University College London (UCL) defines its treasury management activities as:
The management of UCL’s cash flow, its banking, money market and capital market transactions; the effective control of the risks associated with those activities; and the pursuit of the optimum performance consistent with those risks.
UCL acknowledges that effective treasury management will provide support towards the achievement of its business objectives
The Director of Finance & Business Affairs will design, implement and monitor all arrangements for the identification, management and control of treasury management risk: will report at least annually on the adequacy/suitability thereof, and will report, as a matter of urgency, the circumstances of any actual or likely difficulty in achieving the objectives.
UCL’s appetite for risk is low and is more willing to take term than credit risk.
Cash Flow Management
Monthly schedules of actual cash flow performance are to be prepared and monitored against original projections by the Assistant Director – Financial Accounting. Revised cash flow projections will be prepared on a monthly basis.
Cash Flow statements are to be prepared for each Finance Committee detailing actual and projected cash flow for the financial year and significant variances since the last Finance Committee of actual against forecasted cash flow. Copies of UCL’s projected cash flow are to be sent to UCL's Cash Managers twice a year.
Cash Flow Projections are to be prepared for the following financial year, in June of each year, with outline projections for the following four years.
Cash balances are to be reviewed on a daily basis by the Treasury Accountant and surplus funds invested with UCL’s bankers, BlackRock or, on the authority of the Assistant Director – Financial Accounting, with UCL’s Cash Managers, taking into account rates of return and the length of time it is anticipated the funds are available for investment.
UCL will retain funds in currencies only to the extent that payments are due to be made in those currencies. Currency receipts surplus to this requirement will be transferred into sterling (GBP) at the best rate achievable at the time.
Performance targets will be agreed each year with the Cash Managers. Rates of Returns achieved by the Cash Managers will be measured against benchmarks (e.g. 3 month rolling LlBOR).
The Director of Finance & Business Affairs will ensure that satisfactory written procedures are in place for raising invoices and collecting debt. Regular debtors’ reports shall be prepared for Finance Committee and bad debts written off shall be reported above prescribed limits.
Arrangements will be put in place for reporting the level of stocks and stores above an agreed threshold at least once a year and consideration given from time to time to optimising stock levels.
The Director of Finance & Business Affairs shall ensure that satisfactory arrangements are in place for the payment of expenses and suppliers, and that discounts are taken, where appropriate. The Banks Automated Clearing System (BACS) for payment will be used wherever possible.
The Director of Finance & Business Affairs will be responsible for opening and maintaining the bank accounts needed to conduct properly the business of UCL. Finance Committee will authorise account signatories.
The Director of Finance & Business Affairs will ensure the reconciliation of the bank accounts on a monthly basis, by persons other than those whose responsibility includes the handling of receipts and maintaining accounts receivable records.
Other than the Director of Finance & Business Affairs, no member of staff has authority to open a bank account for UCL related activity or use the name of UCL or its departments.
Cheque signatories shall take such steps as necessary to satisfy themselves that proper procedures have been followed to ensure that payment requests are supported by properly checked, approved and appropriate documentation.
The Director of Finance & Business Affairs shall ensure that proper control is exercised over unused and cancelled cheques.
Open Cheque Facilities can be set up with the approval of the Director of Finance & Business Affairs for the cashing of petty cash cheques, and cheques where the payee has no UK bank account.
BACS will be used for the payment of salaries and suppliers wherever possible to reduce the need to draw cheques.
The use of Electronic Banking facilities should be made where appropriate.
The Director of Finance & Business Affairs is authorised, as appropriate, to make use of Banking Facilities including:
Bankers are to be appointed (subject to review at least every three years) to look after UCL’s banking arrangements.
Investment Of Short-Term Funds
The Director of Finance & Business Affairs shall be responsible for arranging short-term deposits of UCL funds on a daily basis with due regard to any restrictions imposed by Finance Committee.
The investment objectives are to maximise returns whilst maintaining an appropriate level of liquidity, without undue risk.
Cash Managers are to be appointed (subject to review at least every three years) to look after the main part of the UCL's short-term funds. Fees are to be negotiated, dependent upon the size of the funds under management, and shall be inclusive of all charges.
UCL’s cash position is to be reviewed on a daily basis.
The Cash Managers will be responsible for the bulk of the UCL's cash balances and are to be advised on the likely period over which sums will be available for investment.
The Cash Managers are required to attend a meeting of Investments Committee each year to review arrangements and past performance.
The balance on liquidity accounts should be kept to a minimum, sufficient to meet working capital needs.
