Victorian Ombudsman Deborah Glass made the finding about Ballarat City Council's director of infrastructure and environment Terry Demeo in a report released on Thursday.

Council chief executive Justine Linley was also involved in employment decisions regarding a friend and former colleague, and a separate person she knew through a member's association, which were "unwise at best, and may have been improper".

Mr Demeo's behaviour was first raised with the ombudsman by the Independent Broadbased Anti-corruption Commission in January 2018 and allegations then emerged about Ms Linley.

Ms Glass found in one matter, Mr Demeo had been conflicted when he appointed an officer he had previously worked with at Geelong Council for five years to work as a consultant project manager.

He had earlier visited the consultant's home twice when a family member was seriously ill and after they had died, along with attending the funeral.

Mr Demeo accepted the consultant's hourly charge for the Ballarat council of $150, with no evidence that he sought other quotes.

He told the ombudsman he hadn't had time to contact recruitment agencies for an estimate of what other workers would have cost.

When the consultant's company later had to compete in a tender process, Mr Demeo also participated in an evaluation panel for the tenders, signing a declaration that he had no conflict of interest.

The ombudsman found Mr Demeo was conflicted when making these decisions, along with decisions linked to the employment of two other people where he had a personal friendship or association.

One was a person he had worked with for 13 years at the Geelong council and who had been to his home and knew his family.

"Mr Demeo's relationships with these people varied in intensity, but all had the flavour of friendships or personal associations that existed before their recruitment to the council," Ms Glass wrote.

In response, Mr Demeo denied any improper involvement in the trio's recruitment, but accepted there was a "potential perception of conflict" and he should have completed a formal statement or declaration.

The ombudsman found Ms Linley had a conflict when making employment decisions about a friend she had previously worked with, which she didn't "declare or manage appropriately".

The chief had approved her friend receiving a higher duties allowance while acting in higher positions, and was the chair of a selection panel through which she was later appointed a director.

She had asked questions but had not rated candidates, which the ombudsman found were "inadequate to manage her conflict of interest".

The chief executive also appeared to give preferential treatment to someone she had connected with through the group LGPro in relation to their appointment as a deputy director, the ombudsman found.

The CEO told the ombudsman she didn't consider people she had worked with in the past as the basis of a conflict of interest.

But she was open to including other metrics to declare, such as whether you had worked with someone before and for how long.

Australian Associated Press