The Principal Accountant presented a report which explained that the Council had formally adopted the Chartered Institute of Public Finance and Accountancy’s Code of Practice on Treasury Management (2009) and remained fully compliant with its requirements.
The primary requirements of the Code included:
· Creation and maintenance of a Treasury Management Policy Statement which sets out the policies and objectives of the Council’s treasury management activities.
· Receipt by Council of an annual strategy report (including the annual investment strategy report) for the year ahead, a mid year review report and an annual review report of the previous year.
The Annual Treasury Report looked backwards at 2014/2015 and covered:
· the Council’s overall borrowing need
· the Council’s treasury position/performance;
· the strategy for 2014/2015;
· the economy in 2014/2015;
· borrowing rates in 2014/2015;
· the borrowing outturn for 2014/2015;
· compliance with treasury limits and Prudential Indicators;
· investment rates for 2014/2015;
· investment outturn for 2014/2015;
· debt rescheduling;
The report showed that during the year the Council maintained a cautious approach to investment and management of debt. Investments returned a percentage of 0.93% exceeding the 7 day LIBID benchmark rate of 0.35%. Interest on debt averaged 3.38% in 2014/2015.
Councillor Pope asked the following questions of the Principal Accountant:
· Whether the Council still received an annual report from its investment advisors, to which he was informed that the investments were now carried out in house rather than by Fund Managers.
· Whether the Council’s Capital Financing Requirement would come down, and whether it would do so as the Council became smaller. It was explained that it related to the Capital expenditure rather than the size of the Council, and the borrowing was higher than normal at the moment due to the major projects underway. It would begin to reduce when properties were sold off and show improvements year on year.
· Page 11, 2.6 of the report – whether the Investment line should show as a debit entry – it was confirmed that it should.
· Where the in-house investment was showing to have reduced from £31.3m to £26.63 where had that money been spend. It was explained that the figure was the end of day Cashflow figure.
· He requested some information on the borrowing of £2.5m from Suffolk County Council. The Regeneration and Economic Development Manager explained that the loan was for the NWES Enterprise Centre, and was held by the Council and released as key points were reached in the build. The full amount would be re-paid by NWES at the end of the build.
Councillor Beales also explained that the draw down on the funding was subject to a Quantity Surveyor confirmation, and that NWES had to be able to demonstrate that they had this funding available to be able to progress with the scheme.
Councillor Mrs Nockolds asked if the Treasury Benchmarking Group consisted of just County Councils. It was explained that it consisted of both District and County Members in the Eastern Region.
Councillor Long asked what the situation was with the European banks such as the BNP which had an AAA rating. It was confirmed that Accountancy were taking advice on a day to day basis as the European situation was developing, but the BNP transactions tended to be overnight deposits only.
Councillor Beales drew attention to the fact that the Major Housing Scheme would show a significant Capital return on the borrowing, as would the NORA scheme. He also drew attention to the terms of some of the longer term borrowings and asked if a robust approach was taken in challenging the terms. It was explained that the long term loans referred to dated from 2007, and the rates for that were quite good, however as the banks were trying to reduce their balance sheets Barclays had approached the Council to discuss the loan, but it wasn’t in the Council’s interest to repay the loan unless favourable terms were offered.
Councillor Beales asked how Local Authority credit ratings were assessed as some authorities financial situations were different from others. The Principal Accountant informed Members that the information was supplied by Capita, but that most local authorities didn’t have a credit rating, but there was an automatic assumption that as an authority was able to raise taxes, it should be AAA. However as there were some that were struggling it was recommended that the Council’s lending to local authorities should be capped. They were dealt with on an authority by authority basis.
Councillor Daubney drew attention to the discussion which had taken place at the Audit Committee where they had supported the recommendations.
RESOLVED:That the Actual 2014/2015 Prudential and Treasury Indicators in the report and the content of the report be noted.