Risk & Economy » Audit » Trustees key to governance failure at Kids Company

TRUSTEES of the collapsed charity Kids Company are among a litany of parties heavily criticised in a report produced by MPs in the Public Administration and Constitutional Affairs Committee.

In today’s report, the committee found the charity’s trustees “repeatedly ignored auditors’ clear warnings about Kids Company’s precarious finances”.

Kingston Smith were the charity’s official auditors from 2011, and in November partner Nick Brooks told the committee that Kids Company was “an unorthodox charity”. He went on to say it was “not up to us auditors to query” the decisions of the therapists – that was up to the organisation and management” to “assess its appropriateness”.

Work undertaken by PwC, PKF Littlejohn and Kingston Smith was put under the microscope during a heated session of the committee in November last year as it probed how a charity that had taken more than £46m in public money over 13 years could collapse so spectacularly.

Conservative MP Bernard Jenkin, who chairs the committee, said the inquiry had heard “an extraordinary catalogue of failures of governance and control at every level – trustees, auditors, inspectors, regulators and government”.

He added: “There has been a litany of allegations of inappropriate ‘therapies’, lavish spending and abuse of power within the organisation, and we hope that this episode highlights to all trustees that protecting the reputation of an organisation is a core element of good governance.”

Camila Batmanghelidjh, who founded the charity in 1996, told the BBC the report “is a product of bias and rumour”.

The charity supported deprived and vulnerable inner-city children and young people in London, Liverpool and Bristol.

She added: “The only place we got a rigorous fact-based investigation was with the police.”

Both Batmanghelidjh and chairman of trustees and former BBC director Alan Yentob repeatedly stated that Kids Company received clear audits throughout its existence as evidence of proper financial management at the charity.

But the report found that Brooks told the inquiry that trustees should have calculated the charity’s necessary level of reserves “on the basis of a number of months.” He suggested that six months spending – about £12m – would have been an appropriate level of reserves for Kids Company’s size and demand-led model.

However, Kids Company sustained free reserves at a fraction of this level throughout its existence; they were in deficit every year between 2003 and 2006, and again between 2009 and 2011, and peaked at £434,282 in 2013, the MPs found.

That said, the ultimate responsibility, the report found, for the charity’s closure was at the door of its “negligent” trustees, although it adds government and regulators must also learn lessons from its failure.

The government is also lambasted, with the committee finding the charity “enjoyed unique, privileged and significant access to senior ministers and prime minsters throughout successive administrations”. That, it said, was “unacceptable” and that taxpayer funds were released to the charity “on the basis of little more than their relationship with a charismatic leader, small-scale studies and anecdotes, and no more than two visits made by [Oliver] Letwin more than ten years previously”.

The report found the charity did provide valuable support to many vulnerable young people, “albeit the evidence shows that this was on a considerably smaller scale than it claimed in its publications and annual reports”.

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