Agenda item

Consider annual report by Chief Financial Officer on the Council’s Treasury Management activities undertaken during financial year 2016/17 for review and scrutiny prior to Council approval.   (Copy attached.)

With reference to paragraph 8 of the Minute of 26 September 2016, there had been circulated copies of a report by the Chief Financial Officer presenting the annual report of treasury management activities undertaken during the 2016/17 financial year.  The report was presented to Audit and Scrutiny Committee for review as part of their scrutiny role in relation to treasury management activities in the Council.  The CIPFA Code of Practice on Treasury Management in the Public Services (the Code) required an annual report on treasury management to be submitted to Council following the end of each financial year.  This report highlighted the Council’s treasury activity in the year ended 31 March 2017 and the performance of the Treasury function.  Appendix 1 to the report comprised the annual treasury management activities for 2016/17 and contained an analysis of performance against targets set in relation to Prudential and Treasury Management Indicators.  All of the performance comparisons reported upon were based on the revised indicators agreed as part of the mid-year report approved on 15 December 2016.

The Appendix also showed the Council’s borrowing requirement to fund the capital investment undertaken during 2016/17, how much the Council actually borrowed against the sums budgeted and the level of external debt carried on the Council’s balance sheet within approved limits.  The Council had, whenever possible, deferred borrowing and used surplus cash rather than undertaking additional long term borrowing during the year.   However, the Council had undertaken short term borrowing for cash flow purposes and long term borrowing for capital purposes during the year, amounting to £9m and £12m respectively.  Treasury management activity had been undertaken in compliance with approved policy and the Code and the Council remained under-borrowed against its Capital Financing Requirement (CFR) as at 31 March 2017.  Reference was also made to the Treasury Management Training session delivered by Mr Richard Dunlop of Capita Asset Services to Members immediately prior to the meeting to facilitate consideration of this report.

In response to questions, Mr Robertson, acknowledged that although capital expansion plans were ambitious and subject to a variety of factors outwith the Council’s control, these would be delivered in line with the Council’s objectives.    There were regular monitoring reports to the Executive Committee and the Service Director of Assets and Infrastructure would report on the risks to the November meeting of Audit and Scrutiny.   Mr Robertson highlighted that the Council’s actual capital expenditure for 2016/17 was £51.8m which was £15.7m less than projected as a result of delays to projects including Broomlands Primary School and the Great Tapestry of Scotland.  With regard to a prospective interest rate increase, Mr Robertson advised that indications were that any future interest rate rises were likely to be gradual.  A prospective rise of ¼% would not give undue concern. He reassured Members that officers monitored rates on a daily basis and that the Council could borrow at a variety of fixed interest rates with different durations from the Public Works Loans Board at very short notice, to protect the Council against future interest rate rises if required.  The prevailing interest rate environment supported the current policy of deferring fixed rate long term borrowing by utilising council cash balances.  It was noted that Standard & Poor had downgraded the Council’s bank, Bank of Scotland, from a stable to a negative outlook, with a long and short term outlook grading of A and A-1 respectively.  The position was being closely monitored, with a review of the Council’s banking service scheduled for 2018.   

DECISION

(a)        NOTED that treasury management activity in the year to 31 March 2017 was carried out in compliance with the approved Treasury Management Strategy and Policy.

(b)       AGREED that the Annual Treasury Management Report 2016/17, as detailed in Appendix 1 to the report, be presented to Council.