Charity for wounded soldiers received almost £550,000 in donations in a year but spent just £15,000 on helping those in need, it has emerged.
Afghan Heroes shelled out almost £500,000 on fundraising in 2012 and paid its eight full-time and 16 part-time staff £190,479.
However, just £15,153 was handed over to ex-service personnel and their families to assist with life after the conflict in Afghanistan.
The charitys bank accounts have now been frozen by the Charity Commission while an investigation takes place.
Members of the commission met Afghan Heroes trustees in October to discuss their worries and said that they were looking into the significant risk to, and potential loss of, the charitys funds or other property.
A spokesperson added: The commission has not yet formed any conclusions and will continue to consider what other regulatory actions it should take.
Conservative MP and former defence secretary Liam Fox has quit as a patron of the charity, citing a breakdown in trust stemming from being kept in the dark about the inquiry.
However, charity founder Denise Harris defended its spending and claimed most of the activities during an incredibly busy period were taken on by her husbandand herself.
We are working with the Charity Commission to resolve this issue and ensure the best interests of recovering personnel are uppermost, she added.
Mrs Harris set up the charity in 2009 after the death of her soldier son.
They employ a Blackpool company to do the collecting - Prize Promotions. The collectors are all employed by them. I don't think much of the collected cash ends up with the charity.
I complained to the charity about an aggressive and ill informed collector and was referred straight away to Prize Promotions.
Seems to me a well intended idea has gone off track.
I do have a problem with the proliferation of different charities that all have their overheads and costs.
If they could be set up under the umbrella of a well established charity I think a better outcome would be possible.
Ms Harris said in a statement: “The charity was set up in 2009 when my son died while serving in Afghanistan and is run by a very small team, with most activities undertaken by myself and my husband. In the past year we have opened our first retreat for service personnel in Somerset, which has five bedrooms that are currently fully occupied. Full financial disclosure and access to our records has been made to the Charity Commission, which will report in due course. We have tried to act properly and within the regulations at all times.
What does 'Encouraging people to donate money' entail? I thought that was more interesting than the wage bill, which only seems 'staggering' in its paucity.
I thought Afghan Heroes seemed one of the more trustworthy of the clutch of forces' charities which appeared in the wake of the huge success of Help for Heroes. I wonder how some of the others' account books look.
It's a shame Dr Fox couldn't have used his influence to get these people- who obviously had good intentions- better advice instead of bailing, conveniently just as association with the forces looks like becoming less fashionable...
ITV news has now picked up on this and quoted the Charity Commission
Somerset veterans charity, Afghan Heroes, is being investigated amid concerns about its management and low levels of charitable expenditure.The Charity Commission says it's opened a statutory inquiry into the charity, based in Ashcott.
It was set up to help serving armed forces personnel and their families, and to relieve suffering among former members of the armed forces.
The charity also uses the working name True Heroes.
The regulator contacted the charity in September 2013 about how much income was spent on charitable activities and various payments to companies connected to some of the trustees.
It met with the trustees in October 2013 and says the trustees have been unable to allay its concerns.
After opening the inquiry, the Commission has acted using legal powers to restrict the charity's and its trading subsidiaries' bank accounts and the transactions they may conduct, so that the trustees cannot make payments from the accounts or dispose of property without the consent of the Commission.
In taking these steps, the Commission has considered carefully how to mitigate any impact of its regulatory action on the charity's beneficiaries and its trading activities.
The trustees were informed on Friday 13 December that the inquiry had been opened, of the regulatory action that had been taken and that this would be made public this week.
The Commission has not yet formed any conclusions and will continue to consider what other regulatory actions it should take.
It sounds like Chuggers (aka charity muggers). A lot of money is raised by street collections these days. You can out-source the collection to a professional agency, which will charge for its services. Typically the collectors are paid an hourly rate to sign up people to a direct debit donating funds to the charity. This is expensive in the short term (wages for the collectors) and only works long term if the direct debits are not cancelled.