Warrnambool City Council has been chastised for using ratepayer funds to buy espresso martinis.

A Victorian Ombudsman investigation has found a Warrnambool City Council senior manager misused a council credit card to pay for cocktails and massages at a spa resort.

The probe uncovered lax practices and poor judgment by other managers in dealing with the issue, but said the credit card misuse was limited to one person.

Even so, the way it was dealt with damaged the council's reputation.

Former manager of visitor economy David McMahon has since paid back more than $8,000 and resigned from his position.

“The people of Warrnambool do not expect their hard-earned payment of rates to be funding espresso martinis, travel to Melbourne coinciding with football games, spa resort massages for family members, or hundreds of dollars in alcoholic beverages described on the invoice as 'room hire',” the ombudsmen’s report said.

“But while the individual no longer works for the council and has repaid the money, the damage has been done.”

Local media reports uncovered the misuse of the council credit card, which led to a wave of public interest.

The authority went back over the details of 3,500 transactions made using 12 credit cards.

Senior managers “could and should” have done more when Mr McMahon's misuse of his credit card was first brought to light, the report found.

In one case, at a tourism conference on the Mornington Peninsula in 2018, thousands of dollars’ worth of food and drinks, including 34 espresso martinis, went on the council credit card.

This transaction was referred to managers, leading former council chief executive Bruce Anson to issue Mr McMahon with a warning.

The ombudsman said Mr Anson should have referred the matter for further investigation when it first arose.

“Although this inaction was neither dishonest nor systemic, it gave rise to the impression of a cover-up,” it said.

The report also questioned the council's “overly generous hospitality policies”, which allowed council officers to hold meetings at local cafes and restaurants.

The council says it accepts the findings of the report and has strengthened its credit card policies and procedures. This includes cutting the number of credit cards it holds from 93 down to 70.

“We note that the ombudsman found that misuse of credit cards was not systemic, and that serious misuse was limited to one individual,” the council said.

“The findings of the ombudsman's investigation are instructive, and council has taken steps to ensure there cannot be a repeat of such behaviour.

“Council also acknowledges that this has been a matter of concern for the wider Warrnambool community and we would encourage those who have followed this issue to read the report.”