ESTABLISHING A CASH FLOW MODEL - · PDF fileESTABLISHING A CASH FLOW MODEL EMILY A. UPSHAW,...
Transcript of ESTABLISHING A CASH FLOW MODEL - · PDF fileESTABLISHING A CASH FLOW MODEL EMILY A. UPSHAW,...
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ESTABLISHING A CASH FLOW MODEL
EMILY A. UPSHAW, CPA
VALLEY VIEW CONSULTING, LLC
Government Finance Officers Association of Texas
Fall Conference 2017
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Objectives:
• Understand the importance of developing a cash flow model
• Discuss laddering of investments • Learn approach to building a cash flow model for
operating funds
• Discuss example cash flow model and various methods of analysis
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Questions:
• Would you try to build a house without a plan?
• Would you try to drive to an address across the country without a map?
• Then why would you try to build an effective portfolio without a cash flow plan??
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Cash Flow Information is Important
• In most cases where portfolios imploded or caused financial duress, it was due to a failure to consider the cash flow needs of the organization.
• Cash flow models can set the portfolio on a firm foundation and should be the cornerstone for building the portfolio structure.
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Cash Flow Information is Important
• How do Cash Flow Models Assist the Portfolio Manager?
– Historical Perspective to Cash Needs
– Identify Trends
– Tool for Enhancing Investment Income
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Note: Important Distinction
• Operating funds
– Forecasting - the use of historic data to determine the direction of future trends (Investopedia)
• Project-based funds
– Draw schedule required for anticipated spending
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Cash Flow Information is Important
Use Cash Flow to Ladder the Portfolio
• Importance of Laddering
– Minimizes Impact of Changing Interest Rates
– Diversifies Risk
– Results in a More Dependable Return
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Yield Curve Opportunities
Rate
Time
Normal Yield Curve Offers Higher Rates for Longer Term Maturities
Cash Flow Model Identifies Potential Maturities Along the Yield Curve
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Where Do I Start?
• Data is All Around You – Bank Statements
– Portfolio Reports
– Accounting Summary Reports
• How Much Time Will It Take? – Set Up and First Entries might take a day
– Subsequent Maintenance should only take a few minutes/hours depending on the number of portfolios/accounts
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Analysis One – What is the History?
• Cash Flow from Cash/Investment Perspective – Bank Statements
– Monthly Portfolio Reports
• Collect Statements/Reports for Last Three (or more) Years
• On a spreadsheet, record the month-end balances for each bank account and the portfolio ending book values
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A AW AX AY AZ BA BB BC BD
1 Sample Client
2 Operating Fund3
4 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
5
6 Depository Bank - Ending Balance 84,502,103.00 80,804,472.00 64,080,263.00 62,030,044.00 35,395,677.00 28,511,374.00 21,835,096.00 10,561,234.00
7 Checking Fund 001 (ending) 476.88 477.05 477.11 477.17 477.23 369,177.29 487.93 492.53
8 Checking Compensating Balance (ending) 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00
9 TexPool (ending) 10,003,113.94 10,007,284.31 10,011,452.92 10,015,785.97 10,020,269.29 10,024,831.81 10,028,013.75 10,031,145.02
10 TexStar (ending) 5,014,531.44 5,039,220.90 5,059,621.20 5,079,658.57 5,094,610.94 5,106,141.73 5,214,904.10 5,222,688.76
11 Bank-MMA (ending) 20,004,520.54 20,013,865.12 20,023,214.06 20,033,219.24
12 Securities Portfolio (ending) 35,849,620.88 37,900,416.20 43,800,570.92 44,526,549.70 49,978,824.16 55,610,515.68 61,457,920.68 70,016,376.98
13
14
15 Ending Totals: 160,369,846 158,751,870 147,952,385 146,652,515 145,494,379 144,635,906 143,559,637 140,865,157
Ending Totals = sum of each column
Graph Row 15
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$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
$140,000,000
$160,000,000
$180,000,000
Operating Fund Historical Portfolio Balances
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Analysis Two – How Much?
