29 October 2015

National Audit Offices publishes report following inquiry to examine Government's funding of Kids Company

Alison Paines
Partner | UK

The National Audit Office (NAO) has become the latest organisation to conduct an inquiry following the closure of Kids Company. The NAO's inquiry follows the Charity Commission's decision to open a statutory inquiry and the Commons Public Administration and Constitutional Affairs Committee's inquiry into the collapse of Kids Company.

The NAO investigation focuses on the level of government funding that was received by Kids Company, and examines the Government's grounds for providing funding and how it monitored the grants.

The report published on 29 October 2015 found that the public sector had provided funding to Kids Company for at least 15 years, and that it had received at least £42 million in central government grants. Most of the funding had come from the Department for Education and its predecessors. In 2008 and 2011 the charity had received larger grants than any other charity under the Department for Education grant programmes – in 2011, this was twice the amount received by any other charity. The NAO also found that the charity also received other support from the public sector such as local government funding and HMRC writing off tax debts of £590,000.

The report found a 'consistent pattern of behaviour' when the charity approached the end of a grant term. The charity would lobby the government for further funding and, if officials resisted, the charity would write to ministers and the press about the risks of redundancies and the impact on users if the services were to close. Officials would then be asked to review the funding options by ministers and the officials would award grants to the charity.

The NAO concluded that the government was aware that Kids Company 'relied heavily on these government grants and in each funding round, the government planned to work with the charity to secure longer-term financial sustainability and reduce its dependence on central government grants'. In July 2013, the Cabinet Office took a more systematic approach to overseeing Kids Company and in June 2015, officials in the Cabinet Office advised ministers that a further grant to Kids Company did not represent value for money.

The report highlights that the officials had been repeatedly raising concerns about the charity, but that the government continued to respond to requests for funding. In particular, concerns had been raised about the charity's cash flow and sustainability since 2002. Nevertheless, the government considered that Kids Company was providing a valuable service and that it would be a major blow to the young people helped by the charity if it were to close down.

The fallout from the closure of Kids Company has not finished yet and the results of the Charity Commission and Commons Public Administration and Constitutional Affairs Committee's inquiries are eagerly awaited.

Alison Paines Partner | London, Cambridge

Category: Article

Client types: Charities and non-profit