A review of the financial and governance controls at Kids Company warned that the charity needed to address its cashflow problems and keep up-to-date with payments to HMRC, more than a year before the charity collapsed.

The Cabinet Office commissioned PKF LittleJohn to carry out a review of the charity’s governance and financial controls and published the report on its website on Friday. Camila Batmanghelidjh, founder of Kids Company (pictured), has often cited this report as evidence the charity was well run until its collapse earlier this month.

The review was carried out during January of 2014 and presented to the Cabinet Office in March 2014.

“It is clear from our work that the main financial risk to the organisation is cashflow,” the report concludes. “A significant amount of management and finance time is spent in assessing and managing the cash position. Without improving the cash position of the charity it is not possible to build reserves and invest in new activities and locations.”

The report recommended that management accounts should include a forecast of the cashflow for the next 12 months to help trustees identify “those periods where net cash outflows mean that meeting liabilities as they fall due is difficult”.  In its response the charity said it had implemented that recommendation.

It also recommended that Kids Company make its PAYE payments to HMRC by the 19th for cheques and the 22nd for BACS to avoid further delays.

“There is a risk, should delays in payment continue, that HMRC requests a security payment,” the report said. “There is a risk that continued delays in paying monthly liabilities may result in HMRC seeking full recovery of debts without offering a repayment schedule.”

The full section on payments to HMRC appears to have been redacted from the report.

In 2003 the government waived a tax bill of £590,000 for Kids Company after the charity failed to keep up to date with its National Insurance payments.

PKF Littlejohn could not find any fault with the charity’s governance arrangements.

Over stating the number of beneficiaries could result in fraud case

Meanwhile a BBC Newsnight and Buzzfeed investigation has reported further claims that the number of people being helped by the charity was far lower than claimed and an MP has said that this could lead to a fraud case.

According to Buzzfeed Kids Company has handed over the details of only 1,692 London clients – adults and children – to the authorities, with 331 designated as high risk, while Bristol City Council has been given details of a further 175 clients.

Batmanghelidgjh has claimed that the charity was helping 3,000 people who were ineligible for public support because of their immigration status and has appointed solicitors to protect records of former clients.

She told the Sunday Times that: “There is a risk that they will take all the asylum-seekers, all the non-status people, and get the Border Agency round to collect them in vans. And I’m concerned about what they want to do with all these children’s information. We have got children from gangs and it’s about protecting [them]. I’ve got kids, for example, who have shared their thoughts in therapy and that could be misconstrued.”

Neil Coyle, the Labour MP whose Bermondsey and Old Southwark constituency was home to a Kids Company centre, has suggested that the police could investigate the former charity for fraud.

“It seems increasingly likely that a criminal investigation will be needed. Suggestions of fraud will have to be investigated fully,” he told the Sunday Times.

“Ministers will need to be clear why they swept aside the significant concerns of their officials to continue to provide significant sums of public money to an organisation that does not appear to have been helping anywhere near the number of young people it claimed.”

Last week the Official Receiver was appointed to liquidate the charity.