Treasury Management Code of Practice 

The Authority will create and maintain, as cornerstones for effective treasury management: 

1. a treasury management policy statement, stating the policies, objectives and approach to risk management of its treasury management activities; and 

2. suitable Treasury Management Practices (TMPs), setting out the manner in which the organisation will seek to achieve those policies and objectives, and prescribing how it will manage and control those activities. 

Investment Management Practices (IMP) for investments which are not for treasury management purposes. 

The Authority will receive reports on its treasury and investment management policies, practices and activities, including as a minimum, an annual strategy and plan in advance of the year, a mid-year review and an annual report after its close, in the form prescribed in the TMPs and IMPs. 

The implementation and regular monitoring of its treasury management policies and practices will be undertaken by the Board. Responsibility for the execution and administration of treasury management decisions will be delegated to the Chief Finance Officer, who will act in accordance with the Authority’s policy statement and TMPs and IMPs, and CIPFA’s Standard of professional Practice on Treasury Management. 

The Authority nominates the Audit and Governance Committee to be responsible for ensuring effective scrutiny of the treasury management strategy and policies.  

The Authority nominates the Audit and Governance Committee to be responsible for ensuring effective scrutiny of the treasury management strategy and policies.  

Treasury Management Policy  

The Authority defines its treasury management activities as: The management of the Authority’s borrowing, investments and cash flows, including its banking, money market and capital market transactions; the effective control of the risks associated with those activities; and the pursuit of optimum performance consistent with those risks. 

The Authority regards the successful identification, monitoring and control of risk to be the prime criteria by which effectiveness of its treasury management activities will be measured. Accordingly, the analysis and reporting of treasury management activities will focus on their risk implications for the organisation, and any financial instruments entered into to manage these risks. 

The Authority acknowledges that effective treasury management will provide support towards the achievement of its business and service objectives. It is therefore committed to the principles of achieving value for money in treasury management, and to employing suitable comprehensive performance measurement techniques, within the context of effective risk management. 

The Treasury Management Practices (TMPs) will be applied to ensure that this Policy is delivered. The Authority will through the use of these practices ensure that security and liquidity are prioritised ahead of yield within the defined risk framework.  

Treasury Management Practices 

Treasury Management Practices (TMPs) set out the manner in which the Authority will seek to achieve its treasury management policies and objectives and how it will manage and control those activities. 

TMP1 Treasury Risk Management 

The Authority regards a key objective of its treasury management activities to be the security of the principal sums it invests. Accordingly, it will ensure that robust due diligence procedures cover all external investment. 

The Chief Finance Officer will ensure the design, implementation and monitoring of all arrangements for the identification, management and control of treasury management risk.  The Chief Finance Officer will report at least annually on their adequacy and suitability, and will report, as a matter of urgency, the circumstances of any actual or likely difficulty in achieving the Authority’s objectives in this respect, all in accordance with the procedures set out in TMP6 Reporting requirements and management information arrangements. 

In respect of each of the following risks, the arrangements, which seek to ensure compliance with these objectives, are set out. 

Credit and counterparty risk management 

The Authority regards a prime objective of its treasury management activities to be the security of the principal sums it invests. Accordingly, it will ensure that its counterparty lists and limits reflect a prudent attitude towards organisations with which funds may be deposited, or investments made, and will limit its investment activities to the instruments, methods and techniques referred to in TMP4 ‘Approved Instruments, methods and techniques’. It also recognises the need to have, and maintain, a formal counterparty policy in respect of those organisations with which it may borrow, or with whom it may enter into other financing or derivative arrangements. This will set out the organisation’s policy and practices relating to environmental, social and governance (ESG) investment considerations. 

The Authority’s arrangements have been formulated to restrict the exposure to risk by taking account of the credit standing of counterparties, and setting limits to different types of borrowers. 

The credit ratings of all three major rating agencies (Fitch, Moody’s and Standard & Poor’s ) will be used to ensure that commercial institutions satisfy the requirements of the current policy.  In essence the Authority looks for the highest rating from banks and sets lending limits against each one.  Banks and UK Building Societies that do not attract these ratings are not considered at all.  The actual ratings sought by the Authority may be varied as part of the regular review of lending policy and counterparties. 

