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CORPORATE PERFORMANCE AND RESOURCES SCRUTINY COMMITTEE

 

Minutes of a meeting held on 16th February, 2017.

 

Present:  Councillor M.R. Wilson (Chairman), Councillor G. Roberts (Vice-Chairman); Councillors: Mrs. P. Drake, H.J.W. James, Mrs. A. Moore, R.A. Penrose and E. Williams

 

 

815     APOLOGIES FOR ABSENCE -

 

Apologies for absence were received from Councillors H.C. Hamilton, K. Hatton and A.C. Williams.

 

 

816     MINUTES -

 

RECOMMENDED - T H A T the minutes of the meeting held on 24th January, 2017 be approved as a correct record.

 

 

817     DECLARATIONS OF INTEREST -

 

No declarations were received.

 

 

818     STAFF CHARTER - UPDATE FROM EMPLOYEE SURVEY (REF) -

 

The above matter had been considered by the Cabinet at its meeting held on 23rd January, 2017.  The Scrutiny Committee was updated on the results of the recent 2016 Employee Survey and related activity as part of the promotion of the Staff Charter. 

 

A copy of the updated Action Plan to support the implementation of the Staff Charter was set out in Appendix 2 to the report.  This set out current progress in relation to the main areas of activity including communications, staff development, leadership and engagement. 

 

As part of the original launch of the Charter it was important to undertake an employee survey as it was necessary to set a bench mark for current staff engagement levels and against which future Staff Charter related activities could be measured. 

 

The Scrutiny Committee was advised that the above survey ran for a six week period between 19th September and 30th October, 2016 and was sent to some 2,563 employees across the Council’s four Directorates.  61% of the surveys were sent out electronically via email and the remaining 39% were sent via hard copy to home addresses.

 

As part of the survey, employees were asked to score each of the 20 expectations within the Charter using the following scale:  1 (Strongly Agree), 2 (Agree), 3 (Neither Agree nor Disagree), 4 (Disagree) and 5 (Strongly Disagree). 

 

A detailed analysis of the results from the survey were set out in Appendix 1 to the report and included an analysis of engagement levels by Directorate, service area, length of service and grade.  There had been 1,240 responses to the survey equating to an overall return rate of 48%.  It was noted that the return rate were relatively even across the four Directorates ranging from 38% (Learning and Skills) to 60% (Resources). 

 

Set out in paragraph 15 of the original Cabinet report was a selection of key outcomes from the employee survey which related to the following: 

  • The overall average response rate to the 20 expectations within the Staff Charter was 71% (i.e. strongly agreeing or agreeing). This is an encouragingly high score and will set the benchmark for future engagement work and subsequent surveys.
  • The level of positive responses was relatively high across all Directorates ranging from 68% in the Learning and Skills and Environment and Housing Directorates to 76% in the Managing Director & Resources Directorate.
  • The level of positive responses from within the 17 service areas was slightly more diverse ranging from 58% in Visible Services and Transport to 94% in the Director's Office within Environment and Housing Services.
  • The highest overall positive response rate related to the assertion "I am trusted to get on with my job". Some 91% of employees responded positively to this statement. It is particularly interesting to note that this statement attracted the highest score in all Directorates and in 12 out of the 17 service areas.
  • The above statement also attracted the highest positive response rates in each of the length of service categories and in all but one of the salary grade categories.
  • The next two highest responses were in relation to "I have regular contact with my manager" (81%) and "I am treated with respect" (81%). This is, again encouraging and will provide a strong basis for further development as part of the Staff Charter.
  • The lowest level of positive response (albeit still relatively high) related to the assertions "I feel supported in achieving my potential" (64%), "I am kept informed about the wider work of the Council" (61%) and "I am helped to understand my contribution to the wider Council" (51%).
  • The responses relating to personal development and the degree to which staff understand their wider contribution were reflected across all Directorates and also in the grade and length of service categories.

