Kids Company collapse: NAO says officials raised concerns over charity "at least" six times

Report by the National Audit Office spending watchdog finds that charity received £46m of public funding over 15 years

By Suzannah Brecknell

29 Oct 2015

Kids Company, the youth charity which collapsed in August amid accusations of mismanagement, received £46m of public funding over 15 years, an investigation by the National Audit Office (NAO) has found.

Civil servants first raised concerns about the charity's financial management in 2002, when the Home Office co-ordinated a £300,000 “financial rescue package” for the charity. The NAO reports that officials were concerned this grant would set a precedent for future funding. 

Kids Company has recorded government grants in its accounts every year since 2001, and the NAO found that with each new round of funding “government planned to work with Kids Company to secure longer term sustainability and reduce its dependence on government grants.” The watchdog found that officials had raised concerns about the charity's financial position "at least" six times between between 2002 and 2015​.

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Despite these repeated attempts to impose conditions on grants, a Cabinet Office letter in March 2015 is “the first evidence we found of a funding department not only setting, but also monitoring, additional conditions related to Kids Company’s financial management and governance,” said the NAO.

In June 2015, the-then permanent secretary of the Cabinet Office, Richard Heaton, sought a ministerial direction over a £3m grant to Kids Company, citing concerns over value for money. A ministerial direction allows permanent secretaries, in their role as accounting officers, to seek specific ministerial permission to implement a policy or decision while recording their own concerns about the decision.

In his letter to ministers, Heaton reported that Kids Company had not met grant conditions agreed to in April, and he had “limited confidence that Kids Company will successfully implement the changes they describe in their new restructuring plans while meeting the stringent conditions set out in the proposed new grant.”

Heaton is due to appear before the Public Accounts Committee (PAC) on Monday, as part of their investigation into the charity's funding.

PAC chair Meg Hillier said: “It is unbelievable that over 13 years taxpayers’ money has been given to Kids Company with little focus on what it was actually achieving for the children it was supporting.”

She added: “Government departments have questions to answer about how they held the charity to account for spending taxpayers’ hard earned money.”

The majority of public funding for Kids Company – £42m – came from central government, with £2m from local government and £2m from Lottery bodies. Departments also supported the charity with secondments and consulting advice, and in 2003 Inland Revenue (now HMRC) wrote of tax debts of £590,000.

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