More than £20 million paid by developers in planning agreements for community projects is sitting in council coffers.

Hammersmith and Fulham Council has received a total of £27.6m from developers - known as section 106 contributions - since 2008, a Freedom of Information request revealed.

The authority said it had received £9.6m last year and spent £7.5m but its new year balance remained at £21.8m.

A total of £23.7m remained in the bank in January last year and £17.8m at the beginning of 2012.

The authority said it had spent a total of £40.1m between 2008 and 2013 on a range of community projects such as upgrades to Hammersmith Library and improving transport links around new developments.

Council leader Nicholas Botterill said money is set aside for projects which may be lengthy or take time to begin.

“Section 106 money must be used to improve neighbourhoods, addressing local needs that a particular development creates,” he said

“This could be anything from building new schools or funding community projects, to creating brand new transport and infrastructure.

“Obviously, such schemes can last several years, so contributions must be set aside so that projects are fully funded for their entirety, according to the legal agreement.

“Money is earmarked for specific projects that are by nature long-term that require careful consideration and need to be well planned, so you cannot just use the money as and when it comes in.”

Stephen Cowan, leader of the Labour opposition, said the council needs to ensure it is getting maximum interest on unspent reserves, this is at a time when council budgets are being slashed by government cuts.

“It is useful to keep some extra capital reserves aside but it is worth noting that the council is getting miniscule amounts of interest on this cash,” he said.

“Section 106 monies are meant to be allocated for capital projects but the council is effectively selling off many of our capital assets such as parks, community centres, public land and council homes.

“They’re selling off public land often at knock-down prices and then getting very little interest once the cash is in the bank. I think most people will think that’s financially incompetent.”

The biggest unspent contributions came from major housing developments including £6.3m from Westfield for its mall extension and 1,500 new homes in White City, and a combined total of £4.1m from developer St George for luxury apartment blocks in Chelsea Creek and Imperial Wharf, Fulham.

A further £1.3m was contributed by Sainsbury’s and Barratt Homes for its Fulham Wharf development.