Agenda item

Treasury Management Annual Report 2018/19

Report of the Cabinet Member for Finance



The Director of Finance reminded the Committee that the Council was required under the Local Government Act 2003 to produce an annual treasury management review of activities and performance against prudential and treasury indicators for 2018/19. The report in the papers met the requirements of both the CIPFA Code of Practice on Treasury Management (the Code) and the CIPFA Prudential Code for Capital Finance in Local Authorities (the Prudential Code).


The Committee was also reminded that the Strategy for 2018/19 was approved by Council on 1 March 2018. Reference was made to a key element of daily operations and how focus was on comparing current market conditions in conjunction with the Link credit rating list and the option to deviate from this guidance should there be clear alternative options available to the Council.  Such decisions had to be clearly documented for audit purposes.  The aim of the strategy was to generate a list of highly creditworthy counterparties that enabled diversification of investments and avoided risk but provided security.


Delegated powers from Council had been given to the Governance and Audit Committee to deal with matters relating to the Council’s Treasury Management activities.  In particular the Committee had the responsibility to monitor, review and amend as appropriate the Council approved Treasury Management Strategy during the course of the financial year. The regulatory environment placed a much greater onus on members to review and scrutinise the treasury management policy and activities. Any potential amendments or minor changes would be submitted to the September Committee meeting. 


Members were informed that strong growth in Quarter 2 and Quarter 3 had impacted by weak growth in Quarters 1 and 4.  With the uncertainties over Brexit this was expected.  The base rate had also increased by a quarter of a percent from 0.5% to 0.75% and this had provided new opportunities and increased income from investments for the Council. 


The average annual interest rate of the Council’s portfolio had slightly increased from .07% to 0.97%.  The budgeted assumption for average investment balances had been £56.684m but was in fact £65.774. The graphs contained in the report highlighted the variances in the short-term investment market.


In respect of Long Term Borrowing no additional long term borrowing had been required during 2018/19. The long-term debt outstanding as at 31 March 2019 was £70.879m and related to the HRA self-financing loans.


Short-Term/Temporary Borrowing outstanding as at 31 March 2019 was £28.221m.


Internal borrowing had been utilised to purchase the Cummins site in Stamford during 2018/19 and it was noted that borrowing would be required to fund any future purchases.


Debt rescheduling had been unviable during the year due to the average 1% differential between PWLB new borrowing rates and premature repayment rates.


Discussion took place on benching marking, rankings and the interaction with other local authorities and the importance of identifying any issues that may arise and how they could be addressed. It was noted that the Treasury Management strategy had been adopted by Council, but it was in the gift of the Governance and Audit Committee to consider and implement any variations should they be required. Clarification was also provided on the difference between cash flow and reserves and how the accounts were monitored on a daily basis.


Members discussed whether all the investments were shown on the graph, how risks were monitored, whether the council held an ethical policy or strategy for investments, whether it was common practice to invest in other local authorities, whether Councils were included in the ratings referred to and who made the decisions to invest.  It was noted that the investments were monitored on a daily basis by a designated officer, there was no explicit ethical policy in respect of choosing who to invest with.  Investing with other Local authorities was common practice and local authorities were not included in the ratings.  It was also noted that all investments carried a risk.


The Chairman suggested that the advisors provide a training session on the ratings and investment process for the Committee.


It was proposed, seconded and AGREED: 


a)     That the Governance and Audit Committee noted and approved the contents of the annual report on the Treasury Management Activity for 2018/19, and


b)     That arrangements are made for the Committee to receive training from the advisors in respect of the ratings and investment processes.

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