This report summarises the Council’s treasury management activities during 2022/23, as required, to ensure compliance with the Chartered Institute of Public Finance and Accountancy’s Treasury Management in the Public Services: Code of Practice (the CIPFA Code) which requires the Authority to approve a treasury management annual report after the end of each financial year.
Rishi Sharma - Strategic Capital Accountant
Nikki O’Connor - Strategic Finance Business Partner
Anna D’Alessandro - Director of Corporate Finance and Commercial
Key points raised during the discussion:
1. The Strategic Capital Accountant introduced the report and noted that the Council's net external borrowing position had reduced by £30 million over the 12 month period to 31 March 2023. The main driver for this was the continuation of the internal borrowing strategy of the Council, with internal borrowing increasing as a result of increases in reserve and working capital balances. The Treasury Management Advisors, Arlingclose, provided advice to the Council to inform decisions around borrowing and there was an expectation of further increases to interest rates before a forecast of them beginning to reduce by the end of the year. The Council continued to invest temporary cash surpluses in Money Market Funds and those returns had reacted to the increases in the Bank Rate, enabling positive variances on the interest received to offset increased costs relating to interest payable. The Council was compliant with all limits in the Treasury Management Strategy and the Prudential Indicators. The Council had set aside an interest rate reserve to mitigate its future exposure to interest rate fluctuations.
2. A Committee member queried how internal borrowing was managed, presuming that it was to fund different services in the annual Council budget and she asked whether the Council operated nominal interest on that to discourage overspend. The Strategic Finance Business Partner clarified that the borrowing requirement was to fund the capital programme and internal borrowing was not borrowing from one service to fund another, it was the Council temporarily using short-term cash surpluses due to the levels of reserves and working capital which reduced the need to be tied into higher long-term interest rates externally.
3. A Committee member referred to the Minimum Revenue Provision (MRP) asking whether that was a prescribed amount or whether that amount was a value judgement as to the amount that the Council needed to set aside. The Strategic Capital Accountant explained that whilst there were different methods to calculate MRP, the underlying requirement for the MRP was that it sets aside a prudent provision for the Council’s historic borrowing in relation to the capital programme, investment properties and loans, in line with the Chartered Institute of Public Finance and Accountancy (CIPFA) code requirements. The Director of Corporate Finance and Commercial explained that any change to the Council’s MRP approach was always discussed and agreed with the external auditors, a change was made three years ago as the MRP approach was overly prudent. The Strategic Finance Business Partner explained that the MRP Policy Statement was approved at the Council Budget meeting in February.
Noted the content of the Treasury Management Outturn Report for 2022/23 and compliance with all Prudential Indicators.
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