Interest raised in balances

January 10, 1997

MANY universities could achieve higher rates of return on their investments through better cashflow forecasting and a more formal approach to treasury management, according to a report from the three funding councils.

As part of the councils' value for money initiative, the study surveyed treasury management in 15 institutions including Glasgow School of Art, University of Wales, Bangor and Leeds University. One exercise looked at institutions' investment of short-term funds, their performance monitored over a one week. The study found that the institutions held a total of Pounds 171 million during the week with balances ranging from Pounds 250,000 to Pounds 30 million. The average rates of interest on cash managed ranged from 5.24 per cent to 6.73 per cent and the maximum rate achieved on a deposit of Pounds 3 million over one year was 7.72 per cent. The minimum rate was 3.44 per cent on a three-day deposit of Pounds 800,000.

The report said it was not necessary to place large deposits in order to achieve good rates of return.

A case study of one of the institutions showed how, through good practice, it could increase its annual rate of return by nearly Pounds 80,000 or 10 per cent of its cash balance. If such an improvement were to take place throughout higher education, millions of pounds could flow into the sector in increased returns.

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