HYNDBURN Council has lost its battle to have an annual government inspection rating overturned and has been rapped for its financial management.

The council was originally told by Audit Commission inspectors if had been graded as a "fair" authority. The council claimed it should have been "good" and lodged an appeal soon after the inspection last autumn.

Council leader Peter Britcliffe, who branded the Comprehensive Performance Assessment (CPA) as "a disgrace", said inspectors downgraded Hyndburn from good to fair after discovering a £1.8million budget deficit.

That deficit led to a series of cuts and various sales of council assets to re-balance the books. Coun Britcliffe said the work to claw back the money was not taken into account.

He added: "I think it is a disgrace because originally we were graded as good and were only a couple of points off being an excellent council.

"We discovered there was a budgetary problem, which we put right. Because there was a problem they withheld their verdict and eventually downgraded us, never taking into account that we had resolved the budget problems."

While the council was rapped for its budgetary controls, it was praised for the work it had achieved in other areas, most notably in its environmental and benefits departments.

Mike Thomas, of the Audit Commission, said: "Financial management and controls need to be further developed and strengthened. Residents of Hyndburn will want to know what happens next. We have recommended that the council use CPA to help it work out how to tackle its weaknesses and would expect the council to make its improvement plans public.

"We will be back to report on progress. The end result should be better services for the people of Hyndburn."

Hyndburn MP Greg Pope said: "This pretty much tells us what we knew, which is that the council has certainly made improvements in recent years.

"It also tells us there is quite a worrying amount of room for improvement."