The homelessness charity Cyrenians Cymru has been forced to close after its funds were frozen following the arrest of a second member of its finance team on suspicion of fraud.
The charity said that in accordance with the policies of its funders – which include the Welsh government, the National Lottery and Swansea Council – its funds had been frozen and its board of trustees decided to declare the charity insolvent and go into administration.
Mark Davies, former head of finance at Cyrenians Cymru, was arrested last month after an independent investigation initiated by the charity’s board and senior management discovered extensive fraud, reported to be worth in the region of £800,000.
Davies, aged 43, was subsequently dismissed, as was the employee who was arrested this week.
The charity’s chair, Mark Sheridan, said in a statement that Cyrenians Cymru, which had an income of £2.2m in the year to the end of March 2013, was unable to meet its financial obligations and was taking action to recover its losses. He said that the charity’s 75 employees had been informed of the situation on Tuesday and the board was due to meet insolvency practitioners on Wednesday.
"We have been working strenuously with the Welsh government and other partners to keep the charity afloat, but without success," said Sheridan.
The charity is hoping that funds will be released to help it continue offering front-line services such as providing accommodation, training and furniture for homeless and other disadvantaged people.
Conrad Watkins, the charity’s chief executive, said two routes were available for the recovery of the losses: the return of stolen assets, or their monetary value, which would depend on a court order at the time of the trial; and an action for damages against external parties for professional negligence. The charity has appointed a lawyer to represent it in the case.
"We are devastated by the incalculable damage this has done," Watkins said.
South Wales Police confirmed that a 40-year-old woman from Swansea was arrested as part of an ongoing investigation by the force’s economic crime unit.
"The woman is currently on police bail while enquiries continue," said a police spokeswoman in a statement.
A spokeswoman for the Charity Commission said: "Cyrenians Cymru has submitted a serious incident report to us, detailing alleged fraud by two staff members. The charity has informed the police and other relevant authorities, and has assured us it is taking all the correct measures to protect beneficiaries.
"We are actively engaged with the charity, which has provided us with regular updates, and we understand that the charity has unfortunately been forced to close."