Agenda item

[Alison Shannon (Chief Accountant) to present the report].

The Chair invited Alison Shannon, Chief Accountant, to present the report.

The Chief Accountant explained that the presentation would cover the Treasury Management Strategy Report and changes to the Treasury Management Code of Practice and Prudential Code, which was published by CIPFA in December 2021.The Council is required to have regard to the codes.

The Chief Accountant gave an overview of the legal requirements, a definition from CIPFA of the term ‘Treasury Management’ and the process for approving the strategy. The performance of the strategy is reported to Cabinet, Full Council and Our Council Scrutiny Panel. The Chief Accountant advised the panel that at the end of the presentation panel members would be invited to give feedback on the strategy and the changes to code.

The Chief Accountant reassured the panel that there were no significant implications for the Council because of the planned changes to the Treasury Management Code of Practice and Prudential Codes (Code).

The Chief Accountant gave details of the six elements covered by the strategy report.

The Chief Accountant advised the panel that the work has been to assess the implications of the changes to the Code along with consideration of the timing of their introduction. The Code was last updated in 2017 and the changes have been introduced to strengthen the requirements for the skills and training for employees and Councillors and for investments not specifically for treasury management purposes.

The Chief Accountant briefed the panel about some of the key changes to the Code, for example, the need to report and clearly distinguish investments for Treasury Management, Services and Commercial. The Chief Accountant explained that treasury management investments are ultimately how the Council invest cash until it is required, service investments are assets primarily used and held for the provision of delivering a public service such as housing, and commercial investments are held primarily for a financial return.

The Chief Accountant advised the panel that the Council is still awaiting detailed guidance from CIPFA about some of the changes to the Code which are not expected until the end of January 2021. The Chief Accountant advised that a further report will be presented to Cabinet and to the panel in due course on these changes.

The Chief Accountant advised that Codes state what local authorities can borrow and invest for. In terms of borrowing, local authorities must not borrow to invest primarily for financial return. The Codes state that it is not prudent for local authorities to make any investment or spending decisions that will increase the capital financing requirement, which may lead to new borrowing. The Chief Accountant listed the purposes that local authorities can borrow and invest.

The Chief Accountant explained the lending terms for the Public Works Loans Board (PWLB) and added that local authorities are required to submit a high-level description of their capital spending and financing plans, including the expected use.

The Chief Accountant added that in terms of treasury management, the Council only has short term cash investments and does not hold any long-term investments such as property funds. The Chief Accountant briefed the panel about the range of prudential indicators detailed in the Codes and explained that performance against them will be reported on a quarterly basis throughout the year.

The panel were invited to comment on the presentation.

The panel wanted to confirm that local authorities cannot make a profit, but they can set up an ALMO which can make a profit. The Chief Accountant confirmed that this was correct and added there were discussions ongoing about strengthening Council budget reports to show the impact of wholly owned companies, such as Wolverhampton Homes and Yoo Recruit, which follows recommendations from the Council’s external auditors

The panel queried if there were any new disclosure requirements for loans to WV Living. The Director of Finance commented that there were no new disclosure requirements.

The panel thanked the presenters and agreed to note the report and requested updates on the new guidance be shared when available.

Resolved:

1. The panel agreed to note the report.

2. The panel agreed to receive further updates on the implications of the revised CIPFA guidance on the changes to the Treasury Management Code of Practice and Prudential Codes.