Shropshire Council cash reserves £10 million less than suggested

A risk assessment carried out by auditors had suggested the authority needed a general fund balance of £28.2 million, a figure approved by the full council earlier this year.

But Shropshire Council today revealed its balance is actually £18.4 million – a figure it insists remains "appropriate".

The figure represents the challenge being faced by the council at a time when it is being forced to make cuts and pay out for redundancies.

It also comes a day after Telford & Wrekin Council revealed it has had to raid its reserves to the tune of £6.5 million in order to keep front line services going.

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James Walton, Shropshire Council's head of finance, said: "The general fund balance is a risk-assessed general balance that the council should hold to mitigate against known and potential financial risks.

"It is a requirement that this assessment is undertaken at least annually and reported to council for approval. Guidance from the Chartered Institute of Public Finance & Accountancy exists as to what should be considered and assessed to arrive at an opinion of the 'adequacy of reserves' for a local authority.

"Our external a, Grant Thornton, also form a view on this. The risk assessment undertaken in February 2016, and approved by full council, suggested that Shropshire Council needed a level of general fund balance of £28.2 million.

"As at March 31, 2016, however, the level of general fund balance was £18.4 million. Members of the council's audit committee have reviewed the methodology and guidance behind the general fund balance risk assessment and confirmed that the approach undertaken to access the level and, given the circumstances, the actual level of general fund balance held was appropriate."

Mr Walton also explained that the authority holds £60.8 million of other reserves which are for specific projects or costs. However the level of the fund is currently being reviewed by the council's cabinet to assess whether it is appropriate.

The total under reserves stated in the council's accounts is £94 million, with the remainder made up from other sources. The remainder is not subject to the cabinet review.