Agenda item - Treasury Management Annual Report 2011/12 and Revised Treasury Management Strategy 2012/13

Treasury Management Annual Report 2011/12 and Revised Treasury Management Strategy 2012/13

Meeting of Value and Performance Scrutiny Committee, Monday 25 June 2012 6.00 pm (Item 6.)

Contact officer: Nigel Kennedy (Head of Finance)

Tele: 01865 252708, email: nkennedy@oxford.gov.uk

The report was not available when the main agenda was printed and will be circulated separately prior to the meeting.

Background Information

The scrutiny committee is the “responsible body” for the scrutiny of the Councils Treasury Management Strategy and so has a formal role in providing an opinion on outcomes from this function. In previous years this has been delegated to a Panel called the Finance and Performance Panel.

Why is it on the agenda?

As a Finance and Performance Panel is yet to be considered by the committee this report is presented here for consideration. The committee should take particular note of performance against the prudential indicators set as well as performance overall.

Who has been invited to comment?

Nigel Kennedy (Head of Finance) will be available to answer the committees questions

What will happen after the meeting?

This report will also be considered by the City Executive Board on the 4^th. July. Any comments the committee wishes to make will be reported to that meeting and presented by the Chair or another nominated councillor.

Minutes:

The Executive Director, Organisational Development and Corporate Services submitted a report (previously circulated, now appended) which set the Council’s treasury management activity and performance for 2011/12 and the proposed revision to the Treasury Management Strategy for 2012/13-2015/2016 which would be recommended to the Full Council.

The report would also be submitted to the City Executive Board for consideration at its meeting on 4^th July 2012.

Nigel Kennedy, Head of Finance introduced the report and highlighted that the Council had achieved all of this targets for the 2011/12 period. He further highlighted that under the Housing Revenue Account (HRA) self financing, the Council had borrowed £198m. Regarding the Council’s capital finance requirement, it stood at £203m at 31^st March 2012. This would have been higher if the new competition pool had been included, but this had slipped to the 2012/13 year.

Councillor Fry asked how underspends should be interpreted. In response Nigel Kennedy said that with the capital programme, these were divided into two categories, underspend and slippage. Underspends where a project came in under budget, slippage was when the cost of the project would be moved to, for example the next year, where the spend would take place.

Anna Winship following questions concerning interest rates said that the Council had a mixture of investments, the majority were on a 3 month basis, but any that were longer would be for a maximum period of a year. All interest was paid in sterling.

Councillors McCready and Simmons asked questions concerning right to buys and loss of rental income. In response Officers explained that the Council as part of the Housing Business Plan had used a figure of 10% of Council homes being bought each year under the RTB scheme. If this figure was greater the financing would have to be looked at again. Under the new self financing arrangements, the Council still gives the discount to the tenant, but part of the sale income still has to be passed to the Government, except where the Council can invest the money in new social housing, when the Council receives the whole RTB receipt.

Councillor Fooks asked what the current position was with the Councils funds in Icelandic Banks. In response Anna Winship said that the Council had received 70% of its funds back from the Heritable Bank with 80% expected in total. Regarding the Glitnir Bank, the Council had received 4 of the 5 currency repayments totalling £1.2m and it was expected that the Council would eventually receive 100% of its holdings back.

Councillor Mills asked if there were additional risks investing in Police Authorities. In response Nigel Kennedy said that the credit rating for Police Authorities was no different to other public organisations.

Nigel Kennedy in response to questions on Money Market Fund Limits said that all of the funds were AAA rated and diversification has taken place. The Council continued to work with advisors and the Council could request any funds back with no notice period required.

The Committee agreed:

(a) To note the report;

(b) To support the proposed changes to the Treasury Management Strategy for 2012/13 to:

(i) Increase the limit invested in Money Market Funds (MMF) to £20m;

(ii) To add the Police Authorities to the Councils counterparty list.

(c) To request the City Executive Board to keep under review the effects of “Right-to-Buy” within the Housing Revenue Account (HRA) Business Plan with particular regard to income streams, and our ability to be flexible within the funding of the capital programme so as to allow the Council to use all of the capital receipts from any sales;

(d) To request the Head of Finance circulate the Housing Revenue Account Business Plan to all Members of the Value and Performance Scrutiny Committee.

Supporting documents: