The City of Atlanta is the state capital of Georgia, US, and is a major transport hub with the busiest airport in the world. As an enterprise, the City has over 7,000 employees and annual revenues of $1.5 billion. They serve a population of over 500,000 in the city proper and up to 10m in the total metropolitan area.

Stefan Jaskulak started work for the City of Atlanta in September, and the CFO, Joya C. DeFoor, started the month before. Previously, both worked for the City of Los Angeles, where they were awarded the Treasury Today Adam Smith Award 2010 for Bank Relationship Management, in addition to receiving the AFP Pinnacle Award and the Alexander Hamilton Award.

Prior to joining the City of Los Angeles, Stefan was Assistant Treasurer/First Vice President of Corporate Finance at IndyMac Bank overseeing treasury operations, structured finance and treasury systems. His experience spans the public and private sectors in the United States in addition to consulting in Europe with over 20 years in the finance profession and more than ten years of Treasury experience. He earned his Certified Cash Manager designation in 1999 and teaches the Certified Treasury Professional preparation course at Brandman University.

Aiming for best practice

The City of Atlanta’s structure is headed by an elected mayor, a 15 member city council and a city council president. The finance department reports directly to the mayor and the city council. At the same time, the following functions report to Stefan Jaskulak: budget, treasury, revenue, controller’s group and grants management.

Following several key staff leaving the finance department and the new CFO and Deputy CFO starting, a range of new projects and developments have recently been launched by the new team. Where treasury operations are concerned, ‘best practice’ standards are the goal.

Treasury operations are divided between cash and investment on one side and debt management on the other. The treasury operations are not only responsible for the general city treasury functions, but also for the enterprise side, including the airport; and a separate enterprise covering the City’s water supply, waste treatment and solid waste collections. The finance department issues debt for the city and manages this function for a range of smaller entities related or affiliated to the City. For example, last November Atlanta issued $600m to fund construction at the new international terminal at the airport and in December refinanced $500m of variable rate bonds, moving to fixed rate bonds, thereby eliminating the interest rate risk exposure.

Jaskulak spoke to Treasury Today about his plans for the City’s cash management processes, the technological challenges the finance department faces and Atlanta’s disaster recovery plans – which have just recently been put to the test.

What is the focus of your cash management activities?

We have major plans. We are restructuring these functions, re-engineering our cash-flow modelling and in the longer term, we will become more proactive on the investment side. In the current low interest rate environment, it is difficult to gain yield anywhere, cash or investments. That problem is compounded by the Georgia State Code which limits our investment opportunities further. As a result, we mostly hold low yield government securities.

Of course, there are two sides to low interest rates and I want to be in a position to take advantage of the low borrowing costs.

The first step in the transformation of our cash management activities is to improve cash flow transparency. If we can boost monitoring, we will be able to use that cash more effectively and also boost our yield when the interest rates rise.

Where did you start the restructuring?

We started with our bank account structure. We began by physically drawing the structure on a white board. The first challenge is to unravel the transactions into manageable segments, so the treasury can easily identify which departments are responsible for each transaction. Without knowing that, we cannot obtain accurate projections.

Once transparency is enhanced, we need a cash flow tool to monitor the whole picture. At a minimum, that would be Excel, but as we use Oracle systems, we plan to use facilities within their cash management module.

Clearly monitoring cash flow is an important and growing area for our treasury team and that is reflected in our recruitment strategy – we are looking for a new Cash and Investments Manager to improve our capabilities in those areas.

You won Treasury Today’s Adam Smith Award 2010 in the Bank Relationship Management category when you worked for the City of Los Angeles. How do manage your bank relationships at the City of Atlanta?

We have one main bank and several smaller, local banks. The main relationship is with Wells Fargo, which we use for services including payroll, accounts payable and large flows of receipts – nowadays, products are so diverse and sophisticated that treasurers really need to use a large bank to handle all that. Smaller flows and deposits are split off to smaller, local banks, though. In addition to that, we also have a few relationships with banks that serve as trustees on bond deals – those are also regional banks and large national banks.

Really, we use a ‘basket’ of banks in terms of size and scope, offering a wide range of services that we obtain when we need them.

What are the biggest challenges you currently face?

Our biggest challenges are technology-related. The City made a very smart move in moving to Oracle ERP. By that I do not mean that Oracle was the only suitable provider – just that it was right to move to a city-wide system.

That ERP has been implemented over the last couple of years, but there are still some problems. Firstly, we still have smaller legacy systems in the periphery of City operations which do not always communicate with Oracle. Secondly, resource constraints prevented the City from updating all of its business processes in line with the new ERP system. Essentially, that means the new software is not being allowed to fulfil its potential.

We are evaluating all our processes and looking to make changes in this direction and that requires certain questions to be asked to find out what our key control points are. For example, at what point is there manual re-keying and at what point is there, or should there be, an automated systems feed?

