The future of Saltburn Arts hangs in the balance.

The future of Saltburn Arts, the charity which runs the Community Theatre and Hall and The Old School, hangs in the balance after it was revealed that it is now insolvent amid claims of financial mismanagement and irregularities.

Saltburn Community and Arts Association (SCAA) has made a loss of £60,000 over 12 months, which has completely cleaned out its cash reserves of more than £55,000.

At the annual general meeting it was revealed that the charity’s accounts were incomplete and the Charity Commission had warned one board member about making inappropriate payments to a company he owns.

Angry trustees called for a police investigation to be launched if there was any illegal activity connected to the charity’s financial crisis after it was revealed that it was board member Peter Neal’s company that was involved in a questionable £3,500 worth of payments.

A packed meeting, held at Saltburn Community Centre, voted to accept a decision for all of the board to resign and elect 12 members in an attempt to save the group from collapse.

Acting chairman Veronica Boland outlined the perilous state of the association when she gave the annual report, telling members that meeting notes and company records had been kept by a former secretary and it was proving difficult to retrieve them to compile an accurate record of the charity’s spending.

She said: “As a result of intensive investigation into the finances of SCAA it has become apparent that SCAA was insolvent. Strict control has been introduced and payment arrangements have been made with creditors.

"The Charity Commission have been consulted and written to. Advice has been taken from an insolvency practitioner and a recovery plan is under consideration and will shortly be promoted."

"During the financial investigations it became apparent that payments had been made to a company owned by a trustee. As these payments were apparently not authorised by the board, requests for repayment have been made. In addition, payments have been made to a company owned by a relation of a trustee and investigations continue in this respect.”

Acting treasurer Philip Thomson, who is also a Redcar and Cleveland Borough Councillor, told members that he had spoken to several creditors in an attempt to keep the charity going and said they were going to have to close down the arts centre they opened at the former Saltburn Junior School.

A Charity Commission spokeswoman confirmed that it had been alerted to a concern about payments to board members.

She said: “At that time (July 2013), we wrote to the charity to remind the trustee body of the rules of their governing document which contains an express prohibition against any member of the trustee body being employed by the charity. We received an acknowledgement from a representative of the trustee body that they accepted our advice.”

Mr Neal has yet to comment.