The Interim Group Manager – Chief Accountant presented a report which updated the Audit Committee on the outturn position for treasury management activities, the Treasury Management Indicators for 2019-20 and highlighted compliance with the Council’s policies and practices before they are reported to Cabinet and Council.

The Interim Group Manager – Chief Accountant explained that the Audit Committee has been nominated to be responsible for ensuring effective scrutiny of the Treasury Management Strategy (TMS) and activities. During the 2019-20 financial year, Audit Committee received the Annual Treasury Management Outturn Report 2018-19 in June 2019, the Half Year Treasury Management Report 2019-20 in November 2019 and the TMS 2020-21 in January 2020. Further background was listed at section 3 of the report.

The Interim Group Manager – Chief Accountant explained that the Council’s treasury management advisors were Arlingclose. The current services provided to the Council included:

• advice and guidance on relevant policies, strategies and reports

• advice on investment decisions

• notification of credit ratings and changes

• other information on credit quality

• advice on debt management decisions

• accounting advice

• reports on treasury performance

• forecasts of interest rates

• training courses

Following a recent tender process, the contract for Arlingclose had been renewed for a period of 4 years, until August 2024 which allowed a continued positive relationship with them and to benefit from their knowledge of the Council and the financial position.

The Interim Group Manager – Chief Accountant explained that 2019-20 had been a challenging year with Brexit and more recently the Covid-19 pandemic. This had seen changes in interest rates and inflation rates. Further economic context was provided at 4.1 of the report.

The Interim Group Manager – Chief Accountant explained that a summary of the treasury management activities for 2019-20 was shown in Appendix A of the report. The Council’s external debt and investment position for 1 April 2019 to 31 March 2020 was shown in Table 1 and more detail was provided in section 3, Borrowing Strategy and Outturn, and section 4, Investment Strategy and Outturn.

He reported that no long term borrowing was taken out in 2019-20 and no debt rescheduling was undertaken as there were no significant savings to be made, however, the loan portfolio will be reviewed during 2020-21.

Favourable cash flows have provided surplus funds for investment and the balance on investments at 31 March 2020 was £30 million, with an average interest rate of 0.82%. This was an increase in investments outstanding from the start of the financial year where investments were £27.4 million (average interest rate 0.94%). Table 2 in Appendix A details the movement of the investments by counterparty types and shows the average balances, interest received, original duration and interest rates for 2019-20.

The Interim Group Manager – Chief Accountant outlined key points in Appendix A of the report which included:

• External Debt and Investment Position
• Borrowing Strategy and Outturn for 1 April 2019 to 31 March 2020
• Investment Strategy and Outturn 1 April 2019 to 31 March 2020

He explained that the main objectives during 2019-20 were:

• To maintain capital security
• To maintain liquidity so funds are available when expenditure is needed
• To achieve the yield on investments commensurate with the proper

levels of security and liquidity

He added that favourable cash flows had provided positive cash balances for investment and the balance on investments at 31 March 2020 was £30 million. Further details were shown in Table 2 which details these investments by counterparty type.

The Interim Group Manager – Chief Accountant  explained that there were two long term investments (original duration of 12 months or more) outstanding at 31 March 2020 totalling £4 million with Local Authorities included in Table 3, which will mature during 2020-21. All other investments at 31 March 2020 were short term deposits (including instant access and notice accounts). Further details were at Table 3.

A Member asked if the Council were looking at the effects of Brexit on their treasury management strategy.

The Interim Group Manager – Chief Accountant advised that he was involved with a Brexit group that looked at the effects of Brexit on areas like Interest rates etc. He explained that details of Brexit were not clear enough to be able to provide a detailed response as of yet.

RESOLVED: That the Audit Committee note the annual treasury management activities for 2019-20.