Augmenting the above, the Head of Human Resources referred to the ongoing work anticipated in relation to some of the Staff Charter areas and particularly in relation to employee development, communications and the continuous need to connect employees with the broader objectives of the Council.  He also touched upon the launch of the new staff appraisal scheme (#ItsAboutMe) work to launch a new (Passport to Training) scheme and a review of the Council’s strategy in relation to the identification and delivery of development needs.  In conclusion, he referred to progress in relation to other areas of the Staff Charter commitments including, the strengthening of the Council’s Leadership Café, the development of a revised Management Competency Framework and the launch of a CMT/Staff Engagement Group and Core Brief Editorial Group.

 

The Scrutiny Committee noted that a further employee survey would be repeated in 2017 and then annually thereafter. 

 

The Committee universally concurred that the survey results were pleasing.  A number of positive comments were made in relation to the findings and the Committee thanked the Head of Human resources, his staff and wider staff involved in the various initiatives for their contribution and effort.

 

The Vice-Chairman, in no way criticising the work undertaken, referred to the challenge ahead to improve upon current levels of satisfaction.  He also noted the lowest satisfaction levels of staff (51%) existed in areas of manual work.  He enquired of initiatives that would be used to improve how staff understood how they contributed to the organisation.  The Head of Human Resources indicated that a number of measures would be utilised, including an appropriate communication strategy and was particularly aware of those staff who were employed in hard to reach areas.  He also touched upon other initiatives being assessed including the launch of  both a recognition and innovation project groupo.

 

RECOMMENDED - T H A T the results of the 2016 Employee Survey set out in the Cabinet Report be noted alongside related activity was part of the Council’s Staff Charter.

 

Reason for recommendation

 

In acknowledgement of the current levels of employee engagement and as a baseline to measure the success of future “Staff Charter” development work.

 

 

819     CORPORATE SAFEGUARDING UPDATE (REF) -

 

The above update had been considered by the Cabinet at its meeting held on 23rd January, 2017 and subsequently referred to the Healthy Living and Social Care, Learning and Culture and Corporate Performance and Resources Scrutiny Committees for consideration.

 

The Corporate Safeguarding Working Group was established to act on the recommendations from a joint CSSIW and Estyn report in 2011, which followed an investigation in to the way Pembrokeshire County Council was managing allegations of professional abuse and its arrangements for safeguarding and protecting children in education.  The Group's work focused on ensuring effective corporate arrangements for safeguarding and protecting children and adults across the Council. 

 

The Council's Safer Recruitment Policy for the Council and Schools had been in place since April 2013 and was adopted across all Directorates and schools.  As a consequence, there had been sustained and ongoing improvements across the Council.

 

Appendix 1 attached to the report provided an update on safeguarding within the Vale of Glamorgan Council that outlined the wide range of work undertaken collectively by the Council and within each Directorate.  It was designed to help ensure greater transparency and accountability as well as a more holistic picture.

 

The Social Services and Wellbeing (Wales) Act 2014 came in to effect in April 2016 and brought about significant changes.  The Act also imposed a duty on a Local Authority to report to another Local Authority if an adult suspected of being an adult at risk was living in or moving to another area.  Revisions to the corporate safeguarding policy were being made to ensure that staff were informed about requirements set out in the new statutory framework. 

 

Welsh Government was issuing a compendium of the statutory guidance under the common heading 'Working Together to Safeguard People'.  Some volumes of guidance had been published: Volume I (Introduction and Overview), Volume 2, (Child Practice Reviews), Volume 3 – (Adult Practice Reviews) and Volume 4 (Adult Protection and Support Orders).  Volumes 5/6 (Handling Individual Cases) would replace guidance which was outdated (Working Together to Safeguard Children and In Safe Hands).  This volume would be subject to a formal consultation in January and February.

 

The Head of Human Resources referred to specific aspects of the latest Safer Recruitment Policy HR Audit relating to Schools and Corporate Services set out in Appendix 1 of the Cabinet report.  He also referred to the monitoring of the return of Risk Assessments in regard to both service areas.  The Committee noted that for the six month period from 1st April to 30th September, 2016, there was over a 94% compliance rate.  Out of the outstanding nine assessments, some four had been signed during the employee’s first day of employment.

