Issue - meetings

(Director of Resources) To consider the attached report (AGC-014-2015/16).

The Director of Resources presented the mid-year progress report on Treasury Management and Prudential Indicators, which covered the treasury activity for the first half of 2015/16, and was a requirement of the Chartered Institute of Public Finance & Accountancy (CIPFA) Code of Practice on Treasury Management.

The Director reported that, during the first half of the year, the Council had continued to finance all capital expenditure from within internal resources. The estimate for the Capital Programme during 2015/16 had indicated expenditure of £26.428million, which would be financed by capital grants, capital receipts and revenue. The Capital Programme for the three-year period ending 31 March 2018 had predicted expenditure of £72million, with £3million available in usable capital receipts and £2million in the Major Repairs Reserve. Therefore, it was considered that adequate resources existed for the Council’s Capital Programme in the medium term.

The Director advised the Committee that the Council had £53.1million under investment at 30 September 2015, and the average net investment position of the Council had been approximately £61.9million throughout the first half of 2015/16. The Council’s investments as at 30 September 2015 had consisted of £45.5million in fixed investments, £2.6million in variable investments and £5million in long-term investments. The Council had also received a further dividend from the administrators of the Heritable Bank; the Council had now received 98% of the value of its deposits. No further update had been received from the Administrator. The importance of carefully monitoring and controlling the Council’s cash flow to ensure enough funds were available each day to cover outgoings was highlighted; this would become more difficult as the Council used up its capital receipts and reduced its investment balances.

The Director stated that the Council held loans totalling £184.7million at 30 September 2014, the majority of which had funded the self-financing of the Housing Revenue Account. It was not anticipated that the Council would require further loans in 2015/16, but it was expected that further borrowing would occur in 2016/17 to fund capital projects such as the Epping Forest Shopping Park. The revised Capital Programme for the five-year period to 2019/20 would be considered by the Cabinet at its meeting on 3 December 2015.

Finally, the Director added that there had been no breaches of any of the prudential indicators relating to capital activity, the indebtedness for capital purposes and the Council’s overall Treasury position.

In response to questions from the Members of the Committee, the Director of Resources stated that the return on the Epping Forest Shopping Park would be significantly higher than the rates currently available on the Money Market. The forecast was that the Council would receive approximately £2.5million in rent each year for an estimated build cost of £30million. Councils were generally looking to invest in property to increase their financial resilience.

The Director acknowledged that the Council’s total investments had decreased a little over the period, and a longer term trends table could be provided for Members if they wished. It was clarified that the 98% return  ...  view the full minutes text for item 33

(Director of Resources) To consider the attached report (FPM-018-2015/16)

The Director of Resources presented a report on the mid-year Treasury Management and Prudential Indicators 2015/16.

The Director of Resources advised that the mid-year treasury report was a requirement of the CIPFA Code of Practice on Treasury Management and that the report covered the treasury activity for the first half of the financial year 2015/16. The Council had continued to finance all capital expenditure from within internal resources although borrowing was likely to be required to finance other capital developments. The original estimate, along with expenditure to month 6 (30 September 2015) was £14.222m, which included the land purchase at Langston Road for which Council agreed a supplementary capital estimate. The original Capital Programme for the three years to 2017/18 totalled £72.0m and was fully funded. It had been predicted that at the end of 2017/18 there would be still £3.0m available in Capital Receipts and £2.0m in the Major Repairs Reserve.

The Director of Resources confirmed that there were no breaches of the Authorised Limit (£230m), the Operational Boundary (£219m) and the Maturity Structure of Fixed Rate Borrowing during the period to 30 September 2015. It was anticipated that all borrowing would be repaid on maturity and the capital programme would be financed through internal resources, although the Council had intended to borrow later in 2016/17, to finance approved capital projects such as the Langston Road Retail Development.

The Treasury position as of 30 September 2015 was that the short term investments of £45.5m were in fixed rates, £2.6m in variable rates and £5.0m in long term investments. The Semi-annual Treasury Outturn Report 2015/16 reported that the counterparty credit ratings for 30 September 2015 remained  above target with the value weighted average credit risk score A+.

The Director of Resources advised that the Council had received a further dividend from the administrators of the Heritable Bank which had taken total dividends so far to 98% of the value of deposits. No further update had been received from Ernst and Young.

Resolved:

(1)        That the management of the risks associated with the Council’s Treasury Management for the first half of 2015/2016 be noted.

Reasons for Decision:

The report was presented for noting as scrutiny was provided by the Audit and Governance Committee who made recommendations to this Committee when necessary.

Other Options Considered and Rejected:

Members could ask for additional information about the CIPFA Codes or the Prudential Indicators.