Review of Reserves
Adequacy of Reserves and Working Balance
The working balance is recommended to be maintained at £9m over the period of the Medium Term Financial Strategy. The consequences of not keeping a minimum prudent level of balances can be serious and in the event of a major problem or a series of events, the council would run a serious risk of a deficit or of being forced to cut spending during the year in a potentially damaging and arbitrary way. The working balance was used to fund the 2022/23 General Fund overspend and therefore replenishing it is a high priority and this will be completed over the next 3 financial years. The budget for 2024/25 includes a first year repayment of £1.125m.
The current level of balances has been based on the robustness of estimates information and the Corporate Risk Register. In addition, the other strategic, operational and financial risks taken into account when considering the minimum level of the working balance include:
(i) The level of mitigation against the ongoing financial impacts of the pandemic;
(ii) The complexity and degree of uncertainty associated with planned economy and efficiency measures and/or service changes and the likelihood of achieving them in full;
(iii) The level of balances required to complement resources potentially available under the Bellwin Scheme for Emergency Financial Assistance to Local Authorities in the event of a major emergency;
(iv) Risks of rising demand, increasing costs and/or falling income due to economic conditions or potential legislative changes;
(v) The risk of major legal challenges, both current and in the future;
(vi) Risks in the financial inter-relationship between NHS partners and the council;
(vii) The need to retain a general contingency to provide against unforeseen circumstances that may arise, for example, delays in council tax billing which could arise from a major systems or power outage;
(viii) The need to retain reserves for general day-to-day cash flow needs.
In addition, the cash flow risk for unitary authorities is significant given the full range of services provided. Taking all of these factors into account, a £9m working balance is considered the minimum appropriate, representing about 2.5 weeks of council tax revenue.
Schools’ Balances
Schools’ balances, while consolidated into the council’ s overall accounts, are a matter for Governing Bodies. Nevertheless, under the council’s Scheme for Financing Schools the council has a duty to scrutinise whether any school holds surplus balances. The council’s Scheme for Financing Schools is in line with the requirements of the Secretary of State for Education and the arrangements in place are considered adequate.
Estimated Earmarked General Fund Revenue Reserves
Processes are in place to regularly review the council’s earmarked revenue reserves. Details of the review of reserves are included in the table below.
The Chief Finance Officer is required, under Section 25 of the LG Act 2003, to review the adequacy of reserves and provisions. The review of reserves assesses the purpose and appropriateness of holding a reserve or provision and assesses the level of the reserve against identified risks and commitments. Following the review, £0.545m can be released from the following reserves in 2024/25:
|
Reserve |
Amount to be Released £’000 |
|
Section 106 Interest |
500 |
|
Customer Access & Accommodation Strategies & The Link Network Upgrade Reserve |
25 |
|
Portslade Adult Learning |
20 |
|
Total Reserves to be released |
545 |
|
|
Estimated Balance as at 01/04/24 £'000 |
Planned Use 2024/25 £'000 |
Estimated Balance as at 31/03/25 £'000 |
Review Arrangements |
Conclusion |
|
General Fund Reserves |
|||||
|
General Fund Working Balance/General Reserves |
5,624 |
1,125 |
6,749 |
Reviewed against the register of financial risks, taking into account the requirements of the Local Government Act 2003. |
A minimum working balance of £9.000m is recommended by the Chief Finance Officer in accordance with the requirements of Section 25 of the Local Government Act 2003. The Working Balance is being replenished over three years with the first repayment included in the 2024/25 budget. |
|
Capital Receipts Reserve |
2,720 |
4,524 |
7,244 |
Ongoing review as part of TBM process. |
Committed to fund the Capital Investment programme including HRA Capital Programme and support for the council's modernisation investment plans. |
|
Library PFI Reserve |
825 |
-158 |
667 |
Following closure of accounts. |
Use for funding the project over the lifetime of the PFI scheme. Expected to be increased contributions from reserves, due to inflationary pressures. Contributions to the reserve may be required in future years. |
|
Waste PFI Project Reserve |
7,463 |
-266 |
7,197 |
Following closure of accounts. |
Use for funding the project over the lifetime of the PFI. This reserve has been used to fund the Term Time only costs and will be replenished in time to meet existing Waste PFI commitments. |
|
Section 106 Receipts (Revenue) |
608 |
0 |
608 |
Reviewed throughout the year to reflect agreed liabilities and new agreements. |
Retain for specified purpose. |
|
Section 106 Interest |
531 |
-31 |
500 |
Reviewed throughout the year to reflect agreed liabilities and new agreements. |
Release £0.500m to support the 2024/25 budget. This reserve relates to accumulated interest on S106 receipts. A review of the council's obligations to accrue interest has allowed the release of the majority of the funds which would otherwise have been reflected in the Financing Costs budget. |
|
Developer Contributions Unapplied (S106 Capital) |
346 |
0 |
346 |
Reviewed throughout the year to reflect agreed liabilities and new agreements. |
Retain for specified purpose. |
|
Brighton Centre Redevelopment Reserve |
287 |
-287 |
0 |
Following closure of accounts. |
This reserve has been redirected to support essential maintenance at the Brighton Centre which is included in the 2023/24 and 2024/25 capital programme. |
