An independent financial watchdog has drawn up a list of 'challenges' which it says Bradford Council must act on.

The Audit Commission spelled out the nine-point plan in its annual inspection letter to the authority.

It outlined why Bradford Council was a 'three-star' authority and why it believed it was 'improving adequately'.

However, inspectors told the Council it must address all the issues arising from the Commission's investigation into the Asset Management Project - a report that hasn't yet concluded or been published.

In June last year the Commission received anonymous allegations about the Council's Asset Management Project which looked at bringing in a private partner to run most of the Council's buildings.

The director of asset management, Linda Carmichael, was suspended to allow an inquiry into the procedures used to appoint consultants.

That ongoing investigation is referred to six times in the letter which was to be put before the Council's audit and staffing committee today. Weaknesses were also found in the way grants were submitted to Government.

However, the letter praised Bradford's benefits service and its work in social care for adults and housing. It says the authority did well in improving education and social care and developing community leadership. The Council's contribution to regenerating the city was also praised along with its success in reducing crime.

A Council spokesman said the Commission had introduced a 'harder test' this year - Bradford's rating is second highest on a five point scale from excellent to poor.

Council leader Councillor Margaret Eaton (Con, Bingley Rural) said said: "The letter outlines the significant improvements we have made, but also the challenges that lie ahead for the Council. We will take on board the details of the letter in order to improve our services even further."

Interim chief executive of the Council David Kennedy added: "There is much to be proud of in this report, and I am particularly pleased we have retained the top rating for our benefits service. However, we are not complacent and recognise the need to improve in certain areas."