Agenda item

2:15

Report by Lorna Baxter, Chief Finance Officer (AG7).

The Chartered Institute of Public Finance and Accountancy’s (CIPFA’s) Code of Practice on Treasury Management (Revised) 2011 recommends that members are informed of Treasury Management activities at least twice a year. This report ensures this authority is embracing Best Practice in accordance with CIPFA’s recommendations.

The Committee is RECOMMENDED to note the report, and to RECOMMEND Cabinet to note the Council’s Mid-Term Treasury Management Review 2014/15.

The Committee considered a report (AG7) which set out the Treasury Management activity undertaken in the first half of the financial year 2014/15 in compliance with the CIPFA Code of Practice, including Debt and Investment activity, Prudential Indicator monitoring, changes in Strategy, and forecast interest receivable and payable for the financial year.

Lewis Gosling in introducing the report, stated that in the six months to 30 September, the Council had achieved an average in-house return of 0.77%, falling slightly below the budgeted rate of 0.80%. This had produced gross interest receivable of £1.38 million for the period.

The 2014/15 budget for interest receivable was £2.4 million, the forecast outturn of £2.5 million exceeded the budgeted figure by £0.1 million. This increased forecast was the result of higher average cash balances, due in part to the timing of capital and revenue expenditure. 

He further reported that the Council continued to prioritise the security and liquidity of cash. All deposits with banks during the period remained restricted to a maximum duration of twelve months.  For the period no deposits over twelve months were made with other Local Authorities. 

The Council continued to use four pooled funds with variable net asset values. Weighted by value, the annualised return for all funds was 2.15% for the period. These funds are held with a long term view, with performance assessed accordingly.

The report recommended that the 2014/15 Treasury Management Strategy was updated, to increase the limit on investments held in pooled funds from 20% to 30% of the total portfolio value. This would help ensure appropriate diversification and assist in moving away from reliance on unsecured bank and building society deposits. The increase would also continue to ensure pooled funds could be held on a long term basis, without the need to temporarily withdraw funds due to fluctuations in portfolio size.

The performance and diversification of pooled funds would continue to be monitored by the Treasury Management Strategy Team.

The Council’s debt financing position to date was shown in Annex 2. In line with the Strategy, no new debt had been arranged during the year.

External debt decreased from £401.4m on 1^st April 2014 to £400.4m on 30^th September 2014, a net decrease of £1m. Interest payable was currently forecast to be in line with the budgeted figure of £18.2m.

Investment benchmarking for quarter 1 undertaken by Arlingclose was shown in Annex 5.  The Council achieved higher than average interest on deposits to 30^th June 2014, which was achieved by placing deposits over a longer than average duration with institutions of a better than average credit quality.

In response to questions and comments in relation to paragraphs 24 and 26 of the report around the reform to move away from government support for failing banks and building societies and the potential risks and impact on the Council’s borrowing, Lorna Baxter reported issues had been identified and that training by Arlingclose had been set up for members.

RESOLVED: to note the report and to RECOMMEND Cabinet to note the Council’s Mid-Term Treasury Management Review 2014/15.