Swansea charity Cyrenians Cymru announced yesterday that it will enter administration, after a second employee was arrested on suspicion of a “systematic and extensive” £800,000 fraud.

South Wales Police confirmed that a 40-year-old woman was arrested on Monday and released on bail. It follows the arrest of the charity’s 47-year-old finance director, Mark Davies, in December.

In a statement released yesterday, Mark Sheridan, chair of Cyrenians Cymru, said: “It is with profound sadness that the Cyrenians Cymru board of trustees has taken a decision to declare the charity insolvent and enter administration.

“The independent financial investigation, which was initiated by the board and senior management towards the end of last year, uncovered a systematic and extensive suspected fraud. This was reported to the police in December and is now the subject of a police investigation. Two employees from the charity’s finance department have been dismissed and arrested.”

Cyrenians Cymru specialised in tackling homelessness and poverty in Swansea and the surrounding area. It was registered with the Commission in 1974 and employed 75 staff. It had ten active projects with an estimated 2,500 service users in Wales.

Staff were informed of the charity’s position on Tuesday.

Its accounts for the financial year ending March 2013, the latest that are available, show that the charity had £747,394 in unrestricted reserves and £711,229 in restricted funds. Its income was £2,157,180 with a spend of £2,350,377.

Sheridan said yesterday that the charity was “taking legal action for the recovery of all losses”.

“The consequences have been devastating for the charity,” he said. “Monies due to keep services running have been frozen, in accordance with the policies of funders, and therefore the charity is unable to meet its financial obligations.

“We will continue to make every effort, with partners and funders, to ensure that these essential services have a future.”

A spokeswoman for the Charity Commission told Civil Society News that: “Cyrenians Cymru has submitted a serious incident report to us and has assured us it is taking all the correct measures to protect beneficiaries.

“We are actively engaged with the charity who have provided us with regular updates, and we understand that unfortunately, the charity has been forced to close.”

A spokeswoman for the South Wales Police confirmed that “an investigation into the matter is being conducted by the South Wales Police economic crime unit”.