Custodial arrangements are to be entered into with parties, agreed by UCL’s Investments Committee, in respect of deposits placed with receiving counterparties, to provide UCL with additional security.
Approved counterparties are to be restricted to those Banks and Building Societies with a Moody's and Standard and Poors short term credit rating of minimum P1 and A1 respectively, with deposit limits set by Investment committee. Deposits may be subject to restrictions imposed from time to time by the Director of Finance & Business Affairs, after discussion with the Cash Managers, on Institutions located in certain geographical areas.
The list of approved counterparties and lending limits are to be reviewed by Investments Committee and updated on a regular basis in consultation with the Cash Managers.
Consideration will be given from time to time by Finance Committee and Investments Committee to the nature of investments. Currently, permitted investments are:
Deposits with approved Banks and Building Societies.
Certificates of Deposit issued by approved Banks and Building Societies.
Investment Limitations are:
No investment/deposit in companies detailed in the bold footnote of this policy.
No powers to enter into or acquire Options, Futures or Contracts of Differences.
Rates of Return are to be measured against benchmarks to include:
Rates of Return on the Barclays Call
Rates of Return on the Investment Managers’ general deposit account.
3 month rolling LlBOR.
Endowments And Long-Term Investments
The Investments Committee is regulated by UCL’s Regulations for Management 5.13, which directs that "There shall be an Investments Committee which may make or vary investments of the funds of the College or of Trusts appertaining thereto, subject to the provision of Statute 6 (3), and shall report, by way of Finance Committee, to the Council.
Statute 6 (3) directs that "Subject to the conditions or provisions (if any) attached by the donor to any gift from which the same are derived moneys and funds of the College may be invested in such stocks, funds, fully-paid shares or securities and investments as the Council shall from time to time think fit, whether within the United Kingdom of Great Britain and Northern Ireland or not, including the purchase of land of any tenure or any interest therein in the said United Kingdom; provided that in the case of monies and funds held by the College as trustees the powers conferred by this Statute shall be exercised, subject to the provisions of the law relating to investment by trustees."
The Investments Committee shall meet at least four times a year, usually October, January, April and July, although additional meetings can be arranged if required.
The Constitution, Membership and Terms of Reference of the Investments Committee are to be confirmed each year, in October, and any changes in membership reported to the Committee on College Governance.
The Director of Finance & Business Affairs shall ensure that legacies, gifts and endowments made to UCL are administered and invested in accordance with the terms laid down by the Donor.
The Investments Committee will agree each year, normally at its October meeting, the investment strategy for both short and long-term investment having due regard to any legislative requirement for charity investments and also any policy that UCL may wish to apply in respect of socially responsible investments. Income targets will also be agreed.
Investment Advisers are to be appointed to manage the long-term investments within the guidelines laid down by the Investments Committee. Appointment of Investment Advisers will be reviewed at least every three years.
The performance of the Investment Managers will be measured against agreed benchmarks and also monitored with other managers taking into account risks and volatility of investment strategy.
The Investment Managers are required to attend the meetings of the Investments Committee to discuss investment strategy, agree investment targets and to report on changes to the investment portfolio. Information to be provided to Investments Committee by the Investment Advisers will normally include:
A Valuation Summary for each of the Funds including details of the book and market values, purchases and sales, rights and bonus issues et
An Investment Review of the period covered, including a report on the economic situation.
A Statistical Analysis Report with performance comparisons against recognised indices.
A Statement of Asset Mix and Income Targets.
Rates of Return are to be measured against benchmarks which may include:
FTSE Government All Stocks Index.
FTSE All Share Index.
Combined Actuarial Performance Services (CAPS) or the WM Charity Universe or similar index.
The fee rates of investment managers will be considered from time to time.
The Finance Committee will formally assess from time to time any future borrowing requirements.
When considering the extent of external borrowing, due regard will be given to the level of internal cash resources and their utilisation.
All financing options will be fully evaluated, and consideration will be given to commissioning independent expert advice.
Formal approval by the Finance Committee and Council shall be given in respect of all borrowing, and where necessary the HEFCE shall be consulted.
A review of financial instruments, available in the market place, will be undertaken by the Director of Finance & Business Affairs at least every three years, with a reassessment of UCL’s borrowing requirements involving security, covenants, interest rate exposure consideration, financially modelling and sensitivity analysis. The appropriateness of existing arrangements, and where necessary, market testing of alternative options will be pursued.
Bankers: Barclays Bank Plc
Cash Managers: Royal London Cash Management Ltd
Investment Managers: Sarasin & Partners LLP.
(References to call account include BlackRock Liquidity Funds)