Councillors met in a special meeting at Ballarat Town Hall to action on a Victorian Ombudsman's report finding serious concerns in how the City of Ballarat chief executive officer and senior officer Terry Demeo had conducted business. Most notably, the report was critical in how Ms Linley and Mr Demeo had recruited friends from past local government roles.

In a statement to media, councillors said while the Ombudsman noted not all evidence supported claims against Ms Linley, there was enough to reveal her poor judgement multiple times.

"Councillors believe the City of Ballarat must be led by someone who conducts themselves at the highest of standards and in a manner consistent with the city's stated code of conduct," the statement read.

"The councillors have also lost confidence in Ms Linley and in the best interests of the community, feel that her position as CEO is no longer tenable. As as a result we have terminated her contract."

Earlier in the day, Mr Demeo delivered his resignation as City of Ballarat infrastructure and environment director to the city's acting chief Neville Ivey.

Allegations against Mr Demeo in Ombudsman's report also included splitting purchase orders to avoid a tender process on a construction project and misuse of a council credit card.

Ms Linley leaves the City's top job almost four years to the day she started.

The council had last month approved Ms Linley to see out the fifth year in her contract.

Councillors have made clear they would ensure a long-term focus on good governance practices be put in place while they also wade through issues raised in the report on recruitment, human resources and credit card use. The council has also agreed to start the process to appoint and interim CEO for the city.

City of Ballarat mayor Ben Taylor was unavailable for comment on Monday night but will host a press conference on Tuesday morning to address the special, closed council meeting.

Victoran Ombudsman Deborah Glass stressed in her report released last Thursday that perceptions mattered and argued a failure to follow processes had inferred a favouritism, regardless of recruits' merits.

"But senior officers must lead by example," the report read. "They set a culture in which demonstration and acceptance of poor practice can become the norm. Poor management of conflicts of interest - actual or perceived, deliberate or otherwise - leaves an organisation vulnerable to charges that can fundamentally damage its integrity."

Mr Demeo issued a statement to media of his disappointment in the specifics of the report and its findings. The statement also said Mr Demeo "always tried to do the right thing for the City Of Ballarat and the community", but felt resigning was the best option at this time.

Ms Linley had been on leave from her role when the report was tabled in parliament. She has not made public comment on the report.

Ms Linley took up City of Ballarat's top job after five years as Northern Grampians Shire chief where among her achievements was advocacy for the Grampians Peaks Trail as a tourist destination and Stawell Gold Mine.

She has also served as Regional Development Victoria director for the Grampians region.

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