 

The Vice-Chairman queried the accuracy of the data contained in paragraph 17 of Appendix 1 relating to “Gender distribution referrals”.  The Head of Human Resources agreed to check the information and provide clarification to Members following the meeting. 

 

In response to a further question from the Vice-Chairman, the Head of Human Resources confirmed that where there was a DBS response awaited, a number of checks were carried out by the relevant officer(s) concerned over the 12 week period (the period to process a DBS application) as part of the risk assessment.

 

The Chairman echoed the comments of the Vice-Chairman and queried the absence of reference to the Education Work Force (EWC) Council given their safeguarding role, particularly in relation to youth work.  In response, the Head of Human Resources confirmed that Learning Support Assistants fell within the EWC registration process, of which the Council funded the relevant fee.

 

The Chairman thanked the Head of Human Resources for a very good report.

 

RECOMMENDED - T H A T the report be noted.

 

Reason for recommendation

 

In acknowledgement of recent developments in corporate arrangements for safeguarding.

 

 

820     EMPLOYEE PAY POLICY 2017/18 (REF) -

 

The above matter was considered by the Cabinet at its meeting on 6th February, 2017 and subsequently referred to the Scrutiny Committee for consideration prior to the final consideration and approval by Full Council at its meeting on 1st March, 2017. 

 

The Council had a statutory requirement under the Localism Act 2011 to prepare a pay policy statement for the new financial year 2017/18.  Such a statement was required to be approved and published by 31st March, 2017.  The Pay Policy Statement 2017/18 had been produced on the basis of statutory guidance, advice from the WLGA and guidance from the Welsh Government.

 

Efforts had continued to be made to take a broader approach to the requirements of the above Act and as such reference had been made to the pay of other relevant groups within the policy statement.

 

Paragraphs 6.25 - 6.31 of the Pay Policy Statement set out details of remuneration arrangements for staff undertaking duties in respect of elections and referenda/ ballots.  The Committee was made aware that the Pay Policy had been incrementally developed since 2012 to incorporate the following matters: 

  • Guidance from Welsh Government as contained within the document "Pay Accountability in Local Government in Wales" as updated in January 2016.
  • Changes as prescribed by the Local Authorities Standing Orders (Wales) (Amendment) Regulations 2014 which took effect from 1st July, 2014.
  • Changes as prescribed required by the Local Government (Wales) Act 2015 to ensure that any proposed changed to the salary of Chief Officers (as defined in the Localism Act 2011) are made following consultation with the Independent Remuneration Panel for Wales.
  • The effects of nationally negotiated pay awards and the emerging provisions of the National Living Wage as introduced in 2016.

In addition to the above matters the Head of Human Resources indicated that the Pay Policy had also been continually refined to reflect changes in the Council’s Senior Management structure over recent years.  He also alluded to a number of changes over the coming year which would impact on the Council’s current pay arrangements and which would need to be reflected in future Pay Policy Statements.  These included: 

  • The impact of the review of the Local Government NJC Pay Structure in response to the incremental effects of the National Living Wage.  It is anticipated that this will result in a significant streamlining of the current national pay point range.
  • The impact of the UK Government’s Enterprise Act 2016, and specifically in relation to a restriction on Local Authority severance payments.  It will be important to monitor how these provisions will be reviewed, translated and implemented by Welsh Government within the Welsh public sector.

RECOMMENDED – T H A T the proposed changes to the Council’s Pay Policy for 2017/18 as detailed in the report and incorporated into the revised Pay Policy Statement as set out in Appendix A to the Cabinet report be noted.

 

Reason for recommendation

 

In acknowledgement of the Council’s legal requirement to respond under the Standing Orders (Wales) Amendment Regulations 2014, the Local Government (Wales) Act 2015 and related advice from Welsh Government.

