Public Fund Investment Tracking and Reporting® (PFITR) is an accounting software development and software sales company that serves public entities by helping them track their investments and quantify objectives. Currently, the market has approximately 120,000 public entities that oversee just fewer than $4 trillion in fixed income assets. PFITR’s product is a subscription-based accounting and analytics system that costs approximately $200 per month preceded by a small investment valuation charge and a set up charge of about $1,000. The program generates reports about investments and analysis needed to quantify objectives of the investment policy.
PFITR’s application is unique because the technology is much more advanced than what is currently offered using the latest languages and interface protocols. It is built for the iPad and it is also a system designed to take the initial set up and data entry out of the hands of the public entity. Setting up includes sending a professional to the entity to collect and enter all the data into the PFITR program and generate the first reports. The iPad would be the most beneficial tool for three reasons. First, it is paperless. There is a political motivation to show that the entity is “going green” by resorting to electronic filing. Second, is the paperless gooey interface are where public entities are headed. Third, boards and councils approve budgets that will directly benefit their council. Boards all across the country have packets of paper prepared for each meeting that typically are outdated by the time they are discussed. Use of the iPad allows easier updates to information on the go, so that information will always be relevant to that time.
Benefits and Features
Every public entity must report on its investments. It is highly recommended that the investment policy has a provision that requires segregation of duties. When someone makes investments for the entity, there can be a great conflict if the same person reports on how well these investments are doing. Unstandardized reporting, like you would do using and Excel spreadsheet, can be subjective and put a positive spin on bad investments. While they must do an audit every year and have specific quarterly reports, an investor can take on risks and become biased to their own decisions. Their investment accounting must include the Government Accounting Standards Board’s (GASB) recommended reports. GASB 31 is called the “Mark to Market” report and GASB 40 is the “safety” analysis. PFITR provides accurate accounting and analysis from a third party that is not subjective. It provides an accurate third party evaluation of the treasuries, agencies, and all other fixed income products in the portfolio. It will calculate an internal rate of return of the investments as well.
The challenges with reporting and investment tracking software in this industry are that most of the software have either serious limitations and quite a bit of data entry, or they are incredibly expensive and have lengthy training processes.
Entering an investment on another program, including an Excel spreadsheet, can be a long and arduous task that could lead to data entry errors and poor calculations.
The largest benefit of PFITR’s software is that public entities only have to enter a few data points in the portfolio: an investment identifier, such as the CUSIP number (CUSIP is an established fixed income investment identifier), the date the investment was purchased, and how much was paid for the investment. The software takes that information and brings in over 180 fields of information. PFITR also has the ability to map this information from their brokerage or safekeeping account. The investment valuations are received from PFITR’s database and multiple data providers that they contract with.
The software then values all of the investments either on a daily, weekly, or monthly basis. It looks at the portfolio as a whole and calculates the internal rate of return while defining the risks in the portfolio. When considering interest rate risk in a portfolio, one must calculate modified duration, effective duration, and convexity. These words would have meaning to a Chartered Financial Analysis (CFA) managing a Mutual Fund; however, to a board member or a newly-elected treasurer, these words often times have little meaning. If those valuations are 7 for the modified duration, 6.5 for the effective duration, and .45 for the convexity, there would be great interest rate risk and a warning. PFITR’s dashboard gives meaning to these terms of risk through a red light, yellow light, or green light.
When managing a portfolio, most public entities have policies that clearly state their investment objectives. However, measuring a portfolio to a policies objective without PFITR’s software is extremely difficult. The typical objective of a public fund portfolio is safety, liquidity, and yield. Public investment policies limit the investment types that they can choose from to lower-risk investments. The policies are trying to protect investments from default risk, but there are several other risks that are often taken on but go unrecognized. PFITR helps define the risks of each investment and each category, guiding to lessen the risk through diversification. The cash flow analysis tool shows how much money can be invested and how much money needs to be liquid. Yields are calculated and recalculated as the market interest rates move. The software also calculates an internal rate of return on the entire portfolio.