Agenda item

Report to follow.

F Jump presented the update, noting that this was brought to the Committee as a supplementary item. The document has not been brought to the Audit Committee in the past, with Cabinet typically undertaking the scrutiny of this as part of the budget papers. F Jump stated that it was felt appropriate that the Audit Committee should review the strategy to provide comment and feedback for Cabinet to consider when making the recommendation to Council.

The strategy provides an outline on how the organisation manages cash flow, borrowing and investments, and the content of the strategy is dictated by legislation and CIPFA's Treasury Management Code of Practice. F Jump advised that prudential indicators must be included, a set of financial performance indicators to provide an overview of capital expenditure and borrowing requirements.

F Jump advised there is a new Treasury Management Code of Practice that will be effective from 1 April 2023, which includes increased reporting requirements. At present 3 documents are produced each year, the strategy, a mid-year update, and a report on performance produced at the end of the year. The new code requires quarterly reporting and this will be provided from 1 April 2023, which should be brought to both the Audit Committee and Cabinet. The new code also requires a liability benchmark indicator, which provides an overview of the Council's indebtedness, and a statement on ESG issues regarding treasury management also needs to be included. It was noted that skills and training for those who work on the strategy must be proportionate to treasury management activity.

Councillor Silwal commented on borrowing and asked if this amount could be justified. F Jump advised that borrowing for local authorities is part of the normal course of events with the majority of forecasted borrowing in relation to the housing revenue account and investment into housing stock. This work can be financed in a number of ways, including rental income and selling off existing assets, with borrowing being the final option.

The Chairman asked if a review of revaluing stock is required to ensure there is adequate range of equity. F Jump confirmed that stock is valued on an annual basis and that borrowing undertaken is independent of valuation. If it was felt there was significant market changes then more regular reviews would be taken.

N Howcutt noted the debt increasing to over £400m and advised that the Council has a housing stock of 10,000. On average, debt is around £30-35,000 per property and each property is worth more than this.

Councillor Townsend queried where the social statement is included in the report. F Jump noted that this is on page 35 of the supplementary item.

Councillor Townsend noted the change in investments with an increased focus on unspecified investments and asked for further clarification on this. F Jump explained that investments are categorised as specified or unspecified, with specified investments generally being those in sterling products that are UK-based and less than 12 months in duration, and unspecified covering all other investments. Practice generally dictates that investments are not undertaken for longer than 12 months, though it is felt that the return to the authority can be increased by undertaking investments in longer-term products, provided that the counterparties have the same level of creditworthiness expected.

Councillor Townsend asked that the acceptable duration for investment be outlined as part of the policy. F Jump explained that there are no limits on an investment, though it would not be expected for any investments to go beyond a 2-year period. For creditworthiness, there would be no change in what is expected and this is set out in the strategy document with ratings taken from a number of agencies. F Jump stated that a number of factors are taken into consideration, including ratings, and that these are set out in the policy, though they will generally access higher rated counterparties. N Howcutt added that they would generally only look at AAA ratings.

Councillor Townsend asked if unspecified investments will only be bonds, loans or money market instruments. F Jump confirmed that they don't take preferred shares or equity as part of the current programme, and whilst the strategy would allow for them, it would be unlikely for this to change. N Howcutt added that whilst there are strategies in place that provide flexibility, they will always be led by security and liquidity before yields, meaning they will not invest if there is a risk to the principle. Councillor Townsend commented that the underlying policy should reflect this. F Jump noted that the strategy does set out that security and liquidity are the first considerations with yields considered last, which is the overarching principle for treasury management investment.

Outcome

The Committee provided feedback on the strategy for the Cabinet’s consideration.