The report, title 'Investigation of alleged improper conduct by Executive Officers at Ballarat City Council', was released publicly on Thursday morning.

The 79-page report is highly critical of council chief executive Justine Linley and director of infrastructure and environment Terry Demeo.

Ms Linley was chief executive of Northern Grampians Shire Council from 2003 to 2016. The allegations do not refer to her time there.

The investigation had been running for more than 12 months.

It did not focus on the conduct of councillors, only council executives.

The report alleges Ms Linley "was improperly involved in recruiting or promoting six friends and/or former colleagues to senior positions at Council".

Ms Linley is already on leave from her position and director of community development Neville Ivey has been appointed acting chief executive.

The report claims Mr Demeo:

Mr Demeo will be on leave by the end of the day.

Justine Linley has since deleted all of her social media accounts.

Summarising the report, Victorian Ombudsman Deborah Glass said:

"It was certainly the perception in Ballarat Council that senior staff, one of them the chief executive, were hiring their friends," the report reads.

"Perceptions matter."

Ms Glass outlined her purpose in the investigation arguing that the failure to follow process had the effect of damaging perceptions about how recruitment was being conducted regardless of the merits of the candidates.

"The heady whiff of favouritism tainted reputations, regardless of individual merits, " Ms Glass wrote in the report.

"I am not tabling this report because of the scale or severity of the conduct: the findings about the chief executive are at the lower end of the spectrum of bad behaviour. But senior officers must lead by example.

"They set a culture in which demonstration and acceptance of poor practice can become the norm. Poor management of conflicts of interest - actual or perceived, deliberate or otherwise - leaves an organisation vulnerable to charges that can fundamentally damage its integrity."

It is understood council staff and councillors are being briefed on the findings this morning.

Council released this response, which you can read in full.

"The City of Ballarat is aware of the Victorian Ombudsman's report released this morning containing allegations that two of its senior officers may have acted improperly."

"The City of Ballarat is committed to making Ballarat a better place for all and continuing to deliver for the community of Ballarat. Our codes of conduct also clearly outline the high ethical standards expected of Councillors and council staff.

"The Council is 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

"To ensure fair and due process, Council CEO Justine Linley, is on leave while the Council is considering its formal response to the Ombudsman's report. Mr Demeo will also be on leave after today.

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

"The wellbeing and welfare of all our employees remains a priority and we have offered our employee assistance program (EAP) to all of our staff.

"While the Council is considering its formal response, it would be inappropriate to comment further and as such, the Council will not be making any further comment on the matter."

The City of Ballarat will need to call a special council meeting allowing chief executive officer Justine Linley to explain her position to councillors.

It is understood the special meeting requires public notice of at least 48 hours and could be held as soon as Monday night. It is believed the public notice could be undertaken as early as tomorrow.

From that meeting, councillors will then have to decide the next course of action required in relation to Ms Linley's future at the council.

Accusations in the report against senior officer Terry Demeo would need to be administered by the acting chief executive Neville Ivey in due course.

Ms Linley is currently taking leave while council has confirmed in a statement this morning that Mr Demeo will also be on leave from Friday.

You can read the report in full here: