The Shetland Charitable Trust has been warned that it could face an accounts freeze and forced suspension of its trustees or employees if an OSCR investigation into the charity proves there is a systemic  conflict of interests on the board.

The OSCR has warned the trust that it is monitoring the actions and practices of its trustees - 21 out of the 23 of which are also Shetland City Councillors – and that any evidence of inappropriate behaviour will be met with harsh sanctions.

The trust has been under constant criticism over its governance structure, which sees the councillors maintain a majority on the board and has led to allegations that the trust is subsidising the Council itself and an investigation into that claim by Audit Scotland.

Strict monitoring is already in place by the OSCR, which has demanded notice of all meetings, copies of reports, minutes, agendas and detailed explanation of how the trustees deal with conflicts of interests they encounter as a result of their dual roles.

The trustees in February voted down a proposal to reform the charity’s constitution, which would have seen the board shrunk down to 15 trustees, seven of which would have to be independent members of the community.

Trustees are due to the discuss the new, more aggressive action by the OSCR at a meeting on Wednesday night.