Non-confidential facts and advice to the Deputy Mayor for Policing and Crime (DMPC)
1. Introduction and background
1.1. Under the Treasury Management Strategy Statement (TMSS) 2014-15 that the DMPC approved in May 2014 [DMPCD 2014-31] an annual report reviewing year end performance must be considered by the DMPC. Similarly, under the Treasury Management Strategy 2015-16 approved in March 2015 [DMPCD 2015 39] mid-year performance should also be reported to DMPC. This paper fulfils these requirements.
2. Issues for consideration
2.1. 2014-15 Outturn Performance
The return on investment was 0.46%. This compares favourably with the London Interbank BID (LIBID) 3 month rate benchmark of 0.43%. This resulted in additional income of £1m above the budget of £800k due to both higher cash balances and better returns from utilising the Group Investment Syndicate (GIS).
2.1.2. Debt Management
As planned no new borrowing took place in 2014/15. Temporary loans of £50m were repaid, as was £19.5m of PWLB loan principal and local authority long term loans of £10m.
These repayments of £79.46m of existing loans resulted in the total debt portfolio reducing from £269.84m at the start of the year to £190.38m at 31 March 2015.
The cost of borrowing was £7.8m against the budget of £9m. The weighted average cost of borrowing of all long term loans as at 31 March 2015 was 3.84% (2.92% as at 31 March 2014).
All transactions undertaken during the year met the criteria for lending to institutions set out in the TM Strategy 2014-15.
2.1.4. Prudential Indicators
Appendix 1 includes the maturity profile for the borrowing portfolio, and performance against the Prudential Indicators set as part of the 2014-15 TM Strategy. All indicators were met.
2.2. 2015-16 Performance to 30 September 2015
The average rate of return was 0.60% compared with the LIBID 3 month benchmark of 0.45%, generating income of £1m. The annual budget for interest receivable is £0.8m.
There has been no new long term borrowing in the first six months of 2015-16, and due to loan repayments the total borrowing has reduced from £190.38m to £183.15m – a reduction of £7.2m
Borrowing costs for the first 6 months was £3.65m, and are forecast to be £7.2m against a budget of £7.2m.
All transactions undertaken during the year met the criteria for lending to institutions set out in the TM Strategy 2015-16.
2.2.4 Treasury Management Prudential Code Indicators
All activity has been within the Prudential Code indicators – see Appendix 1.
2.3. Treasury Management Strategy 2016/17
Discussions are underway with the GLA and our Treasury Management advisers, Capita, to review the existing strategy to ensure that it remains fit for purpose for 2016/17. DMPC will be asked to consider and approve a 2016/17 strategy in March 2016.
3. Financial Comments
3.1. The cost of borrowing and the minimum revenue provision for 2014/15 were £7.8m and £30.3m respectively and within the 2014/15 budget. Interest received in 2014/15 was £1m above the budget of £0.8m.
3.2. To 30 September 2015 the cost of interest payable was £3.65m and forecast to be £7.2m. The minimum revenue provision is forecast to be within the budget of £28.5m. Interest receivable was £1m and is forecast to be £1.9m, above the annual budget of £0.8m.
4. Legal Comments
4.1. Under Section 1 of the Local Government Act 2003, MOPAC as 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.
4.4. An investment strategy statement must be completed as part of risk management and good governance. The report is submitted in compliance with TMSS and DCLG requirements in this regard
5. Equality Comments
5.1. There are no equality or diversity implications arising from this report.
6. Background/supporting papers
6.1. Appendix 1