 

 

821     REVENUE MONITORING FOR THE PERIOD 1ST APRIL TO 31ST DECEMBER, 2016 (MD) -

 

The Head of Finance, in reporting on the matter, indicated that overall the headline position in regard to the revenue budget had not changed significantly to the position previously reported to the Scrutiny Committee at its meeting in December 2016.

 

The following progress was noted in respect of the undermentioned budgetary matters:

 

Learning and Skills

 

The Directorate was projecting to outturn with an adverse variance of £672,000 at year end as detailed below.  £500,000 had been set aside in the Schools Placements reserve to be used as a one off contribution in 2016/17 to mitigate part of the shortfall while further Reshaping Services work was undertaken by the Directorate.   

 

Schools – The delegated budget relating to schools was expected to balance as any under/over spend was carried forward by schools.

 

Strategy, Culture, Community Learning and Resources – This service was projected to outturn with a favourable variance of £286,000 after a transfer from reserves of £467,000.  The net underspend was as a result of early implementation of 2017/18 savings, a reduction in the number of supported non-maintained nursery settings, a number of vacancies throughout the department, an increase in ICT support packages purchased by schools, a projected underspend on the Catering Service of £61,000 and a rate rebate for school buildings of £135,000.  The transfer from reserves would be £93,000 from the Rationalisation reserve to contribute towards school amalgamation costs.  The transfer from reserves would be £192,000 from the Libraries reserve to cover any legal costs and costs relating to the implementation of the service review, £30,000 from the Adult Community Learning reserve to assist with the new Welsh for Adults contract and a previous year’s funding reduction in Schedule 2 / Cardiff and Vale College Franchise and £152,000 from the Early Retirement and Voluntary Redundancy Reserve to fund redundancy and retirement costs in schools.

 

Strategy and Regulation – This service was currently projecting to outturn at a favourable variance of £42,000 due to salary underspends and reductions in office expenses for the Directorate.

 

Achievement for All – This service was projected to outturn with an adverse variance of £280,000 after a transfer from reserves of £672,000.  This was as a result of an adverse variance of £793,000 on the recoupment income budget and an adverse variance on pupil placements of £268,000.  This position could be partly offset by projected salary underspends of £162,000 which were due to vacant posts in the service as a result of early implementation of 2017/18 Reshaping Services savings.  However, £53,000 would be required to be transferred into the Youth reserve to fund the G2E project in 2017/18 whilst the service undertook a restructure.  The service had a £2.4m recoupment income budget in respect of out of county pupil placements purchased at Ysgol y Deri.  As an initial measure £500,000 had already been set aside in a Schools Placements reserve.  This sum would be used as a one off contribution in 2016/17 to mitigate part of the shortfall while further Reshaping Services work was undertaken by the Directorate.  However, if this shortfall of £172,000 could not be mitigated further in the year, other reserves could be utilised to balance the shortfall made up of £94,000 from the Excluded Pupils reserve and £78,000 from the Adult Community Learning reserve.

 

School Improvement – This service was projected to overspend by £48,000 as a result of redundancy and pension strain costs as a result of restructuring.

 

Provision had been made within the budget to make unsupported borrowing debt repayments in relation to the Schools Investment Strategy of £698,000 per annum and any favourable variance on debt repayments would be directed into the Schools Investment Strategy.

 

Social Services

 

The Directorate was projecting to outturn with an adverse variance of £600,000 at year end as detailed below.

 

Children and Young People’s Services – this service was projected to outturn with an underspend of £400,000.

 

Adult Services – it was projected that the Community Care Package budget could outturn with an adverse variance of up to £1m by the year end. 

 

The annual deferred income budget for 2016/17 had been set at £747,000 and as at 30th November, 2016, income received to date was £58,000 above the annual budget.  It was therefore being projected that this budget would outturn at £100,000 over-recovered by year-end and this favourable variance would be included as part of the projected overspend for care packages. 

 

Environment and Housing

 

The Directorate was currently projected to outturn within target at the year-end.

 

Highways and Engineering – there was currently a £36,000 favourable variance against the profiled amended budget.

 

Waste Management – there was currently an adverse variance of £70,000 to be profiled amended budget. 