Lending to other Local Authorities, and Public Bodies is allowed, with differing credit limits according to the type of institution. 

The List of Approved Counterparties is kept under close review and is subject to amendment in the light of changes to credit ratings, takeovers and mergers, or changes to the type of institution. 

Approved institutions are placed on the lending list, deposits may not be made to any institution, which does not conform to the requirements of the Lending List, nor is any transaction allowed to be entered into through any money broker not featuring on the approved list.   The financial press and other sources are monitored with a view to discovering cases where an institution on the List is in any difficulty, financial or otherwise.  If appropriate, any organisation will be immediately suspended from the list until such time that they demonstrate their creditworthiness.  The decision to suspend a counterparty is made by the Devon County Council Head of Pensions and Investments, and notified to other officers by the issue of a revised Approved List. 

Liquidity Risk Management 

The Authority will ensure it has adequate though not excessive cash resources, borrowing arrangements, overdraft or standby facilities to enable it at all times to have the level of funds available which are necessary for the achievement of its business and service objectives. 

Should borrowing be required, the Authority will not borrow earlier than required to meet cashflow needs unless there is a clear business case for doing so, and will  only do so for the current capital programme, to fund future debt maturities, or to ensure an adequate level of short term investments to provide liquidity for the Authority. 

The daily cash flow is managed by officers in order to ‘smooth’ the flow of funds into and out of the Authority, ensuring best returns on surplus funds, whilst minimising borrowing costs on days where there is a shortage.  Short term borrowing and lending is generally undertaken in periods of under one month to ensure as far as is possible that on no one day should there be a requirement to have to fund shortages in excess of £1 million.  Days when it is known that large outflows of money will take place e.g. payroll dates, are obvious dates to ensure there is sufficient liquidity.  

Balances that are identified as not being for immediate use, say within the next few months, may be invested for longer periods. 

Interest Rate Risk Management 

The Authority will manage its exposure to fluctuations in interest rates with a view to containing its net interest costs or revenue, in accordance with its Treasury Management Policy and Strategy and in accordance with TMP6 Reporting requirements and management information arrangements. 

It will achieve these objectives by the prudent use of its approved financing and investment instruments, methods and techniques, primarily to create stability and certainty of costs and revenues, but at the same time retaining a sufficient degree of flexibility to take advantage of unexpected, potentially advantageous changes in the level or structure of interest rates. This should be subject to the consideration and, where required, approval of any policy or budgetary implications. 

The level of exposure to Interest Rate Risk depends on the balance of fixed to variable monies.  Here the risk is twofold. Being locked in to fixed funding when rates are falling, or failing to take advantage at a time when rates are perceived as low, or are forecast to rise; conversely, being locked into investments when rates are rising, and being unable to take advantage of this situation. 

The Authority has a policy of borrowing the fixed rate long-term element of its loans portfolio with loans from the Public Works Loan Board (PWLB) or the Money Market.  This policy is subject to annual reassessment as part of the adoption of the Treasury Policy Statement. 

Interest Rate Risk is not increased by this policy as it is still possible to manage by switching existing loans from fixed to variable or vice versa, or re-scheduling existing debt, i.e. repaying existing debt, and re-borrowing over a shorter, or perhaps longer period.  However, the existing arrangements operated by the Board of different rates for repaying loans as to those applied to new advances, mean that such changes are often uneconomic.  Regard must always be had of the potential costs of any re-scheduling, as often they will attract a premium payable to the lender.  This point is also referred to later under ‘refinancing risk.’ 

Market Loans, usually in the form of Lender’s Option Borrower’s Option (LOBOs), offer an alternative to borrowing from the PWLB.  Here money is borrowed for an initial period against the issue of a Bond, and gives the Lender the Option of varying the rate at the end of the period.  If this Option is taken, the Authority as Borrower can in turn agree to the new rate, or repay the loan without penalty.  The flexibility offered by such loans can be a great help in managing this type of risk.  The lender, who has the choice to (or not to) exercise the first option, has to be seen as having the greater control of the arrangement.  

