A report published today from Hillingdon’s external auditor, Ernst & Young (EY), details significant concerns about the London Borough of Hillingdon’s financial stability and management. The report is a serious warning that the Council is facing a critical financial situation that could impact its services.
The document is dated 24 July 2025 and has been made available this evening as part of the papers for next Thursday’s Audit Committee meeting.
Introduced with a letter addressed to all councillors, the council’s auditors say:
We are not confident that the Council has a clear understanding of its current financial position or that the pace of improvement is sufficient to address the systemic weaknesses which exist within the Council’s financial management and governance. We are also not confident that the urgency of the need to address these systemic weaknesses is fully recognised by all decision makers.
The Council’s financial situation is now critical
Rapidly Depleting Reserves:
The Council’s reserves have fallen to a critically low level. At the end of March 2025, the Council’s reserves were just £6.7 million, which is £25 million below the minimum recommended level. The auditor states that these reserves are “inadequate“.
High Risk of Running Out of Money
The auditors forecast that the Council will completely run out of reserves during this financial year (ie, before the end of March 2026). The required savings for this period (£38 million) are more than five times the level of reserves the Council started with. This poses a “serious threat to the financial viability of the Council“.
Overspending the Budget
For the 2024-25 financial year, the Council had a deficit of £31.5 million. A forecast for 2025-26 predicts a further overspend of £16.4 million, which is more than double the remaining reserves.
DeFICIT IN Schools Budget
The deficit in the Dedicated Schools Grant (DSG) had grown to almost ten times the Council’s remaining reserves and poses a significant risk to the Council’s financial viability.
How this affects confidence in council decision-making and reporting
Poor Data and Unreliable Forecasts
The auditors found that poor data quality has led to unreliable financial forecasts. This means the Council doesn’t have a clear understanding of its own financial position, making it difficult to make properly informed decisions.
Issues with New Finance System
The implementation of a new IT system for finance (Oracle EPM) has had significant problems. This has made it difficult for council officers to access accurate budget information, requiring manual workarounds and leading to a lack of confidence in the data.
Weakened Governance and Controls
The intense focus on the immediate financial crisis has meant that other core areas of governance have been neglected. The Council’s Head of Internal Audit was unable to offer any assurance over the Council’s internal control, risk management, and governance for 2024-25, a finding the external auditor calls “exceptional” (see the video below)
Context of this video
Papers and agenda and full meeting video.
EY are speaking in reaction to Hillingdon’s Internal Audit annual report which said “Overall, it is the HIA’s opinion that Internal Audit can provide NO assurance over the internal control, risk management and governance arrangements in place during 2024/25“
What do the auditors at EY say needs to happen now?
The report is not just a criticism; it issues seven formal statutory recommendations that the Council must publicly address. The letter and report, along with Hillingdon’s response are not just correspondence between themselves – they are copied to Angela Rayner’s department, the Ministry for Housing, Communities & Local Government (MHCLG).
Section 24 recommendations
Section 24 recommendations, presented to the council in this report by EY, are part of a formal process issued to a local council when there are serious concerns about the council’s finances, governance, or ability to provide services. They are often a significant red flag indicating major problems.
The Section 24 Recommendations from EY urge the Council to:
- Develop detailed plans for its planned savings.
- Review its services to ensure they provide value for money.
- Balance the schools’ budget.
- Improve its financial forecasting.
- Urgently get a clear understanding of its current financial position.
- Fix the problems with its Oracle finance system.
- Continue at pace with its improvement plans, known as the Financial Modernisation Programme and the Governance Review Improvement Plan.
The Council has acknowledged the need for action and has started taking steps to address these weaknesses. However, the auditor is concerned that the pace of improvement is not sufficient and that the urgency of the situation is not fully recognised by all decision-makers.
EY’s report shows that the Hillingdon Council is in a precarious financial state. The lack of reliable financial information and weakened internal controls are major problems that need immediate and sustained attention.
