The Academy for New York State's Local Officials

Cash Management

A Tutorial for Local Governments and School Districts

How to Begin

A good place to begin is to examine your current accounts. List all accounts for each bank with which your local government does business. Indicate which accounts are interest-bearing and non-interest-bearing.

You will want to determine if you can increase your interest earnings. To do this, you will use a statement called an account analysis that is provided by your bank and examine your compensating balance.

A compensating balance is an excess balance that is left in a bank to provide indirect compensation for loans extended or services provided. Usually, public sector accounts fall into the commercial/corporate category. Due to regulatory constraints, corporate demand deposit accounts (DDAs) cannot earn interest. However, an amount equal to what would be earned if interest were allowed can be used to offset the cost of bank services. The calculation of this amount is performed using an account analysis, which is a statement from the bank indicating banking activity and the corresponding costs of services.

Module 3: Assessing Your Practices - Questionnaire