Kids Company was awarded £46m in public funding over 13 years, despite repeated warnings from officials, according to a damning National Audit Office report published today.
The National Audit Office report examines Whitehall’s funding of Kids Company up to the point when the charity closed this summer.
It says the charity failed to put itself on a sustainable footing, despite this being a key requirement of grants from government departments. But despite the charity’s repeated failure to meet grant conditions, money continued to flow, in part because of the reputational risk to government if it failed.
The NAO report found that ministers ignored numerous concerns raised on six different occasions by civil servants in three different departments.
The NAO said ongoing funding of Kids Company was partly down to: “the reputational risk to the government’s wider agenda (which would have an impact on delivery) if it withdrew funding”.
It also found that government departments relied on self-assessment reports from Kids Company and criticised the government for failing to properly monitor the charity’s impact.
It also found evidence of favouritism. On two occasions the Department for Education was found to have awarded the charity “significantly” more than others.
In 2005 a condition of a grant was that the charity recruit a project manager, which the charity did, but the person left after four months.
“On leaving he highlighted concerns to DfE and to Kids Company’s trustees about Kids Company’s senior management structure and governance and about some of the individuals receiving cash payments from the charity. DfE’s files do not contain any evidence of its response.”
Meg Hillier, chair of the Public Accounts Committee, said: “It is unbelievable that over 13 years taxpayers’ money has been given to Kids Company with little focus on what it was actually achieving for the children it was supporting.
“Government repeatedly raised concerns about Kids Company’s finances but little action was taken. Despite this, government gave it further grants – funded by the taxpayer.”
Richard Heaton, former permanent secretary to the Cabinet Office, and Chris Wormald, permanent secretary to the Department for Education, will give evidence to the Public Accounts Committee on Monday.
‘Serious questions for government’ say sector leaders
In a statement Acevo said: “The NAO report clearly demonstrates that the current Cabinet Office leadership allowed a lapse of proper oversight and scrutiny of Kids Company.
“Under this government, it appears as though Kids Company had a blank cheque and carte blanche. Other charities, many of them operating in the same field with an historic track record, had to scrabble for the crumbs that remained beneath the table whilst enduring persistent criticism of their activity and intent.
“There appears to have been no appetite among the current leadership of the Cabinet Office or the Office for Civil Society to engage with Kids Company's lack of reserves, governance and chronic cashflow difficulties. Attention to these are essential to deliver value for the taxpayer while ensuring vital government grants are used in a responsible way.”
Karl Wilding, director of public policy at NCVO, said that Kids Company is an “anomaly”.
“During a period when government grant funding to charities declined significantly, Kids Company received at least £42m from seven different departments," he said. "What’s more, it did so without much apparent accountability for how that money was spent. Most charities with government contracts or grants have to put together detailed bids and account carefully for every penny they spend.”
Anna Turley, the shadow minister for civil society, said that the findings of the NAO report show "disproportionate support" from the government to Kids Company.
She said: “It is very concerning that a charity has been able to receive such large sums of government funding with so little scrutiny over how it was spent and whether the charity was actually providing the outcomes that it claimed.
"Whilst it is absolutely right that government should directly support the work of charities and other third sector organisations, this is a clear case of disproportionate support and of civil service advice being overruled in order to protect the government’s reputation.
"The direct consequence of the collapse of Kids Company is the suffering of the children who relied on its support and the government must ensure it works with the sector to ensure this cannot happen again.”
- Between 2002 and 2015 officials in the Home Office, Department for Education and Cabinet Office raised numerous concerns about proposed funding for Kids Company. These included the danger of setting a precedent, lack of financial management at the charity and conditions in previous grants not complied with. For the full list of concerns click here.