Issue - meetings

Treasury Management Annual Review 2020/21

Meeting: 28/07/2021 - Audit, Governance and Standards Committee (Item 19)

19 Treasury Management Annual Review 2020/21 pdf icon PDF 153 KB

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The Finance Manager introduced his report setting out details of the activities of the Treasury Management function for the 2020/21 financial year in accordance with CIPFA’s Code of Practice on Treasury Management in Local Authorities and in the context of the economic environment over the past 12 months.  It was noted that:


·  The Treasury Management Strategy Statement for 2020/21 was approved by the Council on 26 February 2020.  One of the key elements of the Strategy was to utilise cash balances rather than loan debt to finance the Capital Programme in the short term due to low investment returns and high counterparty risk in the current economic climate.


·  During 2020/21, the Council’s investment balances ranged between £5.24m and £48.6m.  The average investment balance for the year was £22.385m.  The Council held investments totalling £16.160m as at 31 March 2021, an increase on the previous year due to postponement of certain projects in the Capital Programme and the influx of Government grant funding due to COVID-19.


·  In January 2021, the Council had unavoidably breached some of the counterparty limits agreed within the Treasury Management Strategy for 2020/21. The breach had arisen due to the receipt at short notice of a tranche of COVID-19 Business Grants funding.  As other local authorities would have received similar allocations, the scope for short-term lending to them was extremely limited.  The options were to either retain the cash in the current account with Lloyds or to allocate it to lower rated counterparties.  These options were rejected to avoid the over concentration of risk in one area or compromising on the security of cash deposits and it was agreed by the Section 151 Officer that the funds be spread over a number of counterparties using the limits proposed in the Treasury Management Strategy Statement 2021/22.  All counterparties are highly rated institutions and in money market funds where the majority of the cash can be accessed instantly.


·  The breach was reported to the Policy and Resources Committee and to the Council which agreed to adopt the new counterparty limits in advance of the previously envisaged adoption date of 1April 2021.


·  In terms of borrowing activity, the total amount of loan debt as at 31 March 2021 was £11m.  All of the Council’s loan debt was short term.  The option of locking into longer-term funding was discussed with Link Asset Services, the Council’s Treasury Advisers.  As interest rates on short-term funding are at an all-time low and funding is readily available, it was decided to continue with short-term debt throughout 2020/21.  This decision would be kept under review during 2021/22 as borrowing was likely to increase along with spend.


·  All Prudential and Treasury Indicators had been complied with throughout the year.


In response to questions, the Finance Manager advised the Committee that:


·  From discussions with the Council’s Treasury Advisers, it did not appear that they believed interest rates would increase significantly over the next three years and the Council had been advised to keep any borrowing short term  ...  view the full minutes text for item 19