Agenda item

To submit a report by the Head of Function (Resources)/Section 151 Officer.

The report of the Head of Function (Resources)/Section 151 Officer on the use of reserves and balances was presented for the Executive’s consideration.

The Portfolio Member for Finance reported that as at 31 March, 2017, the level of general balances stood at £8.355m, a decrease of £0.531m on the previous year. In the 2016/17 budget, a £1m fund was created from general balances in order to fund individual projects that could generate efficiency savings for the Council. The overall financial standing of the Council is currently good with an acceptable level of general balances and earmarked reserves as reflected in Table 4.2 of the report. Notwithstanding, there are a number of risks that have to be assessed in determining the level of general balances required; these are documented in section 3.3 of the report. There is a rule of thumb which indicates that the level of general balances should be 5% of the net revenue budget (excluding the delegated schools budget). However, due to the depleting school balances, the calculation for the 201718 level included the delegated schools budget. Based on the proposed 2018/19

budget, the balance of general reserves needs to be in the region of £6.5m which is in line with the minimum balance projected at 31 March, 2018.

The Head of Function (Resources)/Section 151 Officer said that there are two types of reserves – general reserves and earmarked reserves. The Section 151 Officer reviews and determines the level of general reserves required by the Council each year taking into account the risks it faces and having regard to the general rule of thumb that 5% of the net revenue budget is considered an acceptable level. The Section 151 Officer has assessed that for 2018/19 the Council should be holding £6.5m as a minimum level of general balances; the general reserve fund will be approaching that figure at the end of March, 2018. Earmarked reserves are held for specific projects/commitments; these have been reviewed to ensure they are still required for the purpose for which they were intended and the outcome of the review is set out in Appendix B to the report.

The Executive noted that the report on the 2018/19 Budget (item 12 on the agenda) refers to a number of items which will have to be funded from general reserves in 2017/18 bringing the level of general balances down to £5.882m and that it is intended to replenish the fund from earmarked reserves. The Head of Function (Resources) and Section 151 Officer clarified that the earmarked reserves include £996k held to part fund the cost of Equal Pay Claims. The vast majority of claims have been settled and the Welsh Government has authorised the capitalisation of this expenditure, which will allow the Council to borrow to meet the cost. Although some work is required to finalise the remainder of the claims and pay any fees incurred it is likely that over £700k of this reserve will not be required and can be added to the general balances thereby bringing them back up to £6.56m which is at minimum value.

It was resolved –

•  To note the general policy on reserves and balances adopted on 1 March, 2016, as at Appendix A to the report.

•  To set the minimum level of general balances for 2018/19 at £6.5m in accordance with the Section 151 Officer’s assessment.

•  To confirm the continuation of the existing earmarked reserves.