Agenda item
Treasury Management Activity for Period Ending 31 July 2014
Report to follow.
Minutes:
Kevin Miles (Chief Accountant) introduced, and highlighted key points, in the report which:-
· Detailed treasury management activity for the financial year to end of July 2014.
· Advised AC members of that the Treasury Management Strategy (TMS) and Prudential Indicators agreed by full Council in February 2014 continued to be appropriate, and treasury activities had not resulted in breach of the approved limits. However a mid-year review of the TMS would be considered by full Council in November.
· Detailed the current credit criteria adopted by the Corporate Director of Resources, and also the current investment strategy and projected investment returns.
Points highlighted by Kevin Miles included:-
· At the end of July the Authority had investments of approximately £330 million which was approximately £180 million higher than the projected average cash balance of £150 million.
· Officers anticipated that the cash balance would reduce as expenditure on the capital programme picked up through the remainder of the financial year.
· The current strategy was not to have too much money invested in longer term investments, so as to allow the Authority to take advantage of the potential increase in interest rates.
· The current average return on investment stands at 0.69%, and was on target to achieve budgeted cash return on assets of £1.6 million for 2014/15.
A discussion followed which focused on clarification being sought and given on the following points:-
An AC member considered that an average 0.69% return on investments of £330 million appeared low. It was acknowledged that interest rates were low at the moment but, it was understood that 6% interest was offered by Lloyds for a 30 day deposit. Consideration also that the proportion of investments allocated to the various maturity periods was not appropriate and more could be yielded from shorter term investments. Accordingly benchmarking of investment returns with other local authorities (LA’s) was needed. Capita was the Authority’s benchmarking partner and it advised that the Authority was achieving as good a return on investment as other LAs and it was slightly lower than institutions were achieving.
Although the Authority could borrow to repay what it owed, large penalties offset the benefits of that approach. The Authority did have a large loan with Barclays but had the option to repay this if interest rates rose.?????
Clarification also sought as to which organisation the Authority used short term deposits overnight as it was understood that other LAs used Ignis, but it was not mentioned in the report. It was likely these investments were spread over a number of banks however a written response would be provided.
What was the Authority’s position in relation to Royal Bank of Scotland (RBS)?. RBS was part of the Nat West group and it was sensible to take advantage of the interest rates it offered. However the Government might reduce support for RBS in future years, or even sell it back to the private sector, and this must be borne in mind. Although RBS offered a better return than other banks, and the Authority was in a similar position to others in relation to it, it was advisable not to lock money away for too long.
Assurance sought and given that the Authority was not exposed to fluctuation in Foreign Exchange rates.
The Chair Moved the recommendation as set out in the reportand it was:-
Resolved
That the contents of the Treasury Management Activity report for the period ending 31 July 2014, be noted.
Action by:
Kevin Miles (Chief Accountant)
Supporting documents:
- 140904 Audit Cttee TM UPDATE Report, item 4.3 PDF 242 KB
- 140904 Audit Cttee TM UPDATE Appxs, item 4.3 PDF 105 KB