At its meeting on 30 July 2018, the Joint Audit and Standards Committee considered Paper JAC/18/3 – Joint Annual Treasury Management Report 2017/18.
The recommendations set out in the report were accepted.
It was RECOMMENDED TO COUNCIL
(1) That the Treasury Management activity for the year 2017/18 be noted. Further, that it be noted that performance was in line with the Prudential Indicators set for 2017/18.
(2) That it be noted that Mid Suffolk District Council Treasury Management activity for 2017/18 was in accordance with the approved Treasury Management Strategy, and that, except for one occasion when the Council exceeded its daily bank account limit with Lloyds by £79k, as mentioned in Paragraph 4.7 of Paper JAC/18/3, the Council has complied with all the Treasury Management Indicators for this period.
Note – It is a requirement of the legislation that the Annual Treasury Management Report is submitted to the Full Council for noting.
Minutes:
Councillor Muller introduced the report and MOVED the recommendations in the report which Councillor Morley seconded.
53.2 In his introduction Councillor Muller informed Council that the report had
been presented and discussed at the Joint Audit and Standards Committee meeting on 30 July 2018. There were no changes to the report as a result of that meeting. The report covered the year to 31 March 2018 and provided details of the performance and effects of decisions taken throughout the year.
53.3 Councillor Muller went on to say that the report also demonstrated that the Councils performance was in line with the Prudential indicators set for 2017/18 and was in accordance with the approved Treasury Management Strategy. Apart from one occasion when the council exceeded its daily bank account limit with Lloyds by £79,000 as mentioned in paragraph 4.7 of report JAC18/3. the Council had complied with all treasury management indicators for that period.
53.4 Councillor Otton asked a question relating to the Funding Circle and asked whether the Council should feel concerned or optimistic about their investment?
53.5 In response the Section 151 Officer stated that the Council had taken a decision in the last financial year not to put any more funding into the Funding Circle. As illustrated in the Treasury Management six monthly report, the Council was seeing some failures and some losses and were not achieving the rate of return, Funding Circle had also changed the basis of which you could invest with them, which would mean that the Council would have to take significantly more risk than it actually wanted to. The position that the Council was currently in was that it was letting the existing loans run their life course and the Council would not be putting any further money in, so over a period of time would be withdrawing from the Funding Circle.
53.6 Councillor Otton sought assurance that the Council was not put at any risk and it would be monitoring performance.
53.7 In response the Section 151 Officer stated that the Council could not actually do anything about the loans that had already been made as those loans had been made to external companies, so at this point in time the Council were just letting their loans run until they ended.
53.8 Councillor Hadingham raised concerns about the rise in Council debt of £40m and asked if the operational boundary would increase from its current level of £140m.
53.9 In response the Section 151 Officer informed Council that there were two reasons for the increase, firstly, CIFCO the capital investment company, the Council was putting £25m into the Company to purchase commercial properties and also with the planned figures that the Council had, it was starting to build in some assumptions around Gateway 14 and the investment that was needed to be made there. The operational boundary was reviewed each year in line with the actual borrowing increasing so yes.
53.10 Councillor Wilshaw queried why the actual debt was £40m different from the estimate.
53.11 In response the Section 151 Officer informed Council that this was for the same reasons as previously stated around CIFCO and Gateway 14, because they didn’t happen at the rate that was anticipated when the estimate was put together, it has taken slightly longer to invest the £25m in CIFCO and in 17/18 the Council had not actually put anything into Gateway 14 as it was purchased in this financial year.
53.12 Councillor Mansel sought clarification on the figures on page 45 of the report relating to the estimated capital expenditure of £39m and the fact that the Council had actually only spent £21m.
53.13 The Section 151 Officer confirmed that this was for the same reasons as explained previously.
53.14 The Chairman asked under page 34 of the report table 3, why there was a difference between the average loan rates between Babergh and Mid Suffolk from the PWLB?
53.15 In response the Section 151 Officer informed Council that this was purely historic as to when debt was taken out from PWLB, whatever the prevailing interest rates were at the time they were fixed at the point you take the loan out, that rate was then fixed for the life of the loan.
53.16 Councillor Eburne requested that this information was included in any future reports. She then went on to ask about the overrun of the daily bank limit of £79,000 and whether there was any specific reason for that or any circumstances around it that Council should be aware of.
53.17 The Section 151 Officer in response stated that it was just on that particular day extra money came into the bank account that the Council hadn’t been notified of. This does happen from time to time, The Finance Team obviously try and keep the levels as close to the limits as they can so when something does come in that’s unforeseen it can have the unfortunate circumstance of just pushing the Council over its limit and as it’s Lloyds that the Council bank with, it’s that account where this will impact .
53.18 Councillor Mathissen asked if the Council had got any Lobo loans?
53.19 In response the Section 151 Officer stated that the Council had taken out 50- year Lobo loans before she had actually joined MSDC. So yes the Council had Lobo loans.
53.20 Cllr Hicks queried page 3.52 of the report relating to the Schroder Income Maximiser Fund and asked if the capital decrease was taken into account when working out the rate of return, and whether it was annualised every year or only when the units were sold?
53.21 In response the Section 151 Officer stated that this would only be taken into account should the Council sell the units in that particular fund. The annualised figure on an annual basis was based on the income that the Council has generated from having the investment. The Council would obviously not want to sell the investment while it was below the limit of what it actually invested in the first place so that comes into effect at the point you sell it. The Council when it went into these types of investments did so for a medium term, probably at least 3-5 years so that it didn’t have that impact of the net asset of the value reducing.
53.22 Councillor Hicks queried whether this was a standard accounting practice because the Council has lost £74,000 if it were to sell it.
53.23 In response the Section 151 Officer stated that it was the accounting practice at the moment to show it as it was. The Government was actually consulting over whether that should change in the future, so if it does the Council would have to show it differently. Obviously for transparency the figures are included in the Treasury Management report so as members of the Council you can see what the current valuation was.
53.24 Cllr Field asked what direction the CCLA investment in the property portfolio was heading because some property values were fairly challenged at the moment?
53.25 The Section 151 Officer in her response said she could not answer exactly which direction it was travelling, however this was a similar situation to the previous question, this was a holding for a period of time where the property market fluctuated up and down over a period of time. The reason the Council invested in CCLA was to generate the income return from the rental in those properties and that’s what the Council was still securing. When the money was originally invested it was known that the investment would be for at least 3-5 years knowing that the property markets do fluctuate. There was no reason for the Council to take it out at the moment because it still wanted the income return from it.
By unanimous vote
It was Resolved:-
(i) That the Treasury Management activity for the year 2017/18 be noted. Further, that it be noted that performance was in line with the Prudential Indicators set for 2017/18.
(ii) That it be noted that Mid Suffolk District Council Treasury Management activity for 2017/18 was in accordance with the approved Treasury Management Strategy, and that, except for one occasion when the Council exceeded their daily bank account limit with Lloyds by £79k, as mentioned in Paragraph 4.7 of the report, the Council has complied with all the Treasury Management Indicators for this period.
Supporting documents: