Financial mismanagement at root of Kids Company collapse, say MPs

A report by the Commons Public Administration and Constitutional Affairs Committee, published today, says the children's charity got into financial difficulties because it had a "doctrine" of never turning a child in need away and failed to accumulate cash reserves to act as a safety net when finances became stretched.

Instead, chief executive Camila Batmanghelidjh and the charity's trustees relied upon "wishful thinking and false optimism and became inured to the precariousness of the charity’s financial situation”, the report states.

The charity collapsed in August 2015, amid financial problems and news that police were investigating claims of sexual abuse that have since been found to be unsubstantiated.

The charity claimed to be supporting 36,000 clients, half of whom received intensive wraparound support, and that the high levels of need of its clients was a factor in its financial struggles.

However, the committee heard evidence that Kids Company "significantly over-inflated" how many children it helped. For example, it would count a whole classroom of children as being supported when it was only working with one pupil.

Consequently, the report concludes that Kids Company's reach was "considerably smaller" than it claimed.

It states: "This casts doubt on Kids Company’s claims that overwhelming demand, rather than financial mismanagement, lay at the root of its financial difficulties.

"In addition, the charity’s practice of calculating ‘reach’, for example in counting a whole class of children as clients if they benefited from work with an individual student, was misleading to donors. Trustees were either ignorant of this exaggeration or simply accepted it, because it helped to promote the charity’s fundraising."

The committee also concluded that Batmanghelidjh and the charity had an “unconventional relationship” with ministers.

The report states: “There is little doubt that the high-profile support of successive Prime Ministers for Kids Company had an impact upon decision-making across Whitehall.

“The privileged access to ministers, numerous ‘special grants’ and exemption from usual reporting processes appear to have distorted the expectations of the charity’s leadership and undermined the warnings issued by government that funding might not continue.”

The report also found that: