The Audit Commission said Erewash Borough Council still has major challenges to overcome.

The watchdog found serious failings in the running of the authority last year, highlighting weaknesses in its financial and management systems.

The council will be inspected again in the autumn, the commission said.

'Poorly run'

Council leader Robert Parkinson said it would have been "too optimistic" to expect the council's fortunes to have reversed completely because "recovery from such a low position was always going to take a long time".

"There is an improvement in attitudes and behaviour at the council but these are not enough to bring about recovery," Audit Commission Alison Rigg said.

Councillor Howard Griffiths of the Labour group said: "There is no room for complacency - the council needs to accelerate the pace of change."

In its earlier report, the commission found that the authority was poorly run and criticised the conduct of its former leader Cyril Stevens.