Why all charities aren’t Kids Company

Today, the Public Administration and Constitutional Affairs Select Committee (PACAC) is holding an evidence session for their inquiry into Kids Company and its relationship with government. Chair Alan Yentob and chief executive Camila Batmanghelidjh will have to defend their decisions about the governance and oversight of Kids Company and answer questions on the charity’s financial dealings with government. I have no doubt that whatever details emerge will be seized upon by the media, and wider conclusions about the charity sector may be drawn.

For all its flaws, many of which have been covered extensively, the closure of Kids Company was a sad event. However, after a summer of criticism of the voluntary sector, I think it’s worth explaining why Kids Company was atypical of the vast majority of charities.

In good company?

The PACAC inquiry will focus much of its energy on assessing whether the government’s funding of Kids Company was fair and appropriate. For a start, the sheer amount of funding that Kids Company received from successive governments – approximately £30m since 2008 – is practically unheard of among most charities.

The golden age of grant funding peaked 10 years ago, when grants from government were worth £6 billion; they are now at one-third of that level, having been largely replaced by contracts and fees. The majority of charities receive no statutory funding whatsoever.

The fact that Kids Company was in receipt of government grants even after concerns had been raised about its management is more a reflection of its founder’s relationship with Whitehall than a representation of the sector more generally.

The second way in which Kids Company was unlike other charities – particularly comparable large charities – was its hand-to-mouth nature. Despite receiving millions of pounds a year, it lacked reserves (three months’ worth of operating expenditure is generally recommended).

While it can be difficult for a charity to build up reserves – see my colleague Dave Kane’s blog post explaining why –and as tempting as it is to address needs in the here and now, boards have a duty to their staff and beneficiaries to ensure their organisation is sustainable. Despite tough times, many are taking the difficult decisions needed to adapt to the new funding environment.

Learning lessons

For all the ways in which Kids Company was a maverick among charities, it would be unwise to assume that means we can’t learn lessons from it. Good governance is key to running a charity successfully, and having a long term strategy means you can plan for the future – especially if, like Kids Company, you have an unpredictable income.

The perils of ‘founder syndrome’ are well-known, but many boards need the confidence to challenge where they see misdirection or mismanagement. Identifying skills shortages on boards is crucial, but so is making sure that your organisation has a culture where transparency and accountability reign.

For Kids Company, the aftermath of its closure was complicated by the fact that different reports circulated about how many young people they actually helped – the charity claimed to help 36,000 young people, but reportedly handed over records for only 1,692 clients in London and 175 in Bristol.

Being able to evidence your impact is crucial, not only in the spirit of accountability to funders, but also to assess whether or not you are actually making a difference.

Turning the corner

The story of Kids Company is unlikely to go away anytime soon. I think it’s a good thing that a spotlight has been shone on governance, and my hope is that boards will be more confident in examining their finances, reserves policy, and impact reports as a result of what happened.

But equally important, is to keep making the point that the vast majority of charities are not Kids Company – they are small, local and reliant on donations, not government grants. More importantly, in this context, they are also by and large financially salient, well governed and administratively sound.

As important as it is to acknowledge failings, we should also champion examples of good governance and high impact where we see them. NCVO has tools to help boards recognise what good governance looks like and address problems where they arise, and will soon be celebrating the winners of the Winifred Tumim prize for good governance.

There are more than 160,000 charities in the UK. Let’s be cheered by the good work and huge difference that the vast majority make every day.

Postscript – October 15, 2015

Yesterday I was contacted – challenged – by a former member of staff at Kids Company, who expressed disappointment that this post is perpetuating a myth about Kids Company’s evidence and that in fact Kids Company worked with more young people than local authorities are currently trying to find ongoing provision for. My corespondent also pointed out that different locations operated differently, and that outcome measures also differed. In short, some activities were more successful than others.

I’ve no reason to doubt this, though it’s not necessarily in conflict with the point made above, which is that there are conflicting reports of the outcome and through flow measures. The National Audit Office will soon report on Kids Company and at that point I’ll probably write a follow up post on the learning.