 

Leisure Services – there was currently an adverse variance of £2,000 to be profiled amended budget. 

 

Transportation – there was currently a favourable variance of £77,000 against the profiled budget.

 

Regulatory Services – the allocation of £2.218m represented the Council’s budget for its share of the Shared Regulatory Service.  It was anticipated that the Service would outturn on target.

 

Council Fund Housing – it was anticipated that this budget would outturn on target.

 

Public Sector Housing (HRA) – it was expected that this budget would outturn on target and any underspend in year would be offset by additional contributions to capital Expenditure thus reducing the reliance on Unsupported Borrowing.

 

Managing Director and Resources

 

It was currently projected that this service would outturn within target at year end.

 

Resources – it was anticipated that this service would outturn within budget.

 

Regeneration – there was currently a small favourable variance on this budget and it was still projected that this service would outturn on target by year end.

 

Development Management – there was an adverse variance relating to the Local Development Plan as expenditure was delayed from 2015/16, however, funding was set aside in reserves for the purpose in the last financial year and would therefore be drawn down to offset this position. 

 

Private Housing – there was currently a small favourable variance on this budget.

 

General Policy – the projected outturn for Policy was for a favourable variance of £4m when compared to the amended budget.  Cabinet had previously taken the decision that this sum would be set aside to the General Fund and consideration would be given for that allocation to be used to offset the shortfall in the revenue budget and / or used for capital schemes, the details of which would be considered by the Budget Working Group before the final revenue proposals were presented to Cabinet and Council for approval.

 

As part of the Final Revenue Budget Proposals for 2016/17, a savings target of £9.289m was set for the Authority.  Attached at Appendix 1 was a statement detailing all savings targets for 2016/17 and the projected outturn.  Services were working towards fully achieving their savings targets however at this stage of the year it was anticipated that not all the savings would be made and there could be a shortfall of £680,000.

 

The Vice-Chairman referred to paragraph 18 of the report relating to the use of agency staff. He expressed concern that the Council should further its efforts to collaborate with the colleges and universities.  In pursuing such an initiative training graduate placements could be established within the Council in those areas where shortages existed in skilled professions.

 

RECOMMENDED – T H A T the position with regard to the Authority’s 2016/17 Revenue Budget be noted.

 

Reason for recommendation

 

In acknowledgement of the projected revenue outturn for 2016/17.

 

 

822     CAPITAL MONITORING REPORT FOR THE PERIOD 1ST APRIL TO 31ST DECEMBER, 2016 (MD) –

 

The Head of Finance drew the Committee’s attention to the areas of slippage in regard to the Capital Programme.  In particular, she drew the Committee’s attention to the proposed bringing forward from the allocated 2017/18 Capital Programme budget of £1,912,000 to fund flooring works (£70,000) and changing room works at Penarth Leisure Centre (£40,000) and Barry Leisure Centre (£24,000) (total £134,000). 

 

Having regard to the report, it was

 

RECOMMENDED –

 

(1)       T H A T the following budgets are to be carried forward into 2017/18: 

  • Eagleswell Demolition – Carry forward budget of £100,000.
  • St. Cyres Lower School Marketing and Disposal – Carry forward budget of £48,000.
  • Eagleswell Marketing and Disposal – Carry forward budget of £34,000.
  • St. Andrews Major CIW Primary Fencing – Carry forward budget of £64,000.
  • Cadoxton Primary Partial Electrical Rewire – Carry forward budget of £8,000.
  • Gladstone Primary Boiler Renewal – Carry forward budget of £3,000.
  • Ysgol Bro Morgannwg Renew Sewage Pumps – Carry forward budget of £53,000.
  • Southway Electrical Upgrade – Carry forward budget of £5,000.
  • WHQS Internal Works – Carry forward £2.127m.
  • WHQS External Works – Carry forward £2.064m.
  • Common Parts – Carry forward £1.2m.
  • Cross Common Bridge – Carry forward budget of £50,000.
  • St. Paul’s Church – Carry forward budget of £233,000.
  • Barry Regeneration Fund – Carry forward budget of £11,000.
  • Dock Offices external repairs – Carry forward budget of £80,000.
  • Dock Offices mechanical and electrical – Carry forward budget of £60,000.

