A town council has promised to spend residents' money more wisely after facing fierce criticism over its handling of public funds.

Thornaby Town Council, which last year had to pay out £45,000 in an employment tribunal, was severely criticised by auditors for a lack of procedures and guidelines when spending cash.

Petty cash was not accounted for, receipts were not kept for goods, internal audits were not carried out, and cheques were signed for goods and work before they had even been received or inspected.

The auditors said both the town clerk and councillors had no financial training and said "they were unaware that statutory powers existed which governed their spending."

But chairwoman Beryl Robinson said councillors were due to set the council's new budget on Thursday and had learned from their mistakes.

"We have taken the advice of the auditors on how systems should run and they are all running a lot better now," said Mrs Robinson. "Every aspect that was lacking before has been thoroughly improved.

"There were a lot of concerns, but our financial dealings have now been totally overhauled."

Auditors were brought in after town clerk Leanne Plant was wrongfully dismissed for allowing the Thornaby Independent Association to use the photocopier to run off promotional leaflets at the usual cost.

After two-and-half years of squabbling, the mother-of-three was awarded £12,500 and the council forced to pay costs estimated at £30,000.

The auditors said the TIA should not have been allowed to use the photocopier, but said systems were so lacking, no one was aware of what powers they had or what regulations needed to be followed.

The report, published last year and referring up to March 2003, said: Cheques were authorised without invoices being verified; £593 was spent out of petty cash without receipts; Cash and cheques were placed in drawers and not immediately banked; The current account was needlessly allowed to go overdrawn, incurring costs.