Conwy's schools transport budget is £290,000 in the red
A council's schools transport budget is more than a quarter of a million pounds in the red, it has emerged.
Conwy County Borough Council is conducting an urgent review in to how the £290,000 overspend happened.
Bus operators claimed they raised serious concerns over the way contracts were awarded 18 months ago.
However, the council said it has only just discovered the problem and hopes the situation will soon be "stabilised".
John Pockett, Welsh director of the Confederation of Passenger Transport, said the issue has been rumbling on for more than a year.
He said: "I've spoken to operators who say they alerted the authority to the fact that its tendering process wasn't really fit for purpose, but the council has ploughed on.
"They raised these concerns some time ago, certainly over a year, maybe 18 months ago.
"This overspend has only been picked up in the last few weeks. What's alarmed operators is where was the monitoring?"
The council was expected to spend £3.606m on school buses and taxis over the last 12 months.
But a report will go before councillors later showing it has over spent by 7%.
The report adds: "This overspend was not projected until the last few weeks. Hence internal audit are undertaking a review of the processes to identify why this was not projected earlier in the financial year."
The Aberconwy MP Guto Bebb has met both the council and operators to work towards a solution.
He said the process called e-auctioning, when companies put in their lowest possible bids to run services, was used in 2010.
Mr Bebb added: "In numerous occasions, companies that did put in a very low price have actually walked away from those contracts and the council has been left in a situation where it had to find somebody at very short notice to take up the slack.
"When you're desperately looking for somebody at short notice, I suspect that price control goes out of the window.
"I would say the system is chaotic from a Conwy council point of view."
Many of the contracts are due to end soon but some operators claim they have lost confidence in the council, whose transport department is jointly run with Denbighshire.
BBC Wales has seen a letter from the Conwy Taxi Operators Group to the council warning problems may continue.
It says: "Some of the contract schedules appear inaccurate or indeed impossible to perform. Operators have expressed concern that they may well win a three year contract but have little faith that this will be honoured beyond July.
The council's report said: "It is expected that relatively accurate year end budget projections for home to school transport should be available by October/November as the transport provision for the schools and colleges should have stabilised by then.
"It is for this reason that internal audit have been requested to carry out a review of the processes relating to the home to school transport service.
"The audit review will also provide greater detail on the reasons for the overspend by the time the next school year starts."