Spelthorne Borough Council

Treasury Management Practices and Schedules

Contents

Treasury Management Practices, Principles and Schedules (TMPs) set out how this Council will seek to achieve its treasury management policies and objectives, and how it will manage and control those activities.

Practice	Title	Page
TMP1	Risk management	2
TMP2	Performance measurement	15
TMP3	Decision making and analysis	19
TMP4	Approved instruments, methods and techniques	22
TMP5	Organisation, clarity and segregation of responsibilities, and dealing arrangements	25
TMP6	Reporting requirements and management information arrangements	31
TMP7	Budgeting, accounting and audit arrangements	37
TMP8	Cash and cash flow management	41
TMP9	Money laundering	44
TMP10	Training and qualifications	46
TMP11	Use of external service providers	48
TMP12	Corporate governance	51

Treasury Management Practices

1. Risk management

General Statement

The Chief Finance Officer will design, implement and monitor all arrangements for the identification, management and control of treasury management risk, and will report at least annually on the adequacy and suitability of these arrangements. The Chief Finance Officer will report, as a matter of urgency, the circumstances of any actual or likely difficulty in achieving the Council’s objectives in this respect in accordance with the procedures set out in TMP6 Reporting requirements and management information arrangements. For each of the following risks, the arrangements will seek to ensure compliance with these objectives as set out in the schedules below:

The following paragraphs cover the main areas of risk:

1. Credit and Counterparty Risk Management
2. Liquidity Risk Management
3. Interest Rate Risk Management
4. Exchange Rate Risk Management
5. Inflation risk management
6. Refinancing Risk Management
7. Legal and Regulatory Risk Management
8. Operational risk including Fraud, Error and Corruption
9. Price risk management
10. ESG considerations

Where this document refers to the Government, this refers to the Ministry for Housing, Communities and Local Government (MHCLG).

c. Credit and counterparty risk management

The Council regards a key objective of its treasury management activities to be the security of the principal sums it invests. Accordingly, it will ensure that its counterparty lists and limits reflect a prudent attitude towards organisations with which funds may be deposited, and will limit its investment activities to the instruments, methods and techniques set out in TMP4 Approved investments, methods and techniques. The Council also recognises the need to have, and will therefore maintain, a formal counterparty policy on those organisations which it may borrow from, or which it may enter into other financing arrangements with.

Schedule:

Credit and counterparty risk is the risk of failure by a third party to meet its contractual obligations to the Council under an investment, borrowing, capital, project or partnership financing, particularly as a result of the third party’s diminished creditworthiness, and the resulting detrimental effect on the Council’s capital and revenue resources.

1.1 Criteria to be used for creating/managing approved counterparty lists/limits	The Chief Finance Officer is responsible for setting prudent criteria and the Council’s treasury advisors will provide guidance and assistance in setting these criteria. The Council’s treasury management advisors will advise on credit policy and creditworthiness related issues. The Council will maintain a counterparty list based on its criteria and will monitor and update the credit standing of the institutions on a regular basis. The Council will also take into account information on corporate developments of and market sentiment towards investment counterparties. The current criteria, set out in the Council’s Annual Treasury Management Strategy, are agreed by CP&R Committee and approved by Council.
1.2 Approved methodology for changing limits and adding/removing counterparties	The Chief Finance Officer has delegated responsibility to add or delete counterparties and to review limits within the parameters of the criteria detailed above.
1.3 Counterparty list and limits	A full individual listing of counterparties based on the criteria will be maintained. As credit ratings etc. are subject to change without notice, an up-to-date lending list will be maintained on an ongoing basis within the Operations Manual.
1.4 Country, sector and group listings of counterparties and overall limits applied to each, where appropriate	Investments will be displayed so as to show total group exposure, total country exposure and total sector exposure. Group limits have been set for the above, in terms of monetary value, where appropriate.
1.5 Details of credit rating agencies’ services and their application	The Council considers the ratings of all 3 main ratings agencies (Standard & Poor’s, Moody’s and Fitch) when making investment decisions. Credit rating agency information is just one of a range of instruments used to assess creditworthiness of institutions.
1.6 Description of the general approach to collecting/using information other than credit ratings for counterparty risk assessment	The Council’s Treasury Advisor, currently Arlingclose, provides timely information on counterparties, in terms of credit rating updates and economic summaries. In addition, members of the treasury team read quality financial press for information on counterparties.

2. Liquidity risk management

The Chief Finance Officer will ensure the Council has adequate though not excessive cash reserves, borrowing arrangements, and overdraft or standby facilities to enable it at all times to have the level of funds available to it which are necessary for the achievement of its business and service objectives.

The Council will only borrow in advance of need where there is a clear business case for doing so and will only do so for the current Capital Programme or to fund future debt maturities, and will do so within approved borrowing limits set by Council.

Schedule:

Liquidity risk is the risk that cash is not available when it is needed, that ineffective management of liquidity creates additional unbudgeted costs, and that the Council’s business and service objectives will therefore be compromised.

2.1 Cash flow and cash Balances	The Council will aim for effective cash flow forecasting and monitoring of cash balances, will maintain a rolling 3-month cash flow forecast and is developing longer forecast through the TM CSL system. The Treasury Team shall seek to optimise the balance held in the Council’s main bank accounts at the close of each working day in order to minimise the amount of bank overdraft interest payable or maximise the amount of interest that can be earned. In order to achieve the maximum return from investments, the target for the Council’s bank account daily cash balance is up to £50,000 in, with a maximum limit of a £500,000 credit balance.
2.2 Short term investments	The balance on the Council’s General bank account is used to deal with day to day cash flow fluctuations. The Council also uses various other deposit/ notice accounts and Money Market Funds to manage liquidity requirements. These account/ fund counterparties are named on the Council’s approved counterparty list. The maximum balance on each of these counterparties is reviewed and set as part of the Council’s Treasury Management strategy.
2.3 Temporary Borrowing	Temporary borrowing up to 364 days through the money market is available to cover cash flow deficits at any point during the year. At no time will the outstanding total of temporary and long-term borrowing together with any bank overdraft exceed the Prudential Indicator for the Authorised Borrowing Limit agreed by the Council before the start of each financial year.
2.4 Bank Overdraft and standby facilities	The Council has an authorised overdraft limit with its bankers, Lloyds Bank, of £50,000 at an agreed rate of 1% over base rate. The facility is used as a contingency when temporary borrowing is difficult or more expensive

3. Interest rate risk management

The Council will manage its exposure to fluctuations in interest rates with a view to containing its interest costs, or securing its interest revenues, in accordance with the amounts provided in its budgetary arrangements in accordance with TMP6 Reporting requirements and management information arrangements.

Schedule

Interest rate risk is the risk that fluctuations in the levels of interest rates create an unexpected or unbudgeted burden on the Council’s finances, against which the Council has failed to protect itself adequately.

3.1 Minimum/ maximum proportions of fixed/variable rate debt/interest	Borrowing/investments may be at a fixed or variable rate. When funding asset acquisitions on a long-term funding basis, the Council will normally seek to borrow on a fixed rate basis to ensure certainty of financing commitments. In setting its forward Treasury Strategy on an annual basis, the Council will determine the necessary degree of certainty required for its plans and budgets but will, at the same time, allow sufficient flexibility to enable it to benefit from potentially advantageous changes in market conditions and levels of interest rates and also to mitigate the effects of potentially disadvantageous changes. The Council will achieve this by the prudent use of its approved financing and investment instruments, methods and techniques, primarily to create stability and certainty of costs and revenues, but at the same time retaining a sufficient degree of flexibility.
3.2 Managing changes to interest rate levels	The main impact of changes in interest rate levels is to monies borrowed and invested at variable rates of interest. The Council will consider matching borrowing at variable rates with investments similarly exposed to changes in interest rates as a way of mitigating any adverse budgetary impact. Interest rate forecasts are provided by the Council’s advisors and are closely monitored by the Chief Finance Officer. Variations from original estimates and their impact on the Council’s debt and investments are notified to the Corporate Policy & Resources Committee as necessary. For its investments, the Council also considers dealing on forward periods depending on market conditions and options available in the market place.
3.3 Details of approved interest rate exposure limits	The upper limit for variable interest rate investments as a proportion of total investments is 100%. In terms of long-term borrowing, the Council can have no more than 100% in variable interest rate borrowings.