|
Customer Access & Accommodation Strategies & The Link Network Upgrade Reserve |
25 |
0 |
25 |
Following closure of accounts. |
Release £0.025m to support the 2024/25 budget. The balance of this reserve is no longer required. |
|
ICT Investment Reserve |
546 |
-300 |
246 |
Following closure of accounts. |
Held to support planned IT&D expenditure over the next two years. |
|
Winter Maintenance |
371 |
0 |
371 |
Following closure of accounts. |
Held to fund exceptional costs of extreme weather. |
|
Dome Planned Maintenance |
210 |
0 |
210 |
Following closure of accounts. |
Retain - subject to lease agreement with Brighton Dome & Festival Society. |
|
Hove Park 3G Pitch Renewal |
15 |
0 |
15 |
Following closure of accounts. |
Held to replace pitch at the end of its useful life. Timing to be confirmed. |
|
Surface Water Management Plan Reserve |
405 |
-161 |
244 |
Following closure of accounts. |
Retain
to support planned SWMP related works, emergency work and to
contribute to any carbon neutral opportunities. |
|
Sports Facilities Reserve |
358 |
-200 |
158 |
Following closure of accounts. |
Retain to support Sports Facilities. |
|
Licensing - other reserve |
18 |
0 |
18 |
Following closure of accounts. |
Retain for specified purpose - to fund potential future deficits or repayment to licensees. Reserve irons out fluctuations in volumes of licences issued each year. |
|
Taxi Licensing |
61 |
0 |
61 |
Following closure of accounts. |
Retain for specified purpose - to fund potential future deficits or repayment to licensees. This smooths out fluctuations in volumes of licences issued each year. |
|
Trading Standards Seized Goods |
7 |
0 |
7 |
Following closure of accounts. |
Retain for specified purpose - to fund potential future repayments. |
|
Stanmer Park Parking Surplus |
250 |
0 |
250 |
Following closure of accounts. |
Ringfenced to support expenditure on Stanmer Park as part of the Heritage Lottery funding agreement. |
|
East Brighton Parking Surplus |
0 |
-63 |
-63 |
Following closure of accounts. |
Retain to support expenditure on East Brighton Park |
|
Preston Park Parking Surplus |
187 |
-80 |
107 |
Following closure of accounts. |
Retain to support expenditure on Preston Park. |
|
Road Works Permit Scheme |
53 |
0 |
53 |
Following closure of accounts. |
The reserve is required to ensure that the permit scheme can meet its costs as in accordance with the legislation. The service is demand led depending on the volume of works in the city and the reserve reduces this risk of pressure on the wider council’s revenue budgets. |
|
Overdown Rise Footpath Maintenance |
20 |
0 |
20 |
Following closure of accounts. |
Hold for future years maintenance costs of the foot path at Overdown Rise |
|
HMO Licensing Fees Reserve |
456 |
-75 |
381 |
Following closure of accounts. |
Retain to support annual inspections of HMO licenses - this is a statutory function |
|
Phoenix House Sinking Fund |
60 |
0 |
60 |
Following closure of accounts. |
Tenants’ contributions to be retained for maintenance requirements at Phoenix House. |
|
Damage Deposit Guarantee Scheme |
94 |
0 |
94 |
Reviewed during the year as part of budget monitoring process |
Retained for specified purpose but required level will continue to be reviewed. |
|
RP&M Trust Sinking Fund |
402 |
0 |
402 |
Following closure of accounts. |
Retain - subject to lease agreement with RPMT |
|
Cemeteries Maintenance Reserve |
59 |
-5 |
54 |
Following closure of accounts. |
Retain for maintenance of cemeteries, tree clearance etc |
|
Travellers Site Capital Reserve |
79 |
-50 |
29 |
Following closure of accounts. |
Contribution each year to reserves for future major works costs of the Travellers site. |
|
Restructure Redundancy Reserve |
86 |
0 |
86 |
As part of closure of accounts. |
Restructure & Redundancy costs are funded within the capital programme as part of the capitalisation direction. |
|
CIL - Neighbourhood reserve |
491 |
0 |
491 |
Following closure of accounts. |
Allocations from the Neighbourhood Reserve will be made in accordance with the agreed process which involves ward councillors. |
|
CIL - Strategic reserve |
2,623 |
0 |
2,623 |
Following closure of accounts. |
Allocations from the Strategic reserve will be made in line with the strategic objectives set out in the initial scheme and will be approved by committee. |
|
Total General Fund Reserves |
25,280 |
3,973 |
29,253 |
|
|
|
Schools / DSG Reserves |
|||||
|
Portslade Adult Learning |
20 |
0 |
20 |
Following closure of accounts. |
Release £0.020m to support the 2024/25 budget. Historic reserve no longer required for its original purpose. |
|
Total Schools / DSG Reserves |
20 |
0 |
20 |
|
|
|
TOTAL RESERVES |
25,300 |
3,973 |
29,273 |
|
|
|
General Fund Provisions |
|||||
|
Hostel Accommodation Dilapidations |
82 |
0 |
82 |
Following closure of accounts. |
Held for dilapidation costs for West Pier Hostel following retendering of service. |
|
10 Year lease revenue costs Provision |
78 |
39 |
117 |
Review of annual contribution to this provision at closedown. |
This is required to pay back the borrowing costs when 10 year leases finish in 2032/33.These are 30 properties leased through Rough Sleeping Accommodation Programme partly funded by DCLG. |
|
Voluntary Severance Provision |
1,000 |
-1,000 |
0 |
Following closure of accounts. |
To fund cost of potential severance agreements from 2024/25 Budget plans. |
|
Insurance Provision |
4,076 |
-100 |
3,976 |
The Insurance Fund is subject to a bi-annual health check by the actuaries. The last health check was completed in March 2023. |
The level of the Insurance Fund will be adjusted in line with the recommendations of the actuary as part of the 2023/24 outturn report. |
|
Homewood College Academisation Provision |
350 |
0 |
350 |
Following closure of accounts. |
Hold to fund potential costs of academisation. |
|
Total General Fund Provisions |
5,586 |
-1,061 |
4,525 |
|
|
|
TOTAL ALL FUNDS |
30,886 |
2,912 |
33,798 |
|
|