On the investment side, the use of Call Accounts, Notice Money, Money Market Funds, and Callable Deposits all introduce a degree of flexibility not offered by fixed term investments.  

The CIPFA Code requires that any hedging tools such as derivatives are only used for the management of risk and the prudent management of financial affairs. Derivatives are securities whose price is dependent upon or derived from one or more underlying assets, the most common being stocks, bonds, commodities, currencies, interest rates and market indexes. They can be used to hedge (provide insurance) against risk or for speculative purposes; however it is the Authority’s policy not to use derivatives in its treasury management activities.  

Exchange Rate Risk Management 

The Authority will manage its exposure to fluctuations in exchange rates so as to minimise any detrimental impact on its budgeted income/expenditure levels. 

It will achieve this objective by the prudent use of its approved financing and investment instruments, methods and techniques, primarily to create stability and certainty of costs and revenues, but at the same time retaining a sufficient degree of flexibility to take advantage of unexpected, potentially advantageous changes in the level or structure of exchange rates. The above is subject at all times to the consideration and, if required, Authority approval of any policy or budgetary implications. 

The risk from fluctuating exchange rates is not material as far as the Authority is concerned, as there is currently very little of either income or expenditure transacted in currencies other than Sterling. 

Inflation Risk Management 

The Authority will keep under review the sensitivity of its treasury assets and liabilities to inflation, and will seek to manage the risk accordingly in the context of the whole organisation’s inflation exposures.  

During periods of low and stable inflation, there is little requirement for active consideration of its impact.  The key objectives are that investments reap the highest real rate of return, with debt costing the lowest real cost.  In periods of higher or more volatile inflation, projections of inflation will become part of the debt and investment decision-making criteria, both strategic and operational. 

Refinancing Risk Management  

The Authority will ensure that its borrowing and other long term liabilities are negotiated, structured and documented, and the maturity profile of the monies so raised is managed, with a view to obtaining offer terms for renewal or refinancing, if required, which are competitive and as favourable to the organisation as can reasonably be achieved in the light of market conditions prevailing at the time. 

It will actively manage its relationships with its counterparties in these transactions in such a manner as to secure this objective, and will avoid over-reliance on any one source of funding if this might jeopardise its achievement. 

External long term funding is arranged by the Treasury staff in accordance with the Treasury Strategy, which is adopted by the Authority’s members before the start of each financial year.  All borrowings are with either the Public Works Loan Board or a major bank as lender. 

Loans are offered by the Board over periods of one to fifty years and can be either at fixed or variable rates.  There are also three methods of repaying loans; Maturity, by Equal Instalments of Principal (EIP), or as Annuity loans 

PWLB loans are fairly flexible; variable loans can be converted to fixed loans and vice versa, debt can be re-scheduled over different periods.  Re-scheduling existing fixed rate debt however introduces an element of refinancing risk, which is increased in re-scheduling loans with long maturity profiles.  The penalty (or premium) payable is dependent on the relationship between the loan rate and the current repayment rate for loans of a period equal to the unexpired term.  As PWLB rates are reviewed daily, the timing of the rescheduling exercise is important if the costs of any penalties are not to cause problems to budgeted expenditure levels. 

Legal And Regulatory Risk Management 

The Authority will ensure that all of its treasury management activities comply with its statutory powers and regulatory requirements.  It will demonstrate such compliance, if required to do so, to all parties with whom it deals in such activities. In framing its credit and counterparty policy under TMP1 ‘credit and counterparty risk management’, it will ensure that there is evidence of counterparties’ powers, authority and compliance in respect of the transactions they may effect with the organisation, particularly with regard to duty of care and fees charged. 

The Authority recognises that future legislative or regulatory changes may impact on its treasury management activities and, so far as it is reasonably able to do so, will seek to minimise the risk of these impacting adversely on the Authority. 

Authority officers carry out their duties with reference to Local Government Acts and Regulations, and in accordance with the Authority’s Treasury Management Policy. 

In framing the Lending List, reference is made to official circulars from the Bank of England and to Credit Agency reports in order to vet potential counterparties.  In return, the Authority, if requested, will provide to those institutions, documentation to support the Authority’s and Authority Officer’s powers to enter into any transaction. Annual Accounts, Treasury Management Strategy Statements, and Schemes of Delegation are exchanged with counterparties. 

