Agenda item

Cobtree Manor Estate Financial Position

Minutes:

The Senior Finance Manager (Client) introduced his report summarising the financial position of the Cobtree Manor Estate as at 31 December 2021. The report covered the Golf Course, Kent Life, the Manor Park and residential properties. The report also included details of the proposed budgets for 2022/23 and an update on Members’ request that a review be undertaken of the investment of the Charity’s permanent endowment with Charifund, including alternative investment options and the possible use of permanent endowment funds to repay the balance of the money borrowed from the Borough Council for the car park improvement works.

 

Financial Position

 

The Senior Finance Manager (Client) advised the Committee that:

 

·  Following feedback from Members at the last meeting, the summary table had been redesigned to highlight more clearly whether variances were positive or negative.

 

·  The position as at 31 December 2021 was a surplus of £23,167 for the year to date.

 

·  Budgets had been reallocated to cover some of the previously reported overspends, but the overall budget had not changed with a surplus of £49,660 still forecast.  The £20,000 budget for Covid recovery had now been reallocated to the Golf Course to be used for a feasibility study.  The reallocations meant that at present there were no new significant budget variances.

 

It was suggested and agreed that in response to rising energy costs, consideration be given to the installation of renewables at the Cobtree Manor Estate.

 

Budgets 2022/23

 

The Senior Finance Manager (Client) advised the Committee that:

 

·  The general approach to setting the budgets for 2022/23 was to increase running costs by inflation (2%) where applicable;increase contract income in line with the agreed schedules; update insurance costs in line with estimated premium increases; and update recharges from the Borough Council following a review of the services provided.

 

·  In overall terms the projected surplus from operational activities was budgeted to be £74,970 compared to £79,310 for 2021/22.  After allowing for investment income and the car park construction cost repayments, the overall net surplus would be £45,320.

 

In response to questions by Members, the Senior Finance Manager (Client) said that he would look further into the reasons for the increase in premises insurance for Kent Life, including whether any claims had been made.

 

Investment Options

 

The Senior Finance Manager (Client) advised the Committee that:

 

·  At the last meeting, Members requested a review of the investment of the Charity’s permanent endowment with Charifund, including alternative investment options.

 

·  The current value of the investment with Charifund was £890,740, compared to the figure of £860,945 reported to the last meeting.  The value of the investment in December 2019 was £930,938.

 

·  Charifund was a specialist investment fund aimed specifically at the charity sector.  The fund aimed to provide an annual yield above that available from the FTSE All-Share Index; an income stream that increased every year; and a level of capital growth, net of the Ongoing Charge Figure, that is higher than inflation over any ten-year period, as measured by the UK Retail Prices Index.  There was no guarantee that the fund would achieve its objectives and investors might not get back the original amount they invested.

 

·  There were alternative funds that followed broadly similar principles and the Council’s Treasury Management advisors had been asked to assist in identifying suitable alternatives.

 

·  Consideration could be given to a fund with an ethical investment policy and a decision would be needed as to whether the permanent endowment should be split into two or more funds.  A list of suitable alternative funds with performance data would be presented to the next meeting to enable a final decision to be made.

 

Repayment of Car Park Loan

 

The Senior Finance Manager (Client) advised the Committee that:

 

·  At the last meeting, Members requested that the option of using permanent endowment funds to repay the balance of the money borrowed from the Borough Council for the car park improvement works be investigated.

 

·  The use of permanent endowment funds required the permission of the Charity Commission, and it might be necessary to repay funds withdrawn previously for the new play area and park enhancement works.  This had not happened due to other financial pressures. 

 

·  Withdrawal of permanent endowment funds would reduce the level of investment income received.  There were currently three years left to repay the cost of the car park works and the interest element of that was £9,364.  The loss of investment income over the same period could be £28,362 which was greater than the interest due to the Council.  However, despite the loss of investment income, having repaid the loan, more funds would be available for possible capital investment that would protect income streams.

 

·  Alternative options included using the bank balance to pay off the loan or deferring a decision to retain flexibility when considering the funding arrangements for future capital projects.

 

Members indicated that their preference was to defer a decision at this stage.

 

RESOLVED:

 

1.  That the financial position of the Cobtree Manor Estate as at 31 December 2021 be noted.

 

2.  That in response to rising energy costs, consideration be given to the installation of renewables at the Cobtree Manor Estate.

 

3.  That the proposed budgets for 2022/23, as set out in Appendix 2 to the report of the Senior Finance Manager (Client), be agreed.

 

4.  That the Officers be requested to investigate alternative options for the investment of the Charity’s permanent endowment, including funds with ethical investment policies and the possibility of splitting the endowment into two or more funds, and to report these back to a future meeting of the Committee to enable a final decision to be made.

 

5.  That consideration of the options for repaying the balance of the money borrowed from the Borough Council for the car park improvement works be deferred to a future meeting.

 

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