Issue - meetings

This report reviews the level of the Council’s reserves compared to District Council benchmarks as part of a financial health check, and seeks the Panel’s guidance on transfers between the reserves.

The Panel received and considered a report reviewing the level of the Council’s reserves.

The Panel requested confirmation that the Audit Commission’s suggested range for un-earmarked reserves was 5% to 100% of net operating expenditure, as stated in in the report. (Post meeting note – officers have confirmed the Audit Commission’s suggested range of 5% to 100%).

The Panel queried the appropriateness of the Property Income Equalisation Reserve target balance and whether it was, in fact, over prudent.

The Chief Finance Officer explained that the target balance represented one year’s rental income from each of the five commercial properties purchased in recent years using external borrowing. It was explained that the reserve would be needed to mitigate the risks of losing a tenant and associated rental income, as services to residents depended on this income and the Council would have to fund the annual borrowing costs. The reserve would also needed to mitigate the risk of having to undertake significant capital works at any of the properties in order to maintain tenants/rental income. The Chief Finance Officer confirmed his view that the target balance was appropriate and proportionate to the risks faced by the Council, and agreed to circulate a post meeting note with further detail.

The Panel also queried the level of reserves held principally for Insurance, Value Added Tax, and Property Maintenance.

The Chief Finance Officer explained that these reserve balances were required for the purposes set-out in the report, and considered that the balances were appropriate and proportionate to the level of financial risk faced by the Council in the medium term.

Following consideration, the Panel agreed:

(1)          That the overall level of the Council’s reserves and provisions were appropriate for the sound management of the Council’s finances.

(2)          That the level of individual reserves and provisions were appropriate and it supported the transfers between reserves as set out in paragraphs 7.18, 7.22, 7.35 and 7.51 of the report.