Rainy day account

Question

Hi All
I have worked in the Home Office and it was normal practice to  not have anything in my department budget at the end of the financial year. Our Parish Council has rainy day savings. Is this normal practice or should we be promoting it being used. We are a small PC of 150 villagers with a rainy day account of 2.5k

Answer 1

I think that accountants throughout the land will be searching their tutorials for a "rainy Day heading". What you describe is a contingency amount held for un-forseen expenditure. Whether you require such a contingency depends on how good your budgeting and cost control is.
It doesn't matter how good those handling the accounts are I would say that it is always good to have such and amount held in reserve to meet un-forseen expenses. How much is of course another matter to decide.

Answer 2

We don't work on the old "spend it or lose it" basis and it's not unusual for even relatively small parish councils to have six-figure reserves. That's good practice if the money is required for a reason, but I've seen several where the funds are allocated to cover an insured risk, so are unlikely ever to be required and others who just attach vague headings such as "highways" or "open spaces" without having any plans to justify this.

I find it helpful to look at this from a pounds per resident point of view and consider the impact of that on those at greatest need in the community. When I took on one of my councils it held unallocated reserves of over £125 per resident and had raised the precept in each of the preceding two years, whilst we had pensioners struggling to heat their homes. That's morally indefensible and I told them so.

Answer 3

A 'Rainy Day Account' of £2500 would be quickly cleared if you needed emergency tree works or playground repairs.  Parish Councils have to consider their reserves levels to reflect the risks that they need to cover.  have a look at the Practitioners Guide 2024 as that is the document that RFOs need to work from as it reflects the legislation in place for parish councils and not central government.