A defunct housing charity that lost millions of pounds to fraud by trustees and senior staff made total payments of up to £1m to "ghost employees", a Charity Commission investigation has concluded.
The regulator’s report into Astonbrook Housing Association, published today, says it found "systematic and repeated fraud" over a four-year period, consisting of more than 1,800 fraudulent payments worth about £1.8m.
The charity, which registered with the commission in 2002, provided housing and support to refugees and asylum seekers in the West Midlands, Wales and south-west England and went into liquidation in 2009.
It held contracts worth more than £16m a year with the Home Office, the Border and Immigration Agency, Birmingham City Council and Bristol City Council, to provide services for 3,500 asylum seekers.
Six people, including Mohammed Arwo, its former chief executive, were jailed in September for stealing £1.8m from the charity between 2003 and 2007. But police estimated that as much as £6m might have been stolen from the charity during that time.
The commission’s report says its investigation into the charity began in 2007, after the Border and Immigration Agency and Birmingham City Council both raised concerns about its management.
The commission froze the charity’s bank account shortly afterwards and appointed an interim manager when police arrested those suspected of committing crimes, the report says.
There was evidence that cheques, raised in payment of fictitious invoices, were made out to trustees and staff members at the charity, as well as their extended families, it says.
The interim managers found evidence that the trustees had listed "ghost employees" on the charity’s payroll, including members of the chief executive’s family who lived abroad. The commission’s report says it was estimated that the charity lost between £700,000 and £1m as a result.
There was also evidence that the trustees and senior staff had used charitable funds to buy residential properties that were subsequently used as personal housing or rented back to the charity, the report says.
When its contracts with the Border and Immigration Agency and other bodies ended, the charity was forced into liquidation in March 2009.
A spokeswoman for the commission said the charity would remain on the commission’s register until the liquidation process was completed.
Michelle Russell, head of investigations and enforcement at the Charity Commission, said: "This case also shows that people intent on enriching themselves at the expense of charity will not get away with it. Here, the commission acted quickly, taking robust action to stop abuse and protect the charity’s assets and beneficiaries. By working together, with the police and other agencies, we can help to ensure those who have committed crimes against charity are brought to justice."