Adopted 04/09/2019 – Gainsborough Town Council
To ensure that surplus funds held on behalf of the Gainsborough community are prudently invested.
Gainsborough Town Council (the Council) acknowledges the importance of wisely investing the temporary surplus funds held on behalf of the community, as part of its duty to have the highest standard of care for precept payers’ money.
This Strategy complies with the revised requirements set out in the Department of Communities and Local Government Guidance on Local Government Investments and takes into account
• Section 15 (1) (a) of the Local Government Act 2003
• Statutory Guidance on Local Government Investments (3rd Edition)
• Guidance within Governance and Accountability for Smaller Authorities Practitioner’s Guide March 2018.
The Local Government Act 2003 states that a local authority may invest:
• for any purpose relevant to its functions under any enactment
• for the purpose of prudent management of its financial affairs
The Council defines its treasury management activities as “the management of the Council’s cash flows, its banking and money market transactions, the effective control of the risks associated with those activities, and the pursuit of best value performance consistent with those risks.”
This strategy establishes formal objectives, policies and practices and reporting arrangements for the effective management and control of the Council’s treasury management activities and the associated risks
The Council’s investment priorities are:
• the security of its reserves (to ensure that money held is protected from loss)
• the adequate liquidity of its investments, (to ensure money is available when it is needed and not locked away)
• the return on investment – the Council aims to get the best rate of interest that can be achieved whilst also ensuring that the investment is low risk and easy to access
All investments will be made in sterling.
The Department for Communities and Local Government maintains that the borrowing of money purely to invest or to lend and make a return is unlawful and the Council will not engage in such activity.
The Council will monitor the risk of loss on investments by review of credit ratings on a regular basis. The Council will only invest in institutions of high credit quality based on information from credit rating agencies (e.g. Standard & Poor’s (S&P) Moody’s and Fitch). Investments will be spread over at least two different providers where appropriate to minimise risk.
Specified investments are those offering high security and high liquidity, made in sterling and with a maturity of no more than a year. Such short-term investments made with the UK Government or a Local Authority (as defined) or a Town/Parish Council will automatically be Specified Investments.
The Council, for prudent management of its treasury balances may use: –
• Treasury Deposits with UK clearing banks (of at least A- rating)
• Local Authorities or other Public Authorities
• Other approved public-sector investment funds
The choice of institution and length of deposit will be at the approval of the Management and Finance Committee.
The Council will aim to achieve the optimum return on its investments commensurate with the proper levels of security and liquidity.
These investments have greater potential risk – examples include investment in the money market, stocks and shares. Given the unpredictability and uncertainty surrounding such investments the Council will generally not use this type of investment. Any such investment will be subject to specific consideration and approval by Full Council.
LIQUIDITY OF INVESTMENTS
The Council’s Management and Finance Committee in consultation with the Responsible Finance Officer / Town Clerk, will determine the maximum periods for which funds may prudently be committed so as not to compromise liquidity.
Investments will be regarded as commencing on the date the commitment to invest is entered rather than the date on which the funds are paid over to the counterparty.
LONG TERM INVESTMENTS
Long Term Investments are defined in the Guidance as greater than 36 months. The Council does not currently hold any funds in long term investments. Any investment greater than 36 months will be subject to specific consideration and approval by Full Council.
INVESTMENT STRATEGY 2019 – 2020
For 2019-20, the Council will invest as much of its balance as possible in a low risk product to achieve its investment objectives. The Council is mindful of the need to not make the administration of investments too complex, especially when considering the current low rates of return and the administration costs associated with managing multiple accounts and creating new accounts. The following have been identified using Standard & Poor’s (S&P) Moody’s and Fitch ratings as being suitably secure in the following scenarios:
For day to day banking including current account a high degree of liquidity is required with suitable banking arrangements easy access for both deposit and withdrawal. This condition has limited the practical choice to local “High Street” banks. Gainsborough Town Council has a long-term relationship with HSBC PLC.
Business Current & Deposit Account will be held at HSBC PLC for in year finances plus not less than 3 months working capital from reserves for cash flow purposes.
The Council has significant undertakings alongside large projects for 2019 – 2021 and liquidity of funds is therefore a higher priority than return on investment especially when the differential in rates of interest are very modest. For general investment of reserves and other funds an interest earning account that pays a competitive return is sufficient. The Council will explore suitable arrangements again noting the need for easy access and practicality.
Investment Account to be determined
This will be for all balances not held in the Current Account (Earmarked Reserves and any remaining General Reserve not allocated to the current account).
The Responsible Finance Officer shall have delegated authority to make all necessary transfers between the accounts from time to time as necessary to meet the annual investment strategy.
REGULAR AND END OF YEAR INVESTMENT REPORT
Investment forecasts for the coming year will be accounted for when the budget is prepared. The Responsible Finance Officer will report on investment activity to the Management and Finance Committee as part of the Quarterly Financial Reporting.
REVIEW AND AMENDMENT OF REGULATIONS
The Annual Investment Strategy must be reviewed annually and revised if considered necessary.
The Council reserves the right to make variations to the Investment Strategy at any time subject to the approval of Council. Any variations will be made available to the public.
The policy will be monitored in the following ways:
Quarterly checks of compliance to strategy
Twice yearly checks on compliance and review of investment Management and Finance Committee
Review due annually.
RELATED POLICIES & STRATEGIES
Statement of reserves position at 31st March 2019
- At the end of 2018/19 financial year Gainsborough Town Council had £95,983.71 in its General Reserve and £214,295.36 in its Earmarked Reserves.
- The precept of £481,140 was received in 2019/20.
- The precept of £???,??? for 2020/21 will be paid into the current account in April 2020
- A report containing a summary of the reserve position was considered by the Management and Finance Committee in April 2019.
- The current balance – as at date 31st March 2019 – in each of the specified investments is as follows: –
• Current / Deposit Account – £294,708.95