A cash-strapped council “cannot guarantee” it will avoid bankruptcy, its director of finance has said.
Croydon Council faces a £65.4m overspend in the 2020-21 financial year but only has £10m of reserve funds.
At a meeting on Tuesday, finance director Lisa Taylor said the impact of the Covid-19 pandemic meant a “balanced budget” could not be assured.
Meanwhile, the departure of the Labour-controlled council’s chief executive Jo Negrini was also announced.
If the council were to issue a Section 114 notice – a ban on all but essential spending – it would become only the second council to do so in 20 years, after Northamptonshire County Council went bust in 2018.
Council leader Tony Newman has insisted the authority will not be forced to ban spending.
Ms Taylor said: “There are savings this year in the budget which we are unable to deliver and we will need time to deliver them in future years.
“Likewise with additional income this year we have been unable to deliver that. I can’t guarantee that we won’t issue a 114 notice.”
Croydon Council said it had been “proactive” about addressing its financial situation by taking measures including setting up an independently chaired finance review panel and freezing recruitment.
A spokesman said the authority had also spoken to the government about financial support for “revenue pressures” to tackle its budget gap.
The spokesman said: “Our leadership continues to push ministers for a fair deal for Croydon on both historic underfunding and our Covid-19 shortfall.”
In June, the Local Democracy Reporting Service reported that up to 200 people could lose their jobs at the council, which employs more than 6,000 people, including in schools.
‘Saddled with debt’
Meanwhile, the council has announced its chief executive Jo Negrini is leaving her post after four years.
In a statement, she said: “This is a challenging time for local government and I am leaving with all the structures and the team in place to navigate through this post-Covid period and see the council through the next stage in its journey.
“I loved working for the people of Croydon. It’s an amazing place to work.”
But Tim Pollard, leader of the Croydon’s Conservative opposition, said he was “intrigued” by the timing of Ms Negrini’s departure.
“The town is saddled with masses of debt, it has financial problems fit to bust a gut,” he said.
“I can only assume that the chief executive had a massive breakdown in communication with the political leadership.”
Shifa Mustafa, Croydon’s executive director of place, will take the role up on a temporary basis.