CGFM Test 3 Section 1 (latest update)
already passed
Cash Management
Legislation Affecting Governmental Cash Management
Prompt Payment Acts require payment of invoices within a specified period, like 30 days.
Deficit Reduction Act of 1984 holds federal agencies accountable for collection and deposit
practices.
Cash Management Improvement Act of 1990 enhances the transfer of federal funds to states
and other entities.
Federal regulations mandate federal agencies to disburse payments via EFT with few exceptions.
Limitations on depository accounts include criteria like the bank's headquarters, deposit size,
and collateral requirements.
Controls for Governmental Cash Management
Cash, being the most liquid asset, requires separation of duties to mitigate unauthorized loss.
Roles like authorization, collection, recording, depositing, and reconciliation must be distinct.
Competitive procedures are often necessary for many cash management activities.
The Federal Reserve System conducts monetary policy and provides financial services to various
institutions.
State and local governments establish banking relationships as per legislative guidelines.
Banking Relationships Establishment
Services for state and local governments include collection, payment, borrowing, investment,
and safety deposit services.
Payment for services may involve compensating balances and service charges.
Various techniques like lockbox services, concentration banks, and electronic fund transfers are
utilized.
, Payment acceleration techniques include warrants, checks, electronic payments, credit cards,
and cash discounts.
Electronic benefit cards are used for specific benefit programs with spending limits and
restrictions.
Techniques for Proper Payments and Controls
Identification of programs prone to improper payments is crucial.
Statistical estimation and proactive prevention activities help reduce improper payments.
Detection and recapture activities aid in recovering improper payments.
Government-issued credit cards require internal controls for monitoring usage.
Electronic payments' role and control are essential to prevent improper payments.
Investment Management
Risk, Liquidity, and Yield Concepts
Risk types include credit, market, currency, and political risks.
Liquidity refers to the ease of converting investments to cash without significant value change.
Yield represents the interest or dividend earned on an investment.
Trade-offs exist between risk, liquidity, and yield where higher returns entail greater risk and
lower liquidity.
Investment options like certificates of deposit, commercial paper, and repurchase agreements
offer safety and returns.
Types of Investments and Prudent Practices
Investments for operating funds and pensions include corporate bonds, equity securities,
mutual funds, and real estate investment trusts.
Prudent investment practices require experience, written policies, clear authorities, and
custodianship by financial institutions.
Fiduciary responsibilities encompass loyalty, prudent actions, and diversification of plan assets.
An investment policy outlines care standards, objectives, conflicts of interest, and authorization
protocols.
Investment managers play a vital role in government investment decisions and performance
evaluation.
already passed
Cash Management
Legislation Affecting Governmental Cash Management
Prompt Payment Acts require payment of invoices within a specified period, like 30 days.
Deficit Reduction Act of 1984 holds federal agencies accountable for collection and deposit
practices.
Cash Management Improvement Act of 1990 enhances the transfer of federal funds to states
and other entities.
Federal regulations mandate federal agencies to disburse payments via EFT with few exceptions.
Limitations on depository accounts include criteria like the bank's headquarters, deposit size,
and collateral requirements.
Controls for Governmental Cash Management
Cash, being the most liquid asset, requires separation of duties to mitigate unauthorized loss.
Roles like authorization, collection, recording, depositing, and reconciliation must be distinct.
Competitive procedures are often necessary for many cash management activities.
The Federal Reserve System conducts monetary policy and provides financial services to various
institutions.
State and local governments establish banking relationships as per legislative guidelines.
Banking Relationships Establishment
Services for state and local governments include collection, payment, borrowing, investment,
and safety deposit services.
Payment for services may involve compensating balances and service charges.
Various techniques like lockbox services, concentration banks, and electronic fund transfers are
utilized.
, Payment acceleration techniques include warrants, checks, electronic payments, credit cards,
and cash discounts.
Electronic benefit cards are used for specific benefit programs with spending limits and
restrictions.
Techniques for Proper Payments and Controls
Identification of programs prone to improper payments is crucial.
Statistical estimation and proactive prevention activities help reduce improper payments.
Detection and recapture activities aid in recovering improper payments.
Government-issued credit cards require internal controls for monitoring usage.
Electronic payments' role and control are essential to prevent improper payments.
Investment Management
Risk, Liquidity, and Yield Concepts
Risk types include credit, market, currency, and political risks.
Liquidity refers to the ease of converting investments to cash without significant value change.
Yield represents the interest or dividend earned on an investment.
Trade-offs exist between risk, liquidity, and yield where higher returns entail greater risk and
lower liquidity.
Investment options like certificates of deposit, commercial paper, and repurchase agreements
offer safety and returns.
Types of Investments and Prudent Practices
Investments for operating funds and pensions include corporate bonds, equity securities,
mutual funds, and real estate investment trusts.
Prudent investment practices require experience, written policies, clear authorities, and
custodianship by financial institutions.
Fiduciary responsibilities encompass loyalty, prudent actions, and diversification of plan assets.
An investment policy outlines care standards, objectives, conflicts of interest, and authorization
protocols.
Investment managers play a vital role in government investment decisions and performance
evaluation.
