A Charity Commission inquiry into think tank the Smith Institute has criticised the trustees for not doing enough to protect the charity from claims that it was party political.
The regulator's inquiry, which took nearly a year and a half to complete, was prompted by allegations that the charity was too close to the Labour Party, particularly Gordon Brown, who was then Chancellor of the Exchequer.
Concerns were raised that the institute employed Brown's former adviser, Ed Balls, shortly before he became an MP, and that it was frequently holding seminars at Number 11 Downing Street.
Andrew Hind, chief executive of the commission, said the institute was found to be a charity doing work of educational value. But he added: "The trustees did not adequately manage the risks posed to the independence and reputation of the institute, and it was vulnerable to the perception that it was involved in party politics - never acceptable for a charity.
"Trustees of charitable ‘think tanks' have a responsibility to ensure the political neutrality of the work they do."
HM Treasury said other charities were allowed to use Number 11 on identical terms to the institute, but the commission found no evidence in minutes of meetings that the trustees had given adequate consideration to the implications of using the venue for seminars.
The inquiry concluded that the institute's general educational work was within the subject matter of the UK economy, but that one strand had been focused on a "primarily political concept".
On the question of party political bias, the report said the commission was satisfied that the trustees did not intend to give a platform to a particular point of view, but that "inappropriate party comments" had been allowed at some of the institute's events and in its publications. The inquiry found that trustees had not taken sufficient steps to stop party political comments being made at events, particularly by the institute's senior research fellow, Robert Shrum.
Trustees have promised to reduce their use of 11 Downing Street.
The trustees were also found to be too close the non-charitable trading company, SI Events Ltd, and have said they will appoint at least one trustee with a public allegiance to each of the main opposition parties, provide a clearer briefing for speakers and do more to document the way they make decisions.
The institute will now have to carry out a full governance review, to be completed within a year and reporting back after six months.
In a statement, the institute's trustees said they fundamentally disagreed with the requirement that all speakers at institute events, including politicians, should ensure that their remarks were ‘politically neutral'. "This has profound implications for all UK think tanks," they said.