2022/23 Treasury Outturn Report
The Acting Assistant Head of Finance presented the 2021/22 Treasury Outturn Report noting that the role of the Committee is to consider whether the Treasury decisions and activities undertaken during the year appeared reasonable and aligned to the treasury strategy and prudential indicators. Following presentation of the report, questions and comments were invited.
1. A Member requested further information of long-term and pooled fund investments. The Acting Assistant Head of Finance explained that pooled fund investments have been held for 3 - 4 years; under the Markets in Financial Instruments Directive (MiFID) regulations we are required to keep a minimum of £10m investment balances to qualify for professional investor status. This allows access to more investment instruments. Long Term in terms of pooled funds could refer to 5-6 years with capital values static and returns being generated. The returns on pooled funds are satisfactory and they offer a balance with the rest of the investment portfolio. It is intended to retain the pooled funds in the medium term.
2. A Member queried the effect of the pandemic on treasury activities, the refund for a proportion of the impact from the Welsh Government and if further problems are predicted in view of rising cases of Covid in Wales. It was responded that there has been a significant amount of grant support from Welsh Government which has increased our investments until the money has been expended, provided funds to invest on behalf of Welsh Government plus funds to reimburse additional costs and income loss arising from the pandemic. There has been little impact on treasury activity overall.
3. The Member asked if ear-marked reserves would be increased, and if needed, how they would be impacted in the future. It was responded that the treasury position is not defined on any one outcome. When designing the year’s cashflow, investment and borrowing, expected expenditure and income is taken into consideration and further investment in reserves would be considered at that time. It is also possible to borrow funds if ear marked reserves become depleted.
4. A Member queried the decision-making process for non-treasury investments and was informed that these are capital expenditure investments up to £50m as approved by County Council. An Investment Committee oversees such investments. In future, changes to Public Works Loan Board (PWLB) legislation will mean that investment for financial gain or that are not for economic or local regeneration schemes, may prevent access to PWLB borrowing. Therefore, future non-treasury investments will have an economic or local regeneration approach; decided upon by the Investment Committee. Performance of these assets are regularly reported into the Investments Committee. There is a budgeted income within the revenue budget and performance is monitored as part of that process.
5. A Member requested a breakdown in the changes to asset values of three investments and queried if an investment policy exists, if so, is it managed in line with the Council’s declaration of a climate emergency and if there are any ethical considerations on short / long term investments. In response, a breakdown of change in value of individual investments will be provided following the meeting. The Treasury Strategy set in March 2021 outlines investment policy and the limits set therein. In terms of ethical approach, some data can be provided to Committee by Treasury advisers Arlingclose. Ethical investment is not explicitly included in the treasury strategy to date, but assurances have been provided that no investments have been made e.g. with companies or organisations linked to Russia. Further information will be sought. It was confirmed that the climate emergency declaration was not included in the Treasury Strategy but can be considered when the treasury strategy is reviewed by the Governance and Audit Committee in January and presented for approval by Council in March.
The Deputy Chief Executive commented that an annual report on performance of commercial investments will be presented to the Governance and Audit Committee in September 2022.
6. In response to questions, the Acting Assistant Head of Finance confirmed that:
a) treasury management activities during the year were compliant with the Treasury Strategy and relevant CIPFA code requirements.
b) Distinguishing between the roles and responsibilities of the Finance team and treasury advisers Arlingclose, it was confirmed that Arlingclose provides the authority with advice, but decisions are solely the responsibility of the authority; and
c) Arlingclose provides significant amounts of technical data on the external financial market and status of financial organisations and advise on wider access to borrowing instruments. Arlingclose was reappointed in March 2022 for four years minimum.
As recommended in the report, the Governance & Audit committee reviewed the results of treasury management activities and the performance achieved in 2021/22 as part of their delegated responsibility to provide scrutiny of treasury policy, strategy and activity on behalf of Council and was content with its review with no material exceptions arising.