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.