A Labour MP has told parliament that when a charity paid £349,000 to a consultancy firm solely owned by the charity's chair, the actions of the trustees were "bordering on fraud".
Jim Fitzpatrick, who represents Poplar and Limehouse, also questioned in parliament this week whether the Charity Commission had investigated the east London charity the Island Health Trust quickly enough or had sufficient powers to act.
The commission opened a statutory inquiry in December to examine whether the trust's contract with Suzanne Goodband Interim Solutions was in the best interests of the charity.
Fitzpatrick told parliament he had contacted the commission 10 months earlier after residents raised concerns about the charity, whose chair is Suzanne Goodband, former chief executive of the Royal Berkshire and Battle Hospitals NHS Trust.
He said he did not receive a response until 20 July and was told the commission was satisfied trustees had acted within their powers.
The commission then informed him on 1 September that the charity's governing document explicitly allowed trustee remuneration and therefore it could not intervene, he told MPs.
Fitzpatrick, however, questioned the legitimacy of this. He said the charity's constitution was altered in February 2015, reducing the required quorum for decisions from three to two.
But he had received an email from Stephen Molyneaux, one of the three trustees, saying he did not approve the resolutions altering the constitution and "in the absence of my agreement, these changes could not have been legitimately agreed", Fitzpatrick told parliament.
Molyneaux is no longer a trustee of the charity, which Fitzpatrick said had appointed 10 new trustees since April 2016.
After his email came to light, the commission opened a statutory inquiry.
Fitzpatrick told MPs: "There is serious unhappiness that a much-used, needed and appreciated local health centre with professional clinicians and caring staff is being bled by people who should be cherishing, nourishing and promoting it.
"Furthermore, the Charity Commission, which is responsible for protecting public money and the good name of organisations that receive that money, could have acted more quickly and seems limited in how it can act."
He said trustees were being removed without notice or agreement and approving payments for periods before they were appointed, which "seems to me to be bordering on fraud and so possibly criminal", he told parliament.
Fitzpatrick had further concerns about a letter he received from the commission on 14 January that said it normally dealt with trustees as part of its inquiries.
"I seek reassurance from the minister that former trustees, especially the whistleblower, Mr Stephen Molyneaux, will be interviewed, as well as others who have important evidence," he said.
Fitzpatrick said a current trustee had contacted the commission with concerns only to be told that, as a trustee, they were responsible and should step down if they had concerns.
"If that advice is accurate, it raises serious questions for other whistleblower trustees and the attitude of the Charity Commission towards them," he said.
"It should afford them protection rather than just advising them to walk away."
Fitzpatrick said the sum paid to the chair's firm was £349,955, which represented 68 per cent of its income over two years.
The charity’s latest accounts for the year to 31 March 2016 says that SGIS invoiced the charity for £179,176 for consultancy services.
Tracey Crouch, the charities minister, said in response that the number of statutory inquiries opened by the commission had tripled since 2015 and applications to register charities had grown by 40 per cent over the past four years.
She said: "Since February the commission has had to divert significant resources to dealing with the sudden increase in serious incident reports regarding safeguarding concerns.
"That is a significant volume of work for a small, non-ministerial department with fewer than 300 staff. However, in January the government announced an additional £5m a year for the commission’s baseline funding from April this year in recognition of those pressures.
"I do believe, however, that the commission has the necessary powers to properly investigate and take action in this case."
The trust did not respond to Third Sector's request for comment.
A spokeswoman for the Charity Commission said it had reassured Fitzpatrick that its investigation into Island Health Trust remains a priority. She said the commission hoped to conclude its inquiries as soon as possible, but this would depend on a number of factors, including the nature and complexity of the issues brought to its attention.
"We are continuing to investigate the regulatory concerns outlined in the scope of the inquiry into Island Health Trust and there are a range of robust powers open to us in an inquiry which we will use should we find evidence of mismanagement or misconduct," she said.