• Portfolio Allocations – Three Buckets
1. Long-term (Core)
‒ Maturity beyond 1-year
2. Intermediate
‒ Maturity between 3-months and 1-year
3. Liquidity
‒ Maturity less than 3-months
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$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
$140,000,000
$160,000,000
$180,000,000
Operating Fund Historical Portfolio Balances
14
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A AW AX AY AZ BA BB BC BD
1 Sample Client
2 Operating Fund3
4 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
5
6 Depository Bank - Ending Balance 84,502,103.00 80,804,472.00 64,080,263.00 62,030,044.00 35,395,677.00 28,511,374.00 21,835,096.00 10,561,234.00
7 Checking Fund 001 (ending) 476.88 477.05 477.11 477.17 477.23 369,177.29 487.93 492.53
8 Checking Compensating Balance (ending) 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00
9 TexPool (ending) 10,003,113.94 10,007,284.31 10,011,452.92 10,015,785.97 10,020,269.29 10,024,831.81 10,028,013.75 10,031,145.02
10 TexStar (ending) 5,014,531.44 5,039,220.90 5,059,621.20 5,079,658.57 5,094,610.94 5,106,141.73 5,214,904.10 5,222,688.76
11 Bank-MMA (ending) 20,004,520.54 20,013,865.12 20,023,214.06 20,033,219.24
12 Securities Portfolio (ending) 35,849,620.88 37,900,416.20 43,800,570.92 44,526,549.70 49,978,824.16 55,610,515.68 61,457,920.68 70,016,376.98
13
14
15 Ending Totals: 160,369,846 158,751,870 147,952,385 146,652,515 145,494,379 144,635,906 143,559,637 140,865,157
16 Portfolio Monthly Change 7,340,893 (1,617,976) (10,799,485) (1,299,870) (1,158,136) (858,474) (1,076,269) (2,694,480)
17 Portfolio Declines 0 1,617,976 10,799,485 1,299,870 1,158,136 858,474 1,076,269 2,694,480
18 Portfolio Increases 7,340,893 0 0 0 0 0 0 0
19 Graph table: Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
20 Core base 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
21 Portfolio Balance 86,314 84,939 75,760 74,655 73,670 72,941 72,026 69,735
22 Liquidity Base @ 15% 24,055 23,813 22,193 21,998 21,824 21,695 21,534 21,130
23
24 Liquidity Base 15%
Build the Graph Table to begin to allocate the portfolio into maturity buckets
{
1. Core 2. Intermediate 3. Liquidity
1 2
3
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A AW AX AY AZ BA BB BC BD
1 Sample Client
2 Operating Fund3
4 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
5
6 Depository Bank - Ending Balance 84,502,103.00 80,804,472.00 64,080,263.00 62,030,044.00 35,395,677.00 28,511,374.00 21,835,096.00 10,561,234.00
7 Checking Fund 001 (ending) 476.88 477.05 477.11 477.17 477.23 369,177.29 487.93 492.53
8 Checking Compensating Balance (ending) 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00
9 TexPool (ending) 10,003,113.94 10,007,284.31 10,011,452.92 10,015,785.97 10,020,269.29 10,024,831.81 10,028,013.75 10,031,145.02
10 TexStar (ending) 5,014,531.44 5,039,220.90 5,059,621.20 5,079,658.57 5,094,610.94 5,106,141.73 5,214,904.10 5,222,688.76
11 Bank-MMA (ending) 20,004,520.54 20,013,865.12 20,023,214.06 20,033,219.24
12 Securities Portfolio (ending) 35,849,620.88 37,900,416.20 43,800,570.92 44,526,549.70 49,978,824.16 55,610,515.68 61,457,920.68 70,016,376.98
13
14
15 Ending Totals: 160,369,846 158,751,870 147,952,385 146,652,515 145,494,379 144,635,906 143,559,637 140,865,157
16 Portfolio Monthly Change 7,340,893 (1,617,976) (10,799,485) (1,299,870) (1,158,136) (858,474) (1,076,269) (2,694,480)
17 Portfolio Declines 0 1,617,976 10,799,485 1,299,870 1,158,136 858,474 1,076,269 2,694,480
18 Portfolio Increases 7,340,893 0 0 0 0 0 0 0
19 Graph table: Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
20 Core base 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
21 Portfolio Balance 86,314 84,939 75,760 74,655 73,670 72,941 72,026 69,735
22 Liquidity Base @ 15% 24,055 23,813 22,193 21,998 21,824 21,695 21,534 21,130
23
24 Liquidity Base 15%
1. Core – approximately 50% of the portfolio’s lowest historic balance
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$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
$140,000,000
$160,000,000
$180,000,000
Operating Fund Historical Portfolio Balances
November 2013 was portfolio’s lowest balance at $110MM 17
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A AW AX AY AZ BA BB BC BD
1 Sample Client
2 Operating Fund3
4 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
5
6 Depository Bank - Ending Balance 84,502,103.00 80,804,472.00 64,080,263.00 62,030,044.00 35,395,677.00 28,511,374.00 21,835,096.00 10,561,234.00
