Agenda item

The Committee received a presentation from the Principal Accountant - Commercial Capital and Treasury that provided an update on Treasury Management that managed the council’s borrowing, investments and cash flows.  It highlighted the training that would be delivered to Members in relation to their new scrutiny role (for copy see file of minutes).

The Principal Accountant – Commercial Capital and Treasury gave a detailed presentation that gave an update on the consultations that were launched by CIPFA on its Treasury Management Code of Practice and its Prudential Code for Capital Financing that defined a framework that the Council were required to comply with in relation to borrowing and investing. Within the framework there was a need for transparency, improve capital affordability and tighten up regulations that scrutiny by the Audit Committee would ensure. She had developed an e-learning module for members to help them understand the new role of the committee.  The model was heavy going but relevant that looked at the council’s cash flow, lending and borrowing in a controlled framework to help to achieve the business objective of consistent value for money. 

The Principal Accountant – Commercial Capital and Treasury noted that cash flow was monitored on day to day receipts for long term forecast to make decisions on investing funds in the short term to ensure money was available to finance capital projects. The investment objective was to look at risk and reward and prioritise security and liquidity before yield. She advised that borrowing was in line with the code with costs minimised so the portfolio did not expose the council to risk on maturing.  She stated that work was ongoing with neighbouring authorities to bench marking performance against similar sized authorities for net revenue streams and ensure that the code of practice indicators performed in line with the approved strategy. The Audit Committee would be looked upon as having a critical friend approach to improve and prevent mistakes. It was proposed that all members would complete the e-learning module by 20 June 2024 to receive the first Treasury Management report on 28 June 2024 before it was submitted to full council on 17 July 2024.

P Darby advised that the Treasury Management Audit Review would still take place on an annual basis. The Chief Internal Auditor and Corporate Fraud Manager would continue to do same checks on a day to day basis and produce any other information for the committee to receive before the scrutiny report came to committee.  The Head of Corporate Finance and Commercial Services and the Principal Accountant – Commercial Capital and Treasury met on a monthly basis and the Head of Corporate Finance and Commercial Services and the Corporate Director of Resources met on a daily basis.

Comments on the report from the Audit committee would be submitted to full council.  The scrutiny role would be monitored to see how it went. 

Mr I Rudd acknowledged that there was a lot that went on behind the scenes and the Audit committee would only become aware of things if they went wrong like if the Council ran out of money.  He asked how the committee could measure how good things were.

The Principal Accountant – Commercial Capital and Treasury informed the committee that the training module would include indicators on how to measure how good things were.  She advised that there were already limitations set on what Officers could not do when managing funds so the Council did not go over its budget.  In general income generated looked at security and liquidity before it considered yield. Cash was managed efficiently each day and the report would report indicate the targets set to ensure they were not exceeded.

P Darby added that the committee would scrutinise the decisions on when to borrow and when to delay borrowing.  There would be a raft of information in the treasury management training to advise on capital commitments. The council operated a balanced budget that meant that cash raised would meet cash expenditure functions to ensure that cash flow was adequately planned with surplus monies being invested to arrange the funding of the councils capital programme.  This supported the provision of Council services and delivery of the council plan objectives.  The council had adopted the latest CIPFA code of practice on treasure management to ensure there was adequate monitoring of the councils capital expenditure plans.

Councillor B Kellett shared from his past experience working in the treasury department that the council held short term monies overnight at the Bank of England.  He had been aware of when BCCI had been a reliable company to invest in but it had crashed unexpectedly.  He queried how the council invested its money in the short term and what risks the committee would need to look at.

P Darby responded that cash flows were carefully monitored and invested. He stated that a similar thing to BCCI had happened with the Icelandic banks in 2018. Nothing was certain and it was important that the council followed the advice of its advisors and monitored any changes in credit worthiness of institutions.  He added that the council limited exposure in individual counterparties and only used those that were of the best credit worthiness. Money was invested in long term and short term ways as there was always a need for money to be available on deposit.

The Principal Accountant – Commercial Capital and Treasury added that organisations the council invested in were reviewed on a weekly basis and targets set on how much could be invested.

P Darby gave a good example of work that was ongoing with the six local authorities under the new NECA arrangements to look at intra local authority short term lending and borrowing.  This would be at market rates but could avoid / save authorities the arrangement fees.

Mr C Robinson queried if the audit committee could review and challenge the Treasury Management Strategy and Policies, querying whether the Committee had responsibility for setting the policy or whether this was set by full council.

P Darby acknowledged that the strategy and policy needed to be adopted by the council, as part of the budget setting. The Audit Committee would be engaged in that process going forward to ensure there was appropriate scrutiny.  The committee would provide a greater oversight of the detail.

P Darby confirmed that recommendations would be presented to full council but the decisions would rest with council.

Resolved:

i)               That Members receive online training to be completed by 20 June 2024 be agreed.

ii)             That Audit Committee receive the Treasury Management Outturn Report for consideration at its meeting on the 28 June 2024 be agreed.