Use of Earmarked Reserves

Question

We are coming to the end of a building project, which has been funded out of a specific Earmarked Reserve.
There will be monies left at the end of the project and what we now want to do is set up an EMR for future maintenance (repairs, equipment replacement etc.) and gradually add to this over the years.
From a transparency perspective is the simplest solution to
a) Council vote to transfer the excess back into general reserves.
b) followed by a Council vote to establish a new EMR Maintenance Fund and transfer that sum into the new fund ?
Is that the correct way or is there a better process to follow ?
Secondly, we have a councillor who is adamant that once funds have been put into an EMR for a capital project they can only ever be used for capital works. If the capital project no longer needs the funds, then they must effectively "reserved" for use on a subsequent capital project. That - logically - makes no sense to me. Surely if funds are no longer required, the Council just needs to agree to release the funds which then become available for whatever the council needs ?
Many thanks for any thoughts.

Answer 1

The council may move money in and out of reserves as it sees fit.  Just bear in mind the six-month change of mind procedure in your standing orders (can be done, but must follow due process).  If funds came from an external source and were specifically for capital works, you may need to re-negotiate with the funder.

As you already have a reserve for this project, no harm in keeping it and adding to it for future expenditure, but you could follow your two-stage process if your members are happier with that.

Comments

There is actually a finance reg on unspent reserves:
4.3 Unspent provisions in the revenue or capital budgets for completed projects shall not be carried forward to a subsequent year.

---

Thank you, that's very helpful

Answer 2

Its an interesting point.  I would say that any cash left over should be put into the general reserves, which, should be suitable sized to cope with all maintenance, repairs and so forth in the coming years, for all the councils such needs.  I have worked with councils that have failed to establish suitable and sufficient reserves, limping along from hand to mouth as they take on ever increasing liabilities, without working out the likely annual cost.   Leaving them earmarked would likely result in a plethora of earmarked reserve pots and a fair amount of viring between them when things go wrong.