The Charity Commission is looking into concerns that Tower Hamlets Council made payments totalling £300,000 over the past five years to an organisation that was removed from the register of charities 16 years ago.
Local media in east London have reported that the council has made more than 80 electronic payments totalling more than £300,000 since March 2011 to the Docklands Handicapped Group, which was removed from the commission’s register in March 2000 because it did not operate.
The council said the payments, which are understood not to be grants, were made to assist with the care of a vulnerable adult and it was looking into the case.
Concerns were raised about the payments when Island House, a community centre based at address listed for the DHG, received receipts totalling £35,000 and became afraid that its own funding might be at risk.
A Charity Commission spokesman said today that its inquiries were at an early stage.
"The Charity Commission has contacted the organisation to establish if it is still operating as a charity," he said. "We await a response.
"It is an offence to solicit funds on the basis that an organisation is a registered charity if it is not registered with the Charity Commission in England and Wales, because this is misleading to donors and the general public.
"We have contacted Tower Hamlets Council for further information regarding the organisation."
John Biggs, the mayor of Tower Hamlets, said: "We take this matter extremely seriously and are investigating it thoroughly. It does, however, concern payments made to assist with the care of a vulnerable adult, and this matter needs to be kept in mind and the matter dealt with sensitively.
"This arrangement long preceded my appointment as mayor, but I will ensure that any proper lessons are learnt and that any funding is in future provided in the appropriate manner and is properly accounted for."