In accordance with CIPFA’s Code of Practice on Treasury Management 2011, the Committee considered the revised report of the Head of Finance and Customer Services setting out details of the activities of the Treasury Management function as at the mid-point of the 2012/13 financial year.

The report also addressed proposed amendments to the Treasury Management Strategy 2012/13 and the Prudential Indicators arising from the Cabinet’s consideration of a report on investment opportunities, including the possible use of prudential borrowing to purchase assets to generate additional income to finance capital expenditure.

It was noted that:-

·  £5m had been invested with Lloyds TSB (part nationalised bank), £3m for 346 days and £2m for 367 days.

·  All other investments had been completed on a short term basis (up to one year) as agreed within the Treasury Management Strategy for 2012/13.

·  The balance on investments as at 30 September 2012 was £28.45m.

·  Investment income for the first half of 2012/13 had been above target.  Income of £147k had been received compared to a budget of £124k, with an average rate of 1.23%.

·  The Treasury Management Strategy included an assumption that borrowing would not be required in 2012/13 to support the Capital Programme.  In the light of the decision of the Cabinet borrowing was now a possibility.  Should prudential borrowing prove to be the most cost effective method of financing the Capital Programme then it would be necessary to have the permission to borrow clearly set out in the Strategy.  The amendment required was therefore to include the assumed borrowing of £6m in the Strategy for 2012/13.

·  The Prudential Indicators shown in Appendix C to the report included the amendments necessary to borrow up to £6m in relation to the Capital Programme and an additional £4m short term for cash flow purposes, making a maximum at any one time of £10m.  The currently approved Strategy for 2012/13 includes £4m for each value making a maximum of £8m.

In response to questions by Members regarding the use of prudential borrowing to bring derelict residential properties back into habitable use, the Officers confirmed that such acquisitions would have to comply with CIPFA’s Prudential Code for Capital Finance in Local Authorities and the property investment governance arrangements agreed by the Cabinet.  The Council already had experience of working with partners on such initiatives.

The Committee noted the position with regard to the activities of the Treasury Management function as at 30 September 2012 and accepted the proposed amendments to the Treasury Management Strategy for 2012/13 and the Prudential Indicators, but sought assurances that the property investment governance arrangements are sound and that controls are in place to minimise the risks to the Council associated with this new area of activity.  Specific concerns were raised as to whether it would be appropriate for Members of the Audit Committee to be Members of the Advisory Panel relating to Property Investment.

RESOLVED:

1.  That the activities of the Treasury Management function at the mid-point of the 2012/13 financial year, as set out in the report of the Head of Finance and Customer Services, be noted.

2.  To RECOMMEND to the COUNCIL:  That the Treasury Management Strategy for 2012/13 be amended to include confirmation that up to £6m can be borrowed to support the Capital Programme and that the revised Prudential Indicators as set out in Appendix C to the report of the Head of Finance and Customer Services be approved.

3.  That the Cabinet be requested to consider and respond to the assurances sought by the Audit Committee in connection with the possible use of prudential borrowing to purchase property assets to generate additional income to support the Capital Programme.