7 Checking Fund 001 (ending) 476.88 477.05 477.11 477.17 477.23 369,177.29 487.93 492.53
8 Checking Compensating Balance (ending) 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00
9 TexPool (ending) 10,003,113.94 10,007,284.31 10,011,452.92 10,015,785.97 10,020,269.29 10,024,831.81 10,028,013.75 10,031,145.02
10 TexStar (ending) 5,014,531.44 5,039,220.90 5,059,621.20 5,079,658.57 5,094,610.94 5,106,141.73 5,214,904.10 5,222,688.76
11 Bank-MMA (ending) 20,004,520.54 20,013,865.12 20,023,214.06 20,033,219.24
12 Securities Portfolio (ending) 35,849,620.88 37,900,416.20 43,800,570.92 44,526,549.70 49,978,824.16 55,610,515.68 61,457,920.68 70,016,376.98
13
14
15 Ending Totals: 160,369,846 158,751,870 147,952,385 146,652,515 145,494,379 144,635,906 143,559,637 140,865,157
16 Portfolio Monthly Change 7,340,893 (1,617,976) (10,799,485) (1,299,870) (1,158,136) (858,474) (1,076,269) (2,694,480)
17 Portfolio Declines 0 1,617,976 10,799,485 1,299,870 1,158,136 858,474 1,076,269 2,694,480
18 Portfolio Increases 7,340,893 0 0 0 0 0 0 0
19 Graph table: Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
20 Core base 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
21 Portfolio Balance 86,314 84,939 75,760 74,655 73,670 72,941 72,026 69,735
22 Liquidity Base @ 15% 24,055 23,813 22,193 21,998 21,824 21,695 21,534 21,130
23
24 Liquidity Base 15%
Core can be constant – copy value across the row
Formula: = $AW$20 18
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A AW AX AY AZ BA BB BC BD
1 Sample Client
2 Operating Fund3
4 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
5
6 Depository Bank - Ending Balance 84,502,103.00 80,804,472.00 64,080,263.00 62,030,044.00 35,395,677.00 28,511,374.00 21,835,096.00 10,561,234.00
7 Checking Fund 001 (ending) 476.88 477.05 477.11 477.17 477.23 369,177.29 487.93 492.53
8 Checking Compensating Balance (ending) 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00
9 TexPool (ending) 10,003,113.94 10,007,284.31 10,011,452.92 10,015,785.97 10,020,269.29 10,024,831.81 10,028,013.75 10,031,145.02
10 TexStar (ending) 5,014,531.44 5,039,220.90 5,059,621.20 5,079,658.57 5,094,610.94 5,106,141.73 5,214,904.10 5,222,688.76
11 Bank-MMA (ending) 20,004,520.54 20,013,865.12 20,023,214.06 20,033,219.24
12 Securities Portfolio (ending) 35,849,620.88 37,900,416.20 43,800,570.92 44,526,549.70 49,978,824.16 55,610,515.68 61,457,920.68 70,016,376.98
13
14
15 Ending Totals: 160,369,846 158,751,870 147,952,385 146,652,515 145,494,379 144,635,906 143,559,637 140,865,157
16 Portfolio Monthly Change 7,340,893 (1,617,976) (10,799,485) (1,299,870) (1,158,136) (858,474) (1,076,269) (2,694,480)
17 Portfolio Declines 0 1,617,976 10,799,485 1,299,870 1,158,136 858,474 1,076,269 2,694,480
18 Portfolio Increases 7,340,893 0 0 0 0 0 0 0
19 Graph table: Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
20 Core base 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
21 Portfolio Balance 86,314 84,939 75,760 74,655 73,670 72,941 72,026 69,735
22 Liquidity Base @ 15% 24,055 23,813 22,193 21,998 21,824 21,695 21,534 21,130
23
24 Liquidity Base 15%
3. Liquidity – target percentage of cash equivalents for the total portfolio
Input target percentage in Cell AW24
3
19
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A AW AX AY AZ BA BB BC BD
1 Sample Client
2 Operating Fund3
4 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
5
6 Depository Bank - Ending Balance 84,502,103.00 80,804,472.00 64,080,263.00 62,030,044.00 35,395,677.00 28,511,374.00 21,835,096.00 10,561,234.00
7 Checking Fund 001 (ending) 476.88 477.05 477.11 477.17 477.23 369,177.29 487.93 492.53
8 Checking Compensating Balance (ending) 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00
9 TexPool (ending) 10,003,113.94 10,007,284.31 10,011,452.92 10,015,785.97 10,020,269.29 10,024,831.81 10,028,013.75 10,031,145.02
10 TexStar (ending) 5,014,531.44 5,039,220.90 5,059,621.20 5,079,658.57 5,094,610.94 5,106,141.73 5,214,904.10 5,222,688.76
11 Bank-MMA (ending) 20,004,520.54 20,013,865.12 20,023,214.06 20,033,219.24
12 Securities Portfolio (ending) 35,849,620.88 37,900,416.20 43,800,570.92 44,526,549.70 49,978,824.16 55,610,515.68 61,457,920.68 70,016,376.98
13
14
15 Ending Totals: 160,369,846 158,751,870 147,952,385 146,652,515 145,494,379 144,635,906 143,559,637 140,865,157
16 Portfolio Monthly Change 7,340,893 (1,617,976) (10,799,485) (1,299,870) (1,158,136) (858,474) (1,076,269) (2,694,480)
