Former Mayor Peter Clements and council chief executive officer Andrew Boardman have been found to have committed maladministration and misconduct, and to have taken actions contrary to the law, by the Ombudsman SA.
Mr Clements and Mr Boardman both dispute the finding, which came after an investigation into almost $58,000 paid to Mr Boardman for extra hours worked.
The Ombudsman, Wayne Lines, found the arrangement had not been properly authorised and was therefore unlawful.
On January 29, 2014, councillors were told Mr Boardman would begin working an extra day on some weekends in order to gain more time off when he visited his family, who had moved interstate.
From then on, the CEO kept a record of any extra days he had worked, and days he had taken as time off in lieu (TOIL).
By April 2018, according to that record, he had worked 170 extra days and taken 82 extra days off.
However, on six occasions between 2015 and 2017, Mr Boardman was paid a total of almost $58,000 - equivalent to 78 days' pay - to prevent his TOIL hours from building up too much.
The payments were authorised by Mr Clements.
Councillors were not briefed on the payouts until January 2018, after they were revealed in a freedom of information request by current Mayor Michael Pengilly, who was still a state MP at the time.
The Ombudsman found Mr Boardman had not acted dishonestly, and that he had completed all work for which he had been paid.
However, he suggested it was not possible for Mr Boardman to accrue "additional hours" of work, because his employment agreement specified that he was paid a generous salary in exchange for working as many hours as necessary.
Moreover, while councillors had been aware of the TOIL arrangement since 2014, they had never formally endorsed it or the extra payments, nor had the arrangement been included in Mr Boardman's employment agreement.
"The financial payments and/or TOIL were authorised in the sense that Mayor Clements signed off on them; however, I do not consider that Mayor Clements had any authority to do so," the Ombudsman said in his report, published on Thursday.
"It appears to me that both Mr Boardman and Mayor Clements honestly believed the arrangement was an appropriate way of compensating Mr Boardman for the additional hours worked.
"However, the arrangement did not have the proper authorisation, and Mr Boardman was receiving payments and leave benefits to which he was not lawfully entitled."
As well as recommending that Mr Boardman be asked to repay the $58,000, the Ombudsman recommended the council introduce more transparency to its CEOs' leave approval process, keep its employment agreements up to date, and appoint an independent organisation to conduct performance reviews instead of doing it in-house.
The Ombudsman also looked into allegations Mr Boardman had improperly used council resources for flights and accommodation while visiting his family interstate; for work done on his motorcycle; and for the Kangaroo Island airport.
However, the investigation found Mr Boardman had not committed maladministration or misconduct with regard to any of those allegations.
Mr Boardman was suspended by the council in January, after councillors received a provisional report from the Ombudsman; and fired in February.
'I want to put the lies and rubbish behind me'
In response to the findings, Mr Boardman criticised the Ombudsman's decision not to speak with the councillors who had approved the TOIL arrangement in 2014.
"It is a worry that a democratic decision of council, made unanimously, absolutely clarified in intent and confirmed in execution by the same body, can be dismissed in this manner," he said.
He described it as "most unfortunate" that he had suffered because the council had failed to keep his employment agreement up to date.
He also lamented the fact he had never been allowed to meet with councillors to discuss the Ombudsman's report, or any other concerns they may have had.
While suspended, he was banned from discussing the matter with council staff or members of the public; "on this Island, this effectively totally isolated me from my friends, colleagues and pretty much everyone," he said.
He said medical professionals and insurers had since confirmed he had suffered a "mental health injury" as a result of "accumulated stress derived from the constant attacks on my integrity and capabilities", including the widespread publication of an anonymous diatribe against the council in the lead-up to last year's local election.
"I am rebuilding my life and career and want to put the lies and rubbish that I have been subjected to whilst working for this council behind me, (and) simply focus on those successes that the two elected bodies, I, staff and our community created ... and the fact that I have been able to live on, and contribute to, such a beautiful Island and people who - for the most part - have been wonderfully supportive and inclusive," he said.
"I will stand firm in the knowledge that the people that count ... were aware of the arrangements, were cognisant of the benefits to council and the community from those arrangements, and had expressed their satisfaction."
Former, current mayors weigh in
In an email to The Islander, Mr Clements said he stood by Mr Boardman.
"Mr Boardman is one of the hardest working people I know and his services to the Island community have been exemplary," he said.
"I implore members of the community to ask former councillors for themselves about the reality of Mr Boardman's work ethic, his enormous capacity for hard work and the value he brought to the community."
He suggested the five reports made to the Ombudsman about the matter had been the culmination of eight years of "constant undermining" of the council.
The current Mayor, Mr Pengilly, said the council was likely to follow the Ombudsman's recommendations, including by asking Mr Boardman to repay the $58,000.
"Dealing with these issues has been difficult for all concerned, but we can't ignore these findings and must address them in the appropriate manner," he said in a statement.
The council is due to meet on Tuesday.