More than £2 billion of Barnet Council deposits made over a two year period failed to comply with treasury policy, a report has revealed.

Eighty-nine per cent of all deposits made between April 2006 and October 2008 did not meet approved credit rating criteria outlined in the Treasury Management Strategy (TMS), according to a scrutiny committee report published yesterday.

Treasury manager Patrick Towey has been blamed for the blunders, which led to £27.4 million being frozen in unstable Icelandic accounts.

Overall, £2,212,540,000 of council funds were placed in unapproved institutions.

The officer has now resigned and a full independent investigation is due to take place to examine all aspects of the TMS and how it is implemented.

Mr Towey failed to abide by the TMS because its ratings system was unnecessarily restrictive, according to the treasury department. The policy was consequently relaxed in March 2008 to allow larger deposits to be made in a greater number of institutions.

The policy was then re-tightened at the end of last year, following the Icelandic banks collapse.

The catalogue of errors has led to calls for council leader and resources committee chairman Mike Freer to resign. But Mr Freer, who has received the support of new council chief executive Nick Walkley, denies all responsibility for the mistakes.

Liberal Democrat councillor Duncan Macdonald, one of six members of the cross-party scrutiny working group set up to investigate the Icelandic banks deposits, refused to believe only Mr Towey was to blame for the mistakes.

He said: “I think there was a systematic failure of the whole treasury department. It can’t have been all down to one person. And even if it was, where were the checks and balances to ensure everything was being done correctly?

“At the end of the day, Mike Freer is both leader and chairs the resources committee and he needs to take responsibility."

Mr Macdonald claimed the TMS problems had first been flagged up in an exempt report approved by the leader in October last year.

“Either Mr Freer didn’t read his own report, or he didn’t understand it,” he said.

Labour councillor Alan Schneiderman, who was also on the committee, said: "The report has revealed a shocking series of failures and mismanagement that have put over £27m at risk.

“Mr Freer is paid over £50,000 a year as leader and cabinet member for resources, and it is not acceptable to say that this mess is nothing to do with him.

“He is ultimately responsible and he therefore should resign.”

Mr Walkley, giving his first interview as council chief executive, a job he started on Monday, defended the leader.

He said: “I’m obviously really concerned where any public official is being named and vilified in this way, as that is not what public servant gets into things for, but quite clearly there is officer accountability here and officers are accountable for the failures that appear to have happened.

"The treasury department is a highly technical and specialist area and I would be concerned if the day-to-day activites of that team were the subject of member intervention. There is an appropriate division of responsibilities.

"If there are issues beyond the individuals identified, then the council’s procedures will need to deal with those."