The commission opened an investigation into the charity in June 2010 after receiving what it described as "a significant number of complaints over a number of months from members of the public".
The commission had also noticed media reports that questioned whether Children’s Air Ambulance was a genuine charity.
The commission’s report of its investigation, published yesterday, says the charity’s literature suggested to potential donors that it was already operating an air ambulance and donations were needed to keep it flying, when in fact it was trying to raise money to fund the establishment of a service.
"The trustees accepted that this claim was misleading as they did not own, lease or operate an air ambulance," the report says. "The investigation advised the trustees to amend their literature and the charity did this immediately."
The report says that in the charity’s first year of operation, which ended in August 2006, nearly all of its £46,865 income was paid to its founder.
It says the charity had a fundraising agreement with Lottery Fundraising Services, a commercial firm that ran a lottery service on its behalf. Under this agreement, the report says, about 45 per cent of the money raised from the lottery was given to the charity, with the rest being paid to the company and spent on prizes.
The report says the charity has taken "appropriate steps" to improve its fundraising practice, governance, management and administration.
Nicola Howkins, chief executive of the charity, said: "Some of the literature may have been a little misleading and some people read into it incorrectly. We have changed it now."
She said she was unable to comment on the money paid to the charity’s founder because it had happened before she started working for the charity in April 2010.
"When I joined the charity we had a big shake-up," Howkins said. "All but one of the trustees have stood down and have been replaced by new people. We are making a fresh start."
The charity still has the agreement with Lottery Fundraising Services. Howkins said 45 per cent was a "fairly normal" amount for a charity to receive from such an arrangement.