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MPs’ report into Kids Company collapse blames trustees, regulators, government and auditors

MPs’ report into Kids Company collapse blames trustees, regulators, government and auditors

The Commons Public Administration and Constitutional Affairs Committee (PACAC) has published its report into the sudden closure of Kids Company in August 2015, and blames it on an “extraordinary catalogue of failures at every level”.

Published one week after the unrelated inquiry into fundraising controversies in 2015, the Committee’s report noted the common theme of the need for to take full and effective responsibility for a charity’s governance.

The charity was set up in 1996 to enhance the emotional health of young people through counselling, support and art therapy; and to help schools, and other educational institutions address the emotional needs of young people.

Since then it has received £42 million from central Government Departments and £4 million from local authorities and lottery bodies, according to HM Treasury.

Board of Trustees

The report criticises Kids Company’s Board of Trustees for failing to protect the long-term needs of the charities beneficiaries. It accuses them of ignoring repeated warnings about the charity’s financial health, and failing to provide “robust evidence” of the charity’s outcomes.

The MPs described the Trustees’ financial as “negligent”, leaving the charity “charity unable to survive the predicted reduction in donations following the emergence of allegations of sexual abuse”.

Camila Batmanghelidjh, who founded the charity in 1996, described the report as “a product of bias and rumour”. She stepped down from her role as Chief Executive in July 2015, and complained that the charity had been subjected to a “trial by media“.

Bernard Jenkin MP, Chair of the Committee, said:

“In the course of this inquiry the Committee has heard what can only be described as an extraordinary catalogue of failures of governance and control at every level: trustees, auditors, inspectors, regulators and Government.

“The Committee has heard many positive accounts of the valuable work Kids Company did with some very vulnerable clients, and of employees who were inspired and motivated by the quality of support they could deliver to young people. This makes the Board’s failure to ensure the charity’s sustainability all the more tragic.

“There has been a litany of allegations of inappropriate “therapies”, lavish spending and abuse of power within the organisation, and we hope that this episode highlights to all trustees that protecting the reputation of an organisation is a core element of good governance. To execute this, trustees must ensure they have the breadth of knowledge and experience necessary to understand their charity’s business”.

Government and influence

 

The Committee found that Ms Batmanghelidjh and Kids Company “appeared to captivate some of the most senior political figures in the land, by the force of the Chief Executive’s personality as much as by the spin and profile she generated for the charity”.

The Committee found it “unacceptable that successive Ministers appear to have released funds on the basis of little more than their relationship with a charismatic leader, small-scale studies and anecdotes…”

Bernard Jenkin commented:

“Despite lacking robust evidence about the quality of the charity’s outcomes, value for money or governance, Kids Company attracted high profile support from senior Ministers throughout successive Governments, and tens of millions of pounds of public money have been handed to the charity over the course of its existence.  Government and regulators must learn from this. Proper mechanisms must be put in place to allow dispassionate, transparent, accountable decisions to be made about charity funding and regulation in the future”.

Charity Commission and regulators

The Committee recommended that the Charity Commission do more to support trustees in their duties and also to investigate charities in order to prevent, detect and tackle mismanagement in charities. It added that the Committee must be given the resources and powers to do this.

It also recommended that the Commission should aim for a higher public profile in order to provide reassurance about charities and their regulation and, where necessary, to attract complaints about charities.

Trustees respond

The accusations were countered by former trustees of the charity who issued a statement that accused the MPs of having “naively accepted allegations made in the media and by a small number of individuals, some with vested interests in damaging Kids Company” at the expense of the evidence of expert witnesses.

“It is a regrettable feature of British democracy that the committee can use the curtain of parliamentary privilege to produce what is an irresponsible report, immune from the defamation claims that would inevitably follow without this privilege”.

 

One-off case?

Sir Stuart Etherington, chief executive of the National Council for Voluntary Organisations, said:

“I’m pleased the committee recognise that Kids Company was an aberration among charities, and that its poor practices should not tarnish charities as a whole.

“Charities take their responsibilities to good financial management very seriously. Charities tend, if anything, to be more risk averse than other organisations. No normal charity would take such a reckless approach to its financial sustainability as Kids Company did.

“The report rightly underlines the importance of strong governance through a board of trustees willing and able to exercise oversight of senior staff. Normal charities of this scale go to great lengths to ensure that they have experienced trustees with diverse skills, and that those trustees have limited terms of office to ensure fresh external perspectives are regularly brought to bear”.

 

Who is on PACAC?

The MPs who sit on the Commons Public Administration and Constitutional Affairs Committee are:

  • Mr Bernard Jenkin (Chair) (Harwich and North Essex) (Conservative);
  • Ronnie Cowan (Inverclyde) (SNP);
  • Oliver Dowden(Hertsmere) (Conservative);
  • Mr Paul Flynn (Newport West) (Labour);
  • Rt Hon Cheryl Gillan (Chesham and Amersham) (Conservative);
  • Kate Hoey (Vauxhall) (Labour);
  • Kelvin Hopkins (Luton North) (Labour);
  • Rt Hon David Jones (Clwyd West) (Conservative);
  • Gerald Jones (Merthyr Tydfil and Rhymney) (Labour);
  • Tom Tugendhat (Tonbridge and Malling) (Conservative);
  • Mr Andrew Turner (Isle of Wight) (Conservative)

The BBC is to screen a report on the charity, its demise and the PACAC findings. Camila’s Kids Company: The Inside Story will be broadcast on BBC One at 21:00 on Wednesday 3 February, and on BBC Two in Wales.

Read the report

You can view the PACAC report on the Parliament website or download The collapse of Kids Company: lessons for charity trustees, professional firms, the Charity Commission, and Whitehall in PDF.

Howard Lake is a digital fundraising entrepreneur. Publisher of UK Fundraising, the world's first web resource for professional fundraisers, since 1994. Trainer and consultant in digital fundraising. Founder of Fundraising Camp.

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