Cash Management - Simulation: Help

SonjaD

Hi,

I sat the simulation for cash management and credit contral a couple of weeks back and I had a question I wasn't sure about. I looked it up in my books and in this forum but I couldn't find anything either.

The question was:

"What are the differences in management of cash balances between public sector organisations and private sector organisations?"

Can anyone help?

Thanks
Sonja

BeccaLouJ9

Hi, I asked this exact question a while back, when I took that sim. If you use the search above you will find what people responded with to me.

(I didn't see in my book either, But I was reading the wrong book!)

Good Luck

B x

pirate

I had this on my Sim as well. I hope I answered it correctly I talked about statutory regulations and SORPs. And the set of documents and policies dictate what sort of investments they can make and that its usually low risk and safe and probably wouldnt include shares.
I also got asked about risk versus reward as well, and dont really recall that on the study but may have skipped over it thinking it was something I knew.

It was a long long paper and I bearly had enough time.

what was the rest like for you

stevef

The Local Authority SORP has gone, it has been replaced by an IFRS compliant Code of Practice on Local Authority Accounting. But in a nutshell Local Authority cash investments have to comply with Statutory Regulations, the CIPFA Code of Practice on Treasury Management and the CIPFA Prudential Code. These ensure that investments are in sterling, that risks are minimised, investments are spread, there is a sensible maturity pattern, and that investments are only made in low risk organisations. The Treasury management Code emphasises the requirement that Security and Liquididy take priority to Yield when making investment decisions.

There are a lot more regulations for the Public sector as it is the tax payers money that is being invested.

PAMDILL

The Osborne book has details of the differences between public sector and private sector investment management. Although it refers to standing Orders and Accounting and Audit Regulations but does say all the rest about low risk etc.

uknitty

I had this on my sim as well - not got the results of it back yet though ( I may have droned on about that elsewhere already though....)

I think the main point I raised in my answer is that public sector are are accountable for investing public resources wisely and as such they are not able to take risks on investments whereas public sector companies often have greater flexibility in this respect. I think I then banged on a little bit about the meaning of the terms risk, reward, and exposure and that private sector companies must take care to minimise risk, to make sure they are not over exposed and to ensure the safest possible return on their investment (not necessarily the highest return).

I'm also concerned about this question as I don't couldn't think of anything else to say, and the answer seemed to basic to be what they wanted ?