DERBYSHIRE County Council is in "sound financial health" despite the recession, according to auditors.

The authority's annual audit report said the authority's spending was kept within budget in 2008-9 and that had been able to make a large contribution to its reserve funds.

The audit commission document said the council's "current financial health is sound with a general fund balance of just over £64m at March 31, 2010."

But the auditors added that major challenges lay ahead in light of "uncertain economic prospects and expected cuts in Government funding from 2011-2 onwards".

The Derby Telegraph previously reported how the council must make £54m of savings in the next four financial years.

The report said: "The council has started to identify areas where service delivery will need to be re-engineered to deliver the significant savings that will be required. The impact of the recession will continue to present a challenge."