The Council is now legally required to consider this report and its recommendations at a public meeting.
Hillingdon’s reaction – what next?
In its formal response to the highly critical report from its external auditor (Ernst & Young, or “EY”), Hillingdon Council states that it welcomes the recommendations and fully accepts the crucial nature of the work required. The Council wants to reassure residents that its major improvement work is already underway and is being managed through two key programmes.
The Council is running its own internal improvement programme, but has hired external experts to handle one part of it:
Internal Programme – The GRIP
The overall improvement plan is called the Governance Review Improvement Plan (GRIP). This is a wide-ranging plan to improve the Council’s internal controls, decision-making, and accountability. The GRIP is led and managed internally by the Council’s own senior staff.
External Support – The FMP
A critical part of the GRIP is fixing the Council’s finances. This specific part is called the Finance Modernisation Programme (FMP). For this task, the Council has hired external consultants, Grant Thornton, to provide expert help and support in overhauling the complex financial systems. So, Grant Thornton’s work on the FMP feeds into the larger, internally-run GRIP.
The legally-required public meeting
Hillingdon has monthly full Council meetings, where all 53 councillors from all 21 wards around the borough meet. That includes Ruislip’s councillors of Philip Corthorne, John Riley and Peter Smallwood, as well as Ruislip Manor’s councillors of Douglas Mills and Susan O’Brien, and the senior councillors from Cabinet (where Ruislip Manor’s Susan O’Brien is joined by South Ruislip’s Steve Tuckwell, Eastcote’s Ian Edwards, Ickenham’s Martin Goddard and others).
The public full Council meeting was originally scheduled for 25th September, but following EY’s instruction in July that Hillingdon must discuss these financial issues, the meeting was brought forward to 11th September – and were it not for the summer holidays, would’ve been sooner. Hillingdon asked for permission from EY to have it after the holidays so that all councillors could attend.
Residents can attend in person, and watch on the YouTube livestream.
Will it be enough?
The Council asserts that these combined efforts will address all the weaknesses highlighted by the external auditor. The Council must formally consider and respond to the auditor’s report at a public meeting, which it will do at the full Council meeting at 19:30 on Thursday 11th September. The meeting will be livestreamed on YouTube, and residents can attend in person.
Even if all of the changes were made overnight, they are fixes only to poor financial management and controls – they are not going to produce any new money. The Council have already said that they are approaching central government for Exceptional Financial Support. Since that announcement at the end of July, we have heard nothing more – so we await both the Audit Committee meeting next week and the full Council meeting next month for more details.
Is Hillingdon Council going bankrupt?
No. Partly because councils can’t go bankrupt. Partly because things aren’t that bad. Yet.
Exceptional Financial Support is an “emergency loan of last resort”. When a council’s finances become so strained that it can no longer set a balanced budget and is at risk of issuing a Section 114 notice (the council equivalent of declaring bankruptcy), it can apply to the government for this support. It isn’t extra money or a grant, rather, comes in the form of a loan or permission to use other money to keep the council going – which Hillingdon said multiple times from October last year until earlier this year it wouldn’t take, and wouldn’t be wise… but now has little choice.
Hillingdon Council’s financial situation is now described as “critical,” with forecasts showing it will completely consume its remaining reserves during the 2025-26 financial year. It isn’t allowed to do this, so the Council’s chief finance officer (the “Section 151 Officer”) had to consider issuing a Section 114 notice. However, the officer stated that a notice would not be issued “at that time” because the Council had already begun conversations with the government—specifically the Ministry for Housing, Communities & Local Government (MHCLG) – to receive Exceptional Financial Support (EFS). This indicates the severity of the financial situation, and we await more news.
More details
We don’t have any more details yet, and await them being made public.
Read more
EY’s Statutory Recommendations Report
Other documents prepared for the Audit Committee meeting on Thursday are on the LBH modgov website.
The Audit Committee meeting will be livestreamed below at 17:10 on Thursday 28th August
Comments are closed.