APPENDIX A

TREASURY MANAGEMENT PRACTICES

PRINCIPLES AND SCHEDULES
Revised April 2014

Introduction:

The CIPFA Code of Practice on Treasury Management in the Public Services (the Code) was last revised in
November 2011. The Code requires the setting out of the responsibilities and duties of members and
officers, allowing a framework for reporting and decision making on all aspects of treasury management.
This Council had adopted the original Code and has similarly adopted the revised 2011 Code in February
2014. The Code recommends the creation and maintenance of:

― A Treasury Management Policy Statement, stating the policies and objectives of its treasury
management activities
― Suitable Treasury Management Practices setting out the manner in which the organisation will seek to
achieve those policies and objectives, and prescribing how it will manage and control those activities.

The Treasury Management Practices (TMPs) comprise:

TMP 1: Risk management

TMP 2: Performance measurement
TMP 3: Decision-making and analysis
TMP 4: Approved instruments, methods and techniques
TMP 5: Organisation, clarity and segregation of responsibilities and dealing arrangements
TMP 6: Reporting requirements and management information arrangements
TMP 7: Budgeting, accounting and audit arrangements
TMP 8: Cash and cash flow management
TMP 9: Money laundering
TMP 10: Training and qualifications
TMP 11: Use of external service providers
TMP 12: Corporate governance

Schedules supporting these practices and other documents held at an operational level specify the systems
and routines to be employed and the records to be maintained in fulfilling the Council’s treasury
functions.

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TMP 1: RISK MANAGEMENT

All treasury management activities involve both risk and the pursuit of reward or gain for the Council.
Decisions on borrowing, investment or financing are taken in accordance with the provisions in the Annual
Treasury Management Strategy.

The Section 151 Officer will design, implement and monitor all arrangements for the identification,
management and control of treasury management risk. In respect of each of the following risks, the
arrangements which seek to ensure compliance with these objectives are set out as schedules below.

1) Credit and Counterparty Risk Management: Credit and counterparty risk is the risk of failure by a
third party to meet its contractual obligations to the Council.

Principle: 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 whom funds may be deposited, and will limit its investment
or borrowing methods and techniques. It also recognises the need to have, and will therefore maintain,
a formal counterparty policy in respect of those organisations from which it may borrow, or with whom it
may enter into other financing arrangements.

Schedule:

Criteria to be used for The Head of Finance is responsible for setting prudent criteria and the
creating/managing Council’s treasury advisors will also provide guidance and assistance in
approved counterparty setting the criteria.
lists/limits
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.
Details of credit rating The Council considers the ratings of all 3 ratings agencies (Standard &
agencies’ services and Poor’s, Moody’s and Fitch) when making investment decisions. Credit
their application rating agency information is just one of a range of instruments used to
assess creditworthiness of institutions.

Description of the The Council’s Treasury Advisor, Arlingclose, provides timely information
general approach to on counterparties, in terms of credit rating updates and economic
collecting/using summaries. Credit default swap information is received monthly, as well
information other than as information on share price.
credit ratings for In addition, the Head of Finance reads quality financial press for
counterparty risk information on counterparties.
assessment

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2) Liquidity Risk Management: Liquidity risk is the risk that cash will not be available when it is
needed, that ineffective management of liquidity creates additional unbudgeted costs, and that
the Council’s business/service objectives will be thereby compromised.

Principle: The Head of Finance will ensure the Council has adequate though not excessive cash
resources, borrowing arrangements, 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/service objectives.

Schedule:

Cash flow and cash The Council will aim for effective cash flow forecasting and monitoring of
balances cash balances and will maintain a monthly cash flow forecast.

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 by investing surplus funds.

Short term A balance in the region of £200k to deal with day to day cash flow
investments fluctuations is maintained by investing money overnight with the
Council’s bankers.

The Council also uses various Current and Call Accounts and Money Market
Funds as outlined on the Council’s approved counterparty list. The
maximum balance on each of these accounts is outlined as part of the
Council’s investment strategy.

Temporary borrowing Temporary borrowing up to 364 days through the money market is
available should there be a cash flow deficit 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.

