Agenda - pdf - Selby District Council

endeavoured to secure some deposits generating returns above the
budget estimate of 1.25%. These deposits have been placed for one
year with mainly other local authorities and government backed banks.
The budget monitoring for quarter 2 is forecasting that the Council will
achieve an additional £13k on its interest income estimate of £247k
giving £260k of which £226k would be allocated to the General Fund (an
additional £11k) and £34k to the Housing Revenue Account (an
additional £2k).
2.13 The average level of funds available for investment during the six
months to September was £22.571m. Of which £18.814m was invested
in fixed term deposits at an average of 1.28% and £3.757m was held in
the Council’s immediate access deposit account at a rate of 0.5%.
These funds were available on a temporary basis, and the level of funds
available was mainly dependent on the timing of precept payments,
receipt of grants and progress on the capital programme. The Council
holds approximately £17.5m of core cash balances made up of
earmarked reserves and capital receipts set aside to repay debt for
investment purposes (i.e. funds available for more than one year).
2.14 The Council has a benchmark of its budget target of 1.25% to reflect
performance investments. The average rate to September was 1.28%
for fixed term deposits and 0.5% for the instant access account giving
an overall average of 1.15% which is below benchmark. The overall
average rate currently forecast for the year if investments continue as
forecast is 1.245% (marginally below target). The Council’s cash flows
are remaining healthy and this is enabling the forecast for the amount of
interest earned to be above budget.
2.15 The impact of lower than forecast interest rates means that as
investments mature and are reinvested the interest earned will be less.
The forecast at the time that the budget was set was for interest rates to
start to rise in September 2011, 1.00% by March 2012 and reach 2.00%
by December 2012 this is now unlikely and the forecast has been
revised to 0.75% by December 2012 and 1.75% by December 2013.
The impact is that the interest rates currently on offer are averaging
between 0.4% for overnight up to 1.66% for one year.
2.16 The Council is a member of the CIPFA Treasury Management
benchmarking club, and data for the first three months of the year has
been received. During this period the Council underperformed the club
average of 1.18% with returns of 1.05%. Since then the lower rate
investments have been replaced with higher rate deposits which will
improve performance.
Borrowing
2.17 It is a statutory duty for the Council to determine and keep under review
its “Affordable Borrowing Limits”. The Council’s approved Prudential
Indicators (affordable limits) were outlined in the Treasury Management
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