Treasury Management 2020/21 Outturn

DMPC is asked to note the performance of the Treasury Management function in 2020-21.

In 2020-21 investment income was £1.3m at an average rate of return of 0.53%, 0.50% above the benchmark. Debt interest expenditure was below budget at £9.6m. Total long term external borrowing decreased from £302.95m to £289.35m by 31 March 2021. The weighted average borrowing rate of all long term loans (weighted by size of loan and the rate of interest paid) at 31 March 2021 was 3.30% (last year 3.34%)

All investment and borrowing activity during 2020-21 was undertaken within the guidelines and objectives set out in the relevant policy and investment and borrowing strategies.

The Deputy Mayor for Policing and Crime is recommended to note the 2020/21 treasury management outturn results.

1. Introduction and background

1.1. The CIPFA Treasury Management (TM) Code recommends that organisations be updated on treasury management activities regularly (as a minimum an Treasury Management Strategy, mid-year and annual performance reports).

1.2. This report represents the annual performance report for 2020/21 and ensures MOPAC is implementing best practice in accordance with the TM Code.

1.3. The day-to-day management of the treasury management function is delivered by the GLA Group Treasury team under a shared service arrangement. GLA Group Treasury also manages the Group Investment Strategy (GIS), of which the MOPAC Chief Finance Officer is a syndicate director. By being part of the GIS, MOPAC’s cash balances are pooled with other funds which allows greater investment options, improves diversification, liquidity and returns.

1.4. The annual report at Appendix 1 has been prepared by GLA Group Treasury, and provides details of performance against the TM Strategy Statement (TMSS) 2020/21, approved by MOPAC on 31 March 2020 (PCD710). The report provides a review of investment performance for 2020/21, and reviews specific Treasury Management prudential indicators defined by the Code and approved by the MOPAC in the TMSS.

2. Issues for consideration

Investment

2.1. The average return on investment was 0.53%. This compares favourably with the London Interbank BID (LIBID) 3-month rate benchmark of 0.03%. This resulted in income of £1.3m.

Debt Management

2.2. No new long-term borrowing took place in 2020/21. As a result, the long term borrowing decreased by £13.6m, from £302.95m at the start of the year to £289.35m at 31 March 2021.

2.3. The cost of borrowing was £9.6m. The weighted average cost of borrowing of all long term loans as at 31 March 2021 was 3.30% (3.34% as at 31 March 2020).

Compliance

2.4. All treasury activities were within the Treasury indicators set in the TMSS, and borrowing was within the borrowing limits set by the Mayor for MOPAC. MOPAC CFO confirms that, based on reporting and assurances from the GLA shared service function, throughout the period all treasury activities have been conducted within the parameters of the TMSS 2019/20, alongside best practice suggested by the CIPFA TM Code and Central Government.

Prudential Indicators

2.5. Appendix 1 includes the maturity profile for the borrowing portfolio, and performance against the Prudential Indicators set as part of the 2020-21 TM Strategy. All indicators were met.

3. Financial Comments

3.1. The cost of borrowing and the minimum revenue provision for 2020/21 were £9.6m and £48.6m respectively. Interest received in 2020/21 was £1.3m. The total net cost of the capital financing costs were within the approved budget.

4. Legal Comments

4.1. Under Section 1 of the Local Government Act 2003, MOPAC as a local authority defined under s23 of that Act, may borrow money for any purpose relevant to its functions under any enactment, or for the purpose of the prudent management of its financial affairs.

4.2. The Mayor is required under s3 of the Local Government Act 2003 to determine how much money the GLA and each functional body (which includes MOPAC) can afford to borrow. In complying with this duty, Regulation 2 of the Local Authorities (Capital Finance and Accounting)(England) Regulations 2003 requires the Mayor to have regard to the Prudential Code for Capital Finance in Local Authorities when determining how much MOPAC can afford.

4.3. MOPAC’s scheme of delegation provides that the Chief Finance Officer, as the s127 officer, is responsible for the proper administration of the MOPAC’s financial affairs.

5. GDPR and Data Privacy

5.1. MOPAC will adhere to the Data Protection Act (DPA) 2018 and ensure that any organisations who are commissioned to do work with or on behalf of MOPAC are fully compliant with the policy and understand their GDPR responsibilities.

5.2. This report does not use personally identifiable data of members of the public therefore there are no GDPR issues to be considered

6. Equality Comments

6.1. MOPAC is required to comply with the public sector equality duty set out in section 149(1) of the Equality Act 2010. This requires MOPAC to have due regard to the need to eliminate discrimination, advance equality of opportunity and foster good relations by reference to people with protected characteristics. The protected characteristics are: age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation.

6.2. There are no equality or diversity implications arising from this report.

7. Background/supporting papers

• Appendix 1 GLA Treasury Management Outturn 2020/21