APPENDIX 2

Extract from the Annual Audit and Inspection Letter 2005-06

General fund spending and balances

76 Historically, the Council has held its general fund balances at around £2 million which as we said in our last letter is only acceptable in the context of the Council’s history of financial prudence. As the Council's financial circumstances change, it is important that the level of balances is kept under review to ensure there is an adequate cushion commensurate with the financial risks.

77 In addition to a general fund balance of £2 million the Council also has a number of reserves totalling £27 million at the 31 March 2005, the majority of which are ‘earmarked’ for specific purposes and are therefore not available to provide in-year financial support to the General Fund.

78 The Council will need to satisfy itself when deciding on future expenditure plans that its planned level of balances is sufficient to provide an adequate cushion given the emerging financial pressures and uncertainties in the years ahead.