01636 650 000 customerservices@newark-sherwooddc.gov.uk Your Home Your District Your Business Your Council You are here: Your Council Access to information Council Spending Council borrowing and investments Council budgets Fees and charges Tendering for Council contracts Counter fraud Internal audit and inspections Council managers Spending over £500 Statement of accounts Council insurance claims Council Tax Making payments to the Council Capital reports and major projects Council borrowing and investments Council borrowing and investments Our current, approved treasury management strategy and investment strategy sets out how the Council borrows and invests. Council investments - frequently asked questions How does the Council decide which institutions to invest with? The Council’s treasury management strategy, which is approved by Full Council every year, sets out that we will only invest with financial institutions that have a high credit rating. The Council uses treasury management advisers Link Group who provide daily reports and advice on all the different institutions who accept Council’s investments. They look at credit ratings, as well as other market information and knowledge of forthcoming changes to the global economy and relevant legislation. The reports give advice on the financial standing of the different institutions and whether or not the Council should consider investing with them. How safe are the Council’s investments? No investment is totally risk free. The Council is required to invest its funds prudently by both CIPFA’s (The Chartered Institute of Public Finance and Accountancy) Code of Practice on Treasury Management in the Public Services and central government guidance. These set out that the Council must have regard to the security and liquidity of its investments before seeking the highest rate of return, or yield. The Council’s objective when investing money is to strike an appropriate balance between risk and return, minimising the risk of incurring losses from defaults and the risk of receiving unsuitably low investment income. To achieve security the Council’s investments are diversified over a number of different institutions, so that in the event of an unexpected failure, any losses would be small, and would not impact on the provision of services. To achieve liquidity, investments are kept short-term so that if warnings are received regarding an institutions financial standing, money can be withdrawn with minimal loss of interest. Does the Council use foreign banks? The Council's treasury management strategy sets out the counter parties the Council can invest in. How much does the Council have invested? This varies according to the Council’s cash flow. It is typically between £25 and £30 million. Why does the Council have money to invest? The funds available to the Council to invest come from a range of sources. The Council holds reserves and provisions which are held for specific, identified future expenditure. For example, the Council’s renewal and repairs fund to replace or repairs assets, such as play equipment or a boiler in a leisure centre. The Council holds approximately £20m arising from Capital Receipts, Section 106 funds and normal cash flow balances, which fluctuate on a day by day basis. Why isn’t the money used to bring down my Council Tax? The money is held either to meet known future requirements of the Council or to provide an adequate level of reserves. The Council’s reserves are at approximately the average level for a District Council. The interest earned on the Council’s investments forms part of the Council’s budget and so does help to keep Council Tax down. Why aren’t you using the money to invest in the District’s built environment? Part of the money held forms part of the funding available for the Council’s Capital Programme and so does contribute towards investment in the district. Council borrowing – frequently asked questions What does the Council borrow money for? Most of the Council’s current borrowing relates to the stock of Council houses. New borrowing would be undertaken to invest in assets to provide services to the community. Is there a limit to the amount the Council is allowed to borrow? Yes. This is set out in the Council’s treasury management strategy - the Council is required to ensure that borrowing is affordable. Who can the Council borrow from? Again this is set out in the Council’s treasury management strategy. Most borrowing is from the Public Works Loan Board, which is a central government organisation. For short-term loans, these can be taken out with other Councils who have money to invest. How does the Council decide when to borrow? When new projects are proposed, detailed modelling is undertaken to determine if the Council has enough money in reserves to pay for the expenditure. If not and there was a need to borrow, Link Group, the Council’s treasury management advisers, would provide advice on likely future interest rates, so that it can be done at the right time and for the right term to take advantage of the lowest possible rate. Recent projects have all been financed from reserves. This is for two reasons – due to low interest rates, investments generate less income so it makes more sense to spend the money on assets or services to benefit the community. Secondly the Council would have to pay interest on any borrowing. If the Council has money in reserves, why isn’t borrowing being paid off? Most of the Council’s borrowing was taken out as long-term loans and a premium would be charged by the lender if a loan was repaid early. This would reduce the money available for investment in services. 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