We have heard so much about the financial reserves of Hemsworth Town Council being used as a seemingly bottomless pit of money, by our Independent councillors since the very start of their term of office in May 2019.
Briefly, Financial reserves are there for a purpose:
- to meet unexpected emergencies that have not been budgeted for
- to have money available and earmarked for use on planned and budgeted for items
The normal running costs of a council should have been budgeted for in the previous financial year and are levied as the precept.
Any alterations or requirements to the Financial Reserves should also form part of precept process.
Every Town Council is required to maintain adequate financial reserves to meet the needs of the organisation.
Sections 32 and 43 of the Local Government Finance Act 1992 require local authorities to have regard to the level of reserves needed for meeting estimated future expenditure when calculating the budget requirement.
The level of reserves required will vary according to local circumstances and should be informed by future expenditure plans.
There is no specified minimum or maximum level of reserves that an authority should hold.
It is the responsibility of the Town Clerk (Responsible Finance Officer) and Councillors to determine the level of reserves and to ensure that there are procedures for their establishment and use.
The Good Councillors Guide to Finance and Transparency 2018 suggests that a
Council should typically hold between 3 and 12 months net revenue expenditure
(NRE) as a general reserve.
Typically a Town Council maintains two types of reserves:
General Reserves
This represents the non-ringfenced (earmarked) balance of Council funds.
The purpose of the General Reserve is to firstly to operate as a working balance to help
manage the impact of uneven cash flows and secondly, to provide a contingency to
cushion the impact of emerging or unforeseen events or genuine emergencies.
Earmarked Reserves
This type of reserve provides a means for the holding or accumulation of funds for
use in a later financial year to meet known or planned expenditure.
Through annual proportional increases to Earmarked Reserves, the impact on budgets and therefore
the annual precept, is minimised.
This action also helps to ensure that strong balances are passed to future Councils as part of sustainable financial planning.
Earmarked Reserves are typically held for four main reasons:
a) Renewals
b) To carry forward an underspend
c) To indicate commitment to a capital project
d) To meet known or predicted liabilities
If the reserve is too low then it may not be enough to cover unexpected expenditure or emergencies.
We saw a blatant disregard for financial planning when the Independents undertook a spending spree from 2019.
All earmarked financial reserves were amalgamated into “one pot” to make the money, our money, readily available for their use or as some would say misuse.
Unplanned and unbudgeted saw:
- the creation of the lakeside pub,
- the start of the forlorn attempt to rescind the sale of the Kirkby road site
- Cash payments become routine
- Petty cash used at will
- the infamous diggers and equipment
- the “free” storage unit
- Solicitors and Barristers used to fight lost causes time and time again.
Ferret is sure readers can add to this list.
So where did the money come from to finance all this hair brained activity?
Reserves of course and from other earmarked funds for other Hemsworth Town Council facilities, now all the money was in “one pot” access was easy and the money flowed and flowed, even being spent on councillors’ own properties and “gifts and job creation for staff”
But we all know nothing is for free, so if this money was spent on these things something must have gone without.
Yes it was and the damage started showing and it is still getting worse.
In 2019/20, the first year of this council, Reserves were plundered by £112,692
Yes, One hundred and twelve thousand six hundred and ninety two pounds.
Staggering to say the least.
Well you may say, they would budget to replace this money at the financial year end wouldn’t they?
We would have expected so, but no they didn’t and they didn’t deliver the promised £200, 000 precept reduction either.
So what was the consequences of this financial madness with our money?
All the places and facilities that had had their earmarked or budgeted funds plundered suffered.
For example:
- The condition of the fish stocks
- the Waterpark
- The Football facilities
- The 3g artificial pitch needing use of the earmarked funds that had now been wasted elsewhere.
- The known about repairs to the Waterpark footpaths
- Expensive equipment needing replacing
Once again ferret is sure readers can add to this list.
Did they budget for any of these?
No of course not, because to do so would raise the precept and expose their financial mismanagement even more.
Yet they still went into the reserves to satisfy their personal whims.
Even now they still press for unbudgeted items without business planning in place, like The infamous Jean Eccles’ lift for the Lakeside, while people fall and hurt themselves on the Waterpark paths.
Readers need to remember we are now into the fourth year of this disastrous regime and the ongoing hidden costs are rising daily, that one day will have to be remedied by us out of our pockets and purses.
Pockets and purses that are already facing an enormous strain…