Guildford Borough Council will avoid declaring itself bankrupt for now – but overspends and an almost £2 million deficit in its housing revenue account will need to be tackled.

The council, which shares many back-office roles with Waverley, warned residents in July about the possibility of it issuing a Section 114 notice, effectively declaring itself bankrupt, saying strict controls on spending would need to be brought in.

A revised budget for the year was produced, and along with a £10m accounting error and increased cost of large building projects in the borough, officers set out the issues at the council.

There is also an investigation ongoing into staff in Guildford’s housing maintenance department, with possible fraud being looked into.

But in a report released before today’s executive meeting, it is revealed Guildford has staved off the bankruptcy threat – for now.

While not having to issue a Section 114 is being hailed as “fantastic news” by Guildford’s lead councillor for finance, he said there was “still a lot of work to be done” before the next review in February.

Councillor Richard Lucas (Liberal Democrat, Ash Vale) said: “There has been a lot of hard work that has gone into delivering the first part of our financial recovery plan. This hard work is paying off.

“We have identified savings and additional income to balance this year’s budget gap.

“Controllable spending has been reviewed, contracts revisited, and income streams updated.”

He said increased demand for parking and garden waste had contributed to the recovery plan and that work would continue in the coming months.

He added: “Moving forwards, our focus is to close the gap in the 2024 to 2025 budget and beyond.

“There is still a lot of work to be done to improve our financial situation before the next review in February, when an updated report will be taken to the full council meeting.

“We continue to work towards a sustainable financial future.”

Council documents show a “significant overspend” on responsive repairs in the service area of strategic and community housing services, with a forecast variance of £576,000.

In sheltered housing, there is a variance of £489,000 because of an unbudgeted increased cost of utilities, while council house rents are forecast to be £901,000 lower than the revised budget had planned for.

Managers were currently reviewing all repairs and sheltered housing contracts in light of the overspends.

The £1.9m deficit could mean less money being transferred into the reserves, effectively the savings, for the housing revenue account.

The council’s leader, Cllr Julia McShane (Liberal Democrat, Westborough), thanked the council’s officers for their work during the “challenging” time.

She added: “I’m delighted that we’ve reached this significant milestone on our road to financial recovery.

“I know this has been a worrying time for our community and I’m so happy to be able to share this news.”

Guildford and Waverley councils are still searching for a new chief executive and permanent finance officer.