Global Cash Management. October 1, 2014

Transcription

1 Global Cash Management October 1,

2 Session Presenters Kaliopi Provencher Director of Treasury Operations- Johns Hopkins University Domestic and International Treasury Responsibilities- International focus on sponsored research activities in over 40 countries Prior to Johns Hopkins, worked at Zurich Insurance Group focusing on domestic cash management Initiatives. Carrie Nelson AVP, International Finance - Carnegie Mellon University International Finance works with Carnegie Mellon University central administration (i.e. OGC, Advancement, HR etc.) to provide support and coordination for Global Programs Prior to CMU, Carrie worked at KPMG, focusing on project management, finance, international business and research administration 2

3 Challenges 1.Opening Foreign Bank Accounts 2.Handling Cash in the Field/Getting Funds In and Out of the Country 3.Currency Fluctuations and Funding/Reconciling Foreign Currency Accounts 4.Compliance Issues Survey Feedback 3

4 Ways to Mitigate Some of the Challenges Associated with Opening Foreign Bank Accounts 4

5 Bank Selection Establish interim funding options while registration is pending Hiring a local accounting firm to pay invoices, salaries, etc. Provide pre-paid debit card for employees to pay in-country expenses Consolidate bank relationships with a few key bank providers Identify foreign providers based on footprint in Africa, Europe, Asia, Middle-East, South America, and Asia Rank your banks within a region based on additional factors such as: Financial strength of bank Bank calling effort in the US or New York presence Diversity of product offering: mobile banking, debit cards, reporting and wire transfer platforms Branch and ATM locations to address local cash needs Willingness to negotiate contracts 5

6 Bank Selection If no relationship bank exists in area, look to domestic financial partners to recommend local bank based on their corresponding bank relationships Addressing KYC Issues with Bank Partners May avoid banking partners closing your accounts abroad May require information regarding Board Members and personal information such as parents names of signatories 6

7 Documentation for Account Set-up Account Opening Bank Paperwork from Bank Secure paperwork in advance and have legal review Establish Account Opening Set-up Forms (Completed by Department that gives information such as address, list of signers, purpose of project, estimated number of transactions and estimated dollar value. Address Balance reporting documentation and wire initiation at a Corporate Level rather than allowing each office to set-up their own process Signature cards Develop a process to get Passport pictures, copies of driver s license and passport notarized and secure the proper apostille, if necessary 7

8 Set-up Issues: Manage Expectations Average time to set up a bank account 2 to 3 months unless just adding an additional bank account. Countries like India, Russia, and Bangladesh can easily more than take 6 months to get a bank account set up. 8

9 Ways to Mitigate Challenges Associated with Getting Funds In and Out of the Country/Handling Cash 9

10 Mitigate Challenges Hire local accounting firms to pay employees and fees Use Prepaid Debit Cards for international travel Establish mobile banking to pay local vendors or employees through mobile carriers or banks. Western Union has established a corporate product to send funds either in local currency or USD through their current consumer agent platform in over 100 countries. 10

11 Currency Fluctuations and Funding/Reconciling Foreign Currency Accounts 11

12 Funding Understand currency trend Assess the types and volume of transactions required Employee payments AP invoice payments Wires Receipts Consider funding required in country and in US Gain necessary and timely access to accounts Develop proper reconciliations and metrics work with Treasury 12

13 Compliance Issues 13

14 Monitor Domestic, International Laws US Department of Treasury responsible for administering trade and economic sanctions, can lead to substantial fines or imprisonment US business as well as foreign subsidiaries Work with Legal, Finance and Systems to build a framework: Understand OFAC requirements and incorporate verification in normal business operations such as MOU/Contracts, payments, employee background check, etc. Work with international program administration to implement checks ( Implement automated AP system of monitoring 14

15 Monitor Domestic, International Laws US Department of Justice monitoring unlawful acts for certain persons and entities to make payments to foreign government officials to assist in obtaining or retaining business, directly or indirectly, can lead to criminal and civil enforcement actions US business as well as foreign subsidiaries Work with Legal, Systems, Finance and HR to build a framework to: Implement approval processes Gift giving Contracts Hiring, benefits management and payroll Supplier management and payment Requisitioning and purchasing 15

16 Department of Treasury provision of the law requires that a Form TD F , Report of Foreign Bank and Financial Accounts (FBAR) be filed if the aggregate balances of such foreign accounts exceed $10,000 at any time during the year. This form is used as part of the IRS' enforcement initiative against abusive offshore transactions and attempts by U.S. persons to avoid tax US persons required to file who had financial interest in or signature authority over at least one financial account outside US and aggregate value of all accounts exceeded $10,000 at any time during the year

