Neville Murton, Service Head for Finance and Procurement introduced this report and stated the Draft Annual Financial Report for 2016-17 comprised of a Narrative Report by the Corporate Director for Resources and the draft Statement of Account which was subject to audit.  The full Annual Financial Report also contained the Annual Governance Statement which is subject to a separate report on the Committee agenda. Mr Murton said the draft Annual Financial Report and Annual Governance Statement would be submitted to the external auditors KPMG and would be placed on the Council website for public inspection next week.

Members of the Audit Committee asked the following questions

·         Page 46 – the Earmark reserve has seen a large increase and so has the Pension Reserve. Is there an explanation for this?

Overall the levels of reserves have been reviewed and earmarked reserves have changed to reflect the different priorities of the Council.The Pensions reserve has increased in value due to an increased deficit in the actuary’s report.  Though the pension fund investments increased in value by over £200m, the bond rate used by the actuary to calculate the net present value (NPV) of future pension liabilities has reduced – this reduction increased the under the NPV of pension liabilities by over £300m.

·         The Chair asked Officers to talk through the earmarked reserves on page 70.

Neville Murton responded that two notable earmarked reserves were the IT and theTransformation Reserves. The transformation reserve referred to the Council programme ‘smarter together’ and IT related to the Council’s ambition to update IT systems. The time frame for the projects is short to medium term.

·         Will external auditors have a view on the earmarked reserves?

They will examine the rationale adopted and will question the reasons behind the move away from a generic to more specific reserves.

The Audit Committee NOTED

1.    The Annual Financial Report for the financial year ending 31^st March 2017 comprising of the Explanatory Foreword and the Draft Statement of Accounts which are subject to audit.