The former head of finance at the homelessness and poverty charity Cyrenians Cymru has been arrested after the charity discovered "extensive fraud".
Mark Davies was dismissed by the charity when the fraud came to light.
A statement from the charity said: "Following a recent independent financial investigation, instigated by the board of trustees and senior management, we discovered an extensive fraud.
"When this came to light we immediately dismissed the employee involved and reported the matter to police. He was arrested and a thorough police investigation is now under way. We are cooperating fully with this investigation."
South Wales Police confirmed that a 47-year-old man from Swansea had been arrested on suspicion of fraud and that an investigation was being conducted by the South Wales Police Economic Crime Unit. The man has been released on bail.
BBC News reported that the fraud was "believed to be in the region of £800,000", but Conrad Watkins, the charity’s chief executive, told Third Sector he could not speculate on the figure and did not know where it had come from.
He said the charity, which had an income of £2.2m in the year to the end of March 2013, was working hard to recover the lost funds. "All the staff do a fantastic job; there’s been a lot of support to keep the services going," he said. "We’re all distraught that such a thing has come to light. We’re now actively pursuing recovery of all losses. We’re trying to keep our award-winning front-line services going. That’s our focus."
A Charity Commission spokeswoman said: "Cyrenians Cymru has submitted a serious incident report to us, detailing alleged financial fraud by a staff member. The charity has informed the police and other relevant authorities and has assured us it is taking all the correct measures to protect beneficiaries. We have contacted the charity to explain that we will be asking for more information and an update on the developing situation."