This article is more than 4 years old

This article is more than 4 years old

Labour and Conservative ministers brushed aside civil servants’ concerns about Kids Company’s finances on six occasions to push through government grants to the charity totalling at least £42m over 15 years, official auditors have found.

A National Audit Office (NAO) report indicates that David Cameron, Michael Gove, Ed Balls and David Blunkett intervened to support Kids Company between 2002 and 2015, in some cases to prevent it from becoming insolvent, and often after being directly lobbied by the charity itself.

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Civil servants repeatedly warned ministers that providing financial support to Kids Company carried risks because of the charity’s persistently fragile finances. But they were overruled, the NAO reported – though there is no evidence that ministers acted inappropriately or beyond their powers.

In July 2012, Kids Company wrote to Cameron asking for £10m of funding. Cameron replied that he would “ask senior officials to consider possible funding sources for the charity”. The prime minister’s office convened a meeting in 2013 to thrash out an arrangement with four departments that would lead to £9m of grants being paid over two years.

However, Kids Company went bankrupt in August 2015, five days after it had agreed a £3m rescue package with the government, following reports of a police investigation into allegations of abuse of children on its property. The charity’s founder, Camila Batmanghelidjh, had agreed to step aside as chief executive to resolve officials’ management concerns.

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The NAO report said: “The concerns raised by the Cabinet Office in 2015 were not new. Officials repeatedly expressed concerns about Kids Company, but the government continued to respond to the charity’s requests for funding. As far back as 2002, government records show officials were concerned about the charity’s cash flow and financial sustainability.”

Kids Company provided services for thousands of children with complex mental health issues who were involved in gang and gun crime or suffering from neglect or destitution in south London, Bristol and Liverpool.

Questions over the charity’s management and governance were previously raised at a stormy session of the Commons public administration committee this month. MPs disputed the charity’s claims that it provided services to 36,000 children, young adults and their families.

Facebook Twitter Pinterest Kids Company founder Camila Batmanghelidjh rejected suggestions that the charity had received special favours. Photograph: Dominic Lipinski/PA

Other examples of ministerial intervention cited by the NAO include:



• In 2013, after Kids Company failed to win government grants through competitive tender, the Department for Education drew up a special “public interest” case to enable a £4.5m grant partly on the basis that the government would suffer “reputational damage” if it stopped funding the charity.

• Similarly in 2014, a special grant of £4.5m to Kids Company, funded by several government departments, was agreed after the Cabinet Office invoked powers allowing ministers to provide financial assistance to stop a charity going bust.

• After media reports in 2007 that Kids Company would close if government funding did not continue, Labour education ministers instructed officials to develop plans to keep the charity afloat. It subsequently won a three-year £12.7m grant, one of five charities to share in a major DfE youth sector funding programme.

Ministers supported Kids Company to find alternative sources of funding, for example by the secondment of two civil servants to the charity in 2011 to help it bid for local authority contracts, and, just months before its demise in August 2015, by assisting the charity to prepare a bid to open a free school. The bid did not go ahead.

Civil servants also raised concerns about Kids Company in 2002, 2003, 2008, 2013, March 2015 and June 2015, although it was only on the last occasion that civil servants forced ministers to issue a special direction instructing them to pay a £3m grant to restructure the charity.

On that occasion, Cabinet Office officials told ministers that Kids Company had not met conditions agreed for previous grants, and that they were concerned about its capacity to implement its restructuring plans and had no confidence in the charity’s financial forecasts.

Ministers pressed ahead with a £3m grant on 30 July 2015. However, within hours of the grant being paid, news emerged of a police investigation of alleged child abuse on Kids Company property. That police inquiry, which is continuing, led key backers to withdraw, forcing the charity to to close on 5 August.

No politicians are cited by name, but the report shows that civil service concerns were raised over grants agreed at senior level by departments run at the time by heavyweight figures. Cameron, a long-time supporter of Kids Company, also intervened.

Despite officials’ fears, the government auditor’s report also notes there was widespread agreement in government that the charity provided valuable and innovative services for thousands of disadvantaged youngsters who were often invisible to mainstream services.

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“Up until June 2015 the government continued to fund Kids Company on the basis that it would be a major blow to the young people who benefited from its services if it were to close down,” the report says.

MPs on the Commons public accounts committee said that on Monday they would challenge senior government officials from the DfE and the Cabinet Office about the government’s sustained support for the charity.

Meg Hillier MP, the chair of the committee, 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.

“Government repeatedly raised concerns about Kids Company’s finances but little action was taken. Despite this, government gave it further grants – funded by the taxpayer.”

Batmanghelidjh rejected suggestions the charity had received special favours. “This story has become a little too much much about personalities. There’s a denial of the sophisticated work we were doing. Ministers did not give us money because I did magic, but because we delivered innovative services.”

She also rejected suggestions that ministers had ignored the outcomes achieved by Kids Company. The charity had undergone scores of official audits and evaluations and none had raised any serious issues about its performance, she said.

The NAO report, which was unusual in that it was completed in just six weeks, maps the government funding received by Kids Company since 2000, together with ministers’ reasons for funding the charity. It did not assess whether Kids Company provided value for money or the effectiveness of trustees’ oversight of the charity.

