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Are their any rules on earmarked reserves ?  Should it for example be specified that the money is for X project and due to be spent by X date.  More importantly if the money is not spent should it be credited to reduce the next precept application or does it  in practice simply get vired to another project
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There are no absolute rules, although a widely accepted rule of thumb is that general reserves should be about half a year's precept. The external auditor will query reserves in excess of this, but will be perfectly willing to accept an explanation based on earmarked reserves. It is a good thing for the council (or a finance committee) to review reserves from time to time and to decide what specific reserves are needed and how it is planned that they should be spent. This can then be recorded in a minute. When it comes to the audit, the RFO (probably the clerk) is then able to advise the auditor that the council's policy on reserves is such and such. Provided the explanation sounds reasonable, it is very likely to be accepted by the auditor.

Yes, if the review shows that a reserve is no longer needed or is too large, then the figures can be revised, and some reserves may be added or increased. If there is no other specific need to hold funds, then the council should consider progressive reduction through the setting of the precept. But it doesn't pay to make too drastic changes, as people often object to big increases in the precept, even if it is after a period of lower precept! It is always better to do things gradually. Again, if the council has decided on a reasonable plan, the auditor is likely to accept it.
answered by (29k points)
Thank you Counterpoint . However, I can find no mention in the Auditors proforma which deals specifically with general reserves, Indeed it seems to me that it can be set at any level up to 12 months.  However with earmarked reserves there seems to be even less control i.e. once Cllrs have resolved to identify a project , there is no need to produce a plan to say how and when  it will be spent. Also if it transpires that the money is not spent, there is nothing to stop Cllrs  viring the money to wherever they choose.  Having been used to strict budgetary control I find the way PC finances work is almost without any control or monitoring.
As things stand, the only restriction on parish council spending, whether or not involving reserves, is that it must be on something that the council has a power to do, or it must be within the constraints of LGA 1972 section 137 (which includes a requirement of a commensurate benefit to the citizens of the parish). A council can set the precept to whatever level it likes, and all but the largest councils work on what is essentially a cash basis. Although this might seem uncontrolled, it generally works well and its flexibility also avoids the pressure to spend money or lose it, which afflicts many larger councils and can lead to wasteful expenditure. All decisions need to be made after public notice has been given in advance and meetings are public. It is up to local citizens to see that the council behaves responsibly. Councillors have an obligation to act in the interests of citizens, so "wherever they choose" ought to be viewed in that light. As mentioned in the answer, the council can return money to citizens through a reduction in the precept if there are not projects requiring a reserve. However, it is easy for councils to go too far in not having reserves - for example cemeteries are a notorious problem. If no fund is created for long term maintenance, when a cemetery fills up, the revenue stream from new graves comes to an end, but the cost of maintenance goes on indefinitely. Most councils face some contingencies that are best allowed for.
Thanks once again. I always try and see things from both sides. I can understand Cllrs wanting the comfort blanket of never having to make real tough financial decisions. They can do this through a process  of  building up a budget bid with no theoretical upper limit (the precept) , yet the budget holder (the public) having no say in the amount paid. I further understand the philosophy of once you have the money of  never letting go of it by parking it in earmarked reserves projects some of which are so vague as to be meaningless .  So I understand the process, what I cannot understand is why the Cllrs customers viz residents have no access to any form of control or monitoring. The auditors route is useless as it will only deal with unlawful acts whereas direct complaints are too often met with "you can seek your remedy at the next election" . Don't get me wrong most PCs do a good job , it is the financial environment in which they are allowed to operate which needs some review.  Effectively most PCs operate as a secret club and because there is no public access most people turn a blind eye and let them get on with it.  Incidentally the power of competence makes it even worse in that they now spend money on anything they want
Interesting comments, although I don't altogether agree. I have been a town councillor since 2010, and I wouldn't accept that we don't make tough financial decisions. In fact, along with a group of like minded councillors, when first elected I pressed for a budget and precept around 20% lower than the figures put forward by the then town clerk. It was agreed, and since 2010, bearing in mind the financial environment in which our citizens have to live, we have progressively made further small reductions. That included accommodating the change in calculation of the precept which meant that the town council effectively paid a share of the council tax benefit. Although figures fluctuate substantially and expenditure is inclined to be quite lumpy, we do take considerable care to review the budget each year prior to setting the precept. We don't have any vague reserves, they cover things like the cemetery (as mentioned before) and a fully costed programme of replacement of obsolete streetlights. We also provide specific reserves for clearly identified hazards that could affect the council's assets. The figures we use for all these financial considerations are shown in documents that are considered in meetings of the finance committee, and all supporting documents (such as these) for meetings of the council or its committees are provided on the council web site, shown as links from the relevant agenda. There are no secrets, apart from the few items that have to be kept confidential, such as personal information relating to the clerk, or (in the past) documents relating to an ongoing legal dispute. We rarely exclude the public from meetings, and then only when strictly necessary. So I wouldn't accept that most local councils operate as a secret club. It is true that the only final sanction that citizens have at their disposal is the periodic election. But where there are significant problems, public opinion can certainly put pressure on councillors, and I have experienced this leading to resignations. While I have been involved, the auditors have certainly asked questions that go beyond what is lawful, including asking for an explanation of the size of the reserves. Where a council is not operating to high standards, the only real answer is for dissatisfied citizens to put themselves forward as candidates and to mobilise opinion. Local council democracy can be a valuable asset to local life, but it does require voluntary effort. A community that makes the effort should be able to have a local council that does not have the deficiencies you describe. All the tools are there for you to use to achieve a vibrant local democracy.
