The Charity Commission began an inquiry into Catz Club, which has the working name Schoolfriend Etc, in 2008 after it was revealed that the charity had paid £15,000 to attend a Labour Party event, of which 5,000 was found to be a donation.
In the final report of the inquiry published today, Charity Commission investigators concluded that the childcare charity had failed to comply with the terms of the funding package offered by third sector grants and loans company Futurebuilders.
It said having received a grant and loan package from Futurebuilders, Catz Club had embarked on a path of rapid expansion. But a subsequent low level of take-up at the clubs and the repayment structure of the loan led to the charity getting into financial difficulties.
At the end of September 2008 the charity had a cumulative deficit of more than £10m.
The report adds: "The trustees failed to keep adequate records of their decision-making. This unnecessarily exposed the trustees’ decisions to risk of challenge."
Because Catz Club has since recovered the donation it made to the Labour Party no further action is being taken on the matter.
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