CIPFA publishes new prudential and treasury management codes
CIPFA announced the publication of the new Prudential Code for the Financing of Capital in Territorial Collectivities and Cash Management in the Code of Good Practices for Public Services and the Transversal Orientation Notes at the end of a period of consultation.
The two statutory and professional codes are âimportant regulatory elementsâ of the capital financing framework in which local authorities operate. Local authorities are required by regulations to “take into account” their provisions.
The consultations, which preceded publication, included relevant excerpts for changes to the guidance in support of each of the codes. CIPFA added that guidance notes will follow shortly in the new year.
He confirmed that the update of the Prudential Code includes the following elements at the center of the substantive changes:
- The provisions of the code, which present the approach of borrowing upstream of the need to benefit from the additional sums borrowed, have been strengthened. The relevant parts of the code have been increased to make it clear that borrowing for a debt-for-return investment is not permitted under the prudential code.
He said this recognizes that business activity is part of the regeneration, but stresses that these transactions do not include debt for return as the primary objective of the investment or pose unnecessary risk to public funds.
- Proportionality has been included as an objective in the Prudential Code. New provisions have been added for an authority to incorporate a risk assessment related to the levels of resources used for capital purposes.
- A new requirement has been added for capital strategies to be required to report investments under the following headings: service, cash management and business investments.
The main changes made to the updated Cash Management Code and the accompanying guidelines for local authorities are as follows:
- Investment management practices and other recommendations for non-cash investments are included in Cash Management Practices (TMPs) alongside existing TMPs.
- The guide will recommend the introduction of the liability benchmark as a cash management indicator for local government agencies (note that CIPFA has published a toolkit to help local authorities produce this indicator).
- Environmental, social and governance (ESG) risks are integrated in TMP1 (Risk management) rather than in a TMP 13.
- The purpose and objective of each category of investments should be described in the cash management strategy.
Richard Lloyd-Bithell, Senior Policy and Technical Officer at CIPFA, said: âBoth codes went through a full and in-depth consultation process and received significant response rates with over 100 responses for each consultation. respective.
âWe welcome the challenges and thoughtful contributions from the sector and are pleased that the majority of respondents supported the proposed changes, summarized below, with very few expressing direct opposition. CIPFA looks forward to releasing an analysis of the consultation issues this week.