Trustees removed the chair of the Bangladeshi Parents and Carers Association, a learning difficulties charity based in Tower Hamlets in London, following more than £800,000 of fraud, an inquiry report published today has said.

The Charity Commission opened an inquiry into the charity in May 2012 after receiving a report of fraud and financial mismanagement. Tower Hamlets council, a major funder of the charity, had conducted a review which found unauthorised expenditure of £104,000 and an £732,000 reduction in the charity’s reserve account.

In its inquiry report, published today, the Commission concluded that “there had been gross financial mismanagement at the charity between 2009 and 2011 and there appeared to have been one or more occasions of fraud that took place”.

The inquiry found that the finance manager of the charity had committed a series of frauds and that the management committee at the time had not investigated properly. It found that the chair of the charity had been a dominant trustee and not properly managed the finance manager.

The finance manager now lives abroad, and no civil action against them is likely to take place.

The council later provided support to the charity and asked it to follow 20 recommendations, which the charity is now doing.

Michelle Russell, director of investigations, monitoring and enforcement at the Charity Commission, said: “This report highlights what can happen in a charity where there are poor financial controls. In this instance, the charity was able to continue operating and the trustees have worked with the Commission and the main funder of the charity to learn from the experience and implement a number of recommendations to strengthen its financial controls and governance.”