Ministers could bring in a commissioner to oversee children's services at cash-strapped Northamptonshire County Council after an Ofsted report found "serious concerns" about the department.
Inspectors said children referred to social care services in the county were "not consistently or effectively assessed, supported or protected" in a letter to chief executive Theresa Grant.
The council has twice issued a "section 114" notice restricting its own spending to only essential services in a bid to balance the books.
The latest notice, in July, came amid fears that its budget shortfall could reach £70 million this year.
The letter, from inspector Linda Steele, said: "Against a backdrop of recent significant financial uncertainty and changes in leadership at corporate and managerial levels, services considered during this visit have significantly declined in the past two years since the single inspection in 2016."
Education Secretary Damian Hinds and the Secretary of State for Housing, Communities and Local Government James Brokenshire said the Government intends to send in a commissioner.
Mr Brokenshire said: "Keeping vulnerable children safe is one of the most important duties local authorities carry out.
"Ofsted's report highlights serious concerns about the current performance of children's services in Northamptonshire and this cannot continue."
Victoria Perry, from the council, said: "We know that our children's services are not working well and we will put this right.
"It is clear from the findings from Ofsted that these failures in the system have taken place over the last two years and we are now completely focused on recovering from these failures."
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