Hillingdon Council Faces Bankruptcy Risk as Financial Records Deemed Unreliable
External auditors have delivered a devastating assessment of Hillingdon Council's financial management, revealing that the Conservative-led West London authority has effectively lost track of its financial history. For the second consecutive year, independent auditors from EY have issued their most severe possible audit outcome, stating they cannot offer any opinion on whether the council's financial records are true due to their unreliable and incomplete nature.
Audit Failure Creates Financial Black Hole
According to Stephen Reid from EY, the external auditing firm, this situation represents a domino effect of financial mismanagement. Because auditors have no confidence in the numbers or balances from previous years, they cannot verify the council's opening accounts at the beginning of the financial year, which logically prevents them from verifying the end position. This means Hillingdon Council cannot demonstrate to the public or government how much money it possesses, what it owes, or the value of its assets.
Steve Muldoon, the Corporate Director of Finance at the council, acknowledged the severity of the situation, stating: "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.
Critical Financial Position and Bankruptcy Threat
The council's financial position has been described as critical by auditors. As of March 2025, Hillingdon Council's reserves stood at just £6.7 million, dramatically below the minimum safe level of £25.3 million as outlined by the Chief Finance Officer. In the current financial year, the council is forecasting a revenue overspend of £36 million, including a projected General Fund deficit of £34.5 million that would bankrupt the reserves into a negative position without government intervention.
Mr. Reid emphasized the gravity of the situation: "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." The council has requested Exceptional Financial Support (EFS) from the government and has judged that without this provision, there would be material uncertainty regarding its ability to maintain adequate reserves and liquidity.
Failed Technology Implementation Exacerbates Crisis
One of the primary reasons behind the council's financial disarray is a failed implementation of a new finance system - Oracle - in May 2024. During committee meetings, council officers admitted to a fundamental error in their approach, attempting a "lift and shift" strategy that copied old processes into the new system rather than adapting to the new software's capabilities.
This technological failure has created cascading problems throughout the organization. Staff cannot access accurate budget data, forcing them to rely on manual spreadsheets for financial tracking. This has led to what auditors describe as a "pervasive lack of confidence" among staff in their ability to monitor spending effectively.
When questioned about whether the Oracle system is now fully functional and being used for maximum benefit nearly two years after implementation began, council officers responded negatively. One officer stated: "No, we're not using it for its maximum benefit... it is not one of those systems that you implement everything from day one."
Broader Implications for Local Governance
This audit failure represents more than just an accounting problem - it signals a fundamental breakdown in financial governance at one of London's local authorities. The inability to produce reliable financial records for two consecutive years raises serious questions about oversight, management competence, and the council's capacity to serve its residents effectively.
The situation at Hillingdon Council serves as a cautionary tale about the risks of inadequate financial systems implementation and the importance of maintaining robust financial controls in local government. As the council awaits potential government support, the audit findings highlight the urgent need for comprehensive financial reform and improved governance structures to prevent similar crises in other local authorities.
