Reserve adequacy refers to whether a municipality's saved funds are sufficient to meet anticipated needs and protect against financial risks. Adequate reserves allow municipalities to handle emergencies, smooth out revenue fluctuations, maintain stable tax rates, and fund future capital requirements. Assessing adequacy involves considering potential emergencies, infrastructure replacement schedules, economic conditions, and financial risks. Common benchmarks suggest reserves equal to 10-20% of operating expenditures, though appropriate levels vary by municipal circumstances. Auditors, rating agencies, and provincial overseers evaluate reserve adequacy when assessing municipal financial health. Inadequate reserves can lead to crisis responses rather than planned management.