Nearly £50million of taxpayers’ money was handed over to the collapsed charity Kids Company over the past 13 years despite ministers being warned on six occasions that the cash could be wasted, the spending watchdog has found.
The report from the National Audit Office found that Conservative and Labour ministers since 2002 repeatedly over-ruled the concerns from civil servants about the way the money was being spent.
The grants continued to flow despite a former manager at Kids Company personally warning civil servants and its trustees about the charity’s “senior management structure” and the way cash was being handed out to young people.
The charity, which was led by its high-profile founder Camila Batmanghelidjh, was able to attract the cash by issuing dire public warnings about its future whenever there were concerns about the continued supply of government money.
It was able to railroad ministers into handing over tens of millions of pounds in this way on six occasions between 2002 and June this year, the NAO found. On each occasion civil servants’ concerns about the charity were ignored.
The cash continued to flow despite a former manager at Kids Company warning civil servants and its trustees about its “senior management structure” and the way cash was being handed out to young people.
HM Revenue and Customs, in addition to writing off its tax debts of £590,000 in 2003, had also a secret arrangement “to pay off historic debts, but the amount of the debt is unknown”.
Speaking on Thursday, Ashley Mcdougall, who led on the report into Kids Company for the National Audit Office, said the government had failed to locate a key document analysing the impact of funding.
He told BBC Radio Four’s Today programme that the Education Department had been asked to hand over an analysis document about the company but it “wasn’t able” to find it.
Mr Mcdougall also said that even 13 years after public money stared being given to the company there was no agreed way to test what was being achieved with the investment.
Richard Heaton, formerly permanent secretary at the Cabinet Office, and Chris Wormald, permanent secretary at the Education Departmen will be questioned by MPs on the Public Accounts Committee next Monday about the way the cash was spent.
The hearing could prove embarrassing for the Government because two Cabinet Office ministers – Matthew Hancock and Oliver Letwin – specifically over-ruled civil servants’ objections to give the charity a £3million grant weeks before its collapse in the summer.
Meg Hillier, the Labour chairman of the Public Accounts Committee, said the sums which were spent despite the warnings were “unbelievable”.
She said: “This is a very stark report. Questions were being asked and, before answers were sought, more money was thrown at a charity that was clearly having issues.
“The question has to be asked: why did this keep happening repeatedly over 13 years?
“Government departments have questions to answer about how they held the charity to account for spending taxpayers’ hard earned money.”
At one point Kids Company was accounting up 20 per cent of the voluntary and community grants awarded by the Department for Education.
Monitoring Kids Company’s performance was made harder because the charity’s figures said that it was helping up to four times as many young people as the civil servants expected.
Kids Company reported that it worked with up to 36,000 children, young people and their family members.
Yet NAO found that when it closed in August just over 2,000 cases were handed to councils in London and Bristol.
A Kids Company spokesman said: “The NAO report makes it clear that this assessment does not investigate the value for money of Kids Company itself or the Trustees’ oversight.
“It should be emphasised that government grants to Kids Company have been independently audited on a regular basis.
“The report highlights Kids Company’s delivery of a ‘valuable local service for some of the most disadvantaged and hard to reach young people’ as well as acknowledging that ‘other organisations could learn lessons from the services Kids Company offered and its approach to these problems’.”
A Cabinet Office spokesman said: “Since 2002, successive governments have provided financial assistance to the charity to help it deliver services for vulnerable young people.
“The welfare of the young people has always and continues to be our top priority, and we will continue to work with local authorities, charities and youth clubs in Lambeth, Southwark, Camden and Bristol to support young people with the services they need.”