Financial Reserves Policy 2026

The Council Office, Diamond Jubilee Lodge, Wood View Road,
Hellesdon, Norwich, NR6 5QB Tel: 01603 301751

FINANCIAL RESERVES MANAGEMENT

1. Purpose
1.1 Hellesdon Parish Council (HPC) is required to maintain adequate financial reserves
to meet the needs of the organisation. The purpose of this document is to set out how the
Council will determine and review the level of reserves.
1.2 Section 50 of the Local Government Finance Act 1992 require a local precepting
authority to have regard to the level of reserves needed for meeting estimated future
expenditure when calculating the budget requirement. However, there is no specified
minimum level of reserves that an authority should hold but it is generally accepted that
general (un-earmarked) revenue reserves usually lie within the range of three to twelve
months of gross expenditure.
Governance and Accountability for Smaller Authorities in England: Practitioners’ Guide
2026/27, issued by the Smaller Authorities Proper Practices Panel (SAPPP), Section Five —
Supporting Information for Officers, AGS Assertion 1: Financial management and
preparation of accounts.
It is the responsibility of the Responsible Financial Officer to advise the Council about the
level of reserves and to ensure that agreed procedures are adhered to for their
establishment and use.
2. Types of reserves
2.1 Reserves are categorised as general or earmarked.
2.2 Earmarked reserves can be held for several reasons:
• Renewals – to enable services to plan and finance an effective programme of vehicle
and equipment replacement and planned property maintenance. These reserves are a
mechanism to smooth expenditure so that a sensible replacement programme can be
achieved without the need to vary budgets.
• Carry forward of underspend - some services commit expenditure to projects, but
cannot spend in the current budget year. Reserves are used as a mechanism to carry
forward these resources.
• Insurance reserve – to enable the Council to meet the excesses of claims not
covered by insurance.
• Other earmarked reserves may be set up from time to time to meet known or
predicted liabilities.

Hellesdon Parish Council
Financial Reserves Policy
Adopted May 2026
Next scheduled review May 2027
• Monies received from CIL (Community Infrastructure Levy) payments must be held in
an earmarked reserve in order to account for spending in accordance with government
policy.
• Monies due to the Council under s.106 Agreements are held by Broadland District
Council and released to this council following approval of expenditure and submission of
relevant receipted invoices which confirm payment.
2.3 General reserves are funds which do not have any restrictions as to their use. These
reserves can be used to smooth the impact of uneven cash flows, offset the budget
requirement if necessary or can be held in case of unexpected events or emergencies.
3. Earmarked reserves
3.1 Earmarked reserves will be established on a “needs” basis, in line with anticipated
requirements.
3.2 Any decision to set up a reserve must be given by the Council.
3.3 Expenditure from reserves can only be authorised by the Council.
3.4 Reserves should not be held to fund ongoing expenditure. This would be
unsustainable as at some point, the reserves would be exhausted. To the extent that
reserves are used to meet short term funding gaps, it must be resolved that they must be
replenished in the following year. However, earmarked reserves that have been used to
meet a specific liability would not need to be replenished, having served the purpose for
which they were originally established.
3.5 All earmarked reserves are recorded on a central schedule held by the Responsible
Financial Officer and lists the various earmarked reserves and the purpose for which they
are held.
3.6 The Council’s Financial Risk Assessment is considered within the budgeting
procedure and year end accounting procedures and identifies planned and unplanned
expenditure items and thereby indicates an appropriate level of reserves.
4. General Reserves
4.1 The level of general reserves is a matter of judgement and so this document does
not attempt to prescribe a blanket level. The primary means of accumulating general
reserves will be through an allocation from the annual budget. This will be in addition to any
amounts needed to replenish reserves that have been consumed in the previous year.
4.2 Setting the level of general reserves is one of several related decisions in the
formulation of the medium term financial strategy and the annual budget. The Council must
accumulate and maintain sufficient working balances to cover the key risks it faces, as
expressed in its Financial Risk Assessment.
4.3 If in extreme circumstances general reserves were exhausted due to major
unforeseen spending pressures within a particular financial year, the Council would be able
to draw down from its earmarked reserves to provide short-term resources.
4.4 Even at times when extreme pressure is put on the Council’s finances the Council
must keep a minimum balance sufficient to pay one month’s salaries to staff in general
reserves at all times.

Hellesdon Parish Council
Financial Reserves Policy
Adopted May 2026
Next scheduled review May 2027
5. Opportunity cost of holding reserves
5.1 In addition to allowing the Council to manage unforeseen financial pressures and
plan for known or predicted liabilities, there is a benefit to holding reserves in terms of the
interest earned on funds which are not utilised. This investment income is fed into the budget
strategy.
5.2 However, there is an “opportunity cost” of holding funds in reserves, in that these
funds cannot then be spent on anything else. As an example, if these funds were used to
repay debt the opportunity cost would equate to the saving on the payment of interest and
the minimum revenue provision, offset by the loss of investment income on the funds.
However, using reserves to pay off debt in this way would leave the Council with no funds to
neither manage unexpected risks nor provide a mechanism to fund the planned expenditure
for which the reserves were earmarked.
5.3 Given the opportunity costs of holding reserves, it is critical that reserves continue to
be reviewed each year as part of the budget process to confirm that they are still required
and that the level is still appropriate.
6. Current level of financial reserves
6.1 The level of financial reserves held by the Council will be agreed by the Property
Policy & Resources Committee during the discussions held regarding the setting of the
budget and precept for the forthcoming financial year.
6.2 The current level of general reserves to be held by the Council is no less than
£300,000.00 as this is considered to be adequate for six months running costs of the council.
6.3 The current level of earmarked reserves to be agreed by the Property Policy &
Resources Committee.
7. Current Financial Service Provider
7.1 The current financial service provider is Barclays Bank plc and Unity Trust Bank. The
credit rating and reputation of the provider is considered by the Property Policy & Resources
Committee during the discussions held regarding the level of financial reserves.
7.2 The Council may consider other providers as appropriate in order to achieve the best
return on its investments. The credit rating and reputation of the provider must be relevant to
local government policies and best practice.
7.3 HPC currently has two loans with PWLB, both agreed by Full council following
recommendations from Property, Policy and Resources Committee, payback of these loans
are included in the precept amount requested from Broadland District Council.

Hellesdon Parish Council
Financial Reserves Policy
Adopted May 2026
Next scheduled review May 2027