Kids Company mistakes could be repeated, MPs warn, as government internal auditors face committee grilling

Treasury committee questions why internal auditors did not raise concerns about government funding of the now-collapsed Kids Company youth charity

By Suzannah.Brecknell

09 Feb 2016

Andrew Tyrie, chair of the Treasury select committee, has told the head of Government Internal Audit Agency (GIAA) that he has “no confidence" the organisation could protect "against quite a serious misallocation of public funds to a charity" in the wake of the Kids Company scandal.

The youth charity collapsed in August 2015, and late last year the public accounts committee said there had been “insufficient” scrutiny of the charity’s performance over the years it received government funding. The report found metrics used to assess performance were “severely ill-judged”.

John Whitfield, chief executive of the GIAA, was giving evidence on the work of the agency, which was established in April 2015 but operated as a shadow body from October 2014. The GIAA investigated the review and oversight of payments to Kids Company in November 2014, concluding that the Cabinet Office had satisfactory reporting and assurance arrangements in place.

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Ministers at odds with top Cabinet Office official Richard Heaton over £3m Kids Company grant


Asked by Tyrie (pictured) whether he now believed the GIAA's conclusion in 2014 to have been mistaken, Whitfield said he did not. During a long set of questions on the topic, he added that the GIAA’s report had looked only a “number of questions relating specifically to risk of Cabinet Office” rather than the full history of government funding to Kids Company.

“With hindsight clearly more has come out going back over a number of years. Had there been some indication of that at the time it might have caused us to reflect on scope,” he said.

Tyrie also asked whether the Cabinet Office had consulted with the GIAA before deciding to pay Kids Company’s annual grant in one go in April 2015; and whether the department's then-permanent secretary officer Richard Heaton had consulted with an internal auditor when he raised formal concerns about further funding to the charity in June 2015.

Whitfield said he did not believe there had been consultation on either occasion.

Tyrie described Whitfield’s answers on the topic of Kids Company as “concerning, because even with the benefit of hindsight it seems that the big lessons with what’s gone wrong with Kids Company don’t seem yet to have been drawn".

It was “particularly concerning”, Tyrie said, that the GIAA had not investigated how ministers came to make the decision to fund Kids Company, despite clear civil service advice against the decision.

Whitfield reports to Julian Kelly, director general of public spending within the Treasury and is also accountable to accounting officers in the departments which use the agency’s services. The agency’s sponsoring minister is the economic secretary to the Treasury.

Tory MP Jacob Rees-Mogg also questioned whether the agency had sufficient “political backing to do your extremely difficult job”.

Rees-Mogg asked: “To be able to be as forthright as you would like to be, do you think you need to have the prime minister or chancellor [as sponsor]?”

Whitfield replied: “It would be an odd answer to suggest that with such backing the job might not be easier.”

Rees-Mogg asked whether the agency had ever come under political pressure to be “gentler” in its conclusions.

“Not to be gentler,” replied Whitfield. But he added: “There have been occasions when there have been political interventions which sought to alter scope of work, but not, in my experience, to alter findings.”

Whitfield was also questioned about the agency’s objective to reduce the government’s use of external contractors and increase in-house capability.

He said it would take time to build this in-house capability, but it was his aim to attract top talent from within and outside of government and increase turnover in the internal audit profession.

In the past, he said, there has been  “far too little churn in internal audit units within government, and that’s been bad for the internal audit service.”

Questioned whether increasing turnover would mean a loss of corporate knowledge, he replied: “It’s absolutely a question of balance - my view is that balance at the moment is not right and we have insufficient churn through the profession.  I’m trying to encourage more.”

He continued: “I want the brightest and best to come and work in internal audit; if I’m getting the brightest and best they can’t really stay as there are insufficient senior roles for them.

“I want them to see internal audot as what I believe it can be – a great stepping stone for their careers.”

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