Is there a legal limit to how much general reserve a parish council may hold?

Question

I have read through the whole separate thread on reserves, but I can’t see a definitive answer.

I understand that earmarked reserves (for named projects) are effectively unlimited.

However, is there a legal limit to the amount of general reserve a PC may hold? If so, in what document does this policy reside so I may refer to it?

Answer 1

The simple answer is no. If the total of all reserves (earmarked and uncommitted) is greater than twice the precept, the council will be required to explain its reserves as part of the annual audit process. The auditor may highlight an excessive general reserve, but the final decision rests with the council.

Comments

Dave, thank you, very clear.

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As Dave says excessive reserves should be picked up by the auditors ( both internal and external). Not including capitol reserves ( for long term projects) a lot of councils hold a reserve of monies equivalent to a years costs in running the council. The thinking being that should the council be non funded for whatever reason that they have a years reserves to "wind down" thereby not failing their community.
Due to the corona virus ( what will we blame in future?) many councils have for 18 months shelved projects or scaled down spending and have now large amounts in the bank. What should happen is that now things are getting back to "normal" the council should be examining what these amounts were budgeted for and get those projects implemented immediately. Too many are looking around for what vanity project to spend these amounts on rather than advancing the original budget or adjusting the next precept bid.

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Mentorman - thank you, that’s hit the nail on the head. We have the first finance committee meeting this FY (should be quarterly) and I have heard rumblings of some who prefer no reduction in precept and a rush to fund projects that are not necessary top of the pile in terms of importance (in my view). We have reserves well in excess of 1 year operating costs, but less than 2 so no trigger on the audit.

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Two questions here . Do S106 and CIL monies held count as earmarked reserves?  And secondly does the PC has any discretion re s106 and CIL monies if they come with conditions ?  In other words if money is provided for say 10years maintenance on a children's play area can a PC spend it on new equipment and then take on board the maintenance costs from its own coffers?

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S106 and CIL money is usually held by the local planning authority, so it is not included in the council's accounts or reserves until actually received. The section 106 agreement is a legal document, so the use of funds and any discretion would be included in the document. Variation of the use should be negotiated with the planning authority and the developer.