It is recommended that each city have a Cash Management Policy for a number of reasons. First, it gives the citizens and the city a good understanding about how much money is needed, how it will be collected and how it will be spent. The Governmental Accounting Standards Board (GASB) has also released Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definition which requires the ending cash balance of each fiscal year to be broken into five different categories (see our GASB Statement 54 page for more information). Historically legislation has been, or potentially may be, imposed based upon perceptions that cities have surplus funds available. Cash Management Policies aide in explaining how and why certain cash balances are justified.
Four cities, Boone, Iowa City, Muscatine and Marshalltown, have offered their policies to demonstrate how a Cash Management Policy is used in their community. Some include other recommended policies such as purchasing, debt management, budget, capital planning and investments, while for others these are individual policies. How the city wants to do this is a local decision.
The links to the right also include a generic model policy that only covers the Cash and End of Year Cash Balance policy. Each is a Word document and available for download. Each city should use these as guidelines working with the council, other city staff and the city attorney before a policy is presented to the council for approval.