| 主权项 |
1. The Liquidity Position Score is a process by which an analyst or analyst(s) evaluating a government entity or higher education entity (the client) can effectively communicate to the client what cash balances are earning an interest rate or earnings credit rate, what balances are available for long-term deposit and/or investment, and what effective interest rate was earned on long-term dollars over a specific time period. In addition, the Liquidity Position score allows an analyst to evaluate progress towards recommended actions set forth by three+one (if applicable), and also determine the appropriateness and effectiveness of client's investment policy statement. First, the analyst should identify every account held by the entity that is earning an interest rate and total each of these interest bearing account's average balance over the time period being studied. This sum should then be divided by the total average cash balance amongst all accounts (both interest and non-interest bearing) over the time period being studied, and the result will be the percent of available funds invested figure. Second, the analyst will use sophisticated Monte Carlo techniques to forecast potential “worst-case” cash flow scenarios to determine what cash balances are available for long-term deposit and/or investment. Next, determine what cash balances on average were being viewed/used by the entity as long-term deposits/investments (i.e. Money Market Accounts, Investment Accounts), and divide this amount by the long-term cash available identified through Monte Carlo simulations. The result will be the ratio used for the liquidity proficiency section of the score. Third, the analyst will calculate the total interest earned by the entity over the time period being studied, and divide it by the average total cash balance amongst all accounts held by the entity. The result is the effective interest rate earned by the entity over the time period being studied, and should then be compared to a target rate (set by the analyst). The percent discount or premium of the calculated effective interest rate to the target rate is the Warnick Rate Indicator. Fourth, if applicable, the analyst should determine through communications with the client, how many of three+one's recommendations have been implemented or are in the process of implementation. The percentage of recommendations that have been implemented or are in the implementation process is identified under the cash flow optimization section. Finally, the investment policy should be reviewed in detail by the analyst to determine how many, if any, critical elements are present in the policy (as explained in detail in the specification). This review will produce the final aspect of the score, labeled “Investment Policy.” Going through these steps to arrive at the final Liquidity Position Score for a client will allow an analyst to effectively evaluate an entity's historical and current cash position, and also communicate these findings to the client. |
