Many charities that expected to benefit are appalled at the costs and fear the organisation, the Princess Royal Trust for Carers, is wasting donations that would normally have gone to them.
At one stage, according to a senior source, the Princess, the trust's president, was so concerned she would have considered resigning if her name had not been associated with the organisation. However, she has since decided to give extra support and will help publicise the trust.
The trust aims to raise money for projects and charities which help people who provide care for others. It forecasts a deficit of more than pounds 290,000 in this, its third year. It expects to spend pounds 612,000 on administration and pounds 263,000 on charity.
The trust has pledged to provide at least pounds 2.2m in donations during the next four years for 30 projects. This will be matched by about pounds 4m from local authorities.
The chairman of the trust's committee of trustees is Ian Vallance, the chairman of British Telecom. BT donated pounds 250,000 to the trust in September. Mr Vallance also gave his pounds 150,000 BT bonus to the charity in 1990 and pounds 90,000 the following year.
Charity leaders have accused the trust of behaving like an established business, with high salaries for executives and advertising consultants as well as high expenses on travel and projects such as 'corporate identity', for which pounds 33,718 was spent last year.
Administration costs for charities are usually between 5 and 20 per cent of the budget.
Executives of the Princess Royal Trust for Carers argue that start-up costs are always high and it is initially expensive to attract big corporate donations. They also point out that in the past eight months they have been promised about pounds 2m spread over the next four years. This includes BT's pounds 250,000 donation.
Mr Vallance, BT's chairman, said: 'Any charity of this nature will have high initial costs.'
The trust was set up in May 1990. In the year ending 31 March 1992 it was given about pounds 591,000, which included a pounds 250,000 donation from the Joseph Rowntree Foundation. It spent pounds 679,000 on administration, leaving a deficit of about pounds 88,000. This included more than pounds 32,000 on travel, pounds 109,500 on publicity, and pounds 138,000 on fund-raising. The salaries and pension contributions were pounds 221,500. There was an average of 10 staff throughout the year. Consultants were paid separately. The previous year the trust spent pounds 182,500 on administration - about pounds 5,000 more than it received in donations.
Harry Cayton, director of the Alzheimer's Disease Society, said: 'It's tragic to see money which carers' organisations desperately need being spent on the trust's administration and consultancy fees. I can only hope things will improve.'
Dr Elizabeth Nelson, who became the trust's chief executive in August, said the charity had pledged to reduce administration costs to 15 per cent next year. She argued that all the donations and local authority finance was new money, obtained after months of negotiation. It would not have been available otherwise to carer charities.
She said: 'We have used highly-paid professionals, but we are aiming at raising a lot of money. We intend to raise pounds 25m in the next five years. If you really want to raise significant sums you have to spend money.'