MPs condemn 'staggering lack of scrutiny over Kids Company funding'
Vulnerable children across the country are likely to have lost out as a result of the Government's decision to treat failed charity Kids Company as a "special case", a parliamentary report has found.
The influential House of Commons Public Accounts Committee said it was "staggering" that KidsCo - described by one official as "a prime minister-favoured charity" and by the committee as "a favourite of successive ministers" - was given more than £40 million of taxpayers' cash over 13 years without ministers having any idea what they were getting for it.
In a scathing report, the cross-party committee said it was "very sceptical" of the charity's "inflated" claims of what it achieved, and said funding decisions were not based on evidence and did not follow correct procedures.
Issuing a demand for a "fundamental review" of government grants to charities, it warned: "This must never happen again."
Central government funding to KidsCo was "far in excess of grants paid to other charities", and there was an "obvious unfairness" in so much money going into an organisation operating for most of its life only in two south London boroughs at the expense of services for children elsewhere in the country, the report said.
Founded by Camila Batmanghelidjh in 1996 to offer counselling, support and art therapy to disadvantaged youngsters in Lambeth and Southwark, KidsCo was widely praised for its innovative approach and received a total of at least £42 million from central Government and £4 million from local authorities and lottery bodies.
It folded on August 5 this year just six days after receiving a £3 million grant in a final bid to keep it afloat.
Ministers overruled Whitehall officials who advised against this payment, which came hot on the heels of a £4.3 million lump sum in March.
The new report said that until this point, continued funding of the charity had never been "seriously questioned", despite "repeated warnings and concerns" about KidsCo's financial situation and the impact it was achieving.
Instead, responsibility for the charity was passed around Whitehall departments "like a hot potato".
After it failed to win funding through competitive grant schemes in 2013, the Government awarded money directly without competition.
There was "insufficient scrutiny" of what KidsCo delivered, with the Government relying "heavily" until 2013 on the charity's own assessment of its performance, the report said.
It was "particularly alarming" that the Government carried on handing over money for years without the charity ever demonstrating that its methods could be applied elsewhere in the country.
Senior officials with responsibility for ensuring value for money "have not served taxpayers or children across the country well" in failing to stand up to ministers and advise them against further grants in a process known as "seeking ministerial direction", the report stated.
The Government "failed to learn lessons" from its experience of the charity until the end of its existence.
"All the warning signs of a failed and expensive experiment had long been there, but it was not until June 2015 that officials finally stood up to ministers, said enough was enough, and sought ministerial direction before providing more money," the committee said.
"By then it was too late."
Committee chair Meg Hillier said: "The case of Kids Company will anger many people.
"The charity was passed around Whitehall like a hot potato, with no-one willing to call time on spending millions of tax pounds for uncertain outcomes.
"The lack of scrutiny over its funding was staggering.
"Fairness and value for money - fundamental values when considering public spending - appear to have been forgotten in repeated and ultimately doomed attempts to keep Kids Company afloat.
"Even after civil servants finally refused to agree additional funding, ministers 'took a punt'.
The final £3 million of public money was handed over just a week before Kids Company closed.
Payments during the charity's final months alone totalled more than £7 million.
"The faith that things would improve when they didn't was naive," she added.
"So many other charities did not get the same support and it is clear that Kids Company received special treatment - to the detriment of other deserving charities around the country."
The committee called for the Government to carry out a review of its grant-making processes, to establish a register of such payments and to improve monitoring and evaluation of organisations receiving public money.
Karl Wilding, director of public policy at the National Council for Voluntary Organisations, said: " This report will make extremely frustrating reading for the thousands of charities who have to submit highly detailed plans in order to have a hope of funding and who work very hard to produce honest and accurate assessments of the difference they make.
"Successive governments threw money at Kids Company at the same time as they were making life harder for other charities. Local and national government have been imposing complex contracts on many of the charities they contract with in the name of efficiency, but these are often so unwieldy that they create more problems than they solve."
A Government spokesman said: " The Government will consider the recommendations laid out in this report. The welfare of the young people continues to be our primary concern and we are now working closely with local authorities to make sure they have access to the services they require."