The Charity Commission has dismissed concerns about payments to people connected to the Society Network Foundation, the charity that owns the Big Society Network.
And it will stay out of the disagreement between the charity and the Cabinet Office over the transfer of money from restricted to unrestricted funds, because it is a "contractual dispute".
The regulator opened an operational compliance case into the charity after concerns were raised about potential connected party transactions and an apparent transfer of restricted funds to unrestricted funds.
The commission’s report on the case, published yesterday, says that the concerns related to three people, all of whom had received payments from the charity’s trading company.
The report says that two of them had never been trustees of the charity.
It says that payments to the third person, which ceased shortly after the charity became operational, meant that conflicts of interest could have arisen.
But the regulator found that the payments were allowed because the charity’s governing document included a provision permitting the other trustees to authorise such a conflict if it was in the charity’s best interest.
The regulator decided not to take any action over the transfer of cash from restricted to unrestricted funds because it was outside the commission’s jurisdiction.
The Cabinet Office has said that it would seek to recover almost £34,000 of grant funds given to the SNF for the now cancelled children’s fitness project Get In.
The charity said that the department had agreed to the transfer of grant funds from restricted to unrestricted funds, and said it would not be returning the money.
The Charity Commission’s report says of the dispute: "Given that the principal cause of concern is a matter of contractual dispute, it is outside our jurisdiction and therefore we did not take regulatory action with regard to that issue."
The regulator’s report says the charity’s trustees said that Cabinet Office officials had told them during a meeting that the terms of the grant could be varied, thereby allowing the transfer.
The commission’s report says the regulator is "critical of the trustees for proceeding to spend the grant funds on general purposes based on a verbal discussion, without obtaining written confirmation that the terms of the grant had been varied".
The report says the commission noted that the charity’s accounts were not compliant with the charities Sorp, which sets out how charities should report their income and expenditure in their accounts.
But the regulator decided to take no further action except for reminding trustees of their obligations to file Sorp-compliant accounts because the charity was in the process of winding up.
A statement from the trustees of the Society Network Foundation said: "The trustees welcome the publication of the Charity Commission’s report, which on all the issues relating to the Society Network Foundation that the commission was asked to consider has confirmed that there was no inappropriate conduct on the part of its trustees and no matters of regulatory concern were identified.
"As the commission has decided that there is no basis for further investigation, it has closed its case. The trustees thank the commission for its prompt review and publication of its findings."