BBC Scotland has unearthed evidence of possible serious problems in the award of building contracts across the city.
Claims include bribes being offered by contractors, overcharging, and unnecessary and poor quality work.
The fraud unit at Lothian and Borders Police is currently investigating the council’s property conservation department, which deals with repairs to multiple-ownership buildings.
Over the past year about 15 of its officials – nearly half the department – have been suspended.
The local authority also called in Deloitte auditors to carry out an investigation, which is still ongoing.
The department is in charge of the “statutory notice system” which allows the council to intervene to organise repair work for private properties when the owners cannot reach agreement.
Council surveyors arrange the work through approved contractors and recoup the cash from owners – the local authority also receives 15% of the final bill.
The value of statutory notices issued by council surveyors has increased dramatically in recent years, from £9.2m in 2005 to more than £30m in 2010.
The BBC investigation, Scotland’s Property Scandal reveals claims of cosy relationships between contractors and council officials.
The BBC understands that police have been passed evidence claiming a council officer went on holidays paid for by a contractor.
The property conservation department’s hospitality records until 2009 have now been lost.
The power to issue repair orders to private homeowners is unique to Edinburgh. But there has been an increasing number of complaints from residents and businesses affected by them.
A recurring theme of these complaints has been spiralling costs when further repairs are carried out without owners being consulted, leaving them with bills totalling hundreds of thousands of pounds.
BBC Scotland commissioned two experts to examine cases where work was carried out under the statutory notice system.
They concluded that the residents had been over-charged, and that some of the repairs were unnecessary, of poor quality and may actually have made the buildings worse.
The BBC also found evidence that the council was using firms not in their list of framework contractors.
The BBC also spoke to an informant who used to work in the council department and left a few years ago. He said he was encouraged to find things wrong with buildings and issue statutory notices.
He said: “You were congratulated on how many notices you served, whether it was warranted or not.
“Inexperienced surveyors were going out and finding work. When they got builders on board they were being led by builders rather than the other way round. That’s why the bills were rising.”
A council report says about 3,000 notices are issued each year, but all non-emergency cases have now been put on hold while the police and Deloitte investigations are carried out.
The statutory notice system aims to protect the rich architectural heritage of Scotland’s capital, which includes a World Heritage site.
Mark Turley, director of the council’s Services for Communities, said: “The fact that we commissioned Deloitte to carry out a very thorough investigation is a sign of how seriously we take the complaints and concerns that have been raised and our commitment to addressing them.
“We fully recognise that the public should know the results of these investigations and they will be reported to a meeting of the council once we are in a position to do this.”