(2)       T H A T the following changes to the 2016/17 Capital Programme be noted: 

  • Sully Primary Playground Resurfacing – Vire the remaining budget of £10,000 to Fire Precaution Works.
  • Asset Renewal – Traffic Management Measures – Vire £19,000 to Broad Street Crossing.
  • Additional Highways / Environmental Improvements – Vire the remaining budget of £11,000 to Cross Common Bridge.
  • Penarth Pier Supports – Vire the remaining budget of £11,000 to Cross Common Bridge.
  • Wick to Ewenny Highway – Vire £40,000 to the Visible Services Highways Improvements scheme.

Reason for recommendations

 

(1&2)  In acknowledgement of changes to the Capital Programme.

 

 

823     TREASURY MANAGEMENT AND INVESTMENT STATEMENT 2017/18 (S151O) -

 

The Welsh Government (WG) provided the Council with a General Capital Funding grant and the Authority was also advised of a level of borrowing that WG was prepared to fund via the Revenue Support Grant Settlement.  If the Council wished to borrow in excess of this level to increase its capital expenditure, then it could. However, it would either have to find the additional costs of borrowing through savings in other services or increases in Council Tax.

 

In order to manage this increased flexibility, Part 1 of the Local Government Act 2003 required Local Authorities to have regard to the Prudential Code, which has been developed by the Chartered Institute of Public Finance and Accountancy (CIPFA) as a professional code of practice.

 

The key objectives of the fully revised Prudential Code are to ensure that the capital investment plans of Local Authorities: 

  • Are affordable;
  • That all external borrowing and other long term liabilities are within prudent and sustainable levels;
  • The treasury management decisions are taken in accordance with professional good practice.

In March 2012 the Council adopted the CIPFA Treasury Management in the Public Services: Code of Practice 2011 Edition (the CIPFA Code), which requires the Council to approve a treasury management strategy before the start of each financial year.

 

The Code of Practice and legislation requires the Council to set out its Treasury Management Strategy and to prepare an Investment Strategy.  The WG issued revised Guidance on Local Authority Investments in April 2010 that requires the Council to approve an Investment Strategy before the start of each financial year and states that Authorities may produce a single strategy document, covering both the requirements of the CIPFA Treasury Management Code and WG's guidance.

 

The Principal Accountant referred to the proposed Treasury Management and Investment Strategy for 2017/18, which was attached at Appendix 1.  The Treasury Management Strategy itself covered a rolling period of three years and was intended to link in to the Medium Term Financial Planning process.  The Investment Strategy covered the next financial year.  The document also included a number of statutory Prudential Indicators that may be used to support and record local decision-making.  She provided an overview of both elements indicating that in regard to the Treasury Management Strategy, she referred to the economic outlook for the UK and to the significant factors that could have a potential bearing on interest rate setting by the Bank of England.  However, Arlington Close Ltd., who provided independent treasury service to the Council, predicted that interest rates would remain stable during 2017/18. 

 

In regard to borrowing, she indicated that it was forecasted that non-HRA Borrowing CFR would reduce with small amounts of borrowing being made for the Capital Programme in relation to 21st Century Schools, whereas HRA Borrowing was forecast to increase significantly throughout the period in line with the Council’s Draft Housing Business Plan, with the Plan being approved before the end of March 2017.  In relation to investments, the Council’s level of reserves would enable the Council to undertake a certain amount of internal borrowing.  The CFR did not include additional borrowing that would be required under the City Deal or any financing for HRA or 21st Century Schools.  She also referred to Prudential Indicators and specifically to Indicator No. 5 – Gross Debt.  External borrowing was forecasted to reduce during 2016/17.  It was predicted that £13m would need to be borrowed, however, the Strategy was to internally borrow wherever possible, but there may be a need to borrow short term for cash flow purposes. 

