Treasury Management 2017-18 Outturn Report

Reference code: 
PCD 418
Date signed: 
30 August 2018
Authorisation name: 
Sophie Linden, Deputy Mayor, Policing and Crime

Executive summary

DMPC is asked to note the performance of the Treasury Management function in 2017-18. In 2017-18 investment income was £2.1m at an average rate of return of 0.47%, 0.26% above the benchmark.  Debt interest expenditure was below budget at £6.4m. Total long term external borrowing reduced from £143m to £116.6m by 31 March 2018. Short term borrowing at 31 March 2018 was £129.5m.  The weighted average borrowing rate of all long term loans (weighted by size of loan and the rate of interest paid) at 31 March 2018 was 4.33%. 

All investment and borrowing activity during 2017-18 was undertaken within the guidelines and objectives set out in the relevant policy and investment and borrowing strategies.

Recommendation

The DMPC is asked to note the 2017/18 treasury management outturn results.

Non-confidential facts and advice to the Deputy Mayor for Policing and Crime (DMPC)

1.    Introduction and background

1.1.    The CIPFA TM Code recommends that organisations be updated on treasury management activities regularly (at least a Strategy, Mid-year and Annual performance reports). This report therefore meets these requirements with regard to an annual report, and ensures MOPAC is implementing best practice in accordance with the TM Code.  

1.2.    The day to day management of the treasury management function is delivered by the GLA Group Treasury team under a shared service arrangement with the GLA. 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.  

1.3.    The annual report at Appendix 1 has been prepared by GLA Group Treasury, and provides details of performance against the TMSS 2017/18, approved by MOPAC on 30 March 2017 (PCD 1797). The report provides a review of investment performance for 2017/18, 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 0.47%. This compares favourably with the London Interbank BID (LIBID) 3 month rate benchmark of 0.26%. This resulted in income of £2.1m.  

Debt Management  

2.2.    As planned no new long term borrowing took place in 2017/18, and as scheduled, long term borrowing reduced by £16.5m from £143m at the start of the year to £116.6m at 31 March 2018.

2.3.    The cost of borrowing was £6.4m.  The weighted average cost of borrowing of all long term loans as at 31 March 2018 was 4.33% (4.14% as at 31 March 2017). 

Compliance

2.4.    All treasury activities met 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 2017/18, 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 2016-17 TM Strategy.  All indicators were met.

3.    Financial Comments

3.1.    The cost of borrowing and the minimum revenue provision for 2017/18 were £6.4m and £23.3m respectively.  Interest received in 2017/18 was £2.1m.  

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. 

5.    Equality Comments

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

6.    Background/supporting papers

6.1.    Appendix 1