Investment Strategy (2024)
Introduction
Crowland Parish Council appreciates the importance of prudently investing temporary surplus funds on behalf of Crowland Parish. The objective of our Investment Strategy is to try to control risk and optimise returns from the investments made. Our Investment Strategy complies with relevant Local Government legislation and Guidance (note 1)
Definitions
The following definition of terms apply
Investment covers all of the financial assets of a local authority as well as other non-financial assets that the organisation holds primarily or partially to generate a profit; for example, investment property portfolios. This may therefore include investments that are not managed as part of normal treasury management processes or under treasury management delegations. For the avoidance of doubt, the definition of an investment also covers loans made by a local authority to one of its wholly-owned companies or associates, to a joint venture, or to a third party
A Credit rating agency is one of the following:
• Standard and Poor’s
• Moody’s Investors Service Ltd;
• Fitch Ratings Ltd 2.1.
A loan is a written or oral agreement where a local authority temporarily transfers cash to a third party, joint venture, subsidiary or associate who promises to return it according to the terms of the agreement, normally with interest. This definition does not include a loan to another local authority, which is classified as a specified investment.
Investment Policy
Crowland Parish Council will operate a prudent investment policy giving priority to three key objectives in the following order of importance:
1. Security – protecting the capital sum invested against loss.
2. Liquidity – ensuring that funds invested are available for expenditure when needed
3. Yield (return) – once appropriate levels of security and liquidity have been determined, Crowland Parish Council will strive for the best rate of return consistent with this.
Investment Strategy 2024/2025
Investments held for treasury management purposes.
These are made to support effective treasury management activities e.g. cash flow management, banking and investing cash deposits
Other investments.
Crowland Parish Council owns eight residential properties in the parish of Crowland which are leased to tenants at a commercial rent. The rental income, after deducting maintenance expenses, is used to reduce our precept requirement.
Crowland Parish Council also owns 194.54 acres of agricultural land which are leased to tenants at a commercial rate.
Security
Financial Investments
• Specified Investments - these are made in sterling, for twelve months or less and are with a ‘high quality’ body or investment scheme or with the UK Government or another Local Authority. Crowland Parish Council will mainly make this type of investment. We consider UK banks and building societies that are protected by the Financial Services Compensation Scheme and investment schemes rated ‘A’ or above by a credit rating agency (note 3) to be ‘high quality’.
• Loans – Crowland Parish Council will make loans.
• Non-financial investments – the rental property held by Crowland Parish Council has no loans or borrowings secured against it. As such there are no concerns about loss in asset value relative to the capital invested.
Risk Assessment
• The Parish Council’s reserves are covered by the Financial Services Compensation Scheme up which protects savings up to a specified limit in the event of failure of a financial services firm. The current limit is £85,000 per authorised institution. Crowland Parish Council will strive to spread investments over different institutions and keep below the FSCS limit where possible. However, we will take into consideration the perceived risk of financial organisation failure compared with the administrative burden of managing numerous accounts.
• Crowland Parish Council’s aim is to invest via simple financial instruments which do not require expert knowledge. A residential lettings agency is employed to run the residential lettings and a Land Agent is employed to run the agricultural lettings.
• Our investment decisions will be based on publicly available information on yield and credit ratings. This information will be reviewed by the Finance Committee at least annually, and more often if there is a marked deterioration in performance, credit rating or market conditions. Crowland Parish Council will act to protect funds as necessary.
Liquidity
• The Responsible Finance Officer in consultation with the Finance Committee of Crowland Parish Council will ensure that funds invested are available for expenditure when needed by carrying out an annual cash flow forecast, before the start of the financial year, to determine the maximum period that funds may prudently be committed.
• General Reserves will be invested in deposits requiring no more than three months’ notice to allow quick access in case of emergency. Other designated reserves may potentially be invested for longer periods if Crowland Parish Council is satisfied that the funds will not be needed before the investment matures.
Capacity and Skills
• Crowland Parish Council recognises that our Officers and Cllrs might not have expertise in investment analysis. We aim to use simple financial instruments that do not require expert knowledge. Our annual investment strategy will be recommended by the RFO/Clerk and reviewed by the Finance committee prior to being presented to Crowland Parish Council for approval. If Crowland Parish Council should wish to consider more complex investment types, we will make training available to Officers and Cllrs as appropriate and/or get professional advice. Crowland Parish Council will not make investments unless we have enough understanding to make an informed decision.
Financial Regulations
This Strategy should be read in conjunction with Crowland Parish Council’s Financial Regulations.
Investment Approval
The Finance Committee has the delegated authority to consider and recommend any short-term investments, in accordance with the Annual Investment Strategy, subject to the final approval of the investment provider by the Full Parish Council. All resolutions relating to investments will be noted in the minutes of meetings.
Any decision on long term investments or loan activity may only be approved by the full council and noted in the minutes of the meeting.
Transparency
This strategy will be posted on the Parish website and a hard copy will be available from the Parish Clerk.
Review and Amendment of Regulations
The Investment Strategy will be reviewed annually. The Annual Strategy for the coming financial year will be prepared and reviewed by the Finance Committee which will then make a recommendation to the Full Council.
The council reserves the right to make variations to the Strategy at any time, subject to the approval of the Full Council. Any variations will result in an updated strategy being published.
Adopted at the Full Council Meeting on 5th August 2024
Next Review: March 2024
Notes:
1. The Government has issued Guidance on Local Government Investments (s16, Local Government Act 2003) which has statutory force and is mandatory where investments of a Parish Council are or are expected to exceed £100,000 at any point in a financial year.
2. Parish Councils have the power to invest for any purpose relevant to their functions under any enactment, or for the purposes of the prudent management of their financial affairs (s17, Local Government Act 2003)
3. A Credit Rating Agency is one of the following three companies:
• Standard and Poor’s
• Moody’s Investors Service Ltd
• Fitch Ratings Ltd