COUNTY CASH FLOW UPDATE

June 22, 2009

Urgency of Cash Flow Management State of California is projected to run

short of cash by the end of this week and will again stop sending payments to local governments.

State budget is grinding along, and will not be done in time to stave off another cash crisis.

Sale of the County’s Tax and Revenue Anticipation Notes (TRAN) largely deferred.

Delay in Sale of the TRAN

The County offered market $355 million in TRANs last Thursday, but only sold $17 million.

Likely causes are State budget quagmire & postponed County budget.

Hope to take another offering following adoption of County budget June 30.

Current General Fund cash = $91.8M Bi-weekly General Fund payroll = $40M

State Cash Flow Impact

Without the TRAN in place, deferral of State payments and advances will severely impact the General Fund’s cash position.

All departments are called upon to assist as we navigate this unprecedented situation.

What Departments Can Do

There are three principal areas in which the EO is asking departments to assist through this cash crisis:Actively managing cash advances both into

and out of the General FundAggressively tracking and pursuing

receivablesManaging out-flowing payments to best

advantage

Managing Inflowing Cash Advances Inflowing cash advances are typically

held as restricted cash in deferred revenue within a General Fund sub-fund or other fund until earned.

It is imperative cash advances be unrestricted and recognized as General Fund revenue as soon as earned, preferably concurrent with expense, but no later than a day or two.

Managing Out-flowing Cash Advances The General Fund advances cash to

other funds or entities for a variety of reasons.

Wherever possible, such out-flowing advances should be held off until absolutely necessary.

Cash advances to other County funds for operating reserves should only be done once the need in the other fund becomes essential.

Tracking Receivables

The EO is asking all departments to begin booking receivables on a rolling basis, rather than just at year end, and to not reverse receivables in the new year.

This will allow better management information on accumulated amounts owed to the County over time, particularly by the State.

Tracking Receivables

The EO is encouraging all departments to work with OASIS staff to begin implementing use of the Accounts Receivable and the Billing Modules in the new year to manage all receivables within the financial system.

This will allow the greatest amount of information to be gathered, tracked and reported in real time.

Pursuing Receivables

• The EO asks all departments to get, and stay, caught up on billing and claiming for all amounts due the County, and to assertively pursue payment.

• Bills and claims should be done as quickly after the end of the billing period as possible:– Monthly bills should go out before the end of the

following month. – All other bills should be done at least quarterly,

and should also go out by the end of the following month.

Managing Out-flowing Payments

The EO asks all departments to prudently manage out-flowing payments to the County’s best advantage within agreed terms of payment.

Whenever possible and prudent, hold payments until the end of the agreed payment term.

Weathering the Storm

• The EO, Treasurer’s Office, and the ACO are looking at all our internal cash flow options.

• We hope to take another TRAN offering to market once the County budget is adopted on June 30 to stabilize our own cash flow needs.

• However, the State’s cash crisis may continue to threaten our cash position for months.

• And, this is all part of a long-term financial restructuring at all levels of government.

Managing Through Crisis

A British motto during WWII was:

“Stay calm, and carry on.” These times pose some great challenges

for us, as a County and as employees. We will get through these tough times, if:

We all pull together, Get resourceful, Get nimble and adapt to change, and Each do our part.