Council finance bosses in Powys became “complacent” over investments and there were “weaknesses” in the system, a review has found.

The review was ordered after the collapse of several Icelandic banks, in which Powys County Council had several million pounds invested.

The inquiry into how £4 million worth of taxpayers money became tied up in the failed banks said the authority became “complacent” after years of apparently “risk-free” investment.

The council had the money invested in two Icelandic banks and remains hopeful the cash can be retrieved, but is losing interest totalling £250,000 per year.

The review panel’s draft report has now been reviewed by a small committee of councillors, which has made several recommendations about future investments.

The report says last summer, when the world’s banking system started to show signs of collapse, the council already had £3 million invested with Landsbanki and Glitnir banks.

But in September, a month before the Icelandic banks went into receivership, the council invested a further £1 million in Landsbanki.

The review committee said: “Little or no report of the effect and potential risks of the changing economic climate was made to the board from the summer/autumn of 2007.

“The panel believes the council had become complacent after many years of apparently risk-free investment.”

Lee Evans, council spokesman, said the review group would meet again to discuss the suggested amendments in further detail.