Agenda item

(a)       That the Audit Committee recommend the draft Treasury Management Strategy 2013/14, Treasury Management Policy Statements 2013-2016 and Treasury Management Practices 2013-2016 to Cabinet on 19 February 2013 subject to the amendments referred to;

(b)       That the Treasury Management 2012/13 quarterly update be noted; and

(c)        That the Finance Manager - Strategy & Technical liaise with other North Wales Authorities and Town and Community Councils to explore the suggestion for a joint approach on investments and provide a note to the Committee.

The Head of Finance presented the 2013/14 draft Treasury Management Strategy for review prior to recommendation to Cabinet.  The report also provided an update on matters relating to the 2012/13 Council’s Treasury Management Policy, Strategy and practices and on the Council’s investment in Landsbanki.

The Corporate Finance Manager remarked on the transfer of the treasury management function from the Funds team to the Strategy & Technical Team which was managed by Liz Thomas and that a treasury management training session which had been arranged for all Council Members the previous day.  The Chair commented that the training had been helpful in providing Members with a better understanding of the Council’s finances but that attendance on the day had been disappointing.

The Finance Manager - Strategy & Technical introduced the appendices to the report and said that the focus of the Committee should be to consider the Treasury Management Strategy 2013/14 which contained the Council’s approach for investment and borrowing over the coming year, together with budget implications and treasury management indicators.  An error in the Credit and Counterparty Policies table shown under (TMP1) Risk Management on the TMP Schedules would be replaced by the correct version (shown under Section 5 of the Treasury Management Strategy) before the report was submitted to Cabinet and County Council.  The Finance Manager - Strategy & Technical went on to describe the changes to the Strategy, as included in the report, which had been agreed with the Council’s treasury management advisers Arlingclose Ltd.

In response to a comment by Councillor J.B. Attridge on the Policy Statement and Practices changing from annual documents to three yearly, it was explained that any significant changes during this period would be reported to Members.

Councillor R.B. Jones pointed out that in addition to the correction to the table, the bullet point following this would also need amendment to reflect the category for minimum asset size of UK building societies of £1bn.  He sought assurance on the recommendation to allow investments with a credit rating of A- albeit for a reduced maximum six month investment limit.

The Finance Manager - Strategy & Technical said that all investments carry risk and so absolute assurance could not be given.  However, the recommendation had been made in discussion with the Council’s treasury management advisors, and was considered to be a measured risk given that it would introduce more counterparties for the Council to invest with.

Mr. P. Williams asked about any additional recommendations made by the advisors.  The Finance Manager - Strategy & Technical explained that advice had been given to increase the investment period to ten years rather than the current five year limit to reduce the unrated building society limit to those with assets less than £250m rather than £1bn and to invest more in a more diverse range of financial products which would be capital in nature.  Due consideration had been given to their suggestions, however, they were not considered as right for Flintshire’s Strategy and risk appetite currently.

Following queries raised by Councillor G.H. Bateman, it was explained that Sterling Consultancy Services had been acquired by Arlingclose Ltd who were now providing the same service by the same personnel.  The list of investments appended to the report showed a range of interest rates and the suggestion for investment in Debt Management Office (DMO) only at a rate of 0.25% was put forward.  Officers recognised that this was an approach followed by some Councils but not the approach recommended as best value for money, given the current rate of inflation.  It was also explained that the term ‘external cash managers’ was used to describe individuals who managed investments on behalf of others.

Ms. A. Hughes said that the Committee needed to consider the report which had been produced in the context of advice received in acting responsibly to protect the Council’s finances.

Councillor G.S. Banks asked if there was potential for a greater return if investments were made in a joint approach with other Authorities.  The Finance Manager - Strategy & Technical said that whilst this could be taken into consideration, each Authority would have its own approved Strategy that may not have the same appetite for risk.  The Chair requested that a note be provided to the Committee giving further detail on this.  Councillor Jones asked if officers could also consult with clerks of Town and Community Councils and include in the note to be provided.

In response to a query from the Chair, the Head of Finance said that the Finance Function Review had been implemented and that appraisals were part of the ongoing programme.  She thanked the officer team, some of whom were present in the public gallery, and reported on the smooth handover of the treasury management function.  She went on to say that the issues discussed at this meeting and the training session would provide sufficient information for Members to move forward in the process.

RESOLVED:

(a)       That the Audit Committee recommend the draft Treasury Management Strategy 2013/14, Treasury Management Policy Statements 2013-2016 and Treasury Management Practices 2013-2016 to Cabinet on 19 February 2013 subject to the amendments referred to;

(b)       That the Treasury Management 2012/13 quarterly update be noted; and

(c)        That the Finance Manager - Strategy & Technical liaise with other North Wales Authorities and Town and Community Councils to explore the suggestion for a joint approach on investments and provide a note to the Committee.