Under no circumstances are officers involved in cash management allowed to borrow or lend for the purpose of generating surpluses from speculative money market dealings. 

Operational Risk, Including Fraud, Error And Corruption 

The Authority will ensure that it has identified the circumstances that may expose it to the risk of loss through inadequate or failed internal processes, people and systems or from external events. Accordingly, it will employ suitable systems and procedures and will maintain effective contingency management arrangements to these ends. 

Day to day treasury management activities are undertaken on behalf of the Authority by officers of Devon County Council. Systems and procedures are in place to ensure that all money market deals are documented and authorised. 

Proprietary systems are used to record money market transactions (Logotech Treasury Management), and to process transactions (Barclays.net). Both of these systems are operated with a clear division of duties between personnel involved in data entry, checking, and authorisation of transactions.  Both systems are accessed only through a system of passwords. Reports and records from the systems also allow independent checks by others, for example Internal Audit, on the accuracy and completeness of all transactions, and to verify that they were made in accordance with agreed policy. 

A summary of each day’s activity is kept which shows the opening bank balances, and record of individual receipts and payments to be transacted during the day.  This allows a forecast to be made of the end of day balance, and from this, the requirement to either borrow or lend funds. 

Generally, if the forecast closing balance is less than £100,000 overdrawn, it is not economic to borrow at rates just marginally below the rate payable by having an overdrawn balance.  The transaction costs, and the cost of brokerage, will more than outweigh any saving of interest. 

A forecast credit balance of anything below £250,000 will not be offered to the ‘market’, but will be simply kept with Barclays Bank. 

All borrowing is conducted via money brokers, and every effort is made to ensure that no one broker is given a disproportionate amount of business. 

Lending can be arranged either direct with counterparties, or via a broker (as lending does not attract brokerage).  It is clearly important to show that the interest rate for deposits made was competitive, and so a record is kept of rates available from other potential borrowers on the day. 

Deals are entered into the Logotech system, and reports produced from it confirming the details entered, and a current list of all outstanding borrowing and lending. The Barclays.net system is used to electronically transfer funds where deposits have been agreed, or where borrowings are to be repaid.  Confirmation reports of data input to Barclays.net are created, and together with the Logotech reports and the Summary Sheet are passed to another section for checking and validation. 

Authorisation to release electronic payments is restricted to a small number of senior officers, each of whom has been allocated a unique sign in. 

Arrangements are in place to ensure that the roles of creator, validation and authoriser are covered for holidays and other absences.  

Officers responsible for cash management follow the recommended procedures set out in the London Code of Conduct.  This code requires that: 

• Officers should not disclose or discuss, or press others to disclose or discuss, any information relating to specific deals transacted without permission from the relevant counterparty or broker; 
• Visits to or from brokers should not be organised without the express permission of a senior officer. Any hospitality received must be declared and recorded; 
• The dealer must bear in mind that in accepting a firm price, they are committing the Authority to dealing at that rate.  If a dealer wishes merely an indicative price, this must be made clear; and 
• Brokers must be supplied with a copy of the Authority’s current approved Counterparty Lending List. 

Price Risk Management 

The Authority will seek to ensure that its stated treasury management policies and objectives will not be compromised by adverse market fluctuations in the value of the sums it invests, and will accordingly seek to protect itself from the effects of such fluctuations. 

The majority of lending is in the form of cash deposits.  However a proportion of the Authority’s funds may be invested in alternative forms of investment where the capital value may fluctuate. These will be managed in such a way as to minimise the risk of financial loss. 

Commercial Investments 

The Authority does not currently have a policy of making commercial investments outside of its treasury management activity for mainly financial reasons. All capital investments outside of treasury management activities are held explicitly for the purposes of operational services, including regeneration, and are monitored through existing control frameworks.  

TMP2 Performance Measurement 

The Authority is committed to the pursuit of value for money in its treasury management activities, and to the use of performance methodology in support of that aim, within the framework set out in its treasury management policy statement. 

