How much money should a Town Council keep in its reserves?

Question

Is there  legal or good practice guidance on how much a Town Council should keep in its reserves either as a percentage of total annual budget or perhaps to cover certain fixed costs?

Thanks,

Answer 1

The starting point for deciding on the level for reserves is to take 50% of the annual precept. Then it is prudent to add some specific provisions for things that might go wrong but would not be covered by insurance. Finally, it is reasonable to add any specific capital projects that are intended to be paid for out of the reserve.

If the reserve is a lot different from 50% of the precept, the auditor will expect it to be explained, but will accept a reasonable explanation along the lines outlined above.