The state ombudsman has found improper conduct by a senior officer and possibly improper conduct by a CEO in its investigation of “jobs for mates” allegations at a Victorian Council.

In a report handed down on Thursday Ombudsman Deborah Glass found council’s director of infrastructure and environment Terry Demeo was improperly involved in recruiting three mates to senior roles at Council.

The ombudsman heard evidence that “there was a perception amongst staff that: Oh yeah, Terry’s hiring his mates”.

“The heady whiff of favouritism tainted reputations, regardless of individual merits” – Ombudsman Deborah Glass

Mr Demeo had previously worked with all three at Geelong Council before he joined Ballarat in July 2014.

One them, “Officer A” moved from a full-time job worth $93,000 a year to part time work for which his company was paid $400,000 over three years.

In one case Mr Demeo changed a job description for “Officer C” whose father was known to him, after HR said she wasn’t qualified for it.

He also chaired a panel that selected a friend’s company as a supplier.

The CEO, Justine Linley, meanwhile, was involved in employment decisions about two staff “which were unwise at best and may have been improper”.

In one case, she advanced her friend, “Officer D”, doubling her salary, and she appeared to have given preferential in the employment of “Officer E”, whose salary was increased by $50,000 six months after he began at council.

“The heady whiff of favouritism tainted reputations, regardless of individual merits,” Ms Glass said.

The investigation was sparked by a series of whistleblower complaints “alleging a director was hiring his mates and his boss hiring hers”, the report said.

Not all the allegations against Ms Linley were held up.

Ms Glass said it was crucial for senior leaders to lead by example.

“They set a culture in which demonstration and acceptance of poor practice can become the norm,” she said.

The report recommends disciplinary action against Mr Demeo and “appropriate action” against Ms Linley.

The Ombudsman also found  council had “carved up” $300,000 worth of repair work to the Ballarat City Oval to deliberately avoid a public tender, something for which other senior officers including Mr Demeo were ultimately responsible.

Council said it was “deeply concerned and disappointed” by the allegations and the findings of the Ombudsman’s report.

“Such allegations do not align with the City of Ballarat values and governance practices,” it said in a statement.

It said Ms Linley was and Mr Demeo would be on leave while Council is considered its formal response to the report.

Mr Neville Ivey has been appointed Acting CEO while Ms Linley is on leave.