Councillors have reacted with horror after learning the extent of the financial chaos at County Hall.

Head of finance Chris Gray, who has since applied for early retirement, admitted at a best value committee meeting the scale of the problem was "huge".

He said there were thousands of receipts and invoices that were either "not traceable" or had not been "matched with invoices or bank balances".

Jean Fooks said: "It appears there have been no procedures for checking anything. I'm gobsmacked."

John Jackson, the director for resources, said departments had made a habit of "going off and doing their own thing", disregarding policy and good financial practice.

Mr Gray admitted cutting corners had been rife within financial management.

He said: "We are doing everything possible to put an end to the bad habits.

"Now we've been found out, but it has to be pointed out that many of the problems are rooted in underfunding and understaffing."

The Oxford Mail revealed earlier this year that almost £1m had been discovered in a "lost" social services bank account.

That amount is now expected to be in the region of £1.7m.

A team of specialists has been recruited to sort out the mess. In February, £250,000 was put aside to fund the rescue operation. Since then, an extra specialist has had to be employed, pushing up the cost to £311,000.

The "lost" bank account was one of about 1,400 held by the county council.

Council leader Keith Mitchell said after the meeting: "When financial systems fail, like in this case, then there is always the risk of people putting their hand in the public till.

"I don't believe it's happened here, but when the system's not tight, it's essential we make sure there are measures in place to prevent the public from being the victim of fraud.

"Hence my letter to the chief executive. The truth is that every time we pick up a stone, we find something unpleasant under it."

District auditor Andy Burns produced documents showing that there had been accountancy irregularities dating back many years.

In 2000-01, Mr Burns wrote to the council: "While the council has provided additional resources to strengthen its arrangements in recent years, our review identified continued weaknesses which impact on our assessment of your overall control environment.

"There are significant weaknesses in financial management within social services."

The following year, Mr Burns wrote: "Weaknesses continue to exist in the council's arrangements for internal financial control. In particular, the council's audit and risk management service has identified significant weaknesses within the payroll, creditors and asylum-seeker systems."

When questioned by the committee, Mr Burns admitted that not all the accounts of Social and Health Care had been "reconciled with bank statements".

"If we cannot rely on our external auditors, then our internal auditing has to be watertight," said Mr Mitchell. "If we had a more ferocious accountancy regime, similar to that of health authorities, I would rest more comfortably at night.

"A culture has been fostered in which staff are afraid to shout for help. "I don't want to read headlines that this council is bankrupt, because that's not true. We have severe financial problems in one area."

The county council's annual expenditure is £726m. A third of that is on social services, £11m of which has caused the crisis. The accounts for residential care and children's services are in order.

Councillor Don Seale, the Conservative representative for Burford and the executive member for community care and health, said he was worried about what was "going on under the surface".

Gail Hanrahan-Barnes, of High Street, Chalgrove, who campaigned against the £9m cuts in the social services budget and the closure of respite homes, reacted with disgust and dismay to the news.

She said: "It makes me want to weep. Someone has to be held to account. This financial incompetence is causing so much heartache and worry to families, it's a national scandal.

"Closures and cutbacks could all have been avoided if only the county council had got its act together. This cannot be allowed to be swept under the carpet. There has to be a fullscale public inquiry."

Clare McCarthy, of Pickenfield, Thame, whose 11-year-old son Matthew is disabled, said: "This beggars belief when families are breaking up because of the distress they're going through.

"I've been campaigning for more than two years now for more help from social services and all the time I've been fobbed off with excuses that there are no resources.

"Now we hear that the finances have been mismanaged and, for all we know, the money could have been there all the time. There has to be a day of reckoning."

Chris Gray, an economics graduate from University of Exeter, qualified in accountancy while working at councils in Berkshire and Shropshire.

Married with two daughters, he has held the post of county treasurer, later changed to head of finance, since 1992. Mr Gray was not at his desk at County Hall on Thursday, April 15.

Mr Mitchell, the Conservative member for Bloxham, would neither confirm nor deny that Mr Gray's impending departure would be on the agenda of today's sub-committee meeting.

But a county council officer said: "The sub-committee will consider Mr Gray's request. It's up to that committee to decide whether or not it's granted."

When another officer was asked if Mr Gray had been 'pushed', he replied: "Use your own judgement."