17 Portfolio Declines 0 1,617,976 10,799,485 1,299,870 1,158,136 858,474 1,076,269 2,694,480
18 Portfolio Increases 7,340,893 0 0 0 0 0 0 0
19 Graph table: Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
20 Core base 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
21 Portfolio Balance 86,314 84,939 75,760 74,655 73,670 72,941 72,026 69,735
22 Liquidity Base @ 15% 24,055 23,813 22,193 21,998 21,824 21,695 21,534 21,130
23
24 Liquidity Base 15%
Formula Cell AW22: = ( AW15 * $AW$24 ) / 1000
Copy across the row
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A AW AX AY AZ BA BB BC BD
1 Sample Client
2 Operating Fund3
4 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
5
6 Depository Bank - Ending Balance 84,502,103.00 80,804,472.00 64,080,263.00 62,030,044.00 35,395,677.00 28,511,374.00 21,835,096.00 10,561,234.00
7 Checking Fund 001 (ending) 476.88 477.05 477.11 477.17 477.23 369,177.29 487.93 492.53
8 Checking Compensating Balance (ending) 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00
9 TexPool (ending) 10,003,113.94 10,007,284.31 10,011,452.92 10,015,785.97 10,020,269.29 10,024,831.81 10,028,013.75 10,031,145.02
10 TexStar (ending) 5,014,531.44 5,039,220.90 5,059,621.20 5,079,658.57 5,094,610.94 5,106,141.73 5,214,904.10 5,222,688.76
11 Bank-MMA (ending) 20,004,520.54 20,013,865.12 20,023,214.06 20,033,219.24
12 Securities Portfolio (ending) 35,849,620.88 37,900,416.20 43,800,570.92 44,526,549.70 49,978,824.16 55,610,515.68 61,457,920.68 70,016,376.98
13
14
15 Ending Totals: 160,369,846 158,751,870 147,952,385 146,652,515 145,494,379 144,635,906 143,559,637 140,865,157
16 Portfolio Monthly Change 7,340,893 (1,617,976) (10,799,485) (1,299,870) (1,158,136) (858,474) (1,076,269) (2,694,480)
17 Portfolio Declines 0 1,617,976 10,799,485 1,299,870 1,158,136 858,474 1,076,269 2,694,480
18 Portfolio Increases 7,340,893 0 0 0 0 0 0 0
19 Graph table: Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
20 Core base 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
21 Portfolio Balance 86,314 84,939 75,760 74,655 73,670 72,941 72,026 69,735
22 Liquidity Base @ 15% 24,055 23,813 22,193 21,998 21,824 21,695 21,534 21,130
23
24 Liquidity Base 15%
2. Intermediate – remainder of the portfolio total
Formula for AW21: = (AW15 / 1000) – (AW20 + AW22)
2
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A AW AX AY AZ BA BB BC BD
1 Sample Client
2 Operating Fund3
4 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
5
6 Depository Bank - Ending Balance 84,502,103.00 80,804,472.00 64,080,263.00 62,030,044.00 35,395,677.00 28,511,374.00 21,835,096.00 10,561,234.00
7 Checking Fund 001 (ending) 476.88 477.05 477.11 477.17 477.23 369,177.29 487.93 492.53
8 Checking Compensating Balance (ending) 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00
9 TexPool (ending) 10,003,113.94 10,007,284.31 10,011,452.92 10,015,785.97 10,020,269.29 10,024,831.81 10,028,013.75 10,031,145.02
10 TexStar (ending) 5,014,531.44 5,039,220.90 5,059,621.20 5,079,658.57 5,094,610.94 5,106,141.73 5,214,904.10 5,222,688.76
11 Bank-MMA (ending) 20,004,520.54 20,013,865.12 20,023,214.06 20,033,219.24
12 Securities Portfolio (ending) 35,849,620.88 37,900,416.20 43,800,570.92 44,526,549.70 49,978,824.16 55,610,515.68 61,457,920.68 70,016,376.98
13
14
15 Ending Totals: 160,369,846 158,751,870 147,952,385 146,652,515 145,494,379 144,635,906 143,559,637 140,865,157
16 Portfolio Monthly Change 7,340,893 (1,617,976) (10,799,485) (1,299,870) (1,158,136) (858,474) (1,076,269) (2,694,480)
17 Portfolio Declines 0 1,617,976 10,799,485 1,299,870 1,158,136 858,474 1,076,269 2,694,480
18 Portfolio Increases 7,340,893 0 0 0 0 0 0 0
19 Graph table: Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
20 Core base 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
21 Portfolio Balance 86,314 84,939 75,760 74,655 73,670 72,941 72,026 69,735
22 Liquidity Base @ 15% 24,055 23,813 22,193 21,998 21,824 21,695 21,534 21,130
23
24 Liquidity Base 15%
Graph the entire table
“Stacked Area Chart”
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Using the Historical Balances Graph
• Completed Graph Shows Three Portfolio Divisions
– Liquidity Component – the amount to deposit in Pools/MMA/MMMF to pay day-to-day bills
– Intermediate Component – the amount used to ladder to address projected obligations during the year
– Core Component – The longer-term foundation of the portfolio
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Analysis Three – When?
