Leaked details of the investigation reveal former housing director Barry Simons and assistant director John Mann face questioning from personnel expert Brian White. Managing director Richard Harbord ordered the inquiry after complaints under the council's whistleblowing procedures.
Mr Simons retired last month. Mr Mann is the assistant director responsible for the private sector and housing benefits. A terms of reference document, produced by Mr Harbord, says the allegations against Mr Simons and Mr Mann include:
Failing to follow council procedures
Failing to act in the council's best interests
Undermining junior managers.
This last allegation relates to a proposed temporary change of duties affecting two managers. The document says: 'It is alleged that the proposed change would have undermined the managers concerned, breached their contracts of employment and, it is alleged in respect of at least one member of staff, that he would have been discriminated against on the grounds of his race.
'Other staff in the department have made informal complaints against local managers, alleging incidents of racism, harassment, bullying, sexism and homophobia.'
Assistant finance director Pat Gough is to examine the allegations of mismanagement, possibly with the help of internal audit. Mr White has been brought in to look at the complaints about staff relations.
He has been provided with a secure office. Initial reports are due to be submitted to Mr Harbord by 25 April. These should clarify whether the claims warrant further investigation.
Staff have been warned 'any allegations found to have been made on a vexatious or frivolous basis may result in action being taken against the person making the allegations'.
The council said: 'We take all allegations seriously, and will be investigating the matter as expeditiously as possible.' Neither Mr Simons nor Mr Mann could be contacted for comment.