The Charity Commission will contact the trustees of a housing charity after a lettings company set up by the same man who established the charity received housing benefit payments of more than £5.5m over a two-year period.
The charity, called Fresh Start Housing, finds clients from homelessness charities in London.
The BBC reported that a lettings agency called Investing Solutions, set up by Samir Patel – who also founded Fresh Start Housing – received the money over the past two years by finding properties for single homeless men.
The BBC reported that the agency made money by putting several unrelated people into one house and charging housing benefit for each person rather than on the property, meaning the total benefit paid out was higher than the rental fee passed on to the property’s landlord.
Neither the company nor the charity had done anything illegal, the BBC reported.
According to records in Companies House, Investing Solutions was set up in 2002 by Patel, who also set up Fresh Start in 2010. Both organisations are based in the same building in Battersea, south London.
The BBC reported that Fresh Start Housing referred clients to both Investing Solutions and private landlords. It said that Investing Solutions had said that the bulk of the rents were passed to private landlords.
Patel said in a statement to the BBC that Fresh Start Housing was an independent charity with its own board of trustees.
He said the majority of the properties used were sourced from private sector landlords.
"The simple point being, the bulk of the rents gets passed to our private sector landlord clients," he said.
A spokesman for the Charity Commission said: "We are aware of the concerns regarding this charity and we will be engaging with the trustees."
The regulator’s online register shows that Fresh Start Housing’s accounts for the year to the end of September 2014 are more than 100 days overdue.
The charity had an income of £8,500 and an expenditure of £8,160 in the previous year, the commission’s register shows.