Bank overdraft and The Council has no authorised overdraft limit with its bankers.
standby facilities

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3) Interest Rate Risk Management: 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.

Principle: 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 as amended in accordance with TMP6 Reporting requirements and management
information arrangements.

Schedule:

Minimum/ maximum Borrowing/investments may be at a fixed or variable rate.

proportions of
fixed/variable rate The Prudential Code requires the Council to determine each year the
debt/interest maximum proportion of interest payable on net borrowing which is subject
to fixed and variable interest rates. This is set each year as part of the
annual budget setting process.

Managing changes The main impact of changes in interest rate levels is to monies borrowed
to interest rate and invested at variable rates of interest. The Council will consider
levels 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 Arlingclose and are closely

monitored by the Head of Finance. Variations from original estimates and
their impact on the Council’s debt and investments are notified as part of
the Council’s budgetary management process.

Details of approved As per the Council’s prudential indicators, the upper limit for variable
interest rate interest rate exposure expressed as the amount of net principal borrowed is
exposure limits £19m (2014/15).

Details of hedging The Council will only use the following standalone financial derivatives
tools used to (such as swaps, forwards, futures and options) where they can be clearly
manage risk demonstrated to reduce the overall level of the financial risks that the
Council is exposed to.

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4) Exchange Rate Risk Management: 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.

Principle: 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/expenditure levels.

Schedule:

Exchange rate risk This Council does not, on a day to day basis, have foreign currency
management transactions or receipts, and does not intend to make any investments
denominated in foreign currencies.

5) Refinancing Risk Management: 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.

Principle: 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 or 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.

Schedule:

Projected capital 4 year projections are in place for capital expenditure and its financing
investment or funding. Financing will be from capital receipts, reserves and any
requirements grants or contributions awarded, revenue resources or reserves. Funding
will be from internal or external borrowing, as decided.

The Council’s projected long-term borrowing requirement will be linked

to the projected Capital Financing Requirement.

Debt profiling, policies Any longer term borrowing will be undertaken in accordance with the
and practices Prudential Code and will comply with the Council’s Prudential Indicators
and the Annual Treasury Management Strategy.

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.

Policy concerning limits The revenue consequences of financing the capital programme are
on revenue included in cash flow models, annual revenue estimates and medium
consequences of capital term forecasts.
financings

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6) Legal and Regulatory Risk Management: 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.

Principle: The Council will ensure that all of its treasury management activities comply with its statutory
powers and regulatory requirements. In framing its credit and counterparty policy under TMP1(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.

Schedule:

References to The treasury management activities of the Council shall comply fully with
relevant statutes legal statute and the regulations of the Council. These are:
and regulations
 CIPFA’s Treasury Management Code of Practice 2001 and subsequent
amendments
 CIPFA Guide for Chief Financial Officers on Treasury Management in
Local Authorities
 CIPFA Prudential Code for Capital Finance in Local Authorities 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
 Pensions, England and Wales - The Local Government Pension Scheme
Regulations 2009 – SI 2009 No 3093
 The CLG’s statutory Guidance on Minimum Revenue Provision (MRP)
 The ODPM’s (now CLG’s) Guidance on Local Government Investments in
England issued March 2004 and subsequent amendments
 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
(from 2010/11 onwards)
 Accounts and Audit Regulations 2003, as amended together with CLG’s
Guidance
 Council’s Constitution

Required Lending shall only be made to institutions on the Council’s authorised lending
information from list.
counterparties
concerning their The Council will only undertake borrowing from approved sources such as the
powers/ authorities PWLB and LEP, organisations such as the European Investment Bank and from
commercial banks who are on the Council’s list of authorised institutions, and
other local authorities.

Statement on Political risk is managed by:

political risks and  adoption of the CIPFA Treasury Management Code of Practice
management of the  adherence to Corporate Governance (TMP 12 – Corporate
same Governance)

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7) Fraud, Error and Corruption, and Contingency Management: 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.

Principle: 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:

Details of systems Segregation of duties minimises the possibility of fraud and loss due to error,
and procedures to and is detailed in TMP5 Organisation, clarity and segregation of
be followed, responsibilities and dealing arrangements.
including Internet
services 1. Electronic Banking and Dealing

The Council’s online banking service provided by HSBC is subject to separate

log-on and password control allowing varying levels of access.

