Cash reserves are sources of funds which agencies use to finance their needs whenever they come up. The cash reserves are useful to agencies; hence, they should be managed well to ensure the agencies’ operations are not stopped due to lack of finances. This paper analyses the need for agencies to maintain cash reserves with the use of the Cashton agency as the case study.
Agencies use cash reserves to pay for the expenses they incur in their operations (Paramasivan & Subramanian, 2009). Various agencies have diversified expenses which they incur in their daily activities. In the Cashton agency, for instance, the general fund reserve is used to fund the administrative expenses of the agency. These include the fire, police, and public works functions expenses. The debt service is used to repay all the debts incurred by the agency in the form of bonds and loans. The service fund repays the interest amounts incurred and the principal amount of the debt.
The Cashton city does not hold enough cash reserves in the four funds. This is portrayed by the various deficits seen in payment of expenses of the agency. For instance, the General Fund was unable to meet the expenditure allocations in all months other than the month of May and November. As such, the city should hold more cash in this fund. The park general fund was able to fully pay for the expenses of the agency in May and November only, the other months the funds fell short. The park General fund paid for all the expenses on time other the month of January and August. The debt service fund was also able to meet allocated expenditures on time except for the months of May and August. Therefore more funds should be allocated for the four funds to ensure all allocated expenses are paid for in their months of allocation.
References
Paramasivan, C. & Subramanian, T. (2009). Financial management. New Delhi: New Age International (P) Ltd., Publishers.
