27 MARCH 2009
                             EXECUTIVE SUMMARY

Paper title:       Updated Treasury Management Policy                     Part 1
                                                                          Part 2
Paper Author       Dawn Smith & Margaret        Sponsoring                Antony M Waite
                   Dean                         Director                  Director of finance

Summary of paper:
This report provides an update of the Trusts Treasury Management Policy

That the Board
•     Review and comment on the policy
•     Approve the policy

Assessment of implications in respect of:

Human resources: neutral

Equality and diversity: EIA has been completed and is appended to the policy

Finance: financial risk

Patient safety: neutral

Legal issues:

History: Advise on sub-committees

                    Date                 Decision

Audit Committee     17 March 2009        Recommended to the Board for approval
considered at
Trust Board
                            The Mid Yorkshire Hospitals NHS Trust

                     Updated Treasury Management Policy

     1.      Introduction

          The Trust is required to have in place a treasury management policy to
          ensure there is control over the management of its cash.

          Attached is the draft treasury management policy for review and approval

          There is an ALE level 2 requirement for ‘The board to demonstrate that the
          trust’s cash management policies, procedures, structures and systems would
          meet the requirements of the NHSFT regime, where appropriate.’ The policy
          was last updated in May 2007 to reflect this requirement

          Given recent changes to national regulations on cash within NHS Trusts the
          policy was due for update.

          The policy was presented to the Trusts Audit Committee on 17.03.09, who
          subject to a couple of minor changes recommended that the Trust Board
          approve the policy.

2.        How has the policy been updated?

          The policy has been updated to reflect:
             • the latest internal Trust policy ‘An organisation wide policy for the
                 development and management of procedural documents’
             • changes in central DH regulations on the control and management of
                 capital and cash across the NHS
             • a further check to Treasury management policies in place in two local
                 Foundation Trusts and another NHS Trust to ensure our policy is
             • Monitor’s guidance – Managing Operating Cash in NHS Foundation

3.        Comparison to Foundation Trust Policies

          Many of the requirements outlined within Monitor’s guidance are not
          applicable to NHS Trusts as Foundation Trusts have greater flexibility in how
          they manage their cash.

                          Trust flexibilities                  FT flexibilities
Bank Accounts             Maximum average £50k                 Can hold monies in
                          cleared balance in a                 commercial accounts
                          commercial account
                          Bulk of cash should be held
                          in the OPG
Investment                Can only invest in the               Can invest in other
                          national loan fund (NLF)             financial institutions
Overdrafts                Not permissible                      Permissible
Temporary Borrowing       Temporary PDC available              Temporary PDC not
                          to fund short term working           available
                          capital requirements
Borrowing to fund working DH loans permissible                 Loans permissible from
capital requirements                                           other         financial
Borrowing to fund capital DH capital loans available    Permissible from other
schemes                   so long as the prudential     financial institutions so
                          borrowing limit is not        long as the prudential
                          breached and with SHA         borrowing limit is not
                          agreement                     breached
Cash balance at year end  Permissible provided do not   No limits re balance
                          over shoot EFL                held
Operate within EFL        In year cash must be          No target EFL figure at
                          managed with EFL target,      year end but must
                          Can undershoot (i.e. have     operate within PBL
                          more cash) can’t overshoot    (Prudential Borrowing
                          (i.e. spend more cash than    Limit)
                          EFL target)

4.    Key points of the policy

      The Policy sets out the Trusts Treasury Management, Investment and
      borrowing strategy including
          • Appointment of bankers
          • Authorized signatories
          • Details of bank accounts
          • Investment rules & limits
          • Borrowing rules and limits

      Key points to note are
         • the overarching aim is to maximize investment income whilst at the
             same time minimizing risk, ensuring there are sufficient funds to
             cover planned expenditure and financial obligations
         • the requirement to live within the Trust’s prescribed External
             Financing Limit (EFL) and Prudential Borrowing Limit (PBL)
         • the Trust is only authorized to place investments in the National
             Loans Fund which is a government deposit
         • the Trusts main current account is with the Office of Paymaster
             General – a government account
         • the Trust also holds a current account with a commercial bank, for
             operational reasons but the maximum average cleared balance
             over a year must be no more than £50k.
         • there is a separate treasury management policy for Charitable

5.    Recommendation

      That the Board:

      •   Review and comment on the policy
      •   Approve the policy

Dawn Smith
Assistant Director of Finance
March 2009


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