Full procedure notes covering the day to day operation of the on-line banking
system are documented and included in the Operations Manual.

2. Payment Authorisation

 Payments can only be authorised by an agreed cheque signatory(ies) of

the Council, the list of signatories having previously been agreed with
the Council’s bank.
 Inflow and outflow of monies borrowed and invested will only be from
the counterparty’s bank accounts.
 Separate officers process, check and authorise dealing transactions.

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.

Business Continuity 1. All treasury systems are retained on the Council’s network. Daily back-
ups are taken and maintained and network back-ups can be used by the
IT department to restore files, if necessary.

2. Electronic Banking System Failure : details of emergency arrangements

are contained within the Council’s Business Continuity Plan, which is
maintained by the Director of Resources.

Insurance Cover The Council has Fidelity Guarantee cover. Cover details are held within the
details Finance Department.

8) Market Risk Management: 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.

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Principle: This 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:

Details of approved Investment instruments used by the external fund managers are subject
procedures and limits to fluctuation in capital movements and exposed to interest rate risk. In
for controlling exposure order to minimise these risks capital preservation is set as the primary
to investments whose
objective and pursuit of investment performance should be
capital value may
fluctuate (gilts, CDs etc) commensurate with this objective.

Pooled Funds with a Variable Net Asset Value (VNAV) – The Council
currently uses pooled funds as per its Treasury Management Strategy,
and on advice from its treasury advisors.

Accounting for The method of accounting for unrealised gains or losses on the valuation
unrealised gains/losses of financial assets will comply with the Accounting Code of Practice.

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TMP 2: PERFORMANCE MEASUREMENT

Principle: 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.

Schedule:

Policy concerning Best value reviews will include the production of plans to review the way
methods for testing services are provided by
value for money  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.

Policy concerning Performance measurement at this Council is intended to calculate the

methods for effectiveness of treasury activity in delivering the strategic objectives set
performance through the Treasury Management Strategy and the Council’s Prudential
measurement Indicators and to enhance accountability.

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.

Methodology to be Monitoring of the outcome of treasury management activity against

applied for Prudential Indicators approved by the Council will be included with mid-
evaluating the year and year-end Treasury Reports.
impact of treasury
management The year-end Annual Treasury Report will also include, as a matter of
decisions
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 advisors benchmark the performance,

risk and returns of the Council’s in-house funds with funds managed on a
similar basis by other local authorities.

Methodology to be Treasury management activity is reported twice yearly against strategy and
employed for prevailing economic and market conditions. The report will include:
measuring the
performance of the a) Total debt including average rate and maturity profile (where
Council’s treasury appropriate)
management b) The effect of new borrowing and/or maturities on the above
activities c) The effect of any debt restructuring on the debt portfolio
d) Total investments including average rate, credit and maturity profile
e) The effect of new investments/redemptions/maturities on the above
f) The rate of return on investments against their indices for internally
and externally managed funds
g) 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)
h) A statement whether the treasury management activity resulted in a
breach of the Prudential Indicators and other limits set within
treasury strategy.
Best value When tendering for treasury-related or banking services, the Council adheres
to its Financial Regulations.

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TMP 3: DECISION-MAKING AND ANALYSIS

Principle: The Council will maintain records of its treasury management decision. The issues to be
addressed and processes and practices to be pursued in reaching decisions are detailed below.

Schedule:

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 Indicator(s) during the course of the financial
year
b) raising a new long-term loan / long-term source of finance
c) prematurely restructuring/redeeming an existing long-term loan(s)
d) investing longer-term (i.e. in excess of 1 year)
e) utilisation of investment instruments which constitute capital
expenditure (i.e. loan capital/share capital)
f) leasing
g) change in banking arrangements
h) appointing/replacing a treasury advisor
i) appointing/replacing a fund manager

Process The Council’s strategy for the application of its treasury policy is set
out in the annual Treasury Management Strategy.

Delegated powers for The Section 151 Officer has delegated powers to carry out the Council’s
treasury management strategy for debt management, capital finance and borrowing,
depositing surplus funds and managing the cash flows of the Council.

