Senior managers at the London Borough of Croydon face investigation and potential disciplinary action as the council tries to extricate itself from a financial crisis.
Croydon has a £66m deficit and last week took the rare step of issuing a section 114 notice, which prevents non-essential spending.
The council is to ask the Local Government Association to undertake an independent initial investigation into senior management actions over the period covered by the public interest report by auditor Grant Thornton, which led to the s114 notice.
A council paper said: “This independent initial investigation will advise whether there is any formal action to be pursued through any relevant formal disciplinary process.
“The decision to undertake this independent initial investigation supports the council’s commitment to being open and fully accountable for the actions that have led to the report being issued.”
Investigators will report initially to interim chief executive Katherine Kerswell, who joined Croydon in September.
This will include the creation of an independently-chaired improvement board, tighter spending controls, improved risk management, increased monitoring, more robust governance arrangements and greater transparency.
Hamida Ali, who became council leader last month, said: “My absolute priority, as the new leader, is to tackle Croydon’s financial challenges, get the council back on a stable footing and change the way we do things so that we deliver quality services in a way that is financially sustainable.
“As a council we are fully committed to implementing the changes and improvements to address the recommendations made by the auditor as swiftly as we can, and to learn from our mistakes.”
The action plan includes implementation of all 20 recommendations made by Grant Thornton together with four added locally.
These concern risk management, clarified member and officer roles, member training in finance and development of an improvement plan.
Croydon is expected to ask the Ministry of Housing, Communities and Local Government for approval to capitalise the 2020-21 in-year budget deficit and for further capitalisation funds over the next three years to sustainably balance the budget.
Dealing with the financial crisis has come with an implied threat to jobs.
A council report said responding would make it “necessary to reshape and resize the council in order to ensure its resources are organised to fully support the resolution of these issues and to ensure its financial sustainability.
“The council has to deliver its statutory duties and will then have to right size any further discretionary services within available funding.”
This process would mean careful consideration of whether Croydon has the capacity and capability to undertake all the required improvements and it may need to “seek to secure those specialist skills where they do not currently exist within the council", through a combination of external support and staff secondments.
At the end of October the MHCLG announced a rapid review into Croydon that will look at its governance, culture and management of risk. Recommendations to Local Government Secretary Robert Jenrick are expected this month.