THE chairman and chief executive of a major Harrow charity which was being mismanaged tried to hide thousands of pounds in bonuses paid to staff.

A devastating investigation by PriceWaterhouseCoopers (PwC) has revealed Harrow Association of Voluntary Services (HAVS) was being largely run by the chairman, Alan Peel, and chief executive Julia Smith, who agreed to “keep shtum” about bonuses being doled out without the knowledge of trustees.

The whole future of the charity, an umbrella organisation for Harrow's voluntary sector, is now in doubt as Harrow Council reviews the funding it receives and the way it is being run.

Ms Smith, who resigned in June when the allegations came to light, was paid a salary of £54,636 a year, but in 2008/09 received more than £80,000 thanks to bonuses and payments not approved by the governing board.

In emails from Mr Peel to Ms Smith in 2007, he said it was “better if we could avoid” mentioning the bonus scheme to the trustees, and later added: “You weren't showing this to the COM [Committee of Management] but hiding it in the accounts. I agree to keep stum.”

Ms Smith, who admitted to investigators that the payments were kept especially from councillors for fear it would affect the charity's funding, also confessed to “mistakenly” not paying VAT and income tax on some of the bonuses.

PwC wrote in its report that “serious concerns” had been identified, and added: “The governance arrangements within HAVS are inadequate when compared to the Charity Commission's good practice guidance. The Board of Trustees do not receive sufficient quality or depth of information, particularly financial information, in order to fulfill their governance role.”

Harrow Council stopped its £90,000 annual funding to the charity when the allegations were brought to light by the auditor, and has now set up a committee to try to address all the problems identified.

The Charity Commission has also opened its own investigation into how the charity is being run.

Councillor Bill Stephenson, leader of the council, said today: “It is our duty at the council to ensure that every penny of taxpayers money is accounted for and is used to support the work of voluntary organisations,” and pledged to “find a way forward for a strengthened and renewed HAVS”.

Trustees Asoke Dutta, Mary John, and Saroj Aggarwal departed from the board managing HAVS at a chaotic annual general meeting last week, when new trustees were elected, but little of the problems besetting the charity were discussed.

Mr Dutta, who had been chairman since January, was heavily critised in the report for not having the correct training to be a trustee, and had according to fellow trustee Councillor Joyce Nickolay, adopted the role of executive chairman taking decisions which should have been put to the whole board.

At last week's meeting, Mr Dutta refused to discuss the investigation into HAVS, citing a confidentiality agreement he had signed, but insisted his resignation was not related to the mismanagement claims which had been unearthed.

Councillor Mrinal Choudhury, who has been treasurer of the organisation for at least the last two years and signed off the accounts being probed, has stayed on as a trustee despite the financial mismanagement uncovered.

Cllr Choudhury, who is the serving deputy mayor of Harrow, could also now face questions as to why he has never declared his role at HAVS to the council, in breach of official standards rules.

The future of the organisation remains unclear, as the Charity Commission continues to investigate and “engaging with the charity to address these concerns”.