What is the purpose of a cash management plan in municipal finance?

The purpose of a cash management plan in municipal finance is primarily to outline how a municipality will manage its cash flow. This involves a strategy that details the timing and amounts of cash inflows and outflows, ensuring that the municipality has sufficient liquidity to meet its financial obligations as they arise. A well-structured cash management plan aims to optimize the use of available cash, manage investments wisely, and minimize cash-related risks.

While the other options touch on important aspects of municipal finance, they do not specifically address the direct role of a cash management plan. Creating a budgeting framework relates more to the planning and allocation of resources rather than cash flow management. Evaluating financial performance annually pertains to assessing overall fiscal health and may occur in conjunction with a cash management plan but is not its main focus. Ensuring compliance with state regulations is essential for all municipal operations but does not specifically define the cash management plan’s purpose. Thus, option B most accurately captures the essence of what a cash management plan aims to achieve in municipal finance.