Ministers could bring in a commissioner to oversee children's services at Northamptonshire County Council after an Ofsted report found "serious concerns" about the department.
In a letter to chief executive Theresa Grant, inspectors said children referred to the county's social care service were "not consistently or effectively assessed, supported or protected".
In an effort to save money, the council has twice issued a "section 114" notice, which restricts its own spending to essential services.
There are fears that the council's budget shortfall could reach £70 million this year.
Education Secretary Damian Hinds and the Secretary of State for Housing, Communities and Local Government James Brokenshire said the Government plans to send in a commissioner.