Issue - meetings

(See report at agenda item 6 (pages 34 to 37) of the Cabinet agenda of 7 February 2017 and pages 49 to 80 of the first supplement to the agenda)

RECOMMENDED BY THE CABINET

1)    That the Treasury Management Policy and Treasury Management Strategy Statement for 2017-2018 as contained in appendix 2 to the agenda report be approved.

2)    That the Investment Strategy 2017-2018 as detailed in the Treasury Management Strategy Statement be approved.

3)    That the Prudential Indicators and Limits for 2017-2018 included in appendices 2 and 4 to the agenda report be approved.

4)    That the Minimum Revenue Provision statement for 2017-2018 in appendix 4 to the agenda report be approved.

Mrs Hardwick, (Cabinet Member for Finance and Governance Services), seconded by Mr Dignum (Leader of the Council), moved the recommendations of the Cabinet.

Mrs Hardwick introduced the report saying that by law the council was required to approve a Treasury Management Strategy and the relevant prudential indicators included in this report by 31 March 2017.  The Corporate Governance and Audit Committee had considered this strategy on 26 January 2017, suggesting inclusion of clarification as to how Community Infrastructure Levy monies were considered as part of treasury management.  The key updates to the strategy were detailed in the report and were drafted to support the vision as outlined to members in the treasury management training provided in January 2017.  These were a) to identify core cash requirements and invest this for security & liquidity and b) to identify long term surplus funds and invest these for security and return.

Mrs Hardwick extended thanks to the treasury management team - Mrs Belenger (Accountancy Services Manager) and Mr Catlow (Group Accountant) in particular.

Mr Plowman commended the Treasury Management Statement, but was concerned at the ‘unknown’ in three areas going forward – inflation, general economy and the housing market in general.  Mrs Hardwick confirmed that these items were regularly under review and that the first two were on the council’s Strategic Risk Register which was constantly reassessed and monitored.  The third was a well-known and valid risk.  Mrs Tull (Chairman of the Corporate Governance & Audit Committee) confirmed that her committee had reviewed the strategy and the corporate risks and had commended the strategy to Council for approval.

On the recommendations being put to the vote, they were declared carried.

RESOLVED

1)      That the Treasury Management Policy and Treasury Management Strategy Statement for 2017-2018 as contained in appendix 2 to the agenda report be approved.

2)      That the Investment Strategy 2017-2018 as detailed in the Treasury Management Strategy Statement be approved.

3)      That the Prudential Indicators and Limits for 2017-2018 included in appendices 2 and 4 to the agenda report be approved.

4)      That the Minimum Revenue Provision statement for 2017-2018 in appendix 4 to the agenda report be approved.

The Cabinet is requested to consider the agenda report and its four appendices and to make the following recommendations to the Council:

That the Council approves:

(a)   The Treasury Management Policy and Treasury Management Strategy Statement for 2017-2018 as contained in appendix 2 of the report.

(b)   The Investment Strategy 2017-2018 as detailed in the Treasury Management Strategy Statement.

(c)   The Prudential Indicators and Limits for 2017-2018 included in the report at appendices 2 and 4.

(d)   The Minimum Revenue Provision statement for 2017-2018 included at appendix 4.

RECOMMENDED TO THE COUNCIL

(1)   That the Treasury Management Policy and Treasury Management Strategy Statement for 2017-2018 as contained in appendix 2 to the agenda report be approved.

(2)   That the Investment Strategy 2017-2018 as detailed in the Treasury Management Strategy Statement be approved.

(3)   That the Prudential Indicators and Limits for 2017-2018 included in appendices 2 and 4 to the agenda report be approved.

(4)   The Minimum Revenue Provision Statement for 2017-2018 in appendix 4 to the agenda report be approved.

The Cabinet received and considered the agenda report and its four appendices in the main agenda supplement (copies attached to the official minutes).

In addition to the public copies of the main agenda supplement, hard copies of appendix 1 (pages 49 to 51) in the main agenda supplement were available to those observing the meeting. 

The report was presented by Mrs Hardwick.

Mr Catlow was in attendance for this item. 

Mrs Hardwick explained that CDC was required to approve a strategy and the relevant prudential indicators included in the report by 31 March 2017. The report had been considered by CDC’s Corporate Governance and Audit Committee on 26 January 2017, as a result of which it had been amended to clarify how Community Infrastructure Levy monies were considered as part of treasury management (page 56 of the main agenda supplement) as well as other minor changes. The risk appetite statement (page 53) was unchanged.

