LEVELS OF AUTHORITY YEAR ROUND VERSUS EARMARKED RESERVES

Question

We had a very interesting meeting last night about devolving levels of spend of earmarked reserves to various committees.  Firstly as I understand it Earmarked reserves were said to be  “owned by the Full Council” and spend can only authorised against such funds by the Full Council? Is that default situation correct?   I know they must review them but do they control their use as well?

Our Fin Regs were stated to  control “normal year round budget spend” ie not EMR..   Anyhow the upshot was that spend against Earmarked reserve individual pots has now been devolved to nominated Committees and with varying limits which are way above the £5k upper limit.

This means that we now have different limits on spend depending on whether the allocated pot is year round budget or earmarked reserves.  Does this sound OK to our readers (and should the Fin Regs be amended accordingly) ?

Answer 1

I don't know how it works in other councils but in mine an earmarked reserve is simply a reserve that has been built up for a specific purpose in mind.  For example we built up an earmarked reserve to replace play equipment in the recreation ground.

Expenditure from reserves is treated no differently from any other expenditure in that it is allocated to a budget heading as an accounting activity, and where expenditure is against an earmarked reserve, the expenditure is allocated to that budget heading in the same way as any other expenditure.

Where committees have budgetary authority to agree expenditure then the same rules apply wherever the money comes from (e.g. earmarked reserve, precept or general reserve) so same process for tendering where applicable, etc. etc.   In the example of our play equipment, our parks committee have delegated authority to agree expenditure up to (in our case) £5K per contract/item.  Our EMR was £10K and after going through the tender process, the quotes came in at around the £9K mark, i.e. over the limit the committee could agree.  This was then referred to full council as a recommendation to accept a quotation based upon the tendering process.  Full Council authorised the expenditure and equipment was ordered and installed.  When the invoice came in, it again went to full council (as is our procedure), approved for payment and paid in the usual manner.  The RFO then allocated the expenditure against the EMR in the accounts leaving a balance at the year end which, on agreement, was retained as an EMR to fund future developments of the play park.

Comments

Your approach sound perfectly reasonable Delboys wife from a "levels point of view".   Ultimately it seems that my Council have ignored the general advice that all forms of reserves should only be managed by Full Council and exercised a wish to disregard this approach and delegate the power to selected committees and with varying limits. This was IMHO a clerk led initiative designed to get urgent decisions made in a more timely fashion

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Sometimes it is difficult to separate out some of the complications of interpreting decisions and the legislation which allows those decisions to be taken but in essence the full council is responsible for any budget or expenditure but full council can delegate authority to make decisions, including ones with financial implications, to a committee or indeed an officer (but not, note, a single councillor).  There is no difference between expenditure from reserves (earmarked or otherwise) or expenditure from the precept and I would suggest that attempting to separate out the two is something which could/should be challenged at audit.
It is quite normal for expenditure decisions to be delegated to committees (the model financial standing orders specifically include this) but those decisions are still subject to the financial regulations and ultimately are the responsibility of full council as the power to make that delegation rests with full council.

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So lets be clear.  My Council has placed maximum levels that can be spent on individual Earmarked Reserves pots for its committees.  Some are in excess of the  limits stated in the Fin Regs 4.1 and some are below.  They decline to alter the Fin regs themselves.  Therefore we have the Fin T=Regs and a resolution which overrides them.  Is the resolution therefore lawful? .  If not what I can I do about it

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Without seeing the actual wording of the resolution itself, its difficult to comment on whether the resolution is lawful or not but my understanding is whilst it's perfectly lawful to delegate the authority to spend from a particular budget to a committee, whatever that budget is, limits on single contracts/purchases as outlined in a different part of the financial regulations would still apply.   Going back to our play equipment purchase, the budget was £10K to be met from an EMR.  The contract value was in excess of our authority to agree at £9K so full council had to approve.  In effect, you could delegate authority to spend from a budget of £1m to a committee but that committee would still be limited in terms of the contract value or purchase price to whatever your financial regulations state.

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The precise text reads Resolved - That approval of expenditure from selected EMR is delegated to the following Committees to allow for projects to progress without delay. The delegation  will be reviewed for each financial year. Each expenditure will be reported back to Full  Council. The delegation of 329 – Planning Contingency was increased to £20,000.

The Financial Regs remain unchanged .   I spoke and said that you cant change one without the other.    The main reasoning was to get quicker access to some funding .   The ability to call extra ordinary meetings was ignored .  So to me the ultimate question is how sacrosanct are the Fin Regs i.e. to they trump any "differing" resolution