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Abstract: 

While research has established that managers influence performance, the proficiency of public financial officers navigating working capital management receives less attention. These managers must select strategies that rely on internal resources (e.g., unrestricted cash, savings, interfund borrowing, interfund transfers, and delaying payments) and/or external financing (e.g., faster collections of receivables, accessing lines of credit, direct lending, and issuing short-term debt) to sustain operations. Managers may prioritize strategies based on a modified pecking order, using internal resources before engaging external financing. Results from a survey of local government financial managers indicate a preference ranking: these officers opt to reduce unrestricted cash before turning to other plans (such as delaying payments, hastening the collections of receivables, issuing short-term debt, and taking no action), and often implement strategies that combine use of unrestricted cash and short-term debt. However, a deficiency of related policies and procedures may prohibit managers from using their preferred strategies.

Keywords: Cash Flow and Working Capital Management; Modified Pecking Order Theory; Interfund Borrowing; Short-Term Debt

Affiliations:  1: University of Georgia School of Public and International Affairs.