Accordingly, the treasury management function will be the subject of ongoing analysis of the value it adds in support of the Authority’s stated business or service objectives.  It will be the subject of regular examination of alternative methods of service delivery, of the availability of fiscal or other grant or subsidy incentives, and of the scope for other potential improvements. 

The review of treasury management decisions is carried out at regular officer meetings held to discuss treasury matters.  This forum reviews past actions as well as considering the period ahead. 

The minutes of these meetings are made available to External Audit as part of their Annual Audit, and to Internal Audit should they be required. 

The performance of the treasury management function will be measured against agreed benchmarks. Performance criteria will include measures of effective treasury risk management in addition to measures of financial performance (income or savings). 

Long term debt is judged in terms of average rate of all external debt, and comparisons made with previous years. 

Investment earnings are measured against published benchmarks, including Base Rate and the Sterling Overnight Index Average (SONIA). 

At present the Authority has delegated implementation of treasury management activity to Devon County Council and has no plans to appoint other external cash fund managers.  It is not felt that the cost of such an appointment is likely to be covered by any marginal return over what is currently being achieved internally.  However, this matter needs to be reviewed from time to time, and records are kept of the performance of a number of fund managers. 

TMP3 Decision-Making and Analysis 

Devon County Council will maintain full records of its treasury management decisions taken on behalf of the Authority, and of the processes and practices applied in reaching those decisions, both for the purposes of learning from the past, and for accountability, e.g. demonstrating that reasonable steps were taken to ensure that all issues relevant to those decisions were taken into account at the time. 

In respect of every decision made, Devon County Council’s Treasury staff will have certainty about the legality of the transaction, and be content that the transaction helps deliver the Authority’s objectives as set out in the Strategy Statement. 

Third parties will have been checked to ensure their credit worthiness and to ensure that limits have not been exceeded.  Rates will be fully checked against the market to ensure they are competitive. 

With particular regard to borrowing, market and economic factors will influence the timing of any funding, the most appropriate period, and the repayment profile. 

Similarly, before investing, account will be taken of the existing cash flow, and market conditions, before fixing the optimum period. 

Devon County Council employs Treasury Management Advisors, who are able to ensure that the officers are informed of any potential changes that may affect treasury decisions. 

Records are kept not only of all transactions, but also of all documents that were a part of reaching the decision.  For example, when investing, bids will be obtained from a number of banks, and a record kept of these to demonstrate that the one taken was competitive. 

TMP4 Approved Instruments, Methods and Techniques 

The Authority will undertake its treasury management activities by employing only those instruments, methods and techniques detailed, and within the limits defined in ‘TMP1, Risk Management’. 

The following are approved activities performed by the Authority: 

1. Borrowing; 

2. Lending; 

3. Debt repayment and rescheduling; 

4. Consideration, approval and use of new financial instruments and treasury management techniques; 

5. Managing the underlying risk associated with capital financing and surplus funds; and 

6. Managing cash flow. 

The Authority’s policy is not to use derivatives in its treasury management. 

There are a number of ways of raising external capital finance, which are set out in Local Government Acts,  

The Chief Finance Officer considers borrowing from the Public Works Loan Board and from banks to be the most appropriate form of borrowing, but alternatives to these, which are allowed to Local Authorities, may well be considered. 

(Increasingly, there are other potential sources for the funding of capital projects, e.g. Private Finance arrangements, or the use of leasing, but they are not considered here). 

The majority of lending is in the form of cash deposits.  However a proportion of the Authority’s funds may be invested in alternative forms of investment where the capital value may fluctuate. These will be managed in such a way as to minimise the risk of financial loss. The potential list of alternative forms of investment includes UK Government Gilts, bond funds and property funds, but only those specified within the annual Treasury Management Strategy shall be permitted. 

The Authority has reviewed its classification with financial institutions under MIFID II and will seek elective professional client status where required in order to access the investment opportunity set out in its treasury management policies and strategy. The Authority will set out in its annual treasury management strategy those organisations with which it is registered as a professional client and those with which it has an application outstanding to register as a professional client. 

