Agenda item

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The Financial Services Manager explained that the report was for quarter 3 as at the 31 December 2023.

The Committee was advised that the Quarterly Review Report had been prepared in compliance with CIPFA’s Code of Practice, and drew attention to the following sections of the report:

·         1:  The Treasury Management Quarterly Review 2023/2024.

·         2:  Economic Update.

·         3:  Annual Investment Strategy - 3.4:  Creditworthiness, 3.5:  Investment Counterparty Criteria, 3.8:  Approved limits.

·         4:  Borrowing – 4.2:  The Public Works Loan Board (PWLB) lending facility,

·         6:  Compliance with Treasury and Prudential Limits.

The Financial Services Manager outlined the supporting information as set out below:

Appendix 1 – Economic Update

Appendix 2 – Interest Rate forecasts.

Appendix 3 – Prudential and Treasury Indications for 2023/24.

Appendix 4 – Investment Portfolio.

Appendix 5 – Approved countries for investment.

Appendix 6 – Glossary.

The Chair thanked the Financial Services Manager for the report.

The Chair reminded the Committee that its role was receive the quarterly report and to scrutinise the Treasury Management Strategy and to confirm that the Council was not borrowing to support its revenue expenditure.

The Chair invited questions and comments, a summary of which is set out below.

In response to comments made by Councillor Coates regarding the abbreviations set out on page 23, the Financial Services Manager explained that they were not included in the Glossary but had been taken verbatim from the documents from the Council’s Treasury Advisors, Link and undertook to look at adding a key to include the abbreviations to assist with the interpretation.

The Financial Services Manager and Assistant Director – Resources responded to questions from Councillor de Winton on credit worthiness and local authority lending/ borrowing, investing surplus money within the next quarter, monitoring the cash flow and the capital programme.

In responses to questions from Councillor Bearshaw on surplus being invested, the Assistant Director – Resources explained that the Council worked with brokers to look at options for investment.

Councillor Bearshaw referred to page 23, Appendix 1, second bullet point – A sharp fall in wage growth, with the headline 3myy rate declining from 8.0% in September to 7.2% in October, although the ONS “experimental” rate of unemployment had remained low at 4.2%.  The Assistant Director – Resources explained that the statistical information was supplied by the Office for National Statistics and added that the UK response to wage increases had impacted on inflation which was why it had taken longer than anticipated to come down.  It was noted that even in the fluctuation where it was 3.9% back to 4% had been as a result of the wage growth but had now started to stabilise and was compared year on year.

Councillor Bearshaw drew attention to Appendix 2 – Interest rate forecasts and commented that it was reassuring to see that bank rates had been accessible to the Council since 1 November 2012 and was therefore reassurance that the Council had got it right.

Councillor de Winton drew the Committee’s attention to Appendix 4 – Investment Portfolio and commented that it would be useful to have a graph explaining the level of reserves and trend in the last 5 years and going forward.  In response, the Financial Services Manager took the point raise on board and would see how the request could be accommodated in future reports.

Councillor Bearshaw referred to Appendix 2  - Interest Rate Forecasts and asked how often the figures were refreshed.  In response, the Financial Services Manager explained that rates had been up and down during the past two years and the information was refreshed on a bi-monthly/quarterly basis.

In response to further questions from Councillor Bearshaw in relation to whether the Council commissioned consultation to carry out the above work, the Financial Services Manager advised that professional indemnity was required and paid a reasonable amount to obtain the advice in relation to borrowing and investment and also assisted with a number of services around the Council’s balance sheet and the capital programme.

Under Standing Order 34, Councillor Kemp addressed the Committee and referred to page 34 and the overspend as at the 31 December 2023 of £1,005,160 and asked what this related to.  In response, the Chair advised Councillor Kemp that this question related to the Budget Monitoring report which was the next agenda item.

Under Standing Order 34, Councillor Kemp referred to the investment programme of £6.3m available for investment and asked what the Council was looking at for maximum return.  In response, the Financial Services Manager explained that this was the figure which the Council had already tied up and the authority had cash in and out flows and had a sufficient amount in income at the start of the month which could be invested for a very short time but was paid over the major preceptors and other creditors.  In conclusion, the Financial Services Manager explained that the Council took every opportunity to invest where it could.

