MPs urge charity regulation reform after ‘catastrophic’ Kids Company collapse

MPs have called for a “radical change” in charity regulation to prevent a repeat of the “extraordinary catalogue of failures of governance and control” across the board that led to the collapse of Kids Company.

The youth organisation folded amid a storm of controversy in August 2015 – just days after receiving a £3 million government grant in a final bid to keep it afloat.

In the latest scathing assessment of the fiasco, the Commons public administration and constitutional affairs committee found failings by the charity itself, senior ministers, watchdogs and auditors all played a part.

But they were accused by the former Kids Company trustees of hiding behind parliamentary privilege to present an “inaccurate, unbalanced and irresponsible” account that accused them of ignoring repeated warnings of financial peril and concerns about the behaviour of staff.

They said the publication of the report only days after a Scotland Yard investigation into reports of physical and sexual abuse linked to Kids Company was dropped for lack of evidence highlighted “the committee members’ naivety in believing the claims of a few detractors”.

Among wide-ranging changes backed by the MPs is statutory regulation of charities with safeguarding responsibilities for children or vulnerable adults by an independent watchdog such as Ofsted or the Care Quality Commission.

The report also calls for much stricter controls on “unorthodox” payments to favoured causes by ministers, including a ban on handing cash to charities under investigation and removing responsibility from the Cabinet Office.

And it demanded the Charity Commission do more to encourage people to report suspicions about mismanagement and be given extra resources and powers to launch earlier investigations into good causes.

The charity received more than £42 million of Whitehall funding between 1996 and 2015, thanks in some part to its charismatic founder Camila Batmanghelidjh (pictured) winning “unique, privileged and significant access to senior ministers and prime minsters”.

That included £17 million in direct, non-competitive grants – some made in defiance of the objection of senior mandarins – which the committee said were “unjustifiable in future”.

Committee chairman Bernard Jenkin blamed a “catastrophic confluence of factors”.

“In the course of this inquiry the committee has heard what can only be described as an extraordinary catalogue of failures of governance and control at every level: trustees, auditors, inspectors, regulators and government,” he said.

“Proper mechanisms must be put in place to allow dispassionate, transparent, accountable decisions to be made about charity funding and regulation in the future.”

“There must be a radical change in our approach to charity regulation at every level.”

Cabinet Office minister Oliver Letwin – who was criticised by the committee for releasing £3 million in defiance of officials – stood by the decision to give the charity “one last chance” but said procedures were being reviewed.

The committee said ministers approved a multi-million pound lifeline “on the basis of little more than their relationship with a charismatic leader, small-scale studies and anecdotes, and no more than two visits made by Mr Letwin more than 10 years previously”.

Mr Letwin said: “We will of course pay careful attention to this report and in light of what we now know about Kids Company we will be reviewing our grant-giving process.”

In a statement, the former trustees accused MPs of having “naively accepted allegations made in the media and by a small number of individuals, some with vested interests in damaging Kids Company” at the expense of the evidence of expert witnesses.

“It is a regrettable feature of British democracy that the committee can use the curtain of parliamentary privilege to produce what is an irresponsible report, immune from the defamation claims that would inevitably follow without this privilege,” they said.

But Sir Stuart Etherington, chief executive of the National Council for Voluntary Organisations, said Kids Company had been “reckless” and welcomed calls for stronger controls.

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