Director
Published in December, I would assume the new CIPFA Treasury Management in the Public Services Code didn’t make it onto many people’s Christmas present lists.
An update of the code is not an annual event – the last edition was published in 2017. And so changes will be followed closely by all those public sector organisations which are required to pay regard to it.
But while its contents may be arcane to most of the population – for those of us with an interest in the finer points of treasury management it’s essential reading. The code is effectively a Bible of best practice when it comes to treasury management – a “page turner” for those of us who care about these things!
Treasury management is, of course, at the heart of financial viability for the registered providers which DTP works with. As providers of public services, as defined by the code, RPs have special considerations and responsibilities when it comes to how they manage their investments, their cash flows, and their money and capital market transactions. Questions such as how much money they borrow, from whom, at what rates, and for what purpose, are critical to overall business success, and for an RP’s social purpose.
Put simply: the numbers matter. The myriad figures on our spreadsheets may seem obtuse, but people’s lives and homes depend on them. Successful treasury management puts an RP on a stable and responsible footing, enabling it to deliver quality homes and services for its customers. Poor treasury management can threaten its very existence. Treasury management is also ultimately about risk: what RPs take on and how they manage it.
CIPFA notes that “the landscape for public service delivery has changed significantly” since the last edition. The developing localism agenda and reduced public spending are highlighted as the most important of these changes. The regulatory environment is also much changed, and all public sector organisations are utilising a wider range of investment opportunities.
The full code is available to buy from the CIPFA website, so I am not able to quote from it at length given it isn’t freely available. Firstly, I can point out that the vast majority of the code hasn’t changed a great deal. There are however a number of additions and changes which I would draw RP finance teams’ attention to.
Three areas are noteworthy …
So, at first glance a treasury code flagging non-treasury investments might raise eyebrows. But public bodies including RPs will be making commercial investments which do fall outside the remit of managing the short-term investment of surplus funds – something which was acknowledged in the 2017 edition of the code but not elaborated on.
CIPFA’s concern here is, of course, that public money is protected and managed properly. And while the revised code doesn’t tell RPs exactly how to do that, that’s perhaps missing the point. Instead, the importance of transparency and good governance in this area is what CIPFA is determined to highlight.
This is certainly an area DTP can advise RPs on – as well as wider investment policy. Our approach, as you’d expect, isn’t one size fits all, given providers will have many different types of commercial investments, each with different risks. Investment policies are not off the shelf – but we can certainly help organisations to develop a policy which reflects their own risk appetite and their approach to appraising investments. Fundamentally, it’s about making sure you have the proper governance infrastructure in place before making commercial investments.
As far as ESG is concerned, the code isn’t very specific or prescriptive about what it now expects from public bodies. Instead, they are simply asked to be more mindful of ESG considerations when making investments in the future. That wasn’t there in the 2017 version of the code.
There’s an implicit recognition that many public bodies are in different places when it comes to having ESG policies. In many respects, everyone is on a learning journey on this one, but RPs need to make sure when they are making investments, they are consistent with their ESG policies, if they have one. If you are wondering what to do with surplus cash you have sitting in the bank – ask some searching questions first to make sure decisions are consistent with the values you want to adhere to.
CIPFA’s expectations around knowledge and training is the third change worthy of note. Again, this is designed to improve governance in this area. There are new requirements when it comes to training requirements and records which it’s important RPs get to grips with. I would advise all RPs and treasury staff to make sure they are up to speed on these – and again DTP can provide advice if needed. For boards, it’s about making sure they have the knowledge needed to make good decisions; while for CEOs, FDs and treasury staff there is more of a practical focus on proper skills and training.
So, the new code does mean there are several things which RP finance teams and boards should be aware of. ESG factors, commercial investment and ensuring the organisation has the necessary specialist skills and experience are all areas that most RP Boards and senior teams will have given consideration to in the course of running their organisations. So their increased importance to treasury management won’t come as a surprise. If you need assistance incorporating these elements into your treasury operation, help is at hand from the DTP team.
