DOCUMENT CONTROL
| Author Juliet Cross, Clerk and Responsible Financial Officer. | |||
| Date | Version | Status | Description |
| 29/07/19 | 0.1 | Draft | Draft document circulated to councillors. |
| 12/09/19 | 1.0 | Final | Document approved at the council meeting with amendmentsheld on 12 September (Minute: 19.xxx). |
| Review Cycle Every year before the start of the financial year or in response to new or amended statutory requirements. Next review due March 2020. | |||
| Legislation and Regulation Governance & Accountability for Local Councils Practitioners Guide 2019Local Government Act 2003Statutory Guidance on Local Government Investments (3rd Edition) issued under section 15(1)(a) of the Local Government Act 2003and effective for financial years commencing on or after 1 April 2018Chawleigh Parish Council’s related documents:Financial RegulationsReserves PolicyList of Reserves |
INDEX
| 1. | INTRODUCTION | 2 |
| 2. | INVESTMENT OBJECTIVES | 2 |
| 3. | SECURITY OF INVESTMENTS | 3 |
| 4. | LIQUIDITY OF INVESTMENTS | 4 |
| 5. | YIELD OF INVESTMENTS | 4 |
| 6. | INVESTMENT STRATEGY 2019/20 | 4 |
| 7. | REVIEW AND AMENDMENT OF INVESTMENT STRATEGY | 5 |
1. INTRODUCTION
Chawleigh Parish Council’s (the Council) acknowledges the importance of prudently investing the temporary surplus funds held on behalf of the community as part of its fiduciary duty. This Policy and Strategy complies with the revised requirements set out in the Ministry of Housing, Communities and Local Government Statutory Guidance on Local Government Investments (the Guidance)and takes into account Section 15(1)(a) of the Local Government Act 2003 and guidance within Governance and Accountability for Local Councils Practitioner’s Guide 2019.
The Guidance states:
- Where a town or parish council expects its investments at any time during a financial year to exceed £100,000, the Guidance should apply in relation to that year.
- Where a town or parish council expects its investments at any time during a financial year to exceed £10,000 but not £100,000, it should decide on the extent, if any, to which it would be reasonable to have regard to the Guidance in relation to that year.
- Where a town or parish council expects its investments at any time during a financial year not to exceed £10,000, no part of the Guidance need be treated as applying in relation to that year.
The Council expects its investments during the 2019/2020 financial year to exceed £10,000 but not £100,000 and has agreed to apply the Guidance as set out below.
2. INVESTMENT OBJECTIVES
| 2.1 | The Local Government Act 2003 states that a parish council may invest: For any purpose relevant to its functions under any enactment; andFor the purpose of prudent management of its financial affairs. |
| 2.2 | It is unusual for a parish council to hold its reserves other than in the form of easily accessible bank deposits or other short-term investments. These are often used to maximise income from cash balances during the financial year. |
| 2.3 | Occasionally, circumstances require parish councils to consider making other types of investments, for example when saving for a future capital project or while deciding how to apply the proceeds of an asset sale or a donation. In deciding whether it is appropriate to make long-term investments, the Council should follow the Guidance on local government investments issued by the Ministry of Housing, Communities and Local Government with effect from 1 April 2018. |
| 2.4 | The Council’s priorities for any investment decision, in order of importance shall be: To ensure that funds are prudently invested, putting security of the reserves before yield;To maintain liquidity of its investments to meet the Council’s cash flow requirements and spending plans; To enable the ease of operation and monitoring; andTo aim to achieve the optimum return on its investments commensurate with proper levels of security and liquidity. The risk appetite of the Council is low in order to give such priorities, so whilst aiming to achieve the optimum return the Council must be mindful to the security and liquidity of its investments. |
| 2.5 | All investments will be made in Sterling and, as a minimum, surplus funds will be aggregated in an interest-bearing bank account. |
| 2.6 | The Ministry of Housing, Communities and Local Government maintains the borrowing of money purely to invest or lend and make a return is unlawful and the Council will not engage in such activity. |
| 2.7 | Investments will be spread over different providers where appropriate to minimise risk. |
| 2.8 | 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 a credit rating agency, e.g. Standard and Poor’s. |
| 2.9 | The Council’s Financial Risk Assessment will be reviewed as part of the budgeting and year end accounting procedures in order to identify planned and unplanned expenditure items and thereby indicate an appropriate level of reserves. |
| 2.10 | The level of financial reserves held by the Council will be reviewed and agreed by the Council during the discussions held regarding the setting of the budget for the next financial year. |
