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Waverley Borough Council Committee System - Committee Document

Meeting of the Executive held on 05/02/2008
Treasury Management Policy 2008/2009



APPENDIX I
WAVERLEY BOROUGH COUNCIL

EXECUTIVE – 5TH FEBRUARY 2008

Title:
TREASURY MANAGEMENT POLICY 2008/2009

[Portfolio Holder for Finance: Cllr M H W Band]
[Wards Affected: N/A]
Summary and purpose:

This report is the annual update of Waverley’s Treasury Management Policy which reviews the arrangements and approved limits for the coming year.

Social/Community implications:

There are no direct social/community implications associated with this report.

Environmental Implications:
There are no direct environmental implications associated with this report

E-Government implications:

There are no e-government implications associated with this report.

Resource and legal implications:

There are no direct resource implications and the financial areas are covered in the report.

Background

1. Waverley has adopted the Chartered Institute of Public Finance and Accounting‘s (CIPFA’s) Code of Practice on Treasury Management in the Public Services. Included within the Policy is that an annual review should be undertaken and reported to the Executive. Waverley had 31 million invested at 1st April 2007.

2. The Prudential Code for Capital Finance in Local Authorities requires that the annual investment strategy includes a set of specific prudential indicators.

Review of the Treasury Management Policy

3. The policy continues to be robust and comply with the latest good practice guidance. The Treasury Management Policy continues to give priority to security and liquidity of investment, rather than yield, although officers will always seek the highest yield provided that the necessary safeguards are in place as required under the Annual Investment Strategy.
4. Current Council policy allows for the employment of treasury advisors on a self-financing basis. However, Waverley continues to have a relatively consistent and predictable cash flow year-on-year and officers regularly monitor this and other factors including the credit ratings of investment organisations and the return on investments. Officers are satisfied that managing Waverley’s short-term investments in-house is still appropriate but will keep the option of treasury advice open and review the position periodically.

Annual Investment Strategy

5. The Regulations require the Council to determine a number of limits and guidelines for its investment activity including ‘specified’ and ‘non-specified’ investments. Specified investments are held in sterling with a maturity of no more than a year and must be with the UK Government, UK local authorities or “high” credit rated institutions. Non-specified investments are any investments that do not meet the above criteria.

6. To meet the requirements of the Regulations it is proposed that the following policy and limits, which have not been changed from 2007-08, apply to all of Waverley’s investment activity in 2008-09:

UK Local Authorities and the UK Government
“High” credit rated means AAA rating for sterling money market funds or A and above rating for any banks and building societies
The only non-specified investments that Waverley will invest in are non-rated top 30 building societies.
3million is the maximum investment in any single non-specified organisation at any one time and, 5million for any single specified organisation at any one time.
Credit ratings should be monitored continuously using either Moody’s, Standard and Poor’s or Fitch ratings
All new investment institutions should be ratings checked at the outset and a list of potential investors prepared and approved by the S151 Officer before 1st April each year and monitored throughout the year
The maximum total investment at any one time in non-specified investments is 22 million.
The maximum total investment at any one time that can prudently be committed for more than one year is 10 million.
The minimum total investment at any one time that can be held in short term (less than 365 days) investments is 10 million.

7. These policies and limits update those stated in the approved Treasury Management Policy. They are intended primarily to maximise the security and liquidity of Waverley’s investments but they must also enable flexibility in investment options and allow for the practicalities of day-to-day investment dealing. Whilst maximising the interest earned on investments is of secondary importance behind security, it is nevertheless a high priority and the limits set must enable both security and high yield to be achieved.


Prudential Indicators

8. This section of the report should be considered in conjunction with the Prudential Code report also on this agenda. The following prudential indicators are required under the Prudential Code for Capital Finance in Local Authorities.

The upper limit on fixed rate investments for 2008/09, 2009/10 and 2010/11 to be 100% of net outstanding principal sums
The upper limit on variable rate investments for 2008/09, 2009/10 and 2010/11 to be 40% of net outstanding principal sums
The maturity structure of borrowing (as % of overall projected fixed rate borrowing) in 2008-09 is:
- under 12months - upper limit 100%, lower limit, 0%
- between 1 and 25 years – upper limit 100%, lower limit 0%
The upper limit of principal sums invested for periods of more than 365 days is 10 million.

Recommendation

It is recommended that the Executive:

1. notes the review of the current policy;

2. approves the annual Investment Strategy, as set out in paragraph 6; and

3. approves the prudential indicators in paragraph 8.

Background Papers (DoR)

There are no background papers (as defined by Section 100D(5) of the Local Government Act 1972) relating to this report.

CONTACT OFFICERS:

Name: Paul Wenham Telephone: 01483 523238
E-mail: pwenham@waverley.gov.uk

Name: Graeme Clark Telephone: 01483 523236
E-mail: grclark@waverley.gov.uk

Comms/exec/2007-08/222