Issue - meetings

(Finance  Portfolio Holder) To consider the attached report.

Mover: Councillor C Whitbread on behalf of the Finance Portfolio Holder,

Councillor C Whitbread presented a report on the Council’s Treasury Management Strategy, Annual Investment Strategy and the prudential indicators.

Report as first moved ADOPTED

            RESOLVED:

That the following documents attached to these minutes as Appendices 2 and 3 be adopted;

(a)  Treasury Management Strategy Statement 2017/18;

(b)  Minimum Revenue Provision Strategy;

(c)  Treasury Management Prudential Indicators for 2017/18 to 2019/20;

(d)  Rate of interest to be applied to any inter-fund balances; and

(e)  The Treasury Management Policy Statement.

(Director of Resources) To consider the attached report (AGC-018-2016/17).

The Director of Resources presented a report on the Treasury Management Strategy Statement for 2017/18, which was a requirement of the Chartered Institute of Public Finance & Accountancy (CIPFA) Code of Practice on Treasury Management and covered the Council’s treasury activity for the financial year 2017/18. The Strategy Statement set out the risks associated with the Council’s treasury activity and how these were managed.

The Director reported that the Council undertook capital expenditure on long-term assets, funded by capital receipts, grants or borrowing. The Committee noted that the Council planned to borrow to carry out its capital investment, and that the Capital Programme envisaged a balance of £1.368million in capital receipts and £0 in the Major Repairs Reserve on 31 March 2020, from which it was concluded that adequate resources, including borrowing, still existed to fund the Capital Programme in the medium-term. The Council’s underlying need to borrow was referred to as the Capital Finance Requirement (CFR). As a consequence of the Housing Revenue Account Subsidy reform, and some large projects within the Capital Programme, an authorised limit of £240million had been set for borrowing, rising to £260million by the end of 2019/20.

The Committee was reminded that the Council’s current investments were subject to regular advice from it’s treasury management advisors, Arlingclose, regarding the use of counterparties. Members noted that the Council currently had an investment portfolio of £48.5million, of which £46.5million was invested in the United Kingdom (UK) and £2million in Sweden. The Committee noted that the maturity profile of the investments ranged from £15.5million available for instant access, to £14million with a maturity date between one and three months; it was important that the cash flow of the Council was carefully monitored and controlled to ensure that sufficient funds were available each day to cover its outgoings. Members were advised that this would become more difficult as the Council used up capital receipts and investment balances reduced.

The Director advised members of the key risks associated with the Council’s treasury management activity, and how these had been managed throughout the year via the use of prudential indicators:

            (i)         The Credit and Counterparty risk was the possibility of a counterparty             going into liquidation and failing to meet its obligations to the Council. The   Council’s counterparty list was both prudent and regularly updated by its         treasury advisors, and the authority kept its investments fairly liquid within a      restricted counterparty list. The most significant change from the previous Strategy was an increase in the minimum credit rating for counterparties from            BBB to BBB+.

            (ii)        The Liquidity risk was the possibility that sufficient cash would not be             available to the Council when required. In mitigation of this risk, a number of             Money Market Funds were maintained and the Director of Resources held monthly meetings with treasury staff to review cash flow requirements.

            (iii)       The Interest Rate risk was concerned with potential fluctuations in   interest rates. It was proposed to maintain no more than 75% of the Council’s          investments in variable  ...  view the full minutes text for item 45

(Finance Portfolio Holder) To consider the attached report (C-056-2016/17).

(1)        That the following be recommended to the Council for approval:

            (a)        Treasury Management Strategy Statement 2017/18;

            (b)        Minimum Revenue Provision (MRP) Strategy;

            (c)        Treasury Management Prudential Indicators for 2017/18 to 2019/20;

            (d)        The rate of interest to be applied to any inter-fund balances; and

            (e)        The Treasury Management Policy Statement.

The Finance Portfolio Holder presented a report on the Treasury
Management Strategy Statement for 2017/18.

The Portfolio Holder reminded the Cabinet that the Council was required to approve the Treasury Management Strategy and Prudential Indicators, as well as a statement on the Minimum Revenue Provision (MRP) before the start of each financial year. The Strategy would be scrutinised by the Audit & Governance Committee at its meeting on 6 February 2017, and considered by the Council for final approval at its meeting scheduled for 21 February 2017.

The Portfolio Holder reported that the Strategy had been produced following advice from the Council’s Treasury Advisors, Arlingclose. There had been no major changes to the Strategy since its previous approval in February 2016, but a number of other issues were drawn to the Cabinet’s attention.

The Portfolio Holder declared that the first of these was Minimum Revenue Provision. Following the borrowing of £185.456million to pay for the Housing Revenue Account self-financing initiative, the Council would normally be required to charge Minimum Revenue Provision to the General Fund. However, the Department of Communities & Local Government had produced regulations whereby the Council could ignore this borrowing, and therefore, for Minimum Revenue Provision purposes only, the Council was still classed as debt-free. However, as the Council was likely to undertake further borrowing to support its capital expenditure then Minimum Revenue Provision would be required in 2017/18.

The Portfolio Holder explained that the Council had inter-fund borrowed for many years between the General Fund and Housing Revenue Account, and the interest charge made between the funds had been based on the average interest earned on investments for the year. Draft regulations issued by the Chartered Institute for Public Finance & Accountancy (CIPFA) had proposed that the interest rate applicable to any inter-fund borrowing should be approved by the Council before the start of the financial year, and it was suggested that the average investment interest earned for the year should continue to be used as the rate for any inter-fund borrowing.

The Portfolio Holder informed the Cabinet that the Treasury Management Policy Statement was a high level statement which outlined how the Council’s Treasury function would be undertaken.  The Policy Statement was last updated as part of the 2016/17 Treasury Strategy. There were no amendments to the Statement currently proposed.

The Portfolio Holder advised that all of the Council’s current investments were denominated in sterling and the Council had received regular advice from Arlingclose regarding the use of Counterparties. The Council currently had an investment portfolio of approximately £48.5million, of which all but £2million was invested in the United Kingdom. The maturity profile ranged from £15.5million available for instant access to £14million with a maturity date of three months hence. The continued low interest rates, the use of fewer counterparties and the short durations of the Council’s investments had reduced the estimated interest income for 2016/17. Interest earnings for 2017/18 would reduce further as balances were invested in capital projects rather than short term deposits, and no significant  ...  view the full minutes text for item 126