Merton Council was paying tens of thousands of pounds over the odds for interim staff, a report into whistleblowing allegations has found.
An independent probe into the council's practices was carried out over a period of three months after allegations purporting to be from serving council officers were made anonymously.
The whistleblowers claimed the council’s chief executive Ged Curran and elected members were deliberately misled by a senior officer they accused of unlawfully making payments of £1.29m.
The payments were alleged to be to temporary consultants, when posts could have been filled by permanent staff.
The full 13 page report from Ernst & Young LLP, was made public by the council at 5pm on Friday, February 28.
The report shows tens of thousands of pounds more was paid for interim staffing posts in comparison to the equivalent salary of someone who was in the role permanently.
One example in the report states, as an estimate, that a temporary staff member would have been paid £169,500 a year, and a permanent role would have attracted a salary of between £109,783 to £114,719 - a difference of between £54,781 and £59,717 - money which could have been spent on vital services in the community.
As a result of investigations, independent auditors made seven recommendations for the council to overhaul its procedures, including improving communication between departments, making the human resources department more involved in recruitment and a policy review into declarations of personal friendships.
The report said: "Our work has not identified evidence of corruption, malpractice or unlawful expenditure in relation to specific issues raised by whistleblowers."
Leader of Merton Conservative group, Councillor Oonagh Moulton, said: "Merton’s council taxpayers rightly expect the council to be a responsible guardian of their money and to operate in a fully open and transparent manner.
"Residents will therefore be aghast that, for almost three years, the council has been paying well above the odds to fill vacant posts with interim staff.
"Equally worrying is the report’s conclusion that there has been a ‘lack of transparency and absence of appropriate oversight and scrutiny’ in the engagement of long term contractors for these posts."
Speaking at a press briefing earlier that day, Paul Evans, solicitor and monitoring officer for Merton Council said: "We want people to have confidence that this is a transparent and a professional piece of work that has been carried out by Ernst & Young.
"If Ernst & Young has found no evidence of corruption that’s because there is no evidence of corruption."
Councillor Mark Allison: "When you are regarded as the country’s best council you wouldn’t expect there to be any corruption in our organisation so it was a surprise to hear the allegations and it’s great news that our staff have been cleared of the wrong-doing."
The report will be discussed at a council general purposes committee on Wednesday, March 12.