Minutes:
The Committee considered the undernoted report:
“1.0 Relevant Background Information
1.1Following the release of information by the Environment Minister, Mark H Durkan, in response to an Assembly Question, the Belfast Telegraph on the 22 April 2014 published an article on the reserves of local councils at the 31 March 2013.
1.2The article specifically referred to Belfast City Council’s total reserves position of £20.6m at the 31 March 2013.
1.3Belfast City Council’s total reserves positions includes ‘specified reserves’ (£7.3m) approved by the Strategic Policy and Resources Committee for non recurring purposes and these avoid such expenditure being added to the District Rate. The use of specified reserves has assisted the Council in setting a Zero increase in the District Rate for the past two years.
1.4These specified reserves, all of which have been agreed by the Strategic Policy and Resources Committee, include items such as Local Government Reform £2m, Tall Ships £1.3m, Giro d’Italia £400k, Advice Consortia £426k, Area Interventions £436k, Boxing Strategy £600k, Recycling £568k and Renewing the Routes £645k.
1.5In addition the Council maintains general reserves (£13.3m) to safeguard the Council from unforeseen, or unquantifiable financial risk.
1.6It should be noted that the Council’s reserves position at the 31 March 2013, including analysis of the total of specified and general reserves, was reported to the Audit Panel and the Strategic Policy and Resources Committee in June 2013. This information was also published on the Council’s external web site as part of the financial statements of the Council.
2.0Key Issues
2.1A number of controls are in place within Local Government to ensure that councils maintain an adequate level of general reserves. These include:-
· Under the Local Government Finance (Northern Ireland) Act 2011, the Chief Financial Officer is required to submit a report to the Council on the robustness of the revenue estimates and the adequacy of the proposed financial reserves. The Act also requires that during the financial year the Chief Financial Officer must keep the financial position under review.
· The Chartered Institute of Public Finance and Accountancy (CIPFA) guidance on Local Authority Reserves and Balances requires councils to establish a level of general reserves based on the advice of their Chief Financial Officer taking into account all the relevant local circumstances.
· As part of their work, external Auditors consider whether the financial position of councils is soundly based.
2.2As the CIPFA guidance on reserves and balances requires each Council to assess local circumstances when agreeing the appropriate level of reserves, there is no prescriptive formula assessing the preferred reserves position.
2.3However in December 2009, the Department of the Environment issued guidance suggesting that councils should plan to have minimum general reserve levels of between 5% and 7.5% or just less than one month’s net expenditure. This would suggest a minimum level of reserves of up to £10.8m for Belfast City Council as compared to the reported level of £13.3m.
2.4It should be noted that when reporting the level of reserves to the Strategic Policy and Resources Committee in June 2013, the Director of Finance and Resources recommended that the general reserves should remain at £13.3m to cover the financial risks associated with the uncertainty around the future rate base in the context of local government reform and potential one-off resources required to support the delivery of the leisure transformation programme.
2.5A briefing note highlighting the key issues regarding the council’s reserves position at the 31 March 2013 has been circulated, which if agreed by the Committee will be distributed to all Elected Members.
3.0Resource Implications
3.1Financial
At the 31 March 2013 the Council had specified reserves of £7.3m and general reserves of £13.3m.
4.0Recommendations
4.1The Committee is asked to:-
· ·Note the contents of the report and
· ·Agree that the Briefing Note be distributed to all Elected Members.”
After discussion, the Committee adopted the recommendations and agreed that the Chief Executive, on behalf of the Council, write to the editor of the Belfast Telegraph regarding the article outlined in the report.
Supporting documents: