank you all very much for your help on the above, I'm glad to tell you I passed the additional questions which included a question on the public/private sectors surplus cash. :-)

Webby

Rinske

Congrats, well done Webby!