Thanks once again. My whole argument is that the existing environment works perfectly well for good Councils and Councillors, however, if you have a Council who does not see its residents as customers it can get drawn into spending money on what Councillors want, rather than what residents want. Talking firstly of general reserves experience should indicate what percentage level is necessary to cover contingencies and this is perhaps be a figure (KPI) which is regularly declared.  Earmarked reserves are a different matter as there is no upper limit nor any control or monitoring. I believe they should be set at a certain limit and anything above a certain level subject to some form of public authorisation. I will give you a couple examples of what I mean. My PC has about 6000 residents. The PC decided sometime ago that instead of a Village Hall we needed a Community Centre which of course serves a wider area but is only paid for by us. The bigger it gets the more it loses so much so the grant now constitutes 20% of the budget. The PC have appointed a charity to run it and has a management committee. The trustees on the Committee are all appointed by the PC. They include some Cllrs who even have permission to talk and vote at PC meetings rather than declare an interest. The charity has no members and holds one Public meeting a year, but its constitution specifically excludes it from answering any questions (its says it must consider any points made during the ensuing year). As regards Earmarked reserves some 12 years ago someone suggested they needed some funds to object to any inappropriate developments.  For 12 years this has been added to each year but never spent and now stands at £100k.  The sad thing is that most residents don’t know how much the precept is as all they know is that pay Council Tax which they think goes to the District Council. I suspect this lack of interest comes about because people know that the current system allows them no access to any decision making, sure you can attend meetings and speak but not enter the debate.
Sadly, the current government thinking is not on regulating the existing system but is saying “providing you limit precept increases you can carry on as you are”. I despair.
Well, maybe. But you have all the tools you need at your disposal. Personally, I think it is a mistake to think of local government as having customers. This alters the relationship, which should be one of lively democratic accountability to citizens. A good deal of information is available to you, some simply on account of the local government legislation, such as the right to inspect the minutes of meetings, some by virtue of other legislation such as the Freedom of Information Act. The district council will publish full details of the council tax breakdown, including the amount handed over to the parish council (most usually goes to the county unless it is a unitary district). Publicity is nearly always the friend of democracy. The local press is likely to publish letters, or even articles if they are interesting enough. It's feasible for a small team to quite quickly leaflet 6000 residents, and the cost of materials needn't be large. A petition is easily set up. If interest is growing, it only takes six electors to demand a parish meeting, and although a parish meeting does not bind the council, a well attended meeting will certainly have some influence and further publicise the issues. In most parish councils, occasional vacancies will arise, and just ten electors can demand that there must be a poll, rather than co-option. That can lead to a lively election campaign when there are hot issues. Strong public feeling can also lead to councillor resignations, as not everyone is so thick skinned that they are willing to flout the expectations of their neighbours. Every so often, there is of course an election of the entire council. I honestly do not believe that any amount of interference by central government would change the situation for the better. The key is to ensure that local democracy is alive and well, and to impress on councillors that they have the privilege of spending their fellow citizens tax money and must do so in their best interests. If the current councillors can't do that, then get busy replacing them.
Thank Counterpoint I can see you are a good Councillor. However this does not change the fact that once elected Councillors can do whatever they want and no matter which avenue you pursue at the end of the day you come up against a legal brick wall. The problem is with most decisions you only hear about them once they are made and then the Councillors are not for turning
I  wrote to my MP about this and eventually I had a reply from the relevant government dept . The said that my ideas about a greater control and monitoring protocol around reserves in general "may have some merit". They referred me to the person who is currently chairing the review of   such matters viz wlma. They advised "JPAG will consider the issues you’ve raised around budgeting and the level of General/Earmarked Reserves a smaller authority should have at any given time. We will look to consult on any changes we intend to make during February/March 2019".

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