Issue - meetings

John Owen, Finance Manager, presented a report setting out details of the activities of the Treasury Management function for the 2015/16 financial year in accordance with CIPFA’s Code of Practice on Treasury Management in Local Authorities.  It was noted that:

·  Following a tendering exercise, Arlingclose had been selected as the Council’s Treasury Advisors for a period of three years from 1 January 2016, replacing Capita Asset Services who had acted in that capacity for over fifteen years.

·  During 2015/16, the Council’s investment balances had ranged between £18m and £47m.  The average investment balance for the year was £33.7m.  Investment income for the year totalled £252k against a budget of £270k.  The shortfall was due to the fact that interest rates had not increased in line with the original forecasts made by the Council’s Treasury Advisors.

·  All investments during 2015/16 had been short term due to interest rates not being sufficient to justify the risk of investing funds for longer periods.  Property funds had been considered and discussed with Arlingclose, but it appeared that yields had peaked due to the property market slowing down.  Funds would need to be invested for a minimum of 3 to 5 years in order to earn a modest return and the property market could fluctuate over that time.  Having regard to the Council’s current Capital Programme, it was considered less of a risk to run down balances.

·  The Council had not needed to borrow during 2015/16 except on two occasions for short term cash flow purposes.  The total cost of the borrowing was £139.73.

·  Following the EU referendum decision, rating agencies had downgraded the UK’s sovereign credit rating and it was likely that the ratings of UK banks and building societies would follow suit.  Arlingclose’s advice was that the Council should run down its balances to avoid counterparty risks associated with lower rated institutions and to borrow as and when necessary with interest rates being very low.

In response to a question by a Member, the Director of Finance and Business Improvement confirmed that deposits with overseas banks were sterling deposits with no exchange rate risk.

RESOLVED:

1.  That the review of the financial year 2015/16 which has been compiled in accordance with CIPFA’s Code of Practice on Treasury Management in Local Authorities be noted.

2.  That no amendments are necessary to the current treasury management procedures as a result of the review of activities in 2015/16.