The management of Hayling's Japhetsun care home has been severely criticised in the report because of a lack of staff training and inadequate assessments of residents' needs.
Hampshire County Council has now declared that it will no longer fund people to be sent there for care.

But the seven publicly-funded residents at the Salterns Lane home will remain there for now.

The Commission for Social Care Inspection report found owners Peter and Valerie Anderson provided a homely environment – but found big problems with record-keeping which left residents vulnerable.

In an earlier report inspectors had flagged up the case of an elderly woman where, although she had been bathed by staff, the first record of her having a bath was after staying at the home for 27 days.

Now, if the problems are not addressed within weeks, the commission could close the home completely.

The Andersons have until August 11 to complete an improvement plan, detailing how they plan to tackle the failings identified by the CSCI.

The commission has the power to remove all nine residents and close the home if it is still not satisfied.

The latest report criticised poor management, staff not being given sufficient training, a lack of checking of staff references, and cleaning solutions being left in an unlocked cupboard.

It was the second inspection since January, and although some recommendations had been followed, others, it found, had not.

Mrs Anderson, aged 71, defended the running of the home. She said: "Altogether we have lost five staff since January because we tried to change absolutely everything to comply and the staff couldn't cope with it all."

"These residents are not at risk, these residents are well looked after. If we are closed down and they are moved I don't know how they will deal with it.

"This has put us in a nightmare situation where we have no manager and now no- one wants to come here because of the report.

"It is paperwork that we failed on, nothing else. Where are the residents' needs in all this?"

Mrs Anderson denied that her staff did not have proper checks and said all training was done on the job.

"I have 20 years' experience looking after people with dementia and I train my staff myself," she added.

"Perhaps we should have written it all down, but if it is a choice between paperwork and looking after a sick resident I will look after the resident."

Meanwhile fears have been expressed that the planned new £28million hospital for Havant and Hayling could be too small to cope with planned population increases.

Some 6,000 new homes are set to be built in the borough and neighbouring East Hampshire over the next 20 years.

Hampshire County Council's health scrutiny committee has quizzed the Primary Care Trust over whether the Oak Park Hospital – due to open in 2010 - will have the capacity to cope with more patients than the 25,000 a year predicted.