Agenda item

Sarah Hardy, Principal Finance Business Partner:

a)    presented Performance Scrutiny with the annual Treasury Management Stewardship Report

b)    explained that the prudential system for capital expenditure was well established. For the 2019/20 financial year the minimum reporting requirements were that members received the following reports:

·         an annual Treasury Management Strategy in advance of the year (Council 26^th February 2019)

·         a mid-year Treasury update report (Executive 21^st November 2019)

·         an annual report following the year describing the activity compared to the strategy.

c)    Key issues to note from activity during 2019/20 were:

·         The Council’s total debt (including leases and lease-type arrangements) at 31^st March 2019 was £120.258m as identified at appendix A of the report  compared with the Capital Financing Requirement of £130.736m  This represented an under-borrowing position of £10.478m, which was currently being supported by internal resources. Additional long-term borrowing would be undertaken in future years to bring levels up to the Capital Financing Requirement, subject to liquidity requirements, if preferential interest rates were available.

·         The Council’s Investments at the 31^st March 2020 were £30.55m as outlined in Appendix A of the report, which was £1.35m higher than at 31^st March 2019. Average investment balances for 2019/20 were £28.833m, which was higher than estimated balances of £24.1m in the Medium-Term Financial Strategy 2019-24 due to the timing of borrowing taken. It was noted that this referred to the principal amounts of investment held, whereas the investment values included in the balance sheet were based on fair value. In most cases, this would be equal to the principal invested, unless the investment had been impaired.

·         Actual investment interest earned on balances was £240k compared to £125k estimated in the Medium-Term Financial Strategy 2019-24 identified at Appendix A of the report

·         The interest rate achieved on investments was 0.84% which was 0.31% above the target average 7-day LIBID rate (for 2019/20 the average was 0.53%)

d)    advised that the following reported outturn position against the security and liquidity benchmarks in the Treasury Management Strategy were as follows:

·         Security:

-       The Council’s actual average security risk for the portfolio as at 31^st March 2020 was 0.004%, which compared with the 0.005% for the budgeted portfolio. This gave the estimated default rate on the investment counterparties which comprised the portfolio at 31^st March 2020. This equated to a potential financial loss of £1,222 on the investment portfolio of £30.5m.

-       Specified investments were high security sterling investments (i.e. high credit quality) with a maturity of no more than one year. Non-specified investments were all over investments representing a potentially greater risk; however, the risk was still minimal due to the stringent controls over counterparty credit quality contained within the Investment Strategy. The 2019/20 strategy set a maximum limit of 75% of the portfolio to be held in non-specified investments. At 31^st March 2020, 80% of the investment portfolio was held in specified investments with the remaining 20% held in deposits with other local authorities. The Chief Finance Officer reported that the investment portfolio was maintained within this limit throughout the year.

·         Liquidity – In respect of this area the Council set liquidity benchmarks to maintain:

-       Liquid short-term deposits of at least £5million available with a week’s notice.

-       Weighted Average Life benchmark was expected to be 0.35 years (128 days).

The actual liquidity indicators at 31^st March 2020 were as follows:

-       Liquid short-term deposits of £18.55 million as at 31^st March 2020.

-       Weighted Average Life of the investment portfolio was 0.10 years (38 days). This reflected that larger amounts of investments were deposited in short term accounts to deal with cash flow requirements.

The Chief Finance Officer reported that liquidity arrangements were adequate throughout the year.

RESOLVED that the actual prudential indicators contained within appendices A and B and the annual Treasury Management Report for 2019/20 was noted.