News / FTs look for longer term rewards

Four out of 10 foundation trusts have investments with a maturity date of more than three months, according to a survey by the HFMA.

The practice is in place despite such investments not being counted as cash for the purposes of calculating liquidity in the financial risk rating.

The treasury management survey of more than 70 FTs, conducted by the HFMA's FT Technical Issues Group, found that nearly 80% of FTs had surplus cash of more than £10m at the end of January. (This figure includes cash held in investments; excluding investments, the figure drops to 46%.)
The majority of FTs (60%) had investments with a maximum maturity of three months, with many setting shorter maximums or moving towards instant access. However, 15% had adopted a maximum of up to six months and 25% went up to 12 months. No FT held investments with a maturity of longer than a year.

In February Monitor clarified in its monthly FT bulletin that three months was the maximum maturity for investments to be included in the liquidity calculation.

Other criteria – highlighted in Monitor's 2005 publication Managing operating cash in NHS foundation trusts – included requirements for long-term and short-term ratings.

Given that the maximum maturity for investments is three months, Monitor said it 'no longer considers it appropriate to include criteria for long-term ratings within the permitted rating requirements'.
The criteria were expected to be included in the Compliance framework, which was due to be published just after Healthcare Finance went to press.

FTs with investments over three months may be investing cash not needed to achieve their target liquidity rating.

• HFMA members can access the survey results at www.hfma.org.uk - follow links for publications