Councils have been accused of "negligence" after putting nearly £33m into Icelandic banks just days before they collapsed last October.
According to the BBC, seven authorities "ignored" warnings about the banks' solvency and deposited money in the ailing institutions. The Audit Commission also put £10m away and has now called for "lessons to be learnt".
While councils reject the criticism, the fate of the £954m deposited by more than 100 councils and other public bodies remains uncertain.
The Conservatives have accused the Treasury of being aware of stability concerns surrounding the Icelandic banking system since early 2008 but failing to pass on information to local authorities.
"Someone has to take responsibility for what has happened," says shadow communities secretary Caroline Spelman. "It seems to me that someone in government was asleep on their watch."
While The Audit Commission concedes some councils "heeded warnings" and took action, it says a few behaved "negligently".
It has criticised institutions which continued to deposit money after 30 September when the credit ratings of Glitnir and Landsbanki were downgraded to "adequate" and therefore deemed unacceptable for depositing council money.
According to the commission, the South Yourkshire Pensions Authority deposited £10m on 2 October and Kent County Council made two deposits totalling £8.3m on the same date, just under a week before the banks collapsed.
North East Lincolnshire Council, Redcar and Cleveland Borough Council, Restormel Borough Council as well as the London Borough Council of Havering an Bridgnorth District Council all made deposits in the period.
Commission chief executive Steve Bundred says: "Undoubtedly some mistakes were made especially by the seven authorities which continued to invest money in Iceland at the end of September."
The commission is calling for improved training for council executives which manage investments and says government guidance places "undue reliance" on the options of credit agencies.IFAonline
Alzheimer’s is the most common cause of dementia
Total of 72 accredited firms
23% fall since Q1
Achievements, charity work and other happy snippets
Including advice firm Chadkirk WM