Council amends investment policy to combat COVID losses
GLADSTONE Regional Council has amended its investment policy to increase limits in an effort to combat the COVID downturn and earn more revenue.
At council’s November 17 general meeting, councillors voted on the officers’ recommendation to change the policy to reflect the maximum percentage limits of overall funds invested within a financial institution.
“By amending the counterparty limits the business will be enabled to invest larger amounts in
institutions that are still considered as having adequate capacity to pay,” council papers stated.
“Council may consider it appropriate to hold a further review of the Investment Policy in 2021 to allow for further assessment of the impacts of coronavirus.”
Under section 191 of the Local Government Regulation 2012, a local government must prepare and adopt an investment policy that must outline the local government’s investment objectives and overall risk philosophy; and procedures for achieving the goals related to investment stated in the policy.
Briefing documents before councillors stated GRC had been allocated a Category 1 Investment Power under the Statutory Bodies Financial Arrangements Act 1982.
This limits councils investments to; deposits with a financial institution; investment arrangements accepted, guaranteed or issued by or for the Commonwealth or State or a financial institution; or investment arrangements managed or offered by the Queensland Investment Corporation or Queensland Treasury Corporation.
The documents showed council forecast interest income of $1.9 million for the 2020-21 financial year, but due to COVID it had only earned $100,000.
“The COVID-19 pandemic has impacted on the ability to invest in accordance with the current policy, resulting in the business receiving only $0.1m in actual interest revenue year to date,” council documents stated.
Council general manager Finance, Governance and Rick, Mark Holmes said amending the investment policy would insure better interest returns for council.
“Our investment returns are marginal at best at the moment with respect to our cash offerings,” he said.
Mr Holmes said the amendments to the policy were concerned with banks in the tier below the “big four banks”.
“We are finding that we are getting some marginally better returns from some of those institutions,” he said.
“It’s not going to recover our full budget ($1.9m) in that space, but it will recover some of the losses we are seeing currently.
“We certainly think that we can recover up to about half a million dollars of the loss we are projected to see.”
Cr Muszcat suggested the council should be investing in social and ethical institutions.
“Our focus has been on trying to support our local community banks, but also maximise our return,” Mr Holmes said.
Cr Glenn Churchill said with the current volatility of financial markets, varying interest was a week-by-week, or even a day-by-day issue.
Cr Rick Hansen moved the motion to amend the investment policy, which was seconded by Cr Daryl Branthwaite and unanimously agreed upon.