The Scottish cabinet was kept informed of a cronyism row involving Humza Yousaf in the early days of the SNP government, according to official files.

Newly released cabinet papers show ministers were updated on a growing number of parliamentary questions and FoI requests about the Scottish Islamic Foundation (SIF). 

They were told then First Minister Alex Salmond’s special advisers were helping to field queries from MSPs on the controversial group and that “media interest remains high”. 

Mr Salmond was accused of blatant cronyism after the newly formed SIF, which had multiple links to the SNP, was given £405,000 in grants in 2008 despite having no track record of delivery.

Its founding chief executive was Mr Yousaf's cousin Osama Saeed, a former aide to Mr Salmond who would stand as an SNP candidate at the 2010 general election.

Mr Yousaf was a director of the SIF from May 2008 to September 2009, while his then girlfriend Gail Lythgoe - later this first wife - was a director from June to December 2009.

At the time, Mr Yousaf was a parliamentary assistant to SNP MSP Bashir Ahmad, while Ms Lythgoe was the national secretary of SNP Students.

The SIF, which aimed to improve community relations, claimed it would hold the country's biggest ever celebration of Islamic Culture in Glasgow in June 2009.

Mr Salmond predicted IslamFest would be "an enormous event” for the city and Scotland. 

However, the project collapsed and SIF was forced to repay £128,000 after £72,000 had been spent on development.

SIF then tried to hold an Islamic financial event called Etisal, scheduled for November 2009, but that too fell through.  Ultimately, half the £400,000 in grants was withheld.

Files released by National Records of Scotland show the ill-fated group was included in a Scottish Cabinet Analysis of News and Current Events (SCANCE) report on 19 August 2008.

It said: “A number of media reports over the past month have claimed that Scottish Government funding has been provided to the Scottish Islamic Foundation because their chief executive (Osama Saeed) has strong links to the SNP. 

“A total of just over £400k has been provided: £200k (of an estimated £1.4m) for IslamFest; £190k for a partnership project to develop and promote education and personal development for young Muslims and encourage greater community involvement; and small amount for set up costs for the organisation. 

“All grants were subject to normal funding processes and scrutiny. 

“Political and media interest remains high, with 20 Parliamentary Questions and 16 Freedom of Information requests due to be answered. 

“Audit Scotland is reviewing the grant assessment and payment process at the request of George Foulkes MSP and Frank McAveety MSP has written to ask for an independent inquiry.”

The cabinet minutes repeated the final line.

The SIF was discussed again two weeks later in the SCANCE report for 2 September.

This said: “Following media reports over the past months claiming that Scottish Government funding had been provided to the Scottish Islamic Foundation (SIF) because its chief executive (Osama Saeed) has strong links to the SNP, the Scottish Government has received 26 Parliamentary Questions (PQ) and 21 Freedom of Information requests (FOI). 

“Audit Scotland has been asked by George Foulkes MSP to review the grant assessment / payment process for some of the monies paid to SIF.

“Frank McAveety MSP has also written to the First Minister with a series of questions and calling for an inquiry. Audit Scotland's reply to Mr Foulkes will issue on Monday, 1 September. 

“Correct procedures were followed in providing the grants and it is expected that this will be reflected in the response. 

“Outstanding PQs/FOls will issue concurrently, followed by the response to Mr McAveety.

“Special Advisers were involved in preparing the responses to the PQs/FOls and it is believed that the information going into the public domain will be uncontroversial. 

“However, media interest remains high. 

“Communications Health will be provided with lines and briefing has been put forward for the legislative programme statement and FMQs.”

Mr Saeed quit as SIF chief executive in March 2010 just 72 hours after a damning audit report on the group’s finances showed it went almost £5000 into the red in its first year.

Auditors reported “significant doubt” about its ability to continue as a going concern and gave only a “qualified opinion” on its accounts after failing to obtain all the information needed.

They were “unable to determine whether adequate accounting records have been kept”.

The company behind SIF was formally dissolved in January 2013 with virtually nothing to show for spending £203,000 in government grants.