• Targeting Maturity Needs
– Use a historical perspective
• Which Months Need Maturities and Which Do Not?
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A AW AX AY AZ BA BB BC BD
1 Sample Client
2 Operating Fund3
4 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
5
6 Depository Bank - Ending Balance 84,502,103.00 80,804,472.00 64,080,263.00 62,030,044.00 35,395,677.00 28,511,374.00 21,835,096.00 10,561,234.00
7 Checking Fund 001 (ending) 476.88 477.05 477.11 477.17 477.23 369,177.29 487.93 492.53
8 Checking Compensating Balance (ending) 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00
9 TexPool (ending) 10,003,113.94 10,007,284.31 10,011,452.92 10,015,785.97 10,020,269.29 10,024,831.81 10,028,013.75 10,031,145.02
10 TexStar (ending) 5,014,531.44 5,039,220.90 5,059,621.20 5,079,658.57 5,094,610.94 5,106,141.73 5,214,904.10 5,222,688.76
11 Bank-MMA (ending) 20,004,520.54 20,013,865.12 20,023,214.06 20,033,219.24
12 Securities Portfolio (ending) 35,849,620.88 37,900,416.20 43,800,570.92 44,526,549.70 49,978,824.16 55,610,515.68 61,457,920.68 70,016,376.98
13
14
15 Ending Totals: 160,369,846 158,751,870 147,952,385 146,652,515 145,494,379 144,635,906 143,559,637 140,865,157
16 Portfolio Monthly Change 7,340,893 (1,617,976) (10,799,485) (1,299,870) (1,158,136) (858,474) (1,076,269) (2,694,480)
Formula Cell AX16: = AX15 - AW15
Then copy formula across the row
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A AW AX AY AZ BA BB BC BD
1 Sample Client
2 Operating Fund3
4 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
5
6 Depository Bank - Ending Balance 84,502,103.00 80,804,472.00 64,080,263.00 62,030,044.00 35,395,677.00 28,511,374.00 21,835,096.00 10,561,234.00
7 Checking Fund 001 (ending) 476.88 477.05 477.11 477.17 477.23 369,177.29 487.93 492.53
8 Checking Compensating Balance (ending) 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00
9 TexPool (ending) 10,003,113.94 10,007,284.31 10,011,452.92 10,015,785.97 10,020,269.29 10,024,831.81 10,028,013.75 10,031,145.02
10 TexStar (ending) 5,014,531.44 5,039,220.90 5,059,621.20 5,079,658.57 5,094,610.94 5,106,141.73 5,214,904.10 5,222,688.76
11 Bank-MMA (ending) 20,004,520.54 20,013,865.12 20,023,214.06 20,033,219.24
12 Securities Portfolio (ending) 35,849,620.88 37,900,416.20 43,800,570.92 44,526,549.70 49,978,824.16 55,610,515.68 61,457,920.68 70,016,376.98
13
14
15 Ending Totals: 160,369,846 158,751,870 147,952,385 146,652,515 145,494,379 144,635,906 143,559,637 140,865,157
16 Portfolio Monthly Change 7,340,893 (1,617,976) (10,799,485) (1,299,870) (1,158,136) (858,474) (1,076,269) (2,694,480)
17 Portfolio Declines 0 1,617,976 10,799,485 1,299,870 1,158,136 858,474 1,076,269 2,694,480
18 Portfolio Increases 7,340,893 0 0 0 0 0 0 0
Formula Cell AX16: = AX15 - AW15 Formula Cell AX17: = IF ( AX16>0 , 0 , -AX16 ) Formula Cell AX18: = IF ( AX16<0 , 0 , AX16 )
Then copy formulas across the row
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A AW AX AY AZ BA BB BC BD
1 Sample Client
2 Operating Fund3
4 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
5
6 Depository Bank - Ending Balance 84,502,103.00 80,804,472.00 64,080,263.00 62,030,044.00 35,395,677.00 28,511,374.00 21,835,096.00 10,561,234.00
7 Checking Fund 001 (ending) 476.88 477.05 477.11 477.17 477.23 369,177.29 487.93 492.53
8 Checking Compensating Balance (ending) 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00
9 TexPool (ending) 10,003,113.94 10,007,284.31 10,011,452.92 10,015,785.97 10,020,269.29 10,024,831.81 10,028,013.75 10,031,145.02
10 TexStar (ending) 5,014,531.44 5,039,220.90 5,059,621.20 5,079,658.57 5,094,610.94 5,106,141.73 5,214,904.10 5,222,688.76
11 Bank-MMA (ending) 20,004,520.54 20,013,865.12 20,023,214.06 20,033,219.24
12 Securities Portfolio (ending) 35,849,620.88 37,900,416.20 43,800,570.92 44,526,549.70 49,978,824.16 55,610,515.68 61,457,920.68 70,016,376.98
13
14
15 Ending Totals: 160,369,846 158,751,870 147,952,385 146,652,515 145,494,379 144,635,906 143,559,637 140,865,157
16 Portfolio Monthly Change 7,340,893 (1,617,976) (10,799,485) (1,299,870) (1,158,136) (858,474) (1,076,269) (2,694,480)
17 Portfolio Declines 0 1,617,976 10,799,485 1,299,870 1,158,136 858,474 1,076,269 2,694,480
18 Portfolio Increases 7,340,893 0 0 0 0 0 0 0
