Treasury Strategy 2017 to 2018

TREASURY MANAGEMENT STRATEGY STATEMENT, MINIMUM REVENUE PROVISION POLICY STATEMENT AND ANNUAL INVESTMENT STRATEGY FOR 2017/18

1  Introduction

1.1  Background

The Council is required to operate a balanced budget, which broadly means
that cash raised during the year will meet cash expenditure. Part of the
treasury management operation is to ensure that this cash flow is adequately
planned, with cash being available when it is needed. Surplus monies are
invested in low risk counterparties or instruments commensurate with the
Council’s low risk appetite, providing adequate liquidity initially before
considering investment return.


The second main function of the treasury management service is the funding of the
Council’s capital plans. These capital plans provide a guide to the borrowing need
of the Council, essentially the longer term cash flow planning to ensure that the
Council can meet its capital spending obligations. This management of longer term
cash may involve arranging long or short term loans, or using longer term cash flow
surpluses. On occasion any debt previously drawn may be restructured to meet
Council risk or cost objectives.


CIPFA defines treasury management as:


“The management of the local authority’s investments and cash flows, its banking,
money market and capital market transactions; the effective control of the risks
associated with those activities; and the pursuit of optimum performance consistent
with those risks.”

1.2 Reporting requirements

The Council is required to receive and approve, as a minimum, three main
reports each year, which incorporate a variety of policies, estimates and
actuals.


Prudential and treasury indicators and treasury strategy (this report and
annexes) - The first, and most important report covers:

  • the capital plans (including prudential indicators);
  • a minimum revenue provision (MRP) policy (how residual capital expenditure is
  • charged to revenue over time);
  • the treasury management strategy (how the investments and borrowings are to be organised) including treasury indicators; and an investment strategy (the parameters on how investments are to be managed).

A mid year treasury management report – This will update members with the progress of the capital position, amending prudential indicators as necessary, and whether any policies require revision.

An annual treasury report – This provides details of a selection of actual
prudential and treasury indicators and actual treasury operations compared to
the estimates within the strategy.

Scrutiny

The above reports are required to be adequately scrutinised before being
recommended to the Council. This role is undertaken by the Governance and
Audit Committee.

1.3  Treasury Management Strategy for 2017/18

The strategy for 2017/18 covers two main areas:

Capital issues

  • the capital plans and the prudential indicators;
  • the minimum revenue provision (MRP) policy.

Treasury management issues

  • the current treasury position;
  • treasury indicators which limit the treasury risk and activities of the Council;
  • prospects for interest rates;
  • the borrowing strategy;
  • policy on borrowing in advance of need;
  • debt rescheduling;
  • the investment strategy;
  • creditworthiness policy; and
  • policy on use of external service providers.

These elements cover the requirements of the Local Government Act 2003, the CIPFA Prudential Code, CLG MRP Guidance, the CIPFA Treasury Management Code and CLG Investment Guidance.

1.4   Training

The CIPFA Code requires the responsible officer to ensure that members with responsibility for treasury management receive adequate training in treasury management.  This especially applies to members responsible for scrutiny.  Training was last undertaken by members on 21 September 2015 and further training will be arranged as required. 

The training needs of treasury management officers are periodically reviewed.

1.5  External service providers

The Council uses Capita Asset Services, Treasury Solutions as its external treasury
management advisors.

The Council recognises that responsibility for treasury management decisions
remains with the organisation at all times and will ensure that undue reliance is not
placed upon our external service providers.

It also recognises that there is value in employing external providers of treasury
management services in order to acquire access to specialist skills and resources.
The Council will ensure that the terms of their appointment and the methods by
which their value will be assessed are properly agreed and documented, and
subjected to regular review.

The Council uses the ICD Portal to invest or redeem trades in its Money Market
Funds (MMFs). The portal provides advanced reporting tools so that the authority
can assess its exposure to certain banks or countries.

Some investments via the ICD portal are made via JP Morgan who act as a
clearing house for six of the nine MMFs the Council currently uses. The clearing
house allows the authority to make several investments in different MMFs but only
requires one payment to the clearing house, therefore saving the authority costs in
CHAPS fees.