The Journal reports that 385 jobs have been shed by the Sunderland's City Building Services following revelations that it lost£3.7m on contracts over the course of a year.
The debt has now increased to around£7m, but in his report, the district auditor, David Parkin, rejected claims that CBS was riddled with fraud, nepotism and corruption.
The report said losses had arisen becase of unrealistically low tenders for building contracts. Spiralling debts remained hidden due to previously good performance and over-optimistic estimates by Joe Gill, CBS business manager.
Bryn Sidaway, the council leader, said: 'I am disappointed that we got into that situation. We worked on trust and delegated responsibility. Unfortunately financial information wasn't coming forward and certainly it was withheld on some occasions. Sufficient safeguards are now in place to stop that happening again.'
But Sunderland Lib Dem leader John Lennox said chief executive Colin Sinclair should take responsibility for the losses. He said it was 'disgraceful' that Mr Feeney had been implicated.
The Tories and public sector union Unison joined him in condemning the making of the treasurer into what they termed 'a scapegoat'.