Agenda item

(Director of Resources) To consider the attached report (FPM-013-2014/15).

The Director of Resources presented a report on the mid-year Treasury Management and Prudential Indicators 2014/15.

The Director of Resources reported that the mid-year treasury report was a requirement of the CIPFA Code of Practise on Treasury Management and covered the treasury activity for the first half of the financial year 2014/15. During the first half of the year, the Council had continued to finance all capital expenditure from within internal resources and the average net investment position had been approximately £62million with no significant breaches on any of the prudential indicators.

The probably capital outturn for the current financial year was £24.7million. The prudential indicator assisted the Council in controlling and monitoring the level of useable capital receipts that would be available at the end of a five-year period, which for three years to 2016/17 totalled £60m and was fully funded. It was predicted that at the end of 2016/17 there would be £1.8m available in Capital Receipts and £4.1m in the Major Repairs Reserve. Therefore it could be concluded that adequate resources existed for the Capital Programme in the medium term.

The Director of Resources confirmed that there were no breaches of the Authorised Limit, Operational Boundary and Maturity Structure of Fixed Rate Borrowing during the period to 30 September 2014, in relation to the borrowing for the HRA self-financing. It was anticipated that all borrowing would be repaid on maturity and all future capital expenditure would be financed through internal resources, therefore no risk currently existed for refinancing.

The Treasury position as of 30 September 2014 was that short term investments of £38.3m in fixed rates, £13.8m in variable rates and £10m in long term investments. It was important that cash flow of the Council was carefully monitored and controlled to ensure enough funds were available each day to cover the outgoings. This would become more difficult as the Council used up Capital Receipts and reduces investment balances. The Semi-annual Treasury Outturn Report 2014/15 reported that the counterparty credit quality measured by credit ratings for 30 September 2014 remained that the value weighted average credit risk score A+ and the credit rating was 5.07 with the time weighted average for credit risk score being AA- and the credit rating was 3.87.

The Director of Resources advised that no additional dividends had been received from Heritable Bank and were not expected until all the outstanding litigation had been settled and the administration process completed, which was possibly expected in November 2014.

The Director reported that the continued low interest rate would result in estimated investment income to the Council of £416,000 in 2014/15, which was slightly above the original estimate of £399,000. Interest rates were not expected to rise in the short term.

Resolved:

(1)        That the management of the risks associated with the Council’s Treasury management function during the first half of 2014/15 be noted.

Reasons for Decision:

To comply with the CIPFA Code of Practice on Treasury Management.

Other Options Considered and Rejected:

None, although the Cabinet Committee could ask for additional information about the CIPFA Code of Practice or the Prudential Indicators.