For example, I want to revamp the whole Accounts Payable process. That is typically ‘low-hanging fruit’. Currently, invoices arrive all over the City in a huge range of formats in any department in the City. They can go to the department that made the original purchase, they can go to Accounts Payable, or they can arrive in a department that has nothing to do with the process. On top of that problem, those departments which are not part of the process do not see invoices as urgent business. That means invoices may be piling up for a month or more before they reach Accounts Payable and that could easily mean we miss deadlines – for example, a lot of invoices request payment in 30 days, so if that is waiting in the wrong department we miss that payment date.

Additionally, it can be a challenge to manually match invoices with the original purchase orders. The process requires a lot of reconciliation – were the goods actually received, which purchase order is it, which fund does it come out of, which accounting line is used and so on. At the back end, payments are 99% cheques and 1% ACH [Automated Clearance House].

We have a large project underway to improve this system and remove those inefficiencies. The plan is to put a portal at the front end for invoice submission and receipt and use a proper authorisation matrix that takes into account the various departments with their levels, needs, sizes, typical purchases and contracts. That will then be loaded into Oracle to ensure funds are available and budgeted for and matched up with a payment gateway at the back end.

The gateway will be enabled to accept credit cards, ACH and as an exception, printed cheques. That is one of the initiatives I am looking at in 2011. I know none of it is rocket science – it is all out there and has been done – but the scope and scale is a bit bigger and the fact that we’re going to tackle it end-to-end, all at once, makes it quite an ambitious project.

What are the objectives of your ERP project?

Before this project, we had a lot of smaller, unrelated modules, generally without automated interfaces. When the City chose to work with Oracle, we bought 24 different modules, which we believe makes us one of the largest purchasers of Oracle’s modules. However, we are stretched in terms of resources and so have not been able to fully utilise the ERP. It is up to us in finance to find out what exactly is available – we have so many systems from Oracle that we just have to identify a problem and see what equipment we have got to work with.

For example, we had 600 reports in finance and were able to easily cut that in half because a lot of reports covered the same topic, but for different departments. With better use of the ERP system, the reports are integrated and anyone looking for information can filter the reports by department – it is just a drill-down, saving on time and space. That change made a big impact and only took a few weeks to implement.

Efficiencies like that can be made, and are being made, all across the finance department. At the end of the day, the CFO and I won an Adam Smith Award last year for just such a project and there is no reason why a good, experienced team with the right equipment should not be able to implement best practice processes with the same efficiencies as the finance department in any leading business. We are serving the City and want to do that as effectively as possible.

What is your Financial Business Continuity plan?

This is all about disaster response. It is a joint project with the City of Los Angeles, which is a unique venture. As I used to work there, we clearly have strong links already, which provides a useful foundation.

Further, in previous positions I have been involved in business continuity planning and testing and through this we realised that city governments are typically very good at disaster recovery ‘first response’. In LA they are very good at responding to earthquakes and the same is true of hurricanes in Atlanta – the police, fire and public works departments all know what to do.

However, there are no clear plans to protect the ‘corporation’ of the city – so from a treasury perspective we need to ensure the funds remain available for the first response and to protect the company. In the past, I have always balked at these large binders – the detailed plans of where to go and who should be where in case of a disaster. What we need is more detail that people can really understand on what is expected of each member of staff, what actions they should take.

How have you approached the project?

We spoke to staff from every department to evaluate everyone’s role and redraft the binder up into colour-coded flowcharts for tasks and processes: red/critical tasks include debt payments and payroll which must take place in any situation – essential, even if the building is on fire; yellow/core tasks, like investment accounting, are important and must be accomplished within five days; green/support tasks can wait until the disaster is over and everything is back to normal – cash reconciliation, for example. Areas like cash management can be simplified to just one or two sheets by this method. This showed us what we really need and the state of our backup processes. For example, we have worked with our banks to see how easy it is to replicate our last payroll so staff can be paid a basic amount on time, with adjustments made post-disaster for things like overtime.

Of course, it is important to remember in the planning stage that staff’s attention will not be on their jobs during a disaster – their families and homes are the priority and that needs to be built into the Financial Business Continuity plan’s schedule.

Another practicality beyond the actual fact of having an easy-to-understand binder is that a large file is useless if it is on a desk inside a building that you cannot get to. For that reason, we have simplified the process to a basic flow chart, reminding employees of the ‘red’ tasks which must be completed urgently.

By using a common approach in terms of departmental interviews and methods of documentation, we can easily share lessons learned with Los Angeles and with our banks and other counterparties.

How much progress have you made so far?

We are making good progress on the inventory for the flow chart and will start testing in the summer. Those tests involve simulating a disaster, with the staff moving to ‘hot’ or ‘cold’ sites. The ‘hot’ site is a relatively close building, generally another part of the same company, with similar facilities and software where staff can continue working as normal for the rest of the day. The ‘cold’ site though is much further away – more than an hour’s drive – and the computers need to be pulled out of cabinets, so it takes more time to get set up. During tests, the treasury will need to operate their cash positions from those sites. However, all key staff have use of laptops and wifi that reduce the problems posed by a disaster.

Indeed, a recent snow storm essentially stopped all movement around Atlanta for two days, yet on a skeletal crew the City of Atlanta as a corporation managed to continue working, though it took several more days to get back to normal operations. Lots of people worked from home. That was certainly an interesting reality check for us, in the middle of creating this disaster recovery plan.