Police are examining a claim that a senior Liberal Democrat ordered a personal assistant to destroy a document containing allegations of abuse and mismanagement against the late paedophile MP Cyril Smith.

Liz Lynne, who is standing to become the party’s president, is alleged to have told her constituency aide Deborah Doyle to get rid of a document detailing allegations of a coverup at the Knowl View children’s home in Rochdale.

A former manager at the home, Martin Digan, said he had spoken to detectives about his claim that Lynne avoided meeting him to discuss allegations that Smith knew about child abuse taking place at the home and had taken control of it.

The interviews are part of a wider criminal investigation announced by Greater Manchester police in July to review the way previous reports of child sexual abuse in Rochdale – in particular around Knowl View – were handled or allegedly covered up.

Lynne has categorically denied asking any staff member to destroy any documents relating to Knowl View or child abuse and said nobody had approached her about any such allegations.

Last month Lynne said she had no recollection of any notes detailing child abuse claims that were written or destroyed by a staff member, or of being approached by Digan.

The disclosure comes as ballot forms for the presidential position have been sent to Liberal Democrat members. Senior party sources have told the Guardian that Lynne could well win the contest. Lynne, who followed Smith as the MP for Rochdale, could face a protracted row over the claims as the party approaches the general election.

The party is still reeling from separate allegations against Lord Rennard, the former party election strategist, who was accused of groping women – an allegation he denies – and against Mike Hancock, the MP for Portsmouth South, who has admitted making inappropriate advances towards a vulnerable constituent [see footnote].

The Crown Prosecution Service has said Smith should have been prosecuted for abuse in Rochdale in the 1960s. He died in 2010 aged 82.

Doyle said she first approached police with the claim last year after seeing a Dispatches documentary on Smith, and was contacted by the force last month to arrange an interview. She told the Guardian: “I have been in contact with Greater Manchester police and have told them that I am willing to be interviewed. This meeting is still being set up.”

Digan said: “I have given a statement to the police regarding Liz Lynne.”

Doyle, who worked for Lynne between September 1995 and May 1997, said she took three or four pages of notes from a long telephone conversation with Digan in 1996. Digan had contacted Lynne’s office in Rochdale as claims of widespread abuse had begun to emerge about Knowl View, where boys as young as 10 had been raped. The first questions were being raised publicly about Smith’s role in the school.

Doyle says Digan told her over the telephone that Smith knew of abuse at the school and gave details of a coverup at the institution and the local authority. She says she told Lynne, who had been on holiday when Digan called, about the allegation, but that Lynne said she did not want to meet Digan and told her to destroy the notes. Doyle said of the notes: “I think I took them home and put them on my fire.”

Smith had retired from frontline politics but was still a prominent figure in Rochdale. Lynne had taken over his seat.

Digan, a social worker, was responsible for passing a dossier of evidence to the police that eventually led to the school being closed in the 1990s.

He said last week that he had approached Lynne’s office hoping to discuss suspicions about the way Smith and others had wished to take the school out of local authority control. He also had concerns that Smith had his own set of keys to the school.

A constituent of Lynne’s at the time, Digan said he called her office and had a long conversation with her personal assistant about Smith. He said he called Lynne’s office again some weeks later, on the off-chance of finding out if he could talk to someone else about the school. This time, Lynne answered the telephone.

“I arranged to go and meet her, but someone from her office cancelled it the day before it was due to take place,” he said. “She never got back to me. The shame is that many abuse victims could have been helped if Lynne and many others had taken the abuse at Knowl View seriously at that point.”

In an email, Lynne said: “I have no knowledge that the police are investigating any allegations relating to me but I can assure you that I have not been contacted by them in any way shape or form. I categorically deny that I asked any staff member to destroy any documents relating to Knowl View school or child abuse. I can add that whilst I was an MP, nobody approached me about any such allegations.

“I was able to reassure Lib Dem officials after these unsubstantiated rumours were publicised that they were entirely untrue. I am taking legal advice as to how I should proceed if this false allegation is further publicised.”

A police source confirmed that Doyle and Digan had been in contact with the force.

• This footnote was appended on 14 November 2014. The article stated that “the party is still reeling from separate allegations against Lord Rennard, the former party election strategist, who was accused of groping women – an allegation he denies”. To clarify: the allegations were investigated by the Metropolitan Police, which decided not to proceed.

