To consider the Treasury Management Annual Report 2021/22.
Alistair Rush, Director of Finance explained that each year the Council produced an Annual Report covering its Treasury Management activities for the financial year ending 31st March. This report was presented to the Audit and Governance Committee because they were charged with the overall governance of treasury management activities in the Council.
The Committee were advised that the Treasury Management Strategy and the Annual Investment Strategy were agreed by full Council as part of the annual budget setting process. It was explained that all Treasury Management activities during the year were fully compliant with the CIPFA Code and the Council’s approved Treasury Strategy.
It was explained that GCC had significant invested funds during the year, representing income received in advance of expenditure plus balances and reserves. During 2021/22 GCC’s investment balances had varied and the average was £339.1 million. This generated interest of £4.8m which was equivalent to 1.41%. The Council had continued to add value to the portfolio by longer term deals with other authorities and this had provided a pick-up in rates compared to traditional money market funds, whose rates had decreased as a result of the pandemic. This return was achieved during a period when the bank rate was 0.10% for the majority of the year.
Where funds had previously suffered a capital loss, the Council could off-set those loses through a statutory override and it was expected this type of capital loss would be recovered over the whole period. It was noted that GCC had recovered its principle position in 2021-22 with a fair value totalling £98.5m against a principle position of £95m.
The Council had also maintained effective liquidity with a percentage invested for over twelve months of 41.6% and the remainder being returned investments to maintain the liquidity.
Members were reminded that the council motion to reduce fossil fuel investments, the Director of Finance advised the Committee here were no new investments in fossil fuels in the twelve months and the Treasury Management Advisors had identified two new funds with fossil fuel exclusions which were opened during 2021-22. It was recognised that markets were moving away from fossil fuel investments and green investments were rapidly increasing.
The Council had also diversified into social housing real estate and was considering a social housing trust investment, which focused on supportive housing and it was a quasi-government supported debt which would give the Authority security.
Members were advised in terms of borrowing the early redemption of loans remained expensive o the Council hadn't redeemed any loans early during the year, however all maturing loans had been repaid in full during the year. The Council had complied with all prudential indicators as detailed in Appendix E, it was noted that a revision had been made to these indicators and approved alongside with the 2022-23 Medium Term Financial Strategy.
The Director of Finance advised the Committee overall the Council was in a positive position and the Council had maintained good liquidity and return on its investments.
It was explained in order to add value to the portfolio GCC had increased the use of strategic funds, adding £10 million to existing funds during the year (£20m in total). Following the Council motion to move away from fossil fuel exposure, GCC had worked closely with its treasury advisors to identify funds that meet the Economic, Social and Governance (ESG) objectives of the Council and had invested an £10 million in 2 ESG funds. During the discussion, members requested further clarification on the ESG investment total as detailed on Page 110 of the report, as there appeared to be some discrepancy. (Action - AR).
In response to a question, members were informed that GCC was committed to withdrawing from any investments relating to Russia/Belarus and there would be no additional investments in any Russian based funds.
Members were interested in the possibility of investing in social housing in the County, Officers explained that Treasury Management related to the financial best interest, if an opportunity arose the Council would consider if. The Executive Director advised the Committee that Treasury Management function was different to Capital Programmes but members should be minded not to confuse the roles.
During the discussion, members requested to know the percentage for the return on investments, given the average borrowing cost was 4.62%. The Executive Director explained the difference between investment and borrowing, as it depended on the amounts involved and the length of the investment and the report gave a positive view. Officers agreed to provide this information in a more detailed format and a copy of the Treasury Management Strategy to members via email after the meeting. (Action - AR)
The Chair referred to internal borrowing and the benefit of using tax payer's money to invest in Gloucestershire, he wondered if there was a tolerance to local investments. The Executive Director explained it was possible, and it could be done via Treasury Management, however it was not possible to withdraw from the investment at short notice. It was recognised that local schemes had different risks associated with them, officers aired on the side of caution and felt it was better to keep Treasury Management and Capital Investments separate.
That the Committee considered and noted the Treasury Management Annual Report for 2021/22.