Processes to be The processes to be followed will be in keeping with TMP 4: Approved,

followed Instruments, Methods and Techniques.

Evidence and records to The Council will maintain a record of all major treasury management
be kept decisions.

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TMP 4: APPROVED INSTRUMENTS, METHODS AND TECHNIQUES

Principle: 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:

Approved treasury The Council is permitted to undertake the following activities:

management activities  Managing cashflow
 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.

Approved capital On balance sheet

financing methods and  Public Works Loans Board (PWLB) loans
types/sources of  long term money market loans including LOBOs
funding  temporary money market loans (up to 364 days).
 bank overdraft
 loans from bodies such as the European Investment Bank (EIB)
 Finance Leases
 Deferred Purchase
 Government and EU Capital Grants
 Lottery monies
 Other Capital Grants and Contributions
 PFI/PPP

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.

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Approved investment The Council will determine approved investment instruments through
instruments its Annual Investment Strategy. The approved instruments are
summarised as follows:
 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
 Treasury Bills
 Gilts
 Bonds issued by multilateral development banks
 Sterling denominated bonds by non-UK sovereign governments
 Pooled funds
 Investments with Registered Providers of Social Housing
 Commercial paper
 Corporate Bonds
 Floating Rate Notes
The use of the above instruments by the Council’s fund manager(s)
will be by reference to the fund guidelines contained in the
agreement between the Council and the manager

Use of Derivatives The Council will only use the following standalone financial
derivatives: e.g. swaps, forwards, futures and options where they
can be clearly demonstrated to reduce the overall level of the
financial risks that the Council is exposed to.

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TMP 5: ORGANISATION, CLARITY AND SEGREGATION OF RESPONSIBILITIES, AND DEALING

ARRANGEMENTS

Principle: The Council considers it essential, for the purposes of the effective control and monitoring of
its treasury management activities, for the reduction of the 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 a clarity of treasury management responsibilities.

The principle 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.

Schedule:

Limits to Full Council:

responsibilities at  receiving and reviewing Prudential Indicators as part of the budget
Executive levels setting process (following receipt by Cabinet)
 receiving and reviewing reports on treasury management policies
and activities (following receipt by Cabinet)
Cabinet/Council:
 approval of amendments to adopted clauses, treasury management
policy statement
 budget consideration and approval

Principles and The segregation of duties will be determined by the Head of Finance.
practices
concerning Segregation of duties exists in that:
segregation of  the officer(s) responsible for negotiating and closing treasury
duties management deals are completely separate from the officer(s) 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 officer authorising payments
 all borrowing/investments decisions must be authorised by the Head
of Finance.

Statement of The Head of Finance:

duties/  submitting budgets and budget variations
responsibilities of  recommending clauses, treasury management policy, practices for
each treasury post approval, reviewing the same regularly and monitoring compliance
 submitting regular treasury management policy reports
 receiving and reviewing management information reports
 reviewing the performance of the treasury management function
 ensuring the adequacy of treasury management resources and skills,
and the effective division of responsibilities within the treasury
management function
 recommending the appointment of external service providers
 determining long-term capital financing and investment decisions.
 The Head of Finance 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.

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Senior Accountant:
 monitoring performance on a day to day basis
 submitting management information reports to the responsible
officer
 identifying and recommending opportunities for improved practices
 adherence to agreed policies and practices on a day to day basis
 maintaining relationships with third parties and external service
providers

Trainee 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
 recording and reconciling treasury management transactions
 contributing to the preparation of management information reports

Absence cover Cover in the absence of the relevant treasury management officer is
arrangements provided by
 Accountant provides cover for Trainee Accountant
 Head of Finance provides cover for Senior Accountant

Dealing

Authorised officers Responsible officer for borrowing/investment decisions :

 Borrowing activity: Head of Finance
 Lending activity: Head of Finance
 Authorising payments for borrowing/lending : Senior Accountant
or Head of Finance
 Transaction recording: Trainee Accountant or Accountant

List of approved Brokers used by the Council are named in TMP 11: External Service
brokers Providers

Direct dealing Direct dealing is carried out with institutions as outlined on the Council’s
practices approved investment counterparty list.

