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A West London council facing the risk of bankruptcy has lost track of its financial history according to external auditors. External auditors at the Conservative-led Hillingdon Council have ruled that the financial records provided to them by the council were so unreliable and/or incomplete that they could not offer any opinion on whether they were true.
This means that the council cannot prove to the public or the government - which it has requested EFS (Exceptional Financial Support) from - how much money it has, it owes or the value of its assets.
This is the second consecutive year this has been issued by the independent auditors, and it is the most severe audit outcome possible. According to Stephen Reid, from EY (the external auditors) this was a so-called domino effect.
As EY had no confidence in the numbers or balances from previous years, they could not verify the council’s opening accounts at the beginning of the financial year, meaning that logically they could not verify the end position.
Steve Muldoon, the Corporate Director of Finance at the council said: “it will take a period of time to get back to a full set of clean accounts… the auditors in their report say that actually the council is a couple of years behind schedule.” It is now estimated that the council will not achieve a “clean” audit opinion until the 2027/28 accounts at the earliest.
The council’s financial position has also been described as critical. As of March 2025, the council’s reserves stood at just £6.7 million, way below the minimum safe level of £25.3 million as outlined by the Chief Finance Officer.
In the current financial year, the council is also forecasting a revenue overspend of £36 million, including a projected General Fund deficit of £34.5m million which would bankrupt the reserves into a negative position without a government bailout. Without the provision of EFS by the government, the council has judged that there would be a material uncertainty in respect of its ability to maintain adequate reserves and liquidity over the going concern period.
Mr Reid added: “I describe the council's financial position as critical and without corrective action and exceptional government support the financial position is unsustainable… reserves are very low… and the ability of the council to absorb further shocks is limited.”
One of the reasons behind the council losing track of its money is a failed implementation of a new finance system - Oracle - in May 2024. During the committee, council officers admitted to a “lift and shift” error in trying to copy old processes into the new system rather than adapting to the new software.
As a result, staff could not see accurate budget data, forcing them to use manual spreadsheets. This led to a “pervasive lack of confidence” amongst staff in their ability to track spending.
When Cllr Punja asked offices if the system is yet fully functional and being used for “maximum benefit” almost two years since the implementation began, she was told no. An officer responded: “No, we’re not using it for its maximum benefit… it is not one of those systems that you implement everything from day one.”
Have a story you want to share? Email philip.lynch@reachplc.com or @pjlynchjourno on X.
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