The project was undertaken without proper procurement. No vote was put to councillors.
The council has refused requests to release relevant documents under the Freedom of Information Act.
Its internal audit committee has written to management highlighting concerns with how the project proceeded and a breakdown in budgetary control.
It also queried €143,000 in unrecovered legal fees linked to the scheme.
At the end of 2013, the Local Government Audit Service raised concerns about the cost of the underpass and the unlikely prospect of the council recouping its investment in the near future.
The auditor said he looked to inspect the underpass but could not get access.
The filled-in tunnel is next to the Carrigtwohill railway station and was built on private property. It lies 200m from another new underpass constructed by Irish Rail to service the same undeveloped land bank.
The hidden underpass, paid for by the council, has been located by the Irish Examiner following searches.
Despite audit concerns, the council refused a Freedom of Information request for copies of the internal audit report and briefs for management on the issue.
The council said their release could prejudice investigations, disclose the outcome of contract negotiations, and compromise the fairness of criminal or civil court proceedings.
The manager told the auditor that the “control issues” identified were being dealt with.
However, the decision to build the second underpass was defended because it was considered “critical to delivering of the council’s development objectives for growth along the Midleton Rail Corridor”.
The council said the cost of building it in future years would have been a multiple of the €1.5m paid during the railway construction. It said this meant there were “justifiable exceptional circumstances” not to follow procurement rules.
During the public inquiry held for the Cork to Midleton railway, CIÉ proposed building an underpass to service the property of Blandcrest Ltd, which was bisected by tracks. This underpass was built by CIÉ and, under the terms of the railway order, passed back into the ownership of Blandcrest when finished.
The underpass is open and is being used by horses to graze on the lands after the plan for 800 houses on the site stalled.
When the Irish Examiner began inquiring about the underpass there was a lack of clarity about the location of the bridge which the council was responsible for. In a statement last week, it said the underpass identified on plans as “5A” was its construction — 5A is the open tunnel used by the horses.
Irish Rail subsequently confirmed that 5A was in fact the underpass it had agreed to build on behalf of Blandcrest and that the council underpass was close by but was filled in. This council underpass is 200m east of the Blandcrest one and is tagged 5B. There are no details publicly available to explain why it decided to pay for the underpass or what the terms of the arrangement were. It has told auditors it is open to using development contributions linked to the developer to settle the debt on the project.