To submit a report by the Director of Function (Resources)/Section 151 Officer.
The report of the Director of Function (Resources)/Section 151 Officer on the use of reserves and balances was presented for the Executive’s consideration. The report sets out the Section 151 Officer’s assessment on the level of general balances and reserves for 2020/21 along with recommendations as to the allocation of general balances for use during 2020/21.
The Portfolio Member for Finance reported that as at 31 March, 2019 the level of general balances stood at £5.192m, a decrease of £987k on the previous year. Although there is no hard and fast rule as to the level of general balances that a Council should maintain, a rule of thumb exists which indicates that the level of general balances should be 5% of the net revenue budget which for the Isle of Anglesey County Council for 2020/21 is £7.1m. The current projection is that the Revenue Budget will overspend by £1.24m in 2019/20 which will need to be funded from the general reserves. In addition, £425k will be moved to a service reserve if approved by the Executive following the adoption of a new approach which will allow services to transfer unspent funds (where the underspending is on controllable budgets which are non-demand led) into a service reserve to help manage future pressures or fund future projects where no budget provision exists. Taking all these into consideration, it is estimated that the level of general balances will fall to approximately £4.6m at 31 March, 2020. The Council also holds a number of earmarked reserves for specific purposes as listed in section 4.1 of the report – the Portfolio Member said that he had asked the Section 151 Officer to review the earmarked reserves to establish whether some can be released or transferred to the general fund balance.
The Portfolio Member added that realistically given the current financial circumstances, it is not possible to budget for a budget surplus in order to bring the general reserves balance back to a minimum level and the increase in general reserve must be done more gradually over a period of 3 to 5 years.
The Director of Function (Resources)/Section 151 Officer advised that the Wales Audit Office has undertaken a study on the financial resilience of each of Wales’s 22 local authorities and in initial feedback to the Council in Anglesey ahead of the publication of the formal report, has highlighted the Council’s reducing reserves as a financial risk to the Council which will need to be addressed over the course of the next few years. The Officer confirmed that an initial review of the earmarked reserves has identified two reserves that can be transferred back into the general reserve fund. Whilst Anglesey’s school balances reserve has historically been high compared to that of schools in the rest of Wales, it has reduced significantly over recent years and at 31 March, 2019 school balances stood at £0.631m. It is highly likely that the remaining balance on this reserve will have reduced again during the 2019/20 financial year although this will only be confirmed on the closure of the 2019/20 accounts following which a further report will be presented to the Executive around July, 2020.
It was resolved –
• To note the general policy on reserves and balances adopted on 1 March, 2016 as set out in Appendix A to the report.
• To approve the amendments to the general policy on reserves and balances adopted on 1 March, 2016 in Appendix A.
• To set the minimum level of general balances for 2020/21 as £7.11m in accordance with the Section 151 Officer’s assessment.
• To plan for an increase in general balances over a 3 to 5 year period in order that the actual level of reserves reaches the minimum level. This increase will be achieved by budgeting for planned annual surpluses.
• To confirm the continuation of the existing earmarked reserves.
• To approve the transfer of both Foster Carer Mortgage and Policy Management System reserves from the earmarked reserves to the General Reserves.