Agenda and minutes

To note any changes to the membership.

1.1       There were no changes to the membership.

To receive declarations by Members and Officers of the existence and nature of any pecuniary interests or any other significant interest in matters on this agenda.

2.1       There were no declarations of interest.

Report of the Executive Director, Finance and Resources

3.1       The Committee considered a report setting out the Council’s 2019/20 outturn position for revenue and capital for the General Fund (GF) and Housing Revenue Account (HRA). In addition, the report also provided a summary of the pension fund and the Council’s treasury management for the year. The Committee also considered the 2019/20 statement of accounts and a summary of these accounts. It was noted that the statement of accounts was currently at the draft stage with an audited version of the accounts due to be presented to the Committee at its July 2020 meeting for final sign off. This would be after the public inspection period which was due to end on 1 July 2020.

3.2       Gerald Almeroth (Executive Director of Finance & Resources) and Rikin Tailor (Head of Corporate Finance) provided the Committee with a detailed commentary of the key sections of the financial statements.

3.3       The Committee was informed that the General Fund revenue position had seen a net outturn of £530,000 underspend compared to a Period 10 (January 2020) forecast underspend of £2.643m. It was explained that the majority of this movement was due to income losses as a result of the Covid-19 pandemic. The Committee was advised that this revenue underspend would increase the City Council’s general reserves to £63.306m which would assist the Council’s financial resilience, especially to deal with the financial pressures that would result from Covid-19. It was explained that the HRA revenue outturn was a surplus of £131,000, against a budgeted surplus of £9.793m. HRA revenue balances had increased by the surplus to £17.365m.

3.4       Officers advised that the general fund capital outturn represented a gross expenditure underspend of £71.527m against budget and that this compared to a gross expenditure budget of £235.211m. The HRA capital outturn had a variance of £31.721m against a budget of £149.854m. The Committee heard that the total value of the Pension Fund as at 31 March 2020 was £1.324bn. This was made up of investments in various assets – 66% equities, 23% bonds, 10% property, and 1% infrastructure.

3.5       The Committee held a detailed discussion on the report and noted that the accounts were currently at the draft stage. A concern was raised over the capital programme which was experiencing delays and represented a significant underspend. The Committee commented that this appeared to be a generic issue which had occurred before and questioned if there were linkages between capital programme execution issues and revenue issues. In response, it was explained to the Committee that there was a significant underspend in capital schemes. However the majority of the slippage only related to a few large schemes which accounted for 60% of the total slippage in the programme leading to this variance.

3.6       The Committee discussed elements of the general fund revenue underspend and the reasons for the number of variations. It was explained that, in terms of capital schemes causing delays in revenue, medium term financial planning had been undertaken including an assessment into how the capital  ...  view the full minutes text for item 3.

Report of the External Auditor, Grant Thornton

4.1       Phil Triggs (Tri-Borough Director of Treasury & Pensions) presented the Council’s Annual Treasury Management Outturn Report for 2019/20 as required by the regulations issued under the Local Government Act 2003.

4.2       The Committee noted that the City Council had complied with all elements of the Treasury Management Strategy Statement (TMSS) apart from one instance (already reported in the 2019/20 mid-year review) which arose because of exceptional banking receipts which were received too late to be moved from the bank until the following day. This resulted in funds in excess of the strategy limit set for the Council’s current bank account on one occasion.

4.3       The Committee was also informed that on the 30th October 2020, the Council had breached its authorised overdraft limit by £47.4m at its clearing bank, Lloyds. This had arisen from a failure of HSBC bank to repay £49.2m requested from the Council’s HSBC call account.

4.4       Further updates were provided to the Committee regarding investments and the Council’s arranged forward borrowing loans totalling £400m for 2019/20. With regard to the forward loans, it was confirmed that the fee payable to the Council’s treasury consultant was £300,000 which had come from the overall treasury budget. The Committee was interested to learn more about these loans and the consultancy fee and requested a note be circulated providing further information.

4.5       The Committee held detailed discussions on the Council’s treasury investment position and interest rate received. It was noted that local authorities formed a significant proportion of the organisations that the Council was lending to. It was explained that local authorities were preferred as a counter party due to none ever having gone into administration, however a diversified portfolio of counter parties was maintained.

4.6       The Committee members were interested to learn more about what future planning assumptions had been made in regard to the interest rate. The Committee was provided with details of how, as a result of the impact of the Covid-19 pandemic, a revision had been made to the budget for 2020/21 for investment income as a result in the reduction in the yield received. The situation would continue to be monitored but it was suggested that, as a result of the impact of Covid-19, it was a reasonable assumption that interest rates would remain low.

4.7       RESOLVED: That the annual treasury management final outturn 2019/20 be noted, including the cases of non-compliance.

ACTIONS: The Committee requested that a note be circulated providing further information on future loans and the £300,000 consultancy fee payable to the Council’s treasury consultant.