Dudley’s leaders are gearing up for a crunch meeting to explain how they will fix the authority’s ailing finances after a warning from auditors.

A meeting of the full council on February 26 will debate measures to address statutory recommendations from external auditors Grant Thornton.

Auditors made the recommendations, which require council leaders to publicly outline how they will tackle the budget black hole, after concluding the authority was going to run out of reserve cash and is at risk of effectively going bankrupt.

In its latest report Grant Thornton said: “We understand that there has been an overall positive movement however the outlook is still a serious concern.

“The financial outlook for the council remains highly concerning, the council must now take urgent action to identify and deliver all available opportunities to reduce the current budget gap and reduce reliance on General Fund reserves.”

A total of four recommendations have been made. Auditors say the council needs to cut the deficit for the current and next financial years, strictly enforce spending controls and review statutory levels of service to deliver the minimum required.

They also insist the council needs to find further savings and generate more income in the medium term plus create a contingency fund for unexpected expenditure.

Council leaders say work towards these aims was already underway by the time Grant Thornton issued its statutory recommendations.

Any request to dip into reserves will be challenged and a review of spending controls is under way.

The authority is also conducting a total organisational redesign which it says will include reviewing statutory service levels.

Budget plans approved earlier this month have found a further £4.1m savings for the next financial year which cuts the deficit from £10.1m to £6m and more savings will be found during the summer, ahead of the usual autumn budget statement.

The council has also identified £3.3m per year for a contingency fund as part of the budget that will be put forward for approval at the full council meeting on March 4.

At a meeting of the council’s cabinet on February 15 council leader, Cllr Patrick Harley, said: “We have come a long way from the cabinet report in October and spending controls are working.

“When you have officers complaining it’s a sure sign they are working, we have to continue this work.”