THE UK Government is to hold back six months of funding earmarked for Citizens Advice Scotland (CAS), the embattled charity that sacked its chief executive over her expenses.

CAS has also been told to carry out an immediate governance review by Ministers amid growing chaos in the organisation.

Charity treasurer Stephen Brown also resigned last week after becoming isolated on the CAS board.

CAS is the umbrella body for the 61 member bureaux that provide advice services to over 300,000 people every year.

Its network offers lifeline support for vulnerable people and is one of the most recognisable charities north of the border.

The UK Government is CAS’ core funder: £2.9m a year is handed over for “unrestricted” purposes, while £4.5m is given to deliver consumer advice and advocacy.

However, CAS has been in chaos after Margaret Lynch was fired as chief executive last month following an auditors’ probe into her expenses, which included a review of her use of the company credit card. Jon Dye also left as the CAS Head of Finance recently.

CAS last week unveiled a “governance review” in the wake of the problems, but it can be revealed the probe was ordered by the UK Government’s Department for Business, Innovation and Skills (DBIS), which is headed by Tory Cabinet Minister Sajid Javid.

In a letter to CAS Board chair Dominic Notarangelo, leaked to the Sunday Herald, senior civil servant Caroline Normand wrote: “Following the recent dismissal of the CAS Chief Executive, and the recent departure of the CAS Finance Director, the Department has considered whether CAS currently has the correct governance environment to support propriety and proper use of public funds.

“In particular we have concerns that the current constitution of the Board and its relationship with the executive functions are a barrier to effective scrutiny and oversight of the funding BIS provides to CAS.”

She listed a series of actions DBIS wanted implemented: transparent financial reporting; appropriate and auditable systems of delegated authorities to the CAS chief executive; a strengthened scheme for expenses claims; and stress testing of the charity’s financial stability.

Normand also called for an “independent governance audit” to ensure the Board is able to provide strategic leadership.

She added that her department expected CAS to report against these arrangements on a monthly basis to meet the funding conditions.

Whitehall funding, she added, would only be handed over for “an initial period of six months”, with the remaining six months of funding for the year withheld. The payment of remainder would be subject to CAS complying with the agreed “delivery plan”.

In another development, Brown quit as CAS treasurer on Thursday after less than four months in post. His departure as a director was confirmed on Companies House.

He was elected in December following Lynch’s suspension and was expected to play a key role in turning around the charity.

It was revealed last week that Brown described himself on a company website as “Lord Yerton of Glencoe” after buying a title, a purchase he played down as a “joke”. Brown quit over disagreements about the future direction of the charity.

A CAS spokesperson said: "CAS, UK and Scottish Governments have been working together for some time to develop a course of action that will improve accountability, transparency and effectiveness at one of Scotland's largest charities. There is an appetite for change at CAS and member bureaux, and the assistance of UK and Scottish governments is welcomed...We will work with the UK and Scottish Governments to give Citizens Advice Scotland a strong and certain future."