THE BLOG

Kids Company Collapse: Regulator and Trustees Have Biggest Questions to Answer

26/08/2015 14:46 BST | Updated 25/08/2016 10:59 BST

High profile, political support, lots of money, sudden insolvency could describe the short career trajectory of a reality TV star.

But this is the story of children's charity Kids Company, finished at 19 in a sudden, inelegant financial collapse every bit as public and colourful as its founder, Camila Batmanghelidjh.

The Charity Commission and the board of well-connected trustees who ran it have many questions to answer.

Unfortunately, we may have to wait a while. Nobody involved seems to be volunteering much beyond bravura performances in buck passing.

Even the Charity Commission, whilst announcing its own investigation, has absolved itself at the outset from any responsibility.

"The buck stops with trustees," said William Shawcross, the chair of the Commission, emphatically. Really?

He may be technically right. But his organisation has a far bigger responsibility than any one charity: Maintaining public confidence in all 160,000 of them within the UK is crucial. That buck stops with them.

Confidence has taken a battering in recent weeks. The more we learn, or is alleged, about Kids Company, the less it seems anyone was treating its activities as a business, which every charity needs to be these days.

Why, for example, was it allowed to operate with what Sir Stephen Bubb, chief executive of an umbrella organisation for charity leaders, described as 'perilously low' reserves without apparently ringing alarm bells? There were plenty of warnings.

But the bigger question is almost too worrying to ask: Is the story of Kids Company a harbinger? How well run are other charities in the UK? In 2012, they had a combined income of £37 billion and are, increasingly, often vital to lives and causes abandoned by the state.

An awful lot of money is donated by public, Government and philanthropists; all, presumably, on the assumption that it will be properly spent by properly managed organisations.

There are certainly problems ahead. The Government contributions, at least, are going to be squeezed under austerity plans, as the Treasury has made clear. Are charities making contingency plans to cope? We must hope so.

Good intentions will not be enough; or to put it in more practical terms: operating without reserves but with a determination to meet any demand that shows up will not do.

Mr Shawcross is right to point out that trustees are legally responsible for the proper running of a charity, even if they may not be fully aware of that fact. In the case of Kids Company they should have done more to act on evidence in their audits about how little spare cash was available as a contingency.

But the trustee system is vulnerable. A good board of trustees is chosen because the individuals have skills to offer. They must also be able to manage a chief executive.

This can be tough, particularly when that executive is charismatic and forceful and may even have appointed them. There is every sign that the founder of Kids Company was such an executive. So are others.

Where the buck stops matters. Kids Company handled about £150 million over the course of its existence. It did great work, but should have been advised that it is not enough to act out a mission that defies economic gravity, just because you want to do so.

I rather suspect that we already know the answer to what went wrong with Kids Company before all the inquiries and carefully worded reports are written: Even politicians and regulators get starry-eyed over good works and the often sefless people who undertake them.

The lasting legacy of Kids Company may be that it wakes up everyone to the fact that even if charity begins at home, it will be finished without a workable, regulated business plan.