4. Exchange rate risk management

The Council will ensure that it protects itself adequately against the risk of fluctuations in foreign exchange rates creating an unexpected or unbudgeted burden on the Council’s finances. It will manage any exposure to fluctuations in exchange rates so as to minimise any detrimental impact on its budgeted income and expenditure levels.

Schedule

The risk that fluctuations in foreign exchange rates create an unexpected or unbudgeted burden on the Council’s finances against which the Council has failed to protect itself adequately.

4.1 Exchange rate risk management

This Council does not, on a day to day basis, have foreign currency transactions or receipts. Unexpected receipt of foreign currency will be converted to sterling at the earliest opportunity. If the Council has a contractual obligation to make a payment in a currency other than sterling, then forward foreign exchange transactions will be considered, with professional advice. At the present time, statute prevents the Council borrowing in currencies other than Sterling. The Council has also determined that all its investments will be in Sterling.

5. Inflation risk management

The Council will keep under review the sensitivity of its treasury assets and liabilities to inflation and will seek to manage the risk accordingly in the context of the whole organisation’s inflation exposures.

6. Refinancing risk management

The Council will ensure that its borrowing, private financing and partnership arrangements are negotiated, structured and documented, and the maturity profile of the monies so raised are managed, with a view to obtaining offer terms for renewal and refinancing, if required, which are competitive and as favourable to the organisation as can reasonably be achieved in the light of market conditions prevailing at the time.

It will actively manage its relationships with its counterparties in these transactions in such a manner as to secure this objective, and will avoid over-reliance on any one source of funding if this might jeopardise achievement of the above.

Schedule

The risk that maturing borrowings, capital, project or partnership financings cannot be refinanced on terms that reflect the provisions made by the organisation for those refinancings, both capital and current (revenue), and/or that the terms are inconsistent with prevailing market conditions at the time.

6.1 Projected capital investment requirements	Four-year projections are in place for capital expenditure and related financing or funding. Longer term projections will be undertaken for significant capital developments or asset acquisitions. Financing will be from capital receipts, grants or contributions, revenue resources or reserves. Funding will be from internal or external borrowing, as decided. As required by the Prudential Code, the Council will undertake Options Appraisal to evaluate the best capital expenditure financing route. The Council’s projected long-term borrowing requirement will be linked to the projected Capital Financing Requirement.
6.2 Debt profiling, policies and practices	Any longer-term borrowing will be undertaken in accordance with the Prudential Code and will comply with the Council’s Prudential Indicators and the Annual Treasury Management Strategy. The Council will maintain through its own treasury system spreadsheets reliable records of the terms and maturities of its borrowings, capital, project and partnership funding and, where appropriate, plan and successfully negotiate terms for refinancing. Where the lender to the Council is a commercial body the Council will aim for diversification in order to spread risk and avoid over-reliance on a small number of counterparties.
6.3 Policy concerning limits on revenue consequences of capital financings	The revenue consequences of financing the capital programme are included in cash flow models, annual revenue estimates and medium-term forecasts.

7. Legal and regulatory risk management

The Council will ensure that all of its treasury management activities comply with its statutory powers and regulatory requirements. It will demonstrate such compliance, if required to do so, to all parties with whom it deals in such activities. In framing its credit and counterparty policy under TMP 1 (1) Credit and counterparty risk management, it will ensure that there is evidence of counterparties’ powers, authority and compliance in respect of the transactions they may effect with the Council, particularly with regard to duty of care and fees charged.

The Council recognises that future legislative or regulatory changes may impact on its treasury management activities and, so far as it is reasonably able to do so, will seek to minimise the risk of these impacting adversely on the organisation.

Schedule

The risk that the Council itself, or a third party with which it is dealing in its treasury management activities, fails to act in accordance with its legal powers or regulatory requirements, and that the Council suffers losses accordingly.

7.1 References to relevant statutes and regulations	The treasury management activities of the Council shall comply fully with legal statute and the regulations of the Council. These are: § CIPFA’s Treasury Management Code of Practice 2021 and subsequent amendments § CIPFA Guide for Chief Financial Officers on Treasury Management in Local Authorities § CIPFA Prudential Code for Capital Finance in Local Authorities 2021 and subsequent amendments § CIPFA Standard of Professional Practice on Treasury Management § The Local Government Act 2003 § The Local Authorities (Capital Finance and Accounting) (England) Regulations 2003 SI 2003 No 3146, and subsequent amendments § The Government’s statutory Guidance on Minimum Revenue Provision (MRP) updated 2018 § The Government’s Guidance on Local Government Investments in England issued March 2004 and amended 2018 § HM Treasury’s Guidance Regarding PWLB Lending and the PWLB’s new Operating Circular numbered 162 (Nov 2020) § The Local Authorities (Contracting out of Investment Functions) Order 1996 SI 1996 No 1883 § LAAP Bulletins § Code of Practice on Local Authority Accounting in the United Kingdom based on International Financial Reporting Standards (from 2017/18 onwards) § Accounts and Audit Regulations 2017, as amended together with THE GOVERNMENT’s Guidance § The Non-Investment Products Code (formerly known as The London Code of Conduct) for principals and broking firms in the wholesale markets § Council’s Constitution including:- o Standing Order relating to Contracts o Financial Regulations o Scheme of Delegation
7.2 Procedures for evidencing the organisation’s powers/ authorities to counterparties	The Council’s Financial Regulations contain evidence of the power/ authority to act as required by section 151 of the Local Government Act 1972, under the general direction of the Corporate Policy & Resources Committee. The Council will confirm, if requested to do so by counterparties, the powers and authorities under which the Council effects transactions with them. Where required, the Council will also establish the powers of those with whom they enter into transactions, including any compliance requirements in respect of a duty of care and best practice.
7.3 Required information from counterparties concerning their powers/ authorities	Lending shall only be made to institutions as defined by the Council’s TM strategy. The Council will only undertake borrowing from approved sources such as the PWLB, organisations such as the European Investment Bank and from commercial banks who are on the Council’s list of authorised institutions, thereby minimising legal and regulatory risk. The list of approved sources of borrowing is contained in TMP 4, 1.2.
7.4 Statement on political risks and management of the same	Political risk is managed by: · adoption of the CIPFA Treasury Management Code of Practice · adherence to Local Code of Corporate Governance and as set out in TMP 12 – Corporate Governance · adherence to the Statement of Professional Practice by the Chief Finance Officer. · the role of the Corporate Policy & Resources Corporate Policy & Resources Committee.

8. Operational risk including fraud, error and corruption, and contingency management

The Council will ensure that it has identified the circumstances which may expose it to the risk of loss through fraud, error, corruption or other eventualities in its treasury management dealings. Accordingly, it will employ suitable systems and procedures, and will maintain effective contingency management arrangements, to these ends.

Schedule

This is the risk that the Council fails to identify the circumstances in which it may be exposed to the risk of loss through fraud, error, corruption or other eventualities in its treasury management dealings, and fails to employ suitable systems and procedures and maintain effective contingency management arrangements to these ends. It includes the area of risk referred to as operational risk.

