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Charity technical briefings
The collapse of Kids Company: lessons to be learned
Quarterly charity briefings from Deloitte’s Charities and Not for Profit Group
The high profile collapse of Kids Company in August 2015 has been the subject of an inquiry by Public Administration and Constitutional Affairs Committee (PACAC) of the house of Commons. The PACAC report published on the 1 February 2016 draws out lessons for charity trustees, professional firms, the Charity Commission and Whitehall. This briefing highlights some of the key lessons and recommendations with a particular focus for trustees. Some of the main issues identified by PACAC include:
- Kids Company relied on a hand-to-mouth existence and by refusing to prioritise the building of any significant reserves, the trustees failed to exercise their duty of care towards the charity's clients, employees and donors. (Paragraph 221).
- Kids Company did not have a clear plan to manage cash flow ups and downs but relied on fundraisers and government to make up shortfalls (paragraph 25).
- Kids Company over-inflated figures relating to its caseload. Trustees were either ignorant of this exaggeration or simply accepted it, because it helped to promote the charity's fundraising (paragraph 35).
- Kids Company did not respond to Ofsted concerns (paragraph 40).
- PACAC found it "difficult to see on what basis Kids Company's trustees satisfied themselves of the appropriateness of support given to clients, and the value for money offered by the charity's high resource model...This approach left the trustees unable to defend the reputation of Kids Company which is a prime obligation of the good governance and leadership of any organisation" (paragraph 47).
- The handling of an allegation of a very serious failure in safeguarding was inadequate and irresponsible (paragraph 59).
- There was a lack of relevant trustee expertise in the field of youth services and psychotherapy (paragraph 68).
- There was a clear link between the failure to correct serious weaknesses in the organisation, and the failure to refresh its leadership (paragraph 68).
- No changes were made in response to management letters from auditors and repeated warnings about the charity's low levels of reserves and Kids Company's extensive use of contracted and self-employed workers despite concerns being raised with trustees (paragraph 74).
- There should be particular caution towards boards in which trustees have held their positions for more than two terms, and towards boards where no individuals have experience in the charity's particular area of delivery (paragraph 162).
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