Deal Ticket Deals will be recorded as per the deal ticket proforma
proforma
Settlement  Settlements are made by CHAPS.
transmission
procedures

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 APPENDIX A

Documentation For each deal undertaken a record should be prepared giving details of
requirements dealer, amount, period, counterparty, interest rate, dealing date,
payments date(s), broker (if applicable).

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.

Arrangements The Investment and Loans file contains an uptodate list of Council’s
concerning the approved investment counterparty list.
management of
counterparty funds

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TMP 6: REPORTING REQUIREMENTS AND MANAGEMENT INFORMATION ARRANGEMENTS

Principle: The Council will ensure that regular reports are prepared and considered on the
implementation of its 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 regulatory, economic, market or other factors affecting its treasury management activities; and on
the performance of the treasury management function.

As a minimum, Cabinet and Council 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 organisation’s treasury management policy statement and TMPs.

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

Schedule:

1. Frequency of The Head of Finance will annually submit budgets and will report on
executive reporting budget variations as appropriate.
requirements
The Head of Finance will submit the Prudential Indicators and the
Treasury Strategy Statement (including Annual Investment
Strategy) and report on the projected borrowing and investment
strategy and activity for the forthcoming financial year 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 Head of Finance,

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.

2. Treasury Strategy The Treasury Strategy Statement integrates with the Prudential
Statement including Indicators being set and will include the following:
the Annual Investment  Capital Financing and Treasury Management Prudential Indicators
Strategy & Prudential for the current and ensuing three years
Indicators  Strategy for financing new borrowing requirements (if any) and
refinancing maturing borrowing (if any) over the next three 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 interest rate outlook against which the treasury activities are
likely to be undertaken.

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3. Annual Treasury The Head of Finance will produce an annual report on all activities of
Report the treasury management function during the financial year.

The main contents of the report will comprise:

 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 and practices, statutory and
regulatory requirements
 compliance with Prudential Indicators
 performance measures.

4. Mid-Year Treasury The Head of Finance will produce a mid-year report on borrowing and
Report investment activities of the treasury management function 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

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TMP 7: BUDGETING, ACCOUNTING AND AUDIT ARRANGEMENTS

Principle: The Section 151 Officer will prepare, and the Council will approve and, if necessary, from time
to time will amend, an annual budget for treasury management, which will bring together all of the costs
involved in running the treasury management function, together with associated income. The matters 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
measurement, and TMP4 Approved instruments, methods and techniques. The form which the
Council’s budget will take is set out in the schedule below.

Schedule:

Statutory/regulatory Balanced Budget Requirement: The provisions of S32 and S43 of the
requirements Local Government Finance Act 1992 require this Council to calculate its
budget requirement for each financial year.

S33 of the Act requires the Council to set a council tax sufficient to
meet expenditure after taking into account other sources of income.

Proper accounting CIPFA’s Code of Practice on Local Authority Accounting in the United
practice 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”.

Financial Statements The current form of the Council’s Financial Statements is available
within Financial Services.

Disclosures relating to Due regard will be given to the disclosure requirements under CIPFA’s
treasury management Accounting Code of Practice.

Treasury-related The following information is specifically requested by the external

information requirements auditor and should be considered an initial request for information. It
of external auditors is usually followed by more detailed audit testing work which often
requires further information and/or explanations from the Council’s
officers.
 Determination of Affordable Borrowing Limit under Section 3 of the
Local Government Act 2003.
 Prudential Indicators.
 Treasury Management Strategy including Annual Investment
Strategy.
 Details of External borrowing
 Details of Investments
 Cash Flow Statement

Internal Audit Audit of the treasury management function forms part of the Internal
Audit Plan.
The internal auditors will be given access to treasury management
information/documentation as required by them.

Compliance with CIPFA Auditors may require evidence/demonstration of compliance with

Treasury Management external and internal treasury management policies and strategy.
and Prudential Codes
Any serious breach of the TM Code’s recommendations or Prudential
Indicators should be brought to the attention of the external auditor.

