Chichester District Council
Issue

Issue - meetings

Treasury Management 2017-2018 Mid-Year Update Report

Meeting: 05/12/2017 - Cabinet (Item 452)

452 Treasury Management 2017-2018 Half-Yearly Update Report pdf icon PDF 88 KB

The Cabinet is requested to consider the agenda report and its three appendices and to make the proposed resolution set out below:

 

That the Treasury Management activity and performance for 2017-2018 to date together with any comments made by Corporate Governance and Audit Committee be noted.

Decision:

RESOLVED

 

That the Treasury Management activity and performance for 2017-2018 to date together with any comments made by Corporate Governance and Audit Committee be noted.

Minutes:

The Cabinet received and considered the agenda report and its three appendices.

 

Mrs Hardwick presented the report.

 

Mr Catlow was in attendance for this item.

 

Mr Dignum first of all began by reminding the Cabinet and other CDC members who were present as observers about the treasury management training session on 8 December 2017. He, and later Mrs Hardwick, strongly encouraged members (particularly those who sat on the Cabinet and the Corporate Governance and Audit Committee (CGAC)) to attend this very valuable workshop.

 

Mrs Hardwick said that the report presented a summary of CDC’s treasury activity for the first half of 2017-2018.  A slightly fuller version of this report had been presented to the CGAC on 23 November 2017, which had noted the direction taken so far, the challenges faced for the future and their impact on a future strategy.Those challenges were summarised in para 3.3 with further details in appendix 2.  The greatest challenge was to respond to the new Prudential Code and the Regulatory Guidance that were expected to be issued early in 2018. The aforementioned forthcoming treasury management training session would cover those regulatory changes together with the wider environment within which treasury decisions were made.  

 

As to 2017-2018, treasury funds had risen to around £60m and CDC had continued to use money market deposits for short term liquidity while reducing the level of lending to other local authorities due to the poor returns offered. The current quarterly return for internal investments of 0.52% in para 5.2 was in line with the return received by other district and borough councils in the benchmarking data.  

 

Longer term investments had increased following a further investment in external pooled funds (similar to unit trusts) early in the financial year.  The return to date for investment in the Local Authority Property Fund and the new external pooled funds was set out in paras 5.4 and 5.5 respectively. 

 

The return on CDC’s property portfolio was estimated at 7.82%. However, this did not take into account any income and expenditure for 2017-2018 and Estates officers were developing a system to monitor and report the performance of CDC’s investment properties going forward.

 

Two tables in section 5 of the report set out CDC’s performance against Security and Liquidity benchmarking.  Overall there were no exceptions to note although the Treasury team was not seeking to increase CDC’s use of bank deposits over the short term to ensure that the proportion of funds exposed to bail-in remained below the average of other district/borough councils.

 

Three exceptions to Treasury guidelines during the first half year were listed in section 6 of the report.  These had been reviewed for learning points and procedures had been reviewed to ensure that required improvements were made.

 

Appendix 1 contained a summary of CDC’s external advisor’s latest economic commentary, which dealt with the present economic and credit outlook.

 

She thanked Mr Catlow and his colleagues for their hard work in treasury management.

Mr Catlow did not wish to  ...  view the full minutes text for item 452


Meeting: 23/11/2017 - Corporate Governance & Audit Committee (Item 162)

162 Treasury Management 2017-18 Mid-Year Update pdf icon PDF 140 KB

The committee is requested to consider this 2017-18 mid-year review of treasury management activity and performance and to provide comments to Cabinet as necessary.

Minutes:

Mr Catlow presented this mid-year review of treasury management activity and performance, informing the committee of the relevant regulatory changes that would impact on the council’s treasury management activities next year.

 

The committee made the following comments and received answers to questions as follows:

 

·       Queried whether we were still struggling to find counterparties. A number of banks, due to regulatory change, were splitting their banking and retail arms, and until it was known where we would end up we were reluctant to invest with them therefore at present we had a more limited number of counterparties and a reduced maximum duration of investment with many.

·       Queried whether external funds had an equity component. These were funds invested with and managed by a fund manager, equivalent to investment in a multi-asset fund. They were not cash investments in the council’s name. M&G could have a small equity component. By investing in multi asset funds risk considerations were reduced.

·       Queried corporate bonds. These were bonds with individual companies, generally of high quality and the council preferred those with a supporting asset base.

·       Queried the definition of balance and how that squared with the definition of value and whether the two should tie up. The committee was tasked to decide whether these had been good investments however there was insufficient information to provide comfort to the committee. Returns were calculated based on the original investment therefore the reference on page 59 should probably be amended. This would be considered as part of responding to new prudential codes. The change in capital value had not been an issue for local authorities as there had been no impact however it was likely that could be amended as part of the regulatory changes going forward. Mr Catlow agreed to revisit the presentation of this information in future reports to the committee.

·       Queried external funds (showing as green) and the lack of clarity in the figures as there had been some disappointing quarters. At this time (and until updates in regulation) changes in capital value did not have a revenue impact on the council’s budgets until the investment was disposed of.

·       Queried our reliance on treasury management advisors Arlingclose for advice. The council had a four year contract with Arlingclose for professional treasury management advice. The advisor supported the accountancy team in undertaking additional treasury management research. Officers had access to a number of other websites and professional sites for information. There were not many similar advisory companies in the market. Mr Catlow, Mrs Belenger and Mr Ward had to declare to Arlingclose how we met their criteria as a client before they took us on. The contract, due for renewal in 2018, included training on site for members and access to training courses for officers.

·       Queried whether modelling had taken place to allow members to understand the parameters should there be a volatile period with a dramatic change in interest rates. The council was risk averse in building income into base budgets or financial models  ...  view the full minutes text for item 162


 

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