A War veterans' group who took money from the BNP are to be struck off the charity register.
A probe into Forward Edge of Battle Area (Feba) revealed problems with its management and finances.
Feba, set up by former Queen's Own Highlander Tommy Moffat in 2006, had been backed by First Minister Alex Salmond and former defence secretary Des Browne.
But it emerged last year that Moffat had taken £3000 from the BNP to pay rent on their HQ in Hamilton, Lanarkshire.
The leader of the racist party, Nick Griffin, visited Moffat, claiming he wanted to show his support.
Feba were given charity status in March 2007. But now an inquiry by the Office of the Scottish Charity Regulator (OSCR) has found they don't meet the watchdogs' "public benefit" test.
The probe uncovered "significant weaknesses in governance and financial controls".
The OSCR said Moffat had run up large debts he couldn't repay and was running the charity while they were apparently insolvent.
He had also been the sole trustee of Feba, despite an agreement to have at least four people at the helm.
The report said: "It appears Thomas Moffat has not acted in the best interests of the charity and with the care and diligence that is reasonable to expect.
"The lack of accounting records made it impossible to determine the extent of any financial mismanagement."
The report said Moffat repeatedly refused to provide information and did not act on recommendations for improvement.
Moffat refused to comment. Feba have until November 7 to appeal the decision.
Daily Record
