Cornwall Council has been forced to pay a £45m penalty due to “serious failings” around the use of controversial loans, according to auditors.
A series of recommendations have been issued by the council's auditors in their annual audit letter.
Some of these relate to the council’s use of Lender Option Borrower Option (LOBO) loans, which were found to be a more expensive way of borrowing money.
In Cornwall, the council had two inverse LOBO loans worth £85m with the Royal Bank of Scotland which the council decided to repay early in January last year due to the high cost of the borrowing.
The council had to pay a premium, or penalty charge to exit the loans early of £45.2m.
The audit letter described "serious failings of governance at predecessor bodies a decade or more ago".
No statutory action is being taken due to the length of time since the LOBOs were issued, the fact they have been redeemed, and public awareness.
Cornwall Council was named as one of several councils in the country which had used LOBO loans and in particular inverse LOBOs where banks have an option to propose a rise in interest payments if general banking rates fall.
Local councils had been using the loans as a way of borrowing money but they were later found to be a more expensive way of borrowing money.