It is the Minister that reports to the Council to begin with. And even if the files were altered the chiefs of the operational divisions who are making those reports would notice that very quickly. Anything that is coming from Imperial Intelligence goes through them. And even if there was in fact inefficiency inside the Imperial Intelligence that is no where near a reason to dismantle the whole organization which is vital to the Empire. In that case you simply change the leadership. You don't destroy the priceless infrastructure of spies and informants and make yourself blind.
No matter how you spin it this thing will remain ludicrous.
Office of Strategic Services,look it up if you want a RL example to see how and why an extremely effective organization, that was vital to a war effort, can be decimated, torn down and reorganized into a shadow of it's former self.