Events after the murder, governance concerns, flood mitigation efforts, construction of major infrastructure, the transportation of asbestos and other issues such as health and safety were also examined by a commission of inquiry into Moira Shire Council in northern Victoria.
On Tuesday, the state government introduced legislation to dismiss the council and appoint an administrator as recommended by the commission.
It is expected an election to replace the councillors will not take place until 2028.
Local Government Minister Melissa Horne described the report as deeply concerning.
"Councils must properly represent the communities they serve, and Moira residents deserve to have a council that puts their interests first," Ms Horne said in a statement.
The commission has referred evidence to the coroner about events related to the death of council operations manager Rick Devlin.
Former council worker Andrew Robert Paterson is serving a minimum 21-year sentence after pleading guilty to the murder of Mr Devlin in August 2021.
He wrongly believed Mr Devlin was involved in a harassment campaign against him at work, although the men did not have day-to-day contact.
The commission report said there was good reason to think Mr Devlin's death may have been preventable and the environment of the Nathalia depot Mr Paterson worked at was fundamentally unsafe.
"These events and their tragic outcomes represent, at many levels, a catastrophic governance failure," the report stated.
It said the council's senior executives should have been aware of risks at the depot since 2017, when an external investigator found evidence of a dysfunctional and a toxic culture.
The commission has also contacted the Independent Broad-based Anti-corruption Commission about two instances of alleged corrupt conduct.
The report found the governance of Moira Shire Council had deteriorated to such a level that it could no longer carry out its responsibilities under the Local Government Act.
An interim administrator will be appointed for three months, before a longer-term panel of administrators is found.
It is the fourth council sacked by the Andrews Government since 2019, following the dismissal of the Whittlesea, South Gippsland Shire and Casey councils.
Moira Shire Council and Mayor Peter Lawless have been contacted for comment.
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