This story doesn't suprise me as I used to have a lot of dealings with local authority types.
I used to work in internal Security for a company that was tied into a deal with the council (investigating fraud and other incidents like accidents, fires, assaults)
The Council handed over running of their leisure facilities and our company ran them as a profit making business - giving them a small percentage of the takings and allowing them to run special deals for the usual concessionary groups - low paid, unemployed, 'womens' groups and the like.
We took over the running of their Golf clubs and one of the members of staff told us that other members of staff were on the rob - he'd reported this to the council about six months previously and they'd swept it under the rug.
To cut a long story short we set up covert cctv and caught one of them red handed.
The following three months takings were £10K up on the previous years and that was after poor weather conditions.
Dread to think what they actually got away with.