Agenda item

To receive an update on the policy and effectiveness of treasury management 

The Head of Strategic Finance introduced a report on Treasury Management in the Public Services.  The Code of Practice 2011 recommended that Members received reports on its treasury management polices, practices and activities, including, an annual strategy and plan in advance of the year, a mid-year review and an annual report after its close.

The annual strategy was approved by Council as part of the Medium Term Financial Strategy (MTFS) and the final performance against the strategy was reported to Audit Committee in June 2013 alongside the Statement of Accounts.  The report formed the mid-year review.

The Head of Strategic Finance responded to comments and questions raised by Members.  In summary responses included:

• The Council currently had not undertaken any variable interest rate borrowing; and

·       The Sector Treasury had been part of the Captia Group for a number of years.

7.17pm at this point Councillor Arculus joined the meeting

• The Council currently had no investments for longer than 12 months.  There was however, a treasury investment of £2m under the Local Authority Mortgage (LAM) Scheme;
• The Council would not be advantageous in property or company investments due to the small amount of lending percentage return compared to the amount that the Council would need to pay on the loan;
• An investigation would be conducted if the Council’s Operational Boundary borrowing was likely to exceed a temporary arrangement, the findings of the investigation would also be reported to Audit Committee due to its responsibility to monitor treasury management;
• The amount the Council was required to borrow for its Capital Programme would appear lower in the earlier part of the year than the latter.  As capital scheme projects became more established later in the year, an acceleration of borrowing would particularly occur;
• When the Council pay for capital works it uses framework agreements, which had been a good example of the Council resources.  Capital works would be paid for when the appropriate level of work had been completed by the contractors;
• the prudential indicators were set at a rate that was determined by the amount of borrowing for the current and future years programmes in order to gain the best borrowing rate; discussions would also take place to review whether the operational boundary was set at the appropriate rate;
• Members commented that the annualised operational boundary was set every two years and that Audit Committee would receive a report before the amount of boundary borrowing was exceeded;
• The Council’s anticipated rate of planned expenditure that was set at 85%, was an estimated figure.  The Council’s income account would be utilised before it was necessary to borrow funds;
• The Capital Financing Requirement (CFR) was driven by the Council’s budget and capital spend in the current financial year;
• The Council’s cash income flow was generally higher in the first part of a financial year;
• The Council was in discussions with Lloyds and Treasury Sector regarding the Local Authority Mortgage (LAM) and Help to Buy Schemes (HBS) in regards to offering one scheme to help a first time buyer purchase a property.  The first tranche of applications had released £1m and had helped 40 new home buyers.  Applications had continued to be received and mortgages were anticipated to start in January 2014;
• Members felt that the two schemes (LAM and HBS) should remain in place for first time buyers until the Council was assured that first time buyers could be accommodated by the option of one of the schemes;

·      The Council continued with their work with the National Steering Committee regarding the funds locked into the Iceland banks.  The Council had been successful in initiating the release of three quarters of funds and continued to work with administrators to retrieve the remainder.

The Committee:

Reviewed the current performance against the Treasury Management Strategy (TMS), which was set in the Medium Term Financial Strategy (MTFS).

The Committee also agreed:

That the Head of Strategic Finance would:

·      Provide a percentage representation against the rate of variable interest borrowing for the Council within the future Treasury Management reports;

·         To make it clearer within the Treasury Management Strategy that Audit Committee would be notified if the Council’s operational boundary borrowing had been exceeded, and would receive a report explaining the issues at the available next meeting; and

·      Circulate to Members of the Audit Committee an outline of the key differences between the Local Authority Mortgage and the Help to Buy Schemes.