The Charity Commission has opened a regulatory compliance case into the Uxbridge United Welfare Trusts amid allegations that it has spent £45,000 on legal fees arising from staff grievances, data protection issues and the unlawful suspension of a trustee.
The commission received complaints earlier this year about financial governance at the charity, which was founded in the 17th century and runs almshouses and makes grants in the north-west London borough of Hillingdon.
A spokeswoman for the commission said the regulator had opened a regulatory compliance case to investigate the complaints further.
She was unable to give any more details but a source close to the charity told Third Sector that the commission had indicated it was concerned about possible conflicts of interest, unauthorised trustee benefits and the involvement of trustees in key management decisions.
The commission is also to consider whether staff recruitment is sufficiently open and transparent.
The source said there had been tension on the charity's board since a trustee was unlawfully suspended in 2007 and that trustees used £45,000 of charity funds on legal advice relating to this and other grievances.
The decision to seek legal advice was made without reference to the full board, according to the source.
The charity's latest accounts, for 2008, show that it had an income of £520,000 and an expenditure of £365,000, including £29,000 in "legal and professional fees". It made grants worth £57,000, which cost £18,000 in "applicant support".
The charity's chair, David Routledge, is a Hillingdon councillor and is standing for re-election at the forthcoming council elections.
Four of the charity's trustees are appointed by Hillingdon Council.
Third Sector also understands that a claim of racial harassment has been filed against the charity at the employment tribunal by one of its members of staff.
The charity did not respond to Third Sector's request for comment.