A report to Hertfordshire’s most recent audit committee meeting said the “treasury control failure” had come to light in August, one day after the multi-million-pound redemption was not received.
The update, written on behalf of director of resources Scott Crudgington, said invalid bank details had been given for the repayment of the investments – which meant the funds were returned to the issuer and the council lost out on two days’ worth of interest, valued at “approximately £300”.
SAVE THE DATE – LATIF NORTH
March 25th, 2020, Manchester
Council treasury investment & borrowing
While the report to last week’s meeting said the error did not result in “any material loss to the authority”, it underscored failings in financial-management procedures and suggested that incorrect bank details had been given to other financial institutions.
Councillors were told that the change of payment details – intended to bring a new treasury-management account into use as part of a drive to support improvements to transaction recording and reconciliation – were presented for sign-off on the basis that they had been peer reviewed for accuracy.
But the report said the peer review “either did not take place or failed to identify the error”.
It said that once the error had been picked up, officers made contact with the payment issuer and the council’s bank to trace the funds, then corrected the payment instructions.
The report said a review of all instructions sent in July and August 2019 was started and “amended instructions sent to all counterparties who had received incorrect instructions”.
It added that because amending the county council’s settlement instructions was “not a business-as-usual activity” there was no specific procedure in place to describe how this should be done.
“Treasury officers have now designed and implemented a procedure to cover all signing requests,” the report said.
The new system requires signatories to be given an explanation of the change being requested; evidence to support the change; and confirmation of the officers who prepared and reviewed the request.
Audit committee members were told that because of the “serious nature” of the treasury management failure, an internal audit review of controls and procedures had also been conducted.
The report said that the outcome of the review was an overall rating of “satisfactory assurance” for the risk-management processes covered.
However it added that two “medium priority” recommendations and four “low priority” recommendations were due to be implemented before the end of the current financial year.
Elsewhere, the report updated councillors on Hertfordshire’s recovery of funds deposited – in common with many other authorities – with Icelandic banks that went bust in the global financial crisis.
The report said Hertfordshire had deposits worth £28.0m with four Icelandic banks when the crunch came a decade ago and was currently £1.3m down on the investments.
It said that its claim against Landsbanki had been sold in 2013/14, resulting in a total recovery of 92% of its £10.0m investment, and therefore a £770,000 loss; the council’s outstanding Glitnir claim was resolved in February 2015, with 101% of the original £7.0m recovered.
Hertfordshire said that it had received 98p in the pound from its £7.0m investment in Heritable Bank – spelling a £120,000 loss, with administrators EY currently not forecasting an additional distribution to creditors.
The authority added that as of 30 September it had received 85.75p in the pound back on its £4m investments in Kaupthing, Singer & Friedlander, with EY estimating that up to 87.0p in the pound could ultimately be returned.
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