Council investments come under scrutiny
Perth and Kinross Council has given its Treasury the go ahead to invest in a broader range of banks and building societies.
It was decided at a meeting last week, on the recommendation of John Symon, the council’s head of finance, that it can now invest in those with certificates of deposit.
Previously, the council could only invest in banks with fixed deposits or notice deposits, resulting in a concentration of council investments.
Under this new ruling, investments will only be made where there is one year remaining in maturity, in an attempt to avoid capital loss.
At the meeting Councillor Willie Robertson questioned the profits made from the council’s investment in the Icelandic Central Bank.
Perth and Kinross Council withdrew Kinnoull Primary School at the Glee Challenge their funds in March, 2015, following the country’s financial crisis.
Mr Symon replied: “We invested £1m into the Icelandic Bank and when it reached the banking crisis our investment was at risk, but with regard to the money in capital generated £60,000 in interest, but lost £79,000 on interest rates because of exchange rates.
“However, the capital controls in Iceland have now been removed, so we can now access the rest of the money [£200].”
The council was updated on borrowing in the last quarter and told there were two Public Works Loan Board repayments.
The first was a fixed-rate loan of £1.5m which had reached maturity at a rate of 3.78% with an instalment of an EIP loan of £80.645.
The second repayment was a maturing local authority loan of £5m, which was borrowed for three years at 1.45%. Another short-term loan, which was taken out to meet the cashflow requirements over the council’s Christmas closedown period, was also repaid at the beginning of the financial quarter.
Four new fixed-rate Public Works Loan Board loans were borrowed in the last quarter, totalling £30m, and each was borrowed when the market was at historically low levels.
Investments through the council’s instant access, notice deposit accounts and money market funds went up to £7.6m compared to £3.9m in the previous quarter. Likewise, total investment went up to £53.7m from £52m. This is said to be due to increased levels of capital expenditure.
The council Treasury’s investment levels stood at £83.75m on June 29 2016, following £20m of borrowing in that particular month. The investment levels of £53.75m are therefore a decrease from this high in June 2016, and this reflects the increase in council expenditure and repaying of maturing loans, despite new borrowing of £30m.
The budgeted income from the council’s commercial property investments for the last financial year were projected to be £1.732m, however the latest predictions show this will be more like £1.872m because of delays in releasing sites in their commercial property portfolio to developers.
In the summary of the loans and reports on compliance for the Treasury, councillors were told there were no breaches in compliance in this period.