Risk & Economy » Audit » Kids Company received £46m in public money despite cashflow concerns

Kids Company received £46m in public money despite cashflow concerns

Officials raised concerns about the charity's cash flow and financial sustainability at least six times between 2002 and 2015, NAO finds

AUDITORS have revealed that failed charity Kids Company received at least £46m of public money over 15 years before it ultimately collapsed amid questions over the probity of its financial management.

Officials raised concerns about the charity’s cashflow and financial sustainability at least six times between 2002 and 2015 but the charity never reached a position where it was able to operate without government assistance, a report by the National Audit Office said.

The majority of the charity’s funding (£28m) came from the Department for Education (DfE) and its predecessors. The Cabinet Office, the Department for Work & Pensions, the Department for Communities and Local Government and the Department of Health also made significant contributions between 2013 and 2015.
In addition, Kids Company’s accounts for 2003 report that Inland Revenue (now HMRC) wrote off tax debts of £590,000, the NAO said.

According to the NAO, the government was aware that Kids Company relied on government grants to manage its cash flow. The charity requested early payment of grants in December 2013 and December 2014. Government agreed to these requests and paid the whole annual grant for 2015/16 (£4.3m) in April 2015 rather than quarterly as in previous years.

Joe Bates, managing partner and third sector specialist at accountancy firm Clement Keys, said: “It’s astonishing that the government not only allowed Kids Company to continue getting away with failing to deliver measurable outcomes, but persisted with pumping taxpayers’ money into the organisation despite warnings.

“This shows the detrimental effect it can have when an organisation’s priority is on raising funds at the expense of delivering on its social impact goals. On this occasion, Kids Company has paid the ultimate price for its lack of focus.”

Bates added that new charities SORP requirements, which charities are adopting as part of their transition to the full FRS 102, will increase the degree of transparency and financial scrutiny expected of charities.

“This will allow trustees and funders to spot potential warning signs much earlier. For example, under the new reporting system, charities are required to provide donors and other funders with an outline of the principle risks and uncertainties facing the organisation as well as a summary for managing those risks,” he said.

Kids Company, which closed on 5 August and was subsequently wound up as it was insolvent.

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