The war of words over the financial chaos at a publicly funded business improvement company has continued, with Waltham Forest Council refusing to take any responsibility for the problems.

Last week Fawaad Sheikh, chairman of Leytonstone’s E11 Bid Company, hit out at the council for ceasing to collect an annual levy from businesses which would have helped deal with a £40,000 debt.

But the authority has said it acted after the beleaguered firm, which is being investigated by police over its finances, refused to sign an agreement to contribute towards the cost of collection.

A council spokesman said: “The reason the levy has not been collected this year is because the E11 BID Company refused to sign the draft baseline and operating agreements on the basis that they were not prepared to pay towards the costs of the collection of the levy.

“The draft agreements remain unsigned and accordingly the council is confident that it has acted both legally and properly.”

Mr Sheikh said he refused to sanction the agreement because it did not represent good value for businesses.

Audit reports in 2010 and 2011 found the company was in already financial disarray, with national insurance and tax gathered from employees not passed on to Her Majesty’s Revenue and Customs.

Police fraud investigators have now launched a probe into the company following a complaint.

The E11 BID has had close ties with the council since its launch in 2008.

As well as receiving an annual levy from its members, the company has been paid in excess of £150,000 from the public purse.

According to its accounts, the company received more than £100,000 from the Local Authority Business Growth Incentive.

It was given nearly £50,000 directly from the council for a mix of ‘activities and events’ and ‘consultants’.

Following a request under the Freedom of Information Act, the authority has confirmed it does not hold a contract for the work.

The firm was also hired by a charity to contribute to the Worknet programme on a contract which failed to meet targets to help people into employment.

The deputy leader of Waltham Forest Council served on the board of the company between November 2010 and August 2011.

Under the terms of the agreement between the authority and E11 BID, the company was obliged to provide an annual report to the council on its performance.