Kids Company: Lessons to be learned
In February, The Charity Commission for England and Wales (CCEW) published its long-awaited report into Kids Company, one of the highest profile charity collapses of recent years that attracted considerable publicity, in part due to the considerable amount of funding it had received from central and local government sources. Publication of the report was delayed due to ongoing legal action seeking to disqualify the former trustees and chief executive as company directors, action rejected by the High Court last year.
CCEW found no evidence of misconduct by the trustees, although did note that repeated failures to pay staff and HMRC on time amounted to mismanagement. The report also highlighted:
- The charity’s risky demand-led model when it lacked the necessary level of reserves to support this.
- A lack of transparency when disclosing the number of beneficiaries the charity supported.
- A lack of expertise at board level in specialist areas such as youth services and psychotherapy
- Concerns over the destruction of records by staff when the charity collapsed.
The CCEW’s report sets out a number of issues for the wider sector to consider that primarily cover charity governance and the need for financial stability. Trustees should consider these issues and determine whether there is any action they should be taking to avoid falling into the same traps that befell Kids Company. The report specifically mentions the following:
- Charity boards should ensure checks and balances, and the right blend of skills and knowledge, are in place to avoid power imbalances.
- Charities of all sizes could consider setting an agreed term of office for trustees to bring in fresh perspectives and to avoid complacency, with longer appointments subject to review with clear evidence that the charity had considered the risks and benefits in what should be exceptional circumstances.
- Diversity at board level leads to better decision making and greater breadth of experience and specialist knowledge enables the board to better question management’s decisions.
- Charity’s should identify and balance the risks associated with innovative operating models, and evidence the benefits.
- Charities should undertake financial planning and recording, including maintaining a reserves policy.
- Charities should ensure infrastructure, governance and resources keep pace with growth.