A couple of weeks ago, I sent a FOI request to Colchester Borough Council to try and find out some information about the £4m lost somewhere in Reykjavik. Below are the responses:

1. What financial advice was received by Colchester Borough Council on investments from 1st October 2007 until 10th October 2008?

CBC use Sector Treasury Services to inform our treasury management policy and strategy. This takes the form of half yearly meetings, monthly credit updates, ad hoc credit updates, ad hoc updates relating to all forms of treasury management.

2. What companies, individuals or government departments are responsible for advising Colchester Borough Council on financial matters?

CBC use Sector Treasury Services to inform their treasury management policy and strategy. In addition we comply with Government guidance and legislation on treasury management.

3. What councillors were aware of the large investment (or impending investment) made to Landisbanki before the 6th October 2008?

Under Treasury Management Policy documents, the policy and strategy is set by the Council and the implementation of this is delegated to officers. Under the current policy, short-term borrowing and investment is authorised by Council officers.

4. Who was present at meetings when the decision was made to make the investment? Copies of all relevant meeting minutes should be included, if available and possible.

There were no specific meetings relating to this investment, since it formed part of the day to day Treasury Management activity, delegated to officers. Members of the finance team discuss Treasury Management activity on a daily basis.

5. What was the purpose of the money deposited in Landisbanki - was it short term storage (e.g council tax receipts due to be spent) or long term investment/income?

The council has short term surplus cash mainly due to: timing differences as to when Council Tax & NNDR are collected and required to be paid over; S106 monies received but not spent; delays in Capital Programme spending. This investment was a short term cashflow one.

6. What credit rating agencies were used to judge risk associated with investments, particularly those made in Landisbanki.

The council uses data from Fitch (as supplied through Sector) or if no data is available from Fitch, then data from Moodys or Standard and Poors. The agreed Council policy sets out the total amount that can be invested with a counterparty and the maximum length of time that any monies can be invested. At the time of investment, Landsbanki had a Fitch rating of A, F1, B/C, 2. According to our policy, this meant that at the time of the investment we were permitted to invest up to £5M for up to 3 months.

Given these answers, I see two particular issues. Firstly, no Councillor was aware of the officers placement of £4m of tax payers money into an obviously dodgy bank. Secondly, and more importantly, said £4m was placed in the bank due to issues with short term cash-flow - that means that the Council had too much money coming in at once and had to put it aside to pay for future services. The question remains as to what will happen when they theoretically need to dip into the £4m to pay for services…..