What was the issue?

At the end of the financial year, Council A held reserves totalling almost four times its annual precept. These reserves were held in the form of bank deposits and investments.

What happened?

Over a period of years, the Council built up the reserves by spending less than its income each year. These reserves were held in the form of bank deposits and investments.
The Council had no specific plans to use the money and simply let the surplus money accumulate.

What was/could be the impact? 

Holding significant amounts of money in reserves exposes the Council to loss from theft or fraud.

Each year Councils must prepare a budget in order to set the precept for the year.

If they fail to take into account all relevant information, such as the money held in reserve, local electors might challenge the Councils actions. This could result in additional legal and audit fees.

What improvements should be made?

When setting the budget for the year, the Council should take into account the amount of money held in reserves.

The reserves should be reviewed to ensure the Council has firm plans to use the money for the benefit of the local community.