Issue - meetings

The Deputy Leader and Executive Member for Finance and Governance.

RESOLVED that the Executive:

1.      Note the Treasury Management Performance for the year to date and the updated prudential indicators, note the observations from the Audit Committee, and RECOMMEND the Treasury Management Mid-Year Report 2022/23 to Council.

The Deputy Leader and Executive Member for Finance and Governance, Councillor Schofield, introduced the Treasury Management Strategy Mid-Year Report which provided an update on the performance of the Council’s treasury management activities for the first half of this financial year. The report forms part of formal reporting requirements under the CIPFA Code of Practice on Treasury Management.

Councillor Schofield reported that treasury management performance for 2022/23 to date including performance against the Council’s Prudential and Treasury Management Indicators was on track and complied with the borrowing and investment position and limits that Members had agreed previously as part of the Strategy for 2022/23.

One minor non-compliance matter was highlighted in the report (funds held in an investment account for one day more than the timescale specified) and investment procedures had been reviewed as a result to improve controls.

The report had been considered by the Audit Committee at its meeting on 7 December 2022. An Addendum to the agenda had been published which set out the observations from Members in the draft Audit Committee minute on this item.

A Visiting Member from the Audit Committee commented that the Committee had expressed strong reservations about the information presented at Table 5: Investment Portfolio – Non-Treasury Investments (p105) in the report to the Committee. As the Chairman of the Audit Committee, Councillor J. King, could not attend this Executive meeting, a statement from him on  behalf of the Committee had been circulated to Executive Members. The Committee’s concerns were specifically about the limitations of the information provided in the report on the current and forecast value of the Council’s investments in Horley Business Park LLP, Greensand Holdings Limited and Pathway for Care Limited.

Deputy Leader and Portfolio Holder for Finance and Governance, Councillor Schofield, noted that the purpose of the Treasury Management report was not an appraisal of the Council’s companies. It was a brief snapshot of funds invested at a point of time and showed the cumulative value of loans and interest accrued to date. Information on the Council’s companies was provided in regular performance reports, which were reviewed by Overview and Scrutiny Committee, as well as in the annual Statement of Accounts to the Audit Committee.

Councillor Schofield and Portfolio Holder for Investment and Companies, Councillor Archer, invited Audit Committee Chairman, Councillor J. King, to attend future meetings of the Executive’s Partnership, Shareholder and Trustee Sub-Committee (formerly named the Commercial Ventures Executive Sub-Committee). This gave more detail about ongoing work in this area and the Chairman could thereby be aware of commercial confidential discussions and raise questions on behalf of the Audit Committee.

Visiting Members raised concerns that the information in Table 5 on third party loans was set out in a way that was inaccessible to a member of the public or to a lay person without a finance background. Without further background information attached to the table, it did not provide the information they were seeking on company assets and income. They asked for further clarity on the  ...  view the full minutes text for item 50

To consider this update on Treasury Management Performance for the year to date and provide any comments for consideration by Executive.

The Chief Finance Officer explained that the report provided an update on the performance of the Council’s treasury management activities for the first half of the current financial year.  The report formed part of formal reporting requirements under the CIPFA Code of Practice on Treasury Management.

Overall, the report confirmed that treasury management activity for the current year was on track and complied with the limits that Members previously approved.

There was one minor non-compliance that was highlighted in the report, an occasion when funds were held in an investment account for one day more than the timescale specified in the Strategy. There were no impacts arising from this breach and action had been taken to improve controls to avoid recurrence. Additionally, an anomaly had also been identified within the Strategy that had been approved earlier in the year, which would be remedied when this was reviewed in March 2023.

In response to a member question regarding Table 3 (page 20 of the report) where it appeared that the Council’s Capital Financing Requirement (CFR) was forecast to exceed the Operational Boundary, it was explained that the Operational Boundary for External Debt was defined as being the limit beyond which external debt was not normally expected to exceed. It was based on the forecast Capital Financing Requirement (CFR) which was the difference between forecast Capital Programme expenditure and the available resources to fund it. In typical circumstances the Council would be expected to take out external borrowing to fund the CFR.

While this situation would ordinarily require a request to Executive and Council to seek approval to increase the Operational Boundary to ensure continued compliance, this authority did not yet have any external borrowing as it continued to call on available cash balances to finance expenditure. Therefore the Boundary was not actually at risk of breach.

The main reason for the higher than forecast CFR was a change to the timing of receipt of a £34.000 million capital receipt from the Marketfield Way development.

While the majority of the Treasury Management Strategy Report 2022/23 was noted, Committee Members expressed strong reservations about the information presented at Table 5: Investment Portfolio – Non-Treasury Investments. Specifically, the limitations of the information provided in this report about the current and forecast value of the Council’s investments in Horley Business Park LLP, Greensand Holdings Limited and Pathway for Care Limited.

The Committee recommended that the Executive query with the report owner and the report template provider (Link), whether it would be prudent and suitable to revise the table in light of the latest asset valuation information.

Committee Members also asked officers to provide more detailed briefings on the current trading position of the Council’s companies and the risks of having to write off investment losses.  They also asked for assurance on the Executive’s plans to mitigate any risks identified.

In terms of risk and the Council’s investments, members were asked to refer to the response given to question 12 of the advance questions, which explained  ...  view the full minutes text for item 26