Pros & Cons of Sharing Treasury Services
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Shared treasury services have been touted as one way of councils cutting their costs, but the solution is not without its complications. Many local authorities have moved to shared services over recent years, as they search for ways to save money. Offices, solicitors and payroll are all areas LAs have looked at to share cost.
Three Rivers in Hertfordshire runs treasury for both itself and Watford Council. Councils might look for lower investment fees for larger, pooled reserves, or to save on personnel costs. “Treasury is shared for greater efficiency,” said Alan Power, Three Rivers and Watford’s shared services head of finance. Both Three Rivers and Watford have made good savings since sharing started.
“Benefits include being able to negotiate cheaper services, for example Logotech treasury management systems,” continued Power. “We will only need to use one treasury consultant in the future and have joint meetings rather than separate meetings. In terms of investment fees on reserves the shared arrangement attracts a good savings account interest rate, while, added Power, retaining separate accounts and separate reserves for the two individual councils.
According to David Green, Head of Consultancy at Stirling Consultancy Services, Lancashire County Council is investigating similar possibilities for its district. “It is an area of interest because there are pressures on spending,” says Green. “It might be, however, that treasury is something that people like to keep close to their chest, that it is difficult to trust other people with it.”
The London boroughs of Kensington and Chelsea, Westminster and Hammersmith and Fulham are known for sharing services. The tri-borough arrangements were the first of their kind and include a shared solicitor and many shared office and administrative functions.
However Councillor Warwick Lightfoot, cabinet member for finance at Kensington and Chelsea, is
wary of going down the same route for treasury. “Whatever cash reserves we have, I want to ensure that it is there when I want it and it hasn’t been lost in a bank that has gone bust,” said Cllr Lightfoot.
“I’m very reserved about having a convoluted structure where our cash and investments are held in a way that when the senior counsel for K&C decides that there is trouble that we can’t pick up the phone, speak to some people and get things done.”
Most of Kensington and Chelsea’s £198m reserves are in Treasury Bills in segregated custodial accounts. Risk has to be kept to the very minimum, said Lightfoot. The borough does have funding to work on new sharing initiatives that it is using to investigate sharing more of the cash management infrastructure. “We’re creeping our way to share some of the platforms that you need to collect all your money and wages and things like that,” said Lightfoot.
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