Cash Management - Quicky!

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:09AM in AAT student discussion
Can someone help with the following.........<BR><BR>How does Cash Management in the public sector differ from in the private sector?<BR><BR>Thanks.

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Cash Management - Quicky!

    I suppose in the public sector you are not manufacturing anything so you wont require a production budget. But remember with public companies they are still funded by the government and other charity organisations. However you can still forecast your expected funding budget (sales revenue) some public org. also sale publications you could then estimate how much money would be received from these. You will need to forecast expected expenditure on projects (purchases in manufacturing), salaries and other overhead. Don't forget at the bottom of your cash budget to record the movement of your bank accout, if you have an overdraft try and estimate an interest payable figure (in class it was 1%) but find out from the bank.<BR><BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Cash Management - Quicky!

    Hi Pagey<BR><BR>The following is what I added as my missing knowledge & understanding question:<BR><BR>Task<BR><BR>Explain how public sector organisations such as local authorities, the BBC and NHS Trusts, are constrained in their management of cash balances; and why they enjoy much less freedom than private companies when it comes to investing surplus funds.<BR><BR>____________________________________________________________<BR><BR>In contrast to private organisations who are free to invest surplus funds as they wish, regardless of any associated risks, public sector organisations are heavily governed by regulations and legislation. Large public organisations such as County Councils operate a Treasury function under the control of a County Treasurer. The Treasury will have a section dealing with day-to-day investments. The public sector body (the County Council) will have a set of standing orders or regulations which will set out the authorities and responsibilities vested in the employees of the organisation dictating the types of investments which are permitted. These regulations should be covered in a â??Statement on Internal Controlâ?? drawn up by the local authority in order to comply with the requirements of The Accounts and Audit Regulations (England) 2003.<BR><BR>There are a number of reasons why there are such controls on public sector investing:-<BR><BR>1. Employees may be influenced by political or ethical issues which whilst valid are not appropriate considerations for investment of public funds.<BR><BR>2. Unlike private organisations whose main aim is to make a profit from their normal business activities public sector organisations are generally there to provide services and although funds should be invested wisely it is not their primary function to achieve a profit and risks should not therefore be taken with public funds.<BR><BR>3. Stringent controls are in place for the stewardship of public funds to provide adequate protection against any employees siphoning funds for inappropriate investment or other types of fraud.<BR><BR>4. Public sector organisations are not managing their own funds but those of the public. As such they must be accountable for their stewardship of funds entrusted to them.<BR><BR><BR>Hope this reaches you in time!<BR>

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