Agenda item

Consideration was given to a report of the Director of Finance which presented the proposed Reserves Policy for the financial years 2019/20 to 2020/21 and incorporated any view into the final policy.

From the financial year 2014/15, the Council had developed a strategic approach to the creation and maintenance of reserves through the development of a Reserves Policy.  The presentation of the policy to the Audit Committee introduced improved transparency into the process which had previously been managed at the discretion of the Chief Financial Officer when the closure of the Final Accounts was undertaken.

There had been several reports issued on Local Government Resilience over the last couple of years with the Chartered Institute of Public Finance and Accountancy (CIPFA) releasing its Financial Resilience Index in December 2019.  This index placed an increased focus on the level of reserves held by Local Authorities and therefore, its ability to be financially resilient.  Furthermore, the global pandemic had had a significant impact on Local Government and the financial challenges faced by the Council meant a greater reliance would be placed on reserves.

The Audit Commission in 2012 produced a report into research on the level of reserves held by Councils.  One conclusion was that Councils needed to consider their present decision making around reserves in a number of areas which included:

·         Undertaking an annual review to ensure reserves aligned with Medium Term Financial Plans.

·         Having clarity about what earmarked reserves were for.

·         Ensuring earmarked reserves held to mitigate financial risk reflected an up-to-date assessment of risk.

·         Monitoring the level and use of reserves over recent years, and comparing the Council’s approach to other organisations facing similar circumstances.

·         Budget monitoring and forecasting to give elected members greater awareness of likely year-end movements on reserves.

·         Ensuring significant or unexpected variations to budget were dealt with.

The Council operates in a way that ensures that these six issues were given due consideration and action was taken to ensure compliance as appropriate.

The Policy was presented to the Audit Committee for review and to provide assurance that the Council managed its reserves effectively.  The Policy was appended to the report at Appendix 1 and presented the Council’s strategic approach to the creation and maintenance of reserves.  It highlighted the 15 major reserves which aligned to the information contained in Note 14 of the Statement of Accounts (as presented elsewhere on the agenda).  Members were advised of the purpose of each of the reserves.

Members were referred to Section 5 of the report whereby the decision to utilise any reserve would only be made once the in-year and future impact of use on the overall financial position of the Council had been considered by the Director of Finance. 

Members commented that it was good to have healthy reserves and asked if there were enough to deal with the impact of the pandemic.  Members were informed that there were sufficient reserves in these unforeseen times.  There were some reserves which were required to support the Medium Term Financial Strategy, specifically linked to the transformation programme.  What would be required was careful management to minimise the call on reserves through the times of uncertainty and there should be a delay in the use of committed reserves where possible until there was greater certainty about the financial position. 

Members sought and received clarification on the £10m COVID-19 reserve.  Whilst £7.641m related to Government grant received in 2019/20 as a unringfenced resource to support the response to the pandemic, the balance of £2.359m.  It would either be used to support initiatives to be introduced to alleviate the effect of the pandemic or bridge the gap between the government resources provided and the required level of Council spending.  Members also asked about specific reserves related to the pandemic and were informed that the 15 major reserves as outlined in the report would be reviewed if resources were needed.

RESOLVED that the review of the Reserves Policy for 2019/20 to 2020/21 be noted and was suitable from a governance perspective.