8.1 Details of systems and procedures to be followed, including Internet services	Segregation of duties minimises the possibility of fraud and loss due to error, and is detailed in TMP5 Organisation, clarity and segregation of responsibilities, and dealing arrangements. c. Electronic Banking and Dealing Banking: The Council’s online banking service is provided by Lloyds Bank and is subject to separate log-on and password control allowing varying levels of access.  Details of transactions and balances are available as required, and the system also holds historic data. Officers with access to the bank’s online system are as follows: · Deputy Chief Executive (CFO, s151 officer) – Terry Collier · Joint Financial Services Manager – Mahmud Rogers · Treasury Management and Capital Accountant – Prithiva Janaka · Assistant Accountant – John Bradley-Turner · Systems Accountant – Jodie Hawkes · Revenue Accounts Team Leader – Ben Hanger · Assistant Systems Accountant - Shelley Johnson · Service Accountant – Arun Sood · Service Accountant – Aleksandra Alla Blavatnik · Service Accountant – Nicholas Brown · Finance Apprentice – Ella Stewart · Joint Finance Manager Systems & Controls – Emilia Grodzka Officer access is reviewed at least 6-monthly or as necessary. Procedure notes covering the day-to-day operation of the online banking system and treasury management procedures are documented and included in the Treasury Management system folder. 2.        Standard Settlement Instructions (SSI) list: a list is maintained of named officers who have the authority to transact loans and investments · Brokers and counterparties with whom the Council deals direct are provided a copy of the SSI list. · A list of named officers with authority to borrow from the PWLB and invest with the Debt Management Agency Deposit Facility is also maintained with the PWLB/DMADF. 3. Payment Authorisation: · Payments can only be minimised by the approved signatories of the Council. The list of signatories has been previously agreed with the Council’s bankers. · Inflow and outflow of monies borrowed and invested will only be from the counterparty’s bank accounts. · Separate officers will carry out (a) dealing and (b) recording of transactions and disbursements wherever possible. However, this will not always be possible due to staff numbers.
8.2 Verification	Details of loans and investments will be maintained in treasury management spreadsheet which will include fees and brokerage paid. Transactions will be cross-checked against broker notes, counterparty confirmations and PWLB loan schedules by verifying dates, amounts, interest rates, maturity, interest payment dates etc.
8.3 Substantiation	1.   The Treasury Management system balances are reconciled with financial ledger codes at the end of each month and at the financial year end. 2.   Working papers are retained for audit inspection. 3.   The bank reconciliation is carried out monthly from the bank statement to the general ledger system, Integra.
8.4 Internal Audit	Internal Audit carry out an annual regulatory review of the treasury management function including probity testing. See TMP7 Budgeting accounting and audit arrangements.
8.5 Contingency Management	1. Treasury files are kept on the Council’s network. Daily back-ups are maintained corporately by the ICT service. Network backups can be used to restore files and if necessary can be accessed from sites remote from the Council offices. 2. The Council has access to a Treasury Management system on a secure site managed by the Council’s TM advisers, Arlingclose. This system is due to be set up during January to March 2020 so that the system’s TM tools can be used to facilitate the Council’s treasury management. Arlingclose is responsible for integrity and security of that system. As part of implementation of that system, the Council will determine backup measures that can be taken. 3. Electronic Banking System Failure: Daily bank balances for calculating cash flow requirements can be obtained by telephone from the Lloyds Corporate Banking Online (CBO) helpline on 0808 202 1390 by inimized users, who have security information that will be requested by the bank before sensitive information is provided. 4. CHAPs, Faster Payments, other transfers, stop cheque requests, and so on, can be done directly by the bank. 5. The Accountancy Team maintains an up-to-date Business Continuity Plan
8.6 Insurance cover details	The Council has Fidelity, Professional Indemnity and Business Interruption cover. Details of the provider and cover are held by the Insurance Officer.
8.7 TM system	The TM ‘CS Lucas’ system was implemented during 2020 and has been incorporated into the TM function. This is an online facility provided by company CS Lucas, which provides support including system procedure notes. The system will be used to support accounting and management of the council’s TM function, but is not, and currently will not, be used for trades or financial transactions.

8. Market risk and price risk management

The Council will seek to ensure that its stated treasury management policies and objectives will not be compromised by adverse market fluctuations in the value of the principal sums it invests and will accordingly seek to protect itself from the effects of such fluctuations.

Schedule

This is the risk that, through adverse market fluctuations in the value of the principal sums the Council borrows and invests, its stated treasury management policies and objectives are compromised, against which effects it has failed to protect itself adequately.

8.1 Details of approved procedures and limits for controlling exposure to investments whose capital value may fluctuate (gilts, CDs etc)

Investment instruments used by external fund managers, where applicable, may be subject to fluctuation in capital movements and exposed to interest rate risk. To minimise these risks, capital preservation is set as the primary objective and pursuit of investment performance should be commensurate with this objective. Additionally, the following risk control guidelines are set for each fund as part of the fund management agreement to control market risk: (a) Maximum weighted average duration of the fund; (b) Maximum permitted exposure to gilts/bonds; (c) Maximum maturity of any instrument.

8.2 Accounting for unrealised gains and losses

The method of accounting for unrealised gains or losses on the valuation of financial assets complies with the Accounting Code of Practice. The Council has made irrevocable election to present changes in the fair values of Pooled Funds equity instruments in other comprehensive income, and not in the surplus or deficit on provision of services. This is because such instruments are long-term strategic investments held by the Council primarily to receive regular dividend income rather than for capital growth or to sell.

8. ESG considerations

The Council is keen to pursue Economic, Social and Governance (ESG) issues to help move funds to those that are acceptable and aligned to the Council’s ethical and green objectives.  The Council is currently doing this through a cross-party working group including councillors and with reference to advice and research by Arlingclose.  This area of work is a medium to long term project, to ensure the security of funds held, noting that the funds held by the council contribute to the financial health of the Council.

Treasury Management Practices

2. Performance measurement

The Council is committed to the pursuit of value for money in its treasury management activities, and to the use of performance methodology in support of that aim, within the framework set out in its Treasury Management Policy Statement.

Accordingly, the treasury management function will be the subject of ongoing analysis of the value it adds in support of the Council’s stated business and service objectives. It will be the subject of regular examination of alternative methods of service delivery, of the availability of fiscal or other grant or subsidy incentives, and of the scope for other potential improvements. The performance of the treasury management function will be measured using the criteria set out below.

Schedule

1.1 Policy concerning methods for testing value for money	Best value reviews will include the production of plans to review the way services are provided by · Challenging · Comparing performance · Consulting with other users and interested parties · Applying competition principles in order to pursue continuous improvement in the way the Council’s functions are exercised, having regard to a combination of value for money, efficiency and effectiveness.
1.2 Policy concerning methods for performance measurement	· Performance measurement at this Council is intended to calculate the effectiveness of treasury activity in delivering the strategic objectives set through the Treasury Management Strategy and the Council’s Prudential Indicators and to enhance accountability. · Prudential Indicators are local to the Council and are not intended as a comparator between authorities. · The performance review will be made in the light of general trends in interest rates during the year and how the decisions made corresponded with these trends and the Council’s agreed strategy, i.e. the Council will avoid hindsight analysis. Any comparison of the Council’s treasury portfolio against recognised industry standards, market indices and other portfolios is intended to (i) allow the Council the opportunity to assess the potential to add value through changes to the existing ways in which its portfolio is managed and (ii) permit an informed judgement about the merits or otherwise of using new treasury management techniques or instruments. In drawing any conclusions, the Council will bear in mind that the characteristics of its treasury operations may differ from those of other councils, particularly with regard to the position on risk.
1.3 Methodology to be applied for evaluating the impact of treasury management decisions	Monitoring of the outcome of treasury management activity against Prudential Indicators approved by the Council will be carried out as part of the budget monitoring reports to the Corporate Policy & Resources Committee on an annual basis. The year-end Annual Treasury Report will also include, as a matter of course, the outturn against the PIs set prior to the commencement of the financial year and any in-year amendments.    The Council’s Treasury Management advisers review the existing investment portfolio quarterly and all transactions that have occurred in the interim in order to ensure that best practice has been achieved. The Council’s Treasury Management advisors compare the performance of the Council’s in-house funds against 3-month LIBID cash benchmark, performance by other local authorities and the performance of the externally managed funds is compared. Performance is also compared with funds managed on a similar basis in the local authority fund manager peer group.
1.4 Methodology to be employed for measuring the performance of the Council’s treasury management activities	Treasury management activity is reviewed annually against strategy and prevailing economic and market conditions through the Annual Treasury Report to Corporate Policy & Resources Committee. The report will include: a) Total debt including average rate and maturity profile b) The effect of new borrowing and/or maturities on the above c) The effect of any debt restructuring on the debt portfolio d) An analysis of any risks inherent within the debt portfolio (e.g. exposure to variable rate; LOBOs in their call period) e) Total investments including average rate, credit and maturity profile f) The effect of new investments/redemptions/maturities on the above g) The rate of return on investments against their indices for internally and externally managed funds h) An analysis of any risks inherent within the investment portfolio (e.g. exposure to market movements in the value of CDs, gilts/bonds, callable deposits in their call period) i) A statement whether the treasury management activity resulted in a breach of the Prudential Indicators and other limits set within treasury strategy. j) Daily bank balances: any major deviations from the target bank balances
1.5 Benchmarks and calculation methodology with regard to risk and return	Treasury Management Costs Costs are compared with other Councils within the Surrey Benchmarking statistics. Investment returns are compared to the 3-month LIBID. · Internally Managed Investment Returns - total interest accruing during the month or year on average daily balances invested during the calendar month. · Externally Managed Investment Returns - the growth (i.e. increase in value of the fund) in respect of the monthly average value of the fund. Debt Management Average Rate on all external debt Average Rate on external debt borrowed in financial year Average Rate on internal borrowing Average period to maturity of external debt Average period to maturity of new loans in financial year Ratio of PWLB and market debt (beginning and end of period) Ratio of fixed and variable rate debt (beginning and end of period)
1.6 Best value	The treasury management function will be the subject of ongoing analysis of the value it adds in support of the Council’s stated corporate and service objectives. When tendering for treasury-related or banking services, the Council adheres to its Standing Orders and Financial Regulations. These require that: a) for placing a contract with a value below £75,000, at least 3 quotes and service delivery proposals are generally obtained. b) when placing a contract with a value in excess of £181,302 a tendering process that meets the requirements of the EU procurement procedures (OJEU) is undertaken. c) If necessary, the Council will also consult with other users of similar services as well as with interested parties. d) The Council will also evaluate alternative methods of the availability of fiscal, grant or subsidy initiatives, and service delivery.

