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Waverley Borough Council Committee System - Committee Document

Meeting of the Executive held on 07/02/2005
Treasury Management Policy



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

Quality of Life Implications
Natural Resource Use
Pollution Prevention and Control
Biodiversity and Nature
Local Environment
Social Inclusion
Safe Communities
Local Economy
Natural
Resource Use
Pollution
Prevention and Control
Biodiversity
and Nature
Local
Environment
Social
Inclusion
Safe, Healthy
and Active
Communities
Local
Economy
N/A
N/A
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E-Government implications:

There are no e-government implications.

Resource and legal implications:

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

1. In September 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. Included within the Policy was that an annual review would be undertaken and reported to the Executive. Waverley had 27 million invested at 1st April 2004.

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 complies with 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.
4. In September 2002, the Executive approved the employment of treasury advisors on a self-financing basis. However, Waverley continues to have a relatively consistent and predictable cashflow and officers regularly monitor this and other factors including the credit ratings of investment organisations and the return on investments. Waverley’s overall return on investments compared well to the other Surrey authorities in 2003/04, being the third highest. For these reasons, officers will keep the option of treasury advice open but only seek such assistance at the appropriate time.

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” 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 apply to all of Waverley’s investment activity in 2005/06:-

“High” credit rating means AAA rating for sterling money market funds or A and above rating for any banks and building societies;
The top 30 building societies, non-rated and below A rated and any A-rated UK banks are the only non-specified investment that Waverley will invest in;
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 Director of Finance before 1st April each 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. The following prudential indicators are required under the Prudential Code for Capital Finance in Local Authorities. This section of the report should be considered in conjunction with the Prudential Code report, also on this agenda.

The upper limit on fixed rate investments for 2005/06, 2006/07 and 2007/08 of 100% of net outstanding principal sums;
The upper limit on variable rate investments for 2005/06, 2006/07 and 2007/08 of 40% of net outstanding principal sums;
The maturity structure of borrowing (as % of overall projected fixed rate borrowing) in 2005/06 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 of the report; and

3. approves the prudential indicators in paragraph 8.

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Background Papers (DoF)

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

Name: Paul Wenham Telephone: 01483 523238
Graeme Clark 01483 523236

E-mail: pwenham@waverley.gov.uk
grclark@waverley.gov.uk

comms/executive/2004/2005/397