 

Her attention then turned to the Investment Strategy going forward.  It was proposed to use Local Authorities and possibly Treasury Bills and Reverse Repurchase Agreements.  As for the MRP Policy which covered supported and unsupported borrowing, whilst no changes were proposed at this time for 2017/18, a review of the Policy had been undertaken by Arlington Close Ltd. and a report would be presented to the Committee for approval in the future. 

 

In concluding, she referred to unsupported Prudential Borrowing which consisted of two elements vis-à-vis 21st Century School and Welsh Government funding (LGBI).  For unsupported borrowing for 21st Century School the Council would make MRP Provision in line with the asset life and for the Welsh Government funded debt the Council would continue to make MRP Provision in line with revenue streams from Welsh Government. 

 

In response to a question from a Member relating to confirmation from Welsh Government of continued 21st Century Schools funding, the Principal Accountant indicated that Band B funding had yet to be confirmed.

 

Proposed Strategy 2017/18

 

As at 31st December, 2016 the Authority had placed all of its investments with either the 'Debt Management Account Deposit Facility' (DMADF) of the Bank of England which were guaranteed by the UK Government, or with UK Local Authorities.

 

The Authority would continue to use credit ratings from the three main rating agencies Fitch Ratings Ltd, Moody’s Investors Service and Standard & Poor’s to assess the risk of loss of investments.  The lowest available credit rating would be used to determine credit quality.  In addition, regard would be given to other available information on the credit quality of banks and building societies.

 

Interim Report

 

Insofar as the Council’s Treasury Management operations entered into for the period 1st April, 2016 to 31st December, 2016 were concerned, all activities were in accordance with the Council’s approved strategy on Treasury Management.  The undermentioned table set out the monies borrowed / repaid during this period.

 

Loan Type

Opening   Balance

Received

Repaid

Closing   Balance

 

01/04/2016

 

 

31/12/2016

 

£’000

£’000

£’000

£’000

PWLB

151,211

0

(812)

150,399

Other   Long Term Loans

6,000

0

0

6,000

WG   Concessionary Loan

2,100

0

0

2,100

Temporary   Loans

100

0

0

100

Total

159,411

0

(812)

158,599

 

The Council’s investments for the period to 31st December, 2016 is set out below:

 

Borrowing   Institution

Opening   Balance

Received

Repaid

Closing   Balance

 

01/04/2016

   

31/12/2016

 

£’000

£’000

£’000

£’000

Local   Authorities

48,000

128,150

-111,150

65,000

Debt   Management Account Deposit Facility

30,600

1,371,350

-1,393,150

8,800

Total

78,600

1,499,500

-1,504,300

73,800

 

Interest at an average rate of 0.28% and amounting to £229,432 had been received from maturing investments for the first nine months of 2016/2017.

 

Annual Minimum Revenue Provision Statement 2017/18

 

Capital expenditure when financed by long term debt incurred two elements of cost, interest on and repayment of the principal sum borrowed.  The resources the Council must put aside in each year to repay the principal sum borrowed was known as the Minimum Revenue Provision (MRP).  The Local Authorities (Capital Finance and Accounting) (Wales) (Amendment) Regulations 2008, which became effective from 31st March, 2008, required:  “A local authority must calculate for the current financial year an amount of minimum revenue provision which it considers to be prudent”.

 

WG had issued guidance on what constituted prudent provision and this required the Council to approve an annual statement of its policy on calculating MRP.

 

The "Practitioners' Guide to Capital Finance in Local Government (2012 edition) " discusses four options for the prudent provision of MRP as follows:

 

Option 1 - The Regulatory Method, calculation of MRP provision by applying the statutory formula set out in the 2003 regulations.

 

Option 2 - Capital Financing Requirement (CFR) Method, calculation of MRP provision by multiplying the CFR at the end of the preceding year by 4%.

 

Option 3 - Asset Life Method, calculation of MRP provision by amortising expenditure over the estimated useful life for the relevant assets created.

