A £12m jobs scheme for Nottingham has been badly mismanaged, a watchdog has concluded.

A report by the District Auditor, leaked to the Post, says Nottingham City Council made "unsafe" decisions when it handed out taxpayers' money in a bid to create 1,000 job and 600 volunteer placements.

A Post investigation has also revealed almost one in ten of the job placements – worth a total of £960,000 – went to companies connected to the councillor in charge of the scheme, Hassan Ahmed.

The leaked report says District Auditor Sue Sunderland found no evidence to suggest contracts had been let inappropriately.

But she says officers, who handed out some of the grants, might "be said to have been influenced" by Mr Ahmed's involvement with certain organisations.

The report recommends the council should consider referring Mr Ahmed to its standards committee for potentially compromising officers' impartiality. The auditor says:

She believes Mr Ahmed took part in a decision-making meeting which led to a company where he was director being awarded a £500,000 contract

Mr Ahmed's daughter initially failed to secure a grant on behalf of an organisation, but a direct payment of £12,500 was made after the rules on funding were changed

About £5m of taxpayers' money was spent without proper documentation or formal decisions being taken

The council may have left itself open to legal challenge on the basis of apparent bias by officers towards organisations linked to Mr Ahmed

Mr Ahmed said he didn't take part in decisions to hand out Future Jobs Fund money and didn't know his daughter had applied for a grant when he was interviewed by the auditor.

But the auditor believes he did take part in decisions over the Future Jobs Fund and says he should have known his daughter had applied for a grant.

City council chief executive Jane Todd said: "While I take the District Auditor's concerns seriously, I am satisfied the council is responding in an appropriate manner, and know that the District Auditor is satisfied with our response to date."

Mr Ahmed did not respond to the Post's questions when the paper went to press.

Nottingham City Council chief executive Jane Todd said: "It is important to make clear that the district auditor has already found 'no evidence of inappropriate allocation of contracts' contrary to the law or the code of conduct.

"Indeed she commends the city council for bringing forward so quickly two large citywide programmes to support the creation of 1,360 paid placements in total – 1,000 through the future jobs fund, and 360 through the Nottingham Jobs Plan.

"We have previously accepted that there should be some sharper processes and record keeping put in place and these issues will be addressed through an action plan being prepared to ensure our actions are beyond reproach.

"Beyond that I do not intend responding to your questions given that, on the advice of the monitoring officer, the Jobs Plan Review report was considered by the city council's audit committee as an exempt item and the reasons for such an exemption remain.

"While I take the district auditor's concerns seriously, I am satisfied that the council is responding in an appropriate manner, and know that the district auditor is satisfied with our response to date."

• FULL STORY: 'Conflict of interest' concerns over Nottingham jobs fund contracts