Reserves Policy Adopted by Full Council 13-06-2023

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Chard Town Council
RESERVES POLICY JUNE 2023
1.

INTRODUCTION

1.1

Local Authorities are empowered to hold reserves through section 32 and 43
of the Local Government Finance Act 1992.

1.2

Reserves are an essential part of good financial management, they assist the
Council to manage unpredictable financial pressures and plan for future
spending commitments.

1.3

Legislation states the Council must set a balanced budget. In setting the
balanced budget the Council should consider the following:
• What level of expenditure is required to deliver the desired level of
services;
• What income the Council can generate through fees and charges to
support the expenditure;
• The amount of reserves available to support the Council’s expenditure;
• The level of reserves required to fund the Council’s capital projects
contained within a medium-term financial plan;
• The level of Precept the Council is prepared to charge local residents.

2.

RESERVES-DEFINITION

2.1

This Council’s reserves fall into three main categories:
• The General Reserve;
• Earmarked Reserves to fund future revenue and capital costs;
• Restricted Reserves

2.2

The General Reserve:
The level of this reserve is designed to reflect the general cash flow and day
to day risks surrounding the delivery of the Council’s services. The Council
should determine what is a prudent level of reserve based on its own
circumstances, risks and uncertainties.

2.3

Earmarked Reserves:
These are sums set aside for service departments to meet future expenditure
of a capital or revenue nature not contained within the annual budget. They
are created by carrying approved unspent budgets or over recovery on

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Adopted by Full Council 13 June 2023

income into earmarked reserves, also if expenditure on certain items is
delayed then these may be earmarked for completion in the following year.
2.4

Restricted Reserves:
These are created from sums received with restrictions on how they may be
spent, examples include Community Infrastructure Levy and contributions
received under Section 106 Agreements. They may also contain sums set up
by the Council to fund any special projects not identified in a medium-term
financial plan.

3.

RESERVES POLICY

3.1

General Reserve
The Joint Panel On Accountability and Governance Practitioners’ Guide
recommends that an authority with an income and expenditure in excess of
£200,000 should plan towards 3 months equivalent as the General reserve.
If the General Reserve drops below three months operating costs it should be
topped up by either contribution from the Precept or by virement of sufficient
funds from the Earmarked Reserves to restore the General Reserve to an
acceptable level. If the General Reserve exceeds six months operating costs,
surplus funds should be carried into the Special Projects Fund or the
Earmarked Reserve created to support future years Precept.

3.2

Earmarked Reserves
Earmarked Reserves are created by carrying surpluses into the following
financial year, these may be either underspends on expenditure or over
recovery on income budgets. They may also be created to smooth irregular
revenue expenditure by making an annual allowance in the budget (for
example an Election Reserve). The practice of rolling over budgets due to
over budgeting is not allowed, accounting for such surpluses will take place
each year end, when the overall financial position of the Council can be
established and the treatment of the surplus/deficit is decided by the Full
Council.
Earmarked Reserves are allocated by Full Council and following
recommendation from the Committee responsible for the delivery of the
relevant services and will require a resolution by Full Council to release the
Earmarked Reserves as and when required. The Committee in conjunction
with the head of service should define:
• The reason for/purpose of the reserve;
• How and when the reserve can be used;
• Procedures for the reserve’s management and control;
• Timescale for review of the reserve to ensure its continuing relevance and
adequacy.

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Adopted by Full Council 13 June 2023

3.3

Restricted Reserves
Restricted Reserves contain sums received with restrictions on how the
monies may be spent, for example: Community Infrastructure Levy (CIL) and
Section 106 funding
CIL Receipts: These are the Councils’ share of funds raised from developers
undertaking new building projects in the area, these can be used to fund a
wide range of infrastructure projects needed as a result of the developments
such as park and green space improvements, provision of leisure facilities,
play areas etc.
Section 106 Receipts – These are sums received from developers to finance
specific projects such as the provision and maintenance of a play area etc.
The use to which the funds can be put are generally contained within the
agreement when the funds are handed over.
These funds require resolution of the Full Council to be spent.

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