“•investigation of concerns about the administration, governance and financial management of the Charity, including the concerns arising from specific allegations made by the three former employees of the Charity about alleged inappropriate spending, breaches of financial controls and the conduct of the trustees and CEO amid concerns about the future viability of the organisation; • any regulatory issues arising from the investigation carried out by the Official Receiver as part of the liquidation process; and • whether or not the trustees had complied with and fulfilled their duties and responsibilities as trustees under charity law.”
“In practice, the Statutory Inquiry focused on the following areas: “a. The former employees’ allegations – the seven regulatory concerns arising from the allegations made by the three former employees of the Charity (with the exception of the concern about possible trading whilst insolvent which was a matter of company law for the Official Receiver to investigate). The remaining allegations in essence, were: i. Potential employment irregularities ii. Unclear purpose for payment (PhD fees and accommodation payments) iii. Potential state benefits issues iv. Non-charitable expenditure/acting outside of objects – including payments made to the “top 20/25” clients and understanding how clinical decisions were made v. Circumventing trustee financial controls vi. Related party transactions (related to one employee and one trustee) b. The financial management of the Charity, including the adequacy of financial procedures and controls, and the scrutiny, oversight and control exercised by the trustees over financial matters. c. The governance of the Charity, in particular the level of oversight and scrutiny by the trustees over the management, administration and running of the Charity including the relationship between the CEO and the trustees, and how the trustees held the CEO and staff to account. d. The business and funding model adopted by the Charity; including accepting child self-referrals, the extent of the Charity’s reliance on statutory funding and its practice of starting each year with only 25-30% of required funding having been secured; the trustees’ management of the Charity’s reserves policy; and how the trustees assessed and managed the risks arising from these decisions. e. The conduct and response of the trustees and CEO during the period when there were issues about the financial health and the viability of the Charity. f. Other issues raised by the Official Receiver’s investigation and subsequent complaints by beneficiaries. g. Whether or not the Charity’s trustees had complied with, and fulfilled, their duties and responsibilities as trustees under Charity law.” “a. The former employees’ allegations – the seven regulatory concerns arising from the allegations made by the three former employees of the Charity (with the exception of the concern about possible trading whilst insolvent which was a matter of company law for the Official Receiver to investigate). The remaining allegations in essence, were: i. Potential employment irregularities ii. Unclear purpose for payment (PhD fees and accommodation payments) iii. Potential state benefits issues iv. Non-charitable expenditure/acting outside of objects – including payments made to the “top 20/25” clients and understanding how clinical decisions were made v. Circumventing trustee financial controls vi. Related party transactions (related to one employee and one trustee) b. The financial management of the Charity, including the adequacy of financial procedures and controls, and the scrutiny, oversight and control exercised by the trustees over financial matters. c. The governance of the Charity, in particular the level of oversight and scrutiny by the trustees over the management, administration and running of the Charity including the relationship between the CEO and the trustees, and how the trustees held the CEO and staff to account. d. The business and funding model adopted by the Charity; including accepting child self-referrals, the extent of the Charity’s reliance on statutory funding and its practice of starting each year with only 25-30% of required funding having been secured; the trustees’ management of the Charity’s reserves policy; and how the trustees assessed and managed the risks arising from these decisions. e. The conduct and response of the trustees and CEO during the period when there were issues about the financial health and the viability of the Charity. f. Other issues raised by the Official Receiver’s investigation and subsequent complaints by beneficiaries. g. Whether or not the Charity’s trustees had complied with, and fulfilled, their duties and responsibilities as trustees under Charity law.”
“The Board failed to protect the interests of the charity and its beneficiaries, despite its statutory obligation to do so. Trustees repeatedly ignored auditors’ clear warnings about Kids Company’s precarious finances. This negligent financial management rendered the charity incapable of surviving any variance in its funding stream; when allegations of sexual misconduct emerged in July 2015 and threatened to impede fundraising, the charity was obliged to close immediately.”