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 APPENDIX A

TMP 8: CASH AND CASH FLOW MANAGEMENT

Principle: Cash flow projections will be prepared on a regular and timely basis, and the Head of Finance
will ensure that these 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 below.

Schedule:

Arrangements for Cash flow forecasts are used to formulate the Council’s borrowing
preparing /submitting and investment strategy.
cash flow statements
Content and frequency of The detailed annual cash flow model includes the following:
cash flow projections  revenue income and expenditure based on the budget.
 profiled capital income and expenditure as per the capital
programme.

Monitoring, frequency of The annual cash flow statement is updated monthly with the actual
cash flow updates 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 fire authority & Police and Crime
Commissioner precepts;
 actual salaries and other employee costs paid from account
bank statements;
 actual payments to HMRC from general account bank
statements;
 actual council tax received
 actual rent allowances paid;
 actual housing benefit (less: HB subsidy);
 actual capital programme expenditure and receipts.

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 APPENDIX A

TMP 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.

Principle: 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. The present arrangements are detailed in the
schedule below.

Schedule:

Anti money laundering This Council’s policy is to prevent, wherever possible, the
policy organisation and its staff being exposed to money laundering.

Treasury The Authority will reflect the anti-laundering measures it has in place
documentation as part of its treasury documentation. Such measures include:

― Awareness of what constitutes money laundering (outlined in the

Anti-Money Laundering Policy)
― The obligation to report any suspicions to help prevent and detect
money laundering
― Maintaining up-to-date direct dealing and mandates with
counterparties

Nomination of The Council has nominated the Head of Finance to be the Money
Responsible Officer(s) Laundering Reporting Officer to whom any suspicions relating to
transactions involving the Council will be communicated.

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 APPENDIX A

TMP 10: TRAINING AND QUALIFICATIONS

Principle: 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 Head of Finance will recommend and implement the necessary arrangements.

The present arrangements are detailed in the schedule below.

Schedule:

Qualifications/ The Council expects its treasury staff to have suitable accounting
experience for treasury qualifications and or experience.
staff

Details of approved The courses/events the Council would expect its treasury personnel to
training courses consider are:
 Certificate in International Treasury Management
 Public Finance Training courses run by CIPFA and IPF
 Any courses/seminars run by Treasury Management Consultants.
 Training attended by those responsible for scrutiny of the treasury
function

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 APPENDIX A

TMP 11: USE OF EXTERNAL SERVICE PROVIDERS

Principle: The Council recognises that responsibility for 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 that the terms of their appointment and the methods by which their
value will be assessed are properly agreed and documented, and subjected to regular review. And it 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.

Schedule:

Details of service (a) Treasury advisor

providers Arlingclose Ltd,
60 Moorgate, London, EC2R 6EL
Tel 08448 808200
Contract period: April 2013 to April 2016

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 APPENDIX A

TMP 12: CORPORATE GOVERNANCE

Principle: The Council is committed to the pursuit of proper corporate governance throughout its
businesses 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 has implemented the key recommendations of the Treasury Management
Code of Practice (Revised 2011). This, together with the other arrangements detailed in the schedule
below, are considered vital to the achievement of proper corporate governance in treasury management.

Schedule:

Stewardship The Head of Finance ensures that systems exist to deliver proper
responsibilities financial administration and control and maintaining a framework for
overseeing and reviewing the treasury management function.

List of documents to be The following documents are freely available for public inspection:
made available for public Examples
inspection.  Annual Statement of Accounts
 Budget Book
 Treasury Management Policy
 Treasury Management Strategy
 Budget Monitoring Reports
 Annual Treasury Report

Council’s website. Financial information is additionally available on the Council’s website.

Note: Items the Council would maintain at operational level in an ‘Operations Manual’ and an ‘Investment
& Loans File’ as referred to in this template. The Council ‘Operations Manual’ contains the follows:

 Procedure Notes for the Council’s treasury management system

 Settlement Procedures
 Procedure Notes for the Council’s on-line banking system

The ‘Investment & Loans File’ contains the following:

 Details of all current investments (some of which are contained within transaction files eg pooled
funds, call accounts) and loans (if applicable)
 Current approved investment counterparties

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