Cash management is critical for all organizations, including governments. Cash management touches every program, from how and when entities collect taxes, royalties and fees to how and when they pay suppliers, contractors, grant recipients and employees. Cash management requires forecasting when cash flows will occur to ensure cash is available when needed, to invest surplus cash at optimal returns, and to minimize debt, interest and administrative costs.
When we say economical cash management, we mean: pooling and using cash not needed in the shortterm to minimize debt and borrowing costs; paying bills, grants and other cash outgoings no earlier than necessary; and maximizing the investment return on available cash needed in the short term.
When we say efficient cash management, we mean using information technology cost effectively to avoid people performing tasks that can be automated.
It would be wrong to assume that cash management is efficient and economical just because the Government of Alberta has historically had large revenues and cash balances and that it is able to collect taxes, royalties and fees, and pay its bills, employees and grant recipients. Furthermore, it would also be wrong to assume the way cash was managed in the past across the government as a whole, was or remains the best way to manage cash. Budget 2015 shows that government debt will increase to $36.6 billion by 2017–2018 and that by 2017–2018 debt servicing cost is expected to be about $1.3 billion annually. The key question to ask: Is the Department of Treasury Board and Finance managing cash across the government as a whole in the best way to minimize debt and debt costs?
What we examined
Departments have controls to manage cash, including revenue and expenditure controls. We did not test the effectiveness of these controls. Rather, we assessed if the Department of Treasury Board and Finance has systems to ensure cash management is efficient and economical. We also performed audit work at select departments, including Service Alberta.
The Department of Treasury Board and Finance monitors and manages cash of the general revenue fund and the Consolidated Cash Investment Trust Fund. However, the department can do more to ensure cash management across the government as a whole is efficient and economical. While some improvements have been made to banking practices in recent years, there are significant opportunities to make cash management, banking practices and payment practices more efficient and economical.
Why this is important to Albertans
The government can reduce borrowing costs by better utilizing excess cash. Furthermore, the government can reduce administrative and banking costs if it follows leading cash management, banking and payment practices.