The charity Angell Town Community Project will be closed down after a report showed it spent only 21 per cent of its 2008/09 income on charitable activity and used charitable funds to pay parking fines and legal fees.
The charity, based in Brixton, south London, was set up to provide children's play schemes, care for the elderly and assistance with housing issues to residents of a local housing estate and its surrounding area.Under an agreement with Lambeth Council, it leased three parades of shops on the estate for "effectively nil rent", says the report, which was commissioned by the council and written by professional services firm PricewaterhouseCoopers.
It says the charity's trading subsidiary, which sub-let premises in the parade, was able to collect rent from these premises and donate it to the charity.
According to the report, the charity spent 34 per cent of its 2007/08 income and 21 per cent of its 2008/09 income on charitable activities.
It says ATCP spent at least £8,111 on settling penalty charges, fines, court judgements, bailiff fees and solicitors' fees in 2008/09. "These dubious and avoidable items of expenditure reduced significantly the amounts available for charitable activities," the report says.
ATCP could not demonstrate whether it had collected all the rental income due to it, which the report says was worth about £100,000 a year. It says the charity owed the council £38,000 for building insurance premiums and £56,000 for business rates.
The report says there was a gap of £22,000 between the profits made by the trading subsidiary, Venture Property Management, in 2007/08 and the amount that the company gave to the charity that year.
"This particular case is an example of poor governance and management within the charity, and a complete lack of confidence within the council to take on difficult matters within voluntary and community sector groups," the report says.
A spokeswoman for the Charity Commission said the charity had asked to be wound up.
Lambeth Council said it would terminate its relationship with the charity and attempt to repossess the parade of shops and collect the debts owed to it by the charity.
A spokeswoman for the council said: "We work with many independent organisations that do vital work with local communities. The vast majority carry out their work to the highest standards of probity. We are disappointed that this was not the case in this particular instance."