Kent County Council invested £3million in an Icelandic bank just one day after its brokers warned against doing so, a report has revealed.

The investment with Heritable Bank was made because an email from Butlers, the company contracted to advise KCC about cash deposits,had not been read by council officials.

Details of the decision are set out in a report commissioned by the council to investigate the circumstances surrounding its £50million investments with three Icelandic banks.

It says had the email been picked up, the deposit may not have been made. But the auditors also highlight that at a meeting between council officials and Butlers just two days earlier, the firm made no mention about the state of the Icelandic banks.

An 11-page report by auditors PriceWaterhouseCoopers broadly clears KCC of major mistakes over its decision to invest millions of pounds of taxpayers' money in Iceland. It says that at the time other transactions were made, the decisions were consistent with Butlers' advice.

However, the report suggests in other cases, the council failed to keep detailed records of transactions and there was no consistent evidence of a regular review of transactions.

It states: "Although this review would not have directly prevented any of the shortcomings noted, it may have resulted in additional discussions around some of the deposits."

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Among the report's recommendations is that KCC ensure information about banks is sent to more than one official. It also recommends the council considers whether adequate safeguards are in place to ensure it is not taking risks with public money in seeking a high rate of return from investments.

Cllr Nick Chard (Con) KCC's cabinet member for finance, said: "The email went to one individual when it should have gone to more than one. We are making sure that it does not happen again."

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He insisted KCC did not take unnecessary risks but hinted the council would now review its arrangements with Butlers.

"The world has changed. Events have shown we cannot have the same level of faith in ratings agencies and therefore we cannot have the same level of faith in Butlers."

Opposition parties said the report had showed KCC was too casual about its arrangements for investments but stopped short of repeating an earlier call for resignations.

Cllr Roger Truelove (Lab) said: "KCC has been over-confident and has had a warning. My impression is that things have been a little too casual. The public has lost money and there will be an impact on services."