Former Warrnambool City Council CEO Bruce Anson says he made an error by conducting an audit of a manager's credit card himself.
But he says the most important finding in the ombudsman's report into misuse of credit cards at the council was that it was not a systemic issue and it was picked up internally by the systems in place.
Former manager of visitor economy David McMahon resigned last year after it was made public he had misused his council credit card.
Credit card spending in relation to a trip to Cape Schanck Resort in late July 2018 was flagged in September by a council finance officer and in mid-October Mr Anson was informed and immediately asked for credit card details.
The ombudsman's report, which was tabled in parliament on Friday, found Mr Anson should have referred the matter to an internal auditor for investigation.
"His failure to do so also exposed the council to suspicion, in some quarters, that council had covered up the issue," it says
However, the ombudsman found that Mr Anson was not legally required to refer the matter to IBAC at that time.
"However, if he had not taken David McMahon's explanations on face value, other inappropriate transactions were likely to have come to light, which could well have engaged Council's Fraud Corruption and Control Procedure," it says.
Following the incident, Mr Anson did change the policy to clarify that expenditure on alcohol would not be permitted by council officers on council credit cards. He also issued Mr McMahon a first and final warning.
When provided a copy of the Ombudsman's draft report, Mr Anson told the investigation it was "a depressing read of misplaced trust".
When contacted by The Standard, Mr Anson said the "most important finding of them all" was that it was not a systemic issue within council.
"It was one individual. The systems uncovered it and he fully repaid those amounts," he said.
"I made an error in that I did the audit myself and, in hindsight, I should have appointed an independent auditor to do the review.
"The thing I would want to emphasise is the work systems identified the inappropriate expenditure and action was taken.
"I think what the report shows is the vast majority of staff get on and do their job and this is an unwanted distraction, but council staff have continued to deliver excellent services to the community."
The ombudsman's report also shone a light on the discord between councillors and senior management and staff morale.
While not part of the investigation, the conduct of councillors during the previous term of council was mentioned with Mr Anson revealing the extent of a very difficult and toxic council.
"I think in 2015 ... we had two councillor conduct panels, bullying and harassment complaints by a councillor, five council WorkCover claims all coming from three councillors, two councillors suing the council, and one alleged assault that didn't happen," Mr Anson told the ombudsman.
"We had constant abuse of and undermining of staff by some councillors."
During the course of the ombudsman's investigation, further allegations continued to filter through from whistleblowers including concerns about management inactivity or lack of accountability.
"Several specifically raised concerns about council's investigation into the leaks to the media, and its treatment of those suspected to be the source of the leak," the report said.
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