The finances of Aberdeen City Council are to be examined at a special hearing of the Accounts Commission.
Aberdeen is only the second local authority for which a "best value" hearing has been thought necessary. The Labour opposition has said the SNP/LibDem administration has shamed the city.
The announcement by the commission comes amid protests from disabled and vulnerable groups in Aberdeen concerned at the cuts they face in a £27m budget reduction.
The council has been the subject of a motion of no confidence by teachers at three city schools who are concerned that 80 teacher posts could be axed this summer.
Last week the Controller of Audit published a report on best value and community planning at the council which indicated its financial position was "precarious".
It said the council was doing a lot to change its culture but there was much to do before accountability and continuous improvement was uniformly shown in all service areas.
"The council's leadership has not managed to take all staff groups with it and there is poor morale," the report said.
This week the Accounts Commission considered the Controller of Audit's report and decided to hold a hearing.
"The commission is particularly interested to hear first hand from the council and to gain a greater understanding of the council's difficulties in implementing its long-held vision for the area and its plans to improve its financial position," the commission said.
The hearing will be in public but no date, time and venue have been announced.
The commission's findings from the hearing may include recommendations to the council or Scottish ministers.
The commission held a hearing into West Dunbartonshire Council in 2006 and a commission source told The Herald that some saw the Aberdeen situation as more serious.
Councillor Kevin Stewart, deputy leader of Aberdeen council, said: "The Accounts Commission report, which was carried out between November 2006 and January 2007, said we were not moving fast enough. I, therefore, welcome the hearing."
Following the May elections last year an SNP-Liberal Democrat coalition replaced the previous Liberal Democrat-Conservative coalition.
The commission said that because of the interval since the audit visit they invited the council to submit further information.
Councillor Len Ironside, leader of the opposition Labour group, said: "Aberdeen is a proud city with a well deserved reputation.
"The incompetence of the current SNP/LibDem-run council has made us appear to be a callous city, indifferent to the concerns of our citizens, particularly those who are older, those who are disabled and children.
"It is quite shameful that there has to be a hearing."
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