Agenda item

To provide pre-decision scrutiny to the strategy being proposed (report of the Deputy Chief Executive - Corporate Development (S151) enclosed).

Consideration was given to the report of the Deputy Chief Executive – Corporate Development (S151) which asked the Governance and Audit Committee to provide pre-decision scrutiny to the strategy being proposed.

The Interim Treasury and Investment Manager (PSPSL) introduced the report which outlined the following main points:

• Background to the item;

• Appendix A detailed the Treasury Management Policy Statement 2024/25;
• Appendix B detailed the Draft Treasury Management Strategy Statement which included the following areas:
  • Background to the report;
  • Capital Prudential Indicators 2023/24 to 2028/29;
  • Borrowing; and
  • Annual Investment Strategy;
• The following information was appended to Appendix B:

o   Prudential and treasury indicators;

o   Interest rate forecasts;

o   Treasury Management practice 1 – credit and counterparty risk management;

o   Approved countries for investments;

o   Treasury management scheme of delegation; and

o   The treasury management role of the Section 151 Officer.

Members considered the update and made the following comments:

• Members referred to point 2.2 of Appendix B and asked that the 2027/28 Total Capital Financing Requirement calculation be corrected to 99,717.

• Members referred to the historic losses borne by local authorities that had placed investments with Icelandic banks and asked whether SHDC’s approach to investment ensured government protection of council funds.
  • The Interim Treasury and Investment Manager (PSPSL) responded that:
    • Since the Icelandic Financial crash, Link Group’s advice (SHDC’s external treasury management advisors) considered the credit ratings of each financial institution and its parent group where applicable;
    • Link Group monitored the credit default swap prices (cost of insuring against default) of institutions and adjusted maximum investment duration advice where increased risks had become apparent; and
    • Investments were now only placed with institutions from countries which met the Council minimum sovereign criteria.

• Members referred to the recent nationally published data regarding the amount of debt held by local authorities per head of population and noted that different types of debt had not been distinguished. Had SHDC received any comments on the matter?
  • The Interim Treasury and Investment Manager (PSPSL) responded that:

§  He was not aware of any comments or issues;

§  In general, local authority debt had increased and reserve balances had reduced; and

• Members referred to point 2.5 of the report and asked whether the change in accounting rules affected the Council as lessor and/or lessee.
  • The Interim Treasury and Investment Manager (PSPSL) confirmed that the change in rules applied to the Council in its position as both lessor and lessee. The change would impact the Council’s Capital Financing Requirement where it acted as lessee.

• Members referred to point 1 of Appendix B regarding the adequate planning of cashflow and asked how funds were made available ‘when’ and ‘where’ needed.
  • The Interim Treasury and Investment Manager (PSPSL) responded that:
    • The Council held working capital in the form of cash balances in its bank accounts;
    • All expected income and major items of expenditure were planned for the year ahead;
    • Bank statements were downloaded daily to check receipts and payments; and
    • This activity informed investment decisions.

• Members expressed concern if forecasted cashflow included potential debt that could be written-off.
  • The Interim Treasury and Investment Manager (PSPSL) confirmed that where any degree of uncertainty existed regarding the timing of debt repayments or other income, these were not included in cashflow forecasts.

• Members asked for the percentage of non-collected council tax.
  • The Interim Treasury and Investment Manager (PSPSL) responded that the collection rate was high. Specific information on this matter would be sought from the Revenue and Benefits department.

• Members referred to point 2.1 of the report and queried the notable increase in ‘net financing need for the year’ for 2025/26.
  • The Interim Treasury and Investment Manager (PSPSL) responded that:
    • The increase in need related to a change regarding how HRA expenditure was financed; and
    • Every Capital Programme scheme would be detailed in the budget setting report.

• The External Audit Director – KPMG was in attendance to observe and members requested whether any initial observations regarding the item could be shared.

o   The External Audit Director – KPMG responded that he was encouraged by the detail of the report which would be taken into consideration as part of the risk assessment plan.

AGREED:

After consideration of the Treasury Management Policy and the Treasury Management Strategy Statement, Minimum Revenue Provision Policy and Annual Investment Strategy 2024/25, that the comments of the Governance and Audit Committee be noted prior to consideration by Cabinet on 13 February 2024 and Council on 29 February 2024 of the documents as part of the budget report.