Councillor Kemp asked further questions in relation to the housing companies and how the Council was accounting foe the loss of income in the budget.  The Chair advised a response could be given to the question under the next agenda item.

In response to questions from the Chair in relation to the £16.5 m investment and the difference in the figures reported in the budget monitoring report of £21.9 m (page 46 section 7.3) , the Financial Services Manager explained that this was not an error and reflected the highly liquid items, trends and the surplus available to invest.  The Financial Services Manager explained that he would revisit the chart at 7.3 and seek to make the information clearer.

Councillor de Winton commented on the running of an overnight deposit account and added that lots of companies used such a facility and there was a system in place.  The Financial Services Manager explained that the Council did not have the capacity to make investment decisions on a daily basis and it was normal practice to plan ahead on a two weekly basis.

Following questions from the Chair on the net interest income of £800,000, the cost of loans to the Council of approximately £400,000, the Financial Services Manager drew the Committee’s attention to section 6.1 of the report which stated that the Council was mindful of the capital programme and some of the items were listed as intention rather than commitment and work was being undertaken to re-categorising the content of the capital programme and this would be reported in the new financial year.  The Committee was informed that paragraph 6.1 stated officers were carrying out that piece of work and with that came the ability to better model the Council’s reliance and funding of the capital programme on the cash flows.  In relation to borrowing the Council could better profile and programme what the larger capital schemes meant for the availability of financing.

The Chair asked how the authorised borrowing limit of £86m was determined.  In response the Assistant Director – Resources explained that £86m was based on the estimate of what the capital programme would cost and took into account any internal borrowing being applied up to date and there were forecasts in terms of where the Council expected to borrow to support the delivery of the capital programme of £190m over the course of the medium term.  The Council would look at the projects and determine how the projects would be funded via reserves, grants, reserves or whether the Council would get any back through capital receipts.

The Chair drew attention to Appendix 6 – Capital Loan – funding that the Borough Council provide to support the transfer of housing to West Norfolk Housing Co Ltd and asked it this meant that the Council had an outstanding loan to West Norfolk Housing Co Ltd.  In response, the Assistant Director – Resources explained that it was the capital loan outstanding to West Norfolk Housing Co Ltd and would provide a full response direct to the Audit Committee.

The Chair invited the Portfolio Holder for Finance to address the Committee.

The Portfolio Holder for Finance made comments as a Councillor and not as a Cabinet Member.  Councillor Morley referred to the scrutiny undertaken by the Audit Committee under the previous Administration and added that shortly would move into scrutiny over the group accounts as the two housing companies would become more active and would necessitate a change of some description to the traditional way in which the capital and treasury activities had been reported.

The Assistant Director – Resources added that loans were previously reported on and officers would look at how to bring this back to the Audit Committee going forward.  The Committee was informed that the previous loan facility to West Norfolk Housing Company was £10m and to date £3m had been drawn down.  An update would be forwarded to the Committee when available.

 In response to questions from the Chair regarding the credit rating of other local authorities, the Assistant Director – Resources explained that the loan facility of 4.5% above the bank base rate was for the subsidiary companies and the base rate at 0.5% was affordable for the company to repay but when it increased to 4 – 5% it became unviable.

In response to questions from Councillor de Winton as to whether the loans were interest only or repayment mortgages, the Assistant Director – Resources explained that she did not have the information available but would check with the relevant officer and email to the Committee.

Following questions from Councillor Bearshaw on the interest rate being above the base rate for the loan to housing companies, the Assistant Director – Resources explained that this was not a confirmed rate but had obtained a separate piece of advice on what the loan rate should be based on and would take it into consideration when the Agreement was drawn up with the housing company. 

The Chair commented that the Audit Committee should be involved in detail on the arrangements for the 100% subsidiary loans.  Councillor de Winton commented that the Committee should focus on this item.

RESOLVED:  The Audit Committee noted the report and the treasury activity.