17 FBAR continued US persons include: US citizen, residents and entities, including but not limited to corporations, partnerships or limited liability companies created or organized in the US or under the laws of the US, and trusts or estates formed under US laws Work with Tax, Treasury, Finance and individual schools to identify foreign bank accounts and Document annual process to remain compliant Inform those impacted of the laws and compliance requirements Collect relevant information (bank, account, address, maximum value for the year, established date, and signing authority) 17

18 Survey Results 18

19 Question #1 What approach do you use to register your institution in new countries? General counsel works with treasury to review business to determine if registration is appropriate After need established, attorneys set up legal entity and engage third party entity to provide services for hiring, payroll, taxes, bank accounts, etc. Register locally via a blocker entity 19

20 Approach to Registering in New Countries: At Johns Hopkins, thing that need to be considered when deciding whether to register: Does activity involves foreign research or programmatic activity Is activity expected to exceed $500,000 annually in foreign expenditures Is the duration of activity more than 24 months Does the activity involves opening a bank account Does the activity involves hiring local employees Do you need to execute a lease in host country for office space Will the activity/grant involve joint partnership with local institutions such as Government of Health Is there going to be a clinical trial Will US employees be residing in-country more than 6 months (US tax implications) If you answer yes to most of the questions noted above, then you need to register and decide what type of registration is best. 20

21 Types of Registration MOU Memorandum of Understanding Contract with University and partner whereby University agrees to provide specific services MOU used when in-country registration difficult because of political, legal reason s, the project duration is short (less than 12 months) MOU beneficial because there are little or no reporting obligations to government Liaison Office/Branch Office/Representative Office Formalizes presence of University in the country Outlines activities and research in a specific region for a specific/indefinite period of time Local Entity Establish a local entity in a foreign country only when the assessment suggests that it is necessary or advisable to do Last resort and least desirable option (highest costs, increased reporting obligations, need for and mandatory oversight by a Board) Complicates banking 21

22 How to start: Contact General Counsel s office to notify them of business request General Counsel will reach out to local counsel with the help of field personnel or local contacts. Identifying funding allocations for registration Establishing interim funding sources until registration can be completed. 22

23 Question #2 If you do not register, how do you set up cash management procedures? Cash management procedures for entities are set up by relevant departments, school within the University and central administration treasury office to ensure proper controls. University wide policy on setting up foreign bank accounts Use of US infrastructure to fund short-term needs in country 23

24 Cash Management Procedures Without registration how is cash managed??? Establish account in US to provide payment and funding options Consider petty cash for small dollar transactions Provide credit card Wire transfers Expense reimbursements Establish account in University s name at bank with international presence Carry cash NOT recommended 24

25 Procedures continued Regardless of registration there are key considerations to establishing cash management procedures for new accounts Coordinate and document international cash management procedures and policies due to the risk and potential materiality of transactions and impact Consider procedures specific to international Limit signature authority in domestic and international locations Open accounts centrally with assistance from Treasury department Utilize proper cash management tools over all accounts Establish controls over cash disbursements i.e. sponsored accounts 25

26 Question #3 What is your approach to funding your international activities? Holding accounts for EUR and GBP International activities are funded in the same ways as domestic activities Contract with host institutions where possible for local funding needs Varies: for smaller project school or program has their own grant funds that helps them set-up in a country. For initiatives across the institution, Provost or Presidential funds can be granted for the activity 26

27 Discussion on each of our organization s approach to funding international activities 27

28 Cash Management Hierarchy How Are You Structured? 28

29 Approach to funding International Activities On-line FX modules with Standard Chartered Bank and JP Morgan that allows most foreign currencies to be sent out. Use trading desk to send out some exotic currencies. Imprest ceiling approach - Ceiling is a three month estimate of anticipated expenditures. A cash flow projection is used to establish the ceiling Additional paperwork requiring divisional business office approval USD and local currency accounts usually established except in countries where USD accounts are prohibited. Expenses are submitted via Excel upload and reviewed by Divisional Business Office and Accounts Payable. Reimbursements are sent out via fed wire via a customized file Foreign exchange replenishments are handled by Treasury 29

30 Approaches continued Accounts may be establish in 2 currencies to address home and host needs Multiple accounts may be required depending on international location s requirements Bank accounts are incorporated into multicurrency financial system so that wires can be completed checks cut in AP expense reimbursements are systematic petty cash is replenished when receipts are submitted multiple currencies can be distributed Utilize cash management module for ease of reconciliation University or bank credit card directly tied to applicable account Emergency cash procedure through LOC, advance payment, cash on hand and credit card 30

31 Questions Thank you! 31