A complaint has been made to police about £250,000 spent by the council which has not been fully accounted for.

The report centres on money hastily spent in the wake of the terrorism arrests in 2006 on the One Community Campaign.

Auditors found a number of incomplete files marked ‘social cohesion’ while carrying out a review of council spending under the Better Neighbourhoods Initiative (BNI).

The fund was supposed to be spent on Waltham Forest’s most deprived areas, but council leader Clyde Loakes used delegated powers as then chair of the Local Strategic Partnership to authorise the expenditure on the campaign.

Documents compiled by accountants PricewaterhouseCoopers provide further evidence of the long-term chaos which characterised council spending under BNI and its predecessor, the neighbourhood renewal fund (NRF).

The files show no contracts were in place and the expenditure was not monitored or audited.

The refusal of Cllr Loakes and chief executive Andrew Kilburn to respond to questions raised by Nick Tiratsoo, whose research has uncovered widespread mismanagement of BNI/NRF, have prompted him to lodge the formal complaint.

Cllr Loakes has never accepted any personal responsibility for the mismanagement of funds and says he gave approval for the spending “following the production of appropriate paperwork for each project and detailed discussions with officers".

Chief executive Andrew Kilburn recently insisted that “there was a clear process of accountability in relation to the allocation of funding”.

Detectives from the specialist crime directorate are already investigating claims that EduAction, the company which used to manage education in the borough, used NRF money to boost profits.

The cohesion files show a consultant was paid £66,011 from BNI for a four-month stint in the council press office, although he maintains he was only paid £6,600.

Another document reveals a one-day conference to advise school staff on cohesion cost the taxpayer £480 for each of the 50 people who were expected to attend.

Mr Tiratsoo said: “The Chief Executive’s failure to answer my perfectly reasonable questions in the generous 28 working days stipulated by his own organisation’s customer care standards is deplorable.

“The bottom line is that some £250,000 of public money just disappeared into thin air. This is an appalling situation which self-evidently demands explanation.

“Given that both the Chief Executive and Councillor Loakes (who was much involved in these projects) are apparently unwilling to comment, I have come to the conclusion that the only option left to me is a formal complaint to the police.”

Some of Cllr Loakes Labour Party colleagues in Leyton and Wanstead are so concerned about the BNI/NRF fiasco that they have passed a strongly worded resolution calling for misused money to be paid back by the council.