The Kids Company scandal shows the need for the government and the sector to invest in good governance, charity infrastructure bodies said today, following the publication of a critical report by a Commons committee.

Following the launch of a report by the Public Administration and Constitutional Affairs Committee, Sir Stuart Etherington, chief executive of NCVO, said it was important to remember that Kids Company was an aberration, while William Shawcross, chair of the Charity Commission, welcomed the report”s focus on greater funding for regulation.

Sir Stuart Etherington, chief executive, NCVO:

“I’m pleased the committee recognise that Kids Company was an aberration among charities, and that its poor practices should not tarnish charities as a whole.
 
“Charities take their responsibilities to good financial management very seriously. Charities tend, if anything, to be more risk averse than other organisations. No normal charity would take such a reckless approach to its financial sustainability as Kids Company did.
 
“The report rightly underlines the importance of strong governance through a board of trustees willing and able to exercise oversight of senior staff. Normal charities of this scale go to great lengths to ensure that they have experienced trustees with diverse skills, and that those trustees have limited terms of office to ensure fresh external perspectives are regularly brought to bear.”
 
“We look forward to discussing the report’s recommendations with charities, the Charity Commission, and government.”

Sir Stephen Bubb, chief executive, Acevo:

“The most important lesson was that there was a catastrophic failure of governance driven by the insistence that all resources were pushed to the front line and that the failure to provide effective oversight and professional management led to the collapse of that frontline.

“But while condemning Trustees as ‘negligent’, PACAC nowhere suggests how proper support can be given to charities to promote and nurture good governance. Regulation of charities alone is not a sustainable approach – charities need additional financial, structural and moral support.

“The Government must display a commitment to the golden rule that charities must invest in themselves in order to support their beneficiaries and that effective charity, while delivered on the front line, begins in the back office.”

William Shawcross, chair, Charity Commission:

“I welcome this report which highlights the role of trustees, including the sharp focus on their charities” finances. We have already updated our guidance, particularly on managing financial difficulties and setting appropriate levels of reserves.

“We are raising awareness of our regulatory role with the public and will explore the committee”s other recommendations, including the ease with which people can make complaints. I am pleased that the committee acknowledges the need for adequate funding of the commission, necessary for us to fulfil our regulatory role.

“Our inquiry into Kids Company is ongoing and we will publish our report once it is concluded.”

Dan Corry, chief executive, NPC:

“NPC alerted Kids Company’s trustees to weaknesses in its governance and operations nearly a decade ago. It is a great pity that, as the committee makes clear, the charity didn’t act on these or similar warnings for years until it collapsed.

“Kids Company offers a worst case scenario of a charity relying too heavily on powerful senior figures, not managing its reserves properly and having too little data, especially on outcomes. The majority of charities are much better run, but the whole sector can and must learn lessons from this. The Committee is right to suggest that charities should refresh their leadership to bring in new thinking, but this never happened at Kids Company.

“Kids Company enjoyed tens of millions of pounds of public funding, but there was little robust evidence of how effectively this was used. This need not happen again. In the future, the government must make sure independent experts run their eye over evidence of a charity’s impact before such large payments are agreed. This should be reported back to the minister and published. The best charities will be more likely to get the grants, and the less effective ones will be encouraged to smarten up.”