Agenda item

(a)       That matters on the draft Treasury Management Annual Report 2011/12 be drawn to the attention of Cabinet on 10 July 2012;

(b)       That the update on early Treasury Management activity in 2012/13 up to the end of April 2012 be noted; and

(c)        That the Audit Committee confirm the accepted Treasury Management Policy agreed by County Council and for officers to decide investments within that policy, with any variation to the policy being subject to County Council decision.

The Clwyd Pension Fund Manager introduced the Annual Report on the Council’s Treasury Management Policy, Strategy and Practices 2011/12 and provided an update on Treasury Management activity in 2012/13 to the end of April 2012.

He outlined the background and key considerations of the report and summarised the conclusions of the Annual Report.  On the Treasury Management Policy and Strategy Statement 2012/13, it was reported that as a result of the amber rating on credit risk, the approach being taken by the Council was to limit deposits to a maximum of three months.  An update on Landsbanki reported that the first distribution had been made to priority creditors, including Flintshire, since the winding up of the bank and that a final distribution was awaited.

The Clwyd Pension Fund Manager referred to an investment at the current rate of 2.65% and had discussed with the Head of Finance the potential to place £4M with the same bank at an increased rate of 3% for a period of slightly less than 12 months.  He explained that whilst this was at odds with the current approach on investments referred to earlier, he considered this to be an exception for good reason.  He had recommended this to the Head of Finance who would be responsible for deciding whether to proceed and wished to share this with Members.

Councillor I.B. Roberts asked if the proposal was in compliance with the policy set out and agreed by Council and the Clwyd Pension Fund Manager replied that this was the case and that if it was outside the policy then approval would need to be sought from full Council.

Concern was raised by Mr. P. Williams on the possibility for the Committee to be asked to sanction investments and suggested that the proposal be noted.  The Head of Legal & Democratic Services said that the County Council was responsible for setting the Treasury Management policy and that the role of Audit Committee was to oversee and monitor the Council’s investment portfolio following the Landsbanki situation, therefore the Head of Finance was correct in referring the matter back to the Audit Committee.  The Chair suggested that she and the Vice-Chair discuss the issue with the Head of Finance.

Councillor R.B. Jones asked about the effect of the downgrading of some major banks and the current lower level of inflation.  The Clwyd Pension Fund Manager spoke about the reduction in the number of counterparties currently meeting criteria in the Council’s policy and said that in the event of a bank being downgraded, that investment may be taken out and placed in a money market fund at a slightly lower rate.  On the second point, there would be no impact other than the return achieved.  Councillor Jones’ comment about appendices not being marked was noted.

Following a query by Councillor G.H. Bateman, the Clwyd Pension Fund Manager gave clarification on the phased transfer of the treasury management function to the Corporate Finance division as part of the Finance Function Review.

In response to earlier discussion on the recommended investment, Councillor Roberts proposed that in view of the fact that the policy had been set and approved by County Council, officers should be able to operate within that policy and proceed if they felt the investment was appropriate.  This was seconded and on being put to the vote, was carried unanimously.

RESOLVED:

(a)       That matters on the draft Treasury Management Annual Report 2011/12 be drawn to the attention of Cabinet on 10 July 2012;

(b)       That the update on early Treasury Management activity in 2012/13 up to the end of April 2012 be noted; and

(c)        That the Audit Committee confirm the accepted Treasury Management Policy agreed by County Council and for officers to decide investments within that policy, with any variation to the policy being subject to County Council decision.