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0 votes
Does anyone have a document that they can refer me to giving guidance on how the precept should be set?

In previous years our clerk has advised us that we should not reduce our precept because if we did so, we could only increase it by a certain %, which could be a problem if we needed to fund a certain project. I have read that it is good practice to maintain a reserve of between 3 and 12 months expenditure. Can anyone confirm that and ideally refer to a document? Our draft budget looks as if the aim was to keep the precept the same then work backwards to the budget!


by (200 points)

3 Answers

0 votes
Unfortunately, producing a budget and from that the precept ( amount required to meet budget needs) can be a quite daunting task for some who see doing a job properly as an imposition on their time. It requires planning ( sometimes over several precept periods), and knowledge of what is needed for the community the council serves ( not guesswork).

It should be an ongoing task and not one that is commenced when the starting pistol is fired in the Autumn with the target of the precept bid going to the local main council in time to fit their time table. Hence a finance committee who work and meet all year round who weave needs and wants into their budgets and more importantly are aware of the PC's aims and projects over several periods and phases.

Like any good accounts system this should encompass overhead costs which include payroll, maintenance, utilities rent etc. and replacements and new purchases and also any projects with phasing over several years if required. Contingencies need to be built in and also monies aside for elections etc. Mostly it can be made as simple as possible to read understand and have everything noted.

All budgets need to be monitored closely and reported on to "keep the finger on the pulse" of the financial health of the spending. Nothing wrong with unspent amounts being used for other matters with full council minuited approval.

The aim should be for the council to to have full accountability and tracking for where the money is spent and be prepared to justify every penny of the precept expected of the electorate.

This unfortunately requires that nasty word that a lot of indolent councillors hate "work"
by (25.8k points)
Thank you Mentorman for your detailed answer. One of our councillors has put together a draft budget for expenditure on all the usual overhead costs which seems entirely reasonable. There is a contingency for elections too.  All the items are regulars for several years so the numbers should be fairly accurate. We don't have a reserves policy. I can see from looking at other councils policies, the benefit of having one. We have not identified any projects for the next financial year so it should be easy!
Your comments about avoiding vague projects and a wall of cash instead of clearly identifying  projects and seeking other funding before using the council tax payers money are very relevant.
David glad to see you are making progress and keeping it simple and hopefully transparent. Your comments regarding previous years might indicate a lack of progress in what your council is doing for the community. It is easy to just repeat what was done last year and build in inflation etc but I would argue that a council should be actively seeking new projects to introduce based on the needs and wants of the community based on proactive polling of the community to ascertain what they want from you. Keeping the PC ticking over is not what a PC should be doing but continually improving ( and financing) the future and good of the community that elected you.
Music to my ears!
Community engagement, listen, evidence from a poll to assess support. Clearly identify project and seek external funding. If this isn't forth coming, consult again to see if our residents are happy for us to use their money and only then raise it using the precept.
0 votes
The budget setting process consists of listing all the working income and expenditure you expect in the next financial year, looking at the expectations of the public and working out how much precept you will ask for.  This is for operational expenditure.    Regarding reserves, it is good practice to have around 25% of income as a reserve.  This is in various Parish Council Reserve docs on the web, and is a number the auditor should repeat back to you when you ask them the question.  I guess your council does not have a reserves policy?   The clerk is correct in that if your reduce your precept, then its harder to get back to what it was later, without causing a fuss.  However, that answer is not in the SLCC book of excuses for not reducing precept and you have been fobbed off, or there is a forthcoming project to be funded from precept (which would be in the Council Plans ).  The precept is not there to create a wall of cash to fund an 'as yet to be determined' wish list (or vanity projects ).  If projects turn up the council should seek to fund them from grants, and have a pot of ring fenced reserves for that purpose.
by (2.5k points)
Thank you "Interested". Good point about the auditor.
I dropped a precept from £21,000 to £1,000 for a couple of years and then raised it to £12,000. In percentage terms, it was probably one of the largest increases ever, but we issued a statement to residents explaining why we had done it and received no complaints. Transparency is the key.
Dave   Probably a bit of trust as well in that case?
It sometimes helps to personalise this. Whilst it's absolutely OK to have huge reserves for something you know you will definitely spend (children's play being a good example of a multi-year project), too many councils hold vast sums for a rainy day, without knowing what that rainy day will look like. We have insurance for all rainy day eventualities. Take the uncommitted and poorly justified reserves sum and divide it by the adult population to find a per capita figure. If you would feel uncomfortable telling one of the most deprived members of your community that you are holding £x of their money in the parish council's bank account for no particular reason, it's time to do something about it!

In my case, we had £130 per person and I know that some of our residents were using our local foodbank, as my wife and I run it!  Returning this money to its rightful owner could be the difference between somebody heating their home in the winter and dying of hypothermia in an unheated house.
0 votes
Managing your accounts on a monthly basis should give a foundation for next years budget.

If you are considering reducing your precept don’t forget to take into account inflation for the next year. It would be better to have it remain the same than reduce it and find you are out of pocket.

I have always been taught that the minimum in reserves should be 1/3 of your annual budget
by (6.3k points)
Good points.Inflation is rising now so maybe a reason the justify a larger reserve. I would be happy with that provided it is clearly ear-marked and not used for as yet unknown projects, because it is easy.
We are told it is prudent to keep raising the precept in case one day it is frozen I consider taking money off my residents for no reason is tantamount to theft
As usual I agree with Mentorman
NALC suggests a three year budget I consider a four year one based on the election cycle is better
My Council budget for elections every year even though we’ve only had one in one Ward in 30 years
It’s perfectly acceptable to have an earmarked reserve for elections if they are likely but to include it in expenditure every year is really taking the mickey
Thank you to all who have contributed to this thread. Your advice has enabled me for the first time ever to persuade my council to ring fence a sum for elections and a reserve based on 25% of expected expenditure. We have started proper community consultation on a project for more play equipment and efforts are being made to get grant funding. I proposed a sum is set aside for this project which was unanimously supported. This has resulted in a small reduction in the precept for this year. If we need to increase it in future years, I am more confident of public support now that we have demonstrated that we are diligent and prudent.

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