Internal auditors found a string of 'improper practices' including potential theft of cash, pirate DVDs on the premises, alleged illegal sale of unauthorised alcohol, 'wastage' of drink - where alcohol is not accounted for - and out of date stock.

It was also revealed that former Lord Mayor Cllr Jason Fazackarley cashed eight personal cheques at the club - which later bounced.

He paid the money back but has since referred himself to the Standards Board for England for a fuller investigation.

District auditor Stephen Taylor said he was 'very concerned' about what was taking place at the club, which is for council staff and councillors, past and present.

He said: 'I am very concerned about the findings and about the failures in management that have allowed this situation to arise. There has clearly been inadequate management oversight of activities at the staff club and this has created the opportunity for inappropriate practices to be adopted and sustained.'

Police were called in to investigate the allegations, but dropped inquiries because the amount of money involved was small.

Two members of management staff were suspended last year while disciplinary action was considered, but both have kept their jobs. No-one has been prosecuted.

The club, above the Citizen's Advice Bureau in Dugald Drummond Street, has now been closed down. Councillors claim it was shut because it cost more than £20,000 a year to subsidise.

Mr Taylor, who has not named anyone in his report or specified amounts allegedly stolen, recommended the council reviews its disciplinary procedures.

Lib Dem council leader Gerald Vernon-Jackson said: 'We've accepted all the recommendations and the club is now closed. The city council won't be running any bars in future.'

Lib Dem Cllr Fazackarley said: 'I didn't refer myself to the standards board because I think I've done anything wrong, but because I want this cleared up.' He said it was common practice for staff and councillors to cash cheques at the club, and added: 'My cheques bounced this time because the managers were suspended and didn't bank them, then banked them all on one day.

'I paid the money back immediately.'

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