Treasury Management Practices

3. Decision making and analysis

The Council will maintain full records of its treasury management decisions, and of processes and practices applied in reaching those decisions, both for the purpose of learning from the past and for demonstrating that all reasonable steps were taken to ensure that all issues relevant to those decisions were taken into account at that time. The issues to be addressed and processes and practices to be pursued in reaching decisions are detailed below.

Schedule

1.1 Major treasury decisions	As a public service organisation, there is a requirement to demonstrate openness and accountability in treasury management activities. Accordingly, the Council will create and maintain an audit trail of major treasury management decisions which comprise either: a) Changes to Prudential Indicators during the course of the financial year b) Options Appraisal to determine a funding decision c) raising a new long-term loan / long-term source of finance d) prematurely restructuring/redeeming an existing long-term loan d) investing longer-term (that is, more than 1 year) f) utilisation of investment instruments which constitute capital   expenditure (i.e. loan/share capital in a body corporate) g) leasing h) change in banking arrangements i) appointing/replacing a treasury advisor j) appointing/replacing a fund manager k) any other determined by the Council
1.2 Process	The Council’s strategy for the application of its treasury policy is set out in the annual Treasury Management Strategy. Based on the Annual Treasury Management Strategy, the Treasury Management and Capital Accountant will prepare monthly for the financing, borrowing and surplus cash requirements of the Council, for the purpose of: · applying the strategy on a day to day basis · monitoring the results of the strategy · Recommending amendments to the strategy to the Corporate Policy & Resources Committee where applicable during the course of the year.
1.3 Delegated powers for treasury management	The Chief Finance Officer has delegated powers to carry out the Council’s strategy for debt management, capital finance and borrowing, depositing surplus funds and managing the cash flows of the Council.
1.4 Issues to be addressed, evaluation, authorisation	In exercising these powers, the Chief Finance Officer and those to whom the treasury activity has been delegated will: have regard to the nature and extent of any associated risks to which the Council may become exposed; be certain about the legality of the decision reached and that the necessary authority to proceed has been obtained; be satisfied that the documentation is adequate to deliver the Council’s objectives, protect the Council’s interests, and to maintain an effective audit trail; ensure that the perceived credit risk associated with the approved counterparties parties is judged satisfactory and is within agreed limits; · be satisfied that the terms of any transactions have been fully checked against the market, and have been found to be competitive; · follow best practice in implementing the treasury transaction. In exercising Borrowing and Funding decisions, the Chief Finance Officer will: · evaluate economic and market factors that may influence the manner and timing of any decision to fund; · consider alternative forms of funding, including use of revenue resources, leasing, joint ventures and private partnerships; · consider the alternative interest rate bases available, the most appropriate periods to fund and repayment profiles; · consider ongoing revenue liabilities created. In exercising investment decisions, the Chief Finance Officer will: · Determine that the investment is within the Council’s strategy and pre-determined instruments and criteria; · consider the optimum period, in the light of core balances and reserves, cash flow availability and prevailing market conditions; · consider the alternative investment products and techniques available if appropriate.
1.5 Processes to be followed	The processes to be followed will be in keeping with TMP 4: Approved, Instruments, Methods and Techniques.
1.6 Evidence and records to be kept	The Council will maintain a record of all major treasury management decisions, the processes undertaken and the rationale for reaching the decision made. These will allow for an historical assessment of decisions made and verification that any checks and safeguards are indeed in place and operating correctly. Records and working papers will be maintained by the Council both electronically and in relevant files.

Treasury Management Practices

4. Approved instruments, methods and techniques

The Council will undertake its treasury management activities by employing only those instruments, methods and techniques detailed in the schedule to this document, and within the limits and parameters defined in TMP1 Risk Management.

Schedule

1.1 Approved treasury management activities

The Council is permitted to undertake the following activities: § Managing cash-flow § Capital financing § Borrowing including debt restructuring and debt repayment § Lending including redemption of investments § Banking § Leasing § Managing the underlying risk associated with the Council’s capital financing and surplus funds activities. The above list is not finite and the Council would, from time to time, consider and determine new financial instruments and treasury management techniques. However, the Council will consider carefully whether the officers have the skills and experience to identify and manage the advantages and risks associated with using the instruments/techniques before undertaking them, more so as some risks may not be wholly or immediately transparent.

1.2 Approved capital financing methods and types/sources of funding

On balance sheet · Public Works Loans Board (PWLB) loans · long term money market loans · temporary money market loans (up to 364 days). · bank overdraft · loans from bodies such as the European Investment Bank (EIB) · Finance Leases · Government and EU Capital Grants · Lottery monies · Other Capital Grants and Contributions · Community Infrastructure Levy · S106 funds Internal Resources · Capital Receipts · Revenue Balances · Use of Reserves Off balance sheet § Operating Leases § Structured Finance The level of debt will be consistent with the Treasury Management Strategy and the Prudential Indicators.

1.4 Approved investment instruments

The Council will determine through its Annual Investment Strategy (AIS) which instruments it will use, giving priority to the security and liquidity (in that order) of its invested monies. The investments will be categorised as ‘Specified’ or ‘Non-Specified’ based on the criteria set out by Government in its Investment Guidance February2018 (as amended). The Council will determine through the AIS which instruments will be used in-house and which will be used by the appointed external fund manager (where applicable) including the maximum exposure for each category of non-specified investments. Where applicable, the Council’s credit criteria will also apply. § Deposits with the UK government, the Debt Management Agency Deposit Facility (DMADF), and UK local authorities § Term deposits with banks and building societies § Certificates of deposit § Callable deposits § Investments in Money Market Funds , i.e. ‘AAA’ liquidity funds with a 60-day Weighted Average Maturity (WAM) § Gilts § Bonds issued by multilateral development banks § Bonds issued by financial institutions guaranteed by the UK government § Sterling denominated bonds by non-UK sovereign governments § Pooled funds, i.e. Collective Investment schemes as defined in SI 2004 No 534 The use of the above instruments by the Council’s external fund managers (where applicable) will be by reference to the fund guidelines contained in the agreement between the Council and the manager.

