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Kids Company – lessons from the past and learning for the futureAndy BurmanManaging Director, SEBCO

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About SEBCO

• Provides governance and other support to the Third Sector

• Experienced consultants

• Reviews, project management and outsourcing

• Areas include:

• Governance

• Finance

• HR

• IT

• Media

• Databases

• Publications

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Interactive? The format today…….

Presentation and summary of the issues

Live Questions can be posed on the App

Live polling at the end will find out what we think about our own organisations

Q&A Discussion session

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Learning the lessons – Kids Company

Why this presentation? Why Kids Company?

• The story has messages and themes common to us all.

• ‘Governance’ is the cement between the bricks of any foundation.

• The fallout affects the Sector – questions are being asked more widely as a result.

• The Government may well change charity funding and regulation as a result

• There are things we can all do to ensure we learn – avoid similar mistakes.

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Why this presentation? Why Kids Company?

What we will not look at:

• What Kids Company was set up to do

• What Kids Company did as a charity

• Personalities

What we will look at:

• How Kids Company developed

• Why it collapsed (Depending on who you believe)

• What happened after it collapsed

• What we should all learn

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(Keeping) Kids Company

A short history:

• Founded in 1996 by Camila Batmanghelidjh

• set up to support inner city living children

• expanded from one drop in centre in South London to 11 operating centres in London, Bristol and Liverpool by 2015

• ‘no child should be turned away’

• went into liquidation in August 2015

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From simple beginnings………

• Typical of many charity developments

• ‘Individual’ led and pioneered

• Provided core services to vulnerable children and young people

• Excellent testimonials, making a real difference, etc.

• Reliant on grant funding, donations, etc.

• Between 2008 and 2013 no# WTE rose from 176 to 496

• By 2013 turnover of £23m

• High profile donors and supporters

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…to a difficult end.

• 9 separate inquiries by BBC, Parliamentary Committees, etc.

• TV Documentary

• Countless web and media articles

• Trustees losing roles/resignations

• Likely changes in funding in future

• Reputation risk for the individuals and other charities?

• And finally, impact on service users…..

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National Audit Office - Summary

• Between 2000 and 2015, £42m given by 7 Govt depts.

• Consistent lobbying of Ministers and use of the media to continue funding

• DfE have Kids Co more grant funding than any other charity over several years

• Kids Co lobbied for statutory funding (as a statutory service provider).

• The Govt disagreed but kept funding anyway, even though it agreed there would be a detrimental impact if Kids Co closed

• Govt officials expressed repeated concerns about impact/value

• Govt asked for an ‘exit plan’ to funding – none was achieved

• Poor evaluation by Govt of performance

• Kids Co used Govt funding to cover cash flow

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Public Accounts Committee - Summary

• ‘It is staggering that the Government has given over £40m to Kids Company over the past 13 years and still has no idea what it was getting for taxpayers money’.

• ‘….it was not until June 2015 that officials finally stood up to Ministers….’

• However Govt officials could have done more and sooner.

• By funding Kids Co to such an extent other children’s charities lost out.

• Insufficient scrutiny as to what the charity did.

• Insufficient attention to sustainability.

• Due process by Govt in funding Kids Co was not followed.

• Several recommendations given: how grants are given by central Govt, register of grants, transparency in decision making, etc.

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Public Administration and Constitutional Affairs Committee -Summary

• ‘Primary responsibility for Kids Company’s collapse rests with the Charity’s trustees’

• ‘The Board failed to protect the interests of the charity and its beneficiaries, despite its statutory responsibility to do so’

• ‘…Board of trustees lacked the experience of youth services or psychotherapy necessary to interrogate the decisions of the Founder –Chief Executive’

• Charity Commission must have greater powers to regulate charities.

• Due process in funding Kids Co was not followed.

• Several recommendations given by PACAC: how grants are given by central Govt, register of grants, transparency in decision making, etc.

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Lessons - Sustainability

• In 2013 Kids Co had 20% income from central Govt grants, 3% from Local Authorities and 77% from private donations! (NAO report)

• No real change over 19 years to a more mixed model of business/income

• Govt contributed to the failure by continued funding over many years

• Any surplus usually represented less than 2% of turnover

• £3m in philanthropic donations due, to match Govt funding, never came.

Questions- Sustainability

• What understanding do you have of the ‘value’ that you provide? If challenged, how can you justify what you say you have achieved?

• Is your income/business model weighted in one key area? Is that sustainable, does it need to change?

• What is your reserves policy? Have you met it?

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Lessons - Trustees

• Induction

• “new trustees are invited to familiarize themselves with the charity and the context within which it operates” (Kids Co Annual Reports)

• Trustees heavily criticized, did not take responsibility

• Breadth of expertise and skills not sufficient

• Trustees did not ‘challenge’

Questions – Trustees (or Directors)

• Do your Trustees understand the business as well as the ‘service’?

• Detailed induction, as well as ongoing development and training?

• Is your induction independently delivered and comprehensive?

• Do your Trustees understand their roles and responsibilities?

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Lessons - Audit

• ‘Clean bill of health’

• ‘No financial mismanagement’

• Difference between audited accounts and audit letters to trustees/directors

• However, Audit letters to trustees were not acted upon for years

• Auditors did nothing to pursue this.

• Kingston Smith, PKF Littlejohn and Pricewaterhousecoopers all criticized.

• Government (core provider of taxpayers’ money) did not check

Questions - Audit

• Do you ‘use’ your auditors, where there are concerns?

• Do you act on the management letter and record this?

• Do you ‘challenge’ your auditors?

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Questions for you -

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1. Do you ask your auditors to investigate or comment on issues that concern you?

2. Do you use your auditors’ Management Letter to improve governance, systems or performance?

3. Are you satisfied that your Trustees/Directors have the breadth of skills and experience, relevant to your organisation?

4. Do your Trustees/Directors challenge performance or operating procedures which concern them?

5. Are you satisfied that you have a business model which does not rely too heavily on one source of income?

6. Do you plan to change your business model to become more diverse and generate income from different sources?

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References and further reading

• Charity commission website – Kids Co info. http://forms.charitycommission.gov.uk/find-charities/

• National Audit Office Reporthttps://www.nao.org.uk/report/investigation-the-governments-funding-of-kids-company/

• Public Accounts Committee Reporthttp://www.publications.parliament.uk/pa/cm201516/cmselect/cmpubacc/504/504.pdf

• Public Administrations and Constitutional Affairs Committee Reporthttp://www.publications.parliament.uk/pa/cm201516/cmselect/cmpubadm/433/433.pdf

• BBC Documentary –http://www.bbc.co.uk/iplayer/episode/b06zw47r/camilas-kids-company-the-inside-story

• Third Sector Magazine - February 2016Kids Co – audits under scrutiny

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A parting thought………..

“The Charity’s consistent message, that vulnerable children and young people, must be supported with compassion and personalised care, must not be lost with the collapse of Kids Company and criticism about the appropriateness and effectiveness of some of its methods.” (Public Administration and Constitutional Affairs Committee)

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Thank you.

Questions?

For more information, contact us at:

07966 272591

mail@sebco.org.uk

www.sebco.org.uk

THANK YOU FOR LISTENING

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