The wider learning nevertheless remains. Charities are under more scrutiny than ever. The  evidence hurdle gets higher every year. This is especially the case for the dwindling number of charities that receive public money. And we need to invest in the systems and training so that we can jump over such hurdles.

 

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Karl Wilding Karl Wilding, Director of Public Policy and Volunteering, leads NCVO's volunteering, policy, research and campaigning work in the UK and internationally. With lead responsibility for shaping the external environment for the voluntary sector, he blogs about the big issues facing voluntary organisations.

9 Responses to Why all charities aren’t Kids Company

  1. Mark Freeman says:

    Well said Karl. If those beneficiary numbers are right I know local organisations that match them for 1% of the Kids Co budget.
    We need to find all the ways that we can to publicise the fantastic work of the charities and community groups across the country. Not such a great news story but really important in counteracting the massive bad press the sector has suffered over the past few months.

  2. Chris Taylor says:

    If you are a trustee and are concerned about your understanding of your charities finances then take a look at our upcoming breakfast training session on ‘Understanding The Numbers’ https://www.ncvo.org.uk/training-and-events/events-listing/954-breakfast-learning-session-charity-trustees-understanding-the-numbers-2

  3. Tim Brown says:

    We worked with Kids Company for over a year providing them with free music studio space and recording sessions for children, as they said they had no funding to pay for this service.
    I spent some time discussing fundraising strategies with their senior management. It all came to nothing and I was not impressed by their operation whatsoever. It was all take and no give. We terminated the relationship.
    The fact that they have closed came therefore as no surprise and when I consider the huge sums of money KC received against our modest incomes and high capacity turnaround with young people, I still worry about the publics perception of all of us in the sector.
    Now the Governments Spending round will further decimate our work through cuts to the Arts Council, funding decisions being no doubt fuelled by such disasters as Kids Company and the misuse of public funds.

  4. U Ikpa says:

    To account for money spent receipts should be kept and petty cashbook should be used to account for money spent where receipt is difficult to obtain. The output may not always be measured in terms of numbers as difficult pupils are usually involved.

  5. Lou Andrews says:

    I’m amazed that the government saw fit to hand out such huge sums of money to one charity, this is unheard of. I think someone should be asking the question “why was this charity favoured with the huge sums of public money it was granted”, for me this is more important than the issue of poor governance. I believe that the charity was funded even after concerns were raised about it’s sustainability. The government is at fault here for wasting tax payers money, why all the emphasis on governance ???

    • Karl Wilding Karl Wilding says:

      Hello Lou
      The National Audit Office are currently reviewing the relationship between the government and Kids Company. Whatever my view of that relationship, I doubt the government are remotely interested in what I think.

      I am however very interested in what the public think of charities as a result of what they’ve heard about Kids Company, and I think its my job to strengthen public trust in charities. So my blog is about governance. I suspect we will be hearing more about the government’s role soon.

  6. Paul Halfpenny says:

    I would argue the exact opposite Karl. While Kidsco may have been different in terms of scale, it wasn’t different in terms of form. It was in fact an exemplar of the charity model, one which a great many charities would have happily swapped places with in terms of influence, profile and fundraising ability.

    And no-one can argue that it was an anomaly when there were NEVER any calls for it to be closed down from within the sector, even right to the death when it was killed off by a combination of news agencies, minor politicians and civil servants. Any argument now that Kidsco was anomalous is moot, since if the sector didn’t know it was anomalous while it was still running, how can it be said that other charities aren’t running in exactly the same way, but at a different scale? The sector didn’t know then, and doesn’t know now, so can’t claim that Kidsco was atypical – only that the amounts and sources of funding were atypical. In fact it was a poster child for the sector, and had CB not played her particular blackmail tune one time too many, they could still be running the same people-pleasing, irrational, unevidenced claptrap as their charitable form has allowed them to get away with for so long. Because it’s the ability to raise funds, rather than the ability to benefit people, which defines success for the modern charity. And so, for twenty years, Kidsco was precisely exemplary rather than anomalous.