Kids Company fallout – more collapses inevitable without support

Charity leaders today welcomed the select committee report into the Kids Company collapse – but warned that hundreds of charities will cease to function unless good governance and leadership are bolstered.

Neither the Government nor the Charity Commission provide such support. The charity leaders’ network ACEVO therefore wants to build a Charities Excellence Hub (CEH). But for this to work it will need strong support from Government and the Commission.

The observations made by the Public Administration and Constitutional Affairs Committee (PACAC) chime with many made by ACEVO during the events of last summer. Namely that both Government and trustees allowed founder Camilla Batmanghelidh far too a free hand. Further that there was a repeated failure to deal with the organisation’s extremely low levels of reserves.

The most important lesson was that there was a catastrophic failure of governance driven by the insistence that all resources were pushed to the front line and that the failure to provide effective oversight and professional management led to the collapse of that frontline.

But while condemning Trustees as ‘negligent’, PACAC nowhere suggests how proper support can be given to charities to promote and nurture good governance. Regulation of charities alone is not sustainable approach – charities need additional financial, structural and moral support.

The Government must display a commitment to the golden rule that charities must invest in themselves in order to support their beneficiaries and that effective charity, while delivered on the front line, begins in the back office. ACEVO argued for this throughout the course of last year but the Government has been reticent to project that message to the public – and it would be a tragedy if charity beneficiaries paid the price.

Shortly after the collapse of Kids Company ACEVO Chief Executive Sir Stephen Bubb wrote to the Commission chair William Shawcross warning that the regulator was focusing too much on its policing role at the expense of the pastoral. Sir Stephen then argued that it is better to prevent than fight fire. Today’s report only underlines the need for the Commission to refocus on its stated objective of supporting charity management. PACAC recommends that the Charity Commission should be better resourced by the Treasury and Cabinet Office. Additional money for the Commission should be spent on its duty to provide that support.

ACEVO will work with other major stakeholders in the sector in the endeavour to deliver help from within but without a marked change in emphasis from the Commission and the Government many charities will simply go under. At the last count in 2012, 580,000 people had chosen freely to give their time and expertise to being a charity trustee. 15 per cent of charities warned that they had an insufficient number of trustees and management committee members.

Since then the climate has harshened both economically and politically and while the need for charities has risen so too have the challenges for trustees. To make these duties more onerous without providing support in similar measure the trustee base will be further eroded. Trustees need nurture as well as regulation.

ACEVO Chief Executive Sir Stephen Bubb said: “We have to learn the main lesson from the Kids Company collapse. That for years there has been underinvestment in good governance and leadership. So ACEVO is taking the initiative with the Charities Excellence Hub.

“Government and the Charity Commission need to consider how they support this initiative. For example, since 2015 ACEVO has argued for the use of LIBOR fines in supporting good governance and leadership. How ironic it would be if they failed to grasp the lessons arising from Kids Company and allow this neglect to lead to the collapse of hundreds of other charities.

“For too long now the attitude of Government has been one of hostility rather than encouragement. For too long now the Charity Commission has not only chosen to focus on its role of policeman at the expense of its role as a supporter of charities. These mind sets must change.”

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