Agenda item

            The Director of Finance and Resources submitted for the Committee’s consideration the undernoted report:

 

“1       Relevant Background Information

 

1.1    Members will recall that at the Strategic Policy and Resources Committee on the 4 November 2011, a report was presented which provided an overview of the implications of the new local Government Finance Act (NI) 2011.

 

1.2    The Act introduces a new capital financing system and sets out the legislative framework within which the council may manage its finances. This report provides an update on the programme for the development of council policies and prudential and treasury management indicators which will support the rate setting process for 2012/13 and in future years.

 

2       Key Issues

 

2.1    The Local Government Finance Act (NI) 2011 and the supporting Prudential and Treasury Codes produced by the Chartered Institute of Public Finance and Accountancy (CIPFA), require the council to adopt certain financial policies which support of the rate setting process and the management of the council’s financial affairs.

 

2.2    The Director of Finance and Resources is also required to report to Members on the robustness of the annual estimates and provide key financial information in the form of prudential and treasury management indicators as part of the rate setting process.

 

2.3    The following table provides the timetable for the presentation of reports to Strategic Policy and Resources Committee in relation to the Act. The reporting schedule has been structured to provide the proposed policy documents to the December 2011 committee (and these have been included as an appendices to this report), with reports providing specific financial information being presented at the January 2012 meeting in order that they can be considered alongside the 2012/13 rate increase. Finally, the financial regulations will be updated and presented to the March 2012 committee meeting.

 

Table 1

Finance Act Reporting Timetable

 

Report	SP&R Meeting Date
Treasury Management Policy Statement	9 Dec 2011
Minimum Revenue Provision Policy Statement	6 Jan 2012
Report on 2012/13 Estimates	3 Feb 2012
Prudential Indicators	6 Jan 2012
Annual Treasury Management Strategy	6 Jan 2012
Revised Financial Regulations	3 Feb 2012

 

3       Recommendations

 

3.1    Members are requested to:

 

·       Agree the timetable for the presentation of new policy documents and financial information to the Strategic Policy and Resources Committee.

·       Approve the draft Treasury Management Policy Statement (Appendix A)

·       Approve the draft Minimum Revenue Provision Policy Statement (Appendix B).

 

Appendix A

 

Belfast City Council

Treasury Management Policy Statement

December 2011

 

1.       Introduction

 

1.1     This policy statement is based on the Code of Practice for Treasury Management in Public Services produced by the Chartered Institute of Public Finance and Accountancy (CIPFA) and outlines the arrangements within Belfast City Council for ensuring the proper management of the Council’s investments and cash flows, its banking and money market capital transactions; the effective control of risks associated with those activities; and the pursuit of optimum performance consistent with those risks.

 

2.       Scope of Treasury Management Activities

 

2.1     Belfast City Council defines its treasury management activities as:-

 

·       the management of the organisation’s investments and cash flows

·       its banking, money market and capital market transactions and

·       the effective control of the risks associated with those activities and the pursuit of optimum performance consistent with those risks.

 

2.2     The Council regards the successful identification, monitoring and control of risk to be the prime criteria by which the effectiveness of its treasury management activities will be measured.  Accordingly, the analysis and reporting of treasury management activities will focus on their risk implications for the organisation.

 

2.3     The Council acknowledges that effective treasury management will provide support towards the achievement of its business and service objectives.  It is therefore committed to the principles of achieving value for money in treasury management, and to employing suitable comprehensive measurement techniques, within the context of effective risk management.

 

3.       Treasury Management Practices

 

3.1     The Director of Finance and Resources will develop and maintain suitable Treasury Management Practices (TMP’s) and accompanying schedules as part of the Councils operational procedures. These procedures will set out the manner in which the Council will seek to achieve its treasury management policies and objectives, prescribe how it will manage and control those activities and address each of the of the following twelve TMP’s which are specified in the CIPFA Treasury Management Code of Practice:-

 

·       TMP1:-Risk Management

·       TMP2:-Performance Measurement

·       TMP3:-Decision-Making and Analysis

·       TMP4:-Approved Instruments, Methods and Techniques

·       TMP5:-Organisation, Clarity, and Segregation of Responsibilities and Dealing Arrangements

·       TMP6:-Reporting Requirements and Management Information Arrangements

·       TMP7:-Budgeting, Accounting and Audit Arrangements

·       TMP8:-Cash and Cash Flow Management

·       TMP9:-Money Laundering

·       TMP10:-Training and Qualifications

·       TMP 11:-Use of External Service Providers

·       TMP 12:-Corporate Governance

 

4.       Annual Treasury Management

 

4.1     The Director of Finance and Resources will report to the Strategic Policy and Resources Committee on the council’s treasury management policies, practices and activities, including an annual strategy and plan in advance of the year, a mid-year review and an annual report after its close, in the form described in the TMP’s.

 

Appendix B

 

1.       Introduction

 

1.1     The Local Government (Capital Financing and Accounting) Regulations (NI) 2011 require Councils to determine an amount of minimum revenue provision (MRP) which it considers to be prudent. This provision will be charged to the general fund each year and will be in respect of the financing of capital expenditure incurred in current or prior years.

 

2.       Commencement of the Minimum Revenue Provision (MRP)

 

2.1     The general MRP provision for capital expenditure financed by sanctions issued by the Department of the Environment up to and including 2011/12 and for borrowing incurred in 2012/13 and later years, will be charged to the general fund on a straight line basis in-line with the asset life determined for depreciation purposes either:-

 

·        In the financial year in which the expenditure was incurred, if the expenditure was incurred during the first six months of the financial year.

 

or

 

·        In the financial year following the one in which the expenditure was incurred, if the expenditure was incurred during the last six months of the financial year.

 

2.2     The MRP will not be made on the value of Long term Debtors outstanding, as these will be repaid by third parties and it is not therefore deemed necessary to make an additional revenue charge in relation to these amounts. However, if a third party is not making annual repayments of principal, the MRP payments will be made over the asset life.

 

2.3     If the Council enters into finance leases, the MRP will be calculated in accordance with the requirements of International Financial Reporting Standards (IFRS) and be equal to the principal elements of the lease payments.”

 

            The Committee adopted the recommendations.