The Department for Business, Innovation and Skills has withheld half the annual funding it provides to Citizens Advice Scotland and ordered the charity to carry out an independent governance review, according to reports.
The move comes just weeks after the charity dismissed its chief executive Margaret Lynch following an investigation. The charity’s treasurer, Stephen Brown, and Jon Dye, head of finance, have also resigned, according to the Herald Scotland.
CAS, which last year had an income of £13.5m and, according to its website, receives about 70 per cent of its funding from BIS, announced the review on Friday, saying it believed its governance model needed to reflect the changing needs of society.
But the Herald Scotland reported yesterday that it had seen a leaked letter from BIS civil servants to Dominic Notarangelo, the charity’s chair, ordering the review and asking for transparent financial reporting, a stronger scheme for expense claims, stress testing of the charity’s financial stability, and monthly reporting of whether these requirements were being met.
The letter reportedly said only six months’ worth of CAS’s annual funding would be handed over, and the remainder would be paid only if CAS complied with BIS’s instructions.
A CAS spokeswoman said the charity had been working with the UK and Scottish government for some time "to develop a course of action that will improve accountability, transparency and effectiveness".
She said: "There is an appetite for change at CAS and member bureaux, and the assistance of UK and Scottish governments is welcomed.
"Our objective is to deliver an organisation with improved governance that can support the important work of the Citizens Advice service in Scotland, and we will work with the UK and Scottish governments to give Citizens Advice Scotland a strong and certain future."
She declined to comment on whether the review had been linked to Lynch’s departure, saying Lynch still had a right of appeal and CAS would therefore not comment further at this time.
The charity also did not respond to requests to confirm its funding situation.
A BIS spokeswoman declined to comment on the leaked letter, or to confirm its contents, but said it was continuing to work with the charity.