Lancashire’s accounts expected to be signed off after LOBO delay

24 Aug 18

Lancashire County Council’s accounts are to be given the green light following a delay caused by a controversial loan, the council has said.

Auditor firm Grant Thornton has now accepted the council’s accounting treatment of its LOBO loan was “appropriate” and councillors will approve the accounts next week.

Members of the audit, risk and governance committee delayed signing off the accounts after Grant Thornton asked for more time to seek technical advice about how the loan should be accounted for.

Interim chief executive and director of resources Angie Ridgwell said: “I am pleased that the external auditors have agreed that the accounting treatment we have applied to this particular loan since it was taken out in 2010 remains appropriate.

“It is good to be able to now sign off our accounts after this short delay.”

The loan - taken out in 2010 - was the subject of a protracted audit approval process. Grant Thornton said it had done this because of “increased scrutiny of such financial instruments”, in its audit report.

Lancashire’s £50m LOBO is a specific type known as an ‘inverse floating rate’ LOBO, which the auditors described as a “specific complex variant” of a typical LOBO.

Mike Thomas, who led the audit for Grant Thornton, said that there were 12 other local authorities with this type of loan.

After the initial delay, Ridgwell warned that if councils with ‘inverse floating rate’ LOBOs have to change the accounting arrangements for the loans this “would knock £0.5bn off of local government reserves” across those councils. 

Grant Thornton have asked that some additional explanatory notes be included in the accounts, which will be signed off by the committee.

In July, PF reported that a group 14 local authorities had begun legal action against Barclays Bank amid accusations that the bank sold them LOBOs fraudulently.

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