Eric Pickles, the communities secretary, has sent commissioners into Tower Hamlets council in east London after he failed to receive assurances from the council leadership that they would take on board criticisms over its governance.

A report by PricewaterhouseCoopers published last month and commissioned by the government had found a “worrying pattern of divisive community politics and alleged mismanagement of public money by the mayoral administration of Tower Hamlets”.

It severely criticised how grants were handed out to organisations that failed to meet basic criteria for public funding, property was sold without proper process and taxpayers’ money was spent on political advertising for the mayor.

A month ago, Pickles gave the mayor of Tower Hamlets, Lutfur Rahman, time to promise to accept the criticisms, but said on Wednesday a culture of denial prevailed at the council.

The two commissioners, due to be joined by a third, will take control of grant-making powers, the sale of council property and council publicity. They will also be responsible for the appointment of key officers – the head of paid service, chief finance officer, and monitoring officer. They will also appoint electoral registration officers. The council will not be able to dismiss a statutory officer without the approval of the commissioners and have a wider duty to cooperate with the commissioners.

Eric Pickles, who says a culture of denial prevails at the council. Photograph: PA

The mayor described the sanctions as “unreasonable and disproportionate”, adding: “While the council disputes many aspects of the PwC report, we have never rejected its findings out of hand. In fact, we welcome the inspectors and look forward to working with them. We accept there are areas for improvement in some of what we do.”

The report noted that the council had failed in certain specific cases to meet its “best value” duty, but had not done so overall, he said. Rahman also expressed “concern about the rising costs of this intervention, which exceeds £1m – payable, of course, by the local taxpayer”.

The commissioners, appointed on Wednesday, will not replace the chief executive. They will be led by Sir Ken Knight, the former London fire commissioner and chief fire and rescue adviser to the government. He will be supported by former council chief executive Max Caller, chair of the Local Government Boundary Commission for England. They will remain at the council until March 2017 and report to the communities secretary every six months.

Pickles said the authority, under the direction of the commissioners, will have three months to prepare a strategy setting out how it will comply with its duty to act openly and transparently, serving all of its communities fairly and securing value for money.

“Intervention was not a decision taken lightly, however, I could not ignore the overwhelming evidence of the council’s failure, and allow this to continue unchecked. I do not accept the mayor’s representations that problems are easily put right,” Pickles said.

“Residents need to know that decisions are being taken properly in an open and accountable way. The commissioners I have appointed are experienced and talented professionals who understand that transparency and accountability are vital to the functioning of local democracy.”

Knight said: “We are determined to restore faith in how Tower Hamlets operates. Local people deserve a council that not only makes decisions in an accountable and transparent way but also with the benefit of all residents in mind.

“Today marks the start of a long but necessary journey to ensure public confidence in the council is restored, community cohesion maintained and that Tower Hamlets is no longer a byword for poor governance.”