Agenda item

To consider a report by the Lead Member for Finance and Assets (copy enclosed) providing details of the Council’s TM activities during 2012/2013 and provide background on investments and the annual TM Strategy Statement.

10.55am – 11.30am

 

The Chief Accountant introduced the report (previously circulated) and provided some background information on the Council’s treasury management function.

 

There were six sections to the report :-

 

            i           External economic environment

Ø      An update on any changes in the global economic conditions.

Ø      Financial markets being volatile affected the way investments were dealt with. The council’s treasury advisers had been monitoring economic and political developments and they were comfortable with extending the duration limits with the banks used.  The council’s current policy was to limit all investments to 7 days but the latest advice had been received after the report had been submitted to the Corporate Governance Committee.  The advice received had been considered and it was agreed to relax the criteria and extend the self imposed 7 day time limits.

Ø      The increased duration limits with the following UK banks were as follows:

v     Royal Bank of Scotland (RBS), National Westminster, Lloyds TSB and Bank of Scotland for a maximum period of six months.

v     Nationwide BS and Barclays for a maximum of twelve months.

 

ii          Investments

Ø      An update on who the council invest with and the current position.

Ø      It was decided that extending the duration limits would not yield substantial gains and the instant access call accounts would give greater flexibility to reduce the investment cash without the need for borrowing.  The investment term would be extended when it made financial sense to do so.

Ø      The up to date figure of investment was £27.7million which was divided out as follow:

£8million – Bank of Scotland, Instant Access Call Account

£4million – Lloyds, Instant Access Call Account

£6million – National Westminster, Instant Access Call Account

£4million – Royal Bank of Scotland, Instant Access Call Account

£5.7million – Barclays

 

and a further £2million held in the National Westminster Current Account

 

 

iii         TM strategy statement

Ø      A brief outline of what was included in advance of the report in January 2013.

Ø      The annual Treasury Management Strategy was produced which had to be approved by full council in February 2013.  The Corporate Governance Committee would review the strategy statement in January 2013 prior to full council.

Ø      The statement also outlined:

v     the council’s treasury position and what would be the investment strategy for the forthcoming financial year.  Also the borrowing strategy for the forthcoming year and listed the various sources of borrowing which were permitted to be used.

v     prudential indicators set boundaries within which the treasury management activity operated.  There were twelve indicators of which five were capital related and seven were treasury related.

v     capital related indicators which provided estimates of the capital expenditure over a three year period.  Estimates of the Capital Financing Requirement would also be provided.

v     Treasury management indicators showed the borrowing limits which set the maximum level of external borrowing over a three year period.  The indicators also set upper limits on exposure to fixed and variable interest rates to manage changes in interest rates.  Limits were set on the amount of debt maturing within various time periods, and the final indicator set an upper limit for sums invested over 364 days.

Ø      Procedures were in place regarding money laundering.  They were in place for verifying and recording the identity of counterparties and reporting suspicions.  The Head of Finance and Assets had been appointed as the Money Laundering Officer.

Ø      TM strategy for the future six months was to reduce the investment balances and to use temporary borrowing.

 

iv         Prudential Indicators

Ø      An explanation of the indicators including details of when they were set and a brief introduction.

Ø      The indicators were calculated to demonstrate that the council’s borrowing was affordable and included measures that showed the impact of capital and borrowing decisions over the medium term.  The council had remained within all its borrowing and investment limits for 2012/13 agreed by Council in February 2012.  The council had not deviated from the Capital related indicators either.

v          Money Laundering

Ø      An update on the Money Laundering Policy confirming that there had not been any cases reported. 

Ø      Staff had been trained to be aware of what to look out for.

Ø      The Head of Finance and Assets had been appointed as the Money Laundering Officer.

 

vi         Future Activity

Ø      An update on the plans for the next six months.

Ø      The council intended to reduce its investment balances and to use temporary borrowing as a means of funding short term cash flow requirements.

 

The issue of training for Members was raised.  It was agreed that a special training session be arranged.  Invitations would be sent to the Members of Corporate Governance Committee but would also be open to all other Councillors.

 

RESOLVED that:-

Ø      Members noted the Treasury Management update report

Ø      Member training to be arranged prior to January 2013