Agenda item

The CIPFA (Chartered Institute of Public Finance and Accountancy) Code of Practice for Treasury Management 2021 recommends that Members be updated on treasury management activities at least quarterly. The 2023/24 Treasury Management Strategy states this report will go to the Audit and Governance Committee in September. This report, therefore, ensures this Council is implementing best practice in accordance with the Code.

During the first quarter to 30^th June 2023, the Council complied with its legislative and regulatory requirements, including confirmation that the authorised limit was not breached.

[30 Minutes]

Upon the invitation of the Chair, the Senior Accountant (Treasury) introduced the report to Committee. She explained that the Treasury Management Codes revised in 2021 recommended that Members were updated on treasury management activities quarterly, so this was an additional report. She highlighted page 42, which showed the list of investments on 30 June 2023, at £48 million; page 43, paragraph 2.4 showed a summary and comparison of the investments at 31 March 2023 and 30 June 2023. There was an average level of funds for the first quarter of £43 million, highlighted in 2.8; Page 44, paragraph 2 showed the average rate of return on investments in June of 4.27% against a budgeted return of 3.20%, which had increased further to around 4.5% in August. This was largely due to the interest rate increase; Paragraph 2.11 showed the estimated outturn was currently around £1.9m, showing an over achievement of around £400k; Paragraph 2.13 showed the property and diversified fund valuations, which were still below the principle invested. Due to the IRFS 9 (an unrealised fair value movement), and the override in place, this would not effect the Council’s revenue budget for 2023-24. This override was currently in place until 31 March 2025. For Arun these were both considered to be long-term investments and it was acknowledged the value would rise and fall; Page 49 showed an economic update from the Link Group, the treasury advisors. A revised forecast would be received from them sometime the following week.

Members then took part in a question and answer session where the following points were raised:

·       Whilst investments were doing better, the rate of inflation was rising, did this mean the funding gap was increasing? The Group Head of Finance and Section 151 Officer explained that this was the case.

·       Page 42 showed £8million investments had matured, and this money been reinvested and if so who with? The Senior Accountant (Treasury) explained most of the money had been reinvested and she would circulate an updated investment list to Members after the meeting.

·       It was asked whether consideration could be given to investing in Unity Trust Bank. The Group Head of Finance and Section 151 Officer would look into this.

The Group Head of Finance and Section 151 Officer thanked the Senior Accountant (Treasury) for the clear and concise report she had written. He highlighted that Members should be aware of the IFRS 9, for which local authorities currently had an exemption from the accounting standard. If this exemption was removed, local authorities would have to reflect the capital value in accounts, and at present as this was less than the amount paid in, it would have a negative effect on the budget, and would have implications for Council Tax. This would continue to be reported by Officers, but was something he asked Members to take note of.

          The recommendations were proposed by Councillor Wallsgrove and seconded by Councillor Tandy.

The  Committee

 RECOMMEND TO FULL COUNCIL that

1. the quarter 1 treasury management report for 2023/24 be noted;

2. they note the treasury activity for the quarter ended 30 June 2023, which has   generated interest receipts of £460,918 (4.27%). Budget £1,540,000 (3.20%); and

3. the quarter 1 actual prudential and treasury indicators for 2023/24 contained in the report be noted.