In February 2012, Tower Hamlets Council, a major funder of the charity, commissioned an investigation into the charity as regards its funding and the Bangladeshi Parents and Carers Association conducted an independent review of its own.

This established that there had been unauthorised expenditure of £104,296 with no evidence of an audit trail and that the charity’s reserve account had reduced from £812,486 to £80,933 with no evidence to explain why.

The charity’s review was carried out by Accountability Europe Ltd (AEL), covering the financial years ending in March 2010 and 2011.

The AEL report concluded that: ‘Due to the lack of financial controls and procedures, the finance manager was allowed to make material unauthorised payments. In our opinion the management and the trustees of the charity did not take sufficient due care of the charity’s finances by not exercising any control over the finance manager’s work.

‘Financial decisions were based on this information. In our opinion the financial statements of the charity did not give a true and fair view of its financial position as at 31 March 2009. As a result incorrect financial information was presented to the funders and the management committee.’

The Commission then opened an inquiry which has now concluded that there had been gross financial mismanagement at the charity between 2009 and 2011 and there appeared to have been one or more occasions of fraud that took place.

Its report says the trustees acted responsibly by reporting their concerns to the police, and had also taken professional advice to prevent potential further loss of funds by carrying out an independent audit and seeking help from the council who assisted them in improving and strengthening their financial control systems.

However, legal advice given to the trustees has been that it would not be feasible to seek recovery of the money as the person involved now lives abroad. The police investigated the matter but informed the Commission that they would be unable to take further action at this stage.

Michelle Russell, director of investigations, monitoring and enforcement at the Charity Commission, said: ‘This report highlights what can happen in a charity where there are poor financial controls. In this instance, the charity was able to continue operating and the trustees have worked with the Commission and the main funder of the charity to learn from the experience and implement a number of recommendations to strengthen its financial controls and governance.

 ‘Trustees have a responsibility to recover charity funds that have been misappropriated, which is particularly important where significant sums of money are involved. However, in discharging this duty, they should consider whether there is a reasonable prospect of success in pursuing an action through the courts, to justify the further spend of charity money to do so.’

The Commission’s report is here.