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Waverley Borough Council Committee System - Committee Document

Meeting of the Executive held on 12/06/2007
TREASURY MANAGEMENT – BORROWING AND INVESTMENT
TRANSACTIONS AND PERFORMANCE MEASUREMENT



Summary & Purpose
The purpose of this report is to summarise Waverley’s investment performance for 2006/2007 in accordance with Waverley’s Treasury Management Policy and the Code of Practice on Treasury Management in Local Authorities.

APPENDIX C
Waverley Borough Council

EXECUTIVE – 12TH JUNE 2007

Title:
TREASURY MANAGEMENT – BORROWING AND INVESTMENT
TRANSACTIONS AND PERFORMANCE MEASUREMENT

[Wards Affected: n/a]

Summary and purpose:

The purpose of this report is to summarise Waverley’s investment performance for 2006/2007 in accordance with Waverley’s Treasury Management Policy and the Code of Practice on Treasury Management in Local Authorities.

E-Government Implications:

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

Environmental Implications:

There are no environmental implications immediately associated with the report.

Social / community Implications:

There are no quality of life implications associated with this report.

Resource and legal Implications:

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

Introduction and Background

1. In 2002, the Council adopted the Chartered Institute of Public Finance and Accounting’s (CIPFA’s) Code of Practice on Treasury Management in the Public Services.

2. Included within the Policy was an undertaking that regular reports on performance and transactions were to be prepared twice a year. In November 2006, the Executive considered a report on the half-year, ended 30th September 2006. This report shows the rate of return from the Council’s investments for the whole of 2006/07 financial year compared to Waverley's target.

Investments – Performance Measurement

3. The annual rate of return on the Council’s investments for the year ended 31st March 2007 was 4.88%. Waverley’s criteria for comparative purposes is the London Inter-Bank Bid Rate (LIBID) seven-day rate. The average rate in 2006-07 has been calculated at 4.86%. This comparison is used as it gives a good indication of the average rates achieved in the investment market that is considered most relevant to Waverley’s investment activity. The graph in Annexe 1 also shows the 3-month rate and the bank base rate for comparison.

4. Whilst the performance compares favourably with the pre-determined rates, it is below the target of 0.25% above the 7-day rate. The trend in the last few years has shown a narrowing in the rates across different investment periods and a very small margin between average market rates and the LIBID rate. In addition, when the base rate increases, as it has over the last 12 months (5.25% at 31 March 2007 compared to 4.5% at 31 March 2006), Waverley’s investment performance is caught temporarily in the ‘time-lag’ as all of the investments have a fixed rate of interest and most are for a fixed period of time to meet known cashflow commitments.

5. For information, the Local Performance Indicator (LOBT3) which relates to investment performance is shown below.

Full Description of PI
2005/2006
Actual
2006/2007
Target
2006/2007
Actual
2007/2008
Target
Average rate of return on the Council’s investments compared with the average seven-day LIBID rate (London Inter-Bank Bid Rate)
0.21% above the LIBID rate
0.25% above the LIBID rate
0.02% above the LIBID rate
0.25% above the LIBID rate

Investment Transactions

6. The temporary investments (i.e. investments repayable to the Council within one year) outstanding as at 31st March 2007 was 31,200,000 and comprise 13million invested with building societies and 18.2million with approved banks, which is in accordance with the Council’s approved Investment Policy.

7. In addition, the investments are further classified as being 21.2million “specified” investments and 10million “non-specified” which is well within the Council’s approved limit of 22million for “non-specified” investments. Specified investments are generally with institutions with a credit rating of A or above and the non-specified investments are non-rated top-50 building societies.

Recommendation

It is recommended that the Executive notes the report.

Background Papers (DoF)

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

CONTACT OFFICER:

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


comms/executive/2007-2008/012