Audit Scotland is investigating the relationship between the Shetland Charitable Trust and the Shetland Island Council as it suspects the charity is being used to subsidise Council services.

Having qualified the accounts for the past four years, auditors are now interviewing staff and councillors and holding meetings, with audit manager Carol Hislop saying: “There has to be more work done on that for us to say that SCT is not subsidising the statutory services of the council.”

The Trust, led by general manager Ann Black (pictured), had previously believed the problem with its operations was the dominance of Council members on its board, with 21 out of 23 trustees.

Graham Johnston, head of finance at the Shetland Island Council, said: “There is an unresolved issue with Audit Scotland and we are working with them to resolve it.”

The Council and the Trust have in the past worked together on transactions such as the sale and lease of inter-island ferries and of Sullom Voe oil terminal land, the sale of Shetland Towage and the transfer of the Isleburgh Trust and Shetland Welfare Trust.

Mary Anderson, principal accountant at the Trust, said the issue was a matter for the Council.