Plymouth Argyle Supporters Training and Development Trust, a charity that offers football coaching to young people, has been criticised by the Charity Commission over a £330,000 loan it made to Plymouth Argyle Football Club last year.
The charity made the loan in January 2011, before the club went into administration in March that year.
A report on a Charity Commission investigation into the charity, published yesterday, says trustees did not meet their legal duty to safeguard the charity’s funds and apply them for the charity’s proper purposes.
It says all of the charity’s trustees had links to or interests in the football club and did not manage their conflicts of interest properly.
It says: "In these particular circumstances, the commission concluded that the trustees had placed the interests of the charity secondary to those of the football club.
"The commission is critical of the trustees for allowing the situation to arise, but found they have since done everything expected of them to rectify it."
Figures published on the Charity Commission's website show the charity had an income of £4,000 in the 2009/10, a significant drop from its 2007/08 income of £294,000. Its 2008/09 income was £15,000.
The commission's report says the charity had entered an agreement with Green Pilgrim, the company that took over the football club after it went into administration, under which the loan and interest would be repaid over five years.
Charities can legally make loans to other organisations, but only if this fulfils the charity’s aims or is a financial investment.
Jeremy Wills, the charity's honorary secretary, said trustees would be meeting shortly to discuss the Charity Commission's report. He said they would be able to respond to questions about the case once they had taken legal advice.