Treasury management for the Metropolitan Police Authority

Report: 6
Meeting: Metropolitan Police Authority
Date: 10 July 2000
By: Treasurer

Summary

This report recommends the formal adoption by the MPA of the CIPFA Code of Practice for Treasury Management in Local Authorities, and that the Finance Planning and Best Value Committee approves the Treasury Management Policy Statement in line with the Code and a Treasury Management Strategy for 2000/01.

A. Supporting information

Definition of treasury management

1. 'Treasury Management' is defined as:

"The management of the local authority's cash flows, its borrowings and its investments, the management of the associated risks, and the pursuit of the optimum performance or return consistent with those risks."*

*this definition is taken from paragraph 4 of the 'Code of Practice for Treasury Management in Local Authorities', CIPFA 1996

The need for a code of practice

2. In general local authorities and more recently, police authorities, have for many years needed to manage their cash receipts for the benefit of local tax payers, the national economy and those with whom they deal. In 1992 the Chartered Institute of Public Finance and Accountancy (CIPFA) first issued the Code of Practice for Treasury Management in Local Authorities as a result of the following developments.

• The collapse of certain banking institutions most notably the Bank of Credit and Commerce International (BCCI).
• The need for vigilance with regard to the legality of treasury management activities as demonstrated by a small number of well publicised cases.
• A growing awareness of the categories of risk to which parties in the financial markets may be exposed and a recognition of the need for sound risk management.

3. Adoption of the code is also a requirement of the Financial Management Code of Practice for police authorities which is issued by the Home Office.

Adoption of the code

4. The purpose of the Code at a strategic level is to:

• Support the quality and status of treasury management in local authorities.
• Provide guidance on the proper practices to be employed for treasury management.

5. At an operational level guidance is provided to chief financial officers of local authorities regarding:

• Allocation of responsibility among the relevant staff.
• The balance between security/risk and the rate of return.
• Effective management of risk.
• Reconciliation of the need for rapid decisions on dealing with the need to be accountable for the use of delegated authority.
• Mechanisms to satisfy the statutory obligations placed upon the monitoring officer and chief finance officer.
• Best practice at reporting at various levels in the authority.
• Performance measurement.

7. Copies of the Code are available for inspection by members of the Authority. An Executive Analysis appears as Appendix (A.i) to this report. It is recommended that:

• the code be formally adopted by the MPA;
• the Schedule appearing at Appendix (A.ii) be approved for incorporation with the Financial Regulations of the MPA.

Policy statement and strategy

8. The Code requires the preparation and approval by the authority of a Treasury Management Policy Statement and a Treasury Management Strategy for the year ahead. These documents will be reported for approval at the Finance, Planning and Best Value Committee on 20 July 2000.

B. Recommendations

1. That CIPFA's Code of Practice for Treasury Management in Local Authorities be formally adopted by the MPA (Appendix (A.i) and paragraph 7).
2. The material appearing at Appendix A.ii be approved for incorporation with the MPA's Financial Regulations; and
3. That Finance Planning and Best Value Committee be asked to approve the Treasury Management Policy Statement and the Treasury Management Strategy for 2000/01.

C. Financial implications

There are no direct financial implications of adopting this Code of Practice.

D. Review  arrangements

The decision to adopt the Code is a permanent one. The Finance Planning and Best Value Committee will keep under review its specific implications for Treasury Management in the MPA.

E. Background papers

The following is a statutory list of background papers (under the Local Government Act 1972 S.100 D) which disclose facts or matters on which the report is based and which have been relied on to a material extent in preparing this report. They are available on request to either the contact officer listed above or to the Clerk to the Police Authority at the address indicated on the agenda.

• CIPFA Code of Practice and Guide for Chief Finance Officers on Treasury Management in Local Authorities (1996 Revised Edition)

F. Contact details

The author of this report is Peter Martin.

For information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

Appendix A.ii: Schedule to be incorporated with the financial regulations of the MPA

1. This Authority adopts CIPFA's Code of Practice for Treasury Management in Local Authorities.

2. A treasury management policy statement setting out the matters detailed in paragraph 15 of CIPFA's Code of Practice for Treasury Management in Local Authorities shall be adopted by the Authority and thereafter its implementation and monitoring shall be delegated to the MPA Treasurer.

3. All money in the hands of the Authority shall be under the control of the officer designated for purposes of Section 127 of the Greater London Authority Act 1999 referred to in the Code as the Chief Finance Officer (CFO). For the MPA this officer is the MPA Treasurer.

4. At or before the start of the financial year the CFO shall report to the MPA or a suitable committee of the MPA on the strategy for treasury management it is proposed to adopt for the coming financial year.

5. All executive decisions on borrowing, investment or financing shall be delegated to the CFO who shall be required to act in accordance with CIPFA's Code of Practice for Treasury Management in Local Authorities.

6. The CFO shall report to the MPA or a suitable committee not less than quarterly in each financial year on the activities of the treasury management operation and on the exercise of delegated treasury management powers. One such report shall comprise an annual report on treasury management for presentation by 30 September of the succeeding financial year.

7. Should the CFO wish to depart in any material respect from the main principles of the Code, the reasons should be disclosed in a report to the MPA or a suitable committee.

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