how the Council will manage its investments and its borrowing for the coming year and sets the policies within which the Treasury Management function operates (copy attached).
The Lead Member for Finance Performance and Strategic Assets, introduced the Annual Treasury Management Strategy Statement (TMSS) 2023/24 Report (Appendix 1 - previously circulated) which showed how the Council would manage its investments and its borrowing for the coming year and sets out the Policies within which the Treasury Management function operate.
The Treasury Management Update Report (appendix 2) provided details of the Council’s Treasury Management activities during 2022/23.
The Head of Finance thanked the Lead Member for the introduction. He concurred the paper was presented to the committee for information.
The Chartered Institute of Public Finance and Accountancy’s Code of Practice on Treasury Management (the “CIPFA TM Code”) requires the Council to approve the TMSS and Prudential Indicators annually.
The Governance and Audit Committee was required to review this report before it is approved by Council on 28 February 2023.
Members were reminded of the three priorities considered when investing funds:
· keep money safe (security);
· make sure that the money comes back when it is needed (liquidity);
· make sure a decent rate of return is achieved (yield).
Members were guided to the graph diagrams of the investment and borrowing balances which illustrated the changing levels over the previous three years. The Treasury Investment Strategy provided members with a great deal of information on the guidance and rules the authority followed with any investments.
Members were guided through the list of approved borrowing sources. Long term borrowing was sourced from PWLB any short term borrowing is sourced via a broker to secure the best interest rate.
Members heard the Minimum Revenue Provision was an annual statement produced. It was noted no change had been made to the policy from the previous year.
Members were guided through the Liability benchmark, detailed within the report. The Head of Finance stressed the importance of the monitoring of this with Arlingclose. He highlighted a large increase was shown in the table. The reason for that increase was due to the flooding defence work taking place in the North of the Authority. He explained the cost for the work was having to be borrowed but Welsh Government were providing 85% funding to cover the costs.
Appendix 2 provided the in-year update for members. Members heard two loans had been secured £10m in August 2022 and £10m in September 2022 from the Public Works Loan Board (PWLB) in advance of further interest rate rises. Members heard the authority was required to submit annually a detailed 3 year capital expenditure plan to the PWLB with confirmation of the purpose of the capital expenditure. Officers had to confirm that we were not planning to purchase ‘investment assets primarily for yield’ in the current or next two financial years.
It was noted work continued on the development a medium term strategy for capital. This would help identify projects that we are planning to develop and invest in over a 5 to 10 year period, but had not yet gone through the approval process.
The Chair thanked the Lead Member and Head of Finance for the detailed summary of the report. He stressed to members how essential this area of finance was in the financial management of every Local Authority in the UK.
In response to the Chair’s question the Head of Finance agreed Treasury Management was an important element for the Governance and Audit committee to receive reports regularly and be kept abreast of the finances of the authority. He stressed the rules of which the team followed were published annually along with the authority’s performance measured against those rules. It was stressed to members that officers were in regular contact with Arlingclose with any questions or issues for support and guidance.
Members heard an internal audit on Treasury Management was conducted to review the processes in place.
The Chief Internal Auditor added, going forward it was hoped that internal audit would conduct a light ouch review of all the financial systems in place this year with a full review of each area next year.
The council was predominantly a borrowing council, it only invested when the council had too much cash to hold to limit risk. Any investments the authority did have were on a short term basis.
The Head of Finance confirmed the spike in the debt maturity profile in 2056 was due to the HRA buy out that the authority completed. It had been a requirement that any authorities with HRA had to reschedule the debt, a loan had been taken out to cover the costs.
A loan would be taken out to cover the cost of the flood defence scheme. Borrowing specifically for that scheme would be needed, members heard that consultation with Arlingclose would be sought when the funds where required.
RESOLVED, that the Committee note the Treasury Management Strategy Statement for 2023/24, the Prudential Indicators 2023/24 to 2024/25 and 2025/26. The Committee note the Treasury Management Update Report and confirm it has read, understood and taken account of the Well-being Impact Assessment as part of its consideration.
- GAC TMSS2324CoverReport 25 Jan 23 New Format, item 8. PDF 143 KB
- GAC App 1 TMSS2324Final 25 Jan 23, item 8. PDF 406 KB
- GAC App 2 TM Update Report 25 Jan 23, item 8. PDF 114 KB
- GAC App 3 Wellbeing Assessment TMSS2324Final 25 Jan 23, item 8. PDF 92 KB
- Annex D - Liability Benchmark Chart, item 8. PDF 97 KB
- Annex E - Debt Maturity Profile, item 8. PDF 56 KB