皇冠体育app

An official report has found that Kids Company operated a 鈥渉igh risk business model鈥�, characterised by a heavy dependence on grants and donations, reliance on a key individual for fundraising, low reserves, and a demand-led service.

皇冠体育app regulator has made a formal finding of 鈥渕ismanagement in the administration of the charity鈥� over its repeated failure to pay creditors, including its own workers and HMRC, on time.

皇冠体育app publication of the statutory inquiry into the charity follows the conclusion in 2021 of High Court proceedings, in which the Official Receiver was unsuccessful in its attempt to disqualify the charity鈥檚 trustees and CEO as company directors. 皇冠体育app Commission has had regard to the High Court judgement and agrees with it that there was no dishonesty, bad faith, or inappropriate personal gain in the operation of the charity.

皇冠体育app report finds the charity operated a high-risk business model, having rapidly expanded its operations. 皇冠体育app report finds the trustees allowed expenditure to increase without a secure stream of income to cover increased costs or mitigate an unexpected fall in fundraising. Combined with the low level of reserves, this approach, unusual for a charity of its size, made Kids Company vulnerable to external pressures.

皇冠体育app report notes that a higher level of reserves may have allowed the charity to avoid liquidation, to wind up in a more orderly fashion, or to merge with another charity.

Delayed action to address financial and operational risks

皇冠体育app report concludes that the trustees were aware of the risks arising from the charity鈥檚 operating model for years and had recognised the need to make changes. But the inquiry concludes that they should have acted sooner during the period of the charity鈥檚 growth to improve its financial stability, for example by building up reserves, paying off its debts, thereby strengthening its cash flow position, and controlling the rate at which the charity was expanding.

皇冠体育app charity鈥檚 records and record keeping

皇冠体育app inquiry highlights concerns around Kids Company鈥檚 records relating to decision-making about direct spending on beneficiaries. Some of the records were destroyed at the time of its collapse. It also appears that other records may not have been created in the first place. 皇冠体育app inquiry acknowledges that the trustees were not responsible for, and indeed attempted to stop, the destruction of records when they became aware of it happening during the charity鈥檚 final days of operation. Nonetheless, the report is clear that the destruction of records fell 鈥渂elow the standards the Commission would expect from a charity鈥�.

Due to the limited material available, there was 鈥渋nsufficient evidence鈥� for the inquiry to be satisfied that the charity鈥檚 significant expenditure on a relatively small number of beneficiaries was either justified or in the charity鈥檚 best interests. Available records show that around 25 beneficiaries had spent on them an average of over 拢1,700 per month between January and July 2014. 皇冠体育app Commission notes that, whilst such decisions were within the discretion of trustees to make, the charity might have been able to help a greater number of children had spending on this 鈥榯op 25鈥� been reduced.

皇冠体育app regulator also found that the charity鈥檚 approach to reporting the scale of individuals who benefited from its work 鈥� which it reported amounted to 36,000 鈥� could have been more transparent, and that its methodology for calculating such figures 鈥渟hould have been clearly articulated wherever cited鈥�.

Leadership factors

皇冠体育app report notes that the board lacked expertise in the field of psychotherapy and youth work, potentially limiting challenge of executive decisions. However, as the High Court highlighted in its judgement the trustees were skilled professionals and had collectively identified the need for the board to be strengthened and diversified, and that at the time the charity closed, a plan was in place to recruit additional trustees with such skills.

皇冠体育app report highlights that the founder CEO had been in post since 1993, and its chair had served since 2003, noting that 鈥渞otation amongst a charity鈥檚 trustees allows for an injection of new ideas and approaches and for challenges to the way in which a charity operates鈥�. 皇冠体育app report acknowledges that the CEO was due to perform a different role as part of wider changes, when the charity closed.

Background to the inquiry鈥檚 findings and conclusions

皇冠体育app Commission鈥檚 inquiry opened in 2015. 皇冠体育app regulator put aspects of its investigations on hold while the Official Receiver brought proceedings against the former CEO and trustees, a process that ran from 2017 until February 2021, when the High Court found in their favour.

