The errors at South Lakeland Council in Cumbria, also resulted in a budget shortfall of �1m.

A nine-month investigation highlighted failures in council procedures and in the appointing of outside consultants.

Three senior council officials were subsequently suspended from the council - two have since left the authority.

The independent report highlighted four major failures that led to the problem, including poor project planning and a failure to monitor or verify the work of the consultants, particularly surrounding financial calculations.

I'm hopeful that we can draw this chapter of the council's history to a close, once a new, affordable pay and grading structure has been agreed Acting chief executive, Mike Jones

Acting chief executive of the authority, Mike Jones, said "This has been one of the most difficult situations that the council has ever had to deal with and I'm pleased that the investigations are now complete and we can start to move on.

"We've had some hard lessons over the past nine months, but we've learnt from them and councillors have agreed an action plan that will make sure our procedures are tighter in future.

"Indeed, we're already making good progress in some areas, for example in project management.

"I recognise that there are bridges to be built with staff who have coped admirably under very difficult circumstances.

"I'm hopeful that we can draw this chapter of the council's history to a close, once a new, affordable pay and grading structure has been agreed in a few months time."

In April 2004, when the �1m shortfall came to light, the then chief executive, director of finance and human resources manager were suspended as a precautionary measure.

The human resources manager resigned from the council in September 2004 and took no further part in the investigation.

In January 2005, the independent report cleared the chief executive of any misconduct, however he chose to retire on 1 February.

The director of finance has now returned to work.