FRASER Coast Mayor Gerard O'Connell says a $73.5 million debt created between Wide Bay Water and the council was done at WBW's request.
WBW board member Geoff Skerritt wrote to the Queensland Audit Office this week calling for the Auditor-General to review the debt.
Mr Skerritt said it was created to guarantee an income from WBW for the council, even when WBW could not pay a dividend.
The debt, approved by the former council in May 2011, meant cancelling 73.5 million in WBW shares held by Fraser Coast Council and the creation of $73.5 million in debt as a result.
Cr O'Connell said the loan was signed off by both the Department of Local Government and Queensland Treasury officials.
"Out of respect for the Fraser Coast and particularly the staff of Wide Bay Water, I do not propose to comment further on this issue," he said.
Readers can now vote in a Chronicle poll on the future of Wide Bay Water.
As of 3pm on Wednesday after more than 100 votes, 77% of people wanted WBW to remain a local government-owned corporation.
The remaining 23% of voters wanted the council to continue to turn it into a commercial business unit (CBU).
The council will not be able to turn WBW into a CBU for a further two-and-a-half years to avoid paying $65 million in stamp duty.