TMP5 Organisation, Clarity and Segregation of Responsibilities, and Dealing Arrangements 

The Authority considers it essential, for the purposes of the effective control and monitoring of its treasury management activities, and for the reduction of the risk of fraud or error, and for the pursuit of optimum performance, that these activities are structured and managed in a fully integrated manner, and that there is at all times a clarity of treasury management responsibilities.  

The principles on which this will be based is a clear distinction between those charged with setting treasury management policies and those charged with implementing and controlling these policies, particularly with regard to the execution and transmission of funds, the recording and administering of treasury management decisions, and the audit and review of the treasury management function.  

If and when the Authority intends, as a result of lack of resources or other circumstances, to depart from these principles, the Chief Finance Officer will ensure that the reasons are properly reported in accordance with TMP6 Reporting requirements, and the implications properly considered and evaluated. 

The Chief Finance Officer will fulfil all such responsibilities in accordance with the Authority’s policy statement and TMPs and, as a CIPFA member, the Standard of Professional Practice on treasury management.  The Chief Finance Officer will ensure that there are clear written statements of the responsibilities for each post engaged in treasury management, and the arrangement for absence cover. 

The Chief Finance Officer will ensure there is proper documentation for all deals and transactions, and that procedures exist for the effective transmission of funds. 

There are a number of bodies and individuals with responsibilities in this area. 

The Board

The Board will receive reports on treasury management policies, practices and activities, including audit reports. As a minimum, each year, the Board will have to consider: 

• The Treasury Strategy Report, setting out the strategy and plans to be followed in the coming year.  This report is part of the Budget process; 
• A Mid-Year Monitoring Report; and 
• An Annual Treasury Management Stewardship Report on the performance of the Treasury Management function, and highlighting any areas of non-compliance with agreed policy. (The content of these three reports are more fully explained in TMP 6 ‘Reporting Arrangements’.) 

The Board is required to approve any amendments to the organisation’s adopted Treasury Management Policy Statement, and the selection of external service providers, including agreeing terms of appointment. 

The Chief Finance Officer  

The Chief Finance Officer is responsible for recommending (changes to) Treasury Management Policies to the Board for approval, and for ensuring they receive as a minimum, the three annual reports referred to above.  The Chief Finance Officer will ensure that Treasury Policies are adhered to, and if not will bring the matter to the attention of elected members as soon as possible. 

The Chief Finance Officer will receive reports from the Treasury Team, both Internal and External Audit, and from other sources regarding performance.  It is the responsibility of the Chief Finance Officer to consider such reports, and any recommendations arising from them. 

Prior to entering into any long term borrowing, lending or investment transaction, it is the responsibility of the Chief Finance Officer to be satisfied, by reference to the Devon County Council Investment Team that the proposed transaction does not breach any statute, external regulation or the Authority’s Financial Regulations. 

The Chief Finance Officer has delegated powers to take the most appropriate form of borrowing from the approved sources, and to take the most appropriate form of investments in approved instruments.  In practice these powers are in turn delegated to the Devon County Council Investment Team. 

The Head of Pensions and Investments (Devon County Council) 

The Head of Pensions and Investments needs to ensure the adequacy of treasury management resources and skills, the effective division of responsibilities within the treasury management function, and that all transactions are authorised in accordance with the financial regulations of the Authority. 

The Treasury Management Team (Devon County Council) 

The Treasury management Team are responsible for optimising the Authority’s investment returns commensurate with minimum risk, and in accordance with agreed policy and strategy. 

Nominated team members are responsible for the execution of transactions, and for ensuring that they are documented in accordance with agreed practice. 

In performing their roles they need to be aware of maintaining relationships with third parties and external service providers, which may well lead to identifying and recommending opportunities for improved practice. 

Reports, both verbal and written are required to be made to the Chief Finance Officer and the Head of Pensions and Investments. 

Internal Audit (Devon Assurance Partnership) 

The responsibilities of Internal Audit include ensuring compliance with approved policy and procedures, reviewing division of duties and operational practice, assessing value for money from treasury activities, and undertaking probity audit of the treasury function. 

