An inquiry has found a charity which closed owing Blackpool Council nearly £100,000 in unpaid business rates was mismanaged.
The Africa Trust, which supported people in Uganda, owed the council £99,892 in relation to a warehouse.
An inquiry by the Charities Commission found the trustees mismanaged the charity because they did not undertake appropriate due diligence and failed to manage the risks of a business rates scheme they entered into.
The scheme saw the Africa Trust take over empty premises thus helping the owners get a reduction in their business rates.
Michelle Russell, director of investigations, monitoring and enforcement at the Charity Commission, said: “This case exposed more widely a practice of some retailers and landlords of hard-to-let properties approaching charities to entice them to enter into tenancy agreements that would relieve the landlords of the requirement to pay full business rates.
“These types of arrangements pose serious risks for charities if the charity is not making sufficient and proper use of the premises. In this case the arrangement backfired.
“It was the charity that ended up being liable for paying the business rates and had to close.”
The inquiry found a number of local authorities, including Blackpool, were pursuing the charity for unpaid business rates, totalling more than £800,000.
Blackpool Council wrote off the money it was owed in January this year after deciding there was no prospect of recovering the debt.
The Africa Trust’s debt was one of the highest levels of outstanding business rates in a total sum of £626,000 written off.
The charity, whose objectives were relieving poverty and advancing education, closed in 2015.
The Charities Commission is now considering the fitness of individuals involved in the case to be trustees.
Ms Russell added: “It’s a warning for other charities to be wary of similar deals or arrangements. They may sound attractive, but do not enter into them without researching what you are getting into.
“Trustees must be assured in taking on the occupation of a property in such schemes that it is for the charity’s benefits.
“Charities are held in high esteem by the general public, and these kind of agreements that turn sour jeopardise that public trust.”