Cash-strapped Council of the Isles of Scilly to borrow £3m
A remote group of British islands is about to run out of money for the day-to-day running of the community.
The Council of the Isles of Scilly says it has been told it will need to borrow up to £3.5m to cover costs until April.
Debts have been building up for several years and the council says it only has £500,000 in the bank.
The authority governing about 2,200 inhabitants said it underestimated its income and was also hit by new environmental laws.
The council has been issued with a Section 24 notice by its external auditors Grant Thornton under the Local Audit and Accountability Act 2014 saying its had "inadequate financial controls".
The council has said it will need to review its financial strategy for the next few years.
The authority has also voted to take out a loan of up to £3.5m because council tax is collected for only the first 10 months of the year, with no income for the last two.
The authority expects to have overspent this year by nearly £500,000 and may have just over £40,000 left in the bank at the end of this financial year, it said.
Steve Sims, the council's vice chairman and chair of the finance, audit and scrutiny committee, said the council had been running at a deficit of about £400,000 "for about four years" and "it has hit us now".
"We have made £500,000 of savings," he said.
"But we underestimated the income we were going to get."
Debts have been mounting since 2013 because the council "has to be compliant with environmental laws which we've ignored before," Mr Sims added.
He also blamed a "pretty creaking software system of finance" which it was working with Cornwall Council to improve.