TMP6 Reporting Requirements and Management Information Arrangements 

The Board will ensure that regular reports are prepared and considered on the implementation of its treasury management policies; on the effects of decisions taken and the transactions executed in pursuit of those policies; on the implications of changes, particularly budgetary, resulting from regulatory, economic, market or other factors affecting its treasury management activities; and on the performance of the treasury management function. 

Before the start of each financial year, the Board must adopt the Treasury Management Strategy.  The Strategy sets out the expected treasury activities for the forthcoming year, and is concerned with: 

1. The prospects for future interest rates; 

2. The expected strategy with regard to borrowing and temporary investments (including the appointment of external managers); and 

3. Policies regarding debt redemption and rescheduling. 

A mid-year monitoring report will bring the Board up to date with actions taken. This will draw on the regular meetings which the Chief Finance Officer has with the Devon County Council Head of Pensions and Investments and Treasury staff to consider activity to date, and to discuss particular aspects of treasury management activity. 

An annual Treasury Management Stewardship Report will be presented to the Audit and Governance Committee, and then to the Board at the end of the financial year.  The Treasury Management report includes:  

1. A comprehensive picture for the financial year of all treasury policies, plans, activities and results; 

2. Details of transactions executed and their revenue (current) effects; 

3. A report on risk implications of decisions taken; 

4. Monitoring of compliance with approved policy, practices and statutory/regulatory requirements. 

Details of treasury management indicators and any other investment indicators required by regulation.  

1. Monitoring of compliance with powers delegated to officers; 

2. The degree of compliance with the original strategy and explanation of deviations; 

3. An explanation of future impact of decisions taken on the organisation; 

4. Measurements of performance; and 

5. A report on compliance with CIPFA Code recommendations. 

TMP7 Budgeting, Accounting and Audit Arrangements  

The Chief Finance Officer will prepare, and the Board will approve and, if necessary, from time to time amend, an annual budget for treasury management. This will bring together all of the costs involved in running the treasury management function, together with associated income.  The matters to be included in the budget will at a minimum be those required by statute or regulation, together with such information as will demonstrate compliance with TMP1 ‘Risk Management’, TMP2 ‘Performance Measurement’, and TMP4 ‘Approved Instruments, Methods and Techniques’. 

The Treasury Management Budget or supporting papers will identify 

1. The basis of any recharges from Devon County Council for the undertaking of treasury management activity on behalf of the Authority; 

2. Interest and other investment income; 

3. Debt and other financing costs; 

4. Bank and overdraft charges; 

5. Brokerage, commissions and other transaction-related costs; and 

6. External advisors’ and consultants’ charges. 

The Chief Finance Officer will exercise effective controls over this budget, and will report upon and recommend any changes required in accordance with TMP6 ‘Reporting Requirements and Management Information Arrangements’. 

The Authority will account for its treasury management activities, for decisions made and transactions executed, in accordance with appropriate accounting practices and standards, and with statutory and regulatory requirements in force for the time being. 

The Authority will ensure that its auditors, and those charged with regulatory review, have access to all information and papers supporting the activities of the treasury management function as are necessary for the proper fulfilment of their roles, and that such information and papers demonstrate compliance with external and internal policies and approved practices. 

TMP8 Cash and Cash Flow Management 

Unless statutory or regulatory requirements demand otherwise, all monies in the hands of the Authority will be under the control of the Chief Finance Officer, and will be aggregated for cash flow and investment management purposes.  Cash flow projections will be prepared on a regular and timely basis, and Devon County Council’s Head of Investments will ensure that these are adequate for the purposes of monitoring compliance with TMP1 regarding Liquidity Risk Management, and for the purpose of identifying future borrowing needs (using a liability benchmark where appropriate). 

A Cash Flow Report is produced at the start of each financial year, based upon information contained in the published Capital and Revenue Budgets. 

Items of income and expenditure are examined and in discussion with finance staff from the different services, a time dimension is attached to the flows of cash. 

All of the cash flow data is then entered into the Logotech Treasury Management System, which also contains information relating to all of the Authority’s treasury transactions, both lending and borrowing. 

Actual receipts and payments are monitored against the forecast, and regular discussions are held with services staff who are likely to be able to explain the variations. The forecast is updated in the light of them.  