Treasury Management Practices

5. Organisation, clarity and segregation of responsibilities, and dealing arrangements

The Council considers it essential, for the purposes of effective control and monitoring of its treasury management activities, and for the reduction of risk of fraud or error, and for the pursuit of optimum performance, that these activities are structured and managed in a fully integrated manner and that there is at all times clarity of treasury management responsibilities.

The principles on which this will be based is a clear distinction between those charged with setting treasury management policies and those charged with implementing and controlling these policies, particularly with regard to the execution and transmission of funds, the recording and administering of treasury management decisions, and the audit and review of the treasury management function.

If and when the Council intends, as a result of a lack of resources or other circumstances, to depart from these principles, the Chief Finance Officer will ensure that the reasons are properly reported in accordance with TMP6 Reporting requirements and management information arrangements, and the implications properly considered and evaluated.

The Chief Finance Officer will ensure that there are clear written statements of the responsibilities for each post engaged in treasury management, and the arrangements for absence cover. The Deputy Chief Executive will also ensure that at all times those engaged in treasury management will follow the policies and procedures set out. The present arrangements are detailed in the schedule below.

The Chief Finance Officer will ensure that there is proper documentation for all deals and transactions, and that procedures exist for the effective transmission of funds. The present arrangements are detailed in the schedule below.

The delegations to the Chief Finance Officer in respect of treasury management are set out in the schedule below. The Chief Finance Officer will fulfill all such responsibilities in accordance with the Council’s policy statement and TMPs and, if a CIPFA member, the Standards of Professional Practice on Treasury Management.

Schedule

Organisational chart of the Treasury Management function:

1.1 Limits to responsibilities at Executive levels	Full Council: · receiving and reviewing Prudential Indicators as part of the budget setting process (following receipt by Corporate Policy & Resources Committee) · receiving and reviewing reports on treasury management policies, practices and activities (following receipt by Corporate Policy & Resources Committee) The Corporate Policy & Resources Committee: · approval of amendments to adopted clauses, treasury management policy statement and treasury management practices · budget consideration and approval · receiving and reviewing external audit reports and acting on recommendations · approving the selection of external service providers and agreeing terms of appointment
1.2 Principles and practices concerning segregation of duties	The segregation of duties will be determined by Chief Finance Officer. Segregation of duties exists in that: · the officer responsible for negotiating and closing treasury management deals are completely separate from the officer with responsibility for recording the transactions in the cash book and completing cheque and bank reconciliations. · the officer responsible for negotiating and closing treasury management deals is separate from the officer authorising payments · all borrowing/investments decisions must be authorised by the Chief Finance Officer. Additionally, The Council receives bank statements on a daily basis.  These are posted independent of the treasury function in order to maintain an adequate separation of duties.
1.3 Statement of duties/       responsibilities of each treasury post	The Chief Finance Officer: · submitting budgets and budget variations · recommending clauses, treasury management policy, practices for approval, reviewing the same regularly and monitoring compliance · determining Prudential Indicators and Treasury Management Strategy including the Annual Investment Strategy · submitting regular treasury management policy reports · receiving and reviewing management information reports · reviewing the performance of the treasury management function and promoting best value reviews · ensuring the adequacy of treasury management resources and skills, and the effective division of responsibilities within the treasury management function · ensuring the adequacy of internal audit and liaising with external audit · recommending the appointment of external service providers · determining long-term capital financing and investment decisions. · The Chief Finance Officer has delegated powers to determine and undertake the most appropriate form of borrowing from the approved sources, and to make the most appropriate form of investments in approved instruments. · The Chief Finance Officer may delegate their power to borrow and invest to the Joint Financial Services Manager, Treasury Management and Capital Accountant, Technical Accountant, Accountants and Accountancy Assistants.
	The TM Accountant: · execution of transactions · adherence to agreed policies and practices on a day to day basis · maintaining relationships with third parties and external service providers · monitoring performance on a day to day basis · submitting management information reports to the responsible officer · identifying and recommending opportunities for improved practices. The Accounting Assistants: · execution of transactions · adherence to agreed policies and practices on a day to day basis · maintaining relationships with third parties and external service providers · recording treasury management transactions, · reconciling treasury management transactions with the financial ledger · recording/ reconciling counterparty documentation.
1.4 Absence cover arrangements	Cover in the absence of the relevant treasury management officer is provided by: · Joint Financial Services Manager · Treasury Management and Capital Accountant Accountants as noted in the TM chart above Cover is reviewed at least every 6 months, or as necessary. Full procedure notes are available, detailing the processes required to enable the day-to-day operation of the treasury management function.

Dealing

1.5 Authorised officers	Responsible officer for borrowing/ investment decisions: Mainly Joint Finance Manager – Mahmud Rogers Treasury Management and Capital Accountant – Prithiva Janaka Also Assistant Accountants – John Bradley-Turner Authorising payments for borrowing/lending: Deputy Chief Executive – Terry Collier Joint Finance Manager-Mahmud Rogers Any other Council first signatory Bank payment and ICD portal trade authoriser*: · Deputy Chief Executive (CFO, s151 officer) – Terry Collier · Joint Financial Services Manager – Mahmud Rogers · Treasury Management and Capital Accountant – Prithiva Janaka · Assistant Accountant – John Bradley-Turner (No Authorisation) · Systems Accountant – Jodie Hawkes · Revenue Accounts Team Leader – Ben Hanger · Assistant Systems Accountant - Shelley Johnson · Service Accountant – Arun Sood · Service Accountant – Aleksandra Alla Blavatnik · Service Accountant – Nicholas Brown · Finance Apprentice – Ella Stewart (No Authorisation) · Joint Finance Manager Systems & Controls – Emilia Grodzka Transaction recording*: Accounting Assistants – John Bradley-Turner Finance Apprentice – Ella Stewart * as part of segregation of duties, the authoriser must be separate from the person who sets up the transaction.
1.6 Dealing limits	Internally Managed Investments: · The maximum for any one investment deal is subject to the lending limits detailed in the Council’s Treasury Management Strategy. Externally Managed Investments (where applicable): · The maximum amount placed with any single financial institution is determined and formalised through the guidelines contained in the Agreement between the Council and the Manager(s).
1.7 List of approved brokers	Brokers used by the Council are named in TMP 11: External Service Providers
1.8 Policy on brokers’ services	It is the Council’s policy to utilise the services between at least two brokers. Tradition is usually used because they meet the Council’s exact borrowing and lending requirements. However, each Tradition deal is judged against money market rates provided by other brokers to ensure competitiveness is maintained and that the best deal achieved for the Council.
1.9 Policy on taping of conversations	The Council does not tape conversations with brokers but brokers tape conversations with officers of the Council.
1.10 Direct dealing practices	Direct dealing is carried out with institutions subject to counterparty and maturity limits and dealing limits. Prior to undertaking direct dealing, the Council will ensure that each counterparty meets the Council creditworthiness criteria and has been provided with the Council’s Standard Settlement Procedures.
1.11 Settlement transmission procedures	· settlements are made by CHAPS. · all CHAPS payments relating to settlement transactions (PL3 payment form) require authorisation by 1 authorised signatory. · the details are transmitted by electronic CHAPs to the Council’s bankers. · all CHAPS payments made electronically via the bank require 2 authorised signatories
1.12 Documentation requirements	For each deal undertaken a record should be prepared giving details of dealer, amount, period, counterparty, interest rate, dealing date, payments date and broker. Investments: · deal ticket authorising the investment · confirmation from the broker · confirmation from the counterparty · Chaps payment transmission document Loans: · deal ticket with signature to agree loan · confirmation from the broker · confirmation from PWLB/market counterparty · Chaps payment transmission document for repayment of loan.
1.13 Arrangements concerning the management of counterparty funds	The Council holds several trust funds. The cash in respect of these funds is held in the Council’s bank account but transactions are separately coded. Interest is paid on credit balances and calculated on a daily basis at Bank Rate plus 0.50%

Treasury Management Practices

6. Reporting requirements and management information arrangements

The Council will ensure that regular reports are prepared and considered on the implementation of the treasury management policies; on the effects of decisions taken and transactions executed in pursuit of those policies; on the implications of changes, particularly budgetary, resulting from the regulatory, economic, market or other factors affecting its treasury management activities; and on the performance of the treasury management function.