“(a) The administration, governance and financial management of the Charity including concerns around allegations of inappropriate spending, breaches of financial controls and the conduct of the trustees and the CEO amid concerns about the future viability of the Charity; (b) Any regulatory concerns arising from the investigation carried out by the OR as part of the liquidation process; and (c) Whether or not the trustees had complied with and fulfilled their duties and responsibilities as trustees under charity law”
“Charities should undertake financial planning and recording including maintaining a reserves policy There is no single level of reserves that is right for every charity. However, a low level may mean limited resilience against challenges including short term financial difficulties, cash–flow problems, or increasing demand. COVID-19 is an example of how reserves can be vital to withstand short–term and unforeseen pressures. Research for the Commission found that 40% of charities have drawn on reserves as they responded to the challenges presented by the pandemic. Kids Company operated on a low level of reserves for many years, prioritising the immediate needs of its beneficiaries and expansion over building up reserves. If the Charity had held greater levels of reserves, it may have been able to wind-up in a more orderly fashion or merge with another charity, which would have gone some way to mitigate the impact of its closure on beneficiaries. We advise all trustees to make well rounded and appropriate decisions about their approach to reserves”
“(1) The Commission has the following general functions— 1 Determining whether institutions are or are not charities. 2 Encouraging and facilitating the better administration of charities. 3 Identifying and investigating apparent misconduct or mismanagement in the administration of charities and taking remedial or protective action in connection with misconduct or mismanagement in the administration of charities. 4 Determining whether public collections certificates should be issued, and remain in force, in respect of public charitable collections. 5 Obtaining, evaluating and disseminating information in connection with the performance of any of the Commission's functions or meeting any of its objectives. 6 Giving information or advice, or making proposals, to any Minister of the Crown on matters relating to any of the Commission's functions or meeting any of its objectives. (2) The Commission may, in connection with its second general function, give such advice or guidance with respect to the administration of charities as it considers appropriate. (3) Any advice or guidance so given may relate to— (a) charities generally, (b) any class of charities, or (c) any particular charity, and may take such form, and be given in such manner, as the Commission considers appropriate. . . . ”
“We handed to the Official Receiver 87 metal filing cabinets full of files which were kept secure. The children’s files in the schools were kept there so no one could have access to shred anything. Other than those records that had been entered onto the charity’s Aurora database, paper client files were not shredded. They were kept in a completely different building from where the shredding of paper had taken place”
“Of itself, it simply means that there is an absence of documentation, or documentation in the correct location, demonstrating that a policy-compliant decision-making process had taken place, whether in terms of the appropriate assessment of the client’s needs, or the correct authorisation process within the organisation. In many cases this may not prove that the assessment or authorisation did not occur, but simply that there is now no written record of it, or none that the Official Receiver has located. At most that would be a breach of a policy to create and retain records”. (Emphasis added). Those observations by Falk J do not contradict the Commission’s comment that “some records may not actually have been created”
“Kids Company has also stated that the files handed over to the local authorities do not reflect the charity’s work in schools, which it claimed served 19,000 children in 48 schools. According to Mr Quirke-Thornton, however, Kids Company was in fact only “working in 34 schools in 2014–15 and had already ceased work in 3 schools in the 2014–15 academic year.”
“although I would argue sometimes with [Ms Batmanghelidjh] about the numbers, only because the schools are where the numbers expanded. She believed that sometimes whole schools would be taken in assembly, and you can read it in some of the documentation from the schools, so her scope was significant. We didn’t just look after the kids, we – and this is so important. We worked with the families. In fact, the numbers are all there. 7,600 or whatever, you know, family members as well as the children, the key children, 19,000 in the schools, broken down the ones we looked after a good deal”
“10,736 were supported through personalised support. That could be therapy, social work, any variation of those. 7,224 received one-to-one therapeutic support, such as counselling, psychosocial therapy, speech and language, occupational therapy. 900 attended therapeutic groups, and then there were groups – activity-based stuff like 9,557, and then there was another 8,224 who attended all sorts of activities, like remedial, homework club and so on”
“In an internal email25 June 2014 Emma (finance officer) confirmed that Ms Batmanghelidjh agrees to stop all payments for B1. Payments recommenced on22 July 2014 (cash allowance of£150 ). There is no documentation on file as to why the allowances recommenced”. . . . “Included in the information stored in cerise there is a copy of a care plan dated7 April 2015 which notes that B1 is “now earning a good income”
“I understand that when the review of individual’s personal files was carried out, there was no file for B2 and therefore it is not possible to establish whether the charity has following its distribution policy. B2 was listed on the complete client list which was extracted by the OR from aurora and therefore there should have been a personal file for him. Some information was obtained during the review at Iron mountain.”
“B3s file (on cerise) contain some intervention records (all before the dates covered by the report). However, there is no evidence of any clinical discussions having taken place, nor is there any evidence of regular reviews having been carried out, contrary to the charity’s distribution policy. . . . No written documentary evidence, in accordance with Kids Company Policy for Distributing Financial Assistance, has been identified for the payments detailed above. No clear explanations were found as to why cash was being paid to Annie rather than vouchers or payments to third parties. Also I have seen no evidence of any budgeting assessment being carried out in respect of Annie.”
“No records were identified regarding any clinical assessments or meetings to discuss the expenditure or justification of expenditure on [B4]. Furthermore no written documentary evidence, in accordance with Kids Company Policy for Distributing Financial Assistance, has been identified for the payments detailed above.”
“No written documentary evidence, in accordance with Kids Company Policy for Distributing Financial Assistance, has been identified for the payments detailed above. No clear explanations were found as to why cash was being paid to him rather than vouchers or payments to third parties despite concerns raised in respect of Danny’s continual lack of money due to the use of narcotics, particularly as the policy advises no money will be distributed if there is reason to believe the Client is likely to spend the money on drugs or alcohol.”
“The Current Team and I considered this response and other representations and noted the Claimant’s assertion that£14 million in reserves would have been required to keep the Charity operating because of the criminal investigation which was concluded in 2016 with no further action being taken. Whilst we did not disagree with the assessment that a significant level of reserves would have been necessary both to cover the period of the Police’s criminal investigation and a suitable period after that to regain donor confidence, the point being made in the report was more subtle than this and made clear that greater reserves could allow a more orderly winding up of the Charity even if was not sufficient for survival and not abrupt closure as happened here”
“It was the view of the second team (taking into account their combined professional judgement and Falk J’s findings) that had the Charity maintained a higher level of reserves it may have been possible for it to delay the winding-up petition, or otherwise have explored other options (whilst utilising reserves) to merge with another charity or otherwise facilitate a more orderly closure of the Charity’s services and activities. Whilst it obviously remains a matter for the Court, I maintain that was a reasonable and legitimate observation for the Inquiry to make in its Report”