Treasury as a Profit Center: Learning from Government Organizations

  • By Joanne Oh
  • Published: 8/1/2022

Dollar bills with upward graphFor organizations thinking of using their treasury as a profit center, there are many factors to consider. In a recent webinar, “Treasury as a Profit Center: A Government’s Perspective,” Tony Vu, CTP, treasurer and chief investment officer of the University of Colorado System, shared his experience operating treasury as a profit center for three government or government-like organizations.


A treasury department operating with a “profit center mentality” acts like an independent service provider or an internal commercial bank. Treasurers need to consider their depositors, and they need to consider their assets and liabilities. At the same time, there is an opportunity to take advantage of the arbitrage between the two. “You have to make some profit, and being an internal commercial bank is how you do that,” said Vu.


The size of the treasury, asset size, budget autonomy, and distribution and spend policy are important factors when seeking to transform treasury into a profit center. What doesn’t matter? Staff size. While treasuries are typically thinly staffed, budget autonomy and staff size are related, so having more budget autonomy is one way to help a treasury department reach the right staff size.

Factors FIU M-DCPS CU System
Size $1.7B $7.0B $5.2B
Assets $0.5B ~$1.2B $3.3B
Staff 2 8 7
Budget Self/retrospective Self/retrospective Self+/prospective
Uses No spend plan 'Single Use' Initiatives

Table: Comparing the size, asset size, staff size, type of budget and use of money at Florida International University, Miami-Dade County Public Schools and University of Colorado System.


Vu’s first stop was Florida International University (FIU), a public university in Miami, with about 65,000 students. The treasury had a $1.7 billion annual budget in FY22 and about $0.5 billion in investible assets (also known as excess liquidity). Operating on a self-funded, retrospective budget meant that the treasury department created a budget at the beginning of the year, then funded it by the end.

At FIU, the treasury department was built to put together an investment program and a diversified portfolio. And while there wasn’t a formal spending plan or policy for investment earnings distribution (as of his departure), there was stratified distribution for mandated participants under a formal policy.

By Florida rules, this meant a difference in the returns from the portfolios of certain departments. The treasury department determined the risk profiles of the participants and sorted them into tiers based on risk tolerance. For example, with Financial Aid, “If there were dollars in there, we had to return a certain level,” said Vu. “And so, we translated that into the risk tolerance of that particular fund or department.”


Vu’s second stop was Miami-Dade County Public Schools (M-DCPS), a district with about 350,000 students and, in FY22, a $7 billion annual budget (higher than normal due to COVID funding). Whereas FIU had a steady portfolio and a long-term pool, M-DCPS had very different cash flows because they were based on property taxes.

From November to December, the district received money from property taxes. This money would have been expended by September if the treasury department did nothing — meaning they would have had to borrow to bridge from September to November. So the investment program had to be more short term, with the expectation that every single dollar put to work would go out the door. As such, all participants received a standard minimized mandatory distribution, and any excess earnings were applied to the following year’s budget gap.

Beyond using excess earnings to help fill budget gaps, M-DCPS instituted an administrative fee as part of the cost of issuance for any bond sale it led. This allowed the school district to have a source of income for unplanned expenses on the debt side.


Vu’s third stop was the University of Colorado System (CU System), where he is currently employed. The CU System has a $5.2 billion annual budget in FY22, with $3.3 billion in the treasury pool portfolio (about $2.7 billion available for long term).

Vu described the treasury budget as “self-funded+” because the department funded not only itself, but also other departments within the university system. Overall, the CU System has about 66,000 students across four campuses.

Unlike FIU and M-DCPS, which had retrospective budgets, the CU System uses a prospective budget. Because the budget is automatically put into the pool at the beginning of the year, the treasury department doesn’t need to be worried about hitting the number at the end of the year.

In terms of investment earnings distribution, the treasury department minimized the mandatory distribution based on the risk profiles of participants. The department then put the excess earnings into reserves and toward what Vu called an “initiatives spending model” — money used to accelerate the university’s strategic plan implementation.


When asked if there was a recommended minimum size a portfolio should have before structuring treasury as a profit center, Vu answered, “Whatever you consider excess liquidity.” In other words, it depends. He recommended thinking about the organization’s cash flow and whether the asset size of the organization was a good match for its mission.

Another way to think about it, Vu explained, would be to look at the budget of the treasury department divided by the prevailing interest rates, while also building in a buffer of three times that amount.

Dive deep on similar topics with the treasury management track of educational sessions at AFP 2022. Check out the Session Explorer for details.

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