Agenda item

Members considered a report on treasury activities undertaken during the financial year 2016/17.  During the year to 31 March 2017, the Council continued to invest surplus funds with its own bankers (Santander) and institutions with long-term credit ratings in at least the ‘A-’ Category.

As at 31 March 2017, the Council had short-term investments of £2.30m, this was to invest surplus funds that had come into the Council on over a minimal timescale.  Temporary borrowing had continued to be required to fund normal day to day activities.  All borrowing undertaken was as expected, and within the Council’s agreed time limits.

The report presented the following information:

·        Details of capital financing, borrowing, debt rescheduling and investment transactions

·        Reports on the risk implications of treasury decisions and transactions

·        Details of the outturn position on treasury management transactions in 2016/17

·        Confirms compliance with treasury limits set and Prudential code 

In recent years the Council’s strategy had been to fund capital expenditure from reducing investments rather than undertaking more expensive new long term borrowing.  Total temporary borrowing of £185.8 million was raised during the year, of which with the exception of borrowing related to Queensbury, nil remained outstanding at the 31 March 2017.

Local Authorities measure their underlying need for long-term borrowing through their ‘Capital Financing Requirement’ (CFR) shown in Table 2 (Page 66).  Members were advised of the importance of Table 2 as it takes into account the amount of planned capital expenditure that needs to be funded through borrowing, (as opposed to external funding) irrespective of whether the borrowing itself is undertaken externally or through dis-investing.  The Authority’s current strategy is to maintain borrowing and investments below their underlying levels, sometimes known as internal borrowing.

Comments made included:

·        At what point is borrowing non-sustainable? – Members were advised that when the loan in connection with Friar’s Walk is repaid the Authority will use the cash to pay off existing debt.  CFR shows borrowing dropping off showing a need to borrow an addition £50m in future.

·        Where is the £50m in the table? – Members were advised this was the borrowing dropping off being replaced with new borrowing.

·        Is this something to be worried about? – Members were advised that the concern was over the reserve falling.  The cost, if the reserve is replaced with borrowing will be £3 – £3.5m which has a revenue implication.  The revenue budget is around £11m.  The important element is where the authority wants gross CFR to be.  If it stays stable there might not be much of a concern.   2017/18 marks the end of the capital programme.  The new strategy for 2018/19 will need to be more sophisticated.  It would not be possible to give an answer to members today on the new strategy.  This was a conversation which was currently active in the council and would have to go to Cabinet.  Treasury matters would feature and also the direction of interest rates.

·        Can the Audit Committee be assured that the new strategy come to the Committee well before January 2018 so that Audit can add its comments and not put through without Audit input? – Members were advised changes suggested by Audit will be reflected in a new presentation to Management teams and would be brought to Audit Committee.  The Head of Finance advised Members that Treasury Management Training was proposed for all Council Members in September 2017 where the Treasury Management Strategy would become much clearer to Members.  He stressed the importance for Audit Committee Members to attend the training.

·        Will there be a hard copy as well as a verbal assurance that any recommendations have taken place? – Members were advised that the Head of Finance would bring contextual notes to the next Audit Committee. 

Agreed

1.     To note the Annual Report on Treasury Management for the Financial Year 2016/17.

2.     To note that 2016-17 Prudential Indicators for Treasury Management were in line with those set by Council in February 2016.