ICGFM Promotes Knowledge Transfer Among Public Financial Management Experts

Working globally with governments, organizations, and individuals, the International Consortium on Governmental Financial Management is dedicated to improving financial management by providing opportunities for professional development and information exchange.

Thursday, May 20, 2010

Cash Management Workshop Debt and Investment Policies

Laura Ross from the US Treasury, Office of Technical Assistance described debt and investment policies for proper government debt management. She described how many policy documents are obsolete. Policy documents must not be static.

Ms. Ross explained the importance of tying debt issuances to forecasts. This includes planning matching of service dates to cash forecasts. She described the type of debt vehicles like bonds and notes. She recommended that debt policies should include:
  • Issuance Guidelines
  • Allowable Investments for Proceeds
  • Statements on Projects
  • Refinancing
  • Glossary of terms
Ms. Ross described the need to also tie investments to forecasts. She recommended benchmarking investments to determine investment priorities. Investments should be secure. She recommended:
  • Follow the code of your state or country, then be conservative
  • Be very specific in your investment policy on what can and cannot be used (examples on the next few pages)
  • Investment policy needs to have oversight
  • Constantly monitor information
  • Monitor investment report daily
  • Should be selected by a committee
  • Should understand how the investment works
  • Diversify the investment portfolio
Ms. Ross talked about internal and external investment risk. Risk can be mitigated. She described an investment policy should include:
  1. Objective – typically safety, liquidity, yield.
  2. Roles – who is responsible for investing the funds (ultimately)
  3. Investment Monitor
  4. Finance Board
  5. Ethics and Conflict of Interest
  6. Internal Controls
  7. Uses for Investment Proceeds
  8. Benchmarks
  9. Purchasing Investments – Mechanics
  10. Allowable Investments
  11. Report Components
  12. Glossary of terms
Ms. Ross explained the importance of determining how investment revenue should be used. She warned that investment revenue should not be used to reduce taxes. She showed an example of portfolio management.

She recommended the following links for information on debt and investment policies:

Debt Policy Links - Links
Municipal Bond Terms - LinksInvestment Policy - Links
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