A council may take its own legal action against some of those involved in a collapsed charity after police abandoned a criminal investigation into alleged fraud at the organisation.
O-Regen, also known as Orient Regeneration, had close ties to Waltham Forest Council and owned a number of community buildings in the borough, such as the Epicentre in Leytonstone.
But it went into administration in 2011 and was then subject to an 18-month investigation by detectives after neighbouring Hackney Council made allegations of fraud.
Waltham Forest Police announced over Christmas that it had dropped the probe but Hackney Council has now said it is considering taking further action on its own.
A spokeswoman for the authority said: "Hackney Council's enquiries concerning the payment of a grant to O-Regen remain ongoing and we are examining the options available to resolve performance irregularities concerning work that was carried out under the council’s contract.
"The options available include legal action and for that reason we are unable to comment in more detail at this time on the specific content of our agreement and the criminal investigation that was undertaken."
O-Regen was also awarded several contracts by Waltham Forest Council towards schemes to help the unemployed.
Between 2008 and 2010 it was awarded deals worth £400,000, but it failed to meet its targets.
Despite that Waltham Forest Council then awarded it another similar unemployment contract worth more than £1million.
Police said they abandoned their enquiries due to the "content of a contract" with Hackney Council, but have failed to elaborate and answer the Guardian's questions about what this means.
Conservative opposition leader Cllr Matt Davis, who was the chair of O-Regen's board of trustees, earlier told the Guardian he thought it was "odd" that officers only interviewed three people during their investigation.
Police have also not to responded to his claim that it was "strange" that officers did not speak to anyone from O-Regen's board during the investigation.