TMP9 Money Laundering 

The Authority is alert to the possibility that it may become the subject of an attempt to involve it in a transaction involving the laundering of money.  Accordingly, it will maintain procedures to minimise the risk of any such event occurring, and for verifying and recording the identity of counterparties and reporting suspicions.  It will also ensure that staff involved in treasury transactions are properly trained. 

The source of all monies received by the Authority is required to be identified.  Major unbudgeted income or receipts which had not been forecasted are investigated. 

The Authority does not accept loans from individuals.  All loans are obtained from the Public Works Loan Board or from authorised institutions under the Banking Act 1987.  The names of these institutions formerly appeared on the Bank of England’s quarterly list of authorised institutions, as maintained by the Financial Conduct Authority. 

TMP10 Staff Training and Qualifications 

Devon County Council recognises the importance of ensuring that all staff involved in the treasury management function are fully equipped to undertake the duties and responsibilities allocated to them.  It will therefore seek to appoint individuals who are both capable and experienced and will provide training for staff to enable them to acquire and maintain an appropriate level of expertise, knowledge and skills. The Chief Finance Officer will recommend and implement the necessary arrangements, including the specification of the expertise, knowledge and skills required by each role or member of staff. 

Career development and planning for succession are similarly the responsibility of the Departmental Management.  Qualifications that are required for all treasury posts are contained in their job descriptions. 

The Authority’s Chief Finance Officer, as a member of CIPFA, is committed to her professional responsibilities through both personal compliance and by ensuring that relevant staff are appropriately trained. 

She personally, and through her management team, accepts that these matters are ones that should be regularly assessed to ensure compliance. 

The Chief Finance Officer will ensure that Board and committee  members tasked with treasury management responsibilities, including those responsible for scrutiny, have access to training relevant to their needs and responsibilities. 

Those charged with governance recognise their individual responsibility to ensure that they have the necessary skills to complete their role effectively. 

TMP11 Use of External Service Providers 

The Board recognises that responsibility for treasury management decisions remains with the Board at all times. It recognises that there may be potential value in employing external providers of treasury management services, in order to acquire access to specialist skills and resources. 

If and when it employs such service providers, it will ensure it does so for reasons which will have been submitted to a full evaluation of the costs and benefits.  It will also ensure that the terms of their appointment and the methods by which their value will be assessed are properly agreed and documented, and subjected to regular review. 

The Board will ensure, where feasible and necessary, that a spread of service providers is used, to avoid over-reliance on one or a small number of companies.  Where services are subject to formal tender or re-tender arrangements, legislative requirements will always be observed.  The Board will be mindful of the requirements of the Bribery Act 2010 in their dealings with external providers. The monitoring of such arrangements rests with the Chief Finance Officer. 

TMP12 Corporate Governance 

The Authority is committed to the pursuit of proper corporate governance throughout its businesses and services, and to establishing the principles and practices by which this can be achieved.  Accordingly, the treasury management function and its activities will be undertaken with openness and transparency, honesty, integrity and accountability. 

The Authority has adopted and has implemented the key principles of the Code.  This, together with the other arrangements detailed in this document, are considered vital to the achievement of proper corporate governance in treasury management, and the Chief Finance Officer will monitor and, if necessary, report upon the effectiveness of these arrangements. 

Investment Management Practices 

For non-treasury management investments, the Board should ensure that effective risk and performance management arrangements are in place. These should include: 

1. Investment objectives. 

2. Investment criteria. 

3. Risk management, including risk identification, controls, management and monitoring for any material non-treasury investment portfolios. 

4. Performance measurement and management, including methodology and criteria for assessing the performance and success of non-treasury investments. 

5. Decision making, governance and organisation, including a statement of the governance requirements for decision making in relation to non-treasury investments, and arrangements to ensure that appropriate professional due diligence is carried out to support decision making. 

6. Reporting and management information, including where and how often monitoring reports are taken. 

7. Training and qualifications, including how the relevant knowledge and skills in relation to non-treasury investments will be arranged. 

The above issues should be addressed by the service areas concerned in relation to any financial investments undertaken in support of their service priorities. A summary will be provided in the annual treasury management strategy.