Warrnambool City Council will request Local Government Minister Adem Somyurek conduct "a thorough and in-depth investigation" of council finances and governance over the current and past council terms.
It came as mayor Tony Herbert revealed on Monday night the council credit card spending had been referred to the Victorian Ombudsman which would do a review.
"The information provided by our chief executive officer has led them to do their own analysis," he said.
Cr Peter Hulin put forward the notice of motion for the minister to step in with a slight amendment that the investigation come at no cost to the council.
His motion drew cheers from the packed public gallery, which was vocal throughout the meeting.
"In light of what we have discovered in the last six-to-eight months quite a dark cloud hangs over the council," he said.
"I believe it is only fair for all people involved with the running of the council to have this cloud removed. There is only one way for that to happen and that is for the state government to come forward and fund a thorough investigation into what is transpiring in our council. I think everyone should support this motion and I think the question has to be asked if there was opposition to it, why?"
Cr Sue Cassidy backed Cr Hulin's motion saying it was important to turn over "every stone".
"I feel it is important there is no cost to Warrnambool," she said.
Cr Mike Neoh said the ombudsman would look to review credit card spending and if it did find any evidence of wrong-doing it would be investigated.
"This review will be free and done independently," he said.
"The minister doesn't do investigations - the inspector does, the ombudsman does or IBAC does."
Cr Kylie Gaston said she was satisfied with bringing in external auditors, which was voted for at a special council meeting two weeks ago, and the ombudsman's review.
She said there was a great deal of "innuendo and rumours" about the council and a "fact-checker" was required.
She was met with cries of "resign, resign" from the gallery.
Cr David Owen apologised to the community for the financial issue.
"I am sorry this has happened and it has caused mistrust and out-shadowed the good work the council actually does," he said.
"It did not happen 10 years ago, but very recently and was dealt with responsibly."
Cr Tony Herbert said it was a "real sadness" that this had occurred.
"It's an incredibly unfortunate situation that we have spent so much time and lost so much trust," he said.
Cr Hulin said the people of Warrnambool deserved better.
"The potential mismanagement of this council over a number of years has led to the poor people of Warrnambool now having to endure a rate increase," he said.
"I have not been viewed good enough to be a mayor, yet I would not have tolerated this garbage."
Crs Owen, Neoh and Gaston voted against the notice of motion.
It was hard to hear councillors speak at times throughout the near two-hour meeting.
An earlier agenda item about a proposed staff and mayoral trip to Sweden saw the chamber fire up.
Angry ratepayer Ben Blain yelled out during debate and the meeting was adjourned for about 10 minutes before resuming.
He said the council needed to get its financial affairs in order before sending the mayor, chief executive officer and council officers overseas.
"We want transparency," he yelled.
Other ratepayers joined in a cry of "sack them". The trip was endorsed by councillors.
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