As a minimum the Corporate Policy & Resources Committee will receive:

• An annual report on the strategy and plan to be pursued in the coming year
• A mid-year review
• An annual report on the performance of the treasury management function, on the effects of the decisions taken and the transactions executed in the past year, and on any circumstances of non-compliance with the Council’s Treasury Management Policy Statement and TMPs.

The Corporate Policy & Resources Committee will receive regular monitoring reports on treasury management activities and risks and the Corporate Policy & Resources Committee will have responsibility for the scrutiny of treasury management policies and practices.

The present arrangements and the form of these reports are outlined below.

Schedule

1.1 Frequency of executive reporting requirements	The Chief Finance Officer will annually submit budgets and will report on budget variations as appropriate. The Chief Finance Officer will submit the Prudential Indicators and the Treasury Management Strategy and report on the projected borrowing and investment strategy and activity for the forthcoming financial year to the Corporate Policy & Resources Committee and the Council  before the start of the year. The Annual Treasury Report will be prepared as soon as practicable after the financial year end and, in all cases, before the end of September. A Mid-Year Treasury Report will be prepared by the Chief Finance Officer which will report on treasury management activities for the first part of the financial year. The report will also provide a forecast for the current year. The Mid-Year Report will be submitted to Corporate Policy & Resources Corporate Policy & Resources Committee during the year. Corporate Policy & Resources Committee
1.2 Content of Reporting: 1. Prudential Indicators	The Council will set the following Prudential Indicators, revise if necessary, and following the year end publish actual (where appropriate) in respect of: Financing costs as a proportion of net revenue stream (estimate; actual) Capital expenditure (estimate; actual) Incremental impact of capital financing decisions (estimate) Capital Financing Requirement (estimates; actual) Authorised limit for external debt Operational boundary for external debt Actual external debt Upper limits on fixed and variable rate interest exposures Upper and lower limits to maturity structure of fixed rate borrowing Upper limit to total of principal sums invested longer than 364 days. Minimum Revenue Provision statement The Prudential Indicators are approved and revised by Corporate Policy & Resources Committee and are integrated into the Council’s overall financial planning and budget process. The Corporate Policy & Resources Committee will also receive a copy of this report to carry out its scrutiny role of treasury management.
2. Treasury Management Strategy Statement	The Treasury Management Strategy will include the following: · Link to Capital Financing and Treasury Management Prudential Indicators for the current and ensuing 3 years · Strategy for financing new borrowing requirements (if any) and refinancing maturing borrowing (if any) over the next 3 years and for restructuring of debt · the extent to which surplus funds are earmarked for short term requirements · the investment strategy* for the forthcoming year · the minimum to be held in short term/specified investment during the coming year · the interest rate outlook against which the treasury activities are likely to be undertaken. * Investment strategy: Based on the Government’s Guidance on Investments, the report will set out § the objectives, policies and strategy for managing its investments; § the determination of which Specified and Non-Specified Investments the Council will utilise during the forthcoming financial year based on the Council’s economic and investment outlook and the expected level of investment balances; § the limits for the use of Non-Specified Investments. The Corporate Policy & Resources Committee will also receive a copy of this report to carry out its scrutiny role of treasury management.
3. Annual Treasury Report	The Chief Finance Officer will produce an annual report for the Corporate Policy & Resources Committee on all activities of the treasury management function, including the performance of fund managers where applicable, as soon as practicable after year end and in all cases no later than 30 September of the succeeding financial year. The main contents of the report will comprise: § confirmation that the Council calculated its budget requirements and set a balanced budget for the financial year; § the prevailing economic environment § a commentary on treasury operations for the year, including their revenue effects; § commentary on the risk implications of treasury activities; undertaken and the future impact on treasury activities of the Council; § compliance with agreed policies/practices and statutory/regulatory requirements; § compliance with Prudential Indicators; § performance measures. The Corporate Policy & Resources Committee will also receive a copy of this report to carry out its scrutiny role of treasury management.
4. Mid-Year Treasury Report	The Chief Finance Officer will produce a mid-year report for Corporate Policy & Resources Committee on the borrowing and investment activities of the treasury management function, including performance of fund managers where applicable, for the first six months of the financial year. The main contents of the report will comprise: · Economic background · Economic forecast, including interest rates forecast · Treasury Management Strategy Statement update · Performance versus benchmarks · Borrowing information, including premature repayment, new loans information · Information on investments, including current lending list · Prudential indicators relating to treasury management · Governance framework and scrutiny arrangements The Corporate Policy & Resources Committee will also receive a copy of this report to carry out its scrutiny role of treasury management.
1.3 Content and frequency of management information reports	The Treasury Management and Capital Accountant produces a monthly monitoring report for the Joint Financial Services Manager and the Deputy Chief Executive. The Joint Financial Services Manager includes this information in quarterly budget monitoring statements for Corporate Policy & Resources Committee. Members also receive monthly monitoring reports These report includes details of: · borrowing and investment activity undertaken including forward deals · performance of internal and external investments against benchmark · interest rates and forecasts · extent of compliance with the treasury strategy and reasons for variance (if any) · Prudential Indicator monitoring and compliance

Treasury Management Practices

7. Budgeting, accounting and audit arrangements

The Deputy Chief Executive will prepare, and the Council will approve and, if necessary, from time to time amend, an annual budget for treasury management, which will bring together all the costs involved in running the treasury management function, together with associated income. The matter to be included in the budget will at minimum be those required by statute or regulation, together with such information as will demonstrate compliance with TMP1 Risk management, TMP2 Performance management, and TMP4 Approved instruments, methods and techniques. The form that the Council’s budget will take is set out in the schedule below.

The Deputy Chief Executive will exercise effective controls over this budget and will report upon and recommend any changes required in accordance with TMP6 Reporting requirements and management information arrangements.

The Council will account for its treasury management activities, for decisions made and transactions executed, in accordance with appropriate accounting practices and standards, and with statutory and regulatory requirements in force for the time being. The present form of the Council’s accounts is set out in the schedule.

The Council will ensure that its auditors and those charged with regulatory review, have access to all the information and papers supporting the activities of the treasury management function as are necessary for the proper fulfilment of their roles, and that such information and papers will demonstrate compliance with external and internal policies and approved practices. The information made available under present arrangements is detailed below.

