Agenda item

This report sets out the monitoring of the Council’s Treasury Management function for the period 1 April 2021 to 31 December 2021. A surplus of £619k will be achieved through lower borrowing costs due to historically low interest rates and higher interest earnt on investments.

The Treasury Management Strategy 2022/23 is included as an appendix to this report. Key changes to the strategy have been set out in paragraphs 18-20 as well as inclusion of analysis of the approach to finance more of the capital programme through borrowing.

The report also sets out in paragraph 29-31 to modify the councils accounting policy surrounding capitalisation of interest during the construction of major capital projects.

The Acting Assistant Chief Financial Officer presented a report, a copy of which had been circulated to each Member and a copy of which appears as Appendix 'B' to these Minutes in the Minute Book. The Committee was aware of the requirement under the Chartered Institute of Public Finance and Accountancy (CIPFA) Treasury Management Code of Practice that regular monitoring of the Treasury Management function was reported to elected Members.

The report set out performance within the context of the current economic environment and a tabulation of interest rate projection suggesting an expectation that interest rates could start to increase from June 2022.

The report set out the monitoring of the Council’s Treasury Management function for the period for the period 1 April 2021 to 31 December 2021and a surplus of £619k was expected to be achieved through lower borrowing costs due to historically low interest rates and higher interest earnt on investments.

Council borrowings and Council investments, both as at 31 December 2021, were set out for the Committee together with the applicable interest rate in each case.

The Treasury Management Strategy 2022/23 was included as an appendix and some key changes to the strategy were set out in the report as well as inclusion of analysis of the approach to finance more of the Council’s capital programme through borrowing.

The report also included suggestions for modification of the Council’s accounting policy surrounding capitalisation of interest during the construction of major capital projects. In response to questions, there was reassurance that this was a practice adopted by other Local Authorities and that the proposed capitalisation of interest would only apply during the period of construction. It was agreed to circulate an explanatory note to the members of the Committee to further clarify the implications of what was proposed.

The Chairman advised the Committee that a Treasury Management Training Session was programmed for the Committee during the Summer with the aim of building still further on Members’ understanding of these important investment matters and ensuring that all Members of the Committee possessed the same level of understanding. It was also agreed that in future reports to the Committee any areas of proposed change would be clearly highlighted to enable comparison with existing provisions. It was confirmed that the Treasury Management Strategy, with any proposed amendments, would go forward to Council as part of the Budget report for final agreement.

RESOLVED that the Audit and Governance Committee

(a)  notes the reported activity of the Treasury Management function for the period ending 31 December 2021;

(Voting : Unanimous)

(b)  approves the Treasury Management Strategy 2022/23 &Treasury Management Policy, Practices and Schedules included in Appendix 1 and 2 of the report;

(Voting : Unanimous)

(c)  notes the current position on debt levels of the council as set out in Appendix 3 of the report;

(Voting : Unanimous)

(d)  endorses the recommendation of the Section 151 Officer to amend the accounting policy surrounding capitalisation of interest as set out in paragraph 29-31 of the report.

(Voting : For 5; Against 4; Abstention 0)