Size of general reserve

Question

We have our Budget meeting tonight and amongst the papers it’s clear NALC are on a mission to raise general reserves
There is a comment suggesting that Auditors should not object to general reserves of up-to two years precept
Yet not long ago NALC suggested for larger Councils three months precept was sufficient
So I’d be interested to know  how your Councils  General reserve matches to your precept

For the record I feel a two year reserve is obscene especially as in theory if you want to spend £20,000 more you’d have to raise the precept by £60,000

Answer 1

Surprised by this suggestion.  I also have a budget meeting tonight and have been checking the Joint Practitioners Guide today (the latest version being 2022) and it clearly states that smaller authorities (i.e. with a turnover of less than £200K), should be aiming for general reserves of between 3 and 12 months net revenue expenditure.  The wide range is to accommodate the specific requirements of the council and it is suggested that smaller authorities might be carrying a larger proportion of net revenue expenditure as reserves compared with larger authorities.  There are no limits to Earmarked Reserves provided that the EMR is a clearly defined item and reasonable in the circumstances.  Who is suggesting that the current NALC view is different?

Comments

I will quote from the document in front of me which it is claimed comes from our local association “ external auditors will allow unallocated reserves equal to twice your precept “
There is also the usual scaremongering tactic of claiming that without notice ( and I assume without finance ) parish councils will be forced to take on further services

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Most odd.  We're not members of the local county association so I've not seen any advice along those lines which is why I was checking the JPAG guide.
As far as taking on further services is concerned, I'm afraid that can often be the case but not necessarily for statutory services.  For example locally we have suddenly found our principal authority won't pay for replacement road signs or litter bins any more if the original is damaged.  They are referring requests for such things to the parish council.  There was no consultation on this and we have refused to pay for these things.

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"External auditors will allow unallocated reserves..." That's jolly decent of them. I was under the impression that egotistical chairmen ran local councils! You've well and truly burst that bubble. Next you'll be telling me that planet Earth was created by mice as part of a ten million-year research programme!

As for further services, I haven't found the bit in the legislation that allows other councils to force a local council to do anything, and the vast majority of services provided higher up the chain would be beyond the means of local councils, regardless of their level of reserves. I am a little concerned that they might give external auditors these powers too though!

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Egotistical chairpersons what ever gave you that idea. Why do these funds never get spent on the community they serve. What is this fear of bankruptcy when every twelve months there is a further hike to cover..... last years hike.

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My understanding is that the auditors start to query the total of all reserves i.e. general plus EMR when they exceed twice the net revenue budget .   That is not to say you must tax residents up to that amount.   Unfortunately many Councils have found that they can enjoy unfettered access to residents money without any real controls.   It is clear to me that much more advice is needed to whats in and whats out of the various reserves or else there is real danger of it being included  in  both.  I recently queried why potential Locum costs were shown as an EMR when we held 6 moths contingency funds in our general reserves .  I was then directed to the latest SLCC advice which advises that's where it should be .   It seems a you can never have too much money culture is "the new norm". Unfortunately the payer has little say

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[Scottie] Ha! Legend!

I just did our budget and slashed “prudent reserve” out of the EMR.
What the hell, you can’t just stash a bucket load of cash in EMR as “prudent reserve” - that is just a means of ‘hiding’ unallocated cash in EMR.
When the budget was presented for approval it was all nicely presented and balanced…..

The one issue that they’d completely over-looked, this year, last year, year before….

The current year closing balance (revenue budget carried forward) was not included in the budget as the opening balance - it always started at zero which is completely inappropriate but an easy means of generating a year on year increase in balance and precept.
So - unbelievably - simple.
Net result significant precept reduction this year.  Scary to think nobody has ever got across this.

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Next years Budget has £9000 expenditure for elections a similar figure is shown every year
Last night I pointed out we’ve had an election in one of our four Wards once in over 30 years so the chance of having one in all four wards is remote
In any case we have £80,000 more in our General reserve than our 6 months policy allows
Plus of course if it was seriously believed there would be a full election the proper way would be to have a specific reserve
But as usual “ better safe than sorry “ won

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Better safe than sorry - that's a good one!

I've had:

Everything else is going up so we should put the precept up, and,
We always put it up by 3% so that is what we should do....

Shocking state of affairs....

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How about the Chair last night “ we need a big reserve as the County Council might stop cutting the verges so it could cost us £30,000 “

We’ve had similar scare stories every year