Schedule

1.1 Statutory/regulatory requirements	Balanced Budget Requirement The provisions of S32 and S43 of the Local Government Finance Act 1992 require this Council to calculate its budget requirement for each financial year including, among other aspects: (a) the expenditure which is estimated to be incurred in the year in performing its functions and which will be charged to a revenue account and (b) revenue costs which flow from capital financing decisions. S33 of the Act requires the Council to set a council tax sufficient to meet expenditure after taking into account other sources of income.
1.2 Proper accounting practice	CIPFA’s Code of Practice on Local Authority Accounting in the United Kingdom: A Statement of Recommended Practice (the local authority SORP) constitutes “proper accounting practice under the terms of S21 (2) of the Local Government Act 2003”.
1.3 Financial Statements	The Financial Statements comprise: § An explanatory foreword § Accounting policies, changes in accounting estimates and errors § Presentation of financial statements § Movement in reserves statement § Comprehensive income and expenditure statement § Balance sheet § Cash flow statement § Collection Fund (England) § Statement of Responsibilities § The Accounting Statements § Additional Financial Statements (Collection Fund) § Notes to the financial statements § Statements reporting reviews of internal controls or internal financial controls § Events after the reporting period § Related party disclosures § Annual Governance Statement
1.4 Format of the Council’s accounts	The current form of the Council’s accounts is available within the Finance Department, Accountancy Section.
1.5 Disclosures relating to treasury management	Due regard will be given to the disclosure requirements under CIPFA’s Code of Practice on Local Authority Accounting.
1.6 Treasury-related information requirements of external auditors	The following information is specifically requested by the external auditor and should be considered an initial request for information. It is usually followed by more detailed audit testing work which often requires further information and/or explanations from the Council’s officers. Information is this context includes internally generated documents including those from the Council’s spreadsheets, externally generated documents, observation of treasury management practices which support and explain the operation and activities of the treasury management function. § Determination of Affordable Borrowing Limit under Section 3 of the Local Government Act 2003. § Prudential Indicators. § Treasury Management Strategy including Annual Investment Strategy. External borrowing: · New loans borrowed during the year: PWLB certificates / documentation in relation to market loans borrowed (including copy of agreements, schedule of commitments) · Loan maturities. · Compliance with proper accounting practice, regulations and determinations for the amortisation of premiums and discounts arising on loans restructured during the year and previous years. · Analysis of loans outstanding at year end including maturity analysis. · Analysis of borrowing between long- and short-term · Debt management and financing costs § calculation of interest paid § actual interest paid § accrued interest · MRP calculation and analysis of movement in the CFR. · Bank overdraft position. · Brokerage/commissions/transaction related costs.
	Investments: · Investment transactions during the year including any transaction-related costs · cash and bank balances at year end · Short-term investments at year end · Long-term investments at year end by asset type, including unrealised gains or losses at year end · calculation of interest received and accrued interest · actual interest received · External fund manager valuations, where applicable, including investment income schedule and movement in capital values, transaction confirmations received · Basis of valuation of investments · Evidence of existence and title to investments
	Cash Flow § Reconciliation of the movement in cash to the movement in net debt § Cash inflows and outflows in respect of long-term financing § Cash inflows and outflows in respect of purchase/sale of long-term investments § Net increase/decrease in short-term loans, short-term deposits and other liquid resources Other § Details of treasury-related material events after balance sheet date not reflected in the financial statements. § External advisors’/consultants’ charges
1.7 Internal Audit	Internal Audit generally conducts an annual review of the treasury management function and probity testing. The internal auditors will be given access to treasury management information/documentation as required by them.
1.8 Compliance with CIPFA Treasury Management and Prudential Codes	Auditors may require evidence/demonstration of compliance with external and internal treasury management policies and strategy. Any serious breach of the CIPFA Treasury Management Code of Practice recommendations or Prudential Indicators should be brought to the attention of the external auditor.
1.9 Costs for treasury management	The budget for treasury management forms part of the Corporate Services budget.

Treasury Management Practices

8. Cash and cash flow management

Unless statutory or regulatory requirements demand otherwise, all monies in the hands of the Council will be under control of the Deputy Chief Executive and will be aggregated for cash flow and investment management purposes. Cash flow projections will be prepared on a regular and timely basis, and the Deputy Chief Executive will ensure that they are adequate for the purposes of monitoring compliance with TMP1 (2) Liquidity Risk management. The present arrangements for preparing cash flow projections, and their form, are set out in the schedule to this document.

Schedule

1.1 Arrangements for preparing /submitting cash flow statements	Cash flow forecasts are over three time-horizons and are used to inform the Council’s borrowing and investment strategy by identifying periods of surplus or shortfall of cash balances.  The CS Lucas TM system is being used with a view to replacing spreadsheet forecasting from April 2022. The cash flow forecasts and statements are held at operational level. The accuracy and effectiveness of the  cash flows depend on the accuracy of estimating expenditure, income and corresponding time periods. An outline medium-term cash flow model is prepared as part of the budget process, with projections for 3 further years. It is highly summarised and looks mainly at cash flows arising from the capital programme, the in-year capital financing requirement, scheduled loan repayments and long-term investment maturities, and anticipated movements in reserves. A detailed annual cash flow, prepared for the financial year once the budget for the ensuing year has been agreed, identifies major inflows and outflows and is monitored and updated monthly. It is compiled with reference: to the agreed revenue budget and capital programme; to knowledge obtained from the Council’s various services that incur the expenditure/ receive the income; as well as to information from previous years. Daily cash flows show forecast and planned movements of cash daily, including the matching of known inflows and payments. This is used as part of the decision-making process for daily cash management.
1.2 Content and frequency of cash flow projections	The detailed annual cash flow model includes the following: · Budgeted revenue income and expenditure · Budgeted profiled capital income and expenditure Revenue activities: Inflows: § Revenue Support Grant if applicable § Precepts received § Non-domestic rates receipts § Council tax receipts § Other government grants § Cash for goods and services § Other operating cash receipts Outflows: § Salaries and payments on behalf of employees § Operating cash payments § Housing Benefit paid § Precepts paid § NNDR payments Capital activities including financing Inflows: § Capital grants received § Sale of fixed assets § Other capital cash receipts Outflows: § Purchase of fixed assets § Purchase of long-term investments § Other capital cash payments Financing, Servicing of Finance/Returns on Investments Inflows: § New long-term loans raised § New short-term loans raised § Interest received § Discount on premature repayment of loan Outflows: § Loan repayments § Premiums on premature repayment of loan § Short-term investments § Capital element of finance lease rental payments § Interest paid § Interest element of finance lease rental payments
1.3 Monitoring, frequency of cash flow updates	The annual cash flow statement is updated quarterly with the actual cash inflows and outflows after taking account of any revisions including those relating to grant income and capital expenditure and will be reconciled with: · net RSG and NNDR payments as notified; · county council and police authority precepts as notified; · actual salaries and other employee costs paid from account bank statements; · actual payments to Inland Revenue from general account bank statements; · actual council tax received · actual rent allowances paid · actual housing benefit and grant received from MHCLG; · actual capital programme expenditure and receipts.
1.4 Bank statements procedures	The Council receives bank statements on a daily basis and a daily download of data from its bank. All amounts on the statements are analysed on the bank statement analysis (BSA) and check to source data for example payroll, creditor payment runs. Income transactions are posted independently of the treasury function and are reconciled to the AIM system on a daily basis by the income team.
1.5 Payment scheduling	The Council has a policy of paying suppliers in line with agreed terms of trade and aims to pay suppliers within 28 days of the invoice date. Certificated payments to sub-contractors must be made within 28 days.
1.6 Monitoring debtor/ creditor levels	The Creditors and Income Manager is responsible for monitoring levels of debtors and creditors. Details are passed to the treasury team where necessary to assist in updating the cash flow models.
1.7 Banking of funds	Instructions for the banking of income are set out in Financial Regulations. All monies received will be passed to the cashier and be banked without delay.
1.8 Practices concerning prepayments to obtain benefits	The Council has no formal arrangements in place. Where such opportunities arise, the prepayment would be sought and authorised by the Chief Finance Officer.

Treasury Management Practices

9. Money laundering

Background

The Proceeds of Crime Act (POCA) 2002 consolidated, updated and reformed criminal law in the UK in relation to money laundering. The principal offences relating to money laundering are:

Concealing, disguising, converting, transferring or removing criminal property from England and Wales, from Scotland or from Northern Ireland

Being concerned in an arrangement which a person knows or suspects facilitates the acquisition, retention use or control of criminal property

Acquiring, using or possessing criminal property.

Other offences include failure to disclose money laundering offences, tipping off a suspect either directly or indirectly, and doing something that might prejudice an investigation.

Organisations pursuing relevant businesses were required to appoint a nominated officer and implement internal reporting procedures; train relevant staff in the subject; establish internal procedures with respect to money laundering; obtain, verify and maintain evidence and records of the identity of new clients and transactions undertaken and report their suspicions.

In December 2007, the UK Government published the Money Laundering Regulations 2007, which replaced the 2003 Regulations. CIPFA believes that public sector organisations should “embrace the underlying principles behind the money laundering legislation and regulations and put in place anti money laundering policies, procedures and reporting arrangements appropriate and proportionate to their activities”.

The Council is alert to the possibility that it may become the subject of an attempt to involve it in a transaction involving the laundering of money. Accordingly, it will maintain procedures for verifying and recording the identity of counterparties and reporting suspicions, and will ensure that staff involved in this are properly trained. The present arrangements, including the name of the officer to whom reports should be made, are detailed in the schedule below.