 

Option 4 - Depreciation Method, calculation of MRP provision by making charges to revenue which are based on the proper practices for depreciation as they apply to the relevant assets.

 

The Council was required to have a consistent MRP policy.  It was therefore proposed that the MRP charge for 2017-2018 for capital expenditure would be calculated as in previous years using Option 1 as detailed above.  Taking into account the nature and age of the Council’s non-current assets, the Council had concluded that a 4% charge in line with the CFR Method was sufficient to ensure prudent provision for supported borrowing and this approach matched the funding stream from WG.

 

Capital expenditure incurred during 2017/18 would not be subject to a MRP charge until 2018/19.

 

The above Regulations also required that the Regulatory and CFR methodologies could only be used for expenditure incurred before 1st April, 2008 and expenditure incurred after that date which was supported through Revenue Support Grant (RSG).

 

Included in the 2017/18 revenue estimates were principal repayments totalling £0.428m in respect of Prudential (unsupported) Borrowing (i.e. not supported for Revenue Purposes).  Of this funding, £0.113m was in respect of two specific schemes Llantwit Learning Community and Penarth Learning Community.  The provision made in respect of these schemes was commensurate with asset life as estimated by the Council's External Valuer.  In addition £0.315m had been included in respect of the Local Government Borrowing Initiative (LGBI) funding from WG for 21st Century Schools and the Local Road Network Improvement scheme.  The provision in respect of LGBI schemes was commensurate with the applicable WG funding streams through RSG.

 

The Section 151 Officer considered that the estimated costs of unsupported borrowing were both prudent and sustainable.

 

RECOMMENDED -

 

(1)       T H A T the Treasury Management interim report for the period 1st April to 31st December, 2016 be endorsed.

 

(2)       T H A T the policy for making Minimum Revenue Provision in 2017/18 be endorsed.

 

(3)       T H A T the proposed 2017/18 Treasury Management and Investment Strategy be endorsed, it be noted thereafter it would be referred to Cabinet and Council for approval, including the following specific resolutions: 

  • The Authorised Limit for External Debt be set at £192,500,000 for 2016/17, £214,700,000 for 2017/18, £214,400,000 for 2018/19 and £220,300,000 for 2019/20.
  • The Operational Boundary for External Debt be set at £185,600,000 for 2016/17, £200,300,000 for 2017/18, £199,200,000 for 2018/19 and £205,700,000 for 2019/20.
  • The Section 151 Officer be given delegated authority within the total Authorised Limit and Operational Boundary as estimated for individual years to effect movement between the separately agreed limits for borrowing and other long term liabilities.
  • An upper limit is set on its fixed interest rate exposures of £161,100,000 for 2016/17, for 2017/18 of £190,400,000, for 2018/19 of £190,100,000 and for 2019/20 of £196,000,000 of its net outstanding principal sum on its borrowings / investments.
  • An upper limit is set on its variable interest rate exposures of £0 for 2016/17, 2017/18, 2018/19 and 2019/20 of its net outstanding principal sum on its investments.
  • An upper limit of £5,000,000 for 2016/17, £10,000,000 for 2017/18, £5,000,000 in 2018/19 and 2019/20 is set for total principal sums invested for over 364 days.
  • The amount of projected borrowing that is fixed rate maturing in each period as a percentage of total projected borrowing that is fixed rate for 2017/18 be set as below:

 

 

Upper Limit

Lower Limit

Under 12 months

20%

0%

12 months and within 24 months

20%

0%

24 months and within 5 years

30%

0%

 5   years and within 10 years

40%

0%

10 years and above

100%

0%

 

  • The Prudential Indicators set out in Appendix 1 be approved.
  • The Treasury Management Policy set out in Appendix 2 be endorsed.

 

Reasons for recommendations

 

(1)       To monitor the Treasury Management Interim Report.

 

(2)       To endorse the basis of the Minimum Revenue Provision calculation for 2017/18.

 

(3)       To allow the Treasury Management and Annual Investment Strategy to be prepared as required by the Local Government Act 2003.