Cash Management Practices among Southeastern County Governments: Proper Utilization or Excessive Caution

By Modlin, Steve; Stewart, La Shonda M. | Public Finance and Management, April 1, 2012 | Go to article overview

Cash Management Practices among Southeastern County Governments: Proper Utilization or Excessive Caution


Modlin, Steve, Stewart, La Shonda M., Public Finance and Management


ABSTRACT

Proper management of idle cash reserves is becoming a major feature within county government revenue policy. Each facet of the process, from collections and disbursements to investments, is critical if local governments expect to maximize cash flow. This study examines cash management practices of county governments in North Carolina, South Carolina, and Tennessee. External governmental factors, banking practices, and investment choices are all examined to assess contributions to return on investments. The findings indicate that decision-maker responsibility, the use of external banks, and the use of zero balance accounts or concentration accounts have a positive impact on investment return. In addition, as money be-comes more available, investment prerogatives generally focus on the local government investment pool.

1. INTRODUCTION

Among the many efforts to increase the amount of revenue needed for ser-vice distribution, local governments employ a variety of methods to increase cash flow. The recalcitrance of elected officials to gain more revenue through tax increases has forced government officials to assess internal cash manage-ment procedures and decisions concerning cash investment activities. Strapped with the enormous responsibility of safeguarding public funds, finance man-agers and trustees have the added burden of answering to the public and elect-ed officials. In many states, this confinement burgeons as a result of state oversight policies and procedures that provide direction and determine in-vestment practices of local governments. All of these factors ultimately have a deciding effect on the ability of a county government to have sufficient fund-ing for elevated rates of return.

Despite the cyclical changes of the national economy, local government finance managers and elected officials in many areas across the country con-tinually struggle with disruptive cash flows. To further complicate this issue, external forces and the public scrutinize these activities. First, a heavy reliance on intergovernmental funding can have serious repercussions. Over the past several decades, states and local governments have watched their share of fed-eral revenues decrease while grants to individuals have steadily increased (U.S. Advisory Commission on Intergovernmental Relations, 1988; U.S. Of-fice of Management and Budget, 2010). To combat this problem, it has been recommended that local governments generate revenues from own-sources rather than relying on temporary assistance from other levels of government where a sudden shiftin the agenda can be decisively detrimental (Modlin, 2010). Second, the situation regarding idle cash balances has become quite capricious. In the 1960s, 1970s, and even in the 1980s, various research find-ings maintained that local governments were not working diligently enough to maximize revenues through sound investment practices (U.S. Advisory Com-mission on Intergovernmental Relations, 1965; Aronson, 1968: Cooper, 1972; Thompson and Gates, 1988). High fund balance levels in the 1990s and early 2000s provided an avenue of inquiry as to whether tax levels, especially prop-erty taxes, should decrease. Practices during this time period led to the third problem associated with cash management practices-investments. Question-able investment practices emerged in the 1990s as a result of excess available unrestricted revenues that were invested in higher risk securities. Arguments were made that traditional behaviors associated with risk aversion were negat-ed in many of the infamous investment practices in which large amounts of cash were lost (Bozeman and Kingsley, 1988; Kearns, 1995). However, McCue (2000) found that the majority of investment officials at that time were risk averse with a keen awareness of the need for the protection of public in-terest monies despite notions of potential maximum utilization of portfolios.

This article examines the cash management and investment practices of county governments in North Carolina, South Carolina, and Tennessee. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Cash Management Practices among Southeastern County Governments: Proper Utilization or Excessive Caution
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.