| 2.11 | The Council will review the Investment Policy and Strategy on an annual basis before the start of the next financial year. |
3. SECURITY OF INVESTMENTS
| 3.1 | For the purpose of this Strategy and Policy, security is defined as protecting the capital sum from loss. |
| 3.2 | Government guidance differentiates between specified investments and non-specified investments. |
| 3.3 | Specified Investments Specified investments are those investments offering high security and high liquidity with a maturity of no more than one year. In addition, short-term sterling investments must be with bodies/institutions with high credit ratings. |
| 3.4 | For the prudent management of its treasury balances, maintaining sufficient levels of security and liquidity, the Council will use: UK banks and UK building societies; Public bodies (including Local Authorities and Police Authorities); orUK Financial Conduct Authority regulated qualifying money market funds with a triple A rating. |
| 3.5 | The Council holds: |
| 3.6 | Non-Specified Investments Non-specified investments are investments are usually for longer periods, i.e. more than one year, and with bodies that are not high credit-rated. In addition, councillors and the Responsible Financial Officer must have the appropriate capacity, skills and information to enable them to make informed decisions as to whether to enter into a specific investment, to assess individual assessments in the context of the strategic objectives and risk profile of the Council and to enable them to understand how the quantum of these decisions have changed the overall risk exposure of the Council. No non-specified investments are included in the Council’s Investment Strategy and Policy as these investments are not acceptable due to their higher potential risk. |
| 4.1 | For the purpose of this Strategy and Policy, liquidity is defined as ensuring the funds invested are available for expenditure when needed. |
| 4.2 | The Council holds: Money can be taken out with no notice or penalty by post, online or by telephone. It could take at least eight working days for the funds to be transferred. |
5. YIELD OF INVESTMENTS
| 5.1 | For the purpose of this Strategy and Policy, yield is defined as the income returned on an investment, such as the interest received on a savings account. |
| 5.2 | The Council holds: A current account with NatWest for everyday treasury management. No interest is paid to the account.An investment account with the National Savings & Investments for the reserves/savings. Variable interest is paid to the investment account at 0.80% gross/AER. |
6. INVESTMENT STRATEGY 2020/21
| 6.1 | In the 2020/21 financial year, it is anticipated that the Council will: Draw down a loan of £75,000 from the Public Works Loan Board to support the purchase of the Lower Town Place site and associated capital expenditure; andReceive at least £4,500 of S106 funding for a variety of open space facilities and amenities. These monies will initially be held in the NatWest current account. As a result, the monies held in the NatWest account over £85,000 will not covered under the Financial Services Compensation Scheme. |
| 6.2 | As from 1 April 2020, the Council will continue to: Maintain a current account with NatWest for everyday treasury management. NatWest has a single banking licence and therefore the monies held in the NatWest account are covered for up to £85,000 under the Financial Services Compensation Scheme. The money is instantly accessible. No interest is paid to the account.Maintain an investment account with the National Savings & Investments for the reserves/savings. National Savings & Investments is backed by HM Treasury and all the invested money is 100% secure. Money can be taken out with no notice or penalty by post, online or by telephone. It could take at least eight working days for the funds to be transferred. Interest is paid at 0.80% gross/AER. |
| 6.3 | Following an options appraisal, it was agreed to: Transfer all the reserves (£14,582) to the National Savings & Investments investment account at 0.80% gross AERTransfer the loan monies (£74,974.50) to the National Savings & Investments investment account at 0.80% gross AERThis will ensure the balance held in the NatWest current account is maintained below the £85,000 limit. |
| 6.4 | This Investment Strategy meets the priorities of achieving a return on the investment commensurate with the proper levels of security and liquidity. |
7. REVIEW AND AMENDMENT OF THE INVESTMENT STRATEGY
| 7.1 | At the end of the financial year, the Responsible Financial Officer will report on the investment activity to the Council. |
| 7.2 | The Investment Strategy will be reviewed on an annual basis before the start on the next financial year and approved by the Council. |
| 7.3 | The Council reserves the right to make variations to the Investment Strategy at any time, subject to the approval of the Council. Any variations will be made available to the public. |