Edinburgh City Council's home and business repairs department collapsed after claims that it charged inflated prices for emergency or statutory repairs.
It was disbanded but £22m of unsettled bills remains; £5.5m of that is to be written off as the extent of the problem is finally unravelled.
Hundreds of homeowners were hit by the scandal and many await a resolution..
Alasdair Rankin, Edinburgh City Council's finance convener, said: "We are acutely aware of the issues faced by the former property conservation service. Whilst we are making every effort to fairly recover any money due to the council, this does not include billing for works that should not have been carried out in the first place.
"The council has made provision for the debts."