Why did Kids Company have to close?
There is still a lack of clarity about why Kids Company, the charity founded by Camila Batmanghelidjh 19 years ago to offer support for traumatised and abused children, has had to close.
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Just over one month ago, on 3 July, newspapers reported that Ms Batmanghelidjh was to leave Kids Company. It was claimed she had come under government pressure to step down because of concerns about financial mismanagement. The Guardian said Kids Company had been negotiating a one-off £3m grant from the Cabinet Office, without which the charity risked having to call in the receiver.
Several days later, on 8 July, the Times reported that the Cabinet Office, which has responsibility for handing out the government grant to Kids Company, had commissioned a review of how the organisation was run. That review noted that cash flow was the “key financial risk” and warned that if this did not improve, “it is not possible to build reserves and invest in new activities and locations”.
The review also found that in the summer of 2013 the charity had missed a deadline to pay national insurance contributions because it did not have the funds available.
A Cabinet Office source told the Times: “We want a new CEO to be put in place to oversee cash-flow management and for Camila to become president.”
Read more: Controversial Kids Company charity closes
‘Allegations of crime’
The Kids Company story took a new turn at the end of July when it emerged that the Metropolitan Police’s child abuse, sex offences and exploitation unit was investigating the charity in connection with “a number of allegations of crime”.
Ms Batmanghelidjh responded in a statement: “In the last 19 years there have been no child protection rulings that have found us falling short of safeguarding the people in our care… You can understand that I am taken aback by allegations which now present themselves, about which I knew nothing.”
I am filled with horror at the thought someone may have been harmed in our care. Camila Batmanghelidjh
On the charity’s website she said: “I am filled with horror at the thought someone may have been harmed in our care.”
Then, on 5 August, Kids Company told ministers it was closing because of new concerns about financial management. The £3m government grant paid to the charity the previous week followed agreements to restructure the organisation, but some of the money had reportedly been used to pay staff salaries, breaking conditions on the subsidy and prompting moves to reclaim the taxpayers’ money.
Key players
In the past 24 hours two key players in the Kids Company drama – Alan Yentob, chairman of the charity’s trustees and a BBC executive, and Camila Batmanghelidjh herself – have appeared on TV to answer the claims of financial mismanagement and give their response to sexual abuse allegations.
Mr Yentob has been at pains to deny any financial mismanagement. “The idea of what I’ve heard some journalists call ‘appalling financial mismanagement’ is complete rubbish,” he told Matt Frei on Channel 4 News on 6 August.
“We’ve also got audits from government auditors,” he continued, “saying at the end of every year, including 2014, that we were well run and well managed.”
The idea of what I’ve heard some journalists call ‘appalling financial mismanagement’ is complete rubbish. Alan Yentob
The BBC’s creative director went on to state that the sexual abuse allegations had arisen “on the same night… after we were given the (government) money and put it in the bank.”
Speaking on BBC2’s Newsnight later on the same day, Ms Batmanghelidjh explained: “The minute government money hit our account, suddenly, out of the blue, came these allegations of sexual abuse – about which we knew nothing. And within an hour or so it was all over the news, so we still didn’t know where these allegations were at that point.
“But then consequently, what happened is a charity that is responsible for the welfare and protection of children overnight turned into a charity that was sexually exploiting children – on the back of absolute rumours.”
As a result of the abuse claims, Mr Yentob said Kids Company had felt obliged to inform its philanthropist donors it could not accept their cash, telling them: “With these allegations around, we will not be able to fundraise because people will say ‘What’s going on?'”
Read more: Alan Yentob - 'Kids Company allegations are disgraceful'
No financial backstop
But the vehement denials of mismanagement by both Ms Batmanghelidjh and Mr Yentob should be weighed against a report today that Kids Company ignored warnings about the need to build a financial cushion to protect it from catastrophe.
The Guardian newspaper quotes one source who worked in a senior position at the charity for several years as saying: “Kids Company didn’t have any reserves, the government knew they didn’t have any reserves, and they bailed them out time and again. The charity, the trustees, got complacent. They got into this habit: they knew they would always get bailed out.”
And it shows that despite a 77 per cent increase in income between 2009 and 2013, from £13m to £23m, Kids Company failed to build the sort of financial backstop that allowed it to build reserves and expand its activities.
“All that matters,” Camila Batmanghelidjh told Newsnight on Thursday, “is that the children who’ve been denied care now, and who saw Kids Company as a family, are properly supported. And that’s why we turned to government for extra funding – ’cause we knew that we needed more finances to deal with the challenges that were arriving at our door, including building up reserves.”
The Kids Company ethos, driven by its charismatic founder, may have been that the needs of the children always come first. But it seems also to have become the undoing of this high-profile charity.