Issue - meetings

To consider a report by the Head of Resources regarding a Reserves Strategy and associated governance arrangements.

Approves the Reserves Strategy, as attached as Appendix 1 of the Officer’s report, specifically endorsing:

i.  a minimum level of Reserves at 15% of the Council’s ‘Net Expenditure’; and

ii.  the governance arrangements pertaining to each Reserve, specifically the ring-fencing of capital receipts that are generated from either ‘general service activity’ or from the Commercial Investment Strategy.

The Cabinet received a report by the Head of Resources (a copy of which is appended in the Minute Book) regarding the Reserves Strategy.  The main purpose of the Reserves Strategy was to provide a framework through which the Council was able to effectively manage and govern its use of Reserves.

In January 2015 the Cabinet agreed that the minimum level of General Fund Reserves would be £3m. However, as the Council was expecting to have a reducing, or near static, Net Expenditure over the forthcoming years it was preferable to have a level of reserves that was a percentage of any years’ Net Expenditure. For 2015/16 the £3m equated to marginally over 15% of the Net Expenditure and it was therefore agreed that 15% was set as the minimum level of reserves.

The Council would receive capital receipts as a consequence of the sale of capital assets that supported either general service activity or the Commercial Investment Strategy.  As assets that support general service activity had primarily been financed without external borrowing, in the interests of equity, such assets would finance either new future capital spend of a similar nature or reduce the Council’s internal debt burden.

Those assets that had been acquired as part of the Commercial Investment Strategy would have been financed from a mix of either direct revenue financing or external borrowing.  It was therefore considered that when assets were sold that the associated capital receipt were ringfenced.  If a capital receipt resulted from the sale of an asset from:

•  general service activity the related capital receipt would be applied to acquire/enhance other general service activity assets or pay down related debt; or from

•  the Commercial Investment Strategy the related capital receipt would be applied to acquire/enhance other CIS assets or pay down CIS related debt.

If it was considered that capital receipts were exempt from being ringfenced, this would only occur if approved by the Cabinet.

It was emphasised to the Cabinet that the minimum level of reserves of 15% referred only to the General Fund Balance.  Whereupon the Cabinet

RESOLVED

to approve the Reserves Strategy, as attached as Appendix 1 of the Officer’s report, specifically endorsing:

i.  a minimum level of Reserves at 15% of the Council’s ‘Net Expenditure’; and

ii.  the governance arrangements pertaining to each Reserve, specifically the ring-fencing of capital receipts that are generated from either ‘general service activity’ or from the Commercial Investment Strategy.

To consider and comment on the draft Reserves Policy prior to its submission to the Cabinet.

(Councillor J A Gray, Executive Councillor for Resources, was in attendance for this item).

The Panel received a report by the Head of Resources (a copy of which is appended in the Minute Book) on the outcome of a review of the way the Council managed its reserves. Councillor J A Gray reminded Members of the financial challenges facing the authority and that the Council was about to embark on an ambitious Commercial Investment Strategy. In that context, the review had established a need for a Strategy that clearly defined the operation of any reserves and for associated governance arrangements that would enable the Council to manage its reserves in a more commercial environment.

Members expressed support for proposed terms for the management of each type of reserve, and agreed to a change to the way the minimum level of reserves was defined. In the past it had been set at a fixed figure, whereas it was now recommended that the minimum level of reserves should equate to a percentage of any year’s Net Expenditure.

The Panel concurred with the view expressed by the Executive Councillor for Resources that when managing the Council’s reserves, Members should be led by professional Officers. The Panel, therefore:

RESOLVED

that the Cabinet be recommended to:

·  approve the Reserves Strategy;

·  endorse the minimum level of reserves at 15% of the Council’s Net Expenditure, and

·  endorse the arrangements pertaining to each reserve, specifically the ringfencing of capital receipts that are generated from either “general service activity” or from the “Commercial Investment Strategy”.