Schedule

1.1 Anti-money laundering policy	This Council’s policy is to prevent, wherever possible, the organisation and its staff being exposed to money laundering, to identify the potential areas where it may occur and to comply with all legal and regulatory requirements, especially with regard to the reporting of actual or suspected cases. The Council has accepted responsibility to ensure that those of its staff who are most likely to be exposed to money laundering can make themselves fully aware of the law and, where necessary, are suitably trained.
1.2 Nomination of Responsible Officer	(a) The Council has nominated Head of Corporate Governance to be the responsible officer to whom any suspicions relating to transactions involving the Council will be communicated.   (b) The responsible officer will be conversant with the requirements of the Proceeds of Crime Act 2002 and will ensure relevant staff are appropriately trained and informed so they are alert for suspicious transactions. (c) The responsible officer will make arrangements to receive and manage the concerns of staff about money laundering and their suspicion of it, to make internal enquiries and to make reports, where necessary, to National Criminal Intelligence Services (NCIS).
1.3 Procedures for establishing the Identity of Lenders and Borrowers	(a) In the course of its treasury activities, the Council will only borrow from permitted sources identified in TMP 4 Approved instruments, methods and techniques. (b) The Council will not generally accept loans from individuals. (c) In the course of its treasury activities, the Council will only invest with those counterparties which are on its approved lending list. (d) The identity and authenticity of commercial institutions (banks, building societies and other financial institutions) authorised to carry out borrowing and lending activity in the UK will be checked via the Financial Services Authority’s website www.fsa.gov.uk. (e) All receipts/disbursements of funds will be undertaken by BACS or CHAPS settlement. (f) Direct Dealing mandates: The Council will provide (in the case of lending) and obtain (in the case of borrowing) and maintain on file dealing mandates with any new money market counterparty. The mandates should be on letter-headed paper, dated and signed. (g) All banking transactions will only be undertaken by the personnel authorised to operate the Council’s banks accounts.

Treasury Management Practices

10. Training and qualifications

The Council recognises the importance of ensuring that all staff involved in the treasury management function are fully equipped to undertake the duties and responsibilities allocated to them. It will therefore seek to appoint individuals who are both capable and experienced and will provide training for staff to enable them to acquire and maintain an appropriate level of expertise, knowledge and skills. The Deputy Chief Executive will recommend and implement the necessary arrangements.

The Deputy Chief Executive will ensure that Council members tasked with treasury management responsibilities, including those responsible for scrutiny, have access to training relevant to their needs and responsibilities. Those charged with governance are required to recognise their individual responsibility to ensure that they have the necessary skills to complete their role effectively.

The present arrangements are detailed in the schedule below.

Schedule

1.1 Qualifications/ experience for treasury staff	Members of the Treasury Team are required to have suitable experience and qualifications for them to carry out their duties competently and appropriate training is provided where necessary.
1.2 Details of approved training courses	The courses/events the Council would expect its treasury personnel to consider are: § Certificate in International Treasury Management – Public Finance, a treasury management qualification offered by the Association of Corporate Treasurers § Training courses for Accounting, Auditing, Best Value/Competition, Budgeting, Capital Finance & Borrowing, Financial Management and Treasury Management run by CIPFA and IPF § Any courses/seminars run by Treasury Management Consultants. § Attending CIPFA Conference § Training attended by those responsible for scrutiny of the treasury function
1.3 Records of training received by treasury staff	Treasury-related training records are maintained by staff with their CPD support, with staff appraisal records by the Joint Financial Services Manager and with Human Resources.
1.4 Records of training received by those charged with governance	Training records are maintained of those people/committees responsible for governance of treasury management. Committee Services provide details of this.

Treasury Management Practices

11. Use of external service providers

The Council recognises that responsibility for the treasury management decisions remains with the organisation at all times. It recognises the potential value of employing external providers of treasury management services, in order to acquire access to specialist skills and resources. When it employs such service providers, it will ensure it does so for reasons which will have been submitted to a full evaluation of the costs and benefits. It will also ensure that the terms of their appointment and the methods by which their value will be assessed are properly agreed and documented and reviewed regular. The Council will ensure, where feasible and necessary, that a spread of service providers is used, to avoid over reliance on one or a small number of companies. Where services are subject to formal tender or re-tender arrangements, legislative requirements will always be observed. The monitoring of such arrangements rests with the Deputy Chief Executive.  Details of the current arrangements are set out in the schedule below.

Schedule

1.1 Contract threshold	The Council’s Financial Regulations require that a formal contract is in place with external service providers. The contract will clearly state the services to be provided and the terms on which they will be provided.
1.2 Details of service providers and procedures and frequency for tendering services	(a)   Bankers to the Council            Lloyds Bank            25 Gresham Street, London EC2V 7HN       Telephone 0808 202 1390             Contract period: From March 2015             Formal agreement in place: Yes (b)   Treasury advisor            Arlingclose Limited            35 Chiswell Street, London EC1Y 4SE       Telephone 08448 808 200            Contract period: Aug 2017 to July 2020            Formal agreement in place: Yes            This service may be re-tendered every 3 years (c)    Brokers       It is considered good practice for the Council to have at least two brokers and to spread business between them.            Tradition (UK) Limited       Beaufort house, 15 St. Botolph St, London, EC3A 7QX            Telephone 0207 422 3500            Contract period: no formal contract            Formal agreement in place: No            Sterling/ BGC Brokers LP       1 Churchill Place, London, E14 5RD            Telephone 020 7894 7742            Contract period: no formal contract            Formal agreement in place: No
1.3 Regulatory status of services provided	The Council’s external service providers are regulated by the Financial Services Authority (FSA) and Bank of England.
1.4 Details of service provided by Treasury Advisor	The Service provided by the Council’s treasury advisors is: Financial Strategy and Investment Policy Attend 4 strategy meetings per year and review the Council’s financial position in respect of its objectives, strategy, current financial circumstances, assets and liabilities. Advise on suitable investment strategies to support the Council’s financial objectives in the short, medium and longer term. Market Updates and Interest Rate Forecasting Provide regular interest rate forecasts. Provide regular updates on economic and political changes that may impact the Council’s investment strategy. Monitoring and Reporting Provide data on the performance of external fund managers for comparison purposes. Monitor and report on performance of in-house investments against external fund managers on a quarterly basis. Counterparty Creditworthiness Advise on investment counterparty creditworthiness, including provision of prudent parameters, based on information obtained from leading credit rating agencies (Fitch, Standard and Poors, Moody's). Provide regular alerts of changes in creditworthiness, monthly reports and analyses. Check compliance with counterparty creditworthiness policy on a quarterly basis. Training and Documentation Provide training to treasury management staff where necessary, including access to a technical support helpline. · Provide template documents and advice on: · Treasury management strategy report · Annual review report · Annual investment strategy Future investment of capital receipts The Council may decide to place funds with external fund managers to provide an element of diversity to the investment portfolio. Part of the service required from our appointed advisor will be to assist and advise on the selection and appointment process and to provide ongoing performance monitoring.

Treasury Management Practices

12. Corporate governance

The Council is committed to the pursuit of proper corporate governance throughout its business and services, and to establishing the principles and practices by which this can be achieved. Accordingly, the treasury management function and its activities will be undertaken with openness and transparency, honesty, integrity and accountability.

The Council has adopted and implemented the key recommendations of the CIPFA Treasury Management Code of Practice (Revised 2009). This, together with the other arrangements detailed in the schedule to this document, are considered vital to the achievement of proper corporate governance in treasury management, and the Deputy Chief Executive will monitor and, if and when necessary, report upon the effectiveness of these arrangements.

Schedule

1.1 Stewardship responsibilities	The Chief Finance Officer ensures that systems exist to deliver proper financial administration and control and maintaining a framework for overseeing and reviewing the treasury management function.
1.2 List of documents to be made available for public inspection.	The following documents are freely available for public inspection: § Annual Statement of Accounts § Budget Book § 4 Year Capital Plan § Treasury Management Policy § Treasury Management Strategy § Budget Monitoring Reports § Annual Treasury Report (Outturn)
1.3 Council’s website.	Financial information is additionally available on the Council’s website.
1.4 Procedures for consultation with stakeholders.	Members and senior officers of the Council are consulted via reports to the Corporate Policy & Resources Committee and officer/member briefing and training sessions.
1.5 Externally managed funds.	The Council currently has no external fund managers.