Agenda item

To receive a report by the Head of Finance (copy attaced) on the Annual Treasury Management and Treasury management (TM) update about the Council’s investment and borrowing activity during 2022/23. It also provides details of the economic climate during that time and shows how the Council complied with its Prudential Indicators, and the details of the Council’s TM activities during 2023/24 to date.

The Head of Finance introduced the Annual Treasury Management Strategy Statement (TMSS) 2022/23 Report (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 provided details of the Council’s Treasury Management activities during 2023/24 to date.

The Head of Finance reminded members it had been agreed by Council on 27 October 2009 that the governance of Treasury Management be subjected to scrutiny by the Governance and Audit Committee. Part of this role was to receive an update on the Treasury Management activities twice a year. It was stressed the importance of Treasury Management in the finance department and the Council.

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).

He stressed to members Denbighshire County Council did not have cash to invest to make yield to support budget gaps. The authority did have cash flow which was closely managed by the finance team. Often funds are borrowed in advance of need and are invested on a short term timeframe. The same with some grant funding the authority received. Thus meaning a small return would be made.

Security and Liquidity were the key factors for Denbighshire.

Members were guided to the table included in the covering report which detailed the frequency of updates presented to the committee.

Appendix 2 - Treasury Management Update Report set out the borrowing strategy of the authority. 3.2 of the appendix illustrated that the authority would likely be required to take out additional borrowing. The main reason for the increase in borrowing was due to the Rhyl Flooding scheme. The project would have to be funded by the authority to later reclaim the funds from Welsh Government.

Interest rates were currently high, this impacted gilts and borrowing costs. It is expensive to borrow at the present time. The authority did try to borrow short term and when possible from other authorities.

Work with Arlingtonclose Ltd as when best to borrow and for term lengths continued.

Further guidance and information was provided on the following:

·         Borrowing or investing by nature was risky. Denbighshire’s risks were around making sure investments were secure. A number of rules for investing have to be met. There was always a risk as when best to lock in borrowing. Continued close working with treasury advisors to advice when best to make monetary decisions supported the decisions of officers.  

·         Overspends were possible were avoided. Overspends were figures of overspends over the 12 month period. It was essential to keep in mind the amount of Council reserves was being used to fund the overspends.

·         Arlingtonclose Ltd were the Treasury Management consultants based in London. Every 3 years they have to go through the procurement process to be tendered the contract.

·         Welsh Government have provided the authority with a lot of help since 2019. Recently support regarding the waste depot in Denbigh and extra funding was gratefully received.

·         HRA Ratio percentage against the non HRA Ratio was quite a difference. The Head of Finance informed members finance Section 151officers across Wales were looking at the difference. It had become more of a focus was due to the pressure of HRA to increase capital spending. It was different to the Council fund borrowing as the income stream was 100% funded from the tenants. That funding stream had to be used for the benefit for the tenants. Finance officers had done some benchmarking in this area. The authority was in the middle of authorities in terms of the amount of borrowing. HRA funding was ring fenced.

·         The Capital Plan had two strands of work, 1- Reviewing the process and 2- understanding the capital need moving forward. The financial outlook for 2024/25 and 2025/26 had got worse. It was a project for looking at support and help to review the budget position. It was vital to look at the Capital Plan when savings are needed. Which may result in a delay to some projects. At this point nothing had been resolved.

·         Members were in full support of further training on Treasury Management. And suggested further training with Arlingtonclose Ltd. be sought.

·         A review of the money laundering policy had begun, with a draft of the new policy available. It was currently awaiting the decision as where best it be placed for rectification.

The Head of Finance encouraged members to contact him direct with any specific areas of Treasury Management they want covered in future training sessions.

The Chair thanked the Head of Finance for the detailed report and discussion.

RESLOLVED, that the Committee note the performance of the Council’s Treasury Management function during 2022/23 and its compliance with the required Prudential Indicators as reported in the Annual Treasury Management Report 2022/23.That members note the TM update report for performance to date in 2023/24 and confirm it has read, understood and taken account of the Well-being Impact Assessment as part of its consideration.