Government relationship with Kids Company should not be repeated

Public Accounts Committee issues government with warning over relationship with Kids Company

Published on 18th November 2015

Camila Batmanghelidjh

The government should never again engage in a relationship with a charity as it did with Kids Company, the Public Accounts Committee has warned.

A report by the committee finds it “staggering” that the government gave more than £40 million to Kids Company over 13 years yet “has no idea what it was getting for taxpayers money”.

The committee finds:

  • There was insufficient scrutiny of what Kids Company was delivering

  • By treating the charity as a special case, government missed opportunities to help other children

  • Funding decisions were not based on evidence

  • Accounting officers across government failed to stand up to ministers

  • Government ignored Kids Company’s serious cash flow problems.

Meg Hillier MP, Chair of the PAC, said: “The case of Kids Company will anger many people. The charity was passed around Whitehall like a hot potato, with no one willing to call time on spending millions of tax pounds for uncertain outcomes.

“The lack of scrutiny over its funding was staggering. Fairness and value for money – fundamental values when considering public spending - appear to have been forgotten in repeated and ultimately doomed attempts to keep Kids Company afloat.

“Even after civil servants finally refused to agree additional funding, ministers ‘took a punt’. The final £3 million of public money was handed over just a week before Kids Company closed. Payments during the charity’s final months alone totalled more than £7 million.

“The faith that things would improve when they didn’t was naïve. So many other charities did not get the same support and it is clear that Kids Company received special treatment – to the detriment of other deserving charities around the country,” she added.

Kids Company was founded in 1996 by Camila Batmanghelidjh to support vulnerable young people. The charity announced in August that it would be closing due to financial pressures.

Kids Company was given £7.3 million in 16 weeks

The charity received £42 million from central government since 1996 as well as £4 million from local authorities and lottery bodies. The Department for Education oversaw grant funding for Kids Company until 2013 when the Cabinet Office took responsibility. Despite repeated warnings and concerns about the charity’s financial situation, funding to the charity continued and was never seriously questioned.

After March 2013 government funding was through non-competitive, direct grant awards as Kids Company no longer met the criteria and quality standards for competitive grant funding schemes. The Cabinet Office advised ministers in June 2015 that a further grant to Kids Company would not be value for money. Despite this, ministers directed officials to pay £3 million, to support the restructuring of the charity and secure its long-term sustainability.

The £3 million was in addition to an earlier grant of £4.3 million for 2015-16, which the Cabinet Office had already paid, in full, in April 2015. Payment was made just a week before Kids Company closed on 5 August meaning Kids Company was given £7.3 million within a 16 week period.  

“All the warning signs of a failed and expensive experiment had long been there but it was not until June 2015 that officials finally stood up to ministers, said enough was enough, and sought ministerial direction before providing more money. By then it was too late,” the report said.

“Kids Company was a favourite of successive ministers but Accounting Officers have to make decisions, sometimes under pressure, to safeguard taxpayers’ money: in funding Kids Company for so long they have not served taxpayers or children across the country well,” the committee report added.

The Committee said it was “particularly alarming” that the DfE handed out money despite there never being a model that could be replicated across the country.

“This situation must never occur again”

The report concludes that the government failed to learn lessons from Kids Company until the end. While many government departments had a relationship with Kids Company, there was no knowledge-sharing about the charity across government, for example when the Department for Education transferred responsibility for the charity to the Cabinet Office. The government also failed to act on intelligence from local authorities.

The committee recommends that the government undertakes a fundamental review of how it makes direct and non-competitive grants to the voluntary sector. It needs to ensure the grant making processes are fair and equitable so that no organisations are disadvantaged and it should assesses the financial sustainability of a charity once the grant period finishes.

When funding a charity that provides innovative services which have the potential to be replicated, the government needs to set out clear conditions for how and when this needs to happen.

The report also recommends that the government should develop a register of grants to the voluntary sector so that it can easily identify charities receiving large amounts of government funding from single or multiple sources and share intelligence on charities’ past performance.

The government should improve the way it monitors and evaluates the performance of grant-funded organisations. It should not provide or appear to provide funding commitments without referring the funding request to the appropriate funding department so that the requirements of HM Treasury’s manual Managing Public Money are met.

Finally, if the government decides to use special powers to grant funding, it should provide a transparent case for its decision and report regularly on the use of these powers.

The report concludes: “As the government recognises, there are lessons to be learned from its funding of Kids Company. This situation must never occur again.”

The government’s funding of Kid’s Company report.



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