Agenda item

(a)       That the report be noted; and

(b)       That the Corporate Finance Manager provide the Committee with a written response to the two queries raised by Councillor Banks.

The Corporate Finance Manager presented the Annual Report on the Council’s Treasury Management Policy, Strategy and Practices 2012/13 together with an update on Treasury Management activity in 2013/14 to the end of May 2013.  The report included the reporting cycle schedule for these reports, together with the draft Annual Report to be submitted to Cabinet and full Council in September 2013.  The Corporate Finance Manager highlighted the key points on activity within this and gave a brief update on investments and borrowing.  In pointing out an error in paragraph 3.10 of the report, he confirmed that the total investment balance was £61.9m as stated in Appendix 3 to the report.

The current Treasury Management Strategy had been implemented in April 2013 and there was an obligation to report on any breaches.  Following reference by the Corporate Finance Manager to a breach in relation to a limit applied to a new investment of an A- rated counterparty, the Chair sought clarification on why this had not been applied.  The Corporate Finance Manager explained that an investment of £7m had been made at an early stage of implementation of the new Strategy where the individual had made the investment based on the limit in the previous Strategy.  This had been immediately identified and rectified, with the additional £2m returned, and steps taken to ensure there was no repeat.  In response to a query raised by Councillor G.S. Banks, the Corporate Finance Manager said that there was no financial loss arising from this and that the money had been returned the day after the request had been made.

Following queries raised by Councillor M. Bateman, the Corporate Finance Manager explained that the claim to Landsbanki had been submitted on the understanding that interest amounts would be paid on the investments.  In response to a question on the Single Status and Equal Pay reserve, the Corporate Finance Manager stated that, as with all reserves held, this would form part of overall cashflow considerations in dealing with Treasury Management activity.

Councillor Banks referred to the Council’s average borrowing rate of 5.43% throughout the year and asked about the highest and lowest rates.  He also asked if officers had explored the potential to share treasury management advisor services with other Councils to achieve savings.  The Corporate Finance Manager pointed out that each Council would have its own Treasury Management Strategy but would provide a written response to both queries.

In response to a question from the Chair on borrowing activity, the Corporate Finance Manager explained that the Capital Financing Requirement (CPR) indicated the level of debt to fund capital expenditure.  The difference between this amount and the total external debt was due to internal funds being utilised instead of borrowing.

Councillors Banks and Bateman sought clarification on a number of issues in relation to Landsbanki.  The Corporate Finance Manager explained that the assets held by Landsbanki in their reported accounts meant that it was reasonable to still assume that the Council would eventually receive 100% of its investment.  A large number of investors, particularly in the Local Government sector, were involved in the process to seek recovery of their investments.  Collective action by the Local Government Association on behalf of Councils to instruct a firm of solicitors to act jointly had reduced legal costs.  The Head of Legal & Democratic Services confirmed that the information on investments in the report did not reflect these legal costs.  He explained that these were not recoverable from Landsbanki and that to pursue them through a legal route would result in a reduction in the amount available to be claimed.

Ms. A. Hughes of Wales Audit Office confirmed that the position on these investments had been accounted for within the financial statements.

RESOLVED:

(a)       That the report be noted; and

(b)       That the Corporate Finance Manager provide the Committee with a written response to the two queries raised by Councillor Banks.