Treasury Management Policy. Treasury Management Policy. Working Together. August Borders College 24/10/2011.

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1 Working Together Treasury Management Policy Treasury Management Policy August 2011 Borders College 24/10/ Working Together

2 1.0 Introduction 1.1 Treasury Management is defined as The management of the College s investments and cash flows, 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. 1.2 Borders College regards the successful identification, monitoring and control of risk to be the prime criteria by which the 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 College. 1.3 The College 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. 1.4 This policy sets out the College s approach to Treasury Management and identifies the key principles which the College will apply. 2.0 Scope 2.1 The College adopts the key recommendations of the Chartered Institute of Public Finance and Accountancy (CIPFA) s Treasury Management in the Public Services: Code of Practice (the Code), as described in section 4 of the Code. 2.2 Accordingly, the College will create and maintain, as the cornerstones for effective treasury management: - A Treasury Management Policy Statement (as given in the introduction), stating the policies, objectives and approach to risk management of its treasury management activities. Borders College 24/10/ Working Together

3 Suitable Treasury Management Practices (TMPs), setting out the manner in which the College will seek to achieve those policies and objectives, and prescribing how it will manage and control those activities. The contents of the policy statement and TMPs will follow the recommendations contained in Sections 6 and 7 of the Code, subject only to amendment where necessary to reflect the particular circumstances of this College. Such amendments will not result in the College materially deviating from the Code s key recommendations. 2.3 This policy will apply to all banking, money market and capital market transactions and to all staff involved in such transactions. 3.0 Key Principles 3.1 The key principles that the College will use in approaching treasury management activity can be found in the following Treasury Management Practices (TMPs): TMP1 Risk Management a) Liquidity Risk Management The College 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 to it which are necessary for the achievements of its business/service objectives. The College will only borrow in advance of need where there is a clear business case for doing so and will only do so for the current capital programme or to finance future debt maturities. To meet this principle, it will employ the following practices: - i. The College s cash balances will not be in debit by more than 250,000 in total. ii. The College s overdraft facility over all of its accounts will be maintained at no more than 250,000. Borders College 24/10/ Working Together

4 b) Interest Rate Risk Management The College will manage its exposure to fluctuations in interest rates with a view to containing its interest costs, or securing its interest revenues, in accordance with the amounts provided in its budgetary arrangements as amended in accordance with TMP6 Reporting requirements and management information arrangements. It will achieve this 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 the subject to the consideration and, if required, approval of any policy or budgetary implications. To meet this principle, it will employ the following practices: - i. The College will budget for income from interest by using a spot rate ruling at the budget date. ii. The College will maximise its interest rate return where possible, without exposure to risk. iii. The College will consider hedging instruments where major borrowing is undertaken together with consideration of the proportions of debt, which should be fixed, and variable. c) Exchange Rate Risk Management The College will manage its exposure to fluctuations in exchange rates so as to minimise any detrimental impact on its budgeted income/expenditure levels. Borders College 24/10/ Working Together

5 d) Credit and Counterparty Risk Management The College regards a key 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, 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 will therefore maintain, a formal counterparty contract in respect of those organisations from which it may borrow, or with whom it may enter into other financing arrangements. Deposits will be restricted to: - The top building societies. The English and Scottish clearing banks and subsidiaries. Other banks as specified by the College having regard to Standard & Poors and Moodys Credit References. e) Refinancing Risk Management The College will ensure that its borrowing, private financing and partnership arrangements are negotiated, structured and documented, and the maturity profile of the monies so raised are managed, with a view to obtaining offer terms for renewal or refinancing, if required, which are competitive and as favourable to the College 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 achievement of the above. Borders College 24/10/ Working Together

6 f) Legal and Regulatory Risk Management The College 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(d) Credit and counterparty risk management, it will ensure that there is contractual evidence of any 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 College recognises that future legislative or regulatory changes may impact on its treasury management activities and, as far as it is reasonably able to do so, will seek to minimise the risk of these impacting adversely on the organisation. g) Fraud, Error and Corruption, and Contingency Management The College will ensure that it has identified the circumstances which may expose it to the risk of loss through fraud, error, corruption or other eventualities in its treasury management dealings. Accordingly, it will employ suitable systems and procedures, and will maintain effective contingency management arrangements, to these ends. To meet this principle, it will employ the following practices: - i. No major investments will be placed without the authorisation of the Principal or the Director of Finance and Resources. ii. All transactions will be made by automated bank transfer. h) Market Risk Management The College will not utilise financial instruments where the capital sums invested may be adversely affected by market fluctuations. Borders College 24/10/ Working Together

7 3.1.2 TMP2 Performance Measurement The College 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 organisation 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 performance of the treasury management function will be reviewed regularly against targets as part of the regular reporting framework. Additionally, tendering for banking services will be considered every five years to ensure best value TMP3 Decision Making and Analysis The College will maintain full records of its treasury management decisions, and of the processes and practices applied in reaching those decisions, both for the purposes of learning from the past, and for demonstrating that reasonable steps were taken to ensure that all issues relevant to those decisions were taken into account at the time TMP4 Approved Instruments, Methods and Techniques The College will normally restrict its investments to: - Short-term Bonds Fixed deposits Deposits on call, 2 or 7 day notice/30 Days, 60 Days or 90 Days Certificates of deposit. No other types of investment will be placed without the prior approval of the Finance and General Purposes Committee. Borders College 24/10/ Working Together

