A reserve policy is a formal municipal policy establishing rules and guidelines for maintaining reserve funds. Policies typically specify what types of reserves to maintain, target balance levels (often expressed as percentages of operating budget), authorized purposes for each reserve, processes for contributions and withdrawals, and review schedules. Strong reserve policies promote consistent long-term financial management rather than ad hoc decisions. They provide transparency about how reserves function and protect against inappropriate use of savings. Provincial legislation may require certain policies or set parameters. Auditors and credit rating agencies evaluate municipal reserve policies when assessing financial management quality.