Lancashire County Council accounts to be signed off after contentious LOBO-loan holdup

A north-west county council’s accounts that were held up due to issues with a controversial loan are set to be approved next week.

The approval of Lancashire County Council’s accounts was put on hold earlier this month after auditors Grant Thornton queried how the Lender Option Borrower Option (LOBO) loan, taken out in 2010, should be logged.

Auditors raised issues with the £50m LOBO loan taken about by the authority in 2010. In its official audit document, Grant Thornton noted that LOBO loans have been subject “to significant public scrutiny” in recent years and, during this year’s financial audit, increased scrutiny has been placed on such financial instruments in terms of legality, value for money, and accounting treatment.

Grant Thornton and has now approved the council’s accounting treatment and asked that some additional explanatory notes be included in the accounts in time to be recommended for approval at the council’s meeting of the Audit, Risk, and Governance Committee on 28 August.

LOBO loans allow private banks to propose or impose a new fixed rate on a pre-determined future start date; the borrower can choose to accept this rate or repay the loan in full, but there are no breakage penalties at this point. Breakage penalties only apply if the borrower wants to repay at another point in time or when the rate is not changed — the same conditions as a fixed-rate loan would be.

Angie Ridgwell, the council’s interim chief executive and director of resources, 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." 

This month, the authority’s finances were deemed to be at “tipping point” by auditors, noting that Lancashire is in the top 20 of councils forecasting the most significant net decreases in the coming year.

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Image credit: Geograph


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