The City of Los Angeles was bogged down in fragmented, antiquated banking and cash management practices when treasurer Joya De Foor and assistant treasurer Crista Binder tackled the juggernaut spanning 42 disparate lines of business. They started by dividing city enterprises and departments by the complexity of their banking and cash flow activities. Then the project team looked at how it could rationalize, streamline and automate one after another of the parts of a $17 billion municipal business with more than $60 billion in annual cash flow, at the same time the city wrestled with the worst budget deficit in its history.
The team took care to separate ownership of the project from the city's policymakers and keep it in the hands of the treasury, controller and IT offices, Binder explains. Together, they developed a blueprint for an efficient account structure, greater use of electronic services, and improved visibility and controls. Then they tackled implementation. An RFP last spring led Los Angeles to two banking partners, Wachovia and Wells Fargo, which became one when the credit crunch hit. When treasury workstation providers couldn't deliver what Los Angeles needed, city programmers built their own. The account structure features hundreds of zero-balance sub-accounts that roll up to one master concentration account, dramatically simplifying reconciliation and improving visibility and control. Remote deposit capture proved the key to cutting lockboxes from 24 to 16. Data capture, daily transmission and image availability were added to the complex lockboxes used by the Office of Finance for tax and permit payments, causing the hit rate for automatic cash application to soar from 9.33% to 85%. Ten disbursement accounts were eliminated, including all stand-alone accounts. "By carefully understanding the complexities of each organization from a cash flow, technology and accounting perspective, treasury was able to implement multiple solutions that complemented each other in 18 months," Binder says.