The Office of the Scottish Charity Regulator said the payment from Glasgow East Regeneration Agency to chief executive Ronnie Saez was, "wholly unacceptable," and constituted misconduct.
The regulator's report criticised the board members including three Labour councillors and warned them about their responsibility to any charities they serve in the future.
John Mason, Shettleston SNP MSP, referred the case to the regulator after press reports last year has called on the council to take action.
David Meikle, Tory councillor, has also questioned the councillors' fitness to represent the council on charities.
Of the three elected members who took the decision, Jim Coleman and George Redmond are still councillors. Catherine McMaster is no longer a council representative.
Mr Meikle said: "This report is highly critical of the councillors who made the decision to use charity money to make a discretionary payment to Mr Saez."
A council spokesman said: "The regulator recommended that members undergo training, which we will put in place."