A System for Forecasting and Monitoring Cash Flow: Phase II, Forecasting Federal and State Revenues, Maintenance Contracts, Other Expenditures, and Cash Balances

Report No: 85-R24

Published in 1985

About the report:

The research on which this report is based was performed as part of a study to develop an improved system for generating a two-year forecast of monthly cash flows for the Virginia Department of Highways and Transportation. It revealed that current techniques used by the Department to forecast right-of-way payments, salaries and wages, and allocations to cities, counties, other state agencies, and transit properties require no change. On the other hand, it showed that forecasts of expenditures on materials, supplies and equipment, and maintenance contracts have overestimated actual cash outlays by significant margins. In addition, this research revealed that success in forecasting federal revenue reimbursements is, at best, likely to be spotty and that forecasts typically will be overly optimistic. For state revenues, official forecast approved by the Office of the Secretary of Transportation necessarily serve as the basis of the official cash forecast; nevertheless a technique is proposed for early identification of significant changes in state revenue collections. The use of techniques derived from this research in a December 1983 forecast of cash flows for January Through July 1984 showed that the estimated cash balance for the end of the period was within $4.0 million of the actual balance. Among the major recommendations are that it may be reasonable to establish cash balances at contingency levels consistent with the expected excess of expenditures over revenues for the months of July through October.

Disclaimer Statement:The contents of this report reflect the views of the author(s), who is responsible for the facts and the accuracy of the data presented herein. The contents do not necessarily reflect the official views or policies of the Virginia Department of Transportation, the Commonwealth Transportation Board, or the Federal Highway Administration. This report does not constitute a standard, specification, or regulation. Any inclusion of manufacturer names, trade names, or trademarks is for identification purposes only and is not to be considered an endorsement.

Authors

Other Authors

Gary R. Allen, Ph.D.

Last updated: January 16, 2024

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