19 Graph table: Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
20 Core base 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
21 Portfolio Balance 86,314 84,939 75,760 74,655 73,670 72,941 72,026 69,735
22 Liquidity Base @ 15% 24,055 23,813 22,193 21,998 21,824 21,695 21,534 21,130
23
24 Liquidity Base 15%
Graph Row 16
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A AW AX AY AZ BA BB BC BD
1 Sample Client
2 Operating Fund3
4 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
5
6 Depository Bank - Ending Balance 84,502,103.00 80,804,472.00 64,080,263.00 62,030,044.00 35,395,677.00 28,511,374.00 21,835,096.00 10,561,234.00
7 Checking Fund 001 (ending) 476.88 477.05 477.11 477.17 477.23 369,177.29 487.93 492.53
8 Checking Compensating Balance (ending) 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00
9 TexPool (ending) 10,003,113.94 10,007,284.31 10,011,452.92 10,015,785.97 10,020,269.29 10,024,831.81 10,028,013.75 10,031,145.02
10 TexStar (ending) 5,014,531.44 5,039,220.90 5,059,621.20 5,079,658.57 5,094,610.94 5,106,141.73 5,214,904.10 5,222,688.76
11 Bank-MMA (ending) 20,004,520.54 20,013,865.12 20,023,214.06 20,033,219.24
12 Securities Portfolio (ending) 35,849,620.88 37,900,416.20 43,800,570.92 44,526,549.70 49,978,824.16 55,610,515.68 61,457,920.68 70,016,376.98
13
14
15 Ending Totals: 160,369,846 158,751,870 147,952,385 146,652,515 145,494,379 144,635,906 143,559,637 140,865,157
16 Portfolio Monthly Change 7,340,893 (1,617,976) (10,799,485) (1,299,870) (1,158,136) (858,474) (1,076,269) (2,694,480)
17 Portfolio Declines 0 1,617,976 10,799,485 1,299,870 1,158,136 858,474 1,076,269 2,694,480
18 Portfolio Increases 7,340,893 0 0 0 0 0 0 0
19 Graph table: Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
20 Core base 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
21 Portfolio Balance 86,314 84,939 75,760 74,655 73,670 72,941 72,026 69,735
22 Liquidity Base @ 15% 24,055 23,813 22,193 21,998 21,824 21,695 21,534 21,130
23
24 Liquidity Base 15%
Graph Row 17
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Look at the trends and evaluate each month relative to the same month in other years: 1. December, January and February are typically well funded 2. April and October are typically cash strapped (except when bond proceeds broke the trend, i.e. April 2015)
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
Operating Fund Historical Unfunded Obligations
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A B C D E F G H
1 Sample Client
2 Operating Fund3
4 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12
5
6 Depository Bank - Ending Balance 58,018,679 42,582,870 40,871,891 39,375,873 37,367,758 36,038,641 33,600,000
7 Checking Fund 001 (ending) 20,423 20,425 20,428 343,640 440.43 440.43
8 Checking Compensating Balance (ending) 25,000,000 25,000,000 25,000,000 25,000,000 25,000,000 25,000,000 25,000,000
9 TexPool (ending) 39,545,962.12 43,066,796.33 43,089,403.37 43,111,292.41 43,133,911.11 43,158,419.18 43,178,176.57
10 TexStar (ending) 16,948,269.48 18,457,198.43 18,466,887.16 18,476,268.17 18,485,961.91 18,496,465.36 18,504,932.82
11 Bank-MMA (ending)
12 Securities Portfolio (ending)
13
14
15 Ending Totals: 139,512,911 129,127,288 127,448,607 125,983,861 124,331,271 122,693,966 120,283,550
16 Portfolio Monthly Change (10,385,623) (1,678,681) (1,464,746) (1,652,590) (1,637,305) (2,410,416)
17 Portfolio Declines 10,385,623 1,678,681 1,464,746 1,652,590 1,637,305 2,410,416
18 Portfolio Increases 0 0 0 0 0 0
19 Graph table: Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12
20 Core base 50,000 50,000 50,000 50,000 50,000 50,000 50,000
21 Portfolio Balance 68,586 59,758 58,331 57,086 55,682 54,290 52,241
22 Liquidity Base @ 15% 20,927 19,369 19,117 18,898 18,650 18,404 18,043
23
24 Liquidity Base 15%
25
26 Graph For Projections:
27 Mar Apr May Jun Jul Aug Sep
28 Average Change By Month (1,347,665)$ (8,862,078)$ (1,380,831)$ (1,419,521)$ (1,237,322)$ (1,550,443)$ (2,438,048)$
Formula Cell C28: = AVERAGE ( C16, O16, AA16, AM16, AY16 ) NOTE: These are the columns that contained April date across the years
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Use a multi-year average to determine what is the typical monthly change. This could be used to develop a future-year projection of maturity needs.
