Blue Mountains City Council has hit back at the NSW government after it was threatened with suspension for the second time in less than three months.
NSW Local Government Minister Gabrielle Upton last week issued a notice of intention to suspend the council, with the government arguing there was a "serious conflict of interest" in the council's independent investigation into asbestos management.
Ms Upton said one of the investigators had links to a senior council staff member which would be a "serious conflict of interest and brings into question the council's governance and due diligence practices."
It follows another notice which the council was slapped with in December last year because of serious allegations relating to the council's asbestos management practices.
But, Mayor Mark Greenhill on Wednesday declared Ms Upton was "incorrect" and said he was disappointed she didn't address her concerns with him in a phone call.
"Again, I believe there is no basis upon which the minister may properly suspend the elected body of the council," Mr Greenhill said in a statement on Tuesday.
"The minister stands ready and willing to end democratic government for a period of up to six months, based on inadequate information and, in one very material respect, inaccurate information."
Mr Greenhill said that while he was unaware at the time of the relationship between the investigator and former staff member, the proper process was followed when the council engaged Michael Tooma.
Following the minister's notice last week, the council engaged Maddock's - a separate law firm - to make sure the council did everything right, he said.
"Maddocks has confirmed the appropriateness of the steps taken," Mr Greenhill said.
The council has received its first interim report following its investigation in late 2017 which was prompted by the discovery of asbestos in several council-owned workplaces including a pre-school.
Mr Greenhill said the recommendations identified the need for "significant improvements" in council's policies and procedures and he acknowledged the "organisational failures" in council's asbestos management.
"We have said all along if mistakes have been made we want to know how they happened and to learn from them. If anything has not been managed properly we want it fixed. That is exactly what we are doing," he said.