VWHDC detailed treasury performance in 2021/22

Council treasury investments as at 31 March 2022

 

1.    The council’s treasury investments analysed by age as at 31 March 2022

 were as follows:

 

Table 1: maturity structure of investments at 31 March 2022:
	£000	% holding
Money market fund	16,500	11%
Cash available within 1 week	16,500	11%
Up to 3 months	30,500	20%
5-6 months	27,000	17%
6 months to 1 year	55,500	36%
Over 1 year	23,000	15%
Total cash deposits	152,500	98%
CCLA Property Fund	3,041	2%
Total investments	155,541	100%

 

 

 

2.    The majority of the funds invested were held in the form of fixed interest rate and term cash deposits. These provide some certainty over the investment return. 

3.    The investment profile is organised to ensure sufficient liquidity for revenue and capital activities, security of investments and to manage risks within all treasury management activities.

4.    The chart below shows in percentage terms how the portfolio above is spread across investment types:

 

Treasury investment income

5.    The total interest earned on treasury investments during 2021/22 was £0.74 million compared to the original budget estimate of £0.56 million as shown in table 2 below:

Table 2: Investment interest earned by investment type
		Annual	Actual	Variation
Investment type		Budget	Interest
		£000	£000	£000
Fixed term and call		471	644	173
CCLA Property Fund		87	100	13
Total Interest		558	744	186

 

6.    The actual rate of return achieved was £0.19 million higher than the original budget. This was primarily due to average balances throughout the year remaining higher than forecast.

7.    The actual average rate of return on internally managed treasury deposits for the year was 0.45 per cent.

 

Performance measurement

8.    A list of treasury investments as at 31 March 2022 is shown in appendix E. All investments were with approved counterparties. The average level of investments held was £146 million.  Table 3 below shows in summary the performance of the council’s treasury investments against the benchmarks set out in the Treasury Management Strategy. These benchmarks are used to assess and monitor the council’s treasury investment performance for each type of investment.

9.    The £146 million does not represent the council’s usable cash backed reserves, which at 31 March 2022 totalled £55 million including capital grants received in advance of spend.  The difference represents the council’s working capital balance and timing of cashflows.

Table 3: Treasury investment returns achieved against benchmark
	Benchmark return	Actual return	Growth (below)/above Benchmark	Benchmarks
Bank & Building Society deposits - internally managed	0.24%	0.51%	0.27%	3 Month SONIA
Property related funds (CCLA)*	22.52%	21.78%	(0.74%)	IPD balanced property unit trust index
* Returns include income and capital growth

 

 

 

10. Daily cashflow balances are managed in-house with the portfolio of fixed-term deposits, call accounts and money market fund balances benchmarked against the three-month SONIA rate, which was an average of 0.24 per cent for 2021/22.  The performance for the year of 0.51 per cent exceeded the benchmark by 0.27 per cent. 

11. The CCLA property fund initial principal investment of £2 million (April 2013) increased in value during 2021/22 from £2.6 million to £3 million.  Dividends received in the year totalled £0.1 million. Both the capital appreciation and the interest earned are included in the performance of 21.78 per cent achieved above.  The capital gain is however not realised and so for comparison purposes, the actual rate of return of income received during the year is 3.8 per cent compared with the Fund’s benchmark income return of 3.3 per cent.

 

Land and Property

12.The council holds a portfolio of investment properties, which includes land, offices and shops that are let on a commercial basis.  These assets are valued on an annual basis and had an average net book value of £5.1 million during 2021/22 (£5.7 million as at 31 March 2021).  Income generated was £0.3 million (£0.2 million in 2020/21).  This is equivalent to a gross return of 5.62 per cent.

13.Due to movement in property values and the exclusion of whole life costs, these rates of return should not be taken as a direct comparison with other classes of investment.

Liquidity and yield

 

14. The council uses short-term investments to meet daily cash-flow requirements and also aims to invest a proportion of the portfolio in longer-term instruments where possible. 

 

15. The average daily balance held in short-term notice accounts during 2021-22 was £31 million.