St Columb Major Town Council

 

Reserves Policy

 

Adopted by Full Council, 12th May 2026

To be reviewed May 2027

  1. Introduction

    1. Columb Major Town Council is required to maintain adequate financial reserves to meet its operational and strategic needs. This policy outlines the framework for determining, reviewing, and managing both general and earmarked reserves in line with the Local Government Finance Act 1992, the Local Government Transparency Code 2O15, and Smaller Authorities’ Proper Practices Panel guidance.

 

  1. The Responsible Financial Officer (RFO), who is usually also the Town Clerk, is responsible for advising the Council on appropriate reserve levels, ensuring adherence to legislation, best practice and the establishment of suitable procedures.

 

  1. Smaller authorities have no specific right to accumulate funds via the precept. According to the Smaller Authorities’ Proper Practices Panel (SAPPP) 2O25, authorities must:

−          adopt a Reserve Policy

−          regularly review the level and purpose of its reserves (at least annually)

−          provide transparent justification and publication of reserve levels

 

  1. Types of reserves

 

  1. The Council maintains two types of reserves: General Reserves and Earmarked Reserves.

 

  1. General Reserves comprise the Council’s cash flow and contingency funds to cover unexpected inflation, unforeseen events and unusual circumstances. While there is no statutory minimum level, it is recommended that for larger councils with income and expenditure exceeding £2OO,OOO, a General Reserves level equivalent to three months of net revenue expenditure is prudent; however, the level must be appropriate to the Council’s size, situation and risks. Consideration of the minimum level of reserves requires not only consideration of level of income and expenditure, but also the risks to that income.

 

  1. Earmarked Reserves (EMRs) are funds set aside for specific, known, or planned projects or liabilities, either in the current or future financial years. They are established through Council decisions, increased through allocation(s) e.g., budget, and decrease as they are used for their intended purposes. EMRs support multi−year projects, provide contingency for identified liabilities, and help manage the financial impact of significant expenditure commitments over time, thereby reducing the impact in any one year. While there is no upper or lower limit to EMRs, they must be held for genuine and identifiable purposes and projects, and their level should be subject to annual review and justification (at budget setting) and should be separately identified and enumerated.

 

  1. General Reserves

 

  1. The Council will ensure a minimum General Reserves level equivalent to at least four months of the Council’s Net Revenue Expenditure (NRE). This level is considered prudent − balancing financial risk and operational need, while ensuring taxpayers’ funds are used effectively for community benefit.
  2. The RFO will advise the Council of the appropriate level of General Reserves during the annual budget setting process (typically between October – December).

 

  1. The Council will review its General Reserves each year—prior to setting the Precept—ensuring it reflects known and potential operational, financial and risk−related factors e.g., situations that may lead to a loss in self−generated income as well as increased costs and adapt the General Reserve accordingly.

 

  1. The Council will ensure that its annual budget supports the maintenance of the General Reserves as set out in this policy.

 

  1. The Council will not deploy its General Reserves to finance recurrent expenditure and/or suppress/ understate budgeting and the Precept Balancing the annual budget by drawing on General Reserves must be a short−term option only, in justified circumstances.

 

 

 

  1. The Council’s primary means of building its General Reserves will be through:

−          reallocation of funds e.g. where a project comes in under budget

−          allocation from the annual budget i.e., Precept and/or self−generated income

 

  1. If, in extreme circumstances, General Reserves were exhausted or significantly depleted due to major unforeseen spending pressures within a particular financial year, the Council would draw upon its Earmarked Reserves to provide short term resources.

 

  1. Earmarked Reserves (EMRs)

 

  1. EMRs will be established via Council decision on a need basis, in line with anticipated requirements and pursuant to advice from the RFO. Common reasons for holding EMRs include (not exhaustive):−

−          asset replacement (buildings, equipment) or planned property maintenance

−          elections

−          Capital Receipts Reserve (CRR)

−          carrying forward committed but unspent project funds

−          covering insurance claim excesses

−          devolution funds

−          grants or community initiatives e.g. CIL

−          supporting capital project commitments

−          meeting known or anticipated liabilities

 

  1. When an EMR is established, the Council will ensure : −

−          a clearly defined purpose

−          target amount

−          funding source

−          planned usage timeframe

 

  1. Expenditure from EMRs can only be authorised by the Council, including via delegated authority to specific Committees in Terms of Reference documents and/or to the Clerk/RFO.
  2. The RFO is responsible for ensuring EMR expenditure aligns with the intended purpose, and any drawdowns or top−ups will be reported to Council via budget monitoring.

 

  1. EMRs cannot be used for other purposes and/or reallocated without Council approval.

 

  1. The purpose, justification and timeframe of each EMR will be reviewed annually during the budget setting process, to ensure that they remain relevant and/or supported by sufficient funds.
  2. The Council will budget to support EMRs and, in accordance with their purpose and the extent they are used, will replenish via the annual budget.
  3. EMRs used to meet a specific purpose, project or time−limited liability do not need to be replenished, having served the purpose for which they were originally established.
  4. EMRs will be separately identified and enumerated within the Councils accounting system.

 

  1. Responsibilities and Monitoring

 

  1. The RFO will:

−          maintain a reserves schedule

−          monitor reserve movements

−          advise the Council on the adequacy of its reserves

 

  1. The Council will:

−          approve the establishment and closure of EMRs

−          consider reserves when setting the annual budget and Precept in accordance with this Reserves Policy

−          annually publish information about its reserves on the Council’s website

 

  1. Policy Review:

 

This policy shall be reviewed annually or earlier if there is a change in legislation, the Financial Regulations, guidance or audit recommendations. Amendments must be approved by Full Council.