8 3.1.5 TMP5 Organisation, Clarity and Segregation of Responsibilities Roles and responsibilities with regard to treasury management activity will be clearly defined; ensuring appropriate segregation of duty is maintained TMP6 Reporting Requirements and Management Information Arrangements The College will ensure that regular reports are prepared and considered on the implementation of its treasury management policy; on the effects of key decisions taken and transactions executed in pursuit if that policy; on the implications of changes, particularly budgetary, resulting from regulatory, economic, market or other factors affecting its treasury management activities. This reporting will be conducted in accordance with the Financial Regulations TMP7 Budgeting, Accounting and Audit Arrangement The College will budget for all treasury management activity in accordance with its budgeting cycle. The College 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 College 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. Borders College 24/10/ Working Together

9 3.1.8 TMP8 Cash and Cash Flow Management Unless statutory or regulatory requirements demand otherwise, all monies held in the name of the College will be controlled by the Director of Finance and Resources and will be aggregated for cash flow and investment purposes. Cash flow projections will be prepared on a regular and timely basis, and the Director of Finance and Resources will ensure that these are adequate for the purposes of monitoring compliance with TMP1(a) Liquidity Risk Management TMP9 Money Laundering The College 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, the College will maintain procedures for verifying and recording the identity of counterparties and reporting suspicions, and will ensure that staff involved in this are properly trained TMP10 Staff Training and Qualifications The College recognises the importance of ensuring that all staff members 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 Director of Finance and Resources will recommend and implement the necessary arrangements. The Director of Finance and Resources will ensure that Board members tasked with treasury management responsibilities, including those responsible for scrutiny, have access to training relevant to their needs and those responsibilities. Those charged with governance recognise their individual responsibility to ensure that they have the necessary skills to complete their role effectively. Borders College 24/10/ Working Together

10 TMP11 Use of External Service Providers The College recognises that responsibility for treasury management decisions remains with the College 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. When it employs such service providers, it will ensure that it does so for reasons which have been submitted to a full evaluation of the costs and benefited. 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. It will ensure, where feasible, that a spread of service provider is used, to avoid overreliance 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 monitoring of such arrangements rests with the Director of Finance and Resources TMP12 Corporate Governance The College 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 College has adopted and has implemented the key principles of the Code. This, together with the other arrangements detailed, are considered vital to the achievement of proper corporate governance in treasury management, and the Director of Finance and Resources will monitor and, if and when necessary, report upon the effectiveness of these arrangements. Borders College 24/10/ Working Together

11 4.0 Responsibilities 4.1 The Finance and General Purposes Committee is responsible for approving this Policy and monitoring its implementation and effectiveness. 4.2 The Director of Finance and Resources is responsible for the implementation of this Policy and for ensuring appropriate procedures are in place to facilitate this. 4.3 The Financial Controller is responsible for the operational functions of treasury management. 4.4 Finance Department Staff are responsible for understanding and adhering to this policy and its associated procedures. 5.0 Related Documents 5.1 CIPFA Treasury Management in the Public Sector Code of Practice 5.2 Scheme of Administration 5.3 Finance and Procurement Strategy 5.4 Financial Regulations 5.5 Financial Procedures Manual 5.6 Risk Management Policy 5.7 Anti-Fraud and Corruption Policy 6.0 Review 6.1 This policy will be reviewed every 3 years or earlier if required. Borders College 24/10/ Working Together

12 Rapid Equality Impact Assessment Tool The rapid impact assessment tool requires you to consider the impact your proposal will have on people. Defined below are the types of proposals that require impact assessment, the type of groups the proposal may impact upon and what is meant by an impact. Definitions Proposal means any policy, procedure, strategy, guide or publicity material created to support the business of Borders College. Groups means a subset of our staff, students or other College stakeholders defined by: race, gender, disability transgender sexuality religion faith age employment health income Impacts means an effect on: employment ability to access our education services race relations ability to complete studies successfully lifestyle discrimination against any Group finances working conditions safety Borders College 24/10/ Working Together

13 Rapid Impact Assessment Tool What Impacts may there be from this Proposal on any Group s ability to use the College services? Policy: Treasury Management Policy Positive Impacts (Groups affected) n/a Negative Impacts (Groups affected) n/a Actions taken to alleviate any negative Impacts: n/a Recommendations: none From the outcome of the Rapid Impact Assessment, have negative impacts been identified for race or other equality groups? Has a full Equalities Impact Assessment been recommended? Yes No x Reason for recommendation: Manager s Signature: Date: Borders College 24/10/ Working Together

14 Status: Approved by Finance and General Purposes Committee Dated: October 2011 Author: Director of Finance and Resources Review Date: October 2014 Equality Impact Assessed: n/a Borders College 24/10/ Working Together