Agenda item

Pamela Coppelman, Group Accountant at Adur-Worthing Councils introduced the report.  She highlighted that the actual figure for Capital Financing Requirement (CFR) on page 20/21 was correct but the net movement for CFR should include £19.7m that was allocated as a capital receipt against The Orchard Shopping Centre expenditure.  

Members asked for clarification on the assessment made when making a deposit for over one year, the reason for increasing the Council’s counterparty investment limit, the ability to independently assess the analysis of ethical investments and on access to the General Reserves.

The Group Accountant advised before investing funds  a balanced view must be taken  as there is  no certainty with interest rates, for the last 18 months investments have been short term as it has been felt that interest rates may increase soon.  The Council’s policy allows 50% of the funds placed on the money market to be for more than one year, but most have been in short term deposits.  The Council currently has £90M invested with counterparties and increasing the limit gives greater flexibility to take advantage of possibly higher interest rates.   As the total funds available for investment have increased the Council’s existing counterparty limit is low compared to another local authorities in the county.   There is no standardised way to measure ethical investments, she noted the recommendation  to add HSBC Environmental, Social and  Governance Sterling Liquidity fund to the money market fund (MMF) counterparties list.  More ethical investment opportunities are emerging, and the Council are trying to maximise these deposits, and are checking the institutions’ policies before investing.  Funds placed on the money market are liquid funds which the Council can access immediately or at short notice.

The Chairman confirmed at the current time is can be difficult to place funds on deposit.  He asked for clarification on the Prudential Indicator figures for CFR. 

The Group Accountant explained the CFR and how money must be set aside over a number of years to ensure the capital cost is spread over more years to make it fair to Council Tax payers.  This is done when money is borrowed or internal funds are used.  The purchase of The Orchards Shopping Centre was part of the CFR last year and the capital receipts from the sale of Hurst Farm were used to offset some of the capital costs of the purchase of the shopping centre.

As there were no further questions the Chairman took Members to the revised recommendation in the report which was agreed unanimously.

RESOLVED

The Committee recommended the following to the full Council:

(i)       that no new borrowing has been necessary in the 6 months to 30th September 2021 and the outstanding borrowing has reduced from £7.556m at 31 March 2021 to £7.341.

(ii)      the increase in investments from £57.035m at 31 March 2021 to £78.254m at 30 September 2021 (both figures exclude the £6m investment in the CCLA Local Authorities’ Property Fund).

(iii)     due to the increase in funds available for investment, and the requirement to keep significant liquidity, the Head of Corporate Resources recommends increases in the Council’s counterparty investment limits as follows, subject to compliance with the approved ratings:

- from £4m to £5m for UK banks: HSBC, National Westminster, Barclays, Santander, Handelsbanken, Goldman Sachs International Bank and Close Brothers

- from £4m to £7m for the Council’s banker, currently Lloyds Bank.

(iv) Add HSBC Environmental, Social and Governance Sterling Liquidity fund to the list of money market fund counterparties subject to confirmation of AAA rating. Further details are in section 10.6.