• Home
  • About
  • Subscribe
  • LATIF
  • Conferences
  • Dashboard
  • Edit My Profile
  • Log In
  • Logout
  • Register
  • Edit this post

Room 151

  • 151 BRIEF

    What's New?

  • Welsh pension fund confirms £50m investment in clean energy

    August 10, 2022

  • Inflation ‘disastrous’ for local services, warns LGA

    August 10, 2022

  • Consultation opens into care charging reforms

    August 9, 2022

  • ADASS survey: ‘worst fears confirmed for adult social care’

    August 5, 2022

  • GMCA to unlock funds for home energy-efficiency upgrades

    August 4, 2022

  • Levelling up committee calls for urgent boost to social care funding

    August 4, 2022

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews
  • Briefs

Auditors settle LOBO accounting delay

0
  • by Colin Marrs
  • in 151 News · Technical · Treasury
  • — 30 Aug, 2018

Auditors have resolved an accounting issue relating to inverse Lender Option Borrower Option (LOBO) loans which had delayed the signing off of accounts at several councils.

This week Lancashire County Council’s auditor Grant Thornton concluded that the authority’s accounting treatment of a £50m inverse floating LOBO taken out in 2010 did not breach the rules.

Paul Dossett, head of local government at the firm, told Room151 that he expects all the remaining accounts held up over the LOBO issue to be signed off within a month.

“Lancashire has been signed off and we expect the other councils with inverse LOBOs that we audit — Salford, Trafford and Cornwall — to be signed off by the end of September,” said Dossett.

“My understanding is that the other auditors of the rest of the councils with these loans have, or will be, signing off their accounts.”

The issue over the accounting treatment of inverse floater LOBOs came to light as auditors examined objections to accounting at a number of councils with LOBOs, organised by pressure group UK Debt Resistance.

The debate centred on whether councils should have accounted for interest and other costs related to LOBOs up front, or whether the approach taken by councils — to spread the costs over the lifetime of the loans — was valid.

“If it had been found that councils should have accounted for these costs up front, it could have had a significant impact on general funds,” said Dossett.

“Some councils could have faced costs running into the tens of millions of pounds unless the government had chosen to mitigate it by use of statutory regulations.”

However, following intensive work, Dossett said that the approach taken by councils in spreading the cost of inverse LOBOs was permissible under accounting standards.

Grant Thornton has recommended that councils add additional disclosures in their financial statements to clearly describe the judgements they made in deciding on the accounting treatment of LOBOs.

Around 14 councils are understood to have taken out inverse floater LOBOs, which allow rates for the loan to increase if bank lending rates decrease.

“Vanilla” LOBOs, on which rates can rise when bank rates increase, were not subject to the auditor’s investigations.

The latest development does not mean councils are out of the woods entirely: auditors are still investigating a number of additional objections, including whether it was legal for the councils to take out LOBO loans at all.

Debt Resistance UK is currently crowdfunding for a part-time campaigner to help residents lodge more objections to local authority accounts.

A statement on the group’s website said: “Last year, we provided support for residents objecting to risky and expensive LOBO loans in 18 local authorities.

“This summer, we aim to double that number and have already filed at least 15 objections in just two weeks.”

Get the Room151 Newsletter

Share

You may also like...

  • Back to the future for the PWLB 18th May, 2022
  • Councils ‘becoming more involved in direct delivery of housing’ 28th Feb, 2022
  • Managing performance in a choppy UK money market 18th Jan, 2022
  • ‘Urgent consultation’ issued in response to continuing audit delays 13th May, 2022

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • 151 BRIEFS – WHAT’s NEW?

    • Inflation ‘disastrous’ for local services, warns LGA
    • Consultation opens into care charging reforms
    • ADASS survey: ‘worst fears confirmed for adult social care’
    • GMCA to unlock funds for home energy-efficiency upgrades
    • Levelling up committee calls for urgent boost to social care funding
  • Room151’s LGPS Roundtables

    Biodiversity
    Valuations & Risk
    LGPS Women

  • Room151’s LGPS Roundtables

    Biodiversity
    LGPS Women
    Valuations & Risk
  • Latest tweets

    Room151 14 mins ago

    Which LGPS pools and funds are attending the LGPS Investment Forum on Nov 2 & the LGPS Private Markets Forum on Nov 1st? Answer here: lnkd.in/eDHU8tuy pic.twitter.com/D3gd63Rh7F

    Room151 17 hours ago

    LGPS and levelling up: nothing to fear but fear itself: There have been a number of objections to government plans for LGPS funds to invest 5% of their assets in local projects. But George Graham says these objections can be[...] dlvr.it/SWL7vt pic.twitter.com/ebwBEkZTy4

    Room151 18 hours ago

    George Graham @SYpensions @bordertocoast channels his inner FDR in a call for local government pension funds to avoid the fear factor and embrace levelling up #LGPS #localgov room151.co.uk/local-governme…

    Room151 2 days ago

    Changes to rules on capital receipts raise wider questions: Stephen Kitching argues that DLUHC’s latest rule changes are part of a series following on from revisions to MRP guidance and the purchase of commercial property. He questions whether… dlvr.it/SWGqKC pic.twitter.com/Ycr5hWZDPk

    Room151 5 days ago

    ‘No ifs, no buts’: the Bank of England continues its battle with inflation: Partner Content: CCLA Investment Management’s Robert Evans discusses the MPC’s 0.5% increase in the Official Bank Rate and its ongoing commitment to the 2% inflation target… dlvr.it/SW7SNC pic.twitter.com/ryOzYRSNA9

    Room151 6 days ago

    DLUHC changes rules on flexible use of capital receipts: The levelling up secretary has written to all council leaders to amend the rules concerning the flexible use of capital receipts to fund transformation projects. In his letter, Greg Clark[...] dlvr.it/SW3jyX pic.twitter.com/KEhSSaMITl

    Room151 7 days ago

    Local audit and financial reporting: let’s take back control: Mazars’ Suresh Patel suggests three steps that auditors and council finance teams should take to help get financial reporting and local audit back on track. Following my recent appearance… dlvr.it/SW0PfV pic.twitter.com/miL7pjukce

    Room151 7 days ago

    The case for residential investment: income, impact and resilience: Partner Content: Emma Gullifer from Columbia Threadneedle discusses the options for pension funds looking to invest in residential property including the Build-to-Rent market.… dlvr.it/SVzKwN pic.twitter.com/hdgZ4zKt4H

    Room151 1 week ago

    Draft accounts: delays continue despite deadline dash: Dan Bates discusses the latest data on the publication of local authority accounts and examines why so many councils missed the 31 July deadline. Sunday 31 July 2022 was the[...] dlvr.it/SVx2ZT pic.twitter.com/gdELhD3Yis

    Room151 1 week ago

    DLUHC proposes devolution deal in York and North Yorkshire: The government has proposed a devolution deal for York and North Yorkshire, which it says will bring over £540m of investment to the areas over 30 years. The deal will[...] dlvr.it/SVvzPQ pic.twitter.com/JUKfgZB17f

  • Register to become a Room151 user

  • Previous story Greater Manchester racing to close EIB loan before Brexit
  • Next story LGPS pools miss opportunity to ‘consolidate’ sub-funds

© Copyright 2022 Room 151. Typegrid Theme by WPBandit.

0 shares