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A B C D E F G H
1 Sample Client
2 Operating Fund3
4 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12
5
6 Depository Bank - Ending Balance 58,018,679 42,582,870 40,871,891 39,375,873 37,367,758 36,038,641 33,600,000
7 Checking Fund 001 (ending) 20,423 20,425 20,428 343,640 440.43 440.43
8 Checking Compensating Balance (ending) 25,000,000 25,000,000 25,000,000 25,000,000 25,000,000 25,000,000 25,000,000
9 TexPool (ending) 39,545,962.12 43,066,796.33 43,089,403.37 43,111,292.41 43,133,911.11 43,158,419.18 43,178,176.57
10 TexStar (ending) 16,948,269.48 18,457,198.43 18,466,887.16 18,476,268.17 18,485,961.91 18,496,465.36 18,504,932.82
11 Bank-MMA (ending)
12 Securities Portfolio (ending)
13
14
15 Ending Totals: 139,512,911 129,127,288 127,448,607 125,983,861 124,331,271 122,693,966 120,283,550
16 Portfolio Monthly Change (10,385,623) (1,678,681) (1,464,746) (1,652,590) (1,637,305) (2,410,416)
17 Portfolio Declines 10,385,623 1,678,681 1,464,746 1,652,590 1,637,305 2,410,416
18 Portfolio Increases 0 0 0 0 0 0
19 Graph table: Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12
20 Core base 50,000 50,000 50,000 50,000 50,000 50,000 50,000
21 Portfolio Balance 68,586 59,758 58,331 57,086 55,682 54,290 52,241
22 Liquidity Base @ 15% 20,927 19,369 19,117 18,898 18,650 18,404 18,043
23
24 Liquidity Base 15%
25
26 Graph For Projections:
27 Mar Apr May Jun Jul Aug Sep
28 Average Change By Month (1,347,665)$ (8,862,078)$ (1,380,831)$ (1,419,521)$ (1,237,322)$ (1,550,443)$ (2,438,048)$
29 Months with Average Shortfall 1,347,665$ 8,862,078$ 1,380,831$ 1,419,521$ 1,237,322$ 1,550,443$ 2,438,048$
Formula Cell C29 = IF ( C28<0, -C28, 0 )
Graph Row 29
Copy across the row
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Graph of the months with averages that are negative.
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Various Methods of Analysis
• Based upon the Historical Perspective:
– Use the worst case scenario for each month
– Perform an averaging for each month over the historic period
– Use the last year as a benchmark
• Add a section to your spreadsheet to calculate, based on the preferred method
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Sample Analysis and Benefits
• New Client – Analysis Performed At Beginning of Fiscal Year
($141 MM total balance at 9/30/16) • Core = $50 MM • Intermediate = $70 MM • Liquidity = $21 MM
– Used Historical Averages as the Monthly Targets
(based on 4-years of data)
– Overlay Current Portfolio Maturities – Develop Proposed Maturities
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Graph of the months with averages that are negative.
