The former chief executive of the Charity Commission suggested yesterday that the large charities team at the regulator might have spotted red flags in Kids Company’s accounts, if budget cuts had not forced it to be scrapped.
Andrew Hind, who led the regulator between 2004 and 2010, was speaking in response to a question about the Commission’s responsibility for spotting issues during a panel discussion at the Honorary Treasurers meeting at Cass Business School yesterday.
Hind, who is currently the chair of the Fundraising Standards Board and a visiting professor at Cass, said that during his time at the Commission it had no cause to look at the charity because there were “hardly any complaints made”. Kids Company was much smaller during his tenure.
"There used to be a large charities team which looked closely at the reports and accounts of charities with over £10m," he said. And that the team used to meet regularly with charities.
But by the time Kids Company grew large enough, the unit had been scrapped because of budget constraints.
The Commission’s budget has been reduced by around 40 per cent from over £30m in 2007/08 to around £20m now.
Hind said he now expects the Commission will “come under pressure to reinstate” the large charities unit it in light of what happened at Kids Company.
Trustees need to understand their accounts
Hind took delegates through Kids Company’s last set of accounts, for the year ending December 3013 to highlight the “toxic mix” financial and cultural warning signs that should have alerted trustees to issues with how the charity was run.
“You don’t have to be Sherlock Holmes to spend 15 minutes looking at the annual report and accounts to realise that this was an accident waiting to happen,” he said.
He said that the way photos of beneficiary children had been repeated from the previous year, as well as sections that appeared to have been copied and pasted, raised concerns about whether the charity “cared about its external stakeholders”.
Hind challenged trustees to think about whether they are “close enough to your own trustees’ annual report to pick if there were bits executive colleagues were slipping in,” and said they need to remember that it is their report not the chief executive's.
He said it is important that the “right questions are being asked” even if “it makes you incredibly unpopular”.
“It can be really difficult to do that – often it gets rebuffed the first time you ask. Only when you to get to the fourth time that the answer will come,” he said.
He said that when looking at the accounts the fact that the it had failed to follow its reserves policy and only had one week’s worth of expenditure in cash at the bank should have been red lights.
He added that the way the charity filed at the deadline, had little information about senior executives other than the chief executive and finance director, or detail on strategy and impact, should also have been warning signs.
Genevieve Maitland Hudson, director and lead researcher at Osca, was also speaking at the event, and said that there is no excuse for charities to not be collecting useful information about their impact, suggesting that there should be someone on the trustee board responsible for overseeing it.
She said that the kinds of research being funded by Kids Company were an example of a charity spending a lot of money but it was not “research that tells you anything about Kids Company” and that led to “confusion when talking about operations”.
“From the smallest to the largest charities there is no reason why we shouldn’t do systematic data collection – we have go to the point where we should all be doing it,” she said.
She said it is important that what is collected is useful to help the organisation improve.
She said that there is a place for needs-based research but that it had to be in “proportion” with analysis of the effectiveness of charities’ services.
Maitland Hudson said delegates should consider if “there is a trustee on the board who has responsibility for evidence – if there isn’t possibly there should be”.