Questions have been raised over how a community group accumulated £100,000 of debt, leading to its demise.
Tullyally and District Community Development has now said it has no chance of repaying the money and has ceased to function.
The group, based in the Waterside area of Londonderry, received most of its budget from the Department of Social Development and operated out of the local community centre, which has also closed its doors.
In a move that stunned the local community, the organisation issued a statement announcing its closure.
“It is with regret that the current board of directors of Tullyally and District Development Group Limited, having exhausted all avenues open to them and in order to meet their legal obligations under Company Law, must now advise all their creditors, funding providers and service users that of today, Thursday, January 12, 2012, they are ceasing to operate and trade,” it said.
“This, therefore, leaves the organisation with debts and liabilities it cannot meet, legally deeming that the company would be trading insolvently under Company Law.
“Staff have been notified that, unfortunately this action will result in job losses with the organisation.
“In an effort to sustain future community provision and services for the area, current board of directors of Tullyally and District Group Limited has sought support from local political and community representatives to facilitate this process.”
Questions have been asked about how this level of debt was accumulated without checks being made. It is understood that in the past, the procedure for board members for funding from DSD was that claims were submitted on a monthly basis and these claims were accompanied by bank statements.
A spokesman for the DSD said: “The Department seeks through rigorous procedures to ensure value for money whilst protecting public funds. We have been made aware of this group’s current position and while work is ongoing to establish the facts, we are currently not in a position to comment more fully.”
Assembly member, William Hay, said the DSD must investigate how the debt was allowed to accumulate, but it was vital that a replacement group was set up as soon as possible.
He added: “I have spoken to the creditors to see if they are prepared to wait at all, but we have to look at new structures and see if they are willing to take on the debt.”