Charities have been urged to seek specialist legal advice after an investigation uncovered an organisation’s £27,000 loan to a senior employee.

The Charity Commission prepared a case report on the Air Ambulance Service after several complaints about the charity.

The commission found that the trustees were failing to oversee the operation of the charity, with the chief executive and chairman making important decisions without seeking the input of the full board.

The watchdog established that a loan totalling £27,000 was made to a senior employee, but it was not clear on what legal basis the loan was made.

The wider trustee board was only informed after the event, and the charity’s only contact with the commission was to phone its helpline, which provides only generic advice.

The commission said the conduct of the charity raised wider issues about the way organisations take decisions and what legal advice they based those decisions on.

The report said trustees should act with ‘reasonable care and skill’ but must also recognise when staff do not have the relevant expertise and should then take advice.

‘It is a legitimate call on a charity’s resources to seek professional advice when it is needed, including when entering into significant fundraising ventures. Charities need to be aware when and where they need to obtain proper advice in relation to charity law specifically (as opposed to experts in any other areas of law) – either from the commission, or from a charity law specialist.’

The commission also found the lack of trustee oversight led to a failed fundraising event in London in 2012, which resulted in losses to the charity of around £11,000.

The charity has said the £27,000 loan was in its best interests as it helped to retain a high-performing member of staff. The staff member in question is repaying the loan and payments are up to date.

The Air Ambulance Service said it will continue to ensure new trustees are provided with induction training with regard to their legal duties, and will review risk management strategies.

Administration of the charitable sector has come under closer scrutiny this month with the high-profile closure of the ‘big society’ charity Kids Company. Trustees have denied any suggestions of financial mismanagement.