What is a reserves policy?
Reserves are the funds that GLA holds beyond the planned expenditure for that year. It can be thought of as the money in the bank at the end of the financial year, after all plot holder rents, membership fees and hut donations are paid as income and after all expenditure, such as Dulwich Estate rent, water, bins and other costs are incurred.
Reserves are important to give GLA resilience so it can meet large or unexpected costs, or can cover potential drops in income.
This reserves policy sets out GLA’s approach to reserves, and forms part of GLA financial management. Reserves should be monitored on an annual basis at the end of the financial year (end September) and the policy should be reviewed at least every 5 years.
Potential uses of GLA reserves.
To set the appropriate level of reserves, we have considered the possible uses of reserves, including potential risks. These include
- costs we may be forced to incur – such as health and safety compliance, essential repairs or replacements such as a new gate or lock, increased insurance premium, legal fees
- costs we may choose to incur – such as improving drainage and paths, new eco toilets. We may be able to secure grant funding for some of these costs.
- income loss – income is from plot holders and given the high demand for plots, we think a significant income loss is unlikely.
Proposed level of reserves
Given the range and scale of potential costs that could be incurred, we propose that we hold around 12 months of reserves, as measured at the end of each financial year. If reserves exceed 16 months or fall below 8 months then the Treasurer needs to set out an action plan to bring reserves back to closer to 12 months.
Current reserves position at July 2023
We currently hold 14.6 months of reserves. We have some significant costs expected in the next year which will bring down our reserves to our planned levels; these are covers for water tanks, work to start evening up our paths, and improving our water drainage on the site. This level of reserves fits within our reserves policy, as set out here.
Policy agreed at GLA Committee Meeting on 4th September 2023.