Liquidity Risk in the Reimbursement Cycle: A Daily Treasury Model of Eleven EU-Funded Municipal Social Projects
Liquidity Risk in the Reimbursement Cycle: A Daily Treasury Model of Eleven EU-Funded Municipal Social Projects

Summary/Abstract: European structural funds reach beneficiaries after they have spent, and prefinancing is meant to bridge the interval; this paper asks whether the bridge is long enough for small local governments. It is a forward-looking design study rather than an account of observed cash flows: it takes the approved budgets and contractual disbursement schedules of eleven Romanian rural municipalities whose social service projects were contracted for implementation between 2026 and 2029, worth 54.42 million lei in total, and models each project's treasury position day by day. Prefinancing is treated as an advance recovered from later reimbursement claims, so gross inflows sum to 194.9 per cent of the budget while net inflows equal it, and expenditure starts with implementation rather than with the first request. With every request paid on the day it is submitted, all eleven projects run a financing gap. The mean peak gap is 600 584 lei, or 12.14 per cent of the budget, and every project reaches its deepest point on the day before the first prefinancing instalment. Because start dates differ while that date does not, that moment falls between day 79 and day 142 of each project, and the municipalities that wait longest carry the largest gaps. A Monte Carlo simulation with 4 000 draws of validation delays raises the ninety-fifth percentile of the gap to 19.37 per cent of budget on average, and each day of uniform delay adds approximately 45 852 lei to the aggregate gap. Delay widens the gap; the calendar creates it.

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