Collapsed charity Kids Company given £46m in public cash

Camila BatmanghelidjhImage source, PA
Image caption,
Kids Company's founder Camila Batmanghelidjh has denied claims the charity was financially mismanaged

Collapsed charity Kids Company received at least £46m of public money despite repeated concerns about how it was run, the National Audit Office has found.

There was a "consistent pattern" of the charity receiving grants after claiming it would close without them, it said.

Kids Company got more Department for Education money than any other charity in 2011, and officials relied on its own performance reviews, the NAO said.

Former bosses at the charity have denied it was financially mismanaged.

Ex-children's minister Tim Loughton said he warned the Department for Education against giving a "very sizeable" grant to Kids Company in 2012.

But he said he was "overruled" by Downing Street, after the charity's founder Camila Batmanghelidjh wrote a "Dear David letter" to Number 10.

The charity appeared able to "mesmerise" people into giving it "special treatment", Mr Loughton, a Conservative, added.

The charity - which provided support to deprived and vulnerable children in London, Liverpool and Bristol - closed in August.

The NAO found it received public funding for at least 15 years, with at least £42m provided in government grants, including £28m from the Department for Education (DfE) and its predecessors.

It also received about £2m from councils and £2m from the National Lottery.

Key findings

  • In 2008, Kids Company received 20% of the Department for Education's grant programme
  • From 2011-2013 it received twice as much in grants than national children's charity Barnardo's
  • Kids Company had not been required to compete for its annual grant since 2013
  • Until 2013, the government relied "heavily" on the charity's own self-assessments to monitor its performance
  • Inland Revenue wrote off the charity's tax debts of £590,000 in 2003

The NAO, an independent body which audits government departments, found that despite "repeatedly expressed concerns" from officials, the government "continued to respond to the charity's requests for funding".

What was Kids Company?

Image source, AP
  • Founded in 1996 in south London
  • Provided support to inner-city children and ran youth centres in London, Bristol and Liverpool
  • Relied on donations and government money, and was backed by Prime Minister David Cameron
  • Financial difficulties first reported to councils in June
  • Ministers approve £3m grant on 26 June
  • In July, police say specialist child abuse investigators are looking into charity
  • Cabinet Office tries to reclaim the £3m and the charity confirms it has closed on 5 August

The NAO report said civil servants had noted that other organisations "appeared to offer better value for money" than Kids Company.

It found "a consistent pattern of behaviour" of the charity writing to ministers to express fears of redundancies and the impact of service closures, while raising the same concerns in the media.

This meant that from 2013 it did not have to compete for grants, the NAO found.

When were concerns raised?

2002: Officials criticised Kids Company's record of financial management and said other similar organisations were more effective

2003: Kids Company had not complied with conditions attached to a previous emergency grant, debts at the charity were mounting, and its long-term financial viability needed to be evaluated, officials said

2008: Officials raised concerns Kids Company's dependency on government funding was being prolonged and the government could be accused of favouritism

2013: Kids Company grants were significantly higher than those to similar charities, yet it had limited reserves and consistent cash flow difficulties, officials said

March 2015: Cash flow problems were persisting and officials were concerned that the charity would continue to rely on public funding

June 2015: Officials cast doubt on the financial figures produced by Kids Company, and said they had limited confidence in the charity's willingness or ability to change. They advised ministers not to provide emergency funds - but were overruled

Ashley McDougall, from the NAO, said it was not clear why government had continued to fund Kids Company "year after year" when concerns were known.

Labour MP Meg Hillier, who chairs the Commons Public Accounts Committee which will question officials on Monday, said it was "unbelievable" so much was given to the charity with "little focus" on its achievements.

Downing Street did not respond to Mr Loughton's claims. However, a spokesman again defended its decision to award the £3m grant days before Kids Company closed.

"The government ministers who approved this funding thought it was the right thing to do to give this charity one last chance of restructuring to try to make sure it could continue its excellent work," a spokesman said.

Ms Batmanghelidjh has previously said there had been a "malicious discrediting campaign" against the charity, while Alan Yentob, who was charity chairman, and is the BBC's creative director, said suggestions of financial mismanagement were "complete rubbish".