The Charity Commission is currently reviewing its guidance on reserves and expects to provide trustees with more targeted guidance, as a result of the high-profile collapse of Kids Company earlier this year.

Michelle Russell, director of investigations, told the Public Adminsitration and Consititutional Affairs Select Committee yesterday that the Commission “will clarify and sharpen up our guidance in light of what has happened over the summer”.

“We think its common sense but clearly there’s a need that we give a bit more guidance than we’re giving,” she said. And explained that charities which provided services, had staff, or who worked with vulnerable beneficiaries “had a higher duty of care” than grantmakers, for example.

She said that the Commission would “err away from setting a limit or a threshold” because “it depends on each individual charity” but that it did want to provide guidance that was more tailored to different types of charity.

William Shawcross, chair, added that: “It would be a terrible mistake if we laid down hard and fast rules for every little kitchen table charity.”

‘I wish we had been able to act sooner on Kids Company’

Shawcross told MPs that until the summer the regulator had “received remarkably few complaints about Kids Company”. And that there had been no cause for the Commission to become involved. 

“I wish that we had had a regulatory cause to investigate the charity much earlier but we didn’t have that unfortunately,” he said.

Russell said that once allegations about financial mismanagement had been made the Commission acted “promptly” and was in regular contact with trustees and trustees elect about the future of the charity until its collapse.

She said the Commission had made the Cabinet Office aware of its concerns, via the statutory gateway it has with other government departments, at around the time it met with three former employees on 16 July, before the Cabinet Office released the final £3m grant.

The Commission has also been in touch with trustees following media reports in March, where it discussed the charity’s reserves position.

The Commission has opened a statutory inquiry into Kids Company and will publish its report.

We did not ‘exonerate’ Kids Company

Following allegations in July the Commission demanded a governance review, which was carried out by PwC.

Russell said the review had provided “some assurance” but the Commission had made it clear to the charity that it was an interim report and “was not a clean bill of health”.

She also said that in relation to a complaint from a donor who was unhappy about how her £200,000 donation had been used by Kids Company, “we found no record that we gave specific advice to the charity on repaying the money”.

And that while the charity had acted within the law the incident hightlights “moral code and culture” around “good governance and good practice”.

Shawcross said that it was “the fault of the charity that she wasn’t treated better”.  When asked if the Commission had “exonerated” the charity, he said: “We did no such thing.”