皇冠体育app Official Receiver was unsuccessful in its attempt to disqualify the charity鈥檚 trustees and CEO as company directors and the court rejected the claim that the charity鈥檚 CEO was a de-facto director. 皇冠体育app Commission has had regard to the Court鈥檚 findings on the matters under its jurisdiction.

Helen Stephenson, Chief Executive of the Charity Commission, said:

Kids Company鈥檚 sudden closure was a significant event, not just for those involved in and supported by the charity, but for wider society. It served as a defining moment in the relationship between charities and the public on whom they ultimately rely, highlighting a sharper scrutiny of those running charities in the media and Parliament.

Following other inquiries and the conclusion of director disqualification proceedings in the courts, our job as regulator has been to calmly assess the evidence available, to scrutinise the charity鈥檚 trustees for their compliance with charity law and regulation in how they ran their organisation, and to set out lessons for other charities.

We found that the charity鈥檚 operations and finances made the charity 鈥� and by extension its beneficiaries 鈥� more vulnerable to decisions of individual grant-makers and donors. 皇冠体育app charity鈥檚 repeated failure to pay creditors, including its own workers and HMRC, on time, was mismanagement.

Issues for the wider sector

Kids Company was unusual, and the particular circumstances of its closure are unlikely to be repeated. However, the Commission highlights that there are lessons for charities, and for the regulator itself, to learn. 皇冠体育appse include:

Effective board leadership

皇冠体育app High Court judgement states that although the CEO of Kids Company had significant influence, she was accountable to the trustees. 皇冠体育app Commission鈥檚 inquiry report notes that 鈥渁 single person holding a senior leadership role in a charity for many years can reduce the level of challenge to long established methods of operating and prevent it from identifying and managing risks that flow from longstanding practice鈥�.

Founders of charities also need to be mindful that a permanent leadership role is rarely in the best interests of a charity. 皇冠体育appre are other ways of harnessing the passion and talent of founders or charismatic individuals, without their having executive or strategic power and responsibility.

Asymmetric power or influence can lead to unhealthy board or wider organisation dynamics, and ultimately to poor decision making. No charity should be defined by a single individual.

Managing risks associated with innovative approaches

皇冠体育appre is no 鈥榖est鈥� way for charities to deliver public benefit. Diverse and innovative operating models can help keep the sector relevant and dynamic. Problems can arise, though, when a charity鈥檚 innovative approach is not balanced by management of the commensurate risks. For all charities, measuring impact should be part of the process of evaluation of whether the approach is effective 鈥� particularly where an innovative approach is being adopted.

Planning reserves

皇冠体育appre is no single level of reserves that is right for every charity. But trustees should undertake financial planning and recording including maintaining a reserves policy.

Managing growth

Charities should ensure infrastructure, governance and resources keep pace with growth. 皇冠体育appy should have sustainable income to support their growth and ensure that policies are scaled up to reflect the needs of any expanded or newly introduced beneficiary groups. 皇冠体育appy must ensure that their governance is robust, ideally with at least one trustee with experience of managing a charity of similar scale on the Board.

皇冠体育app full report, with the wider lessons, is available on GOV.UK.

Ends

Notes to editors:

1. 皇冠体育app Charity Commission is the independent, non-ministerial government department that registers and regulates charities in England and Wales. Its purpose is to ensure charity can thrive and inspire trust so that people can improve lives and strengthen society.
2. 皇冠体育app Commission鈥檚 inquiry into Kids Company was opened under Section 46 of the Charities Act 2011 on 20 August 2015. 皇冠体育app opening of an inquiry gives the Commission access to a range of investigative, protective and remedial legal powers. 皇冠体育app scope of this inquiry is set out in the full report.
3. In October 2015, the National Audit Office published the .
4. In February 2016, the Public Administration and Constitutional Affairs Committee published a
5. In February 2021, the High Court ruled on proceedings brought against the directors of Kids Company. 皇冠体育app judgement is .
6. In February 2021, following the High Court judgement, the Commission informed the trustees and former CEO that it would not be using its own power to disqualify them as trustees.