14.The government relied heavily on Kids Company’s self-assessment of its performance. These assessments reported Kids Company far exceeding performance targets set out in grant conditions. For example, Kids Company reported that against a target of 1,347 interventions in 2013–14, they had delivered 30,217. The Department later claimed that the target of 1,347 was for intensive interventions only and that the grant agreement it had signed with Kids Company for the 2013–14 to 2014–15 cross-government grant had set out 35,245 specific funded interventions in total.
15.To us this suggested that the metrics that Kids Company were reporting were so over-exceeded by the charity that there was clearly something wrong with the reporting and measurement framework. The Department for Education said that “I would say it shows a charity achieving more than we had set out”; it still did not seem to consider such dubious performance management information to be a matter that should have begged questions.
16.The Department for Education assured us that, until recently, very few people had doubted the quality of Kids Company’s achievements. The Department had taken the view that the outcomes it was getting for some highly innovative work with extremely vulnerable people did provide value for money. It gave an example of how it had monitored the Kids Company grant under the Youth Sector Development Fund. The Department’s overall evaluation of the Fund had concluded that the grant was helping Kids Company to become a centre of excellence, and enabling them to disseminate informed educational packages for service users and providers. However, we questioned whether this was in fact the case given that Kids Company never operated outside London and Bristol.
17.Before 2013–14 Kids Company had been monitored in the same way as other organisations funded through the Department for Education’s grant programmes. The government took a different approach to monitoring Kids Company for its 2013-14 and 2014-15 grants as these were direct awards to the charity. As a start the Department for Education awarded a £200,000 contract to Methods Consulting, operating from July 2013 until March 2015, to monitor and evaluate the grant funding to Kids Company. When the Cabinet Office took over responsibility for the grant to Kids Company in July 2013, it also took over responsibility for monitoring the charity’s performance. It told us that one of its key concerns when taking over responsibility had been that the charity was not good at, or interested in, measuring its outcomes and the impact it was having in society. So the first thing it did was to work with Methods Consulting, because it wanted to improve the measurement of Kids Company’s outcomes. The then Accounting Officer of the Cabinet Office told us that he considered they had got some way towards that.
18.The Department for Education told us that in 2009 an external review found that Kids Company was basically a well governed organisation. The Department conceded that it may have relied too heavily on that advice, and that advice may have been wrong, but the evidence it had at that time suggested Kids Company was a ‘financially reasonable’ organisation. Equally, when the Cabinet Office sent in accountants PKF Littlejohn in 2014 to do a full study of Kids Company, its then Accounting Officer told us that what they found matched what the Department had found before: it was not an organisation that was badly governed or lacked financial control. However, PKF Littlejohn did highlight Kids Company’s “precarious cash flow situation”. Throughout Cabinet Office’s relationship with Kids Company the main worry had been its lack of reserves and the risk of it going bust at any time, which had led to its constant demand for Government back-up funding – “Looking back, one observation you could make is that we became obsessed about that point”.
19.The Department for Education admitted the charity’s financial position should have been examined more closely before 2013, as there had been warnings about the charity’s financial management. As long ago as 2005, a senior manager at the charity had highlighted concerns to the Department, and to the charity’s trustees, about Kids Company’s senior management structure and governance and about some individuals receiving cash payments from the charity. The Department hoped that such a warning would be better dealt with now.
31 , Summary para 9
32 , para 4.11, Figure 8 (The Cabinet Office subsequently revised the figures previously agreed with the National Audit Office (Cabinet Office)
40 , para 4.9
46 ; , para 3.7
Prepared 11 November 2015