The key updates to the strategy (which had been drafted to support the vision outlined to members in the previous month’s treasury managementsession) were outlined in appendix 1 and were to identify (a) core cash requirements and invest those for security and liquidity and (b) long-term surplus funds and invest those for security and return.  The core cash required for liquidity purposes was expected to be invested in a mix of local authority and money market funds in accordance with the limits and terms set out in tables 5 (page 59) and 7 (page 63).  To facilitate the management of longer term pooled funds, the limit on investments in money market funds had been increased from £15m to £20m (still below the maximum amounts recommended by CDC’s treasury management advisor Arlingclose Ltd ie 50% of total investments) and the funds were considered to represent a good balance of security (AAA rated) and liquidity, being available on demand. In consequence the previous target to maintain at least £10m cash available within three months had been removed (para 7.2 in the main agenda supplement), reflecting the improved systems and processes to forecast daily cash needs.

If required, funds could be borrowed for short term operational needs up to the limits in table 3 (page 57). Currently some £15m of funds were invested for periods greater than one year (table 1 on page 54), £10m of which was with the Local Authority Property Fund and earning a consistent return to support revenue balances of around 4.5%.  Officers had focused on long-term cash flow forecasting over the last six months and had identified that CDC could invest between £7.5m and £10m in similar long-term pooled funds; this was consistent with the vision to invest surplus funds for security and revenue return. In order to facilitate such investment changes had been made to the Approved Investment Counterparties (table 5 on page 59), the Non-Specified Investment Limits (table 6 on page 62) and the Limits on Investments Periods (table 11 on page 66). A pooled fund selection day had been arranged in  ...  view the full minutes text for item 322

The committee is requested to consider the Treasury Management Policy Statement, the Treasury Management Strategy Statement, the Investment Strategy and relevant prudential indicators for 2017-18 and recommend these to Cabinet and Council for approval.

The committee considered the report circulated with the agenda (copy attached to the official minutes).

Mr Catlow presented the report.

The committee made the following comments:

·     Queried the availability of any guidance from CIPFA in respect of building returns from investments into base budgets. Mr Catlow advised that there was no guidance but that CIPFA would say be prudent.

·     Query by Philippa Hardwick as why only the Property Fund interest was included in the revenue budget as it could be a volatile income source and shouldn’t the entirety of our pooled funds be put into revenue instead as this income seemed more certain. Mrs Belenger stated that the Property Fund rate of return was considered to be stable as it was based on rental payments received, whereas the other investments were less certain. However, should the investment income be lower than forecast, then an option is to transfer a lesser amount into the investment opportunity reserve.

·     The footnotes next to headings on page 41 are picked up on the following page – this should be amended to refer to Table 5.

·     Queried the meaning of ‘currently rated above BBB’ - The council’s bank is BBB+ rated. We try to minimise what is held within the council’s bank account and to stay within secured investments. If at any time there was a downgrade to the council’s bank we would be able to get our money out and put it in AAA rated money market funds.

·     Reputational and practical risk to changing bank accounts in future – there are clauses within the current bank contract to allow the Council to terminate the contract, if necessary. We found it relatively easy to move bank accounts. If there was a risk then we would move account. We also have arrangements at an alternative bank, Svenska Handelsbanken and in business continuity terms we could use them.

·     Queried the ratings of other banks – Handelsbanken is based in Sweden so probably A- to A rated. They have a particular operating model which means they are seen as very low risk. The majority of UK clearing banks are BBB+ rated or above. Lloyds and Barclays are A- rated. We went through a tendering exercise and Nat West were the best bid in terms of service and price. We monitor them continuously based on credit ratings alerts. Arlingclose also looks at ratings and Credit Default Swops which would alert us if there was an issue.

·     The council does not hold offshores accounts.

·     Automatic sweeping arrangements are set up so that funds are moved within the council’s bank operational current accounts to the deposit account, and vice-versa when there is an overdraft to be covered.  This saves time and resources as officers used to have to do transfer requests and authorise these transfers in the past.

·     Pages 39 para 5.2 Borrowing Sources has no explanation. Table 4 on page 40 dealing with authorised limits lists the borrowing sources. Mr Catlow agreed to move this information to para 5.2.

·     Query  ...  view the full minutes text for item 113