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Analyze All Graphs to Project Future Liabilities Unfunded Current Proposed
Obligations Cash Equivalent Investments Maturities
Oct-16 10,101,734.44$
Nov-16 1,323,662.85$
Dec-16 -$
Jan-17 -$
Feb-17 -$
Mar-17 1,347,665.11$
Apr-17 8,862,078.49$
May-17 1,380,831.02$
Jun-17 1,419,520.60$
Jul-17 1,237,321.61$
Aug-17 1,550,442.89$
Sep-17 2,438,048.29$
Oct-17 10,101,734.44$
Nov-17 1,323,662.85$
Dec-17 -$
Jan-18 -$
Feb-18 -$
Mar-18 1,347,665.11$
Apr-18 8,862,078.49$
May-18 1,380,831.02$
Jun-18 1,419,520.60$
Jul-18 1,237,321.61$
Aug-18 1,550,442.89$
Sep-18 2,438,048.29$
Oct-18 10,101,734.44$
Nov-18 1,323,662.85$
Dec-18 -$
Maximum=2-years41
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Unfunded Current Proposed
Obligations Cash Equivalent Investments Maturities
Oct-16 10,101,734.44$ 70,848,779.55$
Nov-16 1,323,662.85$ 5,016,376.98$
Dec-16 -$
Jan-17 -$
Feb-17 -$
Mar-17 1,347,665.11$ 5,000,000.00$
Apr-17 8,862,078.49$ 10,000,000.00$
May-17 1,380,831.02$ 5,000,000.00$
Jun-17 1,419,520.60$ 5,000,000.00$
Jul-17 1,237,321.61$ 5,000,000.00$
Aug-17 1,550,442.89$ 5,000,000.00$
Sep-17 2,438,048.29$ 10,000,000.00$
Oct-17 10,101,734.44$ 15,000,000.00$
Nov-17 1,323,662.85$ 5,000,000.00$
Dec-17 -$
Jan-18 -$
Feb-18 -$
Mar-18 1,347,665.11$
Apr-18 8,862,078.49$
May-18 1,380,831.02$
Jun-18 1,419,520.60$
Jul-18 1,237,321.61$
Aug-18 1,550,442.89$
Sep-18 2,438,048.29$
Oct-18 10,101,734.44$
Nov-18 1,323,662.85$
Dec-18 -$
Maximum=2-years
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Actual Cash Balance = $71 MM
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Unfunded Current Proposed
Obligations Cash Equivalent Investments Maturities
Oct-16 10,101,734.44$ 25,848,779.55$
Nov-16 1,323,662.85$ 5,016,376.98$
Dec-16 -$
Jan-17 -$
Feb-17 -$
Mar-17 1,347,665.11$ 5,000,000.00$
Apr-17 8,862,078.49$ 10,000,000.00$
May-17 1,380,831.02$ 5,000,000.00$
Jun-17 1,419,520.60$ 5,000,000.00$
Jul-17 1,237,321.61$ 5,000,000.00$
Aug-17 1,550,442.89$ 5,000,000.00$
Sep-17 2,438,048.29$ 10,000,000.00$
Oct-17 10,101,734.44$ 15,000,000.00$
Nov-17 1,323,662.85$ 5,000,000.00$
Dec-17 -$
Jan-18 -$
Feb-18 -$
Mar-18 1,347,665.11$ 5,000,000.00$
Apr-18 8,862,078.49$ 10,000,000.00$
May-18 1,380,831.02$ 5,000,000.00$
Jun-18 1,419,520.60$ 5,000,000.00$
Jul-18 1,237,321.61$ 5,000,000.00$
Aug-18 1,550,442.89$ 5,000,000.00$
Sep-18 2,438,048.29$ 10,000,000.00$
Oct-18 10,101,734.44$
Nov-18 1,323,662.85$
Dec-18 -$
Maximum=2-years
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Cash Balance After New Investment = $26 MM
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Orange Shaded Area Represents the “Core” Position = $50 MM
Unfunded Current Proposed
Obligations Cash Equivalent Investments Maturities
Oct-16 10,101,734.44$ 25,848,779.55$
Nov-16 1,323,662.85$ 5,016,376.98$
Dec-16 -$
Jan-17 -$
Feb-17 -$
Mar-17 1,347,665.11$ 5,000,000.00$
Apr-17 8,862,078.49$ 10,000,000.00$
May-17 1,380,831.02$ 5,000,000.00$
Jun-17 1,419,520.60$ 5,000,000.00$
Jul-17 1,237,321.61$ 5,000,000.00$
Aug-17 1,550,442.89$ 5,000,000.00$
Sep-17 2,438,048.29$ 10,000,000.00$
Oct-17 10,101,734.44$ 15,000,000.00$
Nov-17 1,323,662.85$ 5,000,000.00$
Dec-17 -$
Jan-18 -$
Feb-18 -$
Mar-18 1,347,665.11$ 5,000,000.00$
Apr-18 8,862,078.49$ 10,000,000.00$
May-18 1,380,831.02$ 5,000,000.00$
Jun-18 1,419,520.60$ 5,000,000.00$
Jul-18 1,237,321.61$ 5,000,000.00$
Aug-18 1,550,442.89$ 5,000,000.00$
Sep-18 2,438,048.29$ 10,000,000.00$
Oct-18 10,101,734.44$
Nov-18 1,323,662.85$
Dec-18 -$
Maximum=2-years
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Results of Sample Analysis
• Initially, Portfolio was excessively liquid and yield was only slightly higher than Pools
• New Portfolio addresses all maturity needs for at least a year and builds in a Core Component
• Portfolio remains significantly liquid to address any unanticipated needs
• As Portfolio matures, the Ladder will continue to roll
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How Will Cash Flow Analysis Enhance Your Management?
• You will better understand your organization’s cash flows
• You will be able to improve yields by not being too liquid
• You will be more comfortable with the investment strategy knowing that cash flow needs are covered for a longer period of time
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Questions?
Emily A. Upshaw, CPA
(512) 633-4093 Office
Susan K. Anderson
(830) 637-7755 Office
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