Kids Company closure may cost taxpayer £1.2m
Whitehall now expects to lose a large portion of a £3m public grant paid to Kids Company less than a week before the high-profile youth-work charity collapsed.
Civil servants' latest estimates are that the department will recover just £1.8m of the grant. Officials have also told BBC Newsnight and BuzzFeed News that the now-insolvent charity served fewer people than they had expected.
In its publications, the organisation had claimed to "intensively" help 18,000 young people and to "reach" 36,000.
In correspondence with government, the charity said that its records showed that it supported 15,933 young people. These are the figures that officials had been working from.
Speaking to Radio 4's The Report on August 5, Camila Batmanghelidjh, the charity's chief executive and founder, had said that the figure of 15,933 represented "the most high-risk group of kids, that's what's sucking up all our money".
She said all of these clients had "keyworkers" allocated to them by the charity, to support them.
However, the charity has handed over records from its database relating to just 1,692 London clients - both adults and children. Of these, the charity had designated 331 as "high-risk". Bristol officials have been given details of a further 175 clients.
This week, a court approved a petition to wind up the insolvent charity, which no longer has employees or a spokesperson. One former senior staff member, who was a member of the charity's management at the end, however, insisted that the charity's user base was much larger.
Local and central government officials, however, believe the lower number of clients passed over to them broadly reflects the true size of the charity's client base - with one exception. They are concerned that some of the charity's staff may not have passed on details of clients whom they believed to be at risk of deportation.
The senior former staff member told Newsnight and BuzzFeed News that the charity's client group included people on limited visas, people without leave to remain and undocumented young people.
As the charity was shutting, Ms Batmanghelidjh told local authorities that the charity supported 3,000 clients who have no recourse to public funding because of their immigration status.
Civil servants and social workers do not believe that figure is correct, but are concerned that some vulnerable young people with visa problems may now be without support. Civil servants are also nervous that public funds from the Cabinet Office may previously have been used to support people who are in the UK illegally.
If the Cabinet Office does realise a £1.2m loss on the £3m grant, it will also reignite the controversy about why the grant was made to begin with. The payment, which was paid to allow the struggling charity to restructure itself, was made despite the Cabinet Office's most senior civil servant advising against it.
Richard Heaton, the permanent secretary of the Cabinet Office, sought a "ministerial direction" from ministers before making the payment. This is an unusual process by which senior officials can object to ministerial decisions. It was used just three times across government during the last parliament.
Mr Heaton objected to the payment in a letter on June 26. He noted that £4.3m had been paid to the charity in April to support Kids Company's work and the conditions attached to that grant had not been met.
He added: "the experience this Department has of the charity's management and capacity gives me limited confidence that Kids Company will successfully implement the changes they describe in their new restructuring plan".
Two Cabinet Office ministers, Matthew Hancock and Oliver Letwin, wrote jointly to direct him to pay the £3m. They acknowledged his concerns however: as a condition of the funding, they demanded that Camila Batmanghelidjh resign as chief executive of the charity, as part of an effort to restructure its management.
In their reply to him, they said: "We have noted your concerns about the confidence we can place in Kids Company's ability and capacity to restructure in a way that will secure its long term viability, based on the department's previous experience, and therefore the value for money of making this payment.
"But equally, we are very mindful of the inspirational work that Kids Company does with young people, for which reason the government has contributed to it for several years."
Emails sent from the charity to civil servants in the week before it closed imply that the £1.2m public outlay allowed the charity to remain open for just 5 working days longer, before its sudden closure on 5 August.
Grants to Kids Company and the charity's management will both be scrutinised heavily in coming years. MPs expect that the National Audit Office and Public Accounts Committee will scrunitise the Cabinet Office's decisions.
Meanwhile, the Charity Commission has now opened an investigation, stating this week that it is "conducting a live compliance case into Kids Company. The case is examining and scrutinising various concerns about alleged financial management and governance issues in connection with the charity".
The Metropolitan police are also conducting an investigation involving the charity.
The inquiry is being led by the complex case team of the Sexual Offences, Exploitation and Child Abuse Command.
Local authority safeguarding officials and police officers have been investigating allegations that potential crimes that were